Q4 2025 Canadian Apartment Properties Real Estate Investment Trust Earnings Call

February 13, 2026

Speaker #1: Hello everyone, and thank you for joining the Canadian Apartment Property Rates 4th Quarter 2025 results conference call. My name is Clare, and I will be coordinating your call today.

Operator: Hello, everyone, and thank you for joining the Canadian Apartment Properties REIT's Q4 2025 results conference call. My name is Claire, and I will be coordinating your call today. During the presentation, you can register a question by pressing Star followed by one on your telephone keypad. If you change your mind, please press Star followed by two on your telephone keypad. I will now hand over to your host, Nicole Dolan, Investor Relations, to begin. Please go ahead.

Speaker #1: During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 on your telephone keypad.

Speaker #1: I will now hand over to your host, Nicole Dolan, Investor Relations, to begin. Please go ahead.

Nicole Dolan: Thank you, operator, and good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of CAPREIT, which are subject to certain risks and uncertainties. We direct your attention to slide two and our other regulatory filings for important information about these statements. I will now turn the call over to Mark Kenney, President and CEO.

Speaker #2: And good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of CAPREIT, which are subject to certain risks and uncertainties.

Speaker #2: We direct your attention to slide 2 and our other regulatory filings for important information about these statements. And we'll now turn the call over to Mark Kenny, President and CEO.

Speaker #3: Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Co, our Chief Financial Officer. Let's start on slide 4 with some key highlights from 2025.

Mark Kenney: Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Co, our Chief Financial Officer. Let's start on slide 4 with some key highlights from 2025. This past year, we continued to actively reposition our portfolio, and we met our disposition target by selling more than CAD 400 million of non-core assets in Canada. We also sold CAD 784 million of ancillary interests in Europe. We used a portion of net proceeds to purchase CAD 659 million in well-built, strategically aligned properties, which offer low capital investment requirements and high, high cash returns above our portfolio average. We also continued to capitalize on the public-private market disconnect by spending CAD 294 million on our NCIB program to enhance earnings for unit holders.

Speaker #3: This past year, we continued to actively reposition our portfolio, and we met our disposition target by selling more than $400 million of non-core assets in Canada.

Speaker #3: We also sold 784 million of ancillary interests in Europe. We used a portion of net proceeds to purchase 659 million in well-built strategically aligned properties which offer low capital investment requirements and high cash returns above our portfolio average.

Speaker #3: We also continued to capitalize on the public-private market disconnect by spending $294 million on our NCIB program to enhance earnings for unitholders. Operationally, same property occupancies remained healthy at 97.3% as of December 31, 2025.

Mark Kenney: Operationally, same property occupancies remained healthy at 97.3% as of 31 December 2025, across which average rent grew by 3.8%. This reflects the effectiveness of our leasing and retention strategies, which Steven will expand on shortly. Combined with ongoing enhancements to cost management and procurement governance, our same property NOI margin expanded to 64.7% for 2025. In addition, we finished the year with a total debt to gross book value ratio on target at 39.3%, in line with our commitment to maintain balance sheet strength. Turning to slide 6, I want to highlight the progress we've made in transforming the portfolio for long-term value creation. Today, 79% of our portfolio is made up of value-add assets, with 68% of this considered a core long-term holding.

Speaker #3: Across which, average rent grew by 3.8%. This reflects the effectiveness of our leasing and retention strategies, which Stephen will expand on. Ongoing enhancements to cost management and procurement governance—our same property NOI margin expanded to 64.7% for 2025.

Speaker #3: In addition, we finished the year with a total debt-to-gross-book value ratio on target at 39.3%. In line with our commitment to maintain balance sheets strength.

Speaker #3: Turning to Slide 6, I want to highlight the progress we've made in transforming the portfolio for long-term value creation. Today, 79% of our portfolio is made up of value-add assets, with 68% of this considered a core long-term holding.

Speaker #3: This 68% comprises high-quality well-located communities that form the backbone of CAPRI's strategy and will continue to drive stable predictable performance over the long run.

Mark Kenney: This 68% comprises high quality, well-located communities that form the backbone of CAPREIT's strategy and will continue to drive stable, predictable performance over the long run. We've classified the other 11% as opportunistic dispositions. These are assets that we would consider selling if we were able to achieve compelling pricing. Maintaining this flexibility is an important part of our ongoing capital recycling strategy, ensuring that we are consistently rotating into higher quality, higher cash-yielding opportunities. In addition, we have an intentional 19% allocation to recently constructed properties. These newer assets help balance the portfolio, bringing down its average age and capital requirements and adding stability from a building quality and operating cost perspective. This mix gives us a more resilient platform through various market cycles.

Speaker #3: We've classified the other 11% as opportunistic dispositions. These are assets that we would consider selling if we were able to achieve compelling pricing. Maintaining this flexibility is an important part of our ongoing capital recycling strategy.

Speaker #3: Ensuring that we are consistently rotating into higher quality, higher cash-yielding opportunities. In addition, we have an intentional 19% allocation to recently constructed properties.

Speaker #3: These newer assets help balance the portfolio, bringing down its average age and capital requirements, and adding stability from a building quality and operating cost perspective.

Speaker #3: This mix gives us a more resilient platform through various market cycles. And finally, ERAs now represents just 2% of our consolidated portfolio, down from 6% at the beginning of the year.

Mark Kenney: And finally, ERES now represents just 2% of our consolidated portfolio, down from 6% at the beginning of the year, reflecting the extent of our European dispositions in 2025, which have greatly simplified our business. On Slide 7, we've displayed our 2025 non-core divestments in Canada, with CAD 411 million sold. These properties had higher capital expenditures, lower expected returns, or other attributes that no longer met our strategic standards. These sales allowed us to recycle capital into stronger-performing properties, which also contributed to important community partnerships, including meaningful transactions with nonprofits and the Squamish Nation. And then on Slide 8, you will see how we spent CAD 659 million to add to our portfolio, 15 well-built, prime located properties across key urban markets in Canada....

Speaker #3: Reflecting the extent of our European dispositions in 2025, which have greatly simplified our business. On slide 7, we've displayed our 2025 non-core divestments in Canada, with $411 million sold.

Speaker #3: These properties had higher capital expenditures, lower expected returns, or other attributes that no longer met our strategic standards. These sales allowed us to recycle capital into stronger performing properties, which also contributed to important community partnerships, including meaningful transactions with nonprofits and the Squamish Nation.

Speaker #3: And then on slide 8, you will see how we spent 659 million to add to our portfolio 15 well-built prime located properties across key urban markets in Canada.

Speaker #3: These buildings were acquired at attractive price points, with strong economic yields that boost the cash flow generating potential of our portfolio. In addition, the recently constructed properties were purchased at pricing well below replacement cost.

Mark Kenney: These buildings were acquired at attractive price points, with strong economic yields that boost the cash flow generating potential of our portfolio. In addition, the recently constructed properties were purchased at pricing well below replacement cost. By investing in these mid-market properties and divesting from off-strategy, underperforming buildings, we reduced the portfolio's long-term capital needs and enhanced its performance. Our NCIB activity is summarized in slide 9. This program has effectively allowed us to invest in our own optimized portfolio at a cap rate well above current market levels for comparable assets, while increasing unit holder returns. In 2025, we remained active on this buyback program, with CAD 294 million invested at a weighted average purchase price of CAD 41. This represents a substantial discount to our NAV per unit of CAD 56 as of 31 December 2025.

Speaker #3: By investing in these mid-market properties and divesting from off-strategy underperforming buildings, we reduced the portfolio's long-term capital needs and enhanced its performance. Our NCIB activity is summarized on slide 9.

Speaker #3: This program has effectively allowed us to invest in our own optimized portfolio at a cap rate well above current market levels for comparable assets, while increasing unitholder returns.

Speaker #3: In 2025, we remained active on this buyback program, with 294 million invested at a weighted average purchase price of $41. This represents a substantial discount to our NAV per unit of 56, as of December 31, 2025.

Speaker #3: And since we started leveraging this program in 2022, we spent a total of 960 million to date to generate higher earnings for unit holders.

Mark Kenney: Since we started leveraging this program in 2022, we spent a total of CAD 960 million to date to generate higher earnings for unit holders. With that, I'll hand it over to Stephen to discuss our operational and financial results.

Speaker #3: With that, I'll hand it over to Stephen to discuss our operational and financial results.

Speaker #4: Thanks, Mark. On slide 11, you can see how our portfolio is performing amid softer rental market conditions. The broader housing market is working through a finite wave of new supply coming online at a time that population growth has temporarily paused due to government changes to immigration targets.

Stephen Co: Thanks, Mark. On slide 11, you can see how our portfolio is performing amid softer rental market conditions. The broader housing market is working through a finite wave of new supply coming online at a time that population growth has temporarily paused due to government changes to immigration targets. That combination has put some pressure on operational results. But given these conditions, we're performing resiliently because we have experienced and tactical teams in place who are effectively mitigating those headwinds. A key part of that resilience is how we're deploying incentives. We're using them strategically, not broadly and reactively, but in a targeted, competitive way. At the same time, we have intensified our focus on retention, which has become a major driver of stability.

Speaker #4: That combination has put some pressure on operational results, but given these conditions, we're performing resiliently because we have experience and tactical teams in place who are effectively mitigating those headwinds.

Speaker #4: A key part of that resilience is how we're deploying incentives. We're using them strategically, not broadly and reactively, but in a targeted, competitive way. At the same time, we have intensified our focus on retention, which has become a major driver of stability.

Speaker #4: Our teams are working directly with residents to keep them in their homes through thoughtful, personalized resident experience and retention initiatives, including price adjustments and other solutions.

Stephen Co: Our teams are working directly with residents to keep them in their homes through thoughtful, personalized resident experience and retention initiatives, including price adjustments and other solutions. All of this translated into metrics shown on the slide. Even with the softer backdrop, occupancy remained healthy and above market averages at 97.3% as of December 31, across the total Canadian residential portfolio. Among occupied suites, average rent increased to CAD 1,718 per month. This reflects both the challenges in today's market and how proficiently we're navigating them. So while the broader environment has temporarily softened, our operational strategy, particularly our leasing discipline and retention management, is ensuring the impact to our portfolio is meaningfully better than it otherwise would be.

Speaker #4: And all of this translates into metrics shown on the slide. Even with the softer backdrop, occupancy remained healthy and above market averages, at 97.3% as of December 31 across the total Canadian residential portfolio.

Speaker #4: And among occupied suites, average rent increased to $1,700.18 per month. This reflects both the challenges in today's market and how proficiently we're navigating them.

Speaker #4: So while the broader environment has temporarily softened, our operational strategy particularly our leasing discipline and retention management is ensuring the impact to our portfolio is meaningfully better than it otherwise would be.

Speaker #4: Turning to slide 12, I want to walk through the turnover metrics for the year. And what they're telling us about the current leasing environment in Canada.

Stephen Co: Turning to slide 12, I want to walk through the turnover metrics for the year and what they're telling us about the current leasing environment in Canada. In 2025, our blended rent uplift on turnover was +4.2%, but the composition of that turnover is important. Residents who have been in their suites for less than two years accounted for nearly half of all turnover at 48%, and those leases turned at a -6.3%. In contrast, the rest of our turnover among residents who have lived in their homes for two years or longer continue to generate stronger performance with +16% rent growth.

Speaker #4: In 2025, our blended rent uplift on turnover was plus 4.2%. But the composition of that turnover is important. Residents who have been in their suites for less than two years accounted for nearly half of all turnover at 48%.

Speaker #4: And those leases turned at a negative 6.3%. In contrast, the rest of our turnover among residents who have lived in their homes for two years or longer continued to generate stronger performance with plus 16 rent growth.

Speaker #4: Looking ahead, you can see that as of December 31, 2025, we have 27% of our residents who have been in their suites for under two years.

Stephen Co: Looking ahead, you can see that as of December 31, 2025, we have 27% of our residents who have been in their suites for under 2 years, and many of those leases currently carry negative Mark-to-Market. This represents a new cohort of leases in this situation versus 1 year ago. As market rents have declined through 2025, more leases were driven into this negative category, which has in turn extended the period over which we are expecting to feel the impact from this. So while we have absorbed much of the impact from leases that were in the negative Mark-to-Market bucket a year ago, we are now working through another tranche of leases that have fallen into this category as conditions soften further. We anticipate this dynamic will continue until we see an inflection point in market forces.

Speaker #4: And many of those leases currently carry negative mark-to-market. This represents a new cohort of leases in this situation versus one year ago. As market rents have declined through 2025, more leases were driven into this negative category, which has in turn extended the period over which we are expecting to feel the impact from this.

Speaker #4: So, while we have absorbed much of the impact from leases that were in the negative mark-to-market bucket a year ago, we are now working through another tranche of leases that fall into this category as conditions soften further.

Speaker #4: We anticipate this dynamic will continue until we see an inflection point in market forces. Housing starts are down significantly across Canada, and population growth is projected to readjust and stabilize at sustainable levels, supporting a return to a more constructive supply-demand imbalance.

Stephen Co: Housing starts are down significantly across Canada, and population growth is projected to readjust and stabilize at sustainable levels, supporting a return to a more constructive supply-demand imbalance. In the meantime, we still have 73% of our leases with residents who have been in their homes for at least 2 years, and the vast majority of those suites are embedded with positive mark-to-market value, even in a declining rent environment. This upholds a runway of stable overall rent growth, even if more moderated, while reinforcing the stability of our long-tenured resident base. With this context, our on our suite turnover in Canada, let's look at how these trends flow through to our financial results. Referring to slide 13, same-property operating revenues grew by 2.8% in Q4 to CAD 224.4 million, reflecting the operational dynamics we have just discussed.

Speaker #4: In the meantime, we still have 73% of our leases with residents who have been in their homes for at least two years. And the vast majority of those suites are embedded with positive mark-to-market value, even in a declining rent environment.

Speaker #4: This upholds a runway of stable overall rent growth, even if more moderated, while reinforcing the stability of our long-tenured resident base. With this context, on our suite turnover in Canada, let's look at how these trends flow through to our financial results.

Speaker #4: Referring to slide 13, same property operating revenues grew by 2.8% in the fourth quarter to $224.4 million, reflecting the operational dynamics we have just discussed.

Speaker #4: On the cost side, same property operating expenses decreased 1% year over year, driven by lower repairs and maintenance, as our organization-wide focus on prudent cost reduction, strong procurement practices, and tighter controllable spend discipline continue to make progress.

Stephen Co: On the cost side, same-property operating expenses decreased 1% year-over-year, driven by lower repairs and maintenance as our organization-wide focus on prudent cost reduction, strong procurement practices, and tighter controllable spend discipline continued to make progress. Together, this drove a 1.3 percentage point expansion in our same-property NOI margin to 64.4% for Q4 2025. Our diluted FFO per unit increased 1.6% to CAD 0.632, benefiting from lower interest costs as well as accretive impact of our NCIB program, which reduced our unit count and enhanced per unit performance. Our fiscal 2025 metrics are shown on slide 14.

Speaker #4: Together, this drove a 1.3% expansion in our same property and a wide margin to 64.4% for the fourth quarter of 2025. Our diluted FFO per unit increased 1.6% to $63.2, benefiting from lower interest costs as well as the accretive impact of our NCFE program, which reduced our unit count and enhanced per unit performance.

Speaker #4: Our fiscal 2025 metrics are shown on slide 14. Despite heightened cost pressures in the beginning of the year, we grew our same property NOI margin by 50 basis points, since 2024 to 64.7% in 2025, reflecting stronger performance achieved in subsequent quarters.

Stephen Co: Despite heightened cost pressures in the beginning of the year, we grew our same property NOI margin by 50 basis points since 2024 to 64.7% in 2025, reflecting stronger performance achieved in subsequent quarters. Diluted FFO per unit was CAD 2.54 for the year ended 31 December 2025, up by 0.3% compared to 2024. This earnings growth has been partially offset by net disposition activity and elevated vacancy, particularly in Europe, with the wind down of ERES. On slide 15, we provide an overview of our strong financial structure, with a well-balanced mortgage renewal ladder that has no more than 13% maturing in any single year.

Speaker #4: Diluted FFO per unit was $2.54 for the year ended December 31, compared to 2024. This earnings growth has been partially offset by net disposition activity and elevated vacancy, particularly in Europe with the wind-down of eRents.

Speaker #4: On slide 15, we provide an overview of our strong financial structure with a well-balanced mortgage renewal ladder that has no more than 13% maturing in any single year.

Speaker #4: We also have ample liquidity, with $188 million in cash and credit facility capacity, a further $200 million in unused accordion option for additional capacity, and $1.4 billion of Canadian investment properties uncovered by mortgages.

Stephen Co: We also have ample liquidity, with CAD 188 million in cash and credit facility capacity, a further CAD 200 million in unused accordion options for additional capacity, and CAD 1.4 billion of Canadian investment properties uncovered by mortgages. This flexibility gives us the agility needed to deploy capital into high return opportunities as they arise. On that note, I will return this call back to Mark.

Speaker #4: This flexibility gives us the agility needed to deploy capital into high-return opportunities at they arise. On that note, I will turn the call back to Mark.

Speaker #5: Thanks, Stephen. Turning to the next slide, I want to take a moment to focus on one of our top priorities—cash flow. Our portfolio repositioning program recycles capital from low- to high-cash-yielding properties.

Mark Kenney: Thanks, Steven. Turning to the next slide, I want to take a moment to focus on one of our top priorities: cash flow. Our portfolio repositioning program recycles capital from low to high cash yielding properties, and our rigorous property management seeks to strategically minimize discretionary spending while not compromising on safety, quality, energy efficient, or service standards. On slide 17, you can see that these two initiatives have reduced our capital expenditure as a percentage of NOI to 37% in 2025, down from the prior 10-year average of 46%, which is in addition to the decrease in operating costs highlighted earlier. As we move forward, further strengthening of our cash flow performance will remain a key objective. With that, on slide 18, I'd like to recognize the exceptional talent at CAPREIT.

Speaker #5: And our rigorous property management seeks to strategically minimize discretionary spending, while not compromising on safety, quality, energy efficiency, or service standards. On slide 17, you can see that these two initiatives have reduced our capital expenditure as a percentage of NOI to 37% in 2025.

Speaker #5: Down from the prior 10-year average of 46%. Which is in addition to the decrease in operating costs highlighted earlier. As we move forward, further strengthening of our cash flow performance will remain a key objective.

Speaker #5: With that, on slide 18, I'd like to recognize the exceptional talent at Capri. Our people's dedication and shared vision remain our greatest strength. And this was key to our delivery of solid strategic, operational, and financial results in 2025.

Mark Kenney: Our people's dedication and shared vision remain our greatest strength, and this was key to our delivery of solid strategic, operational, and financial results in 2025. We're proud to see this culture also validated by CAPREIT's certification as a 2025 Mercer Best Employer in Canada. We've never had a more capable team in place to achieve our goals, and on behalf of everyone here, thank you to our stakeholders for your continued trust and support. We look forward to further enhancing the living experience of our residents, improving the communities in which we operate, and creating value for our unitholders in 2026. We would now be pleased to take your questions.

Speaker #5: We're proud to see this culture also validated by CAPREIT's certification as a 2025 Mercer Best Employer in Canada. We've never had a more capable team in place to achieve our goals, and on behalf of everyone here, thank you to our stakeholders for your continued trust and support.

Speaker #5: We look forward to further enhancing the living experience of our residents, improving the communities in which we operate, and creating value for our unit holders in 2026.

Speaker #5: We would now be pleased to take your questions.

Operator: Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Jimmy Shan from RBC Capital Markets. Your line is now open. Please go ahead.

Speaker #1: Thank you. To ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2.

Speaker #1: When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Jimmy Shan from RBC Capital Markets. Your line is now open.

Speaker #1: Please go ahead.

Jimmy Shan: Thanks. So just thanks for the added color on the turnover stats. So two questions there, I guess. On the 27% of the portfolio that are less than two years, how much above market are they? And similarly, on the remaining, how much below market are the above two-year tenure?

Speaker #5: Thanks. So just thanks for the added color on the turnover stats. So, two questions there, I guess. On the 27% of the portfolio that are less than two years, how much above market are they?

Speaker #5: And similarly, on the remaining, how much below market are the above two-year tenure?

Speaker #3: Yeah, so, yeah, Jimmy, you're asking for, I guess, the mark-to-market on that portfolio. If we look at the under two years, we're averaging probably around negative 8% is what we're seeing.

Mark Kenney: Yeah. So again, Jimmy, you're asking for, I guess, the Mark-to-Market on that portfolio. If we look at the under two years, we're averaging probably around -8%, is what we're seeing. And then anything above that, it's in the +20%. And we would-

Speaker #3: And then anything above that, it's in the plus 20%. And we would expect to see that sort of trend hold over the next short term, at least as far as we can see in the market.

Jimmy Shan: Twenty?

Mark Kenney: Expect to see that, sort of trend to hold over the next, short term, at least as far as we can see in the market, and we'll keep people updated as we see change in trend on that.

Speaker #3: And we'll keep people updated as we see changes in trend on that.

Speaker #5: Okay. And I just want to make sure I heard right—20% you said, right?

Jimmy Shan: Okay. And I just want to make sure I understood. I heard right. 20% you said, right?

Speaker #3: Yeah, plus, plus 20%. So it's about that.

Mark Kenney: Yeah, plus. Plus 20%. So it's above that.

Speaker #5: Plus 20%. Yeah. Okay. And then I guess, by my math, if your turnover rate is around 20%, your return rate, and half of them are these above-market leases.

Jimmy Shan: +20%. Yeah. Okay. And then, I guess, you know, by my math, then, if your turnover rate is around 20%, your churn rate, and half of them are these above-market leases. So it'll take probably, you know, 2.5 to 3 years to churn through these leases, everything else staying the same.

Speaker #5: So, it'll take probably two and a half to three years to turn through these leases, everything else staying the same.

Speaker #3: I think it's got a lot to do with resident mentality as well. If you're paying an above-market rent, and you're shopping the market, you're going to leave more quickly than just following the trend line to date.

Mark Kenney: I think it's got a lot to do with resident mentality as well. Like, if you're paying an above-market rent, then and you're shopping the market, you're going to leave more quickly than just following the trend line to date. So it is. Again, we've not been through this COVID leasing post-free phenomenon before, but we would expect to have a lot more clarity in the spring as the spring market emerges with notices and seeing, you know, what is actually going to happen. So it's hard to gauge trend right now because the winter season is always slower, but the spring season will really reveal sort of the acceleration of those leases, and we'll be able to give better quantification to the impact.

Speaker #3: So it is, again, we've not been through this COVID leasing post-free phenomenon before. But we would expect to have a lot more clarity in the spring as the spring market emerges with notices and seeing what is actually going to happen.

Speaker #3: So, it's hard to gauge trend right now because the winter season is always slower. But the spring season will really reveal sort of the acceleration of those leases, and we'll be able to get better quantification to the impact.

Speaker #5: Yeah, okay. No, that's fair. And then, on the OPEX growth: obviously, this quarter, you saw another pretty good savings on the other OPEX category.

Jimmy Shan: Yeah. Okay. No, that's fair. And then, then on the OpEx growth, what, what's your-- obviously this quarter you saw, you know, another pretty good savings, on the other OpEx category. How, how do we think about that for 2026 on a year-over-year basis?

Speaker #5: How do we think about that for 2026 on a year-over-year basis?

Mark Kenney: ... We're pretty excited. We're using more and more technology to help draw in competitive process. And we obviously are looking forward to the benefits of the newer portfolio, which tend to have more pass-through costs to begin with and generally lower operating costs. So that's also helping. It's also a slight function of the assets that we're selling, having higher costs associated with both CapEx and operating costs, and then bringing in these higher quality. But there is more obviously happening than just that. So we think that with ongoing technology and being able to better access the market, we look forward to those cost controls continuing without compromising standard.

Speaker #3: We're pretty excited. We're using more and more technology to help draw in competitive process. And we obviously are looking forward to the benefits of the newer portfolio, which tends to have more pass-through costs to begin with and generally lower operating costs.

Speaker #3: So that's also helping. It's also a slight function of the assets that we're selling, having higher costs associated with both CapEx and operating costs, and then bringing in these higher quality.

Speaker #3: But there is more obviously happening than just that. So, we think that with ongoing technology and being able to better access the market, we look forward to those cost controls continuing.

Speaker #3: Without compromising standard.

Speaker #4: Yeah. And Jimmy, if I look at 2026—I mean, we're in the first quarter, there's a mix of things happening, but we're going to have a benefit from the carbon tax reduction that was effective last year as of April.

Stephen Co: Yeah, and Jimmy, well, if I look at 2026, I mean, we're. In the first quarter, we're, you know, there's a mix of things happening, but we're gonna have a benefit of the carbon tax reduction that, you know, was effective last year as of April. So on a base effect, it's gonna be, you know, favorable. But again, the winter season has been a bit challenging. There's a lot more snow. It's a lot colder in terms of the weather. I mean, if I take, exclude all those things, I mean, I would just say, OpEx growth was, you know, where we were forecasting was gonna be about inflation.

Speaker #4: So on the base effect, it's going to be favorable. But again, the winter season has been a bit challenging. There's a lot more snow with a lot colder in terms of the weather.

Speaker #4: I mean, if I take—exclude all those things—I mean, I would just say OPEX growth was, where we were forecasting, was going to be above inflation.

Stephen Co: But if, if there's that impact of carbon tax and the, and the heavier snow and, and colder winter, you know, you kinda have to balance that or adjust that in your model.

Speaker #4: But if there’s that impact of carbon tax and the heavier snow and colder winter, you kind of have to balance that, or adjust on your model.

Stephen Co: But if, if there's that impact of carbon tax and the, and the heavier snow and, and colder winter, you know, you kinda have to balance that or adjust that in your model.

Speaker #5: Okay. Okay. Thanks, guys.

Dean Wilkinson: Okay. Okay, thanks, guys.

Jimmy Shan: Okay. Okay, thanks, guys.

Speaker #1: Thank you. Our next question comes from Mike Makitis from BMO Capital Markets. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Mike Markidis from BMO Capital Markets. Your line is now open. Please go ahead.

Speaker #6: Thanks, operator. Good morning, Mark and Stephen. I just wanted to ask, I guess, following on Jimmy's line of questioning—he came up with his own estimate of two to three years to get through the less than two-year cohort, I guess we would call it.

Mike Markidis: Thanks, operator. Good morning, Mark and Stephen. I just wanted to ask, like, I guess, following on Jimmy's line of questioning and came up with his own estimate of 2 to 3 years to get through the less than 2-year cohort, I guess, we would call it. But that presumes, you know, they stay in place, and they don't reset along the way. So I guess my question would be is, you know, given what you're seeing, should we expect that your renewal rate experience will continue to be under pressure just because you're gonna try and retain some of these, and they get reset down to market as we go without term?

Speaker #6: But that presumes they stay in place and they don't reset along the way. So I guess my question would be is, given what you're seeing, should we expect that your renewal rate experience will continue to be under pressure just because you're going to try and retain some of these and make it reset down to market as we go without return?

Speaker #3: I would say Ontario renewals are extremely solid given the guideline. But we still think that we can expect greater than 2% type renewals overall.

Mark Kenney: I would say, you know, Ontario renewals are extremely solid, given the guideline. But we still think that we can expect greater than 2% type renewals overall. Different markets that are, you know, western markets that are fully at market, obviously, are gonna have a different renewal experience than places like Ontario, or even in Quebec, for that matter. But it's-- We're still feeling strong on the renewal front. It's adjusting through these post-COVID leases that CAPREIT of all have to sort of work through, given our +30% mark-to-market achievement during post-COVID. That's what we're working through now.

Speaker #3: Different markets that are Western markets that are fully at-market, obviously, are going to have a different renewal experience than places like Ontario. Or even in Quebec for that matter.

Speaker #3: But it's we're still feeling strong in the renewal front. It's adjusting through these post-COVID leases that cap rate of all have to sort of work through.

Speaker #3: Given our plus 30% mark-to-market achievement during post-COVID, that's what we're working through now.

Speaker #5: Okay, no, that's fair. So, I mean, I guess if you think about sort of revenue—and I know you don't like to give forward guidance—but, I mean, this 2 to 3 percent revenue growth, kind of the objective for this year, would that be a good outcome given what you're seeing?

Mike Markidis: Okay. No, that's fair. So, I mean, I guess if you think about sort of revenue, and I know you don't like to give forward guidance, but, I mean, this 2 to 3% revenue growth, kind of the objective for this year, would that be a good outcome, given what you're seeing?

Speaker #3: Objective and what we're shooting for is a good way to put it. And yes, we're again, the only reason I'm pausing slightly is it's all in the spring market.

Mark Kenney: Objective and what we're shooting for is a good way to put it. And yes, we're... Again, the only reason I'm pausing slightly is it's all in the spring market. The spring market will really give us confidence in sort of direction here. But we will keep people posted.

Speaker #3: The spring market will really give us confidence in sort of direction here. But we will keep people posted.

Speaker #5: Okay. And I guess you guys do get leads, but I mean, when does the in keeping with that theme with the spring market, because your comment's not dissimilar to what we're hearing from other peers, but when do you typically mark historically see that uptick in spring leasing?

Mike Markidis: Okay. And I guess you guys do get leads, but, I mean, when does the, you know, keeping with that theme, with the spring market, because your comment's not dissimilar to what we're hearing from other peers. But when do you typically, Mark, historically, see that uptick in spring leasing and maybe not just the leasing, but the leads and the traffic, where we'll be able to, you know, get a sense of how that's shaping up?

Speaker #5: And maybe not just the leasing, but the leads and the traffic, where we'll be able to get a sense of how that's shaping up?

Speaker #3: Ontario 60-day notice. So, 60 days prior to whatever month we’re calling spring—spring or summer—we get a lead, get an idea of velocity.

Mark Kenney: Ontario, 60-day notice, so 60 days prior to whatever month we're calling spring, spring or summer, we get a lead, get an idea of velocity. Quebec, it's we get a lot more lead time, so we're already starting to form a view in, in Quebec, and some of the other markets are 30 days, so it comes up and sneaks on you quite, quite quickly. And so we're not seeing notices given. So the CAPREIT portfolio is anchored in Ontario, with, you know, 60 days kind of visibility, and, and we, we don't quite have a view on that yet.

Speaker #3: In Quebec, we get a lot more lead time. So we're already starting to form a view in Quebec. And some of the other markets are 30 days.

Speaker #3: So it comes up and sneaks on you quite quickly. And so we're not seeing notices given. So the cap rate portfolio is anchored in Ontario.

Speaker #3: With 60 days kind of visibility and we don't quite have a view on that yet.

Speaker #5: Okay. And last one for me before I turn it back. Market rents obviously declined last year. And you've got many different markets, so I'm sure it's very specific.

Mike Markidis: Okay. Last one from me, before I turn it back. You know, market rents obviously declined last year, and you've got many different markets, so I'm sure it's very specific. Just broadly speaking, do you think market rent growth has decelerated? Has it stabilized? What are your thoughts on that right now?

Speaker #5: But just broadly speaking, do you think market rent growth has decelerated? Has it stabilized? What are your thoughts on that right now?

Speaker #3: We're in a very interesting window of adjusting to the impacts of temporary residence leaving and new supply coming at never-before-seen volumes in Toronto, Vancouver, and Montreal.

Mark Kenney: We're in a very interesting window of adjusting to the impacts of temporary residents leaving and new supply coming at never-before-seen volumes in Toronto, Vancouver, Montreal. And these are key markets for us, obviously, but we're somewhat insulated. The Greater Toronto market for us is suburbs primarily, and that's holding up quite strong. You know, then the core of Toronto is where the most pressure is, and we've talked extensively about, you know, micro condos not being competition for us. But you can't really. There is a window here that we've never seen before in our country's history of decelerated population growth and supply that was initiated four years ago, so four and five years ago, quite frankly. So despite that, we're quite optimistic with how things are holding together.

Speaker #3: And these are key markets for us—obviously—but we're somewhat insulated. The Greater Toronto market for us is suburbs, primarily. And that's holding up quite strong.

Speaker #3: The core of Toronto is where the most pressure is. And we've talked extensively about micro-condos not being competition for us. But you can't really there is a window here that we've never seen before in our country's history of decelerated population growth.

Speaker #3: And supply that was initiated four years ago, so four and five years ago, quite frankly. So, despite that, we're quite optimistic with how things are holding together.

Mark Kenney: But that's why it's hard to call the market. It was quite easy when we had steady immigration and steady housing supply, and that was the story for over 20 years. Now we're in this period of rapid adjustments, really going back to 2015 of COVID, you know, 2015 to 2020, temporary resident acceleration, COVID. What happened post-COVID has never happened in the country's history before, with over 1 million people a year coming in 3 years in a row, followed by a population decline. So obviously, this is going to have short-term impacts on the rental market, but the broader outlook is incredibly positive given the lack of starts of housing that we're seeing coast to coast.

Speaker #3: But that's why it's hard to call the market. It was quite easy when we had steady immigration and steady housing supply. And that was the scenario for over 20 years.

Speaker #3: And now we're in this period of rapid adjustments, really going back to 2015 of 2015 to 2020, temporary resident acceleration, COVID, what happened post-COVID is never happened in the country's history before.

Speaker #3: With over a million people a year coming in three years in a row, followed by population decline. So obviously, this is going to have short-term impacts on the rental market.

Speaker #3: But the broader outlook is incredibly positive given the lack of starts of housing that we're seeing coast to coast. So it is very, very difficult to kind of navigate exactly where this is going to line up.

Mark Kenney: So it is very, very difficult to kind of navigate exactly where this is gonna line up, but the outlook is very positive.

Speaker #3: But the outlook is very positive.

Speaker #5: Understood. Thanks. I appreciate the comments.

Mario Saric: Understood. Thanks. I appreciate the comments.

Speaker #1: Thank you. Next question comes from Jonathan Kelcha from TD Cowan. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Jonathan Kelcher from TD Cowen. Your line is now open. Please go ahead.

Speaker #2: Thanks. Good morning. Just going back to the turnover slide, you talked about the mark-to-market under two years being at negative 8%. How has that trended and do you think that's peaked?

Jonathan Kelcher: Thanks. Good morning.

Mark Kenney: Good morning.

Jonathan Kelcher: Back to the turnover slide. You talked about the mark-to-market under two years being at negative 8%. How has that trended, and do you think that's peaked?

Speaker #3: Well, Stephen could talk about what percentage of those under twos are left. And then really what you're asking is what we're all trying to figure out.

Mark Kenney: Well, Stephen can talk about what, what percentage of those under twos are left, and then really what you're asking is what we're all trying to figure out, when will those people give notice? Will it be steady as it's been, or will it be accelerated in the spring? You know, anyone's guess is really there, Jonathan. We don't have the insights of what people are thinking with their intentions to move. But we know what's happened so far, and it's been relatively steady. But we haven't been through, like, that spring season like this, so we'll see. I know I'm not giving too much clarity on this, but I can only talk about our experience to date and what we can anticipate, given the fact we've never been through this before.

Speaker #3: When will those people get noticed? Will it be steady as it's been, or will it be accelerated in the spring? Anyone's guess is really there, Jonathan.

Speaker #3: We don't have the insights into what people are thinking with their intentions to move, but we know what's happened so far, and it's been relatively steady.

Speaker #3: But we haven't been through that spring season like this. So we'll see. I know I'm not giving too much clarity on this. But I can only talk about our experience to date and what we can anticipate given the fact we've never been through this before.

Speaker #2: Okay, fair enough. And then, Stephen, just back on the op cost question—you said, excluding carbon tax in the winter season, you're expecting about inflation for the year.

Jonathan Kelcher: Okay. Fair enough. And then, Stephen, just back on the op cost question. You said, excluding carbon tax in the winter season, you're expecting about inflation for the year. Would you say the, like, the challenges from the winter season, the carbon tax, do they, like, do they fully offset each other, or is one sort of bigger than the other?

Speaker #2: Would you say the challenges from the winter season and the carbon tax—do they fully offset each other, or is one sort of bigger than the other?

Speaker #3: Yeah. Well, I mean, I would say the colder winter probably has a bigger effect. And then you also have some of the additional—we have snow hauling that I would say is non-recurring, or at least for this year it is going to be much greater than last year.

Mark Kenney: Yeah. Well, I mean, I would say the colder winter probably has a bigger effect. And then you also have some of the additional. We have snow hauling that I would say is non-recurring, or at least for this year, is going to be much greater than last year. And what we're expecting is about CAD 200,000 to 300,000 incremental in terms of cost. But definitely, I think the colder season has a much bigger impact. And we're right in the middle of it. Like, you know, we had a week of -20 weather in Toronto, so real-time, it's hard to kinda grasp - Yeah - Q1 when we're literally in the middle of it. But it's been cold. It's been cold, definitely in the eastern part of Canada.

Speaker #3: And what we're expecting is about 200 to 300 thousand dollars incremental in terms of cost. But definitely, I think the colder season has a much bigger impact.

Speaker #3: And we're right—we're right in the middle of it. We had a week of minus-20 weather in Toronto. So, real-time, it's hard to kind of grasp the first quarter when we're literally in the middle of it.

Speaker #3: But it's been cold. It's been cold, definitely in the eastern part of Canada. And yet we've got a lot of energy initiatives that we put in last year that will help mitigate.

Mark Kenney: And yet we've got a lot of energy initiatives that we put in last year that will help mitigate. But it's real-time, right now, Jonathan, like we're mid-Feb kind of thing, and it's warming up a little bit. But if we had a 40-day, 45-day forecast, we could probably give you a better answer, but it's hard, hard to tell right now.

Speaker #3: But it's real-time. Right now, Jonathan, we're mid-Feb kind of thing. And it's warming up a little bit. But if we had a 40-day, 45-day forecast, we could probably give you a better answer.

Speaker #3: But it's hard to tell right now.

Jonathan Kelcher: Fair. Fair. It has been cold. It has been cold. And lastly, just on the 11% of the portfolio that's still in the opportunistic disposition bucket, how like, how should we think about timing on that? Do you have any disposition targets for this for 2026?

Speaker #2: Fair. It has been cold. It has been cold. And lastly, just on the 11% of the portfolio that's still in the opportunistic disposition bucket, how should we think about timing on that?

Speaker #2: Do you have any disposition targets for this for 2026?

Speaker #3: No, we haven't guided on that at all. But this is definitely opportunistic. There is no rush here. These are steady-performing assets. But if we can arc the market with getting low cap rate deals across the line and replacing them with newer construction or legacy assets at a higher cap rate with better CapEx profiles, then we will want to pursue that.

Mark Kenney: So we have-- we haven't guided on that at all, but this is definitely opportunistic. There is no rush here. These are steady-performing assets. But if we can arm the market with getting low Cap Rate deals across the line and replacing them with new, newer construction or legacy assets at a higher Cap Rate with better CapEx profiles, then we will want to pursue that. And we're really about, you know, this-- the adjustment period is over, and we're looking for opportunistic growth now. We are a real estate company that's committed to real estate, and we're out there looking very hard for the right deals for Cap Rate.

Speaker #3: And we're really about the adjustment period is over. And we're looking for opportunistic growth now. We are a real estate company that's committed to real estate.

Speaker #3: And we're out there looking very hard for the right deals for cap rate.

Speaker #2: Okay, that's it for me. I'll turn it back. Thanks.

Jonathan Kelcher: Okay. That's, that's it for me. I'll turn it back. Thanks.

Speaker #1: Thank you. Next question comes from Kyle Stanley from Desjardins. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Kyle Stanley, from Desjardins. Your line is now open. Please go ahead.

Speaker #4: Thanks. Morning, guys.

Kyle Stanley: Thanks. Morning, guys.

Speaker #3: Good morning, guys.

Mark Kenney: Morning.

Kyle Stanley: Appreciate all the commentary on the spring leasing season and how obviously difficult that is to forecast this early. But just maybe thinking about before we get to the spring leasing season, how has leasing demand been to start the year? Have you noticed any changes versus Q4? You know, obviously, the snow and cold, late January, early February, that you were just talking about, has that impacted demand at all? Just curious on your thoughts.

Speaker #4: Appreciate all the commentary on the spring leasing season and how, obviously, it is difficult to forecast this early. But just maybe, thinking about before we get to the spring leasing season, how has leasing demand been to start the year?

Speaker #4: Have you noticed any changes versus the fourth quarter? Obviously, the snow and cold in late January or early February, which they were just talking about—has that impacted demand at all?

Speaker #4: Just curious on your thoughts.

Speaker #3: Yeah. It's a good question. It's been chilly in the rental offices. As well. It's weather does impact things. We saw the same phenomenon last year.

Mark Kenney: Yeah, it's, it's a good question. It's been chilly in the rental offices, as well. You know, it's weather does impact things. We saw the same phenomenon last year. And we were trying to figure out, was it the effect of Trump tariffs or was that having an effect? And then the spring leasing season was pretty decent. We feel very good about the quality of the portfolio. We feel very good about the acquisitions and dispositions that we've done. We think we're well, well-positioned once the weather does kind of warm up. But it's a very typical phenomenon to see people, like, defer the decision when it's minus 25 outside, and this has been an exceptionally cold season.

Speaker #3: And we were trying to figure out, was it the effect of Trump tariffs, or was that having an effect? And then the spring leasing season was pretty decent.

Speaker #3: We feel very good about the quality of the portfolio. We feel very good about the acquisitions and dispositions that we've done. We think we're well, well positioned.

Speaker #3: Once the weather does kind of warm up. But it's a very typical phenomenon to see people defer the decision when it's minus 25 outside.

Speaker #3: And this has been an exceptionally cold season. So, again, hard to say. But we have to acknowledge the fact that it's definitely not been a robust season of leasing.

Mark Kenney: So again, hard to say, but we have to acknowledge the fact that it's definitely not been a robust season of leasing.

Speaker #4: Okay, no, that's fair enough. Maybe just moving over to your commentary on the capital recycling program—and indicating that you're approaching the end of it, that the bulk of the work's been done after a busy couple of years.

Kyle Stanley: Okay. No, that's fair enough. Maybe just moving over to kind of your commentary on the capital recycling program and, you know, indicating that you're approaching the end, the bulk of the work's been done after a busy couple of years. How does your kind of corporate strategy shift in response to that? I mean, you know, you just talked about the 11% of the portfolio that's opportunistic for dispositions. I mean, has the disposition environment shifted? You know, do you expect that you can still get the solid pricing that you've been able to get? I'm just trying to think about, you know, the next steps, as, you know, maybe this chapter is a little more closed.

Speaker #4: How does your kind of corporate strategy shift in response to that? I mean, you just talked about the 11% of the portfolio that's opportunistic for dispositions.

Speaker #4: I mean, has the disposition environment shifted? Do you expect that you can still get the solid pricing that you've been able to get? I'm just trying to think about the next steps as maybe this chapter is a little more closed.

Speaker #3: So the disposition market has definitely had an effect on programs—government programs, whether they be nonprofit programs or MLI Select. And those programs marry up with our ambitions for the part of the portfolio we want to sell.

Mark Kenney: So the disposition market has definitely had an effect of, I think programs, government programs, whether they be nonprofit programs or MLI Select. And those programs marry up with our ambitions of the part of the portfolio we want to sell. And it's also good corporate citizenship to be vending into a good cause for Canada. So we will always be focused on maintaining value for our unitholders. But if those programs continue as we expect they will, especially on the Rental Protection Fund front, we're still waiting to hear from the federal government on more clarity there. But that, that's very positive for the value of the portfolio.

Speaker #3: And it's also good corporate citizenship to be vending into good causes for Canada. So we will always be focused on maintaining value for our unitholders.

Speaker #3: But if those programs continue as we expect they will, especially on the rental protection fund front, we're still waiting to hear from the federal government on more clarity there.

Speaker #3: But that's very positive for the value of the portfolio. And what I'm glad you brought this up, Kyle, because what I can tell you is we have seen our valuations really hold up well.

Mark Kenney: I'm glad you brought this up, Kyle, because what I can tell you is, we, you know, have seen our valuations really hold up well. You know, it's been proven out by our disposition program, and we're seeing trades in the marketplace that people are still very much interested in the apartment market. There's plenty of liquidity for apartment buildings. There's a lot of trades going on out there, and it's very... It's much more diverse in who the buyers are than I've ever seen before. So it's not like one party is leading the valuation in the marketplace. It's highly diversified in terms of who the buyer pool is, and that's great news for CAPREIT, great news for all the apartment REITs, quite frankly.

Speaker #3: It's been proven out by our disposition program, and we're seeing trades in the marketplace that people are still very much interested in the apartment market.

Speaker #3: There's plenty of liquidity for apartment buildings. There are a lot of trades going on out there. And it's much more diverse in who the buyers are.

Speaker #3: Than I've ever seen before. So it's not like one party is leading the valuation in the marketplace. It's highly diversified in terms of who the buyer pool is.

Speaker #3: And that's great news for cap rate. It's great news for all the apartment REITs, quite frankly. And that's why we're all quite passionate about our NAV and very comfortable about NAV.

Mark Kenney: That's why we're all quite passionate about our NAV and very comfortable about NAV, because we keep, all of us, quite frankly, CAPREIT and our peers, are proving it out in dispositions. And we're really proving it out with the dispositions that, that are probably not strategically aligned for the long run. So all, all good news there. Stephen, would you add anything to that?

Speaker #3: Because we keep all of us, quite frankly, cap rate and our peers are proving it out in dispose. And we're really proving it out with the disposed that are probably not strategically aligned for the long run.

Speaker #3: So all good news there. Stephen, would you add anything to that?

Speaker #2: No. I guess one Mark always talks about it. We have three buckets that we can deploy capital. And right now, debt is it's fairly stable in terms of rates.

Stephen Co: No, I guess, you know, Mark always talks about it. We have three buckets that we can deploy capital, and right now, debt is, you know, it's fairly stable in terms of rates, and that's definitely not where we're going to deploy. But opportunistic acquisitions, obviously, the NCIB program, where, you know, the private-public disconnect in terms of pricing, I definitely think the NCIB is very attractive to us.

Speaker #2: And that's definitely not where we're going to deploy. But opportunistic acquisitions, obviously, the NCIB program—where the private-public disconnect in terms of pricing—I definitely think the NCIB is very attractive to us.

Speaker #4: Okay. No, that's very helpful.

Kyle Stanley: Okay. No, that's very helpful.

Speaker #3: Yeah. And we've talked about this. Again, I'll talk to our peers as well. None of us are trading at valuations where you can buy apartments at these cap rates.

Mark Kenney: Yeah, and we've talked about this, like, you know. Again, I'll talk to our peers as well. Like, none of us are trading at valuations where you can buy apartments at these cap rates. Like, when you look at our trading values, when you look at cap rates, it's massively disconnected, coast to coast, not just unique to CAPREIT, it's coast to coast. And we are, in particular, puzzled by this disconnect in our case, because there's such strong liquidity for our assets. But that's a story that'll continue on, no doubt, and we love to talk about that whenever we have a chance to, because there's plenty of proof.

Speaker #3: When you look at our trading values and you look at cap rates, it's massively disconnected. Coast to coast. It's not just unique to cap rate.

Speaker #3: It's coast to coast. And we are, in particular, puzzled by this disconnect in our case, because there's such strong liquidity for our assets. But that's a story that'll continue on, no doubt.

Speaker #3: And we love to talk about that whenever we have a chance to. Because there's plenty of proof.

Speaker #4: Right. No, that makes a lot of sense. I appreciate that. Just another—maybe a high-level question. The Lastrentals.ca report, it kind of highlighted an improvement in affordability across the country, with rents now on average representing less than 30% of median incomes.

Kyle Stanley: Right. No, that makes a lot of sense. I appreciate that. Just another, maybe a high-level question. The last Rentals.ca report, it kind of highlighted an improvement in affordability across the country, with rents now on average representing less than 30% of median incomes. That obviously probably isn't the case in Ontario, but I'm just wondering: Are you seeing any changes in tenant behavior that would suggest maybe affordability is less of a concern today than it's been?

Speaker #4: That obviously probably isn't the case in Ontario. But I'm just wondering, are you seeing any changes in tenant behavior that would suggest maybe affordability is less of a concern today than it's been?

Speaker #3: All I can say is that it's great news for Canada. I love hearing these kinds of statistics for Canadians. It's not the greatest news for development.

Mark Kenney: All I can say is that it's great news for Canada. I love hearing these kinds of statistics for Canadians. It's not the greatest news for development, because as rents fall, the likelihood of breaking ground on new homes also falls. We need a bit of balance in the market, given the population decline story that we're seeing in pockets across Canada. And we need that absorption of that supply from a business point of view for it. But as a Canadian that's talked loudly about this, I'm very happy to see affordability falling in line, and the market will become balanced, and that's good news for all of us.

Speaker #3: Because as rents fall, the likelihood of breaking ground on new homes also falls. We need a bit of balance in the market given the population decline story that we're seeing in pockets across Canada.

Speaker #3: And we need that absorption of that supply from a business point of view for it. But as a Canadian that's talked loudly about this, I'm very happy to see affordability falling in line.

Speaker #3: And the market will become balanced. And that's good news for all of us.

Speaker #4: Right. Okay. Thank you very much. I will turn it back.

Kyle Stanley: Right. Okay, thank you very much. I will turn it back.

Speaker #3: Thanks.

Mark Kenney: Thanks.

Speaker #1: Thank you. Our next question comes from Brad Sturges from Raymond James. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Brad Sturges, from Raymond James. Your line is now open. Please go ahead.

Speaker #5: Hey, good morning. Just, I guess, following on some of the lines of questions that Kyle had there. Just on maybe broadly speaking on the acquisition opportunity set today, what are you seeing in the market, whether it's new construction or kind of your core legacy asset pool that would have kind of a low capex feature that you're looking for?

Brad Sturges: Hey, good morning. Just, I guess following on some of the lines of questions that Kyle had there, just on, maybe broadly speaking, on the acquisition opportunity set today. What, what are you seeing in the market, whether it's new construction or kind of your core legacy asset pool, that would have kind of a low CapEx feature that you're looking for? Is the opportunity set sort of shifted or the composition changed at all in the last few months?

Speaker #5: Is the opportunity set sort of shifted or the composition changed at all in the last few months?

Speaker #3: I think that we are seeing fewer deals come to market. It is quite difficult to find opportunities out there, which is a double-edged sword.

Mark Kenney: I think that we are seeing a fewer deals come to market. It is quite difficult to find opportunities out there, which is a double-edged sword. It shows the strength and the interest that investors have in apartments in Canada. We have to remain disciplined in CAPREIT's approach to hunting value. But, as an example, Brad, the developers that got caught during COVID with higher interest rates and just had to sell because of leverage, those situations have washed through the market now, and we're seeing less and less of that. It's more portfolios that maybe have other assets attached to them, other asset classes that need some liquidity, and apartments are a good place to go for strong liquidity.

Speaker #3: It shows the strength and the interest that investors have in apartments in Canada. It will we have to remain disciplined in cap rates approach to hunting value.

Speaker #3: But as an example, Brad, the developers that got caught during COVID with higher interest rates and just had to sell because of leverage, those situations have washed through the market now.

Speaker #3: And we're seeing less and less of that. It's more portfolios that maybe have other assets attached to them, other asset classes that need some liquidity.

Speaker #3: And apartments are a good place to go for strong liquidity. But its volumes are relatively light. And cap rates are holding up relatively quite strong.

Mark Kenney: But it's volumes are relatively light and cap rates are holding up relatively quite strong. So, you know, the spread between cost of money and cap rates that are trading in the market is very much in line with historical, if not on the low side. So the rates are a bit higher. Cap rates are a little higher, but the spreads are holding together. It's not compressing slightly, which is, again, a bullish story for the Canadian rental market.

Speaker #3: So the spread between cost of money and cap rates that are trading in the market is very much in line with historical, if not on the low side.

Speaker #3: So, rates are a bit higher. Cap rates are a little higher. But the spreads are holding together, if not compressing slightly. Which is, again, a bullish story for the Canadian rental market.

Speaker #1: The market

Speaker #2: If you know if there's a bit of distress or liquidity requirements from a developer, like, would you be willing to take on a bit of lease-up risk to get better pricing on a very attractive long-term asset?

Brad Sturges: If you know, if there's a bit of distress or liquidity requirements from a developer, like, would you be willing to take on a bit of lease-up risk to get better pricing on a very attractive long-term asset?

Speaker #3: Absolutely. We're absolutely, you know, we are a real estate company that has gone through repositioning, that's poised to grow. To even talk about our leverage levels being very conservative.

Mark Kenney: Absolutely. You know, we are a real estate company that has gone through repositioning that's poised to grow. Steve had talked about our leverage levels being very conservative. But to temper enthusiasm, because rents have fallen a little bit, it's not the developer selling that we would see opportunity in. It would actually be bank repossessions, where you really get, you know, rents falling in line with what valuation should be. And that's really yet to happen. So you've seen a little bit of that on the land development front, but we've not seen that in the apartment market. There's still, you know, frothy demand for deals out there, and values really just haven't collapsed to the same extent that rents have.

Speaker #3: But to temper enthusiasm Because rents have fallen a little bit . It's not the developer selling that we would see opportunity in . It would actually be bank repossessions , where you really get , you know , rents falling in line with with , you know , what valuation should be .

Speaker #3: And that's really yet to happen . So you've seen a little bit of that on the on the land development front , but we've not seen that in the apartment market .

Speaker #3: There's still , you know , frothy demand for , for for deals out there . And values really just haven't collapsed to the same extent that rents have

Speaker #2: Understood. Thanks. I'll turn it back.

Brad Sturges: Understood. Thanks. I'll turn it back.

Speaker #4: Thank you. Our next question comes from Sairam from ATB Capital Markets. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Sairam Srinivas from ATB Capital Markets. Your line is now open. Please go ahead.

Speaker #5: Thank you . Operator . Mark , going back to your comments on , you know , the

Sairam Srinivas: Thank you, operator. Mark, going back to your comments on, you know, the various markets and their performance, and when you overlay that with your comments on the growth for CAPREIT ahead, how are you seeing a geographic capital location strategy in terms of acquisitions?

Speaker #3: It's a great question . The cap rate maintains that the best rental markets in Canada are Toronto , Vancouver , Montreal . And as we work through this shift in temporary residence , those are the markets that are affected .

Mark Kenney: It's a great question. CAPREIT maintains that the best rental markets in Canada are Toronto, Vancouver, Montreal. And as we work through this shift in temporary residence, those are the markets that are affected. And because those markets were really the landing spot for immigration, that is where we saw the most development. Okay? So there is no question that when we return to, like, stable population growth, these are the markets to be in for the long term. Canada is working through unprecedented post-COVID temporary resident growth. You know, we, I think, Sai, we may have showed you before, in our investor deck, this phenomenon of temporary residents that's never happened in our history before. And those residents are being converted into permanent residents now, which is the form of immigration, but it's resulting in population decline in some markets.

Speaker #3: And because those markets were really the landing spot for immigration, that is where we saw the most development. Okay. So there is no question that when we return to, like, stable population growth, these are the markets to be in for the long term.

Speaker #3: Canada is working through unprecedented post-Covid temporary resident growth . You know , we I think we may have showed you before in our investor deck this this phenomenon of temporary residence that's never happened in our history before .

Speaker #3: And those residents are being converted into permanent residents now, which is a form of immigration. But it's resulting in population decline in some markets.

Speaker #3: So what we will look for in all likelihood , are opportunities across the board . But we're going to look for more stability in markets that that represent good affordability , that represent a good strength .

Mark Kenney: So what we will look for, in all likelihood, are opportunities across the board, but we're going to look for more stability in markets that represent good affordability, that represent good strength. But we're going to remain disciplined. And it's hard to predict because we've got a-- we're in 10 markets now. We got our eyes on all 10 of those markets and open to new ones, but really with a keen focus to what CAPREIT is all about, which is our big Canadian rental markets. And we remain quite bullish on the outlook for those markets. But again, we've not been through this window of time before. But the outlook is strong. It's very, very good.

Speaker #3: But we're going to remain disciplined . And it's hard to predict because we've got a we're in ten markets now . We've got our eyes on all ten of those markets and open to new ones .

Speaker #3: But but really with a keen focus to what cap rates all about , which is our big Canadian rental markets . And we remain quite bullish on the outlook for those markets .

Speaker #3: But again , we've not been through this this window of time before . But the outlook is strong . It's very , very good .

Speaker #3: It's it's just you know , you look at that population growth chart and and you look at supply and you see the whole story

Mark Kenney: It's just, you know, you look at that population growth chart and you look at supply, and you see the whole story.

Speaker #5: That definitely makes sense out there. Maybe just looking at your comments on, you know, possibly mixed asset portfolios that could be out there.

Sairam Srinivas: No, that definitely makes sense, Mark. There's a lot of strength out there. Maybe just looking at your comments on, you know, possibly these mixed asset portfolios that could be out there. Could we see CAP probably partner up with maybe some other public or private partners specialize in other asset classes to take on these acquisitions?

Speaker #5: Could we see cap probably partner up with maybe some of the public or private partners specialized in other asset classes to take on these acquisitions ?

Speaker #3: We're very open to looking at all opportunities . You know , joint ventures , if there's good value for us is something that we would we would obviously , we've always been open to there's nothing new there .

Mark Kenney: We're very open to looking at all opportunities. You know, joint ventures, if there's good value for us, is something that we would, we would obviously, we've always been open to. There's nothing new there. There might be a little bit more of that if you get, you know, partnerships in distress, and, and we think we can add value or, or look for compelling value. Again, when there's low, trading volumes, because, you know, when values are holding up, you have to look at creative solutions.... And, and CAPREIT has a history of looking at creative solution, and we remain, remain committed to that.

Speaker #3: There might be a little bit more of that if you get partnerships in distress . And and we think we can add value or look for compelling value again when there's low trading volumes , because , you know , in values are holding up , you have to look at creative solution .

Speaker #3: And Capri has a history of looking at creative solution . And we remain committed to that

Speaker #5: That makes sense . And speaking of solutions , other operating expenses which were significantly down this quarter , I that's a big win for you guys .

Sairam Srinivas: That makes sense. Speaking of solutions, other operating expenses, which were significantly down this quarter, I think that's a big win for you guys. I know we spoke about this in September last year, but would you say the entire impact of all the OpEx initiatives was reflected in Q3, Q4? Or could we probably expect a little bit more of that going forward?

Speaker #5: I know we spoke about this in September last year , but would you say the impact of the optics initiatives was reflected in Q3 , Q4 or could you probably expect a little bit more of that going forward ?

Speaker #6: Yeah, I think we're—we've got our team hard at work, and they're looking at all opportunities within R and any controllable expenses.

Mark Kenney: Yeah, I think, we got our team hard at work, and they're looking at all opportunities within R&M, any controllable expenses. And also even when we talk about, Mark mentioned about energy efficiency initiatives, we're also looking at that. I would say, you know, there are probably some opportunities within the next couple of quarters. So it's not completely baked in, but again, I'm leaning more on the conservative side of saying there's probably, you know, OpEx is probably excluding the weather and also the carbon tax is going to be about inflation, but I think we can probably, you know, exceed that.

Speaker #6: And also , even when we talk about market mentioned about energy efficiency initiatives , we're also looking at that . I would say , you know , there are probably some opportunities within the next couple of quarters .

Speaker #6: side

Speaker #6: of saying there's probably , you know , opex is probably excluding the weather . And also the the carbon tax . It's going to be about inflation .

Speaker #6: But I think we can probably , you know , exceed that

Speaker #5: That's amazing . Thanks , guys . I'll turn it back

Sairam Srinivas: That's amazing. Thanks for that, guys. I'll turn it back.

Speaker #4: Thank you. Our next question comes from Mario Saric from Scotiabank. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Mario Saric from Scotiabank. Your line is now open. Please go ahead.

Speaker #7: Thank you . And good morning guys . Mark I want to come back to your comment on on supply and Montreal Vancouver Toronto .

Mario Saric: Hi. Thank you, and good morning, guys. Mark, I want to come back to your comment on unseen supply in Montreal, Vancouver, and Toronto. Great long-term markets, but it's a bit of a perfect storm in the short term. Based on your kind of internal data, what's your expectation of the timing of peak deliveries in each of those markets? You know, is it a late 2026 thing?

Speaker #7: Great long-term markets, but facing a bit of a perfect storm in the short term. Based on your kind of internal data, what's your expectation of the timing of peak deliveries in each of those markets?

Speaker #7: Is it a late '26 thing?

Speaker #3: That's a .

Mark Kenney: That's yeah. Yeah, that is definitely a ten-market question to answer because they all, they all are quite different. And it's further complicated by the fact that if you looked at the... I'll use Toronto as the example, Mario. If you look at the deliveries in Toronto, you could not form a clear view because our portfolio is suburban and not affected by the deliveries that you see in the data. So it is. And I'm not trying to skirt the question. It's so unique to each market that there's impacts that would appear to be severe for us that are not, and then there's other impacts that don't appear to be there in the data, but they are because of the, maybe, rent level, for example.

Speaker #7: Yeah .

Speaker #3: Yeah , that is definitely a ten market . Question . Answer because they all they all are quite different . And it's further complicated by the fact that if you looked at the I'll use Toronto as the

Speaker #3: If you look at the deliveries in Toronto, you could not form a clear view because our portfolio is suburban and not affected by the deliveries that you see in the data.

Speaker #3: So it is and I'm not trying to skirt the question . It's so unique to each market that there's impacts that would appear to be severe for us , that are not .

Speaker #3: And then there are other impacts that don't appear to be there in the data, but they are because of the, maybe, rent level.

Speaker #3: For example . So it's it's in general directionally , we've got this issue going on , not cap rate , but all the apartment reads cap rate for the Toronto , Vancouver , Montreal is being sensitive to where we're located .

Mark Kenney: So it's, in general, directionally, we've got this issue going on, not CAPREIT, but all the apartment REITs. CAPREIT for Toronto, Vancouver, and Montreal is being sensitive to where we're located. But when you have population decline and deliveries of supply, unprecedented on both metrics, you're really navigating. Now, where we're quite fortunate is we have this affordable mid-tier market, and what we're waiting to see play out is that we know when there's a housing crisis, there's a strong rental market, and we know when there's uncertainty, people will rent over buy. So it's very difficult to see that be revealed right now because of the season that we're in, and just the nature of this situation is very, very unprecedented. And it's highly concentrated. So, you know, you've got these very unique pockets of markets with high supply.

Speaker #3: But when you have population decline and deliveries of supply , you unprecedented on both metrics , you're really navigating now where we're quite fortunate is we have this affordable mid-tier market and what we're waiting to see play out is that we know when there's a housing crisis , there's a strong rental market , and we know when there's uncertainty .

Speaker #3: People will rent over buy . So it's very difficult to see that be right now because of the season that we're in . And just the nature of this , of this situation is very , very unprecedented .

Speaker #3: So and it's highly concentrated . So , you know , you've got these very unique pockets of markets with high supply . You've got to look at the immigration impacts or population growth in general .

Mark Kenney: You've got to look at the immigration impacts and poor population growth in general. It's playing out not as bad as it would appear on paper, simply because of the affordability of the portfolio and the desirability of the assets that we're buying. So it really is around that kind of expertise more than it's around data.

Speaker #3: And it's it's playing out . Not as bad as it would appear on paper simply because the affordability of the portfolio and the desirability of the assets that we're buying .

Speaker #3: So, it really is around that kind of expertise more than it's around data.

Mario Saric: Yeah. Zoning in on your, your GTA portfolio, I don't know how you answer this, but in terms of being able to quantify the variance in performance, between the downtown core portfolio and the suburban portfolio, how would you characterize that? Like, whether it's retro or some other metric.

Speaker #7: Zoning in on your GTA portfolio, I don't know how you want to answer this, but in terms of being able to quantify the variance and performance between the downtown core portfolio and the suburban portfolio, how would you characterize that?

Speaker #7: Whether it's this or some other metric.

Speaker #3: It's it's it's a great question , Mario . Like our our is primarily suburban . The downtown core assets that we have have more of a Covid impact than they have .

Mark Kenney: It's a great question, Mario. Like, our portfolio is primarily suburban. The downtown core assets that we have have more of a COVID impact than they have, like, this market impact because we have large suites, not micro condos. We were getting above new construction rents in some of our downtown core buildings. That's what we're working through, but we're still seeing mark-to-market in those assets in the non-COVID, COVID leasing period or post-COVID leasing period. So our portfolio is holding up quite well in the core because of size, desirability, and we don't have a lot of this new construction, you know, 4-dollar-plus foot rent comparative. We have one asset, our Strata asset, that's in Little Italy, downtown Toronto, and it's holding up like it's in a great market.

Speaker #3: We like this market impact because we have large suites, not micro condos. We were getting above new construction rents in some of our downtown core buildings.

Speaker #3: That's what we're working through . But we're still seeing Mark to market in those assets in the non-COVID Covid leasing period or post-Covid leasing period .

Speaker #3: So our portfolio is holding up quite well in the core because of size , desirability , and we don't have portfolio a lot of this new construction , you know , $4 plus foot rent comparative .

Speaker #3: We have one asset or strata asset that's in Little Italy , downtown Toronto , and it's holding up like it's like it's in a great market .

Speaker #3: So it's literally , you know , corner the corner of whatever streets you're on that that really does impact things . Strata as an example , very , very small asset suites , large suites , desirable area , smaller boutique style and holding up really , really well

Mark Kenney: So it's literally, you know, corner, the corner of, whatever streets you're on, that it really does impact things. Strata, as an example, very, very small asset, large suites. Large suites, desirable area, smaller building, boutique-high style, and, and holding up really, really well.

Speaker #7: Okay. Just shifting gears to the incentives—they ticked up to 1.3% of revenue during the quarter. As you indicated on the Q3 call, they may tick up during the winter.

Mario Saric: Okay. Just shifting gears to the incentives. They ticked up to 1.3% of revenue during the quarter. As you indicated on the Q3 call, it may tick up during the winter. Sounds like the leasing velocity thus far, because of the weather, may be a bit tempered. So I guess two-part question: Would you expect a similar ratio of incentives to revenue in Q1? And then secondly, is it still a fair assumption, granted, there's lack of visibility with respect to the spring leasing season, but are you still targeting something closer to 1% through the remainder of 2026?

Speaker #7: Sounds like the leasing velocity thus far, because of the weather, may be a bit tempered. So I guess, two-part question: would you expect a similar ratio?

Speaker #7: Incentives to revenue in Q1 ? And then secondly , is it still a fair assumption ? Granted , there's there's lack of visibility with respect to the leasing season , but are you still targeting something closer to 1% throughout the remainder of 26 ?

Speaker #3: Yeah , we're feeling comfortable there . If you look at last year's experience we saw exactly the same thing . We saw incentives really roll up in the winter season , and then taper off in the spring .

Mark Kenney: Yeah, we're feeling comfortable there. If you look at last year's experience, we saw exactly the same thing. We saw incentives really roll up in the winter season and then taper off in the spring leasing season. And again, we hadn't seen that before. CAPREIT was quite aggressive with our incentives granted last year because we weren't quite exactly sure the direction of the market, but then it tailed off. And so the hope is, again, with the emergence of the spring market, we'll have far better clarity on where we're going here. But our use of incentives is very disciplined, and it's completely correlated to local competition and who's using them, but we're following the leader instead of being the leader this year.

Speaker #3: Leasing season . And again , we hadn't seen that before . Capri was quite aggressive with our incentives granted last year because we weren't quite exactly sure the direction of the market , but then it tailed off and so the hope is , again , with the emergence of the spring market , we'll have far better clarity on on where we're going here .

Speaker #3: But we're our use of incentives is very disciplined and it's completely correlated to local competition . And who's using them . But we're following following the leader instead of being the leader .

Speaker #3: This year

Mario Saric: This will be the last question on incentives. I think, in Q2 or Q3 last year, they came down a little bit, but it was in part because you concluded that cutting base rent was being more impactful than the use of incentives. Where are you leaning on that spectrum today in terms of offering incentive versus reducing the base rate? And is one more impactful than the other from a tenant psychology standpoint?

Speaker #7: Maybe last question on incentives. I think in Q2 and Q3 last year, they came down a little bit, but it was in part because you concluded that cutting face rent was being more impactful than the use of incentives.

Speaker #7: Where are you leaning on that spectrum today in terms of offering incentive versus reducing the face rate And as one more impactful than the other from a tenant ?

Speaker #7: Psychological psychology standpoint ?

Speaker #6: Yeah , I think it's it's the same . I mean , in terms of we've already cut base rent , so it's not our strategy to do that .

Mark Kenney: Yeah. Mario, I think it's the same. I mean, in terms of we've already cut base rent, so it's not our strategy to do that going forward. We've already done that exercise. So really, it's just your use of incentives. Again, I think it's probably a seasonality that's at play right now. And then we'll really see what happens in the spring leasing season. Our expectation is hopefully it's going to be similar to last year. But we do see elevated, you could say, just as a percentage of revenues, incentive use, just during this winter season so far, and then hopefully it'll taper off.

Speaker #6: Going forward . We're we've already done that exercise . So really it's just to use incentives . Again , I think it's probably a seasonality that's at play right now .

Speaker #6: be similar to last year . But we do see elevated . You could say just as a percentage of revenues incentive use just during this winter season so far .

Speaker #6: And then, hopefully, it'll taper off.

Speaker #7: Okay . One last question on my end . Sorry . That slide 12 . The turnover slide . That's great information . I think we all really appreciate it .

Mario Saric: Okay, Steve, now I have maybe one last question on my end. Sorry. That's slide 12, the turnover slides. It's great information. I think we all really appreciate it. Do you have a sense of what those bars looked like a year ago? So the less than two-year being 20%-27% of the lease tenure today. Do you have a sense of how those look compared to a year ago?

Speaker #7: Do you have a sense of what those bars looked like a year ago? So, the less than two-year being 20%, 27% of the lease tenure today.

Speaker #7: And the other sense of how those are compared to a year ago.

Mark Kenney: I'll have to get back to you, but I'm happy to chat offline about that, Mario.

Speaker #6: I'll have to get back to you, but I'm happy to chat offline about that. Mario.

Mark Kenney: I'll have to get back to you, but I'm happy to chat offline about that, Mario.

Speaker #7: I'm .

Mario Saric: Sound good. Thank you.

Speaker #6: Thank you . Yeah

Mark Kenney: Yeah.

Speaker #4: Thank you. Our next question from Matt comes from National Bank Financial. Your line is now open, Koenig. Please go ahead.

Operator: Thank you. Our next question comes from Matt Kornack, from National Bank Financial. Your line is now open. Please go ahead.

Speaker #7: Hey , guys .

Matt Kornack: Hey, guys. I actually wanted to talk about renewals, because you have this artificial now post-COVID spike in January. Are you still getting kind of roughly, rent control levels? You're not having to give too much in the way of concessions or, or, how should we think about that figure, for Q1 on the renewal front, given the outsized, GTA renewals, Ontario renewals, I should say?

Speaker #8: Actually, I wanted to talk about renewals because you have this artificial, now post-Covid, spike in January. Are you still getting roughly rent-control levels?

Speaker #8: You're not having to give too much in the way of concessions . Or how should we think about that figure for Q1 on the renewal front , given the outsized GTA renewals , Ontario renewals , I should say .

Speaker #6: Yeah . So yeah , we have we have that data . I would say , Matt , it's we are getting close to the the the guideline increase .

Mark Kenney: Yeah. So yeah, we have, we have that data. I would say, Matt, it's, we are getting close to, the guideline increase. So there has been, like, as we kind of pointed out in the conference call, we've, you know, our retention team is really working diligently with our existing tenants, trying to work out, certain payment plans that they're, exceptionally above, if they're exceptionally above market. But, generally, I'll just say, we're achieving close to, the guideline increase.

Speaker #6: So there has been we kind of pointed out in the conference call we've , you know , our retention team is really working diligently with our existing tenants trying to work out certain payment plans .

Speaker #6: If they're , you know , exceptionally above , if they're above market . But generally , I would just say we're , we're we're achieving close to the guideline increase .

Speaker #8: Okay . So that's a nice anchor for growth . At the end of the day . Because as much as it seems like turnover has ticked up a bit , it doesn't seem like people are necessarily leaving suites in in a significantly higher proportion than saw .

Matt Kornack: Okay, so that's a nice anchor for growth at the end of the day, because as much as it seems like turnover has ticked up a bit, it doesn't seem like people are necessarily leaving suites in a significantly higher portion than we saw. But maybe if you could give us a bit of color with regards to the type of turnover you're seeing, because I guess if you're sitting at an above-market rent, but you like your unit, don't you just ask the landlord to give you a lower rent? Like, I'm trying to understand that dynamic a bit.

Speaker #8: But maybe if you could give us a bit of colour with regards to the type of turnover you're seeing , because I guess if you're sitting at at above market rent , but you like your unit , don't you ?

Speaker #8: Just ask the landlord to give you a lower rent, like I'm trying to understand that dynamic a bit.

Speaker #3: So so I would say , Matt , I want to highlight the , you know , the double barrel benefit we're going to get here in the mid-term .

Mark Kenney: So, I would say, Matt, I want to highlight the, you know, the double barrel benefit we're going to get here, in the midterm. We're gonna see the bleed off of the COVID leases, which will be beneficial, and we're going to see the rebalancing of the market as we work through supply and population growth. These are both big drivers for CAPREIT. Everybody's trying to guess when that exactly happens, but, you know, we've talked about when the COVID leasing will bleed off. That's more predictable than the overall health of the Canadian rental market, which again, could be very surprisingly offset by economic uncertainty and people wanting to rent versus own. So that is all kind of good news that I'd want to highlight.

Speaker #3: We're going to see the bleed-off of the COVID leases, which will be beneficial. And we're going to see the rebalancing of the market as we work through supply and population growth.

Speaker #3: These are both big drivers for Capri . Everybody's trying to guess when that exactly happens . But you know , we've talked about when the Covid lease thing will bleed off .

Speaker #3: That's more predictable than the overall health of the Canadian rental market , which again , could be very surprisingly offset by economic uncertainty .

Speaker #3: And people wanting to rent versus versus own So that that is all . That is all kind of good news that I'd want to highlight .

Mark Kenney: It's literally working through the timing of when that all materializes.

Speaker #3: It's literally working through the timing of when that all materializes.

Mark Kenney: It's literally working through the timing of when that all materializes.

Speaker #8: That's fair . And I not to talk we up someone else's economist , but I think Ben Tal at the Toronto Real Estate Forum was talking about the fact that in Toronto and Vancouver , you you had this huge amount of room meeting and doubling up that there's probably excess demand sitting on the sidelines .

Matt Kornack: That's fair. And I not to talk up someone else's economist, but I think Ben Tal at the Toronto Real Estate Forum was talking about the fact that in Toronto and Vancouver, you had this huge amount of roommating and doubling up, that there's probably excess demand sitting on the sidelines. So, I mean, at a certain point, would you expect to see kind of that demand come back if they're well employed and making money into the rental market or-

Speaker #8: So , I mean , at a certain point , would you expect to see kind of that demand come back if they're well , well employed and making money into the rental market or validating the housing ?

Mark Kenney: Yeah.

Matt Kornack: reconsolidating the housing?

Speaker #3: Well , it's it's it's a great point . And we we concur with , with Bentalls comments . We've been I've been talking about this as another potential driver .

Mark Kenney: Well, it's a great point. And we concur with Benjamin Tal's comments. I've been talking about this as another potential driver. When we saw a 10% turnover, we had a lot of this built up demand because the market was just so tight. Now we're getting to 20%, which is in part due to the new construction portfolio. But there's no question that when the average age of a first-time homebuyer, for example, in Ontario, is 40 years old now. 40. Well, I don't believe they're living with mom and dad, so that means they're probably renting a roommate. And so that stat alone is very much leading towards this household consolidation of roommating.

Speaker #3: When we saw a 10% turnover , we we we had a lot of this built up demand because the market was just so tight .

Speaker #3: Now we're getting to 20% , which is in part due to the new construction portfolio , but there's no question that when the average age of a first time home buyer , for example , in Ontario , is 40 years old now 40 , well , I don't believe they're living with mom and dad .

Speaker #3: So that means they're probably renting with a roommate. And so that stat alone is very much leading towards this household consolidation of room-mating.

Mark Kenney: I hate to say this, but again, another tragic fact for Canada is just the birth rate is just so low, that the younger people are going to be looking for lifestyle if they're not getting married, or they're going to be looking for rental, like we said. So we've, you know, intentionally focused our new construction portfolio around amenitized buildings, where we see young professionals. And young professionals that aren't married, that aren't having kids, are far more likely to want well-amenitized buildings, and that's what we're kind of playing into. So a bit of a long answer there, but absolutely, we concur with Ben's assertion. It's. We don't have clear stats on it, but it's well known that this whole roommating phenomenon is very prevalent in Toronto, Vancouver, and Montreal.

Speaker #3: And I hate to say this, but again, another tragic fact for Canada is just the birth rate is just so low that the younger people are going to be looking for lifestyle if they're not getting married, or they're going to be looking for rental, like we said.

Speaker #3: So we , you know , intentionally focused our new construction portfolio around amenitized buildings where we see young professionals and young professionals that aren't married , that aren't having kids are far more likely to want , well , amenitized buildings .

Speaker #3: And that's what we're kind of playing into. So, a bit of a long answer there, but absolutely, we concur with Ben's assertion.

Speaker #3: It's you don't have clear stats on it , but it's it's well known that this whole roommate phenomenon is very prevalent in Toronto , Vancouver , Montreal .

Speaker #8: That makes switching gears completely. And I admittedly have not had time to fully vet the numbers, but it looked like the gap was lower.

Matt Kornack: Yeah, makes sense. Switching gears completely, and I admittedly have not had time to fully vet the numbers, but it looked like the G&A was lower, and there may be some one-time issues there. But maybe, Stephen, if you could give us a sense as to kind of where you expect G&A to come in for 2026, or what a good kind of quarterly run rate is at this point.

Speaker #8: There may be some one-time issues there, but maybe, Steven, if you could give us a sense as to kind of where you expect G&A to come in for 2026, or what a good quarterly run rate is at this point.

Speaker #6: Yeah . So , Matt , I think what we expect it to be , I would say fairly flat to to 2025 if I give it as a percentage of revenues , it's about , you know , four and eight , 4.8% .

Mark Kenney: Yeah, so Matt, I think we expect it to be, I would say, fairly flat to 2025. If I give it as a percentage of revenues, it's about, you know, 4.8%. So I think, you know, there's opportunities within G&A. I truly believe that we can probably do better. So, but I just tend to be on more of the conservative side. Stephen, Stephen makes a very important point here, that we've talked about, but relative to peers, we're doing extremely well as a percentage of revenue. And, we've got a great team, and that team is capable of more. And, we've right-sized the team with the size of the portfolio in an exceptionally well-matched way.

Speaker #6: So I think , you know , there's opportunities within G&A . I truly believe that that we can probably do better . So I just tend to be on more of the conservative side .

Speaker #3: Steve, Steven makes a very important point here that we've talked about. But relative to peers, we're doing extremely well as a percentage of revenue.

Speaker #3: And we've got a great team . And that team is capable of more . And we've rightsized the team with the size of the portfolio in in an exceptionally well matched way .

Speaker #3: So we will continue to see technology having opportunity, which we will, through attrition, no doubt be able to capitalize on. And we remain fully committed on the front to show progress.

Mark Kenney: We continue to see technology having opportunity, which we will, through attrition, no doubt be able to capitalize, and we remain fully committed on the G&A front to show progress.

Speaker #8: Okay . Thanks . Last one for me , just on procurement , I know you guys were going through that process . Not a fun process to kind of rejig those , but how how is it progressing ?

Matt Kornack: Okay, thanks. The last one for me, just on procurement. I know you guys were going through that process. Not a fun process to kind of rejig those, but how is it progressing, and is there still more to go from a cost-saving standpoint as you look to rationalize procurement?

Speaker #8: And is there still more to go from a cost-saving standpoint as you look to rationalize procurement?

Speaker #3: Yeah , it the team is working very , very hard . And again , I made comments on technology . We have more technology .

Mark Kenney: Yeah, the team is working very, very hard. And again, I made comments on technology. We have more technology. We hope to help us access the market even more broadly. But again, this is an area that we know that we can find improvements in, and we will do everything we possibly can to deliver that in the short term.

Speaker #3: We hope to to help us access the market even more broadly . But again , this is an area that we know that we can find improvements in .

Speaker #3: And we will do everything we possibly can to deliver that in the short term.

Speaker #8: Thanks . Makes sense

Matt Kornack: Okay, thanks. Makes sense.

Speaker #4: Thank you. Our next question comes from Dean Wilkinson from CIBC. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Dean Wilkinson from CIBC. Your line is now open. Please go ahead.

Speaker #9: Thanks . Morning , guys . And , Matt , feel free to talk all you want Mark . Just want to go back on the inducements question .

Dean Wilkinson: Thanks. Morning, guys. And Matt, feel free to talk over us all you want. Mark, just want to go back on the inducements question that Mario asked. The tripling of that number, 2025 over 2024, do you think that that's more related to those newer tenured tenants, perhaps in the newer buildings? And if so, how do you look at that going forward and the trade-off between being able to mark those rents and sort of buying ostrich, if you will, in short term?

Speaker #9: Mario asked the tripling of that number 2025 over 2024 . Do you think that that's more related to those newer tenured tenants ? Perhaps in in the newer buildings And if so , how do you look at that going forward in the trade offs between being able to market those rents and sort of supplying occupancy , if you will , in the short term ?

Speaker #3: I think I heard you a little bit muted, but I'll try to answer what I thought I just heard there. Okay.

Mark Kenney: I think I heard you. You're a little bit muted, but I'll try to answer what I thought I just heard there, okay? If we're talking about escalated turnover, Dean, is that what I heard?

Speaker #3: If we're talking about escalated turnover, Dean, is that what I heard?

Dean Wilkinson: The lift from the inducements.

Speaker #9: The lift in the inducements

Dean Wilkinson: The lift from the inducements.

Speaker #3: Inducements okay . I think the lift and inducements does have the new portfolio definitely has an impact on that . I'll kind of go back to the point I thought I was going to answer the newer construction portfolio , higher churn .

Mark Kenney: Inducements. Okay. I think the lift in inducements does have, the new portfolio definitely has an impact on that. I'll kind of go back to the point I thought I was going to answer. The newer construction portfolio, higher churn, so 20% of that portfolio is experiencing higher churn rates than the core portfolio. And in those, both the core and the higher churn new portfolio, we're using incentives. Okay? But the acceleration to your answer is yes, it is because of that, it is having an effect. But what that also means is it falls off much more quickly when the market sort of regains balance. But we're very, very happy with our decision here on the new construction portfolio, in particular, because of the cash flow attribute.

Speaker #3: So 20% of that portfolio is experiencing higher churn rates than than the core portfolio . And in those , both the core and the and the higher churn new portfolio , we're using incentives .

Speaker #3: Okay . But the acceleration to your answer is yes , it is . Because of that , it is having an effect . But what that also means is it falls off much more quickly when the market sort of regains balance .

Speaker #3: But we're very, very happy with our decision here, on the new construction portfolio in particular, because of the cash flow attributes.

Speaker #3: So even with these incentives and even with accelerated turnover , these are proving to be exceptionally wise . Cash flow investments . And we're very excited about the ability for those assets to capture the market when the market comes back in strength .

Mark Kenney: So even with these incentives and even with, you know, accelerated turnover, these are proving to be exceptionally wise cash flow investments. And we're very excited about the ability for those assets to capture the market when the market comes back in strength. Our problem in the Ontario portfolio is always low churn and not able to access market rents when the market was improving. And we're well-positioned to capture that when the market is well-balanced.

Speaker #3: Our problem in the Ontario portfolio is always low churn and not being able to access market rents. When the market was improving, we were well positioned to capture that, and when the market is well balanced.

Speaker #9: Perfect. That's great. Thanks, Mark.

Dean Wilkinson: Perfect. That's great. Thanks, Mark.

Speaker #3: Thanks , Dean .

Mark Kenney: Thanks, Dean.

Speaker #4: Thank you . We have a follow up question from Mike McInnes from BMO Capital Markets . Your line is open . Please go ahead Mike , your line is now open .

Operator: Thank you. We have a follow-up question from Mike Markidis from BMO Capital Markets. Your line is open. Please go ahead. Mike, your line is now open. Please go ahead.

Speaker #4: Please go ahead

Speaker #7: Thank you . Sorry about that . Unprecedented times . Perfect storm . All this stuff . Totally get that Mark . I'm just curious , how would you compare what we're seeing today in Toronto , Montreal and Vancouver to what we saw in Calgary and Edmonton in 2016 and 17 ?

Mike Markidis: Thank you. Sorry about that. Unprecedented times, perfect storm, all this stuff. Totally get that, Mark. I'm just curious, how would you compare what we're seeing today in Toronto, Montreal, and Vancouver to what we saw in Calgary and Edmonton in 2016 and 2017?

Mark Kenney: Hmm. Different dynamics, different rent levels, like the market in, in Toronto in particular, the part of the market that's most impacted is the plus CAD 4 a foot market. So definitely affordability would be a bigger driver here versus people leaving, okay? When an economy gets hit, like you see in Alberta, and people leave because they lost their job, that's very different than roommating because of affordability and, you know, that, that kind of pressure. The kind of supply that we're seeing in Toronto, Vancouver, Montreal, is typically concrete and far more expensive, therefore commanding a far higher rent level. So that, that's a little bit different than wood-frame, Alberta, Saskatchewan, I'm going to call it. So that's how I would say the difference is here.

Speaker #3: A different dynamics , different rent levels like the market in in Toronto particular , the part of the market that's most impacted is the plus $4 foot market .

Speaker #3: So definitely affordability would be a bigger driver here versus people leaving . Okay . When an economy gets hit , like you see in Alberta and people leave because they lost their job , that's very different than ruminating because of affordability .

Speaker #3: And you know , that kind of pressure , the kind of supply that we're seeing in Toronto , Vancouver , Montreal is typically concrete and far more expensive .

Speaker #3: Therefore commanding a far higher rent level . So that's a little bit different than wood frame Alberta , Saskatchewan , I'm going to call it .

Speaker #3: So that's how I would say the difference is here . But also it's this adjustment . Like you said Mike the perfect the perfect storm , which isn't really it's more of a a spring shower than it is a hurricane .

Mark Kenney: But also, it's this adjustment, like you said, Mike, the perfect storm, which isn't really, it's more of a spring shower than it is a hurricane. In our case, we've been holding up our vacancies like we are and holding up our rents like we are. So we're trying to get good color on the changing environment, but we're also really excited about inflection. And it's going to happen. And it's just a matter of us trying to figure out the data. You know, we were talking internally here about all the data we're now gearing in on our market to really try to better understand the specifics around completions, starts, immigration, unemployment.

Speaker #3: In our case, we're holding up our vacancies like we are, and holding up our rents like we are. So we're trying to give good color on the changing environment.

Speaker #3: But we're we're also really excited about inflection . And it's going to happen . And it's just a matter of us trying to figure out figure out the data .

Speaker #3: You know , we were talking internally here about all the data . We're now gearing in on our markets to really try to better understand the specifics around completions , starts , immigration , unemployment and none of these things had to be looked at in the past when you had steady population growth with immigration and natural population growth and steady supply .

Mark Kenney: And none of these things had to be looked at in the past when you had steady population growth with immigration and natural population growth and steady supply. So, this is a very much made in Canada problem in, in our big centers and, and highly influenced by government policy. And I do feel that the government gets the message, and they're doing what they can, and balance will be restored. We don't want to lose our development industry in Canada, and government understands that, and we're, we're really, really, pleased with the kind of conversations that we're, we're hearing from, from the provinces and the feds.

Speaker #3: So this is a very much made in Canada problem in in our big centers and , and highly influenced by government policy . And I do feel that the government gets the message and they're doing what they can .

Speaker #3: And balance will be restored . We don't want to lose our development industry in Canada and government understands that . And we're we're really , really pleased with the kind of conversations that we're we're hearing from from the provinces and the feds .

Speaker #7: I think I think we can all hope for that . Spring shower that you referred to after this winter . And I guess the the one important point is you've got embedded mark to market , which I guess is the key difference .

Mike Markidis: I think, I think we can all hope for that spring shower that you referred to after this winter. And I guess the, the one important point is you've got embedded Mark-to-Market, which I guess is the key difference. Not all your rents are at market, so appreciate the comments.

Speaker #7: Not all your rents are at market, so I appreciate the comments.

Mark Kenney: Absolutely. And thank you for highlighting that, because if it wasn't for CAPREIT's dramatic increase in rents Mark-to-Market post-COVID, you'd be seeing more of the real value we've got in the embedded portfolio. And we do have a big insurance policy sitting underneath this portfolio in those Mark-to-Market rents. And we're very, very happy about our strategy and what we've done to keep that insurance policy strong.

Speaker #3: Absolutely , and thank you for highlighting that because if it wasn't for cap , dramatic increase in rents , mark to market post Covid , you'd be seeing more of the the real value we've got in the embedded portfolio .

Speaker #3: And we do have a big insurance policy sitting underneath this portfolio in those mark-to-market rents. And we're very, very happy about our strategy and want to keep that insurance policy strong.

Speaker #7: Great. Thanks so much.

Mike Markidis: Great. Thanks so much.

Speaker #3: Thanks

Mark Kenney: Thanks.

Speaker #4: Thank you. We currently have no further questions, and I would like to hand back to Mark Kenney for any closing remarks.

Operator: Thank you. We currently have no further questions, and I would like to hand back to Mark Kenney for any closing remarks.

Speaker #3: I'd like to thank everybody for your time today. It was a long call, and if you have any further questions, please do not hesitate to contact us at any time.

Mark Kenney: I'd like to thank everybody for your time today. It was a long call, and if you have any further questions, please do not hesitate to contact us at any time. Thank you again, and have a great day.

Speaker #3: Thank you again, and have a great day.

Operator: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

Q4 2025 Canadian Apartment Properties Real Estate Investment Trust Earnings Call

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