Watch the Skyline Apartment REIT Discussion
Wayne:
Hello and welcome. I’m Wayne Byrd, CFO at Skyline. Thank you for your ongoing trust and support; it’s the driving force behind everything we do.
Today, we’re sharing a quick update on Skyline Apartment REIT, its 2024 performance, and where we’re headed next.As our flagship investment fund created in 2006, Skyline Apartment REIT has had an incredible history of stability, resilience, strength, and growth.
I’m joined today by Matt Organ, President of Skyline Apartment REIT, to get his perspective on some highlights from 2024 and then the REIT strategy going forward. Thanks very much for joining.
Matt:
Happy to be here, Wayne.
Wayne:
Well, let’s jump right into it. Matt, looking back at 2024, what stood out for Skyline Apartment REIT?
Matt:
2024 was a year of outperformance and resilience. While much of the Canadian real estate sector felt the strain of high interest rates, slowing immigration, and affordability challenges, Skyline Apartment REIT delivered a net annualized return of 10.52%, outpacing the average of Canada’s five largest publicly traded apartment REITs by nearly 20 percentage points. That speaks volumes about the strength of our portfolio, the discipline of our strategy, and the thoughtful execution.
We stayed focused on fundamentals, quality housing, strong tenant relationships, and careful capital deployment. From a financial standpoint, we saw solid growth across the board.
Property revenue increased by 5.84% to nearly $380 million. Net operating income (NOI) rose 8.59% to $217.6 million, and our NOI margin improved by 250 basis points to 57.30%. FFO (funds from operations) reached $88 million, up from the year before, while keeping our key leverage ratios well below our internal thresholds.
And we didn’t just grow revenue—we improved the quality of our portfolio. We modernized our asset base by exiting nine lower-performing properties and redeploying capital into higher-return opportunities. Even after these dispositions, our total fair value grew by 1.05%.
Wayne:
Thanks, Matt. Can you provide investors with insights on what trends in the rental market supported the REIT’s impressive performance in 2024? And further, could you speak a little about what trends you anticipate for 2025, and how the Apartment REIT’s strategy will play into this?
Matt:
Rental demand was very strong in 2024, largely due to affordability challenges in homeownership and continued population growth. Even though the federal government adjusted its immigration targets last year, that policy has yet to significantly reduce new arrivals.
Add in a national housing supply shortage, and you’ve got persistent demand for rental housing, especially in the markets Skyline Apartment REIT serves.
The demand translated into strong occupancy (94.9%) and record in-place rents. Our average in-place rent ended 2024 at $1,505 per unit, which was up more than $110 year over year. And there’s still a large gap between in-place and market rents: roughly $290 per unit. That represents over $1.4 billion in unrealized value across the portfolio.
As for what to expect in 2025, we anticipate some regional softening due to rate cuts and increased supply. However, we expect the rental market to remain solid, in part due to pace of new construction. Current housing starts are not closing the demand fast enough. It could take up to 30 years for new housing supply to meaningfully improve affordability under current conditions.
And [secondly,] demographic trends, with continued population growth and affordability constraints favouring rentals.
Wayne:
Shifting gears slightly, 2024 definitely continued to test many from a financial perspective. You mentioned it briefly from an individual lens, but in regard to the REIT, what’s the strategic approach when it comes to managing interest rate risk in this environment?
Matt:
We’ve always believed in staggering our debt maturities to protect against interest rate shocks. So, our strategy is to make sure that we smooth out the peaks and valleys in the mortgage cycle and the interest rate exposure, to try to give us an overall weighted average mortgage rate that remains smooth, [so that] nothing upon renewal is going to make a significant difference in our distributable income one way or another.
So, we do that. We will take short-term debt where it makes sense. We’ll take long-term debt where it makes sense. But the biggest part is looking at the mortgage schedule when we’re either acquiring something or renewing something and trying to plot those mortgages specifically in a year that allows that even flow.
When we look at 2024, we kept our weighted average mortgage term to maturity relatively short to stay flexible. Similarly, for 2025, only about 12% of the portfolio was up for refinancing as we continue to navigate the changing interest rate environment.
As we begin to see rates decline, we’re in a position to look at our debt strategy and lock in longer terms and reduce our average cost of debt over time. It’s all about maintaining optionality while protecting the REIT’s long-term return profile.
Wayne:
Thanks, Matt. Throughout our time together today, you’ve briefly touched upon 2025. Can we dive a little deeper? Can you speak to the long-term outlook for the REIT, and what can Skyline Apartment REIT investors expect for the remainder of 2025 and beyond?
Matt:
For sure, Wayne. Looking at the remainder of 2025 and beyond, we’re very optimistic. Despite short-term economic noise, the fundamentals are in our favour.
Purpose-built rentals remain the most stable segment of the housing market. Construction isn’t keeping up with demand. It could take decades to close the affordability gap. Our secondary and tertiary market focus has proven resilient. And with our strong balance sheet and proven operational model, we’re ready to take advantage of accretive acquisition opportunities as they emerge.
Capital is becoming more affordable, and we’re well-positioned to grow. We’ll continue to do what we’ve always done: deliver stable, long-term value. That means staying disciplined with capital allocation, investing in infrastructure that supports our communities, and operating a portfolio that Canadians can count on for quality, affordability, and consistency.
To wrap this up, I’d like to thank our investors for their continued trust. It’s your partnership that allows us to build a stronger, more resilient REIT and to keep delivering on our mission: strong, stable returns backed by real assets.
Wayne:
Thanks, Matt. Really insightful. And to our investors: thank you for joining us. If you have questions or want to discuss anything you’ve heard today, don’t hesitate to reach out to your Skyline Wealth Relationship Manager. We’re grateful for your continued support.
Disclaimer
The presentation is an overview of the operations and conditions for the year ended December 31, 2023 and should be read in conjunction with the Management’s Discussion and Analysis (“MD&A”) and the Skyline Apartment Real Estate Investment Trust’s (“Skyline Apartment REIT” or the “REIT”) audited consolidated financial statements. Certain statements in this presentation could be considered forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT’s control, which could cause actual results to differ materially from those disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions, the financial condition of tenants, our ability to refinance maturing debt, rental risks, including those associated with the ability to rent vacant suites, our ability to source and complete accretive acquisitions, and interest rates. The information in this presentation is based on information available to Management as of April 30, 2024, except where otherwise noted. Skyline Apartment REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. In some instances, forward-looking information can be identified by the use of terms such as “may”, “should”, “expect”, “will”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potentially”, “starting”, “beginning”, “begun”, “moving”, “continue”, or other similar expressions concerning matters that are not historical facts. Forward-looking statements in this presentation include, but are not limited to, statements related to acquisitions or dispositions, development activities, future maintenance expenditures, financing and the availability of financing, tenant incentives, and occupancy levels.
Commissions, trailing commissions, management fees and expenses all may be associated with investments in exempt market products. Please read the confidential offering documents before investing. The indicated rate of return is the annualized return including changes in unit value and reinvestment of all distributions and does not consider sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. There is no active market through which the securities may be sold, and redemption requests may be subject to monthly redemption limits. The payment of distributions is not guaranteed and may fluctuate. The payment of distributions should not be confused with an exempt market product’s performance. Distributions paid as a result of capital gains realized by an exempt market product, and income and dividends earned are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero. Exempt market products are not guaranteed, their values change frequently, and past performance may not be repeated.