Updated April 13, 2020

Forward-looking Statement Advisory

Please note, this document may contain forward-looking statements with respect to Killam Apartment REIT and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as “may”, “will”, “expect”, “estimate”, “anticipate”, “intends”, “believe” or “continue” or the negative thereof or similar variations. The actual results and performance of Killam Apartment REIT discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from expectations include, among other things, the impact of COVID-19, general economic and market factors, competition, changes in government regulation and the factors described under “Risk Factors” in Killam’s annual information form and other securities regulatory filings. The cautionary statements qualify all forward-looking statements attributable to Killam Apartment REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date to which this presentation refers, and the parties have no obligation to update such statements.

1. How is Killam managing the COVID-19 situation from an operations perspective?
   
   Killam has established a Covid-19 Response Committee (CRC) focused on monitoring this evolving pandemic and has developed the Pandemic Illness Plan as a guideline to help mitigate and manage the spread of the virus. This plan will be updated as required. Our CPC includes individuals from Killam’s property management, human resources, and information technology teams, as well as the executive team. Killam’s executive team is fully engaged and receives continuous updates from our regions.
   
   At the property level, we have increased the frequency and diligent cleaning of all high-touch areas at our properties. Our amenity spaces, including gyms, libraries, social rooms and theatres, have been closed to assist with social distancing. Closing amenity spaces enables cleaning resources to better focus on the areas that tenants more regularly frequent.
   
   Communications with our tenants and employees is a priority. We will continue to communicate with residents through our website, social media and via posters in the lobbies of each of our buildings. Also, we have provided information related to proper hygiene practices and encouraged all residents to follow the protocols set-out by government and health authorities.
   
   We are providing support to our Killam employees across the country, assisting them as they adjust their routines and cleaning practices in the face of this challenge. Our staff are working remotely, when possible, with a limited number of staff in any given office or property. We enforce self-isolation as directed by our health authorities for employees who have travelled, or have been in contact with a carrier, or who are symptomatic.
   
    
2. Will tenants be receiving rental increases?
   
   We have made the decision to stop the collection of rental increases and will not issue any further rental increases during this period of crisis, beginning with April 1, 2020 rent payment.
   
    
3. What happens to tenants who may struggle to pay their rent?
   
   During this period of crisis, we will not be evicting anyone who has arrears caused by financial hardship linked to the COVID-19 virus. Many provinces have implemented legislation to this effect, and we are fully supportive. We will work with tenants to discuss payment options for those facing financial hardship. Currently less than 1% of residential tenants have requested rent deferrals.
   
    
4. What do you expect the non-sufficient funds (NSF) percentage will be during this COVID-19 crisis?
   
   Killam’s historical bad debt expense is low and was less than 0.2% of rental revenue in 2019. We expect this crisis will result in an increase in NSFs and bad debt expense in 2020 but it is too early to estimate what that amount may be.
   
    
5. Do you have many tenants on a preapproved payment plan for their monthly rents?
   
   Yes, 75-80% of our tenants are on a preapproved payment plan.
   
    
6. Do you expect a decrease in turnover due to COVID-19?
   
   Killam’s turnover in 2019 was 30%. It is too early to predict what the change in turnover might be.
   
    
7. Are you still seeing leasing activity during the crisis?
   
   Leasing activity has continued following the onset of the pandemic as leasing agents are readily able to work remotely. Unit showing procedures have been adjusted to adhere to social distancing guidelines using Killam’s online operating platform and technology for virtual showings. We will closely monitor traffic and turnover levels in the coming months as we approach our peak leasing season.
   
    
8. How much liquidity does Killam have?
   
   We have access to capital through two lines of credit totalling $75 million. In addition, we have an accordion feature on one of these lines for an additional $20 million. 
   
   Killam had a balance of $12.5 million owing on its lines of credit as of April 8, 2020.
   
   Killam has access to $87 million of additional capital through its credit facilities (which includes the accordion feature on its $40 million committed revolver facility), as well as approximately $75 million of unencumbered assets.
   
   As of April 8, 2020, mortgage financings and renewals have progressed on schedule with no mortgage financing delays noted as a result of COVID-19. Killam has additional mortgage renewals scheduled for the remainder of 2020 with upfinancing estimated to be approximately $40 million.
   
   Killam’s debt as a percentage of total asset as December 31, 2019 was 43.4%. With an upper limit of debt as a percentage of total assets of 70% according to our Declaration of Trust, Killam has flexibility to increase is debt levels in the future.
   
    
9. Does Killam have any covenants on its debt?
   
   Killam has financial covenants on its $70 million credit facilities and is in compliance with these covenants. The covenants require Killam to maintain a leverage limit of not more than 70% of debt to total assets, debt service coverage of not less than 1.3 times and unitholders equity of not less than $900 million.
   
    
10. Do you anticipate any issues regarding Killam’s mortgage refinancings in the coming months?
    
    No, we do not anticipate any issues with completing upcoming mortgage refinancings. We have a diversified and high-quality lender base and 80% of our mortgage debt is CMHC insured. We have completed mortgage financings over the last month and our lenders have reassured us of their commitment to Killam during this pandemic crisis.
    
     
11. How is your suite repositioning working currently? Are you still renovating units?
    
    Killam’s suite repositioning program, which had accelerated to more than 300 units in 2019 and expected to target 500 in 2020, may be affected by the pandemic. Killam expects delays in completing repositioning work during this period of crisis.
    
     
12. How will the COVID19 pandemic impact your total capital spend for 2020?
    
    During this period of social distancing relating to COVID-19, Killam is limiting capital projects to essential projects, within the parameters of federal and provincial mandated regulations. This pause in certain capital projects may lead to a reduction in Killam’s capital spend in 2020 compared to the original estimate of between $70 and $75 million.
    
    Killam has the flexibility to adjust its capital program. Killam’s maintenance capital spend per year is estimated to be $900 per apartment unit, $300 per MHC site and $0.70 per square foot of commercial space, equal to $14 million in 2019. This spend represents the expected cost to maintain and sustain Killam’s properties, excluding value enhancing investments.
    
     
13. Do you expect delays in your development projects? Are there additional costs associated with the delays?
    
    All of Killam’s construction sites are currently still operational, but we are seeing a slowdown. At this time, additional costs associated with the delays are not expected to be material. Killam will review the commencement timelines of the new development projects scheduled to break ground in the second half of the year.
    
     
14. Are banks still advancing construction financing?
    
    Yes, we do not anticipate issues on construction draws.
    
     
15. How does the COVID-19 pandemic change your views on capital allocation?
    
    Killam’s focus is on our existing portfolio during this period of crisis. Killam is evaluating existing opportunities in its acquisition pipeline to determine viability. Our development projects currently underway are expected to continue post crisis. The timing for starting new developments will be dependent on the length and depth of the COVID-19 pandemic.
    
     
16. Your 2020 target for NOI growth is 3% - 5%. Is this growth still reasonable?
    
    The NOI growth target was set prior to the onset of this global health pandemic. Management expects to provide an update to its 2020 strategic targets when it releases its Q1-2020 results on May 6th.
     
17. What percentage of your business is commercial?
    
    4.7% of Killam’s 2019 net operating income was generated from our 739,000 square foot commercial portfolio.
    
     
18. How does COVID-19 impact Killam's seasonal MHC communities?
    
    Killam has nine seasonal MHC communities in Ontario and New Brunswick, which typically operate from mid-May to late September. These seasonal MHCs may have a delayed opening for the 2020 season due to emergency measures currently imposed in Ontario and New Brunswick.
    
     
19. What is your rent collection for April?
    
    As of April 8, 2020, Killam has received approximately 93% of rental revenue due for the month of April, including approximately 95% for the apartment and MHC portfolios. This is generally in line with the average rent collected by the eighth day of the month. Killam is actively following up with those accounts in arrears.
    
     
20. What is your occupancy like during this pandemic?
    
    Killam’s occupancy remains strong, with apartment occupancy at 97.0% during Q1-2020, and MHC occupancy at 97.7%. This compares with first quarter occupancy in 2019 of 97.1% and 97.8%, respectively. April 2020 occupancy remains strong.

March 23, 2020

Dear Stakeholder,

The impact of COVID-19 is being felt by everyone in Canada and around the world. I’d like to provide you with an update on Killam’s response to the COVID-19 pandemic, and our considerations at this challenging time.

Firstly, our priority is the health and safety of our employees, residents, partners and communities. Killam recognizes that as a property owner, business operator, employer and community member, we have an important role to play in managing and controlling the spread of the COVID-19 virus. Killam has been actively monitoring the growing impact of the virus and implementing its Pandemic Illness Plan to help lessen the spread of the virus and maintain the continued good health of all our stakeholders.

Killam has activated the following actions in response to the COVID-19 pandemic:

• We are communicating with our residents to let them know the actions we’re taking to help protect their health and wellbeing.
   
• We have increased the frequency and diligence of cleaning of all high-touch areas at our properties.
   
• We have closed amenity spaces at our properties to assist with social distancing, including gyms, libraries, social rooms and theatres.
   
• We are providing support to our employees across the country, assisting them as they adjust their routines and cleaning practices in the face of this challenge.
   
• We are supporting staff to work remotely, where possible.
   
• All Killam employees who are required to self-isolate or who are ill will receive paid time-off, as we have made temporary adjustments to our Leave Policy.

We have a committed team at Killam who are adapting quickly to the changing circumstances. I am proud of the responsiveness and professionalism the group has taken in keeping our residents informed and safe.

In addition to health and safety measures noted above, Killam recognizes the financial challenges facing many Canadians. For those facing financial hardship, we will work with our residential and commercial tenants to find flexible solutions on a case-by-case basis. Also, we have made the decision to waive the collection of rental increases and will not issue any further rental increases during this period of crisis, beginning with the April 1, 2020, rent payment.

We appreciate that many people have questions about Killam’s response and exposure to COVID-19. We have prepared a Q&A to help answer questions. We will continue to update this list as additional questions are received.

Yours truly,
 

Philip Fraser
President &CEO