Killam Apartment REIT (TSE:KMP.UN) reported what management described as strong financial and operating results for the fourth quarter and year ended December 31, 2025, highlighting solid same-property net operating income (NOI) growth and continued gains in funds from operations despite a sharp year-over-year decline in net income driven by property valuation movements.
Same-property growth and 2026 outlook
President and CEO Philip Fraser said the REIT achieved its 2025 strategic targets, including a 6.1% total same property NOI increase for the year. The increase was supported by 5.4% revenue growth in the same property apartment portfolio, 7.8% same property revenue growth in the manufactured home community (MHC) portfolio, and 4.4% revenue growth in the same property commercial portfolio.
Fraser said market rents have begun to stabilize in some markets, and the REIT is targeting at least 3% growth in both revenue and NOI in 2026 for the same property apartment portfolio. During the Q&A, management discussed its revenue expectations as a mix of renewals, turnover, incentives, and vacancy. Management indicated renewals in the “around the 3%” range (potentially 3.5% depending on conditions), with turnover increases in the 4% to 7% range depending on which units turn in a given month. Incentives were expected to rise modestly, with management referencing roughly 80 to 90 basis points on the incentive side.
Financial results: net income down, FFO/AFFO up
Chief Financial Officer Dale Noseworthy said full-year net income totaled CAD 29.4 million, down significantly year-over-year. He attributed the decline primarily to a CAD 120.5 million fair value loss on investment properties, reflecting higher cap rates in select markets and moderating market rents, compared with CAD 252 million in fair value gains in 2024. He also noted that 2024 included a one-time deferred tax recovery of CAD 279 million related to the completion of the plan of arrangement.
Noseworthy said those items more than offset underlying operating gains, including a CAD 14.3 million increase in NOI driven by same property growth and contributions from developments completed in 2023 that are now fully stabilized.
Key cash flow metrics improved in 2025. Noseworthy reported:
- FFO per unit increased 4.2% to CAD 1.23
- AFFO per unit increased 5.1%
- AFFO payout ratio improved to 69% from 71%
For the fourth quarter, the REIT posted 4.5% same property NOI growth, supported by 4.1% revenue growth and 3.4% expense growth. FFO was CAD 0.30 per unit, up 3.4% from Q4 2024.
Rent trends, seasonality, and mark-to-market
Management said rental rate growth moderated from peak levels in 2024, consistent with broader Canadian apartment market trends. Noseworthy said the REIT continues to achieve rent growth on both renewals and new leasing, and management emphasized a focus on pricing, occupancy, and incentives by market and by building. He also said that leasing patterns returned to more typical seasonality in 2025, including a winter slowdown and historically peak occupancy in September, a pattern that had been less evident from 2022 through 2024 due to elevated population growth.
Looking ahead, the REIT expects Atlantic Canada to outperform in 2026, supported by mark-to-market opportunities. Noseworthy said the portfolio-wide mark-to-market spread is approximately 9%, down from peak levels in 2024 due to moderating asking rents and the rent increases captured during the year. He highlighted Halifax as presenting the greatest opportunity at 15%, followed by St. John’s, Newfoundland, and Saint John, New Brunswick. British Columbia was also cited as positioned to perform well in 2026 with improving occupancy and a 10% mark-to-market spread.
Balance sheet, interest expense, and development contributions
Noseworthy said higher interest rates have been a headwind over the last four years. While refinancing remained a drag in 2025, he said it was less pronounced than in 2024, with financing costs up 5.9% year-over-year. He said Killam believes it is “past the most significant financing headwinds,” and that year-over-year interest expense growth is expected to begin stabilizing as early as 2027.
Killam also increased its use of insured mortgages, with CMHC-insured mortgages representing 91% of total apartment mortgage debt at year-end, up from 83% the prior year. Debt as a percentage of total assets was 41.9%, which management said reflected the fair value loss recorded in Q4. Noseworthy added that debt to normalized EBITDA improved to 9.66x, and management said it remains focused on further improvement in 2026.
On development, Noseworthy said The Carrick is expected to contribute approximately CAD 800,000 of year-over-year FFO growth in 2026 as it nears full lease-up. Management also pointed to future contributions from Brightwood and Eventide upon completion and lease-up, and said it expects AFFO growth to outpace FFO growth as disposition capital is redeployed into newer, more efficient properties.
Commercial operations, capital recycling, and capital allocation
Executive Vice President Robert Richardson said maintenance capital investment totaled CAD 82 million in 2025, down from CAD 90 million in 2024. He attributed the reduction to initiatives including a preventive maintenance program with energy-efficient upgrades such as solar panels and building automation systems, and to the REIT’s focus on developing and acquiring newer assets. Richardson said that based on 2026 forecasted NOI, 32% of Killam’s apartments were built within the past 10 years and the portfolio’s average age is 29 years. He also cited more than 2,062 repositioned suites over the past five years, which he said improved asset quality while delivering 15% to 20% returns.
In commercial, Richardson said Killam leased 56,000 square feet of vacancy at an average base rate of CAD 20 per square foot net (net effective rate CAD 12 per square foot), and renewed 117,000 square feet at an average face rate of CAD 20 per square foot with a 15% weighted average increase on in-place rents. The commercial portfolio totals 1.2 million square feet and is 97% occupied.
Richardson discussed Westmount Place in Waterloo, including that Sun Life is set to vacate on March 31, 2026. He said Killam is evaluating repositioning plans, with retail rental rates expected in the CAD 20 to CAD 25 per square foot range and office rates in the CAD 15 to CAD 20 per square foot range. In response to analyst questions, Richardson said renovation-driven NOI replacement at Westmount is expected to be pushed out, with no increase anticipated until summer 2027, and he cited an estimated total repositioning cost of CAD 15 million.
Fraser said Killam completed the disposition of 23 properties in 2025 totaling 1,139 units plus two parcels of land, for a combined sale price of CAD 148 million and net cash proceeds of CAD 87.8 million. Proceeds were used to fund CAD 168 million of acquisitions totaling 416 units. He said the sale of Atlantic Canadian assets aligned with Killam’s strategy to optimize portfolio value and increase geographic diversification outside Atlantic Canada. The REIT’s 2026 disposition target is to recycle a minimum of CAD 50 million in assets, with management saying potential dispositions were in early stages.
On capital allocation, Fraser said proceeds could be used to pay down the line of credit, fund the normal course issuer bid (NCIB), or support acquisitions. During Q&A, Fraser said investors should expect more activity under the NCIB, adding that buying back units and paying down debt are the first priorities.
Killam also outlined its energy investments, including CAD 6.8 million in 2025 energy initiatives and year-end solar production capacity of 3.66 megawatts per year, producing approximately 8.54% of operationally controlled electricity. Six new solar installations are planned for 2026 (five in Ontario and one in Halifax), with half expected to be completed in 2026 and the remainder in 2027.
Management said 2026 is expected to bring a more modest pace of growth than 2025, but still a positive year as interest expense pressures ease and Westmount’s repositioning progresses. The company said it plans to report first-quarter 2026 results on May 7.
About Killam Apartment REIT (TSE:KMP.UN)
Killam Apartment Real Estate Investment Trust is an open-ended mutual fund trust. The company specializes in the acquisition, management, and development of multi-residential apartment buildings and manufactured home communities (MHC). It has three main operating segments, Apartment segment, MHC segment, and Commercial segments. Apartment segment acquires, operates, manages and develops multi-family residential properties across Canada. MHC segment acquires and operates MHC communities in Ontario and Eastern Canada, and Commercial segment includes more than seven commercial properties.
