Boardwalk Real Estate Investment Trust

TSX:BEI.UN

Q2-2025 Earnings Call

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust's Second Quarter 2025 Earnings Call. [Operator Instructions]

This call is being recorded on July 30, 2025. I would now like to turn the conference over to Eric Bowers, VP of Finance and Investor Relations. Please go ahead.

[John Bowers, executive]

Thank you, Joelle, and welcome to the Boardwalk REIT 2025 Second Quarter Results Conference Call.

With me here today are Sam Kolias, Chief Executive Officer; James Ha, President; Gregg Tinling, Chief Financial Officer; Samantha Kolias-Gunn, Senior VP of Corporate Development and Governance; and Samantha Adams, Senior VP of Investments.

We would like to acknowledge, on behalf of Boardwalk, the treaties in traditional territories across our operations and express gratitude and respect for the land we are gathered on today and we now know as Canada. We respect indigenous people and communities as the original stewards of this land. We come with respect for this land that we are on today for all the people who have and continue to reside here and the rich diversity of First Nation, Inuit and Métis Peoples.

Before we get to our results, please note that this call is being broadly distributed by way of webcast. If you have not already done so, please visit bwalk.com/investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements, MD&A and quarterly report.

Starting on Slide 2, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements. Additional information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents.

I would like to now turn the call over to Sam Kolias.

[Sam Kolias, executive]

Thank you, Eric. Starting on Slide 4, affordable multifamily communities have always been an essential product and service. Together with our resident members, our associates, investors, partners, capital environment, community are all essential and interconnected with our Boardwalk Family Forever at our core with our True North, where love always lives.

A keyword in community is unity as reflected in our diagrams. Together, we go far. Welcome, everyone, to our Boardwalk Family Forever and to our Q2 2025 results. Next slide, our culture from our humble beginnings, our resident members remain at the top of our organization. Our leaders put our team first and our team puts our resident members first. Guided by the golden rule, we have a peak performing customer service culture that creates exceptional results as we can see on our next Slide 6.

Our continued impressive performance with GAAP and non-GAAP measures increasing from the same quarter last year, same-property rental revenues increased 6.2% and same-property net operating income increased 9.8%. Our operating margin increased by 220 basis points as well as our funds from operations per unit increasing by 11.5%. I would like to now pass it over to Samantha Kolias-Gunn.

[Samantha Kolias-Gunn, executive]

Thank you so much, Sam. We are extremely grateful for our team's perseverance, performance and continued commitment to our purpose, bringing our resident members home to love always. Continuing on to Slide 7, our operational stability and the resilience of affordable housing. Rental market fundamentals in our core markets remain balanced. We are well positioned in some of the most affordable markets in Canada has a reference in our appendix, Slide 31.

Affordability continues to drive positive population and leading economic growth in our core markets, Alberta and Saskatchewan, also reflected in our appendix. Québec has delivered exceptional results, further evidencing the strong demand for affordable housing. Ontario remains stable. We are strategically in all the right places at the right time. Please refer to our appendix for more data on the resilience of the Alberta's economy.

Our self-regulation has us well positioned in a more competitive market as we strategically moderate our rental rates within a resident-friendly renewal rate band, producing greater stability in occupancy and reputation. Paired with our strong financial foundation, minimum distribution policy resulting in maximum reinvestment and free cash flow, strategic repositioning, unparalleled customer service and strong family values, we remain in a position to deliver solid performance. This is what sets us apart, bringing you home to where love always lives. Boardwalk strives to be the first choice in multifamily apartment communities to work, invest, and call home with our Boardwalk Family Forever.

Moving on to Slide 8. Our strategic rebranding enhances our exceptional quality at an affordable price, keeping our occupancy high at just below 98%. Per Rentals.ca data, our average occupied rents of $1,559 for a 2-bedroom apartment are attractive, especially relative to the Canadian average of $2,221. We would like to now pass the call on to Gregg Tinling, who will provide us with an overview of our quarter results, strong balance sheet, fair value and ESG. Gregg?

[Gregg Tinling, executive]

Thank you, Samantha. Slide 9 shows our key operational metrics. Occupancy continues to remain high along with increasing occupied rent. Although vacancy loss increased, the Trust was able to reduce incentives that helped contribute to the higher revenues reported for Q2 2025 compared to the same period a year ago. This is a reflection of our key strategic decisions made to maximize free cash flow and diversify our product offering, yielding significant financial performance.

Slide 10 shows leasing spreads on new and renewed leases within our self-regulated resident-friendly centric model, keeping retention and referrals high and our turnover and expenses low. Year-over-year, leasing spreads on new and renewed leases have decreased, reflecting a return to a more balanced supply and demand picture with new supply entering select markets within the portfolio that resulted in increased competition and vacancy, particularly for product at the higher price point.

For Alberta, our renewal spreads were 4.2% in June 2025. New lease spreads in Calgary are slightly negative as we prioritized occupancy in the more competitive, higher-priced markets within the city. Edmonton continues to see positive new lease spreads as our portfolio of high-quality affordable housing continues to see high demand. Overall, our blended Alberta spreads in the month of June were 2.7% and on a portfolio basis, 3.4%. We continue to prioritize maintaining occupancy and maximizing retention. This will continue to provide resident-friendly affordable housing options in our core markets while lowering our costs and steadying operational results, an outcome that benefits all our stakeholders.

Slide 11 shows sequential quarterly rental revenue growth, including 1% growth in Q2 2025 compared to the previous quarter. The change over each quarter is a reflection of Boardwalk's strategy, striving toward balancing the optimum level of market rents, rental incentives and occupancy rates in order to achieve its NOI optimization strategy.

Moving to Slide 12. For Q2 2025, same-property net operating income increased by 9.8% compared to the same period in the prior year with revenue growth of 6.2%. Alberta, the Trust's largest region saw a revenue growth of 6.2% due to higher in-place occupied rents combined with lower incentives. Total rental expenses decreased 0.6% for Q2 2025 compared to the same period of 2024, primarily attributable to lower utilities with the removal of the federal carbon tax as well as lower insurance premiums.

On Slide 13, administration costs increased $1.5 million, and deferred unit-based compensation was relatively consistent when compared to Q1 2025. The increase in administration costs from the previous quarter was due to a higher profit share and bonus accrual to reflect outperformance year-to-date. Slide 14 illustrates Boardwalk's mortgage maturity schedule. Our mortgages are well staggered with approximately 96% of our mortgage balance carrying NHA insurance through the Canada Mortgage and Housing Corporation.

This insurance remains in effect for the full amortization of the mortgage, and in addition to carrying the government of Canada's backing, provides access to financing at rates lower than conventional mortgages with a current estimated 5-year and 10-year CMHC rate of 3.75% and 4.35%, respectively. Though current interest rates are above the Trust's maturing rates over the next few years, the Trust's maturity curve remains staggered, reducing the renewal amount in any particular year. Lastly, the Trust has an interest coverage of 3.05 in the current quarter.

Slide 15 summarizes our 2025 mortgage program. To date, we have renewed or forward locked $244.1 million at an average rate of 3.85% at an average term of 5 years. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Please refer to Slide 55 for additional details.

Trust is well positioned with approximately $26 million in cash and undrawn $246 million operating line and subsequent committed funded financing of $53 million. This approximate $325 million in liquidity provides the Trust with a flexible financial position. Slide 16 illustrates the Trust's estimated fair value of its investment properties, excluding adjustments for IFRS 16, which totaled $8.4 billion as at June 30, 2025 compared to $8.2 billion as at December 31, 2024. The increase in overall fair value is the result of increases from rental rate growth as well as the acquisition of Elbow 5 Eight in Calgary, Alberta while being slightly offset by an upward adjustment for vacancy assumptions in Calgary to reflect a more balanced market.

Current estimated fair value of approximately $243,000 per apartment door remains below replacement cost. Consultation with our external appraisers, the cap rates used in determining Q2 2025 fair value were unchanged from Q4 2024. As it does every quarter, the Trust will continue to review completed asset sales transactions and market reports to determine if adjustments to cap rates are necessary. Most recent published cap rate reports suggest that the cap rates being utilized by the Trust for calculating fair value are within their estimated ranges.

Slide 17 highlights our ESG initiatives. Using a disciplined capital allocation approach, we are focused on reducing emissions through used utilities consumption and therefore reducing utilities costs while always promoting social and governance initiatives. We encourage our stakeholders to view our 2024 ESG report available on the Trust's website. I would like to now turn the call over to Samantha Adams to highlight our capital allocation and discuss our development pipeline.

[Samantha Adams, executive]

Thank you, Gregg. The first half of 2025 has been very active for capital allocation as we remain focused on our 4 strategic pillars: value-add rebranding; dispositions; acquisitions and development, and the NCIB. Slide 18 illustrates how we invest our free; cash flow into our value-add and rebranding initiatives designed to drive market share, and our target for 2025 is to complete the rebranding of 14 communities.

Our rebranding initiatives began in 2017, and by the end of this year, 74% of our communities will be renovated. This provides our residents with exceptional value as the common area renovations and value-add amenities require minimal per suite rental increases. Over the past 12 months, Boardwalk has announced $491 million of real estate transactions as shown on Slide 19. During this time, we have announced or completed $197 million in dispositions of some of our noncore assets with a vintage age of 1989 and an exit cap of about 5.1%.

The use of some of the net proceeds from the dispositions, combined with the strength of our balance sheet has provided us with the opportunity to announce a total of $294 million in acquisitions, which are a mix of townhomes, mid-rise and high-rise buildings. With an average year of construction of 2021 at an average stabilized cap rate of 5.3%, these communities located in our target growth markets represent excellent value and prudent upcycling of our equity.

Slide 20 summarizes our most recent disposition announcements of 4 noncore properties, Imperial Tower, Insignia Tower, Les Appartements du Verdier, and Place du Parc. The dispositions are located in Edmonton and Québec City where interest from private buyers has been strong and we have been able to capitalize on that demand. These successful dispositions at or above our fair value have provided us with additional equity required to transact on our new communities, North Prairie Townhomes and The Arch.

Slide 21 details our off-market townhomes acquisition. Purchased directly from the developer, this 3-property portfolio provided us with a unique opportunity to buy purpose-built rental townhomes in the strong growth markets of Saskatoon and Regina. These townhomes offer larger unit sizes, attached garages, which are very important to our resident members, as well as easy access to nearby amenities. The 3 properties are located near our existing communities, which will provide operational efficiencies. With a low 26% loan-to-value financing at 2.35% and a going cap rate of 5.2%, these townhomes will generate strong cash flow and lower capital requirements in the near to medium term.

Slide 22 introduces our most recently announced acquisition in Calgary. Well located in the Beltline submarket, The Arch represents the opportunity to acquire a beautiful concrete high-rise at below replacement cost. The Arch offers larger suite sizes and minimal exposure to studios in small one bedrooms, which differentiates our acquisition from the newer developments in the area. The Arch currently has some vacancy, but with the strength of our team and our strong platform, we intend to improve the performance of the property, while adding scale to our portfolio in the Beltline area. Once stabilized, we also have the opportunity to deploy our value-add amenity and common area renovation strategy as the building was constructed in 2015.

Slide 23 illustrates the ongoing disconnect between our unit price, the value of our portfolio and the prudent use of our stock buyback strategy. The use of our NCIB is a key component of our capital allocation. And earlier in the year, Boardwalk invested $30 million in unit buybacks at an average price of $63.16, representing a cap rate of over 6%, which exceeded other opportunities that were available at that time.

Slide 24 provides an update on Boardwalk's development pipeline, which has been designed to support the Trust's long-term growth strategy. We anticipate the Aspire will be welcoming our first resident members in Building 1 in December, and occupancy for the balance of the buildings is expected to be in early 2026. While we continue to work through building permits and concept drawings for both The Marin and Marda Loop, we are not actively moving the projects forward in the short term as we wait for greater construction cost certainty and improved overall market conditions for new developments.

As mentioned in the prior quarter, we have completed the rezoning for Island Highway and are currently marketing the property for sale. I would now like to turn the call over to James Ha to discuss our track record of creating value and our updated 2025 guidance.

[James Ha, executive]

Thank you, Samantha, and thank you to our entire Boardwalk team for your service and commitment to our resident members, which continues to deliver consistent and strong performance that our team is sharing today. Slide 25 provides an update to our outlook as we build off our base of exceptional affordability, product quality and self-moderated rental rates. Each of these are key inputs into the strength of our platform and ability to compete and outperform in a more balanced housing market.

We continue to see that the demand for affordable housing remains resilient and our outlook for the year has further improved. In 2025, our team, platform and portfolio continues to maintain high occupancy and strong blended leasing spreads. Expense optimization has been a priority as demonstrated in our first 2 quarters. As we look forward to the second half of the year, we are anticipating a continued solid revenue profile, with discipline on our operating expenses, including lower-than-anticipated growth in property tax, insurance and the exclusion of carbon tax. These lower expenses will help to ensure that our high-quality affordable housing remains the best value for our resident members.

Our 2025 outlook has improved with same-property NOI growth guidance adjusted to 8% to 10%, while also increasing our FFO per unit outlook to $4.48 to $4.63. This guidance is forward looking in nature and we look forward to regularly updating and refining our outlook as the year progresses.

On Slide 26, we have confirmed the payment dates of our next 3 regular monthly distributions equating to $1.62 per Trust unit on an annualized basis and represents a 12.5% increase from our distribution a year ago. Since 2021, our distribution has increased at an annual average growth rate of over 12%, while still retaining an industry high proportion of our cash flow to reinvest and compound growth. Our formula and operating model has extended our FFO per unit track record, and we are well positioned in 2025 to more than double our FFO in just 8 years.

On Slide 27, this growth, along with our approach to maximum cash flow retention has improved our leverage metrics to provide Boardwalk with one of the strongest and most flexible balance sheets, trailing debt-to-EBITDA in the single digits. Our discipline and solid financial foundation provides us with flexibility to take advantage of opportunities that may arise.

Lastly, Slides 28 and 29 highlight the exceptional value that our Trust units represent. Our current trading price equates to just $200,000 per apartment door and over a 6% cap rate on a forward basis. Both metrics are exceptional when considering our product quality, locations, spread to financing costs and cash flow growth as shared in our outlook. Recent private market transactions continue to be supportive of our estimated net asset value of $243,000 per apartment door or $97 per Trust unit.

In closing, our team continues to be focused on delivering the best quality and value in housing to our resident members. Our unique operating platform continues to demonstrate our ability to create value for all our stakeholders as we continue to deliver leading organic and FFO per unit growth that is growing our free cash flow for reinvestment. We also continue to be active in the private market in sourcing additional capital from noncore asset sales that we can upcycle toward accretive opportunities, including buyback or unique acquisitions where we can implement our platform to deliver strong yields and returns.

Thank you again to our resident members, our team, our partners and all our stakeholders for trusting Boardwalk to provide the best quality homes and communities and are looking forward to continuing our track record of growth.

We would now be happy to take questions from the line. Joelle?

[Operator]

[Operator Instructions]

Your first question comes from Jonathan Kelcher with TD. Cowen.

[Jonathan Kelcher, analyst]

I guess first question just on the blended rent growth change for the overall portfolio. It did inflect positively in June. I know Québec will weigh on that a lot in July. Should we expect a sort of continuation of that? And how should we think about it for the balance of the year?

[James Ha, executive]

Jonathan, it's James. On the renewal front, our team continues to be very active in proactively renewing our leases as we've discussed in the past. Our team is negotiating with -- and renewing our residents 2 to 3 months in advance. And so as we look out from this point, we're already doing renewals into August, September, October. And we're seeing a continuation of the same trends.

Keep in mind, renewals represent about 75% of our deal flow. Retention is key and critical in our revenue formula, and our team is doing a great job with that. As we've talked about in the past, our retention ranges are quite sustainable between the 3% to 7% range. Our Calgary market is seeing generally the lower end of that range, whereas in Edmonton, our most affordable market, you see it in the mid- to upper part of that range.

[Jonathan Kelcher, analyst]

Okay. And just on, I guess, a continuation of that, the sequential revenue growth did slow to 1% this quarter. Is that a level that you guys think you can maintain?

[James Ha, executive]

We do. Again, if you look at the components, as long as we can maintain our high occupancy, which we're confident we can, and when you blend those leasing spreads that we were just talking about, and thank you for pointing out Québec, July is a busy month in Québec. And as we've talked about in the past, we do have one of the higher guideline increases this year, reflecting the higher operating costs that community providers have had over the past many years. And so a lot of that is going to hit for July, which will certainly help our third quarter and quarters coming going forward.

[Jonathan Kelcher, analyst]

Okay. And then just switching gears. Samantha, you just announced the Calgary acquisition. That is a market with some near-term supply challenges. Can you maybe give us a little bit more detail on the thought process behind that and whether you expect to see further portfolio -- I guess, portfolio improvement through more acquisition and disposition activity this year?

[Samantha Adams, executive]

Happy to answer that. No, The Arch is, from our perspective, a unique opportunity to buy a really beautiful concrete high-rise in the Beltline submarket of Calgary. We recognize that there is significant new supply coming in this node. But most of those units on average are 20% smaller than the unit sizes in The Arch. So The Arch for us, yes, we're mindful of supply, but the larger unit sizes, very low exposure to studios and one bedrooms, we really believe that in the -- over the longer term, this property will perform very, very well. So that was the rationale behind The Arch. And sorry, your subsequent question was what can we expect going forward in terms of transactions?

[Jonathan Kelcher, analyst]

Yes.

[Samantha Adams, executive]

We remain very active. The entire team is very, very active, and we hope to complete a few more transactions throughout the balance of the year.

[Jonathan Kelcher, analyst]

Balance is coming buying and selling?

[Samantha Adams, executive]

Yes, yes. We're very focused on dispositions because it's a wonderful opportunity for us to unlock equity and then upcycle that equity into new acquisitions.

[James Ha, executive]

I'll just add. It's James, Jonathan, adding to Samantha's comment on Slide 22. The 2 key stats there, the 982-square-foot average and the $2.30 a foot. Huge opportunity for us to bring in our platform and really optimize that community.

[Operator]

Your next question comes from Fred Blondeau with Green Street.

[Frederic Blondeau, analyst]

Just one question from me for James maybe. Looking at your same-property NOI guidance for '25, what are your views on revenue versus expenses for the second half of the year? Do you feel like revenue growth could actually accelerate from here? Or it's more like what we've seen so far this year, like call it, 7% revenue growth with limited expense growth from here?

[James Ha, executive]

Thanks for the question. I'm actually going to ask invite Gregg to start.

[Gregg Tinling, executive]

Fred, it's Gregg. For the expense side of things, total rental expenses, we're expecting same-door to be negative 2% to around 0.5% higher than 2024. Yes.

[James Ha, executive]

And so when you put that together with our same-store NOI guidance, you can see we're seeing -- we're expecting very similar trends to what we have for revenue. We're running it quite sustainable this year. Again, and for our team members that are on the line, we all know this. We have to maintain this high occupancy. We have to continue to be flexible with our residents and continue to strive for sustainable moderated adjustments, which we continue to get, and that's going to continue to deliver the solid results that we're reporting today.

[Operator]

Your next question comes from Brad Sturges with Raymond James.

[Bradley Sturges, analyst]

Just to circle back to the transaction commentary. Is it fair to say if you are to execute more transactions, you would continue to be tying acquisitions to dispositions, meaning you'd probably be more net neutral from an investment point of view?

[Samantha Adams, executive]

Yes, I think that's fair to say.

[Bradley Sturges, analyst]

Okay. And just on the disposition side, just curious on the Insignia Tower disposition, it looks like it's a little bit of a newer tower. Just curious to get maybe a little bit more thought process behind the decision to sell that specific asset.

[Samantha Adams, executive]

Yes. No, that is a good question because it is one of our newer assets. I don't know if you recall, we sold access as part of a portfolio sale in January, and Insignia is essentially around the corner. So it was, from our perspective, operationally speaking, less efficient to own just Insignia, and like it was also part of the portfolio sale with Imperial Tower and the purchaser was very excited to acquire both.

[Bradley Sturges, analyst]

Okay. And then last question just going back to The Arch acquisition, just one follow-up. There's a small gap, it looks like, between where you suggest in-place NOIs and stabilized. Is that purely a mark-to-market function? Or is there a little bit of savings around op cost as you integrate the asset into the -- onto the platform?

[Samantha Adams, executive]

It's actually more to do with the current occupancy of The Arch. It's currently about 92% occupied. So again, I think as I mentioned in my earlier comments, with the strength of our team and our platform, we're very confident that we'll be able to improve that occupancy over the next, call it, 12 months.

[Operator]

The next question comes from Kyle Stanley with Desjardins.

[Kyle Stanley, analyst]

Thanks for obviously the updated guidance. I'm just trying to think now as we start to look forward, if we incorporate the current supply pipeline across your markets with, I guess, what we believe is the current demand profile, I'm just wondering, what is your expectation with regard to market rent growth over the next 12 to 24 months?

[James Ha, executive]

Kyle, as we know, new supply that's being delivered, rental rates are much higher than where we are. Our average occupied rent across our portfolio in the $1,500, new supply cannot match that. And so our most affordable product, which as everybody on this line has seen, we've invested heavily back into our communities. We offer some of the best value in the marketplace.

The demand for affordable housing remains resilient. Where there is competition is at that upper end. And to Samantha's earlier point, where we do have product at that upper end, we're going to win. We're going to compete with our platform, our product offering and the way we deliver housing. And so that's effectively how we're thinking about maintaining that high occupancy and continuing to deliver [ sustainable growth ] .

[Kyle Stanley, analyst]

Okay, okay. Maybe just a second one just on Elbow 5 Eight. I'm just curious, how much income was generated from Elbow 5 Eight during the quarter? And then maybe if you could just provide some commentary on how the lease-up is progressing, whether there's been any changes to your kind of time line for stabilization, achieving pro forma? Just a general update on that asset.

[James Ha, executive]

Yes. Maybe we can come back to you offline on the exact NOI contribution for Elbow 5 Eight, Kyle. But lease-up's going well. We're about 55% leased here, which is on schedule for our 12-month lease-up time frame. Rents are generally tracking with our pro forma. But it's a wonderful example of where location matters, where our team is aggressively attracting residents. We're seeing a lot of transfers even from folks who are transferring from other communities that we have in the area into Elbow 5 Eight. And so we're quite happy, quite pleased. We'll continue to keep everybody updated, but so far, so good.

[Operator]

Our next question comes from Jimmy Shan with RBC Capital Markets.

[Khing Shan, analyst]

I was wondering if you could talk a little bit about the Saskatoon and Regina market. The occupancy seems very strong in those markets and rent seems to be continuing to grow. What's driving those markets? What's your expectation of sustainability of the strength of those markets?

[Sam Kolias, executive]

Jimmy, it's Sam. Potash is a critical essential mineral that feeds our world and a massive investment of $7 billion, $8 billion for the expansion of that real critical mineral is a big factor of what's driving that economy, and that the scale of that capital is very significant versus the GDP and the population base of Saskatchewan. So Saskatchewan has what our world needs, and we just can't feed everybody without -- that's a big factor.

The other big factor is Saskatchewan is a solution for affordable housing. It still remains at the bottom of the list on average asking rents as per Rentals.ca, so affordability is very high as well. And Saskatchewan is a beautiful awesome place to live and ask everybody who lives there. It's a great, great province and we're really, really happy. Our team is so happy with the acquisitions, with the attached garages, a very, very unique product and off-market, and we're just so excited to offer that affordable large unit sizes with attached garages in that ever-growing marketplace.

[Khing Shan, analyst]

Okay. And then just the kind of big picture question on the demand side. So population growth in Alberta still strong relative to other provinces, but it has come down quite materially from a year ago. But sort of what level of population growth do you feel you need to start to get worried about how that might actually put a dent on occupancy level?

[James Ha, executive]

Jimmy, it's James. I think again, I'm going to come back to the affordability side. The demand for rents that are $1,500, $1,600, $1,700 continues to be really high. Where we do see competition is in our communities where rents are $2,300, $2,400 and $2,500. Again, we're happy to compete and we will compete there. But if you look at the majority of our portfolio, we feel quite confident in the demand for affordable housing.

[Operator]

Your next question comes from Dean Wilkinson with CIBC.

[Dean Wilkinson, analyst]

Maybe this is James. On the annualized $1.62 distribution, with increased capital recycling, do you run into the necessity to maybe bump that up more than would be expected? Or how much room is in there to sort of move that around?

[Gregg Tinling, executive]

Actually, I'll take this one, Dean. It's Gregg. You're right. Given the number of dispositions for 2025, there will be tax from capital gains and recapture that we will need to be distributed to our unitholders at the end of the year. So yes, there will be a special distribution that we'll be looking to do as we get closer to the end of the year. At this time, it's too early to say, but I would say as we get closer to the end of the year, we're going to determine the full impact and plan accordingly.

[Dean Wilkinson, analyst]

Okay, great. And then maybe to one of the Sams, the townhomes, I mean, I think that's a really interesting acquisition. Probably something that the Canadian rental market needs more of. Do you see more opportunities to purchase assets like that? Or at just over $300,000 a door, could you build those? Or was that just a very unique situation, and it might be a bit of a unicorn?

[Samantha Adams, executive]

Dean, okay, I'll start. It's Samantha speaking. You're right. It is a unique opportunity for us. We would love to see more purpose-built townhomes built across the country in all of our target markets actually because we think they really do offer a wonderful choice and option for our resident members. The challenge in some markets, of course, is land cost. But wherever we see these opportunities and we have connected with some developers over the past to see if there's the possibility of working together to build purpose-built townhomes. So we are constantly on the lookout for opportunities to acquire communities like this.

[Sam Kolias, executive]

Dean, it's Sam, and unicorn is the right word because we're always looking for the best deal. That's only one deal. And so that absolutely is the best deal in Saskatchewan that we've seen. And we're so excited because our team is so excited and it is a very unique product, absolutely. It's an underserved product type in the entire Canadian landscape. In our portfolio, historically, our townhomes are as cyclical 3 as our BAP Canmore communities. Very, very little turnover, very, very little vacancy regardless of the economic cycle we happen to be in. So you're spot on, Dean.

[Dean Wilkinson, analyst]

Yes. They're homes, right? They are homes?

[Samantha Kolias-Gunn, executive]

That's right. Just wanted to add so that you got all the Samanthas and Sams, that we maintain our relationships with developers and look forward to future opportunities just like that and hopefully catching more unicorns in the future.

[Operator]

Your next question comes from Mike Markidis with BMO Capital Markets.

[Michael Markidis, analyst]

Obviously, the private market demand, particularly in Edmonton and I guess now Québec City has been pretty strong. We've been hearing about how the institutional demand has kind of dried up in some maybe certain cities. And it feels like you guys are getting a little bit more active. So I was just wondering if you could give us a sense on if this is a reflection of you being more confident to deploy capital from an acquisition perspective, just given what you're seeing in the market. Or is it actually an uptick in the opportunity that you're seeing in the deal flow?

[Samantha Adams, executive]

Mike, it's Samantha Adams speaking. Well, we -- to your point, we've seen a lot of demand for our product in Edmonton and Québec City. And to your point about not a lot of institutional interest, it's all come so far, for us anyway, from private buyers. And so what that does is it does provide us with a wonderful opportunity to transact. We are able to sell some of our older noncore assets and then upcycle into the newer, nearly new depending on the property, obviously, acquisitions as we continue to look for the right opportunity and the best value to continue improving our free cash flow.

[Michael Markidis, analyst]

Okay. But what about on the demand -- the acquisition side? Is it that the opportunity set that you've seen has increased over the past 12 to 24 months? Or is it just that perhaps now that you're -- now that we've sort of seen occupancy stabilize, you guys are more confident in the market, and that's making you more confident in terms of your willingness to deploy capital?

[Samantha Adams, executive]

I would say it's probably a combination of all of the above. I think also what we are starting to see is people are approaching us perhaps earlier in their sale process, and they might not have done prior as we are now quite active on both the disposition side and the acquisition side. But we are very confident in our target markets. And yes, there may be some upcoming supply challenges in a few submarkets within, say, the Calgary area. But overall, we're very confident in our portfolio and in our platform and teams, quite frankly and their ability to provide the best service and for our resident members and unitholders.

[Operator]

Your next question comes from Matt Kornack with National Bank Financial.

[Matt Kornack, analyst]

Maybe a quick follow-up in terms of what you're targeting on the acquisition front. Are you market-agnostic? Does rent control play into kind of what you're looking at? Or is it really an asset-specific attribute that you're looking after?

[Samantha Adams, executive]

I mean, first and foremost, it's sort of the asset specific. We're looking for the -- Sam described it the sort of the unicorn, the very best acquisitions we can transact on. And in terms of the markets, we remain really, really confident in our current target markets, Edmonton, Calgary, Saskatoon, in particular, now as well in Regina. We are still very watchful in some of the BC markets. We're in Victoria, for example, and we continue to watch to see where the opportunities there might be.

Québec has performed very well for us and so we're very interested in looking at further expansion in those markets as well. Ontario gets a little bit trickier, sorry, to your point, which is rent control. So if we were to explore opportunities in the Ontario market, we would definitely be leaning towards the non-rent controlled segment of that market.

[Matt Kornack, analyst]

Makes sense. Maybe switching quickly to the cadence of rent increases. It seems like, again, the June numbers were inflecting. Given where occupancy is, does that give you kind of comfort at this point to be a little bit more aggressive on new leases? It seems like turnover has remained fairly low, and again, occupancy has held up. So can you give us a sense, do you kind of see a convergence between the renewal and new spreads at this point? Or will the new kind of move towards the renewal?

[James Ha, executive]

Matt, it's James. As we said earlier, we're continuing to see a really strong July. To your point, turnover has declined but that's by design. That's by design on our part where our retention teams are quite aggressive in ensuring that we're able to retain as many residents as we can. On the new side, we still have a couple more days here in July, and so we're looking forward to reporting that July, August number come our next report.

But so far, we're seeing good consistency. Again, the #1 priority is keeping this occupancy high. And I'll just remind everybody again, our renewals represent about 75% of that deal flow. And we're already, as we talked about seeing kind of similar trends on the renewal front go way out to September, October at this point.

[Matt Kornack, analyst]

And I know with some of your peers probably less pronounced with you guys because you didn't deal with rent control, but there was a period of time, post-pandemic, when you could really push on the rent front. And some of those -- some people are lapping those and there was a negative roll down, but it's going to be just a temporary kind of roll-through of those higher leases. Is that something that is evident in your portfolio or because you're mostly non-rent-controlled markets, you never really dealt with that?

[James Ha, executive]

Yes, a little less of that, Matt. But I will say that if you're looking at specifically Slide 10 and you're looking at our new leasing spreads, the type of unit that turnover does matter for that. And where we are seeing more turnover within our portfolio is generally more of the upper-end or a more expensive product. And where we are getting a lot of retention is our more affordable product. So when you put those together, there is a little bit of that trend that occurs but for different.

[Matt Kornack, analyst]

Okay, that makes sense.

[Sam Kolias, executive]

Matt, it's Sam. And we really have to give credit where credit is due. Our design team, our small caps and contractor partners and our rebranding is a significant advantage versus our competitors. We have really improved our value proposition and have exceptional -- and as our Stampede tour, for anybody who never got to attend our property tour, we're always open to touring our communities and the amazing work and upgrades and transformational common area upgrades with common area rooms, fitness that we are doing, it really is a big reason why we stay ahead of our competitors.

[Matt Kornack, analyst]

Sure. No, that makes sense. It seems like the value proposition, given the quality is definitely showing through.

[Operator]

Your next question comes from Sairam Srinivas with Cormark Securities.

[Sairam Srinivas, analyst]

Just a quick question for Samantha. Just to clear any comments on your relationship with developers in your markets. If you kind of think about these relationships and the temperature of developers over the last 12 months, how would you characterize that compared to all that we're seeing in newspapers in terms of developers struggling to off-load inventory? And how are they doing across different markets, if you could just comment on that?

[Samantha Adams, executive]

It's Samantha speaking. I mean, it's a bit of a difficult question to answer because, obviously, each market is very different and whether you're new to the development cycle or a well-established developer, you're facing different challenges. I would say as a general statement, though, we are seeing more offers to partner with developers on the equity side. I think that's one of the larger challenges. It's very broadly speaking, of course. One of the largest challenges for the developers is the equity piece. So we are certainly receiving more inbound calls this year than we did this time last year.

[James Ha, executive]

And operating platforms, I think we can add to that as well. Operating platforms certainly matter. And again, our results are the perfect example of that, where yes, there is more balance in the housing market here in Canada, and so we have to be good operators to ensure that we're optimizing the opportunities that present themselves in the current market today.

[Sairam Srinivas, analyst]

Thanks for that color. So when you think about these opportunities, how would you pit them against acquisitions? And in terms of partnering with developers versus going out to the assets completely, how would you make -- go for one versus the other?

[Samantha Adams, executive]

How do we make the decision, sorry, just so I understand between buying an acquisition versus partnering with the developer?

[Sairam Srinivas, analyst]

Yes.

[Samantha Adams, executive]

Okay, sorry. Well, it really depends on the opportunity and the location and what the returns look like. But there -- we like to look for a decent spread essentially with development. And right now, we're seeing some wonderful opportunities to buy existing income-producing properties. And right now, that's our focus.

[Operator]

[Operator Instructions]

Your next question comes from Mario Saric with Scotiabank.

[Mario Saric, analyst]

I wanted to maybe focus a little bit on Calgary, and I appreciate that you don't have a lot of competing products with the new supply that's coming online. With that said, are you seeing any trends with respect to the incentives that are being offered by developers on that new supply? Like are you seeing new incentives come down a little bit? Just maybe share some color in terms of the trends that you're seeing on the incentive level within new supply.

[James Ha, executive]

Mario, it's James. I can start. Certainly, it's for buildings that are going through lease-up, we've actually seen incentives decline relative to what we saw at the beginning of the year. At the beginning of the year, you could find offers that were 2 months free. Today, in our most recent shops, we're seeing one month free is kind of your most common incentive that's out there.

As Jimmy had pointed out earlier, we are still seeing population growth, right, so there is absorption that's happening. And we're seeing some of the best population growth in the country, albeit at a slower pace, but we do need these homes for these new Albertans that are coming to our province. And so, though there is supply, they are going through lease-up. Generally, about one month free is pretty well what we're seeing consistently through these summer months. So on a trend basis, to answer your question, Mario, less discounts from the beginning of the year, but it's been pretty consistent through the summer leasing season.

[Mario Saric, analyst]

Got it, okay. And then within your portfolio, when you're looking at your new leases, internal leases, can you comment on the rent income ratio that you're generally hitting or that you hit in Q2 relative to a year ago relative to 3 months ago, if there's any discernible change there?

[James Ha, executive]

Pretty consistent again. We're actually almost bang-on to the Rentals.ca average when we do look at our rent-to-income ratios, which is generally in your low to mid-20s for the most part. Again, affordability is not the challenge here in Alberta or Saskatchewan, for that matter.

[Mario Saric, analyst]

Perfect. And my last question just looking to '26, again just thinking about new supply and specifically focusing on the rental stock as opposed to the overall housing stock. It's difficult to gauge because completions or anticipated completions can vary in terms of timing. So some may go into '25, some may get delayed to '26 and so on and so forth. But generally for Calgary and Edmonton, when you're thinking about your rental positioning going into '26, what are your expectations in terms of an acceleration/deceleration in the supply growth in those 2 cities relative to '25?

[James Ha, executive]

In terms of product that's going to go under construction, so starts, our expectation would be we start to see a decline for a couple of reasons: one, again, we are seeing more balance in the market; two, CMHC has recently increased the cost and the premiums associated with MI select construction, which should make it a little bit more difficult to access capital; but three, we continue to see construction costs increase, which to Samantha's earlier point, while we are such an attractive crude oil price, that acquisition looks great today. It's going to look even better when we compare it to these inflating construction costs.

And so our expectation would be starts to slow. In terms of deliveries, our team has done, and we have to give our asset management, our operations, our whole team a ton of credit. Whenever we see a new product or new buildings start to go under construction near one of our communities, our team is in front of that, making sure that we are positioned to be able to compete and win against that community. We've already done all of that.

And so if we look around town in both Calgary and Edmonton, where buildings are expected to come online in the next 12 to 24 months, we've already repositioned those assets. And so I think as that supply comes on, again, we need it because we have population growth in Alberta. But from a Boardwalk standpoint, we're well positioned to compete and win through that environment as those buildings come online.

[Mario Saric, analyst]

Got it, okay. But generally speaking, is it your view internally that the pace of supply growth both in Edmonton and in Calgary will decelerate in '26 relative to '25?

[James Ha, executive]

Yes, just on economics. Again, we have -- there's more -- as Sam always says, we have more than enough supply at the upper end. And you're seeing that with the competition and the availability that's there. And that's not just Calgary and Edmonton, that's pretty well across the country.

[Operator]

There are no further questions at this time. I will now turn the call over to Sam Kolias, CEO, for closing remarks.

[Sam Kolias, executive]

Thank you, Joelle. As always, if there are any further questions or comments, please do not hesitate to contact us. With gratitude, we'd like to thank our extraordinary team, loyal residents, CMHC, our lenders and, of course, our unitholders from far and wide and local. It really is all about our BFF, our Boardwalk Family Forever, whose huge shoulders we stand. And as leaders, we continue to do everything we can to support continued growth and extraordinary.

We really can't thank our extraordinary team and great leaders ever enough. We are pleased with our improving results on a foundation of exceptional value, service and experience we continue to provide our family resident members, our investors and all our stakeholders. We conclude home is where our heart is, our heart is where our family is, and our family is where love always lives.

Our occupied rent average $1,559. Our love, always priceless. Welcome home to love always. Our future is Boardwalk Family Forever. What can be more important when choosing where to call home? God bless us with peace.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.