Q3 2019 Earnings Call
This conference call.
At this time all lines are not listen only mode. That's following the presentation. We will conduct a question answer session. If at any time you understand a quite immediate assistance. Please press star zero for the operator not at this conference is being recorded on Friday November eight 2019, and I would like to turn the conference over to Citibank.
Please go ahead.
Thank you Sylvie good morning, and welcome to today's conference call, where we will be discussing our financial results in highlights for the third quarter of 29 eight.
The presentation for this call. This post it in both English and French and the conference call section of our website.
Inline with our disclosure principles access to this call is open to financial analysts investors the public and the media.
The question period will be open to financial adviser.
Before I begin I would like to draw everyone's attention to the notice concerning forward looking statements on page two of the presentation.
With me today is our CFO had their Kirk.
Members of our executive management team now they are that they would day that no pretty gay Michael Hession, John I had me and while he couldn't you are also here with us.
Q3 highlights.
Our strategic plan that we announced last quarter to improve the efficiency of our platform. That's now entered its execution phase.
Recent initiatives had a positive impact in the third quarter with an increase of the any place occupancy.
Strong organic growth in the same property NOI at 3.8%.
But our full year guidance anyway cognitive contribution from each of our asset classes.
A reduction in our leverage and a decline in our capital expenditures.
While we are all highly committed to keep on delivering more it is clear that content. Our has hit an inflection point.
And after day that we held in Toronto, a few weeks ago, what's the first of its kind for coming down and was another sign of our objective to be closer to our investor base and to communicate with enhanced transparency.
Turning to 2020, you can do keep driving your NOI growth and but the emphasis on crystallizing untapped portfolio value.
By making the most sound intensification opportunities.
In line with our ongoing transformation. We are also aligning our organizational structure with the dynamic needs of our markets.
I'm pleased to announce the higher about now I became.
As executive Vice President office, a cheap real estate operations officer.
Now now will oversee the leasing and property management teams for office and industrial assets.
As well as building operations maintenance and construction activities for the entire portfolio.
Recently came at age a significant.
6 million square feet, Ivanhoe, Cambridge office property in Montreal, and let the transformation of glass they'll Marie.
His arrival compliments, our leadership team and ensures a closer presence in our market in Montreal.
As a result at these organizational changes I also announced that I need that executive Vice President and COO well leave commentary today.
Most grateful for his contribution to comment on since the creation of to read in 1998.
He is leaving US a solid foundation on which we couldn't dealt with the leadership team.
We've also added three experienced in highly qualified executives to the team.
They should do for as Vice President legal Affairs and corporate Secretary.
Say that kids, a BLA as vice President leasing retail and John Mac will as vice President operations retail.
Over the past 12 months, we have transformed our senior management team through college and task enhancement in order to create a culture of excellence improved capital allocation.
Drive operating performance and create value for are you worried at all.
Let's move along to our quarterly results.
On page five are committed occupancy rate improved to 94.4%.
110 basis points year over year.
Up 50 basis points since Q2 29 peak.
90 basis points above our historical average.
The into place occupancy rate reached 90.3% as at September 30, 20, <unk> de <unk>.
240 basis points year over year.
In addition, the in place occupancy rate, it's now back to our historical average and is for the first time since 24 key greater than 90%.
Moving on to page six the industrial segment recorded the highest committed occupancy at 96.4% Huntington 20 basis points about Q tweet Q3, 2080, followed by retail at 94% suddenly basis points year over year.
And office at 92.1%.
A significant 130 basis points year over year.
By region, I Qubec city portfolio remain strong and steady at 95.6% committed occupancy.
While the Montreal portfolio was 93.9% three.
100 basis points higher than Q3 20 8-K.
The most significant improvement has been in our Ottawa portfolio, which is now 93.8% leased a material 230 basis points improvement year over year.
Our in place occupancy rate rose to 90.3% in the third quarter, an increase of 40 basis points over Q2, 20, Nike and an increase of 240 basis points year over year.
The in place occupancy of our office portfolio increased by 320 basis points over Q3 2018.
Wow retail was up 130 basis points and industrial increased by 360 basis points.
Moving onto our leasing activity on page seven.
In Q3, our <unk> average net rental rate on renewals increased by 2.4% led by a solid totaled 10.6% increase.
In the industrial portfolio with a 11.2% increase into Montreal market, and 8.8 increased <unk> percent increase into Quebec City market.
And the office portfolio rents on renewals increased 2.1% within decrease of 1.8% into Montreal market, 2.9% in Quebec City market, Hey, 2.1% in the auto loan market.
We recorded a decrease in rents on renewals at 2.7% in our retail portfolio with a strong increase of 5.5% in the auto a market, where we have a small presence partially offset by a 4.8% decrease in Montreal and a 0.4%.
Decrease in Qubec city.
The decline in rents is in part related to space expansions at lower rates to drive and a lot.
[noise] year to date, we improved our retention rate to 66% from 64.6% for 28 tea.
We renewed 3.4 million square feet of expiring leases and in addition, we signed 1.9 million square feet of new leases.
Taken together, we completed renewals and new leases totaling 5.3 million square feet, which represents 102.3% of aren't leasable area maturing at 29 theme.
Moving on page eight with respect to our seven Sears locations, which totaled 672000 square feet, we have signed leases for 230000 square feet or 34% of total area.
We are in advance discussions on 242000 square feet or 36% of the total area.
Combined.
Side space and space in advance discussions now totaled 70% of the total available space and increased from 61% as out last quarter.
To sum it up 70% Sears space is about it or about to be leased and will generate 53% higher rental income.
On page nine during the quarter, we sold properties for gross proceeds of $20 million at pricing $4 million above our most recent I have far less values.
An average cap rate on in place and apply for played 6%.
Year to date as of today, we have disposed of $210 million of properties at an average cap rate on in place and Ohio at 6.8%, excluding three properties sold on the land value basis.
As our refinancing activity is ahead of schedule, we have a revised down our target for dispositions at $250 million in 29 team.
Moving on to page 10, our investment properties held for sale totaled $67 million at Q3, 2019 and totaled approximately 587000 square feet.
Which 64% as retail and 26% is off.
Moving onto page 11 at 800 Palladium drive in Iraq afford Canada will be the tenant for 96%.
Those are 100000 square feet office development, which will house forward to research and development Center for autonomous driving vehicles with occupancy expected to start in September 2020.
The project is budgeted to college, approximately $28 million with a target yield on cost as approximately 9% and is now 100% leased ahead of schedule.
With respect to our 500000 square foot he lumen dad retail project located in the highway 40 in Quebec City adjacent to the Quebec City I can't start.
The 57000 square foot decathlon store opened in October 29 team with great success.
The tramway remains confirmed to be located on our side and as a result, we are reassessing our master plan for this side, particularly with respect to the potential for multi residential development and other uses.
Moving onto page 12, with regards to intensification opportunity.
Our portfolio has the potential of close to 10000 residential units on 10 different sites.
For each of these sites, we will assess the different options that we have a development on our own development and partnership Acella their rights I sell to lag and for each project, we will make the decision that in our view that maximizes value in light of risk.
Hi, there will now discuss our financial results.
Thank you feel like on page 13, operating revenues of $171.5 million for the third quarter up 2019 decreased by 0.7% compared to the third quarter of 2018.
I think street and $1.1 million resulted mainly from a 6 million dollar decrease attributable to properties sold in 2018, and 2019 and $4.9 million of growth in same property operating revenue.
Net operating income of $91.7 million increased by nearly <unk>, 0.5% year over year. The increase in zero point $4 million is explained by the fact that operating expenses decreased by 1.9% well operating revenues decreased by on lease airplane seven.
FFO for the quarter decreased by your point $9 million or 1.8% year over year to $51.8 billion.
The decrease was due mainly to increase an ally related to disposition restructuring and debenture redemption costs, partially offset by a target Canada settlement of $1 million on a per unit basis.
So for the quarter decreased white sand to 28 cents from 29 from Q3 2018.
Excluding restructuring costs zero point $9 million debenture redemption costs of $1.1 million and the settlement, but target Canada.
That's all would've been 52.7 million or 29 cents per unit.
Change from century 2018.
[noise] AFFO for the quarter decreased by $2.8 million or 7% year over year on a per unit basis. After so for the quarter decreased two cents to 29 cents compared to 23 cents for could you pre teen and translates into a payout ratio of 85.7% versus 78.3% last year.
Excluding the risk capturing cost debenture redemption cost and the target settlement payment after I phone freeing up would've been 22 cents.
It should translate into an AFFO payout ratio up 81.8%.
Moving onto page 16, and 17 for the third quarter, our same property NOI increased by 3.8% to $92.7 million driven by a 2.9% increase in same property revenue and expense controls, which delivered a 1.8% increase and same property expenses.
We are pleased to have continued to accelerate our organic growth in Q3, 2019 and continues to be focused on driving stronger operating performance.
Third quarter growth in same property NOI reflected a strong 8.1% increase for the industrial portfolio supported by a 4.1% increase for the office portfolio and by 0.6% increase in our retail portfolio.
They were increase reflects an increase in same property in place occupancy up 220 basis point same property occupancy increase for all property types, including 350 basis point for industrial portfolio 160 basis points for the office portfolio and 100 basis.
Thanks for retail we're pleased that our operating performance has exceeded our forecast and are increasing our same property NOI guidance to 2.5% to 3% for 2019, we are confident the implementation of our strategic initiative position us to continue to accelerate our organic growth and deliver.
Strong results.
Moving onto page 18.
Debt ratio with 53.8% at the end of the quarter down from 55.3% at the end of 2018, our debt to EBITDA ratio was 10.3 times at the end of Q3 famous at yearend 2018.
Our interest coverage ratio was 2.34 to one and our unencumbered asset pool stood at $2.2 billion, representing 1.5 times, our unsecured indebtedness.
The unencumbered asset ratio was down from 1.53 times at year end Titan team.
As you will hear later, we are looking at initiatives to drive that number higher.
Moving on to page 19 during the quarter. We closed the previously announced 400 million dollar unsecured credit facility and the 300 million dollar secured credit facility as of September Thirtyth 20, 1900, $18 million was drawn on the unsecured credit facility and the secured facility with full.
<unk> Undrawn.
On the mortgage frankly close for transactions in the quarter for a total of $263 million at an average loan to value of 64% an average term a 6.8 years and average interest rate of 3.4 or 5%.
Since the beginning of the year, we closed a total of $382 million on 52 properties to six different financing with five different lenders, adding up the credit facilities I knew mortgages and the 200 million I've debentures. We issued last may we have originated $1.3 billion.
I mean that year to date.
We also firmly repaid the $300 million series to debentures due in December 29 team using a combination of cash on hand any draw on our unsecured credit facility at quarter end, we had liquidity of close to $600 million $16 million cash on hand, and an undrawn amount.
Upon $582 million on our credit person at facility.
We are proud at the improvements we've made to our balance sheet, which provide us with enhanced flexibility to execute strategic initiative.
Moving on to page 20, we have no more mortgages maturing in 2019, and only $81 million of mortgages maturing in 2020.
Had a staggered maturity profile with an average of 15.8% emerged that stock maturing annually in the next five years.
There are also currently working on initiatives to early repay high interest rate short term low LTV mortgages to improve our maturity schedule and credit abstract and also drives F.L. Brown.
And finally moving onto slide 21 for the quarter ended September Thirtyth investment income properties, including capital expenditures leasing costs and leasehold improvements totaled $31.6 billion down from $47.1 million for last year's comparable period income.
Building investments in development activity capital expenditures for the quarter totaled $43.7 million down 11.5% from $49.4 million in Q3, 2018, we expect total capital expenditures in the coming quarters.
To write Judy investments and Sears locations, which had been leased to new tenant. However, our outlook for 2020, it's for a decline in expenditures excluding development investment relative to 2019.
I'll now pass the might factor domain.
Thank you had I would like to thank to take this opportunity to take all of our employees for their great work in this exciting period of transformation.
As well as all of our trustees for their contribution over the last quarter.
I will now turn to Mike over to the operator for the question Gary.
Thank you.
Ladies and gentlemen, if you do have a question. Please press star followed by one Samsung.
Sure and freedom from acknowledging your request note that your question will be taken any order received if you decide to withdraw your question simply fresh from side too and we ask that diffusing. The speakerphone. Please lift your handset.
Surfacing entities.
Your first question will be from fed Blondo echelon wealth partners. Please go ahead.
Thank you and a good morning.
And there are just in terms of the reorganize how far we see you are at this stage and what is your timeline from here.
We definitely are looking at you know continuing to find sources for cost reductions I would say that there isn't more to come.
We have done a bulk of it on a fair amount of that already but I think you should expect that we should be through this process that's entirely by midyear next year.
Okay, that's great and regards and in regards to dispositions what would be the sector mix of your targeted dispositions this year and next.
I don't think it's less about you know as we mentioned at the Investor Day, I think what you're going to see from US coming forward is more strategic.
Positions focused on on crystallizing value side, you know, we're doing a lot of work on on season, right now and other.
Assets, where in the middle at the asset reviews, I'm, a little reluctant to peg asset class.
Waiting, but as we've said before you know we want to make our decisions based on solid yeah analytics and the I've never use it really key part of that and I think we believe a that we can improve the you know clearly we want to get off some retail, but we believe we can prove the operations of these properties before we move on.
Disposition.
Right and know that Q3 them into Q3 out for resale, it's about 64% retail and 26% office.
Yes, I know I was just wondering for Q4 and next year, but you still expect to close on 250 million in Q4 correct.
Yeah by the end of the yard somewhere between 250, it maybe a little bit higher up to 270, I guess, our point was just that some of the stuff that we're working on may not close by December 30, Onest. So it may lead into 2020 inch and I think the other important thing to retain its we're in a very very different position from a balance sheet perspective today.
Okay versus where we were a year ago. So a part of the rationale is we don't we're not under pressure to sell and part of it is just start making sure that we're retaining assets, where we see upside.
Okay, but we should still expect more than four 500 million dispositions within next call. It live next 15 months or so.
In a year and I would say like at least 300 million would be our expectation for for 2020, there's a lot of things that we're working on right now that could shift that number but as it stands right. Now I think 300 is a good number to be working away.
The 215, Q4, and maybe Q1.
Alright totaled 300 from here.
Are we talking 2019, our 2020.
Now I'm just talking Q4.
And Oh gosh darn, we're going to okay. So we took our forecast for dispositions or 29 team from 350 offending.
So maybe we get the 70 total we're not planning on selling under $50 million as seen on December 31st Hi, guys I got it and proceeds will be allocated to that right.
Yes initially.
If we if we over you know if 2020 ends up delivering more liquidity than expected and we'll reevaluate the allocation of capital.
So sense and and when do you plan to be and then acquiring again.
The discussion we have a lot internally and I think you know by I would say within the next 18 months that theres the potential for that but again it depends on capital recycling as well.
And frankly, they also have one particular asset that we're looking at assuming certain or you will ask the question. So we'll try to feel the answer right now we are looking at hand.
Value creation opportunities around the gas on track.
So different configurations of what the opportunities we're looking at that could involve a potential sale.
We are working with outside or external advisors.
To see how we best position and create value around that assets.
So thats outside the numbers is something were to happen.
Thats outside the numbers, which had there was referring to.
Perfect. Thank you for your patience I'll leave it there.
Thank you.
Next question will be from Jonathan culture at TD. Please go ahead.
Thanks, Good morning.
Just sticking with the Garson trial. So you would consider selling the entire asset is out one of the the items on the on the table.
We are looking at various alternatives it could be to all partial sale total sales is that something we're currently working on John .
Okay and then what's what do you currently carry that on in terms of item for us value.
A lot less than what we believe the market value as [laughter].
Okay fair enough.
I'm good answer during the prior analyst.
[laughter] well, how about another way what about what's the annualized NOI from not.
The property as a as it currently sets.
$26 million yeah.
But before you started extrapolating.
Value on a cap rate basis off that Doug or the the value of that asset goes beyond its its existing and on Theres density and there's other additional sources of revenues, which can be added to the property Yep No first for sure just.
Starting point.
And then just switching over to to analyze.
The same property, which was driven mostly by the GAAP closing between.
In place and committed occupancy.
We're where do you see that gap getting too over the course of 2020.
No. We don't expect is actually going to be I've been changing the gap because we're outperforming on both fronts. Our our enclave occupancy there wasn't that much we actually expected that number to come down more than actually dead, but it didn't because we outperformed on the in place relative to our budget, but we've also outperformed on me.
Committed on the committed so when you look at those that spread.
I think that it.
For 2020.
[laughter], you know and to be quite honest, if it's not something we're focused on the bottom line is we're focused on what drive cash flow and that's the implied number.
Okay, well, then work where do you see the in place numbers going forward.
Yeah.
[laughter].
Second here.
Can I can you just either move actually [laughter] I'll pull it off sorry, what things are pages era.
Yes, well well. The next one is just what you guys think you're going to do for same property NOI next year.
2% to 3% and look we're in the budget process right now so I apologize for not having all the 2020 numbers at the tip of my fingers, but we're just bring that up and I think we'll be able to give you.
You know numbers that we feel much stronger standing behind at our next call.
Okay, and then that so the 2% to 3% would it would.
That's kind of assume that.
In place occupancy goes to 91, 91 and a half.
Yeah, I think that's a reasonable expectation, where we're in that ballpark.
Okay. Thanks, So I'll turn it back.
Thank you next question will be from paper at RBC. Please go ahead.
Thanks, and good morning, just.
One question with respect to the target proceeds you just clarify was any of that recorded in <unk> in the retail same property NOI or was it just book entirely somewhere else.
No excluded from the same property NOI numbers those are all clean numbers.
Okay.
And maybe just coming back to two CN station, if I remember correctly from I guess my can mark coverage days I think that out there was what's value that years ago.
[laughter] somewhere north of 300 million box.
How would you say that that compares to where you think it is today.
That's not even in the ballpark, where the value of that asset is today.
So much higher number pommies or not and I want to give any price guidance because if we don't do go into a sale process.
I don't think this is a call to sort of set the the Gulf of.
Right, but a significantly higher and I'm going to have there is part of it gets earlier on we are carrying it at a lower value at our books.
Right, Okay and then.
Can you just maybe provide some color on on what stage, you're right in that process and maybe when you may have a decision on the outcome.
We are looking at.
Different ways of.
Creating value with the asset as you've hired consultants, which go beyond the the Bloomberg consultants.
And we expect to have greater visibility on our attention by the beginning of 2020.
Q1 2020.
Okay.
Thats very helpful. And then just coming back to the Investor Day, and I guess question the confidence around asset sales I think there was some discussion at that time around being maybe active on the NC I'd be again I'm just curious how you feel about that today and.
How you're balancing that with your debt reduction goals.
Yeah, we expect that we will be active at some of these disposition activity kind of then for sure we would like to get to 50% or below in terms of leverage.
And then a lot of moving parts there too in terms of you now clearly the unrealized value that we have and Friday of assets within the portfolio, how about positive impact, but you know I think for modeling purposes, weve modeled the up $200 million of repurchases and through the course of 20.
20.
Okay.
Just.
One last one coming back to the comment around potentially 300 million of dispositions next year.
With that figure all sort of what do you think of as income producing dispositions or was that would that perhaps include some potential density sales.
That's all IP.
Okay. Thanks very much.
Thank you.
Next question will be from some mild summer Pepsi IVC. Please go ahead.
Good morning, just to confirm that the target off same property NOI growth of 3%.
That does not factor in any of the re leasing up the Sears space.
No. This year's base was transferred to development. So you actually won't you don't see it in there.
That's helpful.
Okay, and then just to kind of move onto your sort of Neal philosophy on for Capex and being more discipline and noting the value add spending will be coming down.
Now how do you measure the returns on that value on Capex and I guess, what metrics should we be looking at.
[laughter] in terms of how we you're asking how we decide what projects are moving from it next year that.
Yeah, Yeah, and doesn't know I guess, how do you might have success in yard Capex spending and just the returns there.
Well I mean, it depends on what Capex there as I think there's been a radical shift on many fronts in terms of the Capex budgeting process. We also if you notice in some of our leases made some changes to our construction group and consolidated two groups together. So there's a much more disciplined in our tracking.
Whether we're on budget and on time. So that's one of the things that we used to determine whether a worse exceeding the other part of that is we're in the process of establishing explicit KP I'd add to it which will also be tied to performance. So it's things like return on investment.
All of the Capex is is return generating some of that is just enough that we have to win back that we kind of where pocketing it into two groups.
We Havent committee that meets and it's basically we're bringing all of the opportunity to the table to identify which ones are the highest return opportunities and taking a look at that's on a multiyear beta.
Okay that together with the new asset management functions Tonight I wish we added so Oh this is a new group coming together.
Okay. Thank you that's helpful. And then just on a Garson trial can you go over the per instead of the retail there and if there's any opportunity to add more value there at all.
Yes, we have unfortunately to add value to the retail component.
Of the gas archive, we can actually.
Expend the CR you by at least 32000 square feet and it's a plan that were currently working on evaluating what caused the rents could be and what the cost will be to execute the project.
There is theres also I met him every week or the in the arcade add additional retail space as we have to re purpose that space.
That's about 50000 additional and we are working with that with volley who are worthy the consultants for Union station. So.
I'd say, we're working with various consultants to see what we do with the asset.
There is a group that we're working with that's one of the.
Great. Thank you.
Thank you.
Next question will be some gentiva at BMO. Please go ahead.
Thanks, Good morning.
Just sticking on the topic of <unk> Garson trial I'm, just wondering don't Wanna get to deepen the weeds on this but as far as that title or is it one title for the asset or are they a separate titles for the different components.
Im not sure I understand the question Jamie.
I I mean.
I'm wondering that if you are looking to potentially dispose a portion of it if I if there's any complications around splitting out of them. They property, yes, we have a path that we're working on as part of the alternatives. We're looking at right now if you look at it as one title, but we have a path to split.
Title.
Okay, I mean, what's the degree of complication. There. The is it really would it be an impediment to potentially selling a portion of the asset.
It's.
I would call it an impediment just requires a work and implementation.
Okay.
Are you currently advancing any zoning and entitlement initiatives at Garsten child concurrent with the review right now or is it on hold.
We're in full zoning.
Okay, I'm going back to the $300 million of potential dispositions does that contemplate any element to of course <unk> or is that just.
A regular IP.
It does that.
Excludes got some huh.
Okay.
I'm talking about piano, why historically common ours guided to sort of the 1% to 2% range year over year I'm. Just wondering if that's something that that you kind of still stick with or or should we sort of scrap that in light of the the major changes you've done to the right.
For 2020, we're confident we can do 2% to 3% and I think that you know with everything that we're working on I think you're hitting two regularly is what we're really striving to achieve clearly if we do.
You know, we're going to have a short term bump up because of some of the initiatives. We put in place. So it may get you know as you roll forward to be some more difficult comp, but yeah. I now want to do is definitely not what we're targeting anymore.
Okay.
And then with regards to the Sears space leased up the 2% to 3% for next year I'm does that still exclude this year space because it's in a different buckets.
That's correct, so that'll be additive.
Okay, great. Thanks, I'll turn it back.
Thank you as a reminder, ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone and your next question will be from that corner of National Bank Financial. Please go ahead.
Hi, guys.
Congrats on a good quarter, it's nice to see a beat.
With regards to.
I'm, sorry, and why margins.
I think it's been five years since you put up the year over year improvement and not figure and.
Just wondering your ears sitting at in 2018, a little bit over 50% NOI margins, but at the time Coleman our generated close to 60% do do you have a sense as to where.
That figure could trend in time or what are the savings that you'd get embedded in there.
It's a it's a very big subject as Ive debate and I think there's one thing we did quite a bit of analysis on that this quarter. One thing I'd like to highlight is taxes are meaningful taxes and come back are significantly higher than they are another jurisdiction. So comparing us appeared it a little bit of a difficult comparison.
Yes, we are looking to move that higher we're very pleased to see that number I move up and and we expect that to continue to trend that I haven't quite quantified exactly where that's going to be by the end of 2020, but well for sure make sure to get back to you on that number realistically I don't see as being at 60%, but clearly leased up in the portfolio.
I had to protect pretty immaterial impact I think if we get to sort of full lease up in a more stabilized number it's probably more realistic to think about in the mid fiftys as opposed to anything in a 16% I range that the composition of the portfolio has changed dramatically. We didn't have enclosed malls back in the that period of time, but I definitely think theres a lot of.
Yeah.
Makes sense and arguably the goal is to grow top line, maybe marginally higher amount than your expenses.
Once you've done these sort of big moves to get you to the 55% sorry say that against that.
Ultimate goal is to grow your revenues it a little bit more than your expenses that you generate better same property NOI growth ultimately.
Which is exactly what happened this quarter.
Okay, and then switching to the same property NOI growth for Q4, there looks to be in the historical figures. Some some anomalies in the prior Q4.
Just said.
It was pretty high for office in Q4 of 18.
But very low for industrial so should we expect that there's some sort of move in the numbers and all in all you come to 1.7% number and it goes down to 1.1 for Q4 18, So should we expect maybe even a better quarter than 3.8% for Q4.
Yes.
What kind of comments on that but if that's your assumption. We're [laughter]. Okay. I will I think that we've upped the guidance of view.
Look out if not perspective, you all address part of your answer I think you can back into the fact, yeah exactly.
And and there's been a lot of talk on garrison draw, but I'm wondering given your thoughts on that asset how should we look at your decision making process with regards to Garson control. When we look at some of the other value add opportunities through commoners portfolios that a specific case study given its size and scale.
And the amount of capital that's required or is that an analysis that you're going through on a lot of properties that you on that there's probably significant incremental value too.
While the gas somehow Matt is that they say a first of all its our most important asset. So it's one we're paying a lot of attention too.
So unique asset is a tremendous asset in terms of potential so I think that when sticks out. So we have a no. We have a great portfolios. We've demonstrated at Investor day, there number properties, we have in proximity to what I call the grid, either being the Ram or no. The tramway time doesn't come back and we have you ever.
Very good portfolio in terms of potential so we are.
I'm not getting distracted from no running our business and generating and why growth, but we are you will be looking at assets as we can move forward.
I look at my someday, it's an asset which maybe on the day, Heather and I spend a lot of time with the do you mind, because it's a great assets. The Panama station is a key ran station in Montreal, that's another asset which has tremendous potential. So we are devoting time I'd be a C. The high.
Hi reward assets.
Okay.
Last question for me, it's a broader one I mean, it seems like the investment community has gotten a lot more comfortable and its bidding up some assets in Montreal in particular.
The fundamentals industrials, obviously doing exceptionally well, but it seems like cap rates are compressing and other asset classes as well, including office like are you starting to see in your conversations with tenants.
There's just some more confidence and then come back economy and that ultimately you'll be able to charge higher rents going forward is that coming through in your discussions with tenants.
And industrial clearly an office were starting to see it I think we're making progress and even in the the more challenge Sandler on market, which we had we were starting to see a change in the numbers and progress on the lease up.
The mood is extremely extremely positive in Montreal and in the back city. If you look I see a the revenues generated by the eco that government announced last I guess two days ago last night.
No because like economy. It just made great great spacing, yes, we're seeing that at our discussions of the leasing FRE.
And maybe out of it is starting to see a machine. She started to see a more positive tones also in sales per square foot in retail.
What do we see sales per square foot trending is positive so.
Very positive plus a 0.3% in their retail portfolio concept.
So that's a healthy number we hadn't been in that space before so we're seeing positive elements throughout our portfolio.
Okay, great. Thanks, guys.
Thank you.
Actually as a follow up from Scott Billeadeau. Please go ahead.
Thank you.
Yeah. They just in terms of the retail portfolio. How do you are in place rents compared to market trends in your opinion.
I believe coming our it's pretty much in line you know market rents are so volatiles these days, but I really believe that comment or.
It's pretty much in line with you know into market rents when it comes to doing you also of course, we have other you know older leases that are not at market trends and we will deal with them as the expire.
But I I would say, there's there's some room to grow there, but ER in majority pretty much a on a on the market.
In line, but thread one of the initiatives nowadays extremely passionate about two years and increasing I know I is changing the client mix in our non locations.
He go ahead right that's a little what we discussed at Investor Day, you know there are some categories in the mall you know that we will stay away from you know more and more to replace them with a when the customer really wants today, which is more and you don't service oriented entertainment oriented.
Oriented so that you know for helping us to increase both the performance of the mall and the a rental spectrum.
Oh, that's great color. Thank you and others did you make any progress on the potential JV deals that you were that were discussed at the Investor day.
We are in that cycle right now because there are JV opportunities on the table and these are ongoing discussions.
Okay, that's great and lastly, any comments on the far I mean, what's worked to scenario. There. What do you think will happen and do you see any strategic opportunities for you guys right and Fred I would be it would be a proper for any of us to comment. The five is not a common our project I mean, I can I read about in the paper my.
My sense is the.
The the project is delayed in time for a couple of years and.
There's a lot of reshapes waiting to do about the Polish honesty, the hub itself the transportation hub city, but that remains no. We bought a it's a great location, that's why we London.
There is great absorption on would follow you where it is a good location, we have aligned ourselves and move on.
And there will be a project on that plan to our land Sunday and just a great place, but I doubt it will be involved.
No I'm asking because it does affect dynamic in your core market, but I, but that that's very much. Good. Thanks very much thats it from me.
Yes, but I mean for has read we I look I can say the effects dynamics in our card market I look at right now there is no building, which competes with our collection data.
We were full occupancy and no fee. It's a very strong really good configuration to their own property the to lay of the fall just solidifies the the weight I need the quality of the complexion data in this margin no. That's why I'm, asking what you're seeing any strategic opportunities where you have to like.
You may be capitalize on the situation. There that's why I mean for example, we are we are occupants of this property ourselves and I'd like to find a way to move out and capitalize on me.
The physician in March. So these are initiatives we're looking.
That's great. Thank you.
Thank you and at this time, a Super Center, we have no other questions. Please proceed.
Thank you very much and that I look forward to or color on a year end Q4 inch. Thank you very much.
Thank you, ladies and gentlemen, this doesn't need to do conference call for today. Once again, thank you for <unk> and that the South African please disconnect your lines have yourself so great.
Mhm mm.
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