Q3 2019 Earnings Call

November 4, 2019

Armin Martens: Okay. Thanks, Jim. Folks, on balance, we feel we're on track to have a much better year this year than last year. We're making good progress on all fronts and delivering strong performance metrics for our unit holders. Our weighted average rental increase, our same property NOI growth, our FFO and AFFO per unit growth, you know, are all solid numbers. Looking ahead, we're given our very conservative payout ratio and the progress we've made on our strategic initiatives. Debt reduction, as Jim said, debt reduction will be a top priority for us. The progress in our debt reduction should be very noticeable in Q4 of this year and Q1 of next year. Again, looking back at what we promised in terms of our promises made, promises kept, you know, our distribution has been reset. It's very conservative.

Armin Martens: It's the lowest of all the commercial REITs, and we feel it's quite bulletproof and safe. Our unit buyback program is basically 70% complete. When one considers the CAD 85 million of preferred equity we also bought back, we've invested CAD 260 million in equity buyback in the past twelve months. Of course, as mentioned, our disposition program is going very well. About CAD 600 million sold or unconditional, with another CAD 200 million under conditional contract and more visibility. The key to all this, of course, is that we're selling at prices that correspond to our NAV of 1,572. We've been selling some challenging properties. We feel we're doing very well there and demonstrating excellent value for our unitholders and our investors.

Armin Martens: It's important to note, of course, that as our financial metrics improve and as we continue with our disposition program, our portfolio of properties is also improving. All right? We're reducing our office and retail weighting in general. We're increasing our ownership of industrial properties. We're reducing the number of secondary markets we're in as well. Our Calgary office exposure is in the 6% range now, but given the properties we have under contract for sale, we feel that by the end of Q1, we'll be down to the 3.3% level, so just 3% of NOI.

At this time I like to walk them every one to artists reads third quarter 2019 conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

If you're right you asked a question during this time simply press Star then the number one on your telephone keypad.

If you like to withdraw your question. Please press.

Star followed by two thank you.

Armin Martens: Our remaining retail investments, you know, as we close out our US retail dispositions and our last enclosed mall, remaining retail investments will only be open-air service sector properties, if you will. In Western Canada only, which we feel is a good focus for us. All of this, you know, for the retail and office, all this will improve the growth profile of our portfolio. Needless to say, our industrial is already outperforming, doing very well. Meanwhile, you know, our overall portfolio is performing well. The office markets, as discussed, are somewhat inconsistent, but our retail and industrial properties have a very good track record and continue to deliver solid organic growth. Of course, our industrial development pipeline is also on track to deliver excellent results as well.

Today's discussion May include forward looking statements, which include statements that are not statements of historical facts and statements regarding artist reached future financial performance and its execution.

Initiatives to deliver unit holder value.

Such statements are based on management's assumptions and beliefs.

These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.

So you see artist read public filings for a discussion of these risk factors.

Which are included in their annual and quarterly filings, which can be found on artist.

Our discretes website and on SEDAR.

Thank you.

I'd now like to turn the meeting over to Mr. Ahmann Martin Mr. Martin. Please go ahead.

Armin Martens: We invite you again to look at our MD&A and investor presentations for more color here. Looking ahead, we will continue to work hard to keep our buildings full while bringing the rents up to market and consistently streamlining and improving our real estate portfolio and our growth profile. To be clear, the integrity of our balance sheet, our credit rating, and implementing our new strategic initiatives continue to be of utmost importance to us. Given the progress we've made year to date, we really feel at this juncture with the properties we disposed of and at the prices and the unit buyback, you know, we're no longer a wait and see story, but very much a look at what we've done story and look at where we are going. As mentioned, the portfolio is improving.

Moderator good day, everyone and welcome to our Q3 2019 conference calls.

The game I named Army large since I'm, the President Shiels artist suite with me on this call Jim Greener CFO .

Kimberly VP of Investor Jackie committed capacity of the coding and has a nickel VP of Investor Relations.

So again, thanks for joining us and as in the past Jim Green to review, our financial highlights and then I'll wrap up with some more color commentary and then we'll open the lines for questions. So go ahead Jim.

German and good afternoon, everyone.

So just a little reminder, artists as a diversified commercial reach we invest in office retail and industrial properties, because assets and five Canadian properties and six U.S. stage.

Armin Martens: We're shrinking our retail from 20% to 15% of our total portfolio, open air service sector, Western Canada only properties. We'll be shrinking our office from 50% to 45%, possibly lower, and we're growing our industrial from 30% to 40%. All of this will again improve the overall growth profile, earnings growth profile of the REIT and make us a better REIT. That's all from us for now, folks. I'll turn the floor over to the moderator now, and we'll be happy to host any questions you have.

Based on the.

Q3, net operating income for the right, we had a 54.8% waiting in Canada.

45.2% weighted in the United States.

As the majority of future asset sales will likely be in Canada, we expect this ratio.

Moves such that greater than 50% of our assets will be in the U.S.

On an asset class basis at the present time were 49.0%, we did an office 20.2% weighted in retail.

Leonie: Thank you. Ladies and gentlemen, should you have a question, please press star followed by one on your touchtone phone. If you're using a speakerphone, please lift your handset before pressing any keys. One moment please for your first question. Your first question is from Mark Rothschild from Canaccord. Mark, please go ahead.

Operator: Thank you. Ladies and gentlemen, should you have a question, please press star followed by one on your touchtone phone. If you're using a speakerphone, please lift your handset before pressing any keys. One moment please for your first question. Your first question is from Mark Rothschild from Canaccord. Mark, please go ahead.

30.8% weighted in industrial.

As I expect everyone on the calls aware our third quarter earnings press release from November 1st of 28 scheme, So announced a series of new initiatives for the read which we anticipate it be implemented over a three year time horizon.

Mark Rothschild: Thanks. Good afternoon, guys.

Armin Martens: Hello.

Mark Rothschild: Starting with the same store portfolio, the growth in industrial was quite good. One thing that wasn't clear to me from the wording in the MD&A. Does that include income from development? If yes or if not, maybe just talk about what drove that strong growth.

We now one year into that plan. So we've been busy executing on the strategy.

Impact of executing the strategy continues to impact our metrics and will for a few quarters still to come.

However, we're looking forward to the continuation of the strategy in future quarters, because the next steps consist mainly of further asset sales with the proceeds used for debt reduction.

Jim Green: Generally not, because the developments would not have been in the prior year, so we don't have a prior year comparison. We would not include a development property until we have a prior year to compare it against. What drove the strong store growth was a combination of improved occupancy and higher rents.

That should demonstrate continued improvement in our balance sheet metrics.

Hi, just continues to be active in both new development and redevelopment of our existing properties.

We currently have approximately $130 million invested to date in properties currently under development.

During the quarter, we invested roughly 47 million into the development project.

Mark Rothschild: Would that have been? Yeah.

Transferred 62 million of properties from considered under development two completed properties.

Armin Martens: On the south side of the border, we're basically 99% occupied on both sides of the border, and especially in the US side, that's a very good number. It doesn't matter which industrial properties you look at, the big box distribution or the multi-tenant flex or showcase industrial light manufacturing, infill, older generation. It's all performing well on both sides of the border and a little bit more in the US right now.

As detailed in the Mdna there are several new development projects that remain under way.

Adding a new residential tower three.

300, Maine, where to peg the new industrial space in Houston Phoenix in Denver.

Also as detailed in our him DNA, we have several development projects in the planning stages, where construction has not yet actively started.

Mark Rothschild: If you're at such a high occupancy rate, would it be reasonable to assume that that pace of growth will slow down going forward just because there isn't much to lease up?

And they are all progressing nicely through that various development stages.

Okay to touch on this one but we do still have a continued presence in the Calgary office market.

Armin Martens: Possibly. Needless to say, we're pushing rents now as well as we can, and we're making a point to ourselves, well, maybe we've got a lot of the elasticity here, and maybe we've got to charge more rent and live with a little less occupancy. Yeah, we wouldn't say there's any low-hanging fruit out there at this point. There's a lot of runway ahead of us, we feel, in the industrial sector in raising rents in the years ahead on both sides of the border.

Becoming a very small component of our operations.

For Q3, Calgary office contributed 6.4% to burn away. However, we have relatively small exposure to the Calgary office tenant maturities in the near future with only 57000 square feet of space left to mature in 2019.

Only 35000 feet renewing in old 2020.

We've been able to maintain our balance sheet metrics in general terms with GPV up is up slightly.

Mark Rothschild: Understood. In regards to asset sales, you've done quite a bit this year, and it seems like there'll be quite a bit more closing over the next little while. Will this program be extended to sell more assets that you might view as either lower growth or markets you don't want to be in? Or is the plan still to stop at a certain number?

52.6% from 51.9% last quarter.

And it was 50.6 at December of last year.

The main driver.

Of the increases in GPV has been timing of the unit purchases plant under our new initiatives to buyback or units.

Armin Martens: We'll say stop and dial it back a notch or level, so to speak. We'll dial it back and we'll continue. You might recall, we used to recycle between CAD 200 to 300 million of properties, but we definitely see more properties that we would like to sell out of and then reposition our portfolio and more aggressively grow the industrial portfolio, for example.

And versus the timing of asset sales, which will happen in future quarters.

Kurt border, we also redeemed.

The balance outstanding on the series G preferred equity.

In addition to the amount of activity under our NCB.

So that unit purchase combined.

Mark Rothschild: Okay, great. Lastly, just in regard to reducing leverage, it sounds like that's gonna be a focus over the next little while. How far down would you want to take it, and how do you look at it? Do you look at it on a debt-to-EBITDA basis or on debt-to-book value? What is the preferred metric, and what is the target that you're setting?

Being slightly in excess of the net proceeds from asset sales is what contributed to the slight reduction.

Increase in that the JV.

Oh, we anticipate bringing that to GE v. back under 50% in the near future. That's further asset sales are completed we're targeting arranger, 45% to 48% overtime.

Jim Green: We're looking at both. The target that I referenced, it was a Debt-to-GBV basis. We're also very cognizant of maintaining a Debt-to-EBITDA metric. We're really looking at both, Mark. I think they kind of are gonna move in tandem as we get Debt-to-GBV lower. The Debt-to-EBITDA should go up as well.

Our EBITDA coverage ratios remain healthy despite carrying a little bit higher debt level at the current time.

Despite the dilutive effect of asset sales.

The unit buyback program combined with good same property growth and completion of some of our developments, which had a positive effect on our metrics and that's a full came in this quarter at 34 cents up from 33, and the comparative quarter last year.

And they AFFO came in at 25 cents also up a penny from Q3 of 18.

Mark Rothschild: Okay, great. Thank you.

Leonie: Thank you. Your next question is from Dean Wilkinson from CIBC. Dean, please go ahead.

Operator: Thank you. Your next question is from Dean Wilkinson from CIBC. Dean, please go ahead.

Our payout ratios are very conservative at 41.2% of ethical and 56.0% of ancestral.

Dean Wilkinson: Thank you, Leonie. Afternoon, everyone.

Coming back to that.

Armin Martens: Hello.

Initiatives, just a quick update on the on the status as I mentioned on November 1st of 28 team.

Dean Wilkinson: Armin, just on the Calgary office, you know, Alberta as well. Seems to be up a little from Q2, like 6.4% versus 6.1. Not a big move, and about 100 basis points. Is that more a function of selling things like 415 Yonge Street so that the portfolio is lifting, or are you seeing a little strength out of the market that perhaps we're missing?

We announced the new initiatives with the goal of increasing cash flow.

Increasing you didn't values by increasing now.

And improving focus on quality of the portfolio.

Distribution was reset at that time to 54 cents annually.

Building in a much more conservative payout ratio.

Freeing up cash to fund our development pipeline.

Armin Martens: more a function of selling.

The plan also included noncore asset sales of between 800 million to a billion of assets.

Armin Martens: more a function of selling.

Dean Wilkinson: Okay. When you look at the remaining sort of 326 and perhaps more, would that suggest maybe that weighting to both Calgary office and Alberta then maybe ticks up a little as we look forward the next couple of quarters?

And this process is well underway.

We've completed 482 million of sales to September Thirtyth.

Of course to further 13 million subsequent to the quarter end.

We have a further unconditional acquisition 39 million sorry disposition set to close in November .

Armin Martens: Well, we'll be selling down a lot of Calgary probably. We have about four more Calgary offices under contract for sale. We're very optimistic that they'll close by, you know, by Q4, as a matter of fact. Excuse me. For sure be unconditional, if not before we report the Q4 results. We see the weighting going down by default, so to speak, just as we sell down these properties. We expect it in the 3% range when we announce our Q4 results.

Basket of properties held classified as held for sale at September Thirtyth was 327 million.

Putting the two properties just mentioned those are in various stages of sale with most under conditional contract.

We anticipate most of these will sell over the next two to three quarters.

Dean Wilkinson: Okay. Fair to say that the remaining sort of 326 it's classified as for sale is probably gonna be at a substantially higher cap rate than the sort of 500 or so, 490 that you've already sold.

Initiatives also included using a portion of the sales proceeds the buyback or units.

Using her and she had a b and we started this immediately after the announcement last November in advance of the asset sales.

From last November to September Thirtyth, we have repurchased almost 16 million units at a cost of just over $173 million.

Armin Martens: Um, I've got-

Armin Martens: Um, I've got-Slightly. Kim can answer that.

Jim Green: Slightly.

Armin Martens: Kim can answer that.

Jim Green: Yeah. It'll be slightly higher, but not substantially. We expect it to be kind of in the low 7 cap range.

Kim Riley: Yeah. It'll be slightly higher, but not substantially. We expect it to be kind of in the low 7 cap range.

We used or line of credit to fund these purchases with the plan to repay the line is the assets are sold.

Dean Wilkinson: The low sevens. Okay. Then just when we look at the gain on 415 Yonge Street, I kinda noticed that the cap rate was based upon CAD 4.6 million of NOI, which included some leasing. Was that forward look on the leasing included in the IFRS value, or was the IFRS mark based upon sort of what was historically in place, like what would, say, be in the rest of that table?

In addition to the and she I'd be purchases as I mentioned, we also redeemed the maturing series of our preferred equity at a cost of $78.4 million.

So, including the redemption of the preferred equity, we basically met our target for equity redemption.

Weve reached the maximum trust unit purchases permitted under the current nclb.

We will be renewing it in December or over the future unit purchases under that plan will be dependent on the trading value of our units at that time and the amount of debt reduction we have achieved because we in our opinion, it's more important to get our balance sheet metrics under control first.

Armin Martens: The leasing would be included in the IFRS value because we're generally modeling a ten-year time horizon on the valuation of the property. We would be looking forward, including the new leasing.

So trying to just a couple of more operational highlights and then pass it back darman.

Touch briefly on fair value of investment properties. So they are there valued on our balance sheet at fair value.

Dean Wilkinson: Okay, that's good. Just a clarification on how you've got the assets classified in the presentation. Non-core assets to be sold, that was CAD 800 million to 1 billion. Is that on top of what has already been done, or how are you getting? Because I'm looking at 4.2 plus 1 billion plus 200 million of development assets. That kind of gets me to your gross book value there. Is it a billion of non-core assets to be sold, or is it a billion less what you've already done?

This quarter than nuts adjustment, including Gen Joint ventures is relatively nominal roughly 800000 positive.

There was a very nice gains this quarter on the sale of for 15 young intermodal. However, it was offset by reductions in some other properties.

The GBB we remain.

Comfortable with the ratio as I mentioned, we are up very slightly.

And we anticipate that coming down in the near future.

Armin Martens: CAD 1 billion less.

Dean Wilkinson: CAD 1 billion less. Okay. CAD 500.

[noise] [noise] still has a unencumbered asset pool valued at roughly 1.9 billion.

Armin Martens: Yeah. We're almost there.

Dean Wilkinson: Okay. What was that?

Armin Martens: We're almost done.

Dean Wilkinson: You're almost done.

Armin Martens: Yeah.

Dean Wilkinson: The last part's the hardest. That's it for me. Thanks, guys. I'll hand it back to the queue.

Not permit Sicily unsecured debt that's currently on our balance sheet.

We have roughly 700 million.

Leonie: Thank you. Your next question is from Jonathan Kelcher from TD Securities. Jonathan, please go ahead.

Operator: Thank you. Your next question is from Jonathan Kelcher from TD Securities. Jonathan, please go ahead.

Unsecured revolving credit facility with the syndicate of lenders to non revolving unsecured credit facilities for further 300 million.

Jonathan Kelcher: Thanks. Good afternoon.

Jonathan Kelcher [Equity Analyst: Thanks. Good afternoon.

Armin Martens: Hi there.

Jonathan Kelcher: Just turning to the developments. Just on the Tower Business Center, what's your yield expectation on that, and when should we expect that to come online?

Jonathan Kelcher [Equity Analyst: Just turning to the developments. Just on the Tower Business Center, what's your yield expectation on that, and when should we expect that to come online?

The non revolving facilities have been drawn in full.

We play swaps to FIS takes the interest rates and those facilities as we expect they will be outstanding for their full term.

Touching briefly on the operations so same property.

Jim Green: It'll be in the low 7. Yeah.

Same property results were a positive 2% this quarter.

Armin Martens: It'll be roughly between, we're not finished yet, but between 6.8 to 7.2 in that range. It won't be lower than 6.8.

Which really is 1.3% in functional currency.

2% is in Canadian dollars once foreign exchange is factored in.

Jonathan Kelcher: Okay. That, that'll come on when?

Jonathan Kelcher [Equity Analyst: Okay. That, that'll come on when?

Armin Martens: Construction completion is almost finished, and the leasing of the first building is complete, and that lease commences. I'm gonna say it's in Q2 of next year, it might even be Q1. Yeah. The larger of the two buildings, two thirds of the project, if you will, the revenues will kick in in Q2 next year.

We also presented a stabilized same property.

Calculation, eliminating properties plan for disposition or we purposely as well as the Calgary office sector and on this basis.

Same property growth is 3.2% <unk> functional currency and 3.8% once foreign exchange is factored in.

Jonathan Kelcher: Okay. The rest sort of by the end of next year?

Jonathan Kelcher [Equity Analyst: Okay. The rest sort of by the end of next year?

Industrial segment continues to show the strongest performance in both countries.

Armin Martens: Yeah. Yeah. For sure.

Jonathan Kelcher: Okay. The property you're buying in Minnesota, the new development there, where does that stand in terms of occupancy?

Jonathan Kelcher [Equity Analyst: Okay. The property you're buying in Minnesota, the new development there, where does that stand in terms of occupancy?

7.3% growth in Canada, and 10.9% growth in the United States.

Oh this quarter, we had a would disclose our net asset value. So it's simply taking the equity on your balance sheet unless the equity held by the preferred unitholders.

Jim Green: Is that the Prime Center right across?

Kim Riley: Is that the Prime Center right across?

Armin Martens: That was 100% occupied, fifteen-year lease with 2% annual bumps in it. Nice property. It was a call it a forward purchase, so it's been in our MD&A for almost two years now, but.

The number of common units outstanding at the ended the quarter.

The net asset value for Trust unit.

Jonathan Kelcher: Okay. Fair enough. Just lastly on the special committee, you put through CAD 400,000 or so of charges this quarter. Was that in your G&A, and then you just add, you're adding back to FFO?

Jonathan Kelcher [Equity Analyst: Okay. Fair enough. Just lastly on the special committee, you put through CAD 400,000 or so of charges this quarter. Was that in your G&A, and then you just add, you're adding back to FFO?

Was 15 72 at the end of this quarter compared to 15 37 last quarter. So 35 cent lift this quarter.

Driven again this quarter driven by foreign exchange of a 10 cents gain.

Again of roughly seven cents related to the unit buybacks.

Armin Martens: That's correct.

Jonathan Kelcher: Okay. How long is the mandate for the special committee? Is that sort of CAD 400 kinda how we could think about it on a quarterly basis until they're done, or was there any one-time things in there?

Jonathan Kelcher [Equity Analyst: Okay. How long is the mandate for the special committee? Is that sort of CAD 400 kinda how we could think about it on a quarterly basis until they're done, or was there any one-time things in there?

The rest is the fact that are income exceeded our distributions.

So the advantage to the low payout ratio I guess.

I subsequent events, we ended the quarter with roughly $59 million cash on hand, and 96 million Undrawn under letter of credit.

Armin Martens: Well, that's a good question. I don't know if they've got a term on their mandate.

Our opinion adequate liquidity for the right.

Jim Green: They have an expiry date of their mandate. I guess they're still working through it. Probably, I'm gonna say it's a little bit cheaper going forward because some of that, the bulk of that was legal costs as they were getting going, and so it's probably the next quarter or so will be a little less than that.

Kim Riley: They have an expiry date of their mandate. I guess they're still working through it. Probably, I'm gonna say it's a little bit cheaper going forward because some of that, the bulk of that was legal costs as they were getting going, and so it's probably the next quarter or so will be a little less than that.

We have several events detailed in the subsequent events note.

We believe continued to reflect our strategy of intelligent recycling of capital.

We plan to continue the focus on a strong balance sheet and the overall quality of our portfolio.

As I mentioned, we will be renewing our it's yet to be plenty of December however, near term goal is debt reduction.

That completes the financial review I feel the initiatives announced last November will make artists a better and stronger right.

Armin Martens: Yeah. We're not on the committee, not official spokespeople, but I would expect between now and next June AGM, we'll get a lot of visibility from them, and even a report from them. Things will either ramp up or wind down.

We look forward to demonstrating our results in future quarters I'll now pass it back overtime is that more discussion.

Thanks, Jim and folks on Belgium.

We feel we're on track to have a much better year. This year is that last year, we're making good progress at all fronts and delivering strong performance metrics.

Jonathan Kelcher: Okay, thanks. I'll turn it back.

Jonathan Kelcher [Equity Analyst: Okay, thanks. I'll turn it back.

Leonie: Thank you. Your next question is from Matt Logan from RBC Capital Markets. Matt, please go ahead.

Operator: Thank you. Your next question is from Matt Logan from RBC Capital Markets. Matt, please go ahead.

So our unitholders sure a weighted average rental increase our same property NOI growth and football vehicles per unit growth. We are all solid numbers.

Matt Logan: Thank you and good afternoon.

Looking ahead, we're given our very conservative payout ratio and the progress we've made on a strategic initiatives.

Armin Martens: Yes.

Matt Logan: I'm just wondering if you could talk a little bit about your same property NOI growth outlook. Last quarter you mentioned it was about 2% to 3%. Would that include some of the drag from the Calgary office portfolio that we've seen here this quarter?

Debt reduction as Jim said debt reduction will be a top priority for us and the progress in our debt reduction should be.

Very noticeable Q4 this year in Q1 to next year.

Okay and looking back at what we promised in terms of our promises made promise is kept you know our distribution had been reset is very conservative. It's among the most of all the commercial rights and we feel is quite bullet proof and save [noise].

Armin Martens: Oh, yes. I mean, the 2% this quarter was including the drag from the Calgary office portfolio. Yeah, the estimate from us of 2% to hopefully 3% is inclusive of any drag from Calgary office.

Our unit buyback program is basically 70% complete and if you when one considers the 85 million a preferred equity we equity. We also bought back we've invested $260 million an equity buyback in the past 12 month.

Matt Logan: Going forward, I mean, it seems like the organic growth from the business pretty much everywhere except for Calgary is doing quite well. You know, when we look at the industrial growth, that's obviously quite great, but how should we think about the tenant inducements and some of the CapEx for the portfolio? I mean, will that trend down as you sell more of your Calgary office business?

And of course as mentioned our disposition program.

Going very well.

600 million sold or unconditional with another 200 million under conditional contract and and more visibility.

The key to all of this of course.

It is that we're selling.

Armin Martens: It should for sure. Even in our organic growth, it's not just Calgary office that we sell that down. You know, our Minneapolis retail and our enclosed malls, you know, this is where there might have been a drag in same property NOI growth. As you heard me mention, as we streamline our portfolio and finish up with our disposition plan, we will have a better portfolio with a better earnings profile. We're very optimistic about that. Back to CapEx, yeah, the Calgary office always requires a lot of CapEx. So the less of that we have, the better off our FFO will be.

Pricing correspond to I never 15, 72, and weve been selling some challenging properties.

So we feel we're doing very well, there and demonstrates excellent value for for unitholders and our investors.

It's important to note of course, as our financial metrics improving as we.

As you continue with our disposition program our portfolio of properties also is also improving market, we're reducing our office and retail waiting in general we're increasing our ownership of industrial properties.

Reducing the number of secondary markets were in is wrong.

Your office exposure is in a 6% range now, but given the properties under contract for sale, we feel that by the end of Q1 will be down to the 3.3% level. So just 3% of anyway.

Matt Logan: When we look at kind of the business at the end of the strategic review, the maintenance CapEx that we see in the AFFO deduction should really converge to the actual CapEx as we look out to 2020 and 2021?

And our remaining retail investments as we close out our U.S. retail dispositions.

And our Alaska and close mall, we remain retail investments will only be open air service sector properties. If you will.

Armin Martens: Yes.

Matt Logan: Okay. Just in terms of the future asset sales, can you give us a sense for what else you plan to sell in Canada outside of the Calgary office segment?

And in Western Canada, only which we feel was a good folks for focus for us and all of this no food retail and office. All this will improve the growth profile of our portfolio and needless to say on does Joseph already.

Armin Martens: We will. We even have them listed here, I think.

Kim Riley: We have one left in Ottawa, so we plan to sell that one. An enclosed retail center in Saskatchewan. Those are on the list. The rest is really, you know, a lot of Calgary office, so.

Outperforming doing very well so meanwhile.

Overall portfolio is performing while at the office markets as discussed a somewhat inconsistent but are we talking dust and industrial properties are very good track record has continued to deliver solid organic growth.

Armin Martens: Yeah, it's Calgary office. I think that we mentioned the Minnesota office retail, of course.

Of course on industrial development pipeline is on track to deliver excellent results as well, we'll let you again to look at her mdna and investor presentations for more color here.

Kim Riley: Yeah, it's already unconditional.

Armin Martens: Yeah.

Kim Riley: Yeah.

Jim Green: Yeah.

Kim Riley: Yeah.

Matt Logan: Yeah.

Armin Martens: Just unconditional. That's why. It was in there, but it just barely made the list on Friday. We've got four Calgary office properties. We're looking at some other office properties that again, to your point about CapEx and outlook, if we think we've maximized the value, we'll let them go, too. You might recall we own a building in Hartford, Connecticut. The tenant is The Hartford. We just renewed their lease, but they had the right to give us back one floor. They take two of the three floors. Now, we've been able to re-lease that top floor. Now with this new leasing status, we're gonna sell that property as well.

So looking ahead, we we will continue to work hard to keep our building fall last spring the rents up to market and consistent being streamlining and improving our real estate portfolio and our growth profile.

To be cleared the integrity of our balance sheet, graduating and implementing our new strategic initiatives continue to be about most important to us.

Given the progress we've made year to date, we we feel that at this juncture with a probably as we disposed of and at the prices and the unit buyback you know, we're no longer a wait and see story, but very much a look at what we've done story and look at where we are going.

Armin Martens: So there are certain non-core buildings we're looking at. There's a smaller office building in suburban Minneapolis called the DSI Building that's on our list as well. I think we've got a good focus on what we wanna sell and how we're gonna streamline the portfolio.

As mentioned the portfolio is improving were shrinking our retail from 20% to 15% of our total portfolio open Air service sector at Western Canada, only properties will be shrinking your office was 50% to 45%, possibly Lord and we're growing our industrial from 30% to 40% all of this well again improved overall growth pool.

Matt Logan: As you downsize the business, what sort of impact does this have for the staff or the leasing folks who are doing the day-to-day leasing and the planning? Does this simplify their life in terms of the operations? Maybe just some color on how it impacts the rest of the business from an operational perspective.

Earnings growth profile that we and make us a battery.

So that's also must for no folks so I'll turn the flow over to the moderator no and well be happy to host any questions you have [noise].

Thank you [noise].

Ladies and gentlemen should you have a question. Please press star followed by one on your Touchtone phone if using a speakerphone. Please lift your handset before passing any case one moment. Please for your first question.

Armin Martens: Yeah, good question. It's funny how often we might ask one of our property managers and leasing people about a building that we're thinking about selling, and they'll say, "Yes, please sell that one." They don't mind at all. On the other hand, you know, you do a cap rate like in Calgary, for example, it's been tough. Morale is not good anywhere in Alberta in almost any sector right now. We find ourselves spending more time doing our best to cheer our people up than even talk about leasing and keeping the morale up there. Everybody's there working really hard, and it's a thankless job in many respects, being a leasing agent in Calgary.

Your first question is from Mark Rothschild from Canaccord Mark. Please go ahead.

Thanks, and good afternoon guys.

Starting with the same store portfolio.

The growth in industrial was quite good one thing that wasn't clear to me from the wording and then in a does that include income from development and if yes, sorry, if not maybe just talk about what drove that that's strong growth.

Just generally not because the the developments would not have been in.

Armin Martens: At a certain point, when we sell properties in Calgary, we do our best if it's property managers, we know, but for them to transfer with the property to the new owner. The leasing ones, you know, make no mistake about it, some layoffs are involved sometimes, and that's not a good thing. That's the situation we're in right now.

The prior year. So we don't have a prior year comparisons so.

We would not include a development property until we have a.

Prior year to compared against.

So the what drove the strong.

Serverless was a combination of improved occupancy and tyrants.

Matt Logan: Maybe just last question from me in terms of a quick housekeeping item. Can you tell us the IFRS values for Centre 15 and the Minnesota Retail Portfolio?

Now with that have been yeah on on the so some of the board I will basically 99% odd but in both sides of the border and especially in the U.S. side. That's that's a very good number and it doesn't matter, which which industrial properties you look at the big box distribution, though the multi 10 flex showcase industrial leg manufacturing.

Jaclyn Koenig: I don't have the total off the top of my head, but I can tell you.

Armin Martens: Centre 15?

Jaclyn Koenig: Yeah. I don't know the retail. That's Canadian. 65.

In feel older generation, it's all performing well on both sides of the border and a little bit more.

Armin Martens: In total?

Jaclyn Koenig: Yeah, in total.

Armin Martens: Yeah. Does that help you?

In the U.S. right now.

Matt Logan: 65. That would be. Okay.

So if you're at such a high occupancy rate would it be reasonable dust filling that outpacing growth will slow down going forward, just because there isn't much the lease up.

Jaclyn Koenig: Yeah.

Jaclyn Koenig: Was that 15 for Centre 15?

Matt Logan: Was that 15 for Centre 15?

Jaclyn Koenig: It's 13 for Centre 15.

Yeah, but possibly needless to say, we're pushing rents knowledge as well as we can we're making the point towards cells, while maybe we've gotta love watching the electricity here and maybe we've got a charge more rent and live with little less occupancy.

Matt Logan: 13 for Centre 15, the balance from the Minnesota portfolio.

Jaclyn Koenig: Yeah.

Jaclyn Koenig: Excellent.

Jaclyn Koenig: Excellent. Yeah, slight gain on Centre 15.

Jaclyn Koenig: Yeah, slight gain on Centre 15.

Matt Logan: Appreciate the color. That's all for me. I'll turn it back. Thank you, guys.

Armin Martens: Thank you.

Yes.

Leonie: Thank you. Your next question is from Jenny Ma from BMO Capital Markets. Jenny, please go ahead.

Operator: Thank you. Your next question is from Jenny Ma from BMO Capital Markets. Jenny, please go ahead.

I wouldn't say, there's any low hanging fruit altera at this point, but there is.

There's a lot of runway ahead of us we feel in industrial sector in raising rents in the years ahead on both sides of the border.

Jenny Ma: Thanks. Good afternoon.

Armin Martens: Hey, Jenny.

Operator 1: Hi.

Operator: Hi.

Jenny Ma: You talked about reducing the overall debt, but I'm just wondering what your thoughts are on the debt strategy over the near to medium term, given that you still have a pretty big proportion of floating rate debt. The weighted average term on your mortgage is quite low, and presumably you're paying off the credit facilities first. How do you expect that to shake out in the next 1 to 3 years, call it?

Understood and across the asset sales and you've done quite a bit this year.

I'll be quite a bit more clothing over than a little while do you expect to continue it and this program will this program that be extended to sell more assets that you might you as either a lower growth are marked it ought to be in or is that I felt to stop at a certain number.

We'll see stopping and dial it back.

Armin Martens: We're still seeing today that we can refinance much of the maturing debt at interest rate savings, so expect that there will be some savings to come. You're correct. A bunch of it is still floating rate debt. However, LIBOR and BAs in Canada really have not moved as much as you would expect, given where the underlying bond rates have gone. The floating rate debt really isn't as cheap compared to fixed debt as it used to be. That's the reason we've been placing a few more swaps on some of the floating rate debt just to lock them in.

So that will sort as people dial it back.

We will continue.

And you might recall, we used to recycle between 200 to 300 million of properties, but we definitely see more properties that we would like to sell out of and then repositioning our portfolio and more aggressively grow the industrial portfolio for example.

Okay, Great and lastly, I'm just trying to car to reduce to elaborate just I think that's going be a focused over the next little while how far down would you want to take it on and how do you look at you're looking at it debt to EBITDA basis or on that the book value. What is the preferred metric on what is the target.

Setting.

We're looking at both.

Jenny Ma: Sorry, you said the floating rate debt is not as cheap as it used to be?

The target that I referenced it was was it that too to book value or to cross book value basis, but we're also very cognizant of maintaining a debt to EBITDA metrics all.

Armin Martens: It's-

Jim Green: No.

Kim Riley: No.

Armin Martens: No.

Jenny Ma: No.

Armin Martens: Because, you know, the LIBOR is still running at 190 basis points. If your spread is 160 or 170 over LIBOR, you're still running 3.5% on floating rate debt, which is-

Armin Martens: Because, you know, the LIBOR is still running at 190 basis points. If your spread is 160 or 170 over LIBOR, you're still running 3.5% on floating rate debt, which is- About where you can get five-year fixed debt at today.

We're really looking at both Mark I think.

Jenny Ma: So-

The kind of are going to move in tandem as we as we get that the GPV lower they the debt to EBITDA should go up as well.

Armin Martens: About where you can get five-year fixed debt at today.

Jenny Ma: In that case, would you be more inclined to, over time, convert that into fixed rate secured debt?

Okay, great. Thank you.

Thank you. Your next question is from Dean Wilkinson from RBC. Please go ahead. Thank you Leoni afternoon, everyone Hello.

Armin Martens: Some we've done with swaps, right?

Jim Green: Yes. Some of that we've been doing with swaps and. But yes, I'm gonna say over time, we would be more inclined to be fixing more debt today.

Oh, just on the Calgary office, Yeah, it's it and and Alberta, as well seems to be up a little from Q2, 6.4% versus six ones not a big move in about 100 basis points is that more a function of selling things like 450.

Jenny Ma: How are you thinking about the secured versus unsecured balance?

Jim Green: Our secured debt today is less than 30% of GBV, which is probably where we would roughly want it to be. Expect that the secured debt will stay about where it is today, and then the unsecured will layer on top of that.

In young so that the portfolio is lifting where are you seeing a little strength out of out of the market that perhaps we're missing.

Jenny Ma: Okay. That's fair. Just wondering, the Madison office portfolio, it looks like the occupancy's crept up a bit, and it's been fairly stable. When you look at that, do you view it as a core component of your long-term portfolio?

More a function of selling.

So when you look at the remaining sort of 326 and perhaps more.

Would that suggest maybe that that waiting to both Calgary, Alberta, Alberta, maybe picks up a little less as we look forward. The next couple of quarters.

Armin Martens: Good question. I mean, as a REIT, long-term holder, owners and managers and holders of real estate, right now we do consider it as core. It's a good, stable, predictable, reliable source of income. Our NERs are relatively high there compared to the face rates. We're really pleased with it, pleased with that. It's a market that doesn't get disrupted by large players coming in and overbuilding and then poaching tenants. So we like all of that. It adds some good balance to our portfolio. That doesn't mean that someday we wouldn't dispose of it. I mean, not everybody agrees with us that we should be in Madison.

Well, we'll be selling down a lot of Calgary, probably able but for now for more Calgary office under contract for sales were very optimistic that build close by by Q4 as a matter of fact.

Excuse me and for sure be unconditional if not before we report the Q4 results. So we see it with the weeding going down by default so to speak just as we sell down these properties and we expect me to 3% range when we announce a Q4 results.

Okay.

Fair then to say that that remaining sort of 326, it's classified ads for sale is probably going to be at a substantially higher cap rate than the <unk>.

Armin Martens: You know, it is a state capital and it's a university capital and in terms of mid-market, those are two key features to real estate valuations and drivers of rent. Right now we like it. That's not on our list, on the top half of our list of properties to sell, that's for sure.

Honor to show for 90 that you've you've already sold.

A good players slightly all Kim can answer that suddenly slightly higher but not substantially we expected to be kind of in low seven seven cap range the low sevens okay.

Jenny Ma: Would you be able to comment on the cap rate on this portfolio versus when you bought it? Has it changed much?

And then just when we look at stuff. They are the gain on for 15 young.

Armin Martens: Well, the NOI has gone up a fair amount, right, Kim?

Jim Green: Yeah.

Armin Martens: We feel the cap rates dropped at least 50 basis points from our cap rate. We were over 8% when we bought it.

And I noticed that the cap rate was based upon 4.6 million.

Armin Martens: We feel the cap rates dropped at least 50 basis points from our cap rate. We were over 8% when we bought it.

Oh, then Hawaii, which included some leasing was that forward look on the leasing included in the I FRS value or was the <unk> first mark based upon.

Jim Green: Right.

Armin Martens: It was 88, 86% occupied. We brought it up to 90, and we raised the rents across the board. We've been able to add, make some additions on surplus land, with long-term leases in place for existing tenants. We've been able to add value to that portfolio as well.

What was historically in places like what would say be in the rest of that table.

Oh the is on the leasing would be included in the <unk> first value because we will generally modeling a junior time horizon on a on the valuation of the property. So we we'd be looking forward, including the new leasing.

Jenny Ma: Okay.

Armin Martens: We definitely feel it's worth more than we paid.

Jenny Ma: That's interesting. Okay. On the held for sale portfolio, could you comment on sort of the NOI associated with that in aggregate?

Okay. That's good and then just a clarification on how you've got the assets classified in the presentation.

Armin Martens: I'm looking to somebody else in the room. Kim or Jackie or Jim.

Jenny Ma: Well, I'm asking because, you know.

Armin Martens: Yeah.

Jenny Ma: When you look at some of the more recent transactions, the cap rates on them are quite high. I'm just wondering if that's indicative of what's left in the held for sale bucket.

Armin Martens: Yeah.

Jenny Ma: When you look at some of the more recent transactions, the cap rates on them are quite high. I'm just wondering if that's indicative of what's left in the held for sale bucket.

Noncore assets to be sold that was 800 million 2 billion.

Is that on top of what has already been done or how are you getting because I'm looking at 4.2, plus a billion plus 200 million a development assets are kind of gets me to to get to your gross book value there. So.

Armin Martens: It all depends. There were some anomalies there. There are obviously many office retails is an anomaly. I think at Calgary, which was another one. We had a couple of anomalies. You know, we had the retail property.

It is is it a billion of noncore assets to be sold or is it a billion last what you've already done.

Jim Green: Yeah, I would, I mean, I don't have the exact calculation off the top of my head, but I would say in the held for sale bucket, again, it would be closer to that low 7 cap range, is kind of where we're expecting it to be.

Kim Riley: Yeah, I would, I mean, I don't have the exact calculation off the top of my head, but I would say in the held for sale bucket, again, it would be closer to that low 7 cap range, is kind of where we're expecting it to be.

Million less.

One last August .

Okay.

What was that we're almost done you're almost done [laughter]. The last parts of the hardest that's it for me. Thanks, guys, all well I hand, it back to <unk>.

Kim Riley: Okay. That's helpful. Thanks. I'll turn it back.

Leonie: Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question is from Michael Markidis from Desjardins. Please go ahead.

Operator: Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question is from Michael Markidis from Desjardins. Please go ahead.

Thank you.

Next question is from Jonathan culture from TD Securities Johnson. Please go ahead. Thanks, good afternoon I.

Michael Markidis: Hi. Two quick ones for me. Thanks. On Concord Corporate Center and Poco Place, just curious if you could give us some color as to where you guys might be with respect to getting rezoning or upzoning on those two assets.

Just just turning to the.

The developments.

Just on the tower business Center, what what's your yield expectation on August .

And what should we expect doesn't come on line.

Armin Martens: Well, still progressing. It's a work in progress going from here, going from meeting to meeting, so to speak, booking more meetings with the planners and with members of the community. I'd say Concord is definitely further ahead, and we really are optimistic by the end of Q1, Q2 at the latest next year, we'll get at least a positive report, a support report, if you will, from the planning department. After that, it should be downhill to get the final density approved, if the final entitlement's at the level of council. Poco Place, we've had several meetings as well. I include the mayor there in Port Coquitlam. We're progressing, but I'd say at a slower rate.

It'll be in a low seven yeah, yeah it'd be roughly between.

We're not finished yet but between 6.8 to 7.2 in that range and won't be longer than 6.8.

Okay that that'll come on west.

Construction completion is almost finished in the leasing of the first building is complete and that.

At least commences I'm going to say, it's in Q2 over the next you might even be Q1.

Yes, so the larger the two buildings two thirds of the project if you will well.

The revenues will kick in in Q2 next year.

Okay, and then the rest sort of by the end of next year, Yeah for sure Okay and need to property you are buying in Minnesota, The new development, there is that where where's that stand in terms of occupancy.

Armin Martens: However, by the end of next year, we also have a very good chance of getting our entitlements at least confirmed in principle. Now, that's not to say that we wouldn't achieve a lot of value if we dispose of the properties now. However, we feel, they're not at the top of our list. We've got other properties we wanna sell first, and we'll keep working hard at getting this density approved before we go to market with them.

But the primary problems there right. So that's 100% occupied 50 year lease with.

2% annual bumps in it.

Nice property it was.

Going forward purchase so it's been in our and the need for almost two years now.

Okay.

Michael Markidis: Okay. When you say preliminary plans, have you made an initial application or is it just sort of you're having discussions before you make your initial application?

Fair enough and then just lastly on the the Special Committee you put through 400000 or sold charges this quarter.

Armin Martens: Oh, no, we've got a lot of plans done. We've paid a lot of consultants a lot of fees. I hope they've done something for us. No, I've seen the plans too. No, I mean, at Concord, for example, we're looking at density for about 550 suites in one large building there. That's moving forward, and we've had gone back and forth with the planners on making changes to the plans so that they could support them. Then at Port Coquitlam, it's a bigger densification. It's about 1.5 million sq ft. We're looking at either three or four towers of multi-family, and that requires a lot more thought and indigestion, if you will, to go through the process with the planners there.

What that was out in your Gionee and then you decide erotic back to fulfil that that's correct.

Okay and is how long.

How long is the mandate for the special Committee that is out there is that sort of 400 kind of how we can think about it on a quarterly basis until they're done or was there any onetime things in there.

Well that's good question had almost it's got a for sure Malignaggi [laughter], an expiring data their mandate I guess there.

Still working through it probably.

I'm going to say, it's a little bit cheaper going forward because some of that does the bulk and that was legal cost that as they were getting going in.

Armin Martens: So far, they're, in principle, very supportive of giving us more density there because we're within less than a kilometer of a SkyTrain station there, which so makes it a TOD, so to speak.

So it's probably the next quarter, so we'll be a little less than that yeah. I mean, when we're not on a comedian we may not official spokespeople look I would I would expect between our next you need GM.

Michael Markidis: Okay. Last one here for me. Just with respect to how you guys carry those assets, is there any carve-out for the land that you're building on the excess density, or is it just capped as a normal property without any regard to what the-

We'll get a lot of visibility from them.

Jim Green: No, just treated as a normal operating property. No, no potential lift recorded for the future density.

And even the report from them and so.

Things will either ramp up or or wind down.

Okay. Thanks, all up I'll turn it back.

Michael Markidis: Okay. That's helpful. Thank you.

Leonie: Thank you. Your next question is from Johann Rodrigues from Raymond James. Please go ahead.

Operator: Thank you. Your next question is from Johann Rodrigues from Raymond James. Please go ahead.

Thank you. Your next question is from Mt. Logan from RBC capital markets not please go ahead.

Thank you and good afternoon.

Johann Rodrigues: All my questions have been answered. I'm good. Thanks.

Armin Martens: Yeah. Thank you. Next caller.

Yes.

I'm just wondering if you could talk a little bit about your same property NOI growth outlook last quarter. You mentioned it was about 2% to 3% would that include some of the drag from the Calgary office portfolio that we've seen here this quarter.

Leonie: There are no more questions at this time. Please proceed.

Operator: There are no more questions at this time. Please proceed.

Armin Martens: Okay. Well, then, thank you again, moderator, and everyone for joining us on this call and on short notice. For Q4, we'll give everyone more time. It'll be year-end, and we'll have the call the next day after the release of the results. In the meantime, we're looking forward to working hard for our investors. We hope to see a lot of you at the next real estate forum in Toronto and hopefully when we do some marketing as well. We're looking forward to delivering more good results in Q4 as well. Thanks again. Have a good evening.

So yes, the I mean, the to this quarter was including the drag from the Calgary office portfolio. So so yes the.

We estimate for most of two to hopefully three is.

Inclusive of any drag from Calgary office.

And going forward I mean, it seems like the organic growth through the business pretty much everywhere, except for Calgary is doing quite well.

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

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

And.

You know when we look at the industrial growth, that's obviously quite great, but how should we think about the tenant inducements and some of the capex for the portfolio I mean, well that trend down as you sell more of your Calgary office business.

It should for sure and even and our organic growth. It's not just Calgary office that we sell that Don you know, our Minneapolis retail and our enclosed malls. Sheila this is where there might have been a drag and soon probably in high growth and idea you heard me mentioned as we streamlined our put full portfolio and.

Turning to finish up with our disposition plan, we will have a better portfolio was it better earnings profile, we're very optimistic about that and back to cap ex yard eating.

God, We also always because lot of Capex is less of that we have.

The less so and a better off our here for full will be.

So when we look at kind of the business at the end of the strategic review the maintenance Capex, we've seen the EFO deduction should really converged to the actual capex as we look out to 2020 and 2021.

Yes.

Okay, and just in terms of the future asset sales can you give us a sense for what else you plan to sell in Canada outside of the Calgary Office segment.

We will even has listed here [laughter], we have a one left in auto loss, we plan to fill that one and then an enclosed retail center and it's gotten a those are on the list.

And then the rest is really a lot to a lot of foundry office. So, yes, Calgary office and I think there do we match Minneapolis retail of course, it's already unconditionally yeah, Yeah, Yeah, I'm just nontraditional. So that's why we're kind of.

He is in there, but it just just barely made the list on Friday. So we've got four Calgary office properties that were looking at some other office properties.

Again to your point about Capex and outlook as we think we've maximized value.

Let them go too.

Recall, we all know a building in and then in Hartford, New York or is it 10, and then Ted it's hard for insurance, we just renewed their lease but they had the right to give us back one floor. So they take two to three floors now we've been able to release that top floor and now we're just leasing stats were going to sell that property as well.

Yes so.

There's a certain non core buildings, we're lucky Atanas small office building in suburban many alphas called the de aside buildings, that's on our list as well.

Well, we've got to a good focus in what we want to sell and are we still we're going to streamline the portfolio.

And as you downsize the business, how do what sort of impact does this have for the staff for the leasing folks who are doing the data and leasing in the planning does this simplified their life in terms of the operations and.

Maybe just some color on how it impacts the rest of the business from an operational perspective.

Yes, good question.

Funny, how often we might ask one of our property managers and leasing people a lot of building that we're thinking about selling and they'll say, yes. Please so no one [laughter] they don't mind that all the another man you don't.

Are you doing candid appointed in Calgary for example, it's been tough morale is not good anywhere in Alberta in almost any any sector right now and we find ourselves spending more time.

And do our best mature our people up then even talk about leasing.

And then getting keeping the morale up there everybody that worked really hard into thankfully job and in many respects envying leasing agent in Calgary, but so at a certain point when we sell properties in Calgary, We do our best if its property managers, we know that for them to transfer with the probably to the new owner.

And leasing it once you know.

No not make no mistake of bought it somebody also involved sometimes and that's that's not a good things, but that's the situation we're in right now.

And maybe just last question for me in terms of a quick housekeeping item can you tell us the IRS values for center 15, and the Minnesota retail portfolio.

Total tell them I had what I can tell you.

10, or 15, Yeah, and then I don't want to retail.

[noise], so it'll be that's coming up so 65.

In total.

Yes.

Does that help.

65, so that would be okay.

And the split between the two would that was that 15 for center 15.

At 13% or anything.

13% in 15, and the balance from a the Minnesota portfolio.

Excellent like yes, again everything.

Appreciate the color that's all for me I'll turn it back thank you guys.

Thank you.

Next question is from Janney Maher from BMO capital markets Janney. Please go ahead.

Thanks, Good afternoon.

So you talked about reducing the overall debt, but I'm just wondering what your thoughts on the debt strategy over the near to medium term given that you still have a pretty big proportion of floating rate debt.

<unk> is quite low and presumably you're paying off the credit facilities first but how do you expect that to shake out in the next a one to three years call. It.

We're still seeing.

Today that we can refinance.

Much of the maturing debt had interest rate savings. So expect that there will be some savings to come.

Yes, you're correct a bunch of it is still floating rate debt. However.

LIBOR and bees in Canada really have not moved as much as you would expect given where the underlying bond rates have gone so.

The floating rate debt really isn't as cheap compared to fix that as it used to be.

That's the reason we've been placing a few more swaps on.

On some of the floating rate debt just to lock them in.

All right you said there that's floating rate does not as cheap as they used to be.

It's all no does the LIBOR is still running 190 basis points. So if your spread is one six year, one seven deal reliable or you're still running three and 5% on floating rate debt, which is all where you can get five your fixed it today.

So in that case would you be more inclined to overtime convert that into fixed rate secured debt.

Some was done with swaps right if somebody's so some of that we've been doing with swaps and but yes, yes, I'm going to say overtime, we would be more inclined to be fixing more debt today.

And how are you thinking about the secured versus unsecured balance.

So our uns our secured debt today is less than.

Less than 30% as GE, V., which is probably where we would.

A roughly want it to be so expect that the secured debt will.

Well stay about where it is today and then the unsecured will layer on top of that.

That's fair.

Just wondering be Madison office portfolio. It looks like the occupancy has crept up a bit and it's been fairly stable. It. When you look at that do you view it as a core component of your long term portfolio.

Good question I mean, as a reach long term older owners and managers and holders of real estate is right now would you consider it as core.

It's a good stable predictable reliable source of income or any ours. It relatively high there compared to the face weights were really pleased with it. Please. Please was asked it it's a market that doesn't get disrupted by large players coming in and Overbuilding and then poaching tenants.

So we like all of that as it did add some good balance to our portfolio.

It doesn't mean that somebody we wouldn't disposal, but not me not everybody agrees with us that we should be medicine, but you know what is the state Council and say University capital and in terms of Midmarket. That's that's is that there was a two key features to real estate evaluations in drivers Brent So right now we like it where that's not on our list.

On our own on that the top half our list a philosophy is to sell that's for sure.

Would you be I'll comment on the cap rate on this portfolio versus when you bought it hasn't changed much.

Well the anyone has gone up a fair amount right Kim.

And I know, we feel that cap rates dropped at least 50 beeps Primark happy we're over 8% when we bought it and it was 88, 86% occupied we brought up to 19 raised the rents across the board. We've added we've been able to add make some additions and surplus land.

With long term leases in place for existing tenants. So we've been able to add value to that portfolio as well.

Okay, I feel it's worth more than we paid.

[laughter] that's interesting Okay, and then on the the held for sale portfolio could you comment on sort of the I know why associated with that in aggregate.

I'm looking to somebody else in the room, Tim or Jackie Jim why I'm, asking because you know when you look at some of the more recent transactions the cap rates on them are quite high and I'm. Just wondering if that's indicative of what's left in held for sale bucket. It all depends if there were some anomalies there are always Minneapolis.

Retail this is an anomaly and and I think Calgary odd, which was another one that we had a couple of anomalies that retail property.

Yeah, I mean, I don't have the exact calculations it up I have it I'd say in held for sale Buck and again it would be closer to that low seven cap range is kinda are expecting it to me.

That's helpful.

Thanks, I'll turn it back.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by one.

Your next question is from Mike Marquee, that's fun day Chardan. Please go ahead.

Hi, two quick ones for me thanks.

On a Concord corporate center and Poco place just curious would give us some color as to where you guys might be with respect to.

Getting rezoning or upselling on those profits.

Still progressing.

The work in progress going for Hill going from meeting your meeting so to speak booked in more meetings with planners and with with jazz and members of the community I'd say Concord is definitely further ahead and we really are optimistic but I ended by Q1 Q2 at the latest next year, we'll get at least a positive.

Florida support support report if you will from the planning Department and then after that should be down Hill to get the final density approved if the file entitlements at at the level of Council.

Well go place we've had several meetings as well.

I'm pleased that include the mayor their input quick Whitlam and I were progressing, but I'd say at a slower rate. However by the end of next year. We also we could we have a very good chances of getting our entitlements at least confirmed in principle.

Now that's not to see that we wouldn't achieved a lot of value. If we dispose of the properties now, but however, we feel.

They're not they're not at the top of or less we've got other properties, we want to sell first and we will keep working hard at can you. Just did these this density approved before we go to market with them.

Okay. When when you say preliminary plans have you made a initial application or is it just sort of a you're having discussions before you make your national application. One always got lot of plans kind of we've paid a lot of consult with a lot of fees a hope what they've done some divorce not seen applies to no I mean, there and kind of Concord for example of looking at density for about 550 suites.

In one large building there that's that's that's moving forward and we've had gone back and forth for the planners.

On on making changes to the plans that they could support them.

Then if poker quit limits a bigger identifications by 1.5 million square feet, we're looking at either three or four towers of multifamily and that requires a lot more.

Thought and indigestion, if you're willing to go through that process with the planners there, but so far there in principle, they're very supportive of giving us more density Debbie can work with the methanol kilometer of a sky train station there.

Which makes it a kilo d. so to speak.

Okay and last one here for me just with respect to how you guys carry those assets is there any carved out for the land that you're building on the excess density or is it just kept as a normal property without any.

That's what.

Just just treated as a normal operating property no no potential lift recorded for the future density.

Okay. That's helpful. Thank you.

[laughter].

Thank you.

Your next question asked from Joe had Rodriguez from Raymond James. Please go ahead.

All my questions have been answered.

Thanks.

Thank you [laughter] that's color.

Yeah.

There are no more questions at this time. Please proceed.

Okay. Well then thank you again moderate when everyone for joining us on this call and on short notice.

For Q4 will give every one more time it will be here and we'll have the called the next day. After the release of the result in the meantime, we'll look forward to working hard foreign investors, we hope to see a lot of you are at the next real estate form and drawn one hopefully when we do some marketing as well and we're looking forward to delivering more goods.

Hi, good results in Q4 as well thanks again have a good evening.

Ladies and gentlemen. This concludes your conference call today, we thank you for participating and I thought you. Please disconnect your lines.

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