Q3 2019 Earnings Call

November 7, 2019

Operator 2: Ladies and gentlemen, thank you for standing by, and welcome to the Choice Properties Real Estate Investment Trust Q3 earnings announcement. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Adam Walsh, Vice President, General Counsel. Please go ahead.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Choice Properties Real Estate Investment Trust Q3 earnings announcement. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Adam Walsh, Vice President, General Counsel. Please go ahead.

Ladies and gentlemen, thank you for studying bite and welcome to the choice properties Real estate investment Trust Q3 earnings announcement.

This time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to asked a question. During the session you will need to press star one on your telephone keypad.

If you require further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker to date, Adam Walsh Vice President General Counsel. Please go ahead.

Thank you good morning, and welcome to choice properties second or third quarter Conference call I'm joined here. This morning by rail Diamond, President and Chief Executive Officer, and Merial Verifiable Chief Financial Officer.

Adam Walsh: Thank you. Good morning, and welcome to Choice Properties Q3 Conference Call. I'm joined here this morning by Rael Diamond, President and Chief Executive Officer, and Mario Barrafato, Chief Financial Officer. Before we begin today's call, I'd like to remind you that by discussing our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements regarding Choice Properties objectives, strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward-looking statements.

I will begin today's call I'd like to remind you that they discussing our financial and operating performance and in responding to your questions.

We would mean, we may make forward looking statements including statements regarding.

These properties objectives strategies to achieve those objectives as well statements with respect to managements beliefs plans estimates intentions outlook in similar statements concerning anticipated future events result, circumstances performance or expectations that are not historical facts you.

These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward looking statements.

Adam Walsh: Additional information on the material risks that can impact our actual results and estimates and assumptions we applied in making these statements can be found in the 2018 annual report and management's discussion and analysis, together with Choice Properties annual information form, all of which are available on our website and on SEDAR. I will now turn the call over to Rael.

Additional information on the material risk that can impact or actual results and estimates and assumptions that blood me any statements can be found in 2018 annual report and management's discussion and analysis together with twist properties annual information form all of which are available on our website and on SEDAR.

I'll now turn the call over to Rob. Thank you Adam and good morning, everyone. Thanks for taking the time to listen to our conference calls.

Rael Diamond: Thank you, Adam, and good morning, everyone. Thank you for taking the time to listen to our conference call. We are very pleased with both our financial and operational results for Q3. This morning, I'll provide you an update on our operational results and transaction activities. Mario will then provide you with details of our financial performance. At a high level, another solid quarter. Our consolidated portfolio of income-producing assets includes 707 properties comprising 66 million sq ft of GLA. This high-quality portfolio includes retail, industrial, office, and residential properties, and is located across the country with a concentration in Canada's largest markets. Our retail portfolio is primarily focused on necessity-based tenants. This includes grocery-anchored neighborhood retail centers and standalone Loblaw locations. These retailers are far less sensitive to the ups and downs of the economy and the ever-changing retail environment.

Very pleased with both financial and operational results will just a corner.

Good morning, I'll provide.

You an update on operational results and transaction activities. Marios will then provide you with details of our financial performance at a high level another solid corner.

Our consolidated portfolio of income producing assets include 707 properties, comprising 66 million square feet of jelly as high quality portfolio includes retail industrial office and residential properties is located across the country with the concentration in Canada's largest markets.

Our retail portfolio is primarily focused on necessity based Kevin. This includes grocery anchored neighborhood retail centers and Standalone lot more locations. These retailers far less sensitive to the ups and downs as the economy.

And the Evan changing retail environment.

Rael Diamond: Our long-term leases with Loblaw provide for contractual annual rent growth. This makes our retail portfolio well suited to deliver stability and growth. Period-end occupancy in retail was 98%, which was up from 97.8% in the prior quarter, due to 125,000 sq ft of positive absorption. We continue to successfully add to our retail portfolio, both through related party acquisitions and development. During the quarter, we closed on the acquisition of a grocery-anchored retail property from Loblaw for a total cost of approximately CAD 23 million. The property is 128,000 sq ft and is located in Langford, BC, in the Greater Victoria area. On the development front, we added to the retail portfolio through a mix of greenfield developments and intensifications.

And our long term leases with law will provide for contractual annual rent growth.

Makes a retail portfolio well suited to deliver stability and growth.

Appeared in occupancy in retail was 98%, which was up from 97.8% in the prior quarter due to 125000 square feet positive absorption. We continued to successfully avatar retail portfolio, both who related party acquisitions and development.

During the quarter, we closed on the acquisition of a grocery anchored retail property from local for total cost of approximately $23 million to property is 128000 square feet and is located in land could be fee in the greater Victoria area.

On the development front, we added to the retail portfolio through a mix of Greenfield developments and intensification.

Rael Diamond: These development initiatives continue to provide us with the best opportunity to add high-quality real estate to our portfolio at a reasonable cost. In Q3, we completed and transferred a total of 75,000sq ft of retail development at a total cost of CAD 26 million. Included in the transfers is a 28,000sq ft grocery store located in Saint-Julie, Quebec. We have a 75% ownership interest in the site with our development partner. The balance of the site is 43,000sq ft, including a liquor store, dollar store, bank, and other service-based tenants, and is expected to transfer next quarter. Our industrial portfolio includes 112 properties and approximately 16 millionsq ft of GLA and is concentrated in Canada's largest distribution markets.

These development initiatives continue to provide us with the best opportunity Dread high quality real estate portfolio at a reasonable cost in Q3, we compete and then transferred a total of 75000 square feet of retail development at a total cost of $26 million.

Including the transfer is a 28000 square foot grocery store located in centrally Qubec city.

We have is essentially Quebec, we have a 75 doesn't ownership interest in the side with our development partner the balance of this size is a 43000 square funds.

43000 square feet, including ILEC Crystal dollar Stifel Bank and other service based tenants and is expected to transfer next quarter.

And that's what portfolio includes 112 properties and approximately 16 million square feet of Gilly and is concentrated in Canada's largest distribution markets.

Rael Diamond: With the exception of the small bay market in Alberta, industrial assets are operating under healthy fundamentals with low vacancy rates and increasing rent. Period-end occupancy was down 10 basis points to 98.1%, driven primarily by some softness in the small bay market in Alberta. The acquisition environment for industrial properties continues to be extremely competitive, so development is a logical way to add high-quality assets to our portfolio. Incrementally, our development partners continue to provide us with opportunities to acquire their interest in stabilized assets on an off-market basis. As an example, subsequent to quarter end, we closed on our partner's 15% interest in two industrial buildings in Milton, Ontario. This includes our recently completed 665,000 sq ft Peddie Road development and our 635,000 sq ft development at 333 James Snow Parkway.

With exception of the small day Martin in Alberta, industrial assets operating on a healthy fundamentals with low vacancy rates and increasing rents.

Appeared in occupancy was down 10 basis points to 98.1% driven primarily by some softness in the small bay marketing Alberta.

The acquisition environment for industrial properties continues to be extremely competitive. So development is a logical way to at high quality assets fell portfolio incrementally on development partners continue to provide us with opportunities to acquire the interest.

Labor laws assets on an off market basis.

As an example, subsequent to quarter end, we closed on our partners, 15% interest into industrial buildings in Milton, Ontario. This includes our recently completed 665000 square foot pretty wrote development and our 655000 square foot.

Development at three Threethree, James Snow Parkway.

Rael Diamond: Both assets are now 100% leased. The 15% interest in these assets was acquired for CAD 28 million. These assets are new generation, large bay distribution facilities in the GTA West industrial node. We now own a 100% interest in both properties. As mentioned, new generation industrial facilities are extremely difficult to acquire at a reasonable price, so this is a wonderful opportunity to continue to grow our industrial portfolio in a strong distribution market. Next is our office portfolio. Office portfolio is focused on large, well-located buildings in the downtown core of Canada's largest cities. Period-end occupancy for our total office portfolio increased 50 basis points to 93.2% from 92.7% in the prior quarter, primarily due to positive absorption in our Vancouver and Halifax portfolios.

Both assets on our 100% leap.

The 15% interest in these assets was applied for $28 million. These assets on new generation large bay distribution facilities in the DJ with industrial node, we now own 100% interest in both properties.

As mentioned new generation industrial facilities extremely difficult acquired at a reasonable price. So this is a wonderful opportunity to continue to grow industrial portfolio in a strong distribution market.

Next is off office portfolio office portfolio is focused on large well located buildings in the downtown call of Canada's largest cities ferritin occupancy for total office portfolio increased 50 basis points to 93.2% from 92.7% in the prior quarter primarily to do.

Two positive absorption Vancouver, and Halifax Wilson.

Finally, our residential platform provides an opportunity to further diversify portfolio a focus has been on developing new rental residential assets, primarily in the greater Toronto area. The rental market. It did GJ strong as limited new supply and Roma robust demand has driven up rents are current residents.

Rael Diamond: Finally, our residential platform provides an opportunity to further diversify our portfolio. Our focus has been on developing new rental residential assets, primarily in the Greater Toronto Area. The rental market in the GTA is strong as limited new supply and robust demand has driven up rents. Our current residential platform includes four residential rental assets that are income producing. Another six residential assets that are currently in various stages of development. I'd like to highlight the progress of two of these assets. Construction at our 39 East Liberty Village site continues to progress well. The parking structure is now complete, and we are pouring concrete to the second floor. We currently have a 47% interest in the site, which includes 163 units at our ownership's share. We expect that the building will be complete in early 2022, with stabilization a year after.

So platform includes for residential rental assets that are income producing.

And another six residential assets. They currently in various stages of development I'd like to highlight the progress of two of these assets.

Construction at a 30 not east Liberty Bell each side continues to progress well the parking structure is now complete and we are pouring concrete to the second floor. We currently have 47% interest in the side, which includes 163 units at Ownerships share we expected to building will be complete in early 2000.

22, with seven realization your assets.

Rael Diamond: 390 Dufferin Street, located in the Queen West neighborhood of Toronto, is our most advanced residential development project, as construction has reached the sixth floor. We currently have a 47% ownership interest in this project, and it will include 32,000 square feet of commercial space and 163 residential units at our ownership share. The building will be complete in early 2021, and we anticipate stabilization in 2022. When our ongoing residential projects are complete, our residential portfolio will represent approximately 1,500 units at Choice's share. This includes over 1,000 units in the GTA, all of which are in close proximity to major transit. Next, I'd like to provide an update on the Oak Street disposition. At the end of Q3, we completed a 30-property portfolio sale for aggregate sale price of CAD 426 million.

Threeninety Jefferson Street.

Located in the Queen West neighborhood of Toronto is our most advanced residential development project as construction has reached the sixth floor. We currently have a 47% ownership interest in this project and it will to 32000 square feet of commercial space and a 163 residential units at our ownership share the building.

We'll be completed in early 2021, and we anticipate stabilization in 2022.

Then online residential projects will complete our residential portfolio represents approximately 1500 units at choice a share. This includes over 1000 units in the GTK all of which close proximity to major transit.

Next I'd not to provide an update on the street disposition at the end of the third quarter. We completed a 30 property portfolio sale for aggregate sale price of 426 million to unencumber portfolio included 27, Standalone retail properties and three distribution centers with an average lease term.

Rael Diamond: The unencumbered portfolio included 27 standalone retail properties and 3 distribution centers with an average lease term of approximately 12 years. This transaction represents an excellent opportunity for us to recycle capital, and the total portfolio was sold at an amount slightly above the aggregate IFRS carrying value. The proceeds of this transaction we used to repay debt and provide capacity to fund our development program. Mario will speak more about the impact on our leverage metrics in a moment. That concludes my comments. I'd now like to pass it over to Mario, to provide an update on our financial performance for the quarter.

Approximately 12 years. This transaction represents an excellent opportunity for us to recycle capital and the total portfolio was sold at an amount slightly about the aggregate iflorist carrying value.

The proceeds of this transaction, we used to repay debt and provide capacity to fund our development program Mary will speak more about the impact on our leverage metrics in a moment.

That concludes my comments I'll now like to pass it over to married to provide an update on our financial performance for the quarter.

Thank you Ralph good morning, everyone I'll begin with a brief overview of our financial results and then I'll comment on our balance sheet.

Mario Barrafato: Thank you, Rael. Good morning, everyone. I'll begin with a brief overview of our financial results, and then I'll comment on our balance sheet. Overall, our 2019 Q3 results were in line with our expectations and continue to reflect the stability that's inherent in our portfolio. Our reported funds from operations for the Q3 was CAD 175 million or CAD 0.25 per unit diluted. This is up slightly from the 24.8 cents per unit at 30 June 2019. The increase is primarily due to CAD 1.5 million in non-recurring items, which include items such as lease surrender revenue, prior year NOI adjustments, and charges associated with the early repayment of our term loans. Excluding these non-recurring items, FFO on a normalized basis would've been flat with Q2 2019.

Overall, our 2019 third quarter results were in line with our expectations and continue to reflect the stability that's inherent in our portfolio.

Our reported funds from operations for the third quarter was 175 million or 25 cents per unit diluted this is up slightly from the 24.8 cents per unit at June Thirtyth.

The increase is primarily due to 1.5 million in nonrecurring items, which include items such as least are undervalued revenue prior year in Hawaii adjustments and charges associated with the early repayment of our term loans.

Moving these nonrecurring items FFO on a normalized basis would have been flat with Q2 2019.

Included in our Q3 performance was stable year over year growth in same asset cash NOI.

Mario Barrafato: Included in our Q3 performance was stable year-over-year growth in same asset cash NOI. For the quarter, same asset cash NOI increased by 3.1% or 2.66% when you exclude certain prior period adjustments. The growth reflects the annual step rents embedded within the Loblaw portion of our portfolio, as well as incremental cash generated from leasing activity. On the leasing front, we had 151,000 sq ft of positive absorption, primarily from leasing activity in our retail portfolio. This improved our overall quarter end occupancy by 10 basis points from Q2 to a strong 97.8%, with retail occupancy at 98%, industrial occupancy at 98.1%, and office at 93.2%. Now onto our balance sheet.

For the quarter same asset cash NOI increased by 3.1% or two points of 6% when you exclude certain prior period adjustments the growth reflects the annual step rents embedded within the love love portion of our portfolio as well as incremental cash generated from leasing activity.

On the leasing front, we had 151000 square feet of positive absorption primarily from leasing activity in our retail portfolio. This improved our overall quarter in occupancy by 10 basis points for Q2, two a strong 97.8% with retail occupancy at 98% industrial occupancy at 98.1% and office setting.

93.2%.

Now onto our balance sheet.

Mario Barrafato: As Rael previously mentioned, during the quarter, we closed the sale of a 30-property portfolio for CAD 426 million. These proceeds were utilized to repay our remaining CAD 400 million variable rate term loan with the balance applied to the credit facility. This transaction, combined with both the equity and unsecured debenture offerings in Q2 2019, has significantly improved our financial position and our risk profile. Over the last nine months, we've reduced our leverage ratio to 7.5 times debt to EBITDA from 8 times at the start of the year. We've flattened out and extended our debt maturity ladder, and we maintain a strong liquidity position with CAD 1.3 billion of available credit and a CAD 11.7 billion pool of unencumbered assets.

Israel previously mentioned during the quarter, we closed the sale of a 30 property portfolio for 426 million.

These proceeds we utilized to repay our remaining 400 million dollar variable rate term loan with the balance applied to the credit facility.

This transaction combined with both the equity and unsecured debenture offerings in the second quarter financing has significantly improved our financial position and our risk profile.

Over the last nine months, we've reduced our leverage ratio to 7.5 times debt to EBITDA from eight times at the start the year, we flattened out and extended our debt maturity ladder and we retain a strong liquidity position with $1.3 billion available credit and 11.7 billion dollar pull of unencumbered assets.

Mario Barrafato: Overall, Q3 was a very solid quarter with stable operating results and significant improvements to our balance sheet. Looking forward to Q4, we expect continued stability in our operations. However, the full impact of the Oak Street disposition will be reflected in our Q4 NOI and FFO. This is also the time of year where we typically expect a seasonal pickup in CapEx spending, as many of our ongoing projects are completed before winter sets in. On the whole, while we expect a strong Q4, FFO and AFFO will trend slightly lower than Q3. I'll now turn the call back to the operator for questions.

So overall Q3 Q3 was a very solid quarter with stable operating results and significant improvements to our balance sheet.

Looking forward to the fourth quarter, we expect continued stability in our operations. However, the full impact of the Oak Street disposition will be reflected in our Q4 in Hawaii enough and FFO.

This is also the time of year, where we typically expect a seasonal pickup in capex spending as many of our ongoing projects are completed before winter sets in.

So on the whole, while we expect a strong fourth quarter, FFO and AFFO will trend slightly lower than Q3.

Ill now turn call back the operator for questions.

Operator 2: At this time, if you would like to ask a question over the phone lines, please press star, then one on your telephone keypad. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Himanshu Gupta of Scotiabank. Your line is open.

Operator: At this time, if you would like to ask a question over the phone lines, please press star, then one on your telephone keypad. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Himanshu Gupta of Scotiabank. Your line is open.

At this time, if he would like to ask your question over the phone lines. Please press Star then one on your telephone keypad, you will pause for a moment compiled acuity roster.

Your first question comes from the line of committed shoot up the of Scotiabank. Your line is open.

Himanshu Gupta: Thank you, and good morning. On the asset dispositions, I mean, you obviously now sold Loblaw-anchored assets in secondary markets. Have this met your near-term goal, or should we expect more dispositions in the near term?

Thank you and good morning.

On the asset dispositions.

Obviously knew you sold mobileye anchored assets in secondary markets.

How this might you on your them going all should we expect more dispositions in the near term.

Rael Diamond: Yeah. Thanks so much for the question. Yeah, it definitely met our near-term goal. We wanted to bring our leverage down. We're very comfortable with our leverages at the moment. We'll continue to look for disposition opportunities, but nothing of this scale, in the near term.

Yeah. Thanks, so much for the question. So yes, it's Debbie met on near term goal, we wanted to bring our leverage down we're very comfortable we are leverages at the moment.

And we'll continue to look for disposition opportunities.

But nothing of the scale in the near term.

Rael Diamond: Right. You know, just bigger picture, just trying to understand what's your portfolio mix likely to be in, say, you know, 2 to 3 years? I mean, do we see retail component further going down, I mean, in the medium term, or the focus is to reduce secondary and tertiary market exposure?

Himanshu Gupta: Right. You know, just bigger picture, just trying to understand what's your portfolio mix likely to be in, say, you know, 2 to 3 years? I mean, do we see retail component further going down, I mean, in the medium term, or the focus is to reduce secondary and tertiary market exposure?

Right and just bigger picture just trying to understand what's your portfolio mix likely to be into you know two three years I mean, do we see retail component for doubling down on an intermediate term.

The focus is to reduce secondary and tertiary market exposure.

Note that in the medium term I think it's very unlikely that the portfolio composition is going to change materially from where it is today just given the size of retail portfolio in the longer term as we get more traction on now mixed use developments you should.

Rael Diamond: No, but in the medium term, I think it's very unlikely that the portfolio composition's gonna change materially from where it is today, just given the size of our retail portfolio. In the longer term, as we, you know, get more traction on our mixed-use developments, you should see, you know, residential and mixed-use type income, so maybe office trend up.

See you know residential and mixed used top income so maybe office trend up bad.

Rael Diamond: in the short term, I wouldn't expect any major changes. We really viewed the Yonge Street sale as a opportunistic sale to raise capital, not. I wouldn't read much more into it than that.

But in the in the short term I wouldn't expect any major changes and we really viewed the oak Street sale as an opportunistic sale to raise capital.

I wouldn't read much more into it in that.

Himanshu Gupta: Sure. You mentioned about leverage, you know, kind of comfortable. Do you expect the leverage to, you know, bring it down further as the development portfolio grows? Or are you happy at the moment with 7.5x there?

Sure and you mentioned about leverage you know kind of comfortable.

So do you expect the 11 issue you know.

Bring it down further as their development portfolio grows.

Are you happy at the moment that haven't been five times.

Yes.

In the near term I think yes, we're happy with 7.5 times I mean, we've we've lowered our leverage a lot in the last nine months and so we're really comfortable operating here, but the liberal said as we.

Mario Barrafato: In the near term, I think yes, we're happy with 7.5x. I mean, we've lowered our leverage a lot in the last nine months, and so we're really comfortable operating here. Like Rael Diamond said, you know, as we kind of recycle assets, if there is capital, I'm sure we could go a bit lower. Right now we're pretty comfortable, what we've done in the last year.

As we kind of recycle assets if there is capital.

We surely to gold at lower right now, we're pretty comfortable what we've done in the last year.

Himanshu Gupta: Sure. Maybe just last question from my side on the residential development portfolio. I mean, what development deals are you underwriting on East Liberty and Dufferin Street? Obviously, you know, rents have gone up substantially, but so has the construction cost. Have your pro forma development deals changed in the last say, 12 months?

So maybe just last question from my side on the residential development portfolio.

And what development deals you underwriting on east Liberty under from Street, and obviously, you know rents have gone up substantially but she is a construction costs. So have you a pro forma development huge change tend to Las say 12 months.

Rael Diamond: Yeah. In both of those, we were underwriting approximately a 5 yield. We were actually fortunate that we tamed many of our construction costs before some of the increases. We've had the benefit of locking in the pricing and the benefit of rising rents. We would expect to beat that yield.

Yeah. So in both of those we were underwriting approximately a five yield.

We've actually fortunate that we tended to many of our construction cost before some of the increases and so we've had the benefit of locking in the processing and the benefit of rising rents that we would expect to beat that deal.

Sure. Thank you I'll turn it back Thats very helpful.

Himanshu Gupta: Sure. Thank you. I'll turn it back. That's very helpful.

[noise]. Your next question comes from the line of Jenny Mall.

Operator 2: Your next question comes from the line of Jenny Ma of BMO Capital Markets. Your line is open.

Operator: Your next question comes from the line of Jenny Ma of BMO Capital Markets. Your line is open.

[noise] of BMO capital your line is open.

Jenny Ma: Thanks. Good morning.

Thanks, Good morning.

Mario Barrafato: Morning.

Rael Diamond: Morning.

So just from.

Jenny Ma: Just on the one-time items affecting NOI, I just wanna be clear about it. The MD&A mentions CAD 0.6 million impact on same property. Is that related to the prior year NOI adjustments, or is there any lease termination captured in that?

The onetime items affecting no I just want to be clear about it on the Mdna mentioned point Sixmillion impact on same property is that related to the prior year I know I adjustments or is there any lease termination captured in that.

Mario Barrafato: No, hi, Jenny. No, the CAD 600 is just pure, like, prior period adjustments, you know, catching up on property taxes and that kind of stuff. That's in the same asset NOI. No, the termination is totally separate.

No so.

Hi, Ginny.

No. So the 600 as pure the prior period adjustments.

You know catching up on property taxes, and that kind of stuff and that's in the same answer that NOI no. The termination is totally separate okay. Great. Thank you with regards to some of the office Expirees coming up could you speak to where they are I do expect Calgary to be any impact I know, it's a small part of the portfolio.

Jenny Ma: Okay, great. Thank you. With regards to some of the office expiries coming up, could you speak to where they are? Or do you expect Calgary to be any impact? I know it's a small part of the portfolio, but just wondering if Calgary is gonna continue to weigh on the office segment.

But just wondering if five copies going to continue to weigh on the office segment.

Full full 2020, we don't expect koby too and the the office segment. In fact, we have very little rolling and we've done very good job.

Rael Diamond: For 2020, we don't expect Calgary to weigh on the office segment. In fact, we have very little rolling, and we've done a very good job, you know, being proactive on our leasing. In 2021 and 2022, I think the numbers, Jenny, are around 30 or 40,000 feet at our ownership, but I don't have those exact numbers handy. It's not material that those rents will roll down.

Proactive on our leasing.

In 21 in 21, and 22 I think the numbers Jenny are around 30 or 40000 feet at our ownership, but I don't have those exact numbers handy, but it's not material that those rents will roll though.

Jenny Ma: Is it fair to expect a little bit of an improvement on the office same property NOI number, I guess, once you roll in the CREIT office assets, given the strength we've seen in the Toronto, Vancouver, Montreal office markets?

So is it fair to expect a little bit of an improvement on the office same property NOI number I guess once you roll in the crude office assets given the strength, we've seen in the Toronto Vancouver on Montreal Office markets.

Rael Diamond: I think I don't have that information handy, but what we do have is some vacancy in suburban Montreal, which will drag down our NOI growth next year. Overall, I think it would be pretty stable.

I think.

So I don't have any information handy, but what we do have a some vacancy in suburban Montreal, which will drag down how.

And a wide growth next year, but overall I think it would be pretty stable.

Okay. That's helpful and then sticking with the same property NOI you guys to disclose it by geography anymore, but could you give us a general sense of what the distribution has been like in the different markets with it fairly stable across all the markets, where they were on stronger or weaker performance in that mix.

Jenny Ma: Okay, that's helpful. Sticking with the same property NOI, you guys don't disclose it by geography anymore, but could you give us a general sense of what the distribution has been like, in the different markets? Was it fairly stable across all the markets or are there, you know, stronger or weaker performers in that mix?

Mario Barrafato: Obviously retail has been performing well, and that's a function of the strength of the step rents. Otherwise we haven't had a lot of turnover. Retail I say is pretty consistent. No, the markets are strong right now. Alberta industrial maybe is seeing a bit of pressure there, but I don't have the exact numbers by geography, but as we talked about kind of philosophically, you know, the office markets in the big cities are doing fine. In the suburbs, you'll probably see less growth there. Same thing with industrial, strong in Toronto, strong in Vancouver, but in Alberta, a bit of pressure. The retail, because we're locked in, it's pretty consistent.

So obviously, a retails in performing well and that's a function of.

Of the strength of the effect of the step rents. The so so otherwise we haven't had a lot of a lot of turnover for retail they say what is pretty consistent.

The market's a strong right now, Alberta, industrial maybe you're seeing a bit of pressure there, but I don't have the exact numbers by geography, but but as we've talked about kind of philosophically.

You know the office markets from the Big cities are doing fine in the suburbs, you'll probably see less growth there sitting with industrial strong in Toronto stronger than Hoover.

You know in Alberta bit of pressure and the retail because we're locked in it's pretty consistent but again as we talked about power centers part of that would probably have lower growth.

Mario Barrafato: Again, as we talked about, maybe power centers would probably have lower growth.

Jenny Ma: Okay. My last question is, one of your peers who's done transactions with Oak Street announced a special distribution. Is that something that Choice will have to look into given your transaction?

Okay.

Then my last question is one of your peers, who is done transactions without Oak Street announced a special distribution is that something that died choice all have to I look into given your transaction.

Hey, good yeah, we're in the process right now of assessing our level of taxable income so.

Mario Barrafato: Hey, Jenny. You know, we're in the process right now of assessing our level of taxable income. We'll finish that process, and if we're at that level, we'll announce it at that time.

We will finish that process and if we if we're at that level, we'll announce it.

At that time.

Jenny Ma: Great. Thanks. I'll turn it back.

Great. Thanks, I'll turn it back.

Okay, and if you would like to asked a question over the phone lines. Please press Star then one on your telephone keypad. Your next question comes from line of Sam.

Operator 2: Again, if you would like to ask a question over the phone lines, please press star then one on your telephone keypad. Your next question comes from the line of Sam Damiani of TD Securities. Your line is open.

Operator: Again, if you would like to ask a question over the phone lines, please press star then one on your telephone keypad. Your next question comes from the line of Sam Damiani of TD Securities. Your line is open.

Jamie any of TD Securities. Your line is open.

Sam Damiani: Thank you and good morning. I just wanted to get into Alberta a little more. You know, the CREIT portfolio did have exposure in all asset classes there. Just wondering how, you know, how are things performing on the retail and industrial sides, I guess specifically? We've talked about office already.

Thank you and good morning, I, just wanted to get it to Alberta little more.

The creep portfolio did have exposure at all asset classes. There just wondering how how is how are things performing other retail industrial sites I guess specifically.

Talk to put off sorry.

Rael Diamond: Yes. On the retail side, Sam, it's performing very well. It's neighborhood centers. We haven't really seen much pressure. On the industrial side, it's really a function of the different product types, and we're seeing pressure as we commented on the call earlier. We're seeing pressure on the small bay. For example, in Calgary, we have. You know, we have about just under 1 million feet, I think it was 830,000 feet of GLA across 18 properties in the small bay product. We're seeing both an increase in vacancy and some roll down in rents. That's where we're seeing the biggest pressure.

Yes, so on the retail thoughts and it's performing very well it's neighborhood centers as well.

We haven't really seen.

Much pressure on the industrial side, it's really a function of the different product tots and we seeing pressure as we commented on the call early we see pressure on the small bay. So for example in Calgary. We have you know we have about just on a million feet. I think was 830000 feet of GL a across 18 proper.

Ladies and the small bay product and we seeing you know we seeing both an increase in in vacancy and some roll down in rents. So that's where we've seen the biggest pressure.

Rael Diamond: Edmonton, as we've been commenting, for the past few quarters, you know, is a softer market, you know, in the large bay product.

And then Edmonton has remained calm and team.

For the past few quarters.

As a softer markets.

On the large bay product.

Sam Damiani: Is your development there likely to, you know, get some traction any, you know, in the next quarter or so, or no?

And your development, they're likely to.

It gets traction Lenny.

Next quarter, so or no.

Rael Diamond: We have two. We have one in Calgary and one in Edmonton. Edmonton, the leasing's been slow. Calgary, we are currently speaking to a tenant, and we hopefully have something to announce next quarter.

So we have two we have one in Calgary wanting to Edmonson Edmondson the leasing has been slow Calgary, we currently speaking to.

Tenant anyway, hopefully you have something to announce next quarter.

And just wanted to look up the fair value gains on the portfolio I know theres been some puts and takes year to date, but.

Sam Damiani: Just when we look at the fair value gains on the portfolio, I know there's been some puts and takes year to date, but you know, is there anything holding back sort of the ability to record some fair value gains in the current year or maybe even early next year, just given the drop in interest rates and you know, the corporate environment today.

Is there anything holding holding the holding back sort of or the ability to to record suffer if all the gains or if the current year or maybe even early next year gets just given the drop it in interest rates are you able to carper department today.

Right right now some I think like Everything's thing kind of has stabilized.

Mario Barrafato: Yeah, you know, right now, Sam, I think like everything's been kind of has stabilized. We always just watch for retail and that's, you know, things, you know, go out of favor and sometimes there's lack of a market. We kind of look out for that. Right now I think the office market has been stable. We're starting to see some comps on industrial go up. We're watching that and waiting till it's a regular kind of occurrence. Really we're just watching the retail. No, we expect things kind of right now, except on an individual basis as we get, you know, our appraisals done. We're not looking for any blanket kind of changes or concerns to the valuations right now.

We always just flush for retail and that's the other things you know going to favor and sometimes is likely markets. So so we kind of look out for that so right now I think the office market has been stable.

Awaiting were essentially some some constant industrial go off.

So we're watching that and we feel it's a regular kind of occurrence.

But really we're just watching the retail but no we expect things kind of right now except in an internal individual basis as we get.

Our appraisals done we're not looking for any blanket kind of changes or concerns to that to the valuations right now.

Sam Damiani: All right. Just maybe on industrial, you did, you know, a buyout in Milton, which looked like it was priced at around CAD 140 or 145 sq ft. Is that correct? Was the valuation there a negotiation or was it somehow a fixed price agreement based on the JV agreement?

Right and just maybe on industrial you you to do the buyout built it up.

It looks like it was priced at around 140, 145, a square foot Oh, because that is that correct.

And was the valuation there I think association or was it somehow Oh fix price a agreement based off the JV agreement.

Yes, so the purchase was a negotiation and also remember we actually have some extra density from the one buildings on James not Parkway.

Rael Diamond: Yeah. The purchase was a negotiation. Also remember, we actually have some extra density on the one building. On James Snow Parkway, I don't remember the exact number. It's about 200,000 feet of excess density. That we essentially paid land value. You'd have to deduct that from the price per foot. Slightly on a price per foot lower than what you just quoted.

I don't remember the exact numbers about 200000 feet of excess density. So that we says you paid land value so you'd have to deduct that from the prospect for it so slightly on a prosper foot lower than what you just put it.

Okay. Thank you very much.

Sam Damiani: Okay. Thank you very much.

Yes.

Operator 2: There are no further questions over the telephone lines at this time. I turn the call back over to the presenters.

Operator: There are no further questions over the telephone lines at this time. I turn the call back over to the presenters.

There are no further questions over the telephone lines at this time I turn the call back over to the presenters.

Rael Diamond: Thank you very much for joining our call today. Hopefully, everyone, has a good rest of the week. Bye.

Thank you very much for joining our call today hopefully everyone has a good rest of the week.

Hi.

Operator 2: This concludes today's conference call. You may now disconnect.

Operator: This concludes today's conference call. You may now disconnect.

This concludes today's conference call you may now disconnect.

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