Q4 2019 Earnings Call

February 6, 2020

Please standby we're about to begin.

Good day and welcome to the Allied properties read for quarter and you're in financial results 29 keen earnings.

Operator: Good day and welcome to the Allied Properties REIT Q4 and Year-End Financial Results 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Michael Emory, President and Chief Executive Officer. Please go ahead, Mr. Emory.

Conference call today's conference is being recorded at this time when they turn the conference over to Mr., Michael Emery, President and Chief Executive Officer. Please go ahead Mr. memory.

Thank you Derek good morning, and welcome to our conference call, Tom Cecilia and you are here with me to discuss Allieds.

Michael Emory: Thank you, Derek. Good morning and welcome to our conference call. Tom, Cecilia, and Hugh are here with me to discuss Allied's results for Q4 and for the year ended December 31, 2019. We may, in the course of this conference call, make forward-looking statements about future events or future performance. These statements, by their nature, are subject to risks and uncertainties that may cause actual events or results to differ materially, including those risks described under the heading Risks and Uncertainties in our most recently filed annual information form. Material assumptions that underpin any forward-looking statements we make include those assumptions described under Forward-Looking Disclaimer in our most recent annual report. As you know, we pursue sustained profitability for the benefit of our unit holders by operating, acquiring, and developing distinctive urban workspace and network-dense urban data centers in Canada's major cities.

For the fourth quarter and for the year ended December 31st 2019, we may in the course of this conference call make forward looking statements about future events or future performance. These statements by their nature are subject to risks and uncertainties that.

Cause actual events or results to differ materially, including those risks described under the heading risks and uncertainties in our most recently filed annual information form.

Material assumptions that underpin any forward looking statements we make.

Include those assumptions described under forward looking disclaimer in our most recent annual report.

As you know, we pursue sustained profitability for the benefit of our unitholders.

Operating acquiring.

Developing distinctive urban workspace and network dense urban data centers in Canada as major cities.

Michael Emory: In 2019, we pursued our strategy, pardon me, with excellent short-term and long-term results. Most notably, we allocated CAD 870 million to accretive acquisitions and another CAD 425 million to development and value add activity. In the face of this extraordinary level of capital allocation, we maintained strong balance sheet metrics by raising more capital at lower cost than any other year in our history. Cecilia will elaborate on our financial results. Tom will follow with an overview of operations. Hugh will provide a development update. I'll finish with a few words on our near and longer-term outlook. Now over to Cecilia.

In 2019, we pursued our strategy our strategy pardon me with excellent short term and long term results.

Notably, we allocated to $870 million to accretive acquisitions, and another $425 million to development and value add activity.

In the face of this extraordinary level of capital allocation, we maintained its strong.

Balance sheet metrics by raising more capital at lower cost than any other year in our history.

The Celia will elaborate on our financial results, Tom will follow with an overview of operations Hugh will provide a development.

Update.

And I'll finish with a few words on our near and longer term outlook. So now over to Cecilia good morning.

Cecilia Williams: Good morning. I'll summarize our financial results, our balance sheet, and a summary of our outlook for 2020. This quarter was one of our strongest ever. We achieved CAD 0.58 of FFO per unit, even with CAD 810,000 of non-recurring condo marketing costs at King Toronto included in the calculation. Our annualized quarterly EBITDA reached CAD 333 million for the first time ever. Driven by rent growth in Toronto, Montreal, and the UDC portfolio, our same-asset NOI in Q4 was up 4% from the comparable quarter last year, driving 8% growth in our normalized AFFO per unit. For the year, we came in on the higher end of what we expected, with same-asset NOI growth of 5.5%. Moving on to our balance sheet and our capital program.

I'll summarize our financial results, our balance sheet and a summary of our outlook for 2020.

This quarter was one of our strongest ever.

We achieved 58 cents of I feel pretty you had even with 810000 of nonrecurring condo marketing costs at King Toronto later in the calculation.

Our annualized quarterly EBITDA reached $333 million for the first time ever.

Driven by rent growth in Toronto, Montreal, and the beauty.

The portfolio, our same master I know why in the fourth quarter was up 4% from the comparable quarter last year driving 8% growth in our normalized AFFO per unit for the year. We came in on the higher end of what we expected would stay master I know why growth of 5.5%.

Moving onto our balance sheet.

Our capital program.

Cecilia Williams: Driven largely by the strength in our core markets, our NAV per unit at the end of 2019 was up 10.5% from the end of 2018. At year-end, net debt to EBITDA was 6.3 times. Debt represented 26% of our fair value. Both of these metrics are in our targeted range. Interest coverage was 3.3 times, and making progress towards our goal of 4 times. Our ratio of unsecured to secured debt was 3.8 times at year-end, with secured debt representing 21% of our total debt. At year-end, our pool of unencumbered assets was CAD 5.5 billion and represented 72% of our asset base.

Driven largely by the strength in our core markets are NPV per unit at the end of 2019 was up 10.5% from the end of 2018.

At year end net debt to EBITDA was 6.3 times debt represented 26% of our fair value. Both of these metrics are.

In our targeted range interest coverage was 3.3 times and making progress towards our goal for time.

Our ratio of unsecured and secured debt was 3.8 times it you're right with unsecured debt, representing 21% of our total debt.

At year end, sorry, pardon me, what the secured debt.

Representing 21% of our total debt.

At year end, our pool of unencumbered assets was five and a half billion and represented 72% of our asset base.

Cecilia Williams: After closing acquisitions in January 2020, our pool now sits at CAD 5.8 billion and represents 73% of our asset base. We intend to continue prepaying or repaying mortgages as they come due, with the goal that the majority of our asset base will be unencumbered. We believe this will give us the strongest and most flexible balance sheet from both a defensive and offensive perspective in terms of responding to changing market conditions, acting on acquisition opportunities, and financing our development activity. In Q4, Moody's upgraded us to Baa2 with a stable outlook, and DBRS upgraded us to BBB mid with a positive trend, which we're pleased with. Looking forward to 2020, we took the same careful approach in formulating our outlook as we did for 2019.

After closing acquisitions in January 2020, our pool now sits at 5.8 billion represents 73% of our asset base.

We intend to continue prepaying or repaying mortgages as they come to with the goal that the majority of our off that they will be unencumbered.

We believe this will give us the strongest and most flexible balance sheet from both a defensive and offensive perspective in terms of responding to changing market conditions.

Acting like.

Acquisition opportunities and financing our development activity.

In Q4, Moodys upgraded us to be that relate to with a stable outlook and DBRS upgraded asked to triple B med with a positive trend which were pleased with.

Looking forward to 2020, we took the same.

We'll approach in formulating our outlook as we did for 29 team.

Cecilia Williams: Assuming we use our unsecured operating line to finance all of our activities in the year, and assuming no acquisitions in 2020, as well as excluding condo marketing costs, we expect mid-single-digit growth in FFO per unit, AFFO per unit, as well as same-asset NOI. We're starting the year with our portfolio being 95% leased, so there will be some contribution from occupancy take up. The other drivers will be the contribution from CAD 870 million of acquisitions completed in 2019, the development completion of 425 Viger and TELUS Sky, as well as organic growth primarily in our Toronto and Montreal portfolios. These are tempered by continued softness expected in our Calgary portfolio and vacancy expected in our Edmonton asset mid-year. We expect both interest expense and G&A in 2020 to be at roughly the same level as 2019.

So I mean, we use our unsecured operating lines just fine as all of our activities in the year and assuming no acquisitions in 2020 as well as excluding condo marketing call. We expect mid single digit growth in AFFO per unit.

That's helpful per unit as well as same after an ally.

We're starting the year with our portfolio being 95% Lee So there will be some contribution from occupancy take up.

The other drivers will be the contribution from the 870 million of acquisitions completed in 29 team the development completion of sports.

25, VJ Entellus Guy.

Well, it's organic growth primarily in our Toronto in Montreal portfolio.

These are tempered by continued softness expected in our Calgary portfolio and vacancy expected in a Edmonton asset midyear.

We expect both interest expense and G and H and 2020.

To be at roughly the same level is 29 team.

Our approach is consistent with the approach we've taken over the last few years in formulating our outlook. So we're confident in our ability to see the puts and takes 40 year.

Cecilia Williams: Our approach is consistent with the approach we've taken over the last few years in formulating our outlook, so we're confident in our ability to see the puts and takes for the year. I will now pass the call to Tom for a discussion of our leasing and operating activities.

I will now pass the call Tom for a discussion of our leasing at operating activities.

Thank you so.

Tom: Thank you, Cecilia. The leasing environment remains strong with demand in all of our markets, and we leased 2.4 million sq ft in 2019. We are holding at a very healthy portfolio-wide occupancy level of 94.5%, and no surprise, we continue to grow Toronto as well as in Montreal and Vancouver. Moving from east to west, I'll provide a brief update on our leasing activity in our major markets. Beginning in Montreal, we ended the year at 93.2% leased, slipping slightly due to acquisitions, but we are determined to achieve 95% or better by year-end 2020. With Le Nordelec, Cité Multimédia, and our properties on the Gaspé being highly leased, and now with our redevelopment project at 425 Viger 95% leased. Our focus in the coming months has three priorities.

Tom Burns: Thank you, Cecilia. The leasing environment remains strong with demand in all of our markets, and we leased 2.4 million sq ft in 2019. We are holding at a very healthy portfolio-wide occupancy level of 94.5%, and no surprise, we continue to grow Toronto as well as in Montreal and Vancouver. Moving from east to west, I'll provide a brief update on our leasing activity in our major markets. Beginning in Montreal, we ended the year at 93.2% leased, slipping slightly due to acquisitions, but we are determined to achieve 95% or better by year-end 2020. With Le Nordelec, Cité Multimédia, and our properties on the Gaspé being highly leased, and now with our redevelopment project at 425 Viger 95% leased. Our focus in the coming months has three priorities.

Sure.

Leasing environment remains strong with demand in all of our markets and we leased 2.4 million square feet in 2019.

We're holding at a very healthy portfolio wide occupancy level of 94% and no surprise.

Continued to grow Toronto as well as.

In Montreal and Vancouver.

Moving from east to West they'll provide a brief update on our leasing activity in a major markets.

Beginning in Montreal, we ended the year at 93.2% leased.

Slipping slightly due to acquisitions, but we're determined to achieved 95% or better by.

Iran 2020.

With the North Atlantic City multimedia and our properties on the gets paid being highly leased.

And now with our redevelopment project for 25, CJ, 95% leased.

Our focus in the coming months has three priorities.

First to continue to push the lease up smaller.

Tom: First, to continue to push the lease-up of the smaller spaces throughout the portfolio. Second, to proactively address leases expiring prior to December 31, 2022. Third, to finalize the plans for the repositioning of 700 DLG. Moving to Toronto, we are very highly leased in our existing portfolio, and in this market, we are able to quickly fill any space that comes back to us, usually with significant rental uplifts. The leasing program at The Well, our JV with RioCan, continues to go nicely, with 84% of the office space pre-leased. Some excellent high-value small floor plates are now available to the market. In Calgary, we continue to maintain a very respectable 89.3% leased in this market. TELUS Sky, our development project with TELUS and Westbank, we are 64% leased.

Tom Burns: First, to continue to push the lease-up of the smaller spaces throughout the portfolio. Second, to proactively address leases expiring prior to December 31, 2022. Third, to finalize the plans for the repositioning of 700 DLG. Moving to Toronto, we are very highly leased in our existing portfolio, and in this market, we are able to quickly fill any space that comes back to us, usually with significant rental uplifts. The leasing program at The Well, our JV with RioCan, continues to go nicely, with 84% of the office space pre-leased. Some excellent high-value small floor plates are now available to the market. In Calgary, we continue to maintain a very respectable 89.3% leased in this market. TELUS Sky, our development project with TELUS and Westbank, we are 64% leased.

Other spaces throughout the portfolio.

Second to proactively address leases expiring prior to December 31st 2022.

And third to finalize the plans for the repositioning of 700 deal G.

Moving to Toronto, we're very highly leased in our existing portfolio and.

In this market, we were able to quickly fill any space the comes back to us usually with significant let loveless.

The leasing program at the well our JV with real can continues to go nicely with 84% of the office space Preleased.

Excellent Hearts, all you small floor plates are available to the mark or not was able to the market.

In Calgary, we continue to maintain a very respectable 89.3% leased in this market.

Pellets Sky development project with tell us are much bank your 64% leased.

Three mall suites will be completed in the next few weeks and we will be they will be available to show.

Tom: Three model suites will be completed in the next few weeks, and they will be available to show prospective tenants. We expect that the bulk of the remaining space at TELUS Sky will be leased to smaller space users. In Vancouver, our portfolio is highly leased, and there's nothing material to report. Lastly, our urban data center space. We are in active negotiations with two users to backfill vacancy at 151 Front. At 250 Front, we have reached agreement to expand an existing tenant by 9,000 sq ft and are now completing that paperwork. We also continue to work with two prospects for 16,000 sq ft. If we complete these transactions, we will be 82% leased at 250 Front, 99% leased at 151 Front, and 93% leased in the UDC portfolio.

Tom Burns: Three model suites will be completed in the next few weeks, and they will be available to show prospective tenants. We expect that the bulk of the remaining space at TELUS Sky will be leased to smaller space users. In Vancouver, our portfolio is highly leased, and there's nothing material to report. Lastly, our urban data center space. We are in active negotiations with two users to backfill vacancy at 151 Front. At 250 Front, we have reached agreement to expand an existing tenant by 9,000 sq ft and are now completing that paperwork. We also continue to work with two prospects for 16,000 sq ft. If we complete these transactions, we will be 82% leased at 250 Front, 99% leased at 151 Front, and 93% leased in the UDC portfolio.

Prospective tenants, we expect that the bulk of the remaining space to tell us Guy who will be leased to smaller speaks users.

In Vancouver or portfolio is highly leased and there's nothing material to report.

Lastly, our urban data center space.

We were active negotiations with two users to backfill.

They can see a 151 front.

The 250 front, we have reached agreement to expand in existing tenant by 9000 square feet and are now completing that paperwork.

We also continue to work with two prospects for 16000 square feet.

We complete these transactions, we will be 82% leased at.

250, 99% leased the 151, 93% leased in the U. DC portfolio.

Tom: I will now turn the call over to Hugh for a discussion on our development activities.

Tom Burns: I will now turn the call over to Hugh for a discussion on our development activities.

I'll now turn the call over to queue for a discussion on a development activities.

Hugh: Thanks, Tom. In this quarter, we continue to make progress on both our active development projects as well as on our future development pipeline. I'll first provide an overview of our construction progress and then provide an overview of approvals. Projects under development. In Montreal, we have completed our base building work at 425 Viger. The tenant has taken possession and has commenced their fit out work. Our team has begun the initial prep work for the transformation of 700 de la Gauchetière. We intend on establishing a fulsome vision for the property in Q2, with construction beginning in earnest in early spring. In Central Canada, we continue to make progress on our JV projects with Westbank, Perimeter, and RioCan. Construction at The Well continues to progress on schedule.

Hugh Clark: Thanks, Tom. In this quarter, we continue to make progress on both our active development projects as well as on our future development pipeline. I'll first provide an overview of our construction progress and then provide an overview of approvals. Projects under development. In Montreal, we have completed our base building work at 425 Viger. The tenant has taken possession and has commenced their fit out work. Our team has begun the initial prep work for the transformation of 700 de la Gauchetière. We intend on establishing a fulsome vision for the property in Q2, with construction beginning in earnest in early spring. In Central Canada, we continue to make progress on our JV projects with Westbank, Perimeter, and RioCan. Construction at The Well continues to progress on schedule.

Thanks, Tom in this quarter, we continue to make progress on both our active development projects as well as on our future development pipeline.

I'll first provide an overview of our construction progress I'm not provided an overview of approvals.

Projects under development.

In Montreal, we have completed our base building work for 25 VJ. The tenant has taken possession and has commenced their fit up work.

Our team has begun the initial prep work for the.

One of 700, DRG, we intend on establishing a fulsome vision for the proxy in Q2 with construction begins in earnest in early spring.

And Central Canada, we continue to make progress on our JV projects with West Bank parameter and re okay.

Construction at the well continues to progress on schedule.

Hello.

Hugh: At the end of the quarter, we had reached the 14th floor of the office tower and are progressing above grade on a number of the other buildings. This project remains on track to meet our lease obligations for delivery of the base building. Construction has commenced at King Toronto with an anticipated completion of the commercial component in late 2023. In Western Canada, despite some delays in construction of TELUS Sky, we anticipate achieving occupancy on the commercial component of the building in late February. Intensification approvals in Toronto. City Council has approved both our Adelaide and Spadina project, as well as our JV project with Great Gulf at Adelaide and Brant. When completed, these two projects will add approximately 300,000 sq ft of workspace and 40,000 sq ft of living space.

Hugh Clark: At the end of the quarter, we had reached the 14th floor of the office tower and are progressing above grade on a number of the other buildings. This project remains on track to meet our lease obligations for delivery of the base building. Construction has commenced at King Toronto with an anticipated completion of the commercial component in late 2023. In Western Canada, despite some delays in construction of TELUS Sky, we anticipate achieving occupancy on the commercial component of the building in late February. Intensification approvals in Toronto. City Council has approved both our Adelaide and Spadina project, as well as our JV project with Great Gulf at Adelaide and Brant. When completed, these two projects will add approximately 300,000 sq ft of workspace and 40,000 sq ft of living space.

We ended the quarter, we had reached the 14th four of the office tower and are progressing above grade our number of the other buildings. This project remains on track to meet our lease obligations for delivery of the base building.

Construction has commenced king Toronto with an anticipated completion on the commercial.

The commercial component in late 2023.

In Western Canada, Despite some delays in construction of tallest sky, we anticipate achieving occupancy on the commercial component of the building in late February.

Intensification approvals in Toronto City Council has approved both are.

Latest but on a project as well as our JV project with great color satellite and Brad One completed these two projects will add approximately 300000 square feet of workspace and 40000 square feet of living space.

Hugh: Both projects will be launched in late Q2 to early Q3. I will now turn the call back to Michael.

Hugh Clark: Both projects will be launched in late Q2 to early Q3. I will now turn the call back to Michael.

Both projects will be launch in late Q2 to let early Q3.

I'll now turn the call back to Michael.

Michael Emory: Thank you. Our performance in 2019 was at or above the high end of our internal forecast. Our internal forecast for 2020 contemplates equivalent results. I continue to have deep confidence in our outlook beyond 2020 for two main reasons. One is our ability to serve knowledge-based organizations successfully and on an ever larger scale. The other is our ability to allocate very large amount of capital while adhering to a proven investment and development strategy. I believe the latter, our ability to allocate large amounts of capital with strategic coherence and discipline, will underpin our positive outlook for years to come. I also believe the ever-evolving Allied team will underpin our positive outlook for years to come. Building a strong, deep, and well-composed team is critical to the execution of any strategy.

Thanks, you our performance in 2019 was at or above the high end of our internal forecast.

Our internal forecast for Twentytwenty contemplates equivalent results.

I continue to have deep confidence in our.

Our outlook beyond Twentytwenty for two main reasons.

One is our ability to serve knowledge based organizations successfully and on an ever larger scale.

And the other is our ability to allocate very large amount of capital.

While adhering to.

You are proven investment and development strategy.

I believe the latter.

Our ability to allocate large amounts of capital with strategic coherence and discipline.

I will underpin our positive outlook for years to calm.

I also believe.

The ever evolving Allied team will underpin our positive outlook for years to calm.

Building, a strong b and well composed team is critical to the execution of any strategy.

Michael Emory: In my view, Allied has made consistent progress in this regard over the past decade and will continue to do so moving forward. In recent years, we focused intently on interdepartmental and interregional coordination and accountability with demonstrable and encouraging results. Not only is the Allied team stronger, deeper, better composed, and better organized than ever before, it is fully unified around Allied's vision and mission, about which I've spoken at some length recently. I won't repeat myself here other than to reiterate that Allied's vision and mission statements are the aspirational context within which we, as a management team, pursue sustained profitability for the benefit of our unitholders. This has been an uncharacteristically short management presentation on our part, but we took the time to write a short letter rather than a long one.

In my view Allied has made can.

System progress in this regard over the past decade, and we'll continue to do so moving forward.

In recent years, we focused intently on inter departmental and inter regional coordination and accountability.

With demonstrably oil.

And encouraging results.

Not only is the allied team stronger deeper better composed and better organized than ever before it is fully unified around Allieds vision and mission.

About which I've spoken at some length.

Recently.

I won't repeat myself here other than to reiterate that Allieds vision and mission statements are the ash operational contacts within which we as a management team pursue sustained profitability.

For the benefit of our.

Holders.

This has been uncharacteristically short.

Management presentation on our part.

So.

The time to write a short rather letter rather than a long one I hope it's been a useful and comprehensive update for you and we now.

Michael Emory: I hope it's been a useful and comprehensive update for you, and we'd now be pleased to answer any questions that you may have. Derek, back to you.

We'll be pleased to answer any questions that you may have.

Rick back to you.

Operator 3: Thank you, sir. Ladies and gentlemen, if you'd like to ask a question at this time, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to speak for a question at this time. We'll take our first question from Mike Markidis with Desjardins. Please go ahead.

Operator: Thank you, sir. Ladies and gentlemen, if you'd like to ask a question at this time, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to speak for a question at this time. We'll take our first question from Mike Markidis with Desjardins. Please go ahead.

Thank you, Sir and ladies and gentlemen, if you'd like to ask a question at this time. Please signaled by pressing star one on your telephone keypad and if you're using a speakerphone. Please make sure mute function has turned off.

Two layers signal to reach our equipment.

One thing that star one this for a question at this time.

Yeah.

Well take our first question from Mike market is with day Chardan. Please go ahead.

Good morning, everybody on the.

Michael Markidis: Good morning, everybody. On the enhanced disclosure on the UDC and the ancillary revenue, thank you. That was appreciated. I guess CAD 4.3 million of ancillary in 2019, 8.5% of the total for that segment. Are you able to comment on how that might compare to 2018?

Mike Markidis: Good morning, everybody. On the enhanced disclosure on the UDC and the ancillary revenue, thank you. That was appreciated. I guess CAD 4.3 million of ancillary in 2019, 8.5% of the total for that segment. Are you able to comment on how that might compare to 2018?

The enhanced disclosure on the you do you see an ancillary revenue thinking it was.

Appreciate it I guess 4.3 million of ancillary and 2019.

For center the total for that segment.

Are you able to comment on how that might compare to 2018.

No.

Michael Emory: No.

Okay.

Michael Markidis: Was there a material ramp through the quarters in 2019? Was it just a relatively stable amount?

How much was there a material ramp through the quarters and.

Mike Markidis: Was there a material ramp through the quarters in 2019? Was it just a relatively stable amount?

Thank you.

What was just a relatively stable now.

Is there was I would.

Michael Emory: There was, what I would characterize as a gradual ramp through 2019.

I would characterize as a gradual ramp through 2019.

Michael Markidis: Okay. Is that all attributable to 250 Front, or is there any ancillary revenue coming from 151?

Mike Markidis: Okay. Is that all attributable to 250 Front, or is there any ancillary revenue coming from 151?

Okay and is that all attributable to 250 front or is there any ancillary revenue coming from 1.1.

Actually its attributable to all.

Michael Emory: Actually, it's attributable to all three properties, 151 Front, 250 Front, and 905 King.

All three properties 151 front to 50 front and I know five king.

Michael Markidis: Okay, gotcha. I guess the potential for the cross connects at 151 Front, that wouldn't be reflected in that figure, would it?

Mike Markidis: Okay, gotcha. I guess the potential for the cross connects at 151 Front, that wouldn't be reflected in that figure, would it?

Okay, Gotcha, and I guess the potential for the cross connects or 151 front that wouldn't be reflected in that figure would it.

No.

Michael Emory: No. Only actual ancillary rental revenue earned per period would be reflected in those numbers.

Only actual and ciliary rental revenue.

Ah earned period would be reflected.

No problem, Okay, and then I guess in your outlook of same property NOI.

Michael Markidis: Okay. I guess in your outlook of same-property NOI coming in the mid-single digits, is growth in that ancillary base, a meaningful number in that outlook?

Mike Markidis: Okay. I guess in your outlook of same-property NOI coming in the mid-single digits, is growth in that ancillary base, a meaningful number in that outlook?

Coming in in the mid single digits, because theres a growth in that sort of rebase a meaningful number.

[music].

Michael Emory: It actually is. However, the same asset NOI growth from UDCs in 2020 will be muted because of the turnover vacancy at 151 Front. Even though we do expect the growth in ancillary rental revenue to continue to ramp up gradually, it will be muted by the turnover vacancy at 151 Front in 2020. We don't expect that turnover vacancy to mute the impact in 2021 and beyond, but certainly it will in 2020.

It's actually is how ever.

The same asset and Hawaii growth from new Dcs in Twentytwenty will be muted because of the turnover vacancy at 151 product.

So even though we do expect the growth in and still Uri rental revenue to continue to ramp up.

Gradually get will be muted by the turnover vacancy at 151 front in Twentytwenty.

We don't expect expect that turnover vacancy to mute.

The impact in 2021 and beyond but certainly willing twentytwenty.

Michael Markidis: Got it. Okay, that's helpful. Thanks very much. Cecilia, just looking at your debt ladder here, and I think you had prepaid a good amount or pretty much all of your 2021 mortgages. If you look to 2022, you've got a fairly significant balance of mortgages and an unsecured that are probably 100 basis points, give or take, higher than what you could do in the unsecured market. What would be the defeasance payments on those just given where bond rates are today? Is that something we could expect to occur in a relatively quick manner, or is the defeasance just too prohibitive at this juncture?

Mike Markidis: Got it. Okay, that's helpful. Thanks very much. Cecilia, just looking at your debt ladder here, and I think you had prepaid a good amount or pretty much all of your 2021 mortgages. If you look to 2022, you've got a fairly significant balance of mortgages and an unsecured that are probably 100 basis points, give or take, higher than what you could do in the unsecured market. What would be the defeasance payments on those just given where bond rates are today? Is that something we could expect to occur in a relatively quick manner, or is the defeasance just too prohibitive at this juncture?

Got it okay.

Okay. That's helpful. Thanks, very much just feeling I just I'm looking at your desk bladder here and I think it prepaid a good amount or pretty much all of your 2021 mortgages.

If you look to 2022, you've got a fairly significant balance of mortgages and to an unsecured that.

Probably hundred basis points.

Give or take higher than what you could do in the unsecured market.

It would be the defeasance payments on those just give more bond rates are today is that is that something we could expect from a relatively to occur in a relatively quick manner or is that defeasance just to frame, but at this juncture.

Cecilia Williams: You mean the penalty on the Series B coming in 2022? That one.

You mean the penalty on the series.

D and 20.2 that well I'm just looking at I'm, just looking at everything actually say because you're going on mortgages.

Michael Markidis: Well, I'm just looking at everything actually. Because you've got your mortgages.

Mike Markidis: Well, I'm just looking at everything actually. Because you've got your mortgages.

So I mean.

Cecilia Williams: I mean, we've been analyzing this over the last few weeks, the team has been. The prepayment penalty on the Series B at this point would be, you know, I think too high for us to consider prepaying at this point.

Analyzing this over the last few weeks the team has done and the prepayment penalty on a series B at this point would be.

You know I think too.

Hi for us to consider prepaying at this point Uh huh.

Michael Markidis: Okay.

Mike Markidis: Okay.

Yeah.

Cecilia Williams: Yeah.

Michael Markidis: the mortgages, is that?

And the mortgages.

Mike Markidis: the mortgages, is that?

Cecilia Williams: Same with the mortgages for that matter in that period, yeah. Else we would, I mean, we would've taken advantage of that last year when we did the other mortgages. It just didn't make sense from a prepayment penalty and the net savings, the annual net savings.

And with the mortgages for that matter in that period or else, we were running we would've badger that.

Last year alone.

The other mortgages, but it just doesn't make sense and I'm pretty pan out.

Dan and net saving the annual net savings.

Okay great.

Michael Markidis: Okay, great. You know what? I have a couple more, but I'll turn it back and just get back in the queue. Thank you.

Mike Markidis: Okay, great. You know what? I have a couple more, but I'll turn it back and just get back in the queue. Thank you.

I have a couple more but I'll turn it back in just about going to keep thank you.

Operator 3: Thank you. We'll next go to Mark Rothschild with Canaccord. Please go ahead.

Operator: Thank you. We'll next go to Mark Rothschild with Canaccord. Please go ahead.

Thank you we'll next go to Mark Rothschild with Canaccord. Please go ahead.

Mark Rothschild: Thanks, Dan. Good morning.

Thanks, and good morning.

Michael Emory: Good morning, Mark.

One of Mark.

Mark Rothschild: You've guided to similar growth in 2020 between same-store NOI and FFO per unit, and obviously the amount of equity raised over the past year to strengthen the balance sheet and fund development is temporarily dilutive, but also allows for NAV growth and development. Should we expect the focus to remain more on NAV growth, and that looking forward in future years as same-store NOI growth is likely to remain solid, will you be willing to continue to sacrifice FFO per unit growth just for longer term value creation? Or will the same-store NOI growth lead to stronger FFO per unit growth as you look forward into 2021?

You got it similar growth in 2020 between same store NOI enough units and obviously the amount of equity raised pathway to strengthen the balance sheet and fund development that temporarily dilutive, but also allows for any be growth and development should we expect the focused on making it more now to be growth and that's looking forward in future years that same store NOI growth is.

Likely to remain at solid will you be willing to sacrifice continue to sacrifice hope unit growth just for longer term value creation or will the same show I go to lead to stronger I Hope you had growth as we look forward into 2021.

Mark if I understand the question I think.

Michael Emory: Mark, if I understand the question, I think the need to sacrifice cash flow per unit growth in order to achieve the debt metrics we want is behind us. We've achieved that, and we fully plan to maintain that and to do the acquisitions and developments we have going forward on a leverage neutral basis. I do think that the need to depress, if that's the right word, or put downward pressure on our earnings per unit growth in 2020, 2021, and beyond won't be as pronounced as it was in the past. Maybe put differently, we won't be sacrificing short-term results for long-term value creation as much in 2020 and beyond as we felt it was appropriate to do in 2019, 2018, and 2017.

The need to.

Sacrifice.

Cash flow per unit growth in order to achieve the debt metrics. We want is behind US we've achieved that and we fully plants and maintain that and to do the acquisitions.

And developments, we have going forward on and leverage neutral basis. So I do think.

That they need to depress it that's the right word or put downward pressure on our earnings per unit growth.

In 2020, 2021 and beyond wont be.

As pronounced as it was in the past.

Maybe put.

Differently, we won't be sacrificing short term results.

For long term value creation as much in Twentytwenty and beyond as we felt it was appropriate to do in 2019 2018.

In 2017.

Okay. You understand thanks, maybe just one other question when I look at the cap rates that you are using for your life threatening maybe it's interesting that in every market you're in you reduce the cap rate pretty substantially over the past year, except for Toronto.

Mark Rothschild: Okay. You understand. Thanks. Let me just ask one other question. When I look at the cap rates that you're using for your IFRS NAV, it's interesting that in every market you're in, you reduced the cap rate pretty substantially over the past year except for Toronto. Would you say that maybe Toronto had already compressed more or maybe you're being more conservative in the cap rate, do you think for Toronto, or is there anything at all, any conclusions I can draw from that?

Would you say that maybe.

Rocco had a ready compressed more or maybe you being more conservative in the cap rate using for dropped or is there anything at all I can I conclusions I can draw from that.

Hi, Hi marketed for sale, yeah on the way that the way that were I guess looking at Chirano as you know Cushman does and.

Cecilia Williams: Hi. Hi, Mark. It's Cecilia. The way that we're, I guess, looking at Toronto is, you know, Cushman does a complete appraisal of our properties every quarter. They would look to, you know, the most recent trades in the market and how they would compare both from a quality of asset perspective and the nature of the asset as it relates to our assets in Toronto, which are primarily the class A or the hybrid. There's a bit of a lag in terms of reflecting lower cap rates in Toronto. We are seeing an increase in value in our Toronto assets from the market rate assumptions, and that's why we're seeing an increase on the asset side of things on the balance sheet. It's really market leasing assumptions driven.

Complete appraisal of our properties every quarter and so they would look to you know the most recent trades in the market and how they would.

Harbourside quality of asset perspective, and the nature of the asset as it relates to our assets in China, which are primarily the.

The the class on where the hybrid so there's a bit of a lag in terms of reflecting the lower.

Cap rates in Toronto, we are seeing an increase in value in our Toronto assets from the market rate assumptions and so that's why we're seeing and an increase on the asset.

The side of things on the balance sheet, it's really market market leasing assumptions, Kevin, but I think it I think it is reflecting the the cap rates in Toronto.

Cecilia Williams: I think it is reflecting the cap rates in Toronto. It's

And I think in terms of the relative market smart.

Michael Emory: I think in terms of the relative markets, cap rate compression is more pronounced in Montreal today than Toronto, only because Toronto, as you pointed out, had already compressed quite meaningfully in 2018 and 2017. Whereas I believe cap rates are continuing to compress in Montreal, as opposed to a pretty low base in Toronto. I personally can't see them going much lower in Toronto. I'd be delighted if they did, I suppose. I think they've reached a point of stability. Whereas Montreal is still being discovered, not only by international investors, but even by other Canadian investors, and there's downward pressure on cap rates. Vancouver, of course, has always been astronomically low and remains that way.

Cap rate compression is more pronounced in Montreal.

Today than Toronto.

Only because Toronto as you pointed out had already compressed quite meaningfully in two.

2018, and 2017, whereas I believe cap rates are continuing to compress in Montreal.

Opposite pretty pretty.

Load base in Toronto, I can't I personally can't see them going much lower in Toronto I'd be delighted as they did I suppose but I think they reached a.

Appointment of stability, whereas Montreal is still being discovered.

Not only by.

National investors, but even by other Canadian investors and there's downward pressure on cap rates and then Vancouver of course has always been.

Astronomically low and remains that way.

Michael Emory: It does depend on the market, but if we showed little cap rate compression in Toronto in 2019, it's because the cap rates had already compressed previously.

So it does depend on the market, but if we showed little cap rate compression in Toronto in 2019.

Michael Emory: It does depend on the market, but if we showed little cap rate compression in Toronto in 2019, it's because the cap rates had already compressed previously.

It's because the cap rates had already compressed previously.

Got it thank you so much.

Mark Rothschild: Got it. Thank you so much.

Michael Emory: No problem.

No problem.

Thank you we'll next go to Johan RG Rodriguez with Raymond James. Please go ahead.

Operator 3: Thank you. We'll next go to Johann Rodrigues with Raymond James. Please go ahead.

Operator: Thank you. We'll next go to Johann Rodrigues with Raymond James. Please go ahead.

Hi, just with respect.

Johann Rodrigues: Hi. Just with respect to the FFO and FFO growth. As recently as last quarter, the outlook for last year was low to mid-single digits. And then this year, you know, presumably a part of that was the CAD 1 billion of equity raised, you know, like Mark said, inhibited the per unit growth there. And then the outlook for this year, you've dropped to low and you expect mid-single digit growth. Would it be right to say that it was really the chief driver of you dropping to low would be that, you know, you wouldn't raise a CAD 1 billion of equity this year? Or is growth kind of accelerating if you neutralize the impact of the equity?

The F.

As recently as last quarter it.

For last year was low to mid single digits.

And then this year you know, presumably part of that was the billion dollars of equity raised.

Like Mark said inhibited the.

Per unit.

There and then the outlook for this year, you've you've dropped below and expecting mid single.

Did you grow so.

Would it be right to say that.

It was really the chief driver dropping below would be that no.

You wouldn't raised $1 billion of equity this year.

Or is grows kind of accelerating.

Neutralize the impact of the equity.

Well I think a lot of the equity raised last year is matched to new earnings from the acquisitions, we made over the course of 2019 so a.

Michael Emory: Well, I think a lot of the equity raised last year is matched to new earnings from the acquisitions we made over the course of 2019. A big portion of the equity raised in 2019 was actually raised accretively to the business. A smaller portion of the equity raised in 2019 was allocated to getting our debt metrics where we wanted them to be. We did put pressure on our earnings last year on a per unit basis in order to get our debt metrics to where we wanted them to be, but we also allocated a lot of equity to accretive acquisitions, which is why I think ultimately we're very confident in our internal forecast for 2020 in the mid-single digit range without having to go low. Acquisitions are contributing to that confidence.

Portion of the equity raised in 29.

I was actually raised accretive lead to the business and a smaller portion of the equity raised in 2019 was allocated to getting our debt metrics, where we wanted them to be.

So.

We did put pressure on our earnings.

Last year on a per unit basis in order to get our debt metrics to where we wanted them to be but we also allocated a lot of equity to accretive acquisitions, which is why I think ultimately we're very confident in.

Our internal forecast for 2020 in the mid single digit range without having to go low while acquisitions are contributing to that confidence or rent growth is contributing to that confidence.

Michael Emory: Rent growth is contributing to that confidence. A bit of occupancy gain over the course of the year is contributing to that confidence. As Cecilia said, we've become, I think, much more deliberate in identifying the potential puts and takes, in a given year. In my view, to sort of summarize what I've said and to answer your question directly, I hope, our ability to generate earnings growth is accelerating in 2020. We don't anticipate raising equity in a way that would decelerate it or put downward pressure on it in 2020. Our plan in 2020 and beyond is to raise equity on a leverage neutral basis. We do not have to raise equity in an amount sufficient to put downward pressure on our debt to EBITDA or our debt to fair value.

Bid of occupancy gain over the course of the year is contributing to that.

Confidence and that's the Celia said.

We become I think much more deliberate in that identifying the potential puts and takes.

Any given year, but in my view to sort of summarize what I've said and to answer your question directly I hope.

Our ability.

To generate earnings growth is accelerating in Twentytwenty, and we don't anticipate raising equity in a way that would be celebrated or put downward pressure on it in 2020, we are plan and 2020 and beyond this to raise equity on a leverage neutral basis, we do not have.

To raise equity.

In an amount sufficient to put downward pressure on our debt to EBITDA or our debt to fair value.

But we will certainly maintain those debt metrics and we will fund our development and acquisition accordingly on a leverage neutral basis.

Michael Emory: We will certainly maintain those debt metrics, and we will fund our development and acquisition accordingly on a leverage neutral basis.

Johann Rodrigues: Okay, great. Maybe Cecilia, the 4.3 million sq ft of potential density that you guys mentioned as part of the appraised value, how is that being valued or what is the value of that?

Okay great.

And maybe situated the 4.3 million square feet of potential density that you guys mentioned as part of the appraised value.

How does that being valued or what is the values that.

Hugh: Well, it would be reflected in our intensification table. I'm not sure what you mean, how is that being valued. It's project-by-project basis, so it might be land value in some instances or-

Well it would mean hide it would be one.

Cecilia Williams: Well, it would be reflected in our intensification table. I'm not sure what you mean, how is that being valued. It's project-by-project basis, so it might be land value in some instances or-

So I see that intensification Kamal.

I'm not sure what you mean, how is that being valued project by project basis, So it might be land values.

Some of it isn't being valued at all know exactly and some of its being valued if we have the ability.

Michael Emory: Some of it isn't being valued at all.

Hugh: No, exactly. Yeah.

Cecilia Williams: No, exactly. Yeah.

Michael Emory: some of it's being valued if we have the ability and have the commitment.

And have the.

Commitment so.

Hugh: That's right.

Cecilia Williams: That's right.

Michael Emory: In Toronto, it's 6.3 million.

So I can get sick in Toronto at six point Threemillion, how much of that is.

Michael Emory: In Toronto, it's 6.3 million.

Hugh: Correct.

Cecilia Williams: Correct.

Michael Emory: How much of that is in the pipeline?

Hi, Paul.

Hugh: In Toronto, we have 1.5 million.

We have in China, we have one and a half of them. So that one and a half is probably valued yeah less comfortable so that's what I'm, saying.

Cecilia Williams: In Toronto, we have 1.5 million.

Michael Emory: Yeah. That 1.5 is probably valued.

Hugh: Yeah, less constantly. Yeah.

Cecilia Williams: Yeah, less constantly. Yeah.

Michael Emory: That's what I'm saying.

Hugh: Yeah.

Michael Emory: Yeah.

Michael Emory: It would be valued probably on a cost per buildable foot basis. The remaining intensification potential, in accordance with IFRS, is not valued at all. It's not until-

So and it would be valued.

Michael Emory: It would be valued probably on a cost per buildable foot basis. The remaining intensification potential, in accordance with IFRS, is not valued at all. It's not until-

Probably on a cost per buildable foot basis, the remaining intensification potential.

In accordance with my FRS is not valued at all.

So it's not a skill.

Johann Rodrigues: Great.

Michael Emory: I think we have a present intention to develop and actually have no impediment to development that we can even assign a value to that intensification potential, even if the approval is in place. We have a number of approvals in place, where the buildable area is not valued in any way, shape, or form. I think the biggest approval in place that we do assign value to is Union Centre, which is about 1.13 million sq ft of space, and there we've assigned an amount of buildable-

I think we have a president attention to develop and actually I have no impediment to develop meant that.

We can even a sign of value to that intensification potential even if the approval is in place. So we have a number of improve it was in place.

Where the buildable area is not valued in any way shape or form I think the biggest approval in place that we do assigned.

Well you too is Union center, which is about 1.13 million square feet of space.

And there we've assigned to the mouth.

Cecilia Williams: Correct. Almost CAD 100.

Yeah, and that has to be quite precisely appraiser has a sign that otherwise there is no material approval.

Michael Emory: Yeah. To be quite precise, the appraiser has assigned that. Otherwise, there's no material approval to which or in relation to which value is assigned to the buildable value.

Two which were in relation to which value is assigned to the yeah go on page 41, you'll see that especially where we have zoning approval status. That's complete the appraisal fair value will reflect.

Cecilia Williams: Yeah. On page 41, you'll see that especially where we have zoning approval status that's complete, the appraisal fair value will reflect some of that. You can see that on a project-by-project basis.

So you can see though.

Thanks.

[noise], Brent so maybe a better.

Johann Rodrigues: Right. Maybe a better way to ask my question would be, what is the average dollar per square foot value being assigned to that 4.3 million sq ft?

I asked my question would be what is the average dollar per square foot value being assigned to that 4.3 million square feet.

I don't know I [laughter], there or are we assigning value to 4.3 million square feet of downsizing or whatever.

Cecilia Williams: I don't know. I'll have-

Michael Emory: Well,

Cecilia Williams: I'd have to-

Michael Emory: Are we assigning value to 4.3 million sq ft of density?

Johann Rodrigues: Whatever.

Michael Emory: I don't know where your numbers are coming from. That's why I asked the question.

I I don't know where these your numbers are coming from that's why I.

Michael Emory: I don't know where your numbers are coming from. That's why I asked the question.

Asked the question 4.8 page 39, it's as of the 8.7.

Cecilia Williams: Four point three dot seven.

Johann Rodrigues: On page 39, it says of the 8.7 million sq ft of potential incremental density, 4.3 million sq ft is being reflected and 4.4 is not.

In square feet of potential incremental density 4.3 million square feet as being reflected in 4.4 is not.

Cecilia Williams: Right. Three million of the 4.3 or whatever is detailed on page 41, which are our future intensification projects that we've already earmarked as specific projects.

Right just threemillion all of the 4.3 or whatever it is detailed on page 20.

Which RC chain classification projects that we've already year, Mark as specific projects and has committed to develop.

Michael Emory: Have committed to develop.

Cecilia Williams: We haven't started developing.

Well, we haven't started developing.

Cecilia Williams: We haven't started developing.

But we haven't signed buildable value to right Okay, yes.

Michael Emory: We have assigned buildable value to.

Cecilia Williams: Correct.

Michael Emory: Okay.

Cecilia Williams: Yes. That would be the bulk of it.

So that would need a bulk of it.

Michael Emory: Most of those are in Toronto.

And most of those are in draw.

Michael Emory: Most of those are in Toronto.

Cecilia Williams: Yes.

And my guess I mean, I guess is and I. This is now a guess just based on market knowledge the value, we decided to them would be somewhere between $60 a buildable and.

Michael Emory: My guess.

Cecilia Williams: They're all in Toronto.

Michael Emory: I mean, my guess is, this is now a guess just based on market knowledge, the value we'd assign to them would be somewhere between CAD 60 a buildable and maybe as high as CAD 80 or CAD 100 a buildable. It would be within that range. It certainly would not be the ludicrous value levels that are assigned.

Maybe as high as 80 or $100 available. So it would be within that range Im sure. It certainly would.

The the ludicrous value levels that are assigned condominium and buildable area.

Cecilia Williams: Yeah, I know.

Michael Emory: to condominium and buildable area.

Okay. Thanks, it's that.

Johann Rodrigues: Okay. Thanks. That answers my question, last part of that. I'll turn it back.

My question.

I'll turn it back.

Thank you. Our next question comes from Johnson catch Terry culture with TD.

Operator 3: Thank you. Our next question comes from Jonathan Kelcher, or Kelcher, with TD Securities.

Operator: Thank you. Our next question comes from Jonathan Kelcher, or Kelcher, with TD Securities.

These securities.

Thanks, Good morning.

Jonathan Kelcher: Thanks. Good morning.

Michael Emory: Good morning.

Good morning.

Jonathan Kelcher: Just turning back to the ancillary revenue on the UDC. At 151, is the new meet me room from the Crosslake Fibre fiber connection up and running?

Turning back to you in Saudi revenue on that you do you see a 151 is that there's a new meet me room.

From the cross like fiber connection up and running.

Yes.

Tom: Yes. Just beginning.

Tom Burns: Yes. Just beginning.

Just beginning.

Okay.

Jonathan Kelcher: Okay. Is much of that the ancillary, the annualized ancillary revenue from Q4? Has that contributed much to that?

And it is as much of the ancillary to utilize it sort of revenue from Q4 is not as that contributed much to that.

Not really.

Tom: Not really.

Tom Burns: Not really.

Okay can you guys quantified the.

Jonathan Kelcher: Okay. Can you guys quantify the revenue opportunity there?

Revenue opportunity there.

We'll have to let it bill Johnson before we can confidently provided an estimate.

Michael Emory: We'll have to let it build, Jonathan, before we can confidently provide an estimate. It has just started. The rate at which it builds will really be dependent on the take-up of the Crosslake Fibre fiber itself, and that's something we have no control over, and it's something we have no rational basis for providing an estimate on. Intuitively, I would think in the interest of redundancy, there will be fairly significant take-up, and obviously the developer of the cable is of the same view. We wouldn't be confident projecting that forward until we have either half a year or a year of actual results, because you know, these things don't build rapidly, as you know. When they start to gain momentum, they can become very significant.

It is just started.

The rate at which it builds will will.

Really be dependent on the take up of the crops like fiber itself and that's something we have no control over and it's something we have no rational basis for.

Providing an estimate on intuitively I would think in the interest of redundancy there will be fairly.

It can take up and obviously the developer the cable.

He is up the same view.

But we wouldn't be confident projecting that forward until we have either half a year year.

Actual results because you know these things don't build rapidly.

As you know, but when they start to gain momentum they can become very significant but you know until that actually starts to happen, we're very low to make any kind of projection.

Michael Emory: It, you know, until that actually starts to happen, in fact, we're very loath to make any kind of projection.

Jonathan Kelcher: Okay. Now do you think-

Okay.

Michael Emory: For our own purposes and for the purposes of the market.

People are old purposes, and for the purposes of the market.

Michael Emory: For our own purposes and for the purposes of the market.

Right. So the there wouldn't be a lot of that in your same property NOI assumptions.

Jonathan Kelcher: Right. There wouldn't be a lot of that in your same property NOI assumptions then. Do you-

Michael Emory: There, there. Sorry, go ahead.

And there and area.

Sorry go ahead, okay. It's just that said you take that the 151 cross connect opportunity can be bigger than they used to one new habits to 50 front.

Jonathan Kelcher: Okay. I was just gonna say, do you think that the 151 cross-connect opportunity can be bigger than the one you have at 250 Front?

Michael Emory: Not in the short term. Not in the near term. In the near term, the biggest single cross-connect opportunity is at 250 Front. Interestingly, there may even be a fairly material opportunity at 905 King. I believe, Tom, a major cloud infrastructure provider has set up an on-ramp at 905 King West, which again is now extant and is beginning to be used, but not at a rate that would enable us to project. 905 King, I shouldn't say unbeknownst to us, but I guess not consistent with what we originally expected, now has its own dedicated on-ramp to the cloud, and we could see some revenue building there as well. I wouldn't have predicted that two years ago.

Not in the short term.

Not only not in the near term in the near term that Big a single cross connect opportunity is at 250 front.

And interestingly there may even be it a fairly material opportunity at 95, King I believe Tom.

A major.

Cloud infrastructure provider has set up and on ramp at 95, King West, which again is now at Stan and is beginning to be used but not at a rate that would enable us to project. So so 95 King and.

So.

Those to us but.

I guess not consistent with what we originally inspect the expected now has its own dedicated onramp.

To the cloud and we could see some revenue building there as well.

And I.

Okay.

Predicted that two years ago.

Okay.

Jonathan Kelcher: Okay. Just switching to the leasing outlook in Toronto and Montreal. Are there any large RFPs out there, or do you just expect sort of steady state leasing over the course of the next year?

[noise] just switching to the leasing outlook in Toronto Montreal.

Are you guys aware are there any larger or piece out there or you just expect sort of steady state leasing over a over the course of next year.

There's always some a piece floating around but we're looking at.

Tom: There's always some RFPs floating around, but we're looking at filling small spaces, you know, 10,000 and 20,000 and 30,000 sq ft spaces as well as some larger ones. The market is active and running on all cylinders. We're not relying on big RFPs. There are a few, but it's consistent in both Montreal and Toronto, at all size levels.

Tom Burns: There's always some RFPs floating around, but we're looking at filling small spaces, you know, 10,000 and 20,000 and 30,000 sq ft spaces as well as some larger ones. The market is active and running on all cylinders. We're not relying on big RFPs. There are a few, but it's consistent in both Montreal and Toronto, at all size levels.

Building small spaces.

10, and 20, and 30000 square foot spaces as well as merger wants so the market is active in running on all cylinders.

So we're not relying on bigger piece.

There are few.

But it's it's consistent in both material in Toronto.

That all sides levels.

Jonathan Kelcher: Okay. Are any of the RFPs large enough that they might kickstart another office tower?

Okay or any of your piece large enough that they might kick started another another office tower.

I think the.

Michael Emory: I think the probability of that is low. Right now, I mean, there is a tower being built by Broccolini for National Bank, as everybody knows. There is some potential movement back into the inner city with large users. I think the probability of that grounding a large new office development is low. Certainly in transforming 700 de la Gauchetière, we are not counting on any such user or any such requirement to fill the building. We wanna have an ecosystem with ultimately within 700 de la Gauchetière that in a way will sort of connect with 747 Square Victoria and 425 Viger, where a major global tech firm occupies 75% of the building.

He is that is low.

Right now I mean, there is that there is a tower being built by broccoli any for National Bank as everybody knows [noise].

There there is some potential movement back into the inner city.

With large users.

I think the probability of that rounding a large.

New office development is low.

And certainly in transforming 700 be LG, we are not counting on any such.

User or any such requirement.

To fill the building we want to have an echo system.

With ultimately within 700 de LG that in a way, we'll we'll sort of connect with 747 square Victoria and for 25.

BJ, where.

A major.

Sure Global Tech from occupies 75% of the building. So so were more intent on on creating the kind of echo system. We have in all of our concentrations across the country, we're not looking for.

Michael Emory: We're more intent on creating the kind of ecosystem we have in all of our concentrations across the country. We're not looking for a major Canadian entity to move into 700 de la Gauchetière, although we wouldn't turn them away. We're really creating the building or recreating the building to serve the kind of ecosystem of users that we're in the business of serving on a daily basis.

A major Canadian entity to.

Moving to 700, GLG, although we wouldn't turn them away, but but we're really creating the building or recreating the building.

To serve the kind of echo system of users that we're in the business of serving on a daily basis.

Okay and similar for.

Jonathan Kelcher: Okay. It's similar for Toronto?

Toronto.

Absolutely.

Michael Emory: Absolutely. That's why, Jonathan, we think it highly unlikely that we'll start Union Centre. There isn't a use around that I'm aware of material enough to represent a large enough pre-leasing commitment at Union Centre for us to start it. As Hugh mentioned, we will be starting some smaller development projects or intensification projects this year and perhaps next, but none of them will be million-plus square foot office buildings. That'll come the next cycle in our view. As I say, I'm not aware of a requirement in Toronto that would be even close to adequate to kick off Union Centre. Even if it is, we're not out there looking for it.

Oh, that's why.

That's right Jonathan we think it's highly unlikely that will start Union center.

There isn't a use around that I'm aware of.

Material enough.

Two.

Represent a large enough preleasing commitment at Union centre for Us to started so we will be as you mentioned, we will be starting some smaller development projects are intensification projects.

This year and perhaps next.

But none of them will be a million plus square foot.

Office buildings.

That that'll come the next cycle as in our view.

And as I say I'm not I'm not aware of a requirements in Toronto that would would be even close to adequate.

To to kick off Union centre, and and even if it is we're not out there looking for it.

Okay Fair enough I will turn it back thanks.

Jonathan Kelcher: Okay. Fair enough. I will turn it back. Thanks.

Oh.

Thank you, we'll next go to Chris to pre with C.I.B.C.

Operator 3: Thank you. We'll next go to Chris Couprie with CIBC.

Operator: Thank you. We'll next go to Chris Couprie with CIBC.

Oh good morning.

Chris Couprie: Good morning. Wanted to just turn back quickly to the UDCs. In the ancillary revenues, you kind of identify three sources, conduit space, rack space, and cross connect. Is there a way you could give us an idea of the contribution from these three different sources, and which of them have the better growth outlook?

Wanted to just turned back quickly to the UTI sees and you had salary revenues you kinda identify its resources.

Conduits stage Frac spacing cross connect Israel at away you could give us an idea of the contribution from these three different sources add which of them have the better growth outlook.

We are we deliberately didnt.

Michael Emory: We deliberately didn't break that information down for all kinds of reasons, including competitive ones. We don't think it adds a great deal to the disclosure if we did it. We understand, as I'm sure you do, Chris, that the normal level of ancillary rental revenue for UDCs is higher than the current level that Allied has. Was it 8.6%, Cecilia?

Mike that information down for all kinds of reasons, including.

Competitive ones.

And we don't think it adds a great deal.

To closure if we.

Did it we understand as I'm sure you do Chris that the normal level.

And silly rental revenue for you. The sees is is higher than the current level that Allied has was 8.6% yeah.

Cecilia Williams: Yeah. Yeah, it is.

Cecilia Williams: You know, the normal level is somewhere between 12% and 15%, and our goal over time is to move to that level of ancillary rental revenue. We do believe that the biggest driver, once momentum is established, will be rental of cross-connect space. That's probably the only helpful thing I can add. We're simply not prepared to break it down between rack space, conduit space, and cross-connect space, at this juncture. I don't think we'll be inclined to do that ever. We will certainly, when we have a rational basis for predicting the growth in the rental of cross-connect space, we'll be the first to provide it.

The normal level is somewhere between 12, and 15% and our goal over time is to move to that level of ancillary rental revenue.

Michael Emory: You know, the normal level is somewhere between 12% and 15%, and our goal over time is to move to that level of ancillary rental revenue. We do believe that the biggest driver, once momentum is established, will be rental of cross-connect space. That's probably the only helpful thing I can add. We're simply not prepared to break it down between rack space, conduit space, and cross-connect space, at this juncture. I don't think we'll be inclined to do that ever. We will certainly, when we have a rational basis for predicting the growth in the rental of cross-connect space, we'll be the first to provide it.

We do believe that the biggest driver once momentum is establish.

Bill.

The rental of cross connects space, but.

Yes.

That's probably the only helpful thing I can add we're simply not prepared to break it down between rack space conduit space and cross.

Next phase at this juncture and I don't think will I don't think will be inclined to do that ever but we will.

Certainly when we have a rational basis.

We're predicting the growth.

In the rental of cross connects space.

We'll we'll we'll be the first to provided.

Okay, that's fair.

Chris Couprie: Okay. That's fair. Just a question on the cloud provider choosing 905 King versus 250 Front. What would have been kind of the factors that would have driven their decision to locate there versus at, you know, the quote-unquote cloud facility?

Just a question on the cloud provider choosing nine to five king versus 250 fraud.

What would be what would have been kind of the a the factors that would have drilled in their.

Listen to locate their versus that.

Quote unquote cloud facility.

Current presence in nine of five.

Michael Emory: Current presence in 905 King West.

Okay.

Chris Couprie: Okay. Then maybe just switching gears, I know you're probably still drinking the champagne from the recent credit rating upgrade. Is there any idea as to what the requirements would be to get a further credit rating upgrade? Is that something that is anywhere on your radar?

And then maybe just switching gears I know, you're probably still a drink condition pain from the recent credit rating.

Is there any any.

Idea as to what the requirements would be to get a further credit rating upgrade and is that something that is anywhere on your radar.

Right currently analyzing that primarily.

Cecilia Williams: We're currently analyzing that. It's primarily. Well, I should say DBRS has changed a little bit their approach, and so we're still going through what their new matrix assessment is. If I had to guess, it would probably be debt-to-EBITDA-driven with less of an emphasis on absolute EBITDA dollar amount level, which would have been what drove them in the past. On the Moody's side, it would be continued debt metrics where they currently are with some improvement on their debt-to-EBITDA level. Where we are currently targeting to remain below 7x, I think Moody's would look for us to stay in the low sixes, but I'd have to confirm that.

Oh I should say he has.

Changed a little bit their approach and so we're still going to what their new matrix assessment as but if I had to get it would probably be debt to EBITDA driven with less of an emphasis on absolute EBITDA dollar amount level, which what does.

And what drove them in the past and then on the Moody's side it would be continued.

Yeah.

Continued debt metrics, where they currently are with some improvement on the debt to EBITDA level. So where we are currently targeting to remain below.

Seven times I think Moody's wouldn't look frac stay in that.

Low sixs, but I'd have to confirm that.

Okay, Great and then maybe just any comments that you might have on the acquisition environment I'm, maybe going across the country.

Chris Couprie: Okay, great. Maybe just any comments that you might have on the acquisition environment, maybe going across the country.

Our outlook for acquisitions can.

Michael Emory: Our outlook for acquisitions continues to be favorable. We are evaluating a number of opportunities. What I hope unfolds this year and have reason to expect could unfold this year is a number of additional smaller infill acquisitions in Montreal, Toronto, Calgary, and Vancouver that augment existing concentrations that Allied has already established. We love those transactions. They often carry with them longer-term intensification opportunity, but they come with acceptable accretive levels of current yield. We were very successful in 2019 in that regard, and I believe will continue to be in 2020. There is a possibility, there are possibilities in 2020 for larger scale acquisitions.

10 years to be favorable.

We are evaluating a number of opportunities what I hope to unfold this year and have reason to expect.

Could unfold this year is a number of additional.

All smaller infill acquisitions in Montreal, Toronto, Calgary, and Vancouver that augment existing concentrations that Allied has already established we love those transactions they often carry with them.

Longer term intensification opportunity, but they come with acceptable accretive levels of current yield we were very successful in 2019.

In that regard and I believe we'll continue to be.

In 2020.

There is up.

Possibility there are possibilities in 2020 for larger scale acquisitions, they take a great deal longer.

Michael Emory: They take a great deal longer to negotiate and execute, and they are much less certain, if you will, or there are many more variables beyond our control that can impact on whether or not we do acquisitions of the kind of magnitude we did in 2019. I believe there are opportunities for Allied that fit our investment and operating focus perfectly in 2020, that we may be able to avail ourselves. I think they will tend to be later in the year, as opposed to earlier in the year because they take so much time to negotiate, structure, and execute. We hope to have a steady pace of acquisitions over the course of the year.

Two.

Negotiate and execute and they are much.

Less certain if you will or there are many more.

Renewables beyond our control that can impact on whether or not we do acquisitions.

The kind of magnitude we did in 20 night team, but I believe there are opportunities for allied that fit our investment in operating focus perfectly in 2020 that we may be able to.

They allow ourselves I think they will tend to be later in the year as opposed to earlier in the year because they take so much time.

To negotiate structure and execute.

But we hope to have a steady pace with acquisitions over the course of the year.

And as I say.

Michael Emory: As I say, what really excites me about 2019 or our experience in 2019 is the fact that we can continue to acquire small infill acquisitions that fit our investment and operating focus perfectly on acceptable financial terms, even though everybody knows what Allied does, and even though there's an incredible wall of money out there chasing product. We're able to capture a lot of this off-market, because we're such a reliable buyer and because we will pay what those opportunities are worth to us. I love the fact that we can continue to do that, notwithstanding our size, notwithstanding the fact that everybody in the world sees us coming miles and miles away. The RCA Building in Montreal was a large-scale example of that last year.

What really excites me about 2019 for our experience in 2019 is the fact that we can continue to acquire.

Small infill acquisitions that fit our investments in operating focus perfectly.

On an acceptable financial terms, even though everybody knows what allied does and even though there's an incredible wall of money out they're chasing product, we're able to capture a lot of this off market.

Because we're such a reliable buyer and because we will.

Hey.

What those opportunities are worth to us so I I love. The fact that we can continue to do that notwithstanding our size notwithstanding the fact that everybody in the world sees us coming miles and miles away.

The RC a building.

In Montreal was.

A large scale example of that last year and our ability to continue to acquire class I.

Michael Emory: Our ability to continue to acquire Class I assets of a very high caliber, and in some cases with considerable scale, isn't diminished one bit. There is a lot of Class I space left for Allied to consolidate in Montreal, Toronto, Calgary, and Vancouver. There are larger transactions that we can execute that will be both accretive and fit squarely within our focus. The outlook is positive. I do think just like last year, the larger acquisitions will be back-end-weighted in the year if they occur at all. The smaller infill acquisitions will continue at a more regular pace.

Assets of a very high caliber and in some cases with considerable scale.

Isn't diminished one that.

There is a lot of classify space left for allied to consolidate in Montreal, Toronto, Calgary and Vancouver.

And there are larger transactions.

With that we can execute that will be both accretive and fits squarely within our focus so the outlook is positive I do think.

Just like last year, the larger acquisitions will be backend weighted in the year if they occur at all.

And the smaller infill acquisitions will continue at a more regular pace.

Chris Couprie: Right.

Right there much sorry.

Michael Emory: They're much.

Chris Couprie: Sorry.

No no problem.

Michael Emory: No, no problem.

Chris Couprie: Yeah, sorry. Did I miss in terms of the larger acquisitions in terms of what markets you think they are more likely to be in?

I I I'm, maybe did I Miss in terms of the larger acquisitions in terms of what market. She thinks they are more likely to Dan.

I think there are four markets, we focus on Montreal, Toronto Calgary in Vancouver.

Michael Emory: I think there are four markets we focus on: Montreal, Toronto, Calgary, and Vancouver. I think I can say this much: the larger acquisitions won't be in Calgary. They could be in Montreal, they could be in Toronto, and they could be in Vancouver.

I think I can.

Say this much larger acquisitions wont to be in Calgary.

They could be in Montreal, they could be in Toronto, and they could be in Vancouver fair enough. Okay. Thanks, I'll turn it back.

Chris Couprie: Fair enough. Okay, thanks. I'll turn it back.

Michael Emory: No problem.

No problem.

Thank you all next move to met corn.

Operator 3: Thank you. I'll next move to Matt Kornack with National Bank Financial. Please go ahead.

Operator: Thank you. I'll next move to Matt Kornack with National Bank Financial. Please go ahead.

With National Bank financial Please go ahead.

Good morning, guys.

Matt Kornack: Good morning, guys.

Running with regards to for 25 VJ. So it sounds like your large tenant expanded from 5300, 75%, but the other 20% to the similar type user to the large tenant that's another building.

Michael Emory: Morning.

Matt Kornack: With regards to 425 Viger, so it sounds like your large tenant expanded from 53% to 75%. The other 20%, is that a similar type user to the large tenant that's in that building or going to be in that building?

We're going to be in that building.

It's a tech user as well, but then and I guess that give you more confidence with regards to the strategy and 700 daily.

Tom: It's a tech user as well.

Tom Burns: It's a tech user as well.

Matt Kornack: Okay. I guess that gives you more confidence with regards to the strategy at 700 de la Gauchetière as well as what you're doing on Square Victoria more generally.

Yeah as well as a.

Well, you're doing on square Victoria more generally.

It does I certainly the large floor plates that exist in those buildings are.

Tom: It does.

Tom Burns: It does.

Michael Emory: Absolutely.

Tom: It's certainly the large floor plates that exist in those buildings are very attractive to those users.

Tom Burns: It's certainly the large floor plates that exist in those buildings are very attractive to those users.

Very attractive to those users.

And then on on the recent acquisition the World Trade Center I mean, obviously the retails.

Matt Kornack: On the recent acquisition, the World Trade Centre, I mean, obviously the retail, I would think an opportunity there, but what else do you see in terms of upside within that building? Clearly it fits the Class I designation, but it seems like maybe there's more than just what the current tenants are.

I think an opportunity there, but what else do you see in terms of upside within the building clearly it's it's the glass.

Designation, but it seems like.

Maybe there's more than just what the current denim Sir.

I think Matt near term the retail does represent.

Michael Emory: I think, Matt, near term, the retail does represent the most significant opportunity. When I say near term, that isn't today, tomorrow, or even necessarily this year. I think there's a real opportunity to enhance the retail space in the complex sooner rather than later. I think it's going to take longer, a matter of years at least, to take advantage of the opportunities inherent in the workspace. I think they have two basic categories or fall into two basic types of opportunity. One is simply rationalizing the space itself. There are inefficiencies that I believe we can eliminate and create additional area without compromising the quality of the space, and in fact probably enhancing the quality of the space. There is a modest intensification opportunity there.

The most significant opportunity and when I say near term that isn't today tomorrow or or even necessarily this year, but but I think there's a.

Real opportunity to enhance.

The retail space in the complex sooner rather than later I think it's going to take longer a matter of years at least to take advantage of the opportunities inherent in the workspace and I think they have.

Two basic.

Categories or fall into two basic types of opportunity one is simply rationalizing the space itself there are inefficiencies.

But I believe we can eliminate and create additional area without compromising.

The the quality of the space and in fact, probably enhancing the quality of the space. There is a modest intensification opportunity there it's around 60 to 80000 square feet.

Michael Emory: It's around 60,000 to 80,000 sq ft in one component of the asset. I think it will be in time, not in the near term, basically rationalizing the workspace and potentially adding a modest amount to it. That's what we see at 747 Square Victoria. That opportunity is much more pronounced and in my view, much more imminent at 700 DLG. Our goal is ultimately well, to transform 700 DLG first and foremost, 747 Square Victoria, and the remainder of 425 Viger in a coordinated manner. I actually believe we can have each of those buildings contributing to the success of the other two by integrating the way we operate and manage them, and allocate the right kind of users to the different buildings.

In one component of the asset so I think it's it will be in time.

Not in the near term in time, basically rationalizing the workspace and potentially adding a modest amount to it.

That's what we see it.

At a at 7.7 square Victoria.

That opportunity as much more pronounced.

Since then in my view much more imminent at 700 de LG and our goal is ultimately to transfer were up to transform.

700 de LG first and foremost Sevenforty seven square, Victoria and the remainder of for 25 VJ in a coordinated.

Manner I actually believe we can have each of those buildings contributing to.

The the success of the other two by integrating the way, we operate and manage them.

And allocate the right kind of users.

So the different buildings and obviously.

Michael Emory: Obviously, they represent expansion area or expansion potential for the other buildings or the users in the other buildings, as well as other users in our space in the city of Montreal. We had one experience at Cité Multimédia, which was horrifying to Tom and I in that we lost a great tenant there that we really valued and I think had an excellent relationship with, simply because they needed more space, and we didn't have the space to accommodate their new need. That's not a position we like to be in. I think what Square Victoria and 700 de la Gauchetière allow us, among other things, is the opportunity not to be in that position again.

They represent expansion area or expansion potential for the other buildings, where the users in the other buildings as well as other users in our space in the city Montreal, We had one experience at Citi multimedia.

Which was horrifying to Thomas.

Hi.

In that we lost a great tenants there.

That we really valued and I think had an excellent relationship with simply because they needed more space and we didnt have the space to accommodate their new need.

And.

That that's not a position we like to be in and I think what square Victoria and 700 DRG allow us among other things is the opportunity not to be in that position again, Fortunately for us at Citi Multimedia Morgan Stanley essentially backfilling that space and we.

Michael Emory: Fortunately for us at City Multimedia, Morgan Stanley essentially backfilled that space, and we wouldn't have been able to accommodate Morgan Stanley's need had that particular user not outgrown the building. We did lose one terrific user that we would love to have maintained a relationship with, and I think who would very much like to have retained a relationship with us, but we simply didn't have the space. Now we do.

I wouldn't be able to accommodate Morgan stanley's need had that particular use or not I'm not outgrown the building, but we did lose one terrific user that we would love to have maintained.

Our relationship with and I think who would very much like to.

You have retained a relationship with us, but we simply didnt have the space now we do.

And then makes sense.

Matt Kornack: That makes sense. On Montreal generally, it sounds like you're pretty positive in terms of lease up, getting to 95%. You also mentioned or Tom mentioned in the comments that you're proactively addressing leases. Is there anything sizable that you'd expect not to renew or that may have space issues at this point?

On Montreal generally it sounds like you're pretty positive in terms of lease up getting to 95%, but you also mentioned or Tom mentioned in my comments, but your proactively addressing leases is there anything.

Sizable that you'd expect not to renew or that may have space issues discipline.

Tom: There's none that come to mind at the moment, but part of our leasing program is always to be forward-looking and to not be surprised. The environment is strong in Montreal, so we're pushing out perhaps a year further than we ordinarily would to get things done.

Tom Burns: There's none that come to mind at the moment, but part of our leasing program is always to be forward-looking and to not be surprised. The environment is strong in Montreal, so we're pushing out perhaps a year further than we ordinarily would to get things done.

There's nothing that come to mind at the moment, but part of our leasing program is always to be forward looking and to not be surprised so the environment as strong as much. We also were pushing out perhaps a year for.

And then we ordinarily would to get things done.

Okay. That's good.

Matt Kornack: Okay. No, that's good. You mentioned infill. I mean, you slowly are putting the puzzle pieces together on the Esplanade and Front East. When should we expect a project or some sort of sense as to the opportunity for that plot of land that you're putting together there?

And then you mentioned infill I mean, you slowly or putting puzzle pieces together on the Esplanade in front of east.

When should we expect.

The project or some sort of senses to the opportunity for for that plot of land.

And that you're putting together.

I think that's one that's very much.

Michael Emory: I think that's one that's very much in the longer term. It's an awesome assembly. I think it's either just under or just over two acres of land now. There's a portion in the middle of those marvelous heritage structures that was actually built in 1950, and nobody's gonna regret that disappearing. It will be the area that we can use to anchor the new structure while preserving either all of or much of the marvelous heritage structure. I don't see us executing that in any meaningful way whatsoever for as much as a decade for two reasons. One is we've got so much to do that is further advanced in the approval process.

In the longer term, it's an awesome assembly. It's I think it's it's either just under or just over two acres of land now and there's a portion in the middle of those.

Those marvelous heritage structures that was actually built in 1950 and Nobody's gonna regret.

That disappearing and it will be the area that we can use the anchor the new structure, while preserving either all over much of the marvelous heritage structure, but I.

See us executing that in any meaningful way whatsoever for as much as a decade.

For two reasons one is we've got so much to do.

That is further advanced in the approval process and number two there are.

Michael Emory: Number two, there are a number of great users in that complex that have longer term leases, and we're getting a very good return on our capital from the 8 or so constituent buildings in that aggregation. I think that's one of those projects that we'll think about, at least for the time being, as 10 years out. I've found in the past that what I originally thought was 10 years out is 2 years out, and I'd be thrilled if it transpires that way in this case. I do think it's probably 10 years out. They're really good users in that complex, and we wouldn't want to bear the cost of buying them out of their space.

A number of great users in that complex that have longer term leases and we're getting a very good return on our capital up from the the eight or so constituent buildings in that aggregation. So I think.

That's one of.

Those projects that will think about at least for the time being as 10 years out I.

I've found in the past that what I. Originally thought was 10 years out as two years out and I'd be thrilled that if it transpires that way in this case, but I do think I do think.

It's probably 10 years out there really really good users in that complex and we wouldn't want to bear the cost of buying them out of there out of their space and we wouldn't want to have the bad relationship with them that that.

Michael Emory: We wouldn't want to have the bad relationship with them that would flow from buying them out of their space, even if we paid them really generously for it. Nobody likes to terminate a successful business prematurely, and there are just too many of them for us to be able to do it on a non-cost prohibitive basis. I really do think it's 10 years down the road. Ten years down the road, that is one awesome intensification opportunity.

Would flow from buying them out of their space.

Even if we paid them really generously for nobody likes to terminate a successful business prematurely and there are just too many of them for us to be able to do it on a.

And on cost prohibitive basis, So I I really do things 10 years down.

On the road, but 10 years down the road.

That is one awesome intensification opportunity.

Absolutely.

Matt Kornack: Absolutely. One last technical question, and I'll turn it back. On TELUS, it looks like you've extended a loan to the construction loan, and then it's JV accounted at this point. Is there any interest income associated with that in the JV figures, or is that in interest income elsewhere in the financial statements?

One last a technical question and I'll turn it back on on tell us it looks like you've extended alone to the.

Construction loan.

And then its JV accounted at this point.

Is there any interest income associated with that in the JV figures or is that in interest income elsewhere in the financial statement.

No.

Cecilia Williams: No, the interest income is essentially a loan into the project that equals our one-third interest. It's kind of a loan to ourselves, so we wouldn't be recording any interest income.

Got it essentially.

A long into the project.

That equals our western interest that's kind of along to ourselves.

We wouldn't according any interest.

Okay. So that's just the way you're structuring the holding a bad.

Matt Kornack: Okay. That's just the way you're structuring the holding of that asset.

Yes, that's right.

Cecilia Williams: Yeah. We tried to address the legal structure in 2019, so we wouldn't have to do equity accounting because we think it's silly. Under IFRS, we had to, now that there was a P&L impact, so we had to equity account for it. We provided all of the reconciliations in the MD&A. I believe it's page 63 and 64. You can see, you know, if your model is on a proportionate consolidation basis, we reconciled everything back so that you can still keep your model on that basis and have the relevant TELUS figures.

We try to address the legal structure between 1971 has to be lapping accounting doesnt thinking.

Philly.

But I I Fracs, we had two now that.

There was a piano so we had to equity like what we provided all the reconciliation anything that I believe its pay 60 70 Farsi can see you know it's your model is on a proportionate consolidation basis, we reconciled everything back then.

He care model.

And have the relevant.

Yeah.

Matt Kornack: Perfect. I will do that. Thank you very much.

Perfect I will do that thank you very much and also also mask the underlying economics of that.

Michael Emory: Also, Matt, the underlying economics of that. Cecilia understands the equity accounting. I have made every effort not to understand it. The underlying economic reality there is we paid off our share of the construction financing, because it was in our financial interest to do so. That's what creates, if you will, the fiction of our lending to ourselves. What we did there, in the interest of managing our interest cost and managing our balance sheet optimally was retire our share of the construction facility.

Really understands the equity accounting I have made every effort not to understand it but the underlying economic reality. There is we paid off our share.

Of the construction financing or because it was in our financial interest to do so and so that's what creates if you will.

The fiction of our lending to herself, but let's see what we what we did there are in the interest of managing our.

Trust cost.

And managing our balance sheet optimally was retire the concern our share of the construction facility.

Matt Kornack: That makes sense.

That was saying that was the real action on our part that then precipitated.

Michael Emory: That was the real action on our part that then precipitated this particular accounting treatment.

This particular.

Accounting treatment.

Matt Kornack: Okay. Perfect. Thank you.

Okay perfect. Thank you.

Thank you next we'll go to Howard Me I'm with Veritas investment Research. Please go ahead.

Operator 3: Thank you. Next, we'll go to Howard Leung with Veritas Investment Research. Please go ahead.

Operator: Thank you. Next, we'll go to Howard Leung with Veritas Investment Research. Please go ahead.

Thanks, Good morning.

Howard Leung: Thanks. Good morning. I just wanted to drill into the same asset NOI forecast for 2020. I guess looking at, thinking back to last year, the projection was low to mid-single digits, and I guess the driver of that would have been Toronto, Kitchener, and also the UDCs. Looking at this year, you've made comments that maybe UDCs isn't going to grow potentially the same rate on the same asset basis. So what do you think are the drivers for mid-single digits, like a little higher than last year's forecast?

I just wanted to.

I went to the same at the end of life forecast and for 21 I guess.

Looking at adding back to last year.

That protection of low to mid single digit.

And I got the driver of that wouldn't be drawn Kitchener Nelson you.

Looking a bit here you made comments that maybe you disease isn't gonna grow potentially the same rate anything that basin. So what's the.

What do you think the drivers for out for mid single digits like a little higher than last years for again.

At first of all just to confirm your your question or the promise of it we don't expect nearly as much of a contribution for new Dcs in 2020 as we enjoyed in.

Michael Emory: First of all, just to confirm your question or the premise of it, we don't expect nearly as much of a contribution from UDCs in 2020 as we enjoyed in 2019, and that's a temporary vacancy situation. I think the drive from rent growth in Toronto and some occupancy gain in Montreal is what will more than offset or at least completely offset the temporary shortfall in UDC.

Uh huh.

In 2019, and that's a temporary vacancy situation I think the drive from rent growth in Toronto, and some occupancy gain in Montreal is what will more than offset or at least completely.

The offset the temporary shortfall in UGC.

Right and is there any forecast for declines in Calgary.

Howard Leung: Right. Is there any forecast for declines in Calgary as well baked into this?

I'll begin today.

I think it I remember a modest decline in Calgary actually it wasn't a big deal, but but it would be.

Michael Emory: I think that I remember a modest decline in Calgary and Cecilia.

Cecilia Williams: Yeah.

Michael Emory: Like, it wasn't a big deal, but.

Cecilia Williams: It would be similar to what you would have seen in the 2019

Similar to what you would've seen in the 29 team.

Okay, Yeah, that's pretty modest.

Howard Leung: Okay. Yeah. That's pretty modest. Just turning to Toronto Kitchener leasing, the spreads there for next year look pretty significant. It's almost CAD 10 a square foot. Do you think you can capture pretty much the whole gap on renewals?

And then just turning to Toronto Kitchener leasing spread there for next year in a pretty significant.

Almost got almost 10000 square foot do you think you can capture and pretty.

There's a whole gap.

Renewals.

Yes, you know, especially in Toronto, I think the numbers are actually fairly conservative.

Michael Emory: Yes. You know, especially in Toronto, I think the numbers are actually fairly conservative. You know, we're seeing huge uplifts on anything we're doing in Toronto and in Kitchener.

Tom Burns: Yes. You know, especially in Toronto, I think the numbers are actually fairly conservative. You know, we're seeing huge uplifts on anything we're doing in Toronto and in Kitchener.

We're seeing cues uplift from anything we're doing in Toronto.

Hey, vintage now.

Yeah.

Howard Leung: Yeah. It looks, it's one of the widest, I think I've seen. Just maybe one last one. The Well, I saw the valuation from Q3 to this quarter was, like, kind of taken up by 10%. Is that just cap rate compression on the development project?

It.

Of the widest I think I see.

And then just just maybe one last one the.

Well I thought the valuation from Q3, two a this quarter what kind of taken up by 10% is that just cap rate compression.

Good.

No it would be.

Cecilia Williams: No, it would be driven partially by just the spend on the project. As we invest in the site, it affects the IFRS value. I don't believe there were any material changes in the assumptions in terms of the unleased area.

It would be driven partially by just the spend on projects. So as we invest site in assessing the IRS value.

I don't believe though any material changes in the assumptions in terms of the Ami area.

Okay, great Yeah, I think the anyway.

Howard Leung: Okay, great. Yeah. I think the NOI forecast look pretty stable.

Okay look pretty stable.

Cecilia Williams: Yeah.

Howard Leung: Great. I'll turn it back. Thanks.

I'll turn it back thanks.

Thank you.

Michael Emory: Thank you.

Thank you we'll next go to Mario Saucier, each with Scotia Bank. Please go ahead.

Operator 3: Thank you. We'll next go to Mario Saric with Scotiabank. Please go ahead.

Operator: Thank you. We'll next go to Mario Saric with Scotiabank. Please go ahead.

Hi, good morning.

Mario Saric: Hi. Good morning.

Michael Emory: Good morning.

Good morning.

Mario Saric: Just a couple of questions. First, on the acquisition side. Michael, last year, you talked about kind of an evolving model with the company in terms of potentially engaging more in JV initiatives. Based on kind of your discussion of the potential acquisition opportunities that could present themselves this year, how do you think about the positivity associated with, you know, incremental or new fee income and perhaps risk diversification versus not getting all of it for yourself or all of the upside associated with potential transactions to yourself? Like, how do you think about that balance today versus a year ago? Should we expect that more of the bigger transactions might be done on a JV basis going forward?

Just a couple of questions.

For some acquisitions one of them like last year, you talked about kind of an evolving.

Model.

Would the company in terms of potentially you more JV.

Sure good.

Based on kind of your discussion of the potential acquisition opportunities.

It could present themselves.

This year, how do you think about.

Positivity associated with incremental new fee income and perhaps risk.

ER diversification versus not getting old for yourself.

So two versions yourself will tell you could with a balance today versus a year ago.

Should we expect or more of the bigger transactions might be done on the JV basis.

Michael Emory: Yeah, really good question, Mario. I did very explicitly state, probably at this time last year, that we wish to leverage our platform more deliberately and more meaningfully than we had historically. We worked on a number of transactions in 2019 that would have achieved that for us. Those particular transactions, interestingly enough, did not come to fruition. Not because I think we can't do what I suggested we would be doing on a more meaningful scale, but simply because the investment profile didn't quite fit the needs of the two sides of the equation, if you will. Interestingly, lots of opportunity flowed directly to Allied out of that initiative.

Yes really good question really good question Mario I did very explicitly state probably at this time last year that we wish to leverage our.

Platform.

More deliberately and more meaningfully than we had historically and we worked on a number of transactions in 2019.

That would have achieved that for us those particular transactions interestingly enough did not.

Not come to fruition.

Not because I think we can't.

Do what I suggested we would be doing on a more meaningful scale, but simply because the investment.

Profile.

Didnt quite.

At the needs of of the two sides of the equation if you will.

Interestingly lots of opportunity flow directly to allied how did that initiative.

Michael Emory: Looking into 2020, the determination on Allied's part and on the part of other sources of material capital for investment in real estate is undiminished. It is my hope that we will achieve what we set out to achieve early in 2019 in concrete terms over the course of 2020. Interestingly, the acquisitions that we're working on now are acquisitions that we're more than competent to execute on our own, both financially and operationally. They are of a scale large enough to merit joint participation in them, and we'll be evaluating the relative merits of doing it on our own or doing it with a more passive source of capital, as we go forward and as the opportunities become more concrete.

Looking into 2020.

The determination on Allieds part and on the part of other.

Other sources.

Material capital for investments in real estate is undiminished and it is my hope.

That said that we will achieve what we set out to achieve early in 29 team in concrete terms over the course of 2020.

Interestingly the acquisitions that we are.

Working on now our acquisitions that were more than comparisons.

To execute on our own both financially and operationally.

But they are of us.

Scale.

Large enough to merit.

Joint.

Participation in them and we'll be evaluating.

The relative merits of.

Doing it on our own or doing it with a more passive source of capital.

Total as we go forward and that's the opportunities become more concrete, but we remain a of the view that it's in the interest of Allied business long term.

Michael Emory: We remain of the view that it's in the interest of Allied's business long term to lever its platform more effectively and more fully than it has historically. It's an important goal. It's a longer-term goal. I had hoped to achieve an example of it in 2019, although we didn't. It wouldn't impact our forecast for a given year. It is something we very much want to achieve, believe we can achieve, and believe will expand the opportunity set for our business going forward. Yes, one of the larger potential acquisitions in particular could be something that we execute in a way that allows us to lever our platform more than we have in the past.

Lever its platform more effectively and more fully than it has historically and.

It's an important goal, it's a longer term goal.

I had hoped to achieve.

An example of it in 2019, although we didnt it wouldnt impact our forecast for for a given year, but it is something we.

Very much one to achieve believe we can achieve and believe will expand the opportunity set for our business going forward. So yes, one of the larger potential acquisitions in particular could be something that we.

Execute in a way that allows us to lever our platform.

More than we have in the past.

Mario Saric: Understood. Okay. My second question just pertains to Montreal and valuations. Michael, I appreciate your commentary in terms of Montreal being the one market where you could see cap rates come down even further. I was a bit surprised to see the IFRS cap rate flattish in Montreal, Q4 versus Q3. Is that something that, you know, the appraisers may be a bit lagging in terms of timing and that's something that could come to fruition with Q1 results? Or are you very comfortable with that IFRS cap rate today?

Understood Okay.

Then my second question just opportunities to Montreal and valuations regular appreciate your commentary in terms of.

True all being the one market, where you could see.

Complete come down even further I was disappointed because you guy for as kind of flattish image.

No.

Q4 versus Q3, so you've got something.

<unk> lodging interim Dupont Union.

Okay that could come to fruition Q1 results or.

No or very comfortable with my first comparator.

Michael Emory: I can't predict quarterly, and I'd get in trouble with my colleagues if I did. I do believe over the course of 2020, we very well might see a decline in the IFRS cap rates for the purposes of valuing our Montreal portfolio. I do think appraisal practice is a backward-looking more than forward-looking process. In fact, I think it is deliberately and probably properly a backward-looking rather than forward-looking discipline. Yes, if we were to see some compression translate through our IFRS values in the Montreal portfolio over the course of 2020, it wouldn't come as a surprise to me and maybe not even to Cecilia.

I can't predict quarterly and I'd get in.

Trouble with my colleagues, if I did but I do believe over the course of Twentytwenty, we very well might see a decline in the IRS cap rate for the purposes of valuing their Montreal portfolio and I do think appraising.

Appraisal practice is is a backward looking.

More than forward looking process. So in fact.

I think it is deliberately and probably properly a backward looking rather than forward looking.

So so yes, I, if we were to see some compression translate through our IRS values in the Montreal portfolio over the course of 2020, it wouldn't come as a surprise to me and maybe not even to civilians.

Okay. My last question.

Mario Saric: Okay. My last question just pertains to Toronto rents that have come up quite a bit in the market. When you're talking with tenants today and in the past, Michael, I think you know you mentioned the ultimate governor of rents is going to be new supply when it comes online. That very well could be a couple years from now in terms of anything of scale. But in the near term, within those couple years, when you have discussions with tenants, what are you seeing any incremental pushback in terms of the rents that you're asking? If so, are you seeing any trend in terms of tenants kinda saying Toronto, that Toronto is too expensive?

Pertains to.

On a run.

We had come in pretty good in the market.

When you're when you're talking.

In the Cosmical entry.

From the ultimate Governor.

The floor or when it comes on board.

Very well could be a couple years from now in terms of.

But in the near term.

Couple of years.

It's kind of.

What are you seeing any incremental push back in terms of.

That's what you're asking.

Yeah. So.

Are you seeing trend in terms of kind of concern.

That's what drives to expenses.

Mario Saric: Are they considering the suburbs or, you know, different parts of Toronto, given the rapid increase in rents in downtown today?

Considering the suburbs.

But the funnel.

Given.

Right.

Sure.

We're seeing very little pushback merial.

Tom: We're seeing very little pushback, Mario. To give you an example, not long ago, we had a tenant needing to sublet their space in Downtown West. They had about 30,000 sq ft. They needed more space than we could provide for them, so they had no choice but to go somewhere else. There were 8 offers on their space as a sublease. We converted that into a direct deal. The market is just waiting for space to come available in our portfolio. We don't see any reduction in the demand. The rent is being accepted as market.

Tom Burns: We're seeing very little pushback, Mario. To give you an example, not long ago, we had a tenant needing to sublet their space in Downtown West. They had about 30,000 sq ft. They needed more space than we could provide for them, so they had no choice but to go somewhere else. There were 8 offers on their space as a sublease. We converted that into a direct deal. The market is just waiting for space to come available in our portfolio. We don't see any reduction in the demand. The rent is being accepted as market.

Give me. One example, not long ago, we had attended meeting to sublet their space.

Yes.

In downtown West They had about 30000 square feet they needed more space than we could provide for them.

So they had no choice, but to go somewhere else.

Eight offers.

Their space is assemblies we.

We converted the dive into a.

Deal, but the the market is just.

Waiting for space to come available.

In our portfolio.

So we don't see any.

Reduction in the demand the rent is being accepted as as market.

Michael Emory: Tom, am I right in remembering that someone at King and Spadina in a real high-quality building of ours agreed to a CAD 50 net rate?

Tom Am I, right and remembering that someone a cadence, but I'm in a real high quality building bars agreed to a 50 that rates. We yes, we were achieving actually we just did a deal about two weeks ago.

Tom: Yes. We were achieving. Actually, we just did a deal about two weeks ago at CAD 51 beginning rent, and going up over the term with next to no allowance.

Tom Burns: Yes. We were achieving. Actually, we just did a deal about two weeks ago at CAD 51 beginning rent, and going up over the term with next to no allowance.

The $1.

Getting rent.

And going up over the term.

Next to no allowance.

Yeah.

Michael Emory: Yeah. I think so far, Mario, no pushback and no reverse migration to the suburbs. I don't think that's gonna happen anytime soon. I really don't.

So I think so far merial, no pushback and no reverse migration to the suburbs.

No I don't think that's going to happen anytime soon I really don't.

Okay.

Mario Saric: Okay. Maybe not necessarily to the suburbs, but are you seeing anything with respect to international global tenants that are looking at Canada and saying nine times or ten times out of ten, we were located in Toronto, but maybe we're considering a different market today that we otherwise wouldn't have in the past?

Maybe maybe not Mr. We can be suburbs book.

Are you seeing an engine infrastructure.

International Global standards.

Okay.

Good morning turns in terms of return.

For now and maybe we'll consider it a different market.

Every other words when.

No indication of that in any of our dealings I think the only people that moved to the inner or outer suburbs.

Michael Emory: No. No indication of that in any of our dealings. I think the only people that move to the inner or outer suburbs are people who are trying to address markets there. So some of the accounting firms have located, I think out in Vaughan somewhere. They haven't gone there because of cost. They've gone there because there's a big client base in that area, in that geography that they wanna serve better. That's rational. But nobody needing to capture a specific talent pool is looking outside of Toronto because it's somewhat less expensive. At least no one to our knowledge is. No one. We've never had a situation in negotiating with users for our space where someone said, "You know what? It's too expensive.

Our people who are trying to address markets. There. So some of the accounting firms have located.

I think.

Out in bonds somewhere.

They haven't gone there because of cost they've gone there because there's a big client base in that area in that geography that they want to serve better and that's rational or but nobody meeting to capture a specific talent pool.

Is is looking outside of Toronto, because it's somewhat less expensive.

At least no one to our knowledge is and no. One we've never had a situation in in in negotiating with users for our space where someone.

So you know what it's too expensive I'm going out to the suburbs I, It's just never happened.

Michael Emory: I'm going out to the suburbs." It's just never happened.

Okay now that's not to say it can't happen, but we're certainly not at the point in fact now it's as Tom suggested.

Mario Saric: Okay.

Michael Emory: Now, that's not to say it can't happen, but we're certainly not at the point. In fact, now it's as Tom suggested. If a piece of space comes available in our portfolio, restored brick and beam or otherwise, it's incredible the demand and the speed with which that gets released and the price points. Tom told us about the 50 net number. It was late last year. Even I found that hard to believe, but he was absolutely correct, in what he relayed to us.

If a piece of space comes available in our portfolio.

Restored brick and beam or otherwise, it's incredible the demand and the speed with which that gets released and the price points. Tom told us about the 15 that number it was late last year and even by.

And that hard to believe but.

But he was absolutely correct.

We're lucky related to us.

And maybe.

Mario Saric: Maybe, like, with a space like that, with very few other options. Like, what's the governor for the tenant in the near term, again, if supply is a couple years out, in terms of that being CAD 50 net or CAD 53 or CAD 54 or CAD 55? How do you assess that?

Space like Oh.

Very few other options.

What's the government this would kind of in the near term.

If the plug a couple years or.

In terms of therapy.

$50 in that or 53 year for before 55.

How do you were so strong.

It really I think it it's it's basically supply and demand you know this clearly was a space that suited that tenant to at Ti.

Michael Emory: I think it's basically supply and demand. You know, this clearly was a space that suited that tenant to a T, in terms of area, in terms of attributes. I personally, if I had to guess, I don't see rents in our tier one Class I portfolio in Downtown West rising materially above that point, nor would we be counting on that. Indeed, there may come a point in time where we can't even replicate that level of net rent, especially once the supply catches up with the demand. Our feeling is, Mario Saric, that during that interlude between now and the point in time when supply catches up with the excess demand, there's going to be continuous upward pressure on rental rates, and nobody is gonna capitulate and go to the suburbs.

In terms of area in terms of attributes.

I personally if I had to guess I don't see rents in our tier one class III portfolio in downtown West rising materially above that point at nor.

Nor would we be counting on that.

And indeed, there may come a point in time, where where we can't even replicate that level of net rent, especially once the supply catches up with the demand our feeling is merial that.

During that interlude between.

Now and the points in time and supply catches up with the excess demand, there's going to be continuous upward pressure on rental rates and nobody is going to capitulate and go to suburbs.

And now once the once the new supply.

Michael Emory: Now, once the new supply is extant, I don't think we're gonna see anything dropping off a cliff, but clearly, users are gonna have more options, and clearly, the upward pressure on rental rates is gonna either lessen or disappear altogether. It's even possible that there's some downward pressure that. It's amazing how adamant people are, or certain users are, in acquiring the kind of space that's available in our Class I portfolio in Toronto and elsewhere, for that matter. I mean, Le Nordelec is another incredible example. The demand for the format is huge. The demand for the hybrid format is huge.

Is X.

Dan.

I don't think we're going to see anything dropping off a cliff, but clearly users are gonna have more options and clearly.

The upward pressure on rental rates is going to.

Either.

Less than or or disappear altogether.

We're in it even possible that theres some downward pressure that.

That but it's amazing how adamant people are or certainly users are in acquiring the kind of space. That's.

Available in our class I portfolio.

In Toronto, and and elsewhere for that matter I mean, nor do I think is another incredible example, so the demand for the format is huge the demand for the hybrid format is huge and in fact, the demand for new space.

Michael Emory: In fact, the demand for new space that is technologically better and is designed in a humanistic way for the kind of knowledge-based organizations we serve, the demand for that is huge. What isn't in demand is commoditized boxes. Nobody is creating commoditized boxes anymore. The new space that's being created is designed better, and I think is more thoughtful than. Of course, there are variations on that spectrum, but you know, some of it's close to commoditized, but some of it's really very good. I think Ivanhoé Cambridge's development for CIBC is going to prove to be a very good example of urban workspace that will work for the knowledge-based organization that CIBC is. Office leasing decisions are entirely based on employees. It's

That is technologically.

Better and is designed.

In a humanistic way for the kind of knowledge based organizations, we serve the demand for that is huge.

What isn't in demand is commoditizes boxes.

And nobody is creating.

Commoditized boxes anymore, the new space, that's being created.

Is is designed to better.

And I think is more thoughtful.

Then and of course, there are variations on that spectrum, but you know some of its close to commoditized.

But some of it's really very good I think Ivanhoe, Cambridge is development foresee RBC is going to prove to be a very good example of urban work space that will work for.

For the knowledge base.

Organization.

See I do see is.

Office leasing decisions are entirely based.

Tom Burns: Office leasing decisions are entirely based on employees. It's

On employees.

Its.

Michael Emory: Employees are demanding interesting, comfortable, clean workspace with amenities nearby. They wanna walk to work, ideally. They wanna maybe ride a bike. The urban environment is in high demand. We're never compared to the suburbs.

Tom Burns: Employees are demanding interesting, comfortable, clean workspace with amenities nearby. They wanna walk to work, ideally. They wanna maybe ride a bike. The urban environment is in high demand. We're never compared to the suburbs.

Employees are demanding interesting.

Comfortable.

Clean.

Workspace with amenities.

By period.

They want to walk to work ideally you want to maybe by the break.

So the urban environment is.

In high high demand, we're never compared to the suburbs.

Okay are you on your friends or do you.

Mario Saric: Okay. No, that makes sense. Okay, thank you.

[noise].

Thank you. Our next question comes from Ginnie mom with BMO capital markets.

Operator 3: Thank you. Our next question comes from Jenny Ma with BMO Capital Markets.

Operator: Thank you. Our next question comes from Jenny Ma with BMO Capital Markets.

Hi, good morning.

Jenny Ma: Hi. Good morning.

Michael Emory: Good morning.

Hi, good morning.

Jenny Ma: I wanted to ask. Michael, one year ago, we were talking about your evolved outlook on the Vancouver office market, and what we've seen since has really played into that. Just wanted to get an update on your views on the timing of getting to your 1 million sq ft goal, and if I may, maybe if you could talk about a sort of a longer term big audacious goal for how much you think you could acquire in Vancouver over the longer term.

So Michael one year ago, we were talking about your evolved outlook on the Vancouver office market and what we've seen since that's.

He played into that so just wanted to get an update on your views on the timing of getting to your 1 million square feet tool and die and if I may maybe if you could talk about eight sort of a longer term bake audacious goal for how much you think you could acquiring vancouver over the longer term.

Michael Emory: Well, I think I can say confidently that we're right on schedule for our 1 million square feet. 400 West Georgia has been an extraordinary success. It's well out of the ground now. I believe one of the users in the building, an excellent tech firm that I don't think is yet publicly identified, has exercised its right to expand and has increased the total leased area. Then there's another firm that I think has a right to expand, exercisable either in Q2 or Q3, that we fully expect to exercise. Indeed, they may even exercise early in an effort to just get things finalized. That project has gone as well as a project can go so far.

Mm.

Well I think I can say confidently that we're right on schedule for our million square feet at 400 West Georgia.

Has been an extraordinary success, it's well out of the ground now and I believe.

One of the users in the.

Building.

Excellent tech from that I don't think as yet publicly identified a has exercised its right to expand and has increased the total least area and then there's another for that I think has a right to expand.

Exercisable either into two or two three that we fully expect to exercise and indeed, they may even exercised early in an effort to just get things finalized. So that project has gone as well as a project can.

Go so far I mean, it's not over and there's still construction risk.

Michael Emory: I mean, it's not over, and there's still construction risk, although it tends to be much greater below grade than above grade. Our project on Beatty Street is at the early stages of approval, but it has the potential to be, and I'm very confident will be, another excellent example of distinctive urban workspace. We haven't initiated the leasing there in a formal way because I think we're finalizing the municipal approval and it's never wise to get ahead of the municipality in leasing office space. But we expect that's a larger project. It's 600,000 sq ft of leasable area, roughly our share being 300,000. Assuming we continue to progress that project, we'll absolutely get to our 1 million sq ft within the timeframe we contemplated. Big, hairy, audacious goal.

Although it tends to be much greater below grade and then about great.

Our project on BD Street is at the early stages of approval.

But it has the potential.

Well to be Anna and I'm very confident will be.

Another excellent example of distinctive urban workspace, we haven't initiated the leasing there in a formal way because I think we're finalizing the Minnesota pull approval and it's never wise to get ahead of the munis.

Capacity in leasing.

Office space, but but we expect that's a larger project at 600000 square feet of leasable area, roughly our share being 300000 and.

Assuming we continue to progress that project.

We'll absolutely get to our million square feet.

Within the timeframe we contemplated.

Big area They should school.

I don't have enough visibility at the moment.

Michael Emory: I don't have enough visibility at the moment to sort of intelligently establish one for the city of Vancouver. I actually believe, like Toronto, the supply in the city of Vancouver is going to catch up to the excess demand in the next two or three years. It may indeed be that we stay at our million square feet for a period of time, even though we hate standing still anywhere. The market conditions in Vancouver may be such that that's just where we stay. There are a few opportunities there that we may look at later this year, that could change that outlook.

Two.

Sort of.

Intelligently.

Establish one for the for the city of Vancouver, I actually believe like Toronto.

The supply in the city of Vancouver is going to catch up to the excess demand in the next two or three years and it may indeed be.

That we stay at our million square feet for a period of time, even though we hate standing still anywhere, but but the market conditions in Vancouver may be such that that's just where are we stay.

There are a few opportunities there that that we may look at later this year that could change.

James that outlook, but I would say.

Michael Emory: I would say my current reasonable outlook for Vancouver is on schedule to get to 1 million sq ft, but by the time we do, the conditions may be such that we will have to stay there for a period of time before a significant growth spurt. We look at this as a long game. It's not a game, but this is a long-term business, and we're determined to become a key player in the city of Vancouver as we are already in the city of Toronto and the city of Montreal.

My current reasonable outlook for Vancouver is on schedule to get to a million square feet, but by the time, we do.

The conditions may be such that we will have to.

Stay there for a period of time before a significant growth spurt, but.

We look this is a long.

Game as it's not a gain but this is a long term business.

And we're determined to to become a.

A key player in the city of Vancouver, as we are already in the city of Toronto in the city of Montreal.

Jenny Ma: Okay. The opportunities that you mentioned, would they be somewhat similar to what you've done in Montreal with 700 DLG and Square Victoria in terms of taking some more conventional office space and fitting it out so that it appeals to the knowledge-based workers?

Okay. So the opportunity that you mentioned would they be somewhat similar to what you've done in Montreal with 700 de LG and square Victoria in terms of taking some more conventional office space and and fitting it out was that it appeals to the knowledge base burgers.

One that I have in mind is it I wouldn't call it.

Michael Emory: One that I have in mind, I wouldn't call it analogous to 700 DLG, but it would be almost an adaptive reuse kind of project, where we take a building that is currently used for an altogether different purpose and adaptively reuse it. The scale is not inconsequential. But that's something that if it arises at all, will be later this year or early next. That would be the only exception to the sort of, the tranquility at 1 million sq ft that I've sort of contemplated.

Analogist to 700 D L G.

But it wouldn't be almost an adaptive reuse kind of project.

Where we take a building that is currently used for an altogether different purpose and adaptively reviews, and the scale is not inconsequential.

But that's something that if it arises at all will be later this year or early next that would be the only exception to the sort of.

The tranquility at a million square feet.

That I've sort of contemplated.

Jenny Ma: Okay, great. Just a couple of modeling related questions. Cecilia, in talking about the guidance, I think you had mentioned that you don't expect, or the guidance doesn't contemplate any additional condo marketing costs to flow through in 2020. But I guess there's just been a lot of buzz on King Toronto. So I'm just wondering if maybe some of those costs were already booked in Q4 2019, or if there might be some that trickles through into 2020.

Great just a couple of modeling related question.

Cecilia and talking about the guidance I think you had mentioned that you don't expect that where the guidance contemplate any additional condo marketing costs to flow through and Twentytwenty, but I guess, there's just been a lot of buys on King Toronto. So I'm just wondering if maybe some of those costs were already booked in Q4 19, or if there might be summed it trickles through into.

Okay.

Yeah, so cilia needed to step away to deal with something else Jenny, but I can answer that sure car unfit mentally there will be a small amount of condo costs incurred in twentytwenty in relation to came to auto the bulk of them have been incurred I think what's the.

Michael Emory: Yeah. Cecilia needed to step away to deal with something else, Jenny, but I can answer that.

Jenny Ma: Sure.

Michael Emory: Confidently. There will be a small amount of condo costs incurred in 2020 in relation to King Toronto. The bulk of them have been incurred. I think what Cecilia meant is our internal forecast for 2020 of mid-single-digit percentage growth in same asset NOI, and more importantly, FFO per unit and AFFO per unit, ignores that small amount of condo cost that we'll bear in 2020. Technically it's carved out of FFO, but because it's a non-recurring cost relating to a project, we look upon our recurring FFO number that excludes those costs as the one that really reflects where the business is going.

We have meant is our internal forecast for 2020 of mid single digit percentage growth in the same asset and NOI and more importantly.

FFO per unit and AFFO per unit ignores that small amount of condo cost.

That will bear in.

Seatwave technically it's it is carved out of EFO.

But because it's a nonrecurring cost relating to a project.

We look upon our recurring FFO number that excludes those cost as the one that really reflects where the business is going so I think what you meant when.

Michael Emory: I think what she meant when she said that was that the very small amount of costs we incur this year at our share, we'll simply ignore it, in terms of our real FFO run rate, even though technically it has to be included, in FFO in accordance with the white paper.

She said that was that the very small amount of costs, we incurred this year at our share will simply ignore it.

In terms of our real FFO run rate, even though technically it has to be included.

And that that FFO in accordance with the white paper.

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

Great. Thanks for clarifying.

I'll turn it I O problem okay. Thanks.

Michael Emory: No problem. Okay, thanks.

Thank you and we do have a follow up question from Mike Marcus with Desjardins. Please go ahead.

Operator 3: Thank you. We do have a follow-up question from Mike Markidis with Desjardins. Please go ahead.

Operator: Thank you. We do have a follow-up question from Mike Markidis with Desjardins. Please go ahead.

Sorry, just one last quick one here and Kenya, Brent Natalie and spin Dyna.

Michael Markidis: Sorry, just one last quick one here. On King and-

Mike Markidis: Sorry, just one last quick one here. On King and-

Michael Emory: No problem.

Michael Markidis: Brand, Natalie, and Spadina, is that one that's gonna be transferred into PUD? Is it one that, just given the market, it doesn't look like those projects are too big? Trying to get a sense if the marketing project and the construction commencement will be concurrent.

Mike Markidis: Brand, Natalie, and Spadina, is that one that's gonna be transferred into PUD? Is it one that, just given the market, it doesn't look like those projects are too big? Trying to get a sense if the marketing project and the construction commencement will be concurrent.

Is that when that's going to be transferred into Bu.

He is it when it is just given the market. It doesn't look like those projects are two big trying to get a sense of the marketing project in the and the construction commencement will be.

Concurrent.

Yes, good good question.

Michael Emory: Yeah. Good question. King and Brant is more likely to be transferred into PUD sooner. It's relatively small, Mike. I should know the magnitude, but it's so small that it's not something I have to track very carefully. It'll probably go into PUD late this year or early next year. Spadina is a good income producing group of properties at the moment. Whether or not it goes into PUD is gonna depend on pre-leasing. I think it wouldn't go into PUD until sometime in 2021 at the earliest. We don't see either individually or collectively having much impact on our PUD percentage.

Canyons King in brand is more likely to be transferred into pieces.

The sooner, it's relatively small Mike I should know the magnitude, but but it's so small that it's not something.

I have to track very carefully you know probably go into appealed the late this year early next year Spuds, China is going to spend is a good income producing a group of properties at the.

And whether or not it goes into PD PD is going to depend on pre leasing and I think it wouldn't go into PD until sometime in 2021 at the earliest so so we don't we don't see either individually or.

Collectively having.

Much impact on ARPU the percentage.

Michael Markidis: Okay. Gotcha.

Mike Markidis: Okay. Gotcha.

Okay.

Michael Emory: Uh, and-

Michael Markidis: King and Brant, it sounds like. Sorry, go ahead.

Mike Markidis: King and Brant, it sounds like. Sorry, go ahead.

Brad It sounds like sorry go ahead.

Michael Emory: No. As I say, the only thing that will have any impact in 2020 would be King and Brant, and it's pretty small. How much, Hugh, is the-

No and and as I say, the only thing that will have any impact in 2020 would be king and brands and it's pretty small how much Hughes, there's only 30000 square feet existing square footage.

Hugh: There's only 30,000 sq ft existing square footage in 544.

Hugh Clark: There's only 30,000 sq ft existing square footage in 544.

Slide 44 that will be transferred over yeah. So it's a it's pretty small loss of earnings and it's a pretty small increment to the PD.

Michael Emory: Yeah

Hugh: that would be transferred over.

Hugh Clark: that would be transferred over.

Michael Emory: Yeah. It's a, it's pretty small loss of earnings, and it's a pretty small increment to the PUD.

Hugh: Yeah.

Hugh Clark: Yeah.

I'm sorry go ahead, just that one with a 130000 aren't completion no requirement for Preleasing, there and then on late inspire sounds like double roughly about.

Michael Emory: Yeah. Sorry, Mark, go ahead.

Michael Markidis: Just that one with 130,000, on completion, no requirement for pre-leasing there. Adelaide and Spadina sounds like double roughly of that amount. You'll look for some pre-leasing on that one.

Mike Markidis: Just that one with 130,000, on completion, no requirement for pre-leasing there. Adelaide and Spadina sounds like double roughly of that amount. You'll look for some pre-leasing on that one.

I don't know Joel you look for some pretty Luciano.

Michael Emory: Absolutely.

Absolutely.

And I think I think it's a very achievable pre leasing, but we absolutely will achieve want to achieve that before we commit.

Michael Markidis: Okay.

Mike Markidis: Okay.

Michael Emory: I think it's a very achievable pre-leasing, but we absolutely want to achieve it before we commit irrevocably to the construction.

Irrevocably to the construction.

Michael Markidis: Okay. Sorry, I lied. One last one. Just with the forward sale of the residential component of The Well, can you remind us, is that a 2020 event and what the quantum of capital coming back to Allied would be?

Mike Markidis: Okay. Sorry, I lied. One last one. Just with the forward sale of the residential component of The Well, can you remind us, is that a 2020 event and what the quantum of capital coming back to Allied would be?

Okay, and I'm sure I live in one last one just with the.

The forward sale of the residential for another well can you remind us is that a 2020 event and what the quantum of capital coming about Oh it would be.

I think that spelled out in the Mdna. It actually occurred over a few years a couple of years spoken 20, and 2021, because it theres different.

Hugh: I think that's spelled out in the MD&A. It actually occurs over a few years, or a couple of years, both in 2020 and 2021 because there's different closing dates by tower.

Hugh Clark: I think that's spelled out in the MD&A. It actually occurs over a few years, or a couple of years, both in 2020 and 2021 because there's different closing dates by tower.

I think dates by tower and do not quantify.

Michael Markidis: Got it.

Mike Markidis: Got it.

Michael Emory: Do we quantify?

Tom Burns: Do we quantify?

Hugh: I thought so.

Hugh Clark: I thought so.

Also so.

Michael Emory: I kinda remember the number, but I don't wanna. I think it's better that we look it up.

I see I kinda remember number, but I don't want to I think it's better than what we look at up yeah, remember and I think I seem to think our share was around 45 million, we view quantify the.

Michael Emory: I kinda remember the number, but I don't wanna. I think it's better that we look it up.

Hugh: Yeah

Tom Burns: Yeah

Michael Emory: rather than remember it. I seem to think our share was around CAD 45 million, but

Hugh: We do quantify the total, for sure. Yes.

Hugh Clark: We do quantify the total, for sure. Yes.

Total for sure yes.

Michael Emory: Yeah.

And so why we yeah.

Michael Emory: Yeah.

I'll have a looking if a if I need further clarification I understand you guys know.

Michael Markidis: I'll have a look and if I need further clarification, I'll just send you guys a note.

Mike Markidis: I'll have a look and if I need further clarification, I'll just send you guys a note.

Okay.

Michael Emory: Super.

Thank you and it does appear we have no further questions at this time I'd like turn the conference back over to Michael Emery for any additional or.

Hugh: Thank you.

Hugh Clark: Thank you.

Operator 3: Thank you. It does appear we have no further questions at this time. I'd like to turn the conference back over to Michael Emory for any additional or closing remarks.

Operator: Thank you. It does appear we have no further questions at this time. I'd like to turn the conference back over to Michael Emory for any additional or closing remarks.

Closing remarks.

Thank you Derek and thank a thank you everyone for participating in the call. Appreciate the questions and we look forward to keeping you apprised of our progress going forward and 2020, Thank you and have a great day.

Michael Emory: Thank you, Derek, and thank you to everyone for participating in the call. Appreciate the questions, and we look forward to keeping you apprised of our progress going forward in 2020. Thank you, and have a great day.

[noise]. Thank you and again that does conclude today's.

Operator 3: Thank you. Again, that does conclude today's call again. We thank you for your participation. You may now disconnect.

Operator: Thank you. Again, that does conclude today's call again. We thank you for your participation. You may now disconnect.

Well again, we thank you for your participation you may now disconnect.

[music].

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