Q4 2019 Earnings Call

February 28, 2020

Good afternoon, ladies and gentlemen, my name is China, and Alethia conference operator today.

Operator: Good afternoon, ladies and gentlemen. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to Artis REIT's 2019 Annual Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Today's discussion may include forward-looking statements, which include statements that are not statements of historical fact and statements regarding Artis REIT's future financial performance and its execution of initiatives to deliver unit holder value. Such statements are based on management's assumptions and beliefs.

At this time I would like to welcome everyone to artist Suite 2019, and you all the South conference call.

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

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

And profession.

Just a question during this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question. Please press star followed by too.

Today's discussion May include forward looking statements, which includes statements that are not statements of historical facts and statements regarding artist speech future financial performance and execution initiatives to deliver you know holder value.

Statements are based on management's assumptions and beliefs.

Operator 1: These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those statements. Please see Artis REIT's public filings for a discussion of these risk factors, which are included in their annual and quarterly filings, which can be found on Artis REIT's website and on SEDAR. Thank you. I would now like to turn the meeting over to Mr. Armin Martens. Mr. Martens, please go ahead.

Operator: These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those statements. Please see Artis REIT's public filings for a discussion of these risk factors, which are included in their annual and quarterly filings, which can be found on Artis REIT's website and on SEDAR. Thank you. I would now like to turn the meeting over to Mr. Armin Martens. Mr. Martens, please go ahead.

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

P C suites public filings for a discussion of these risk factors, which are included in the annual and quarterly filings, which can be found on artist pickup faith and I see our.

Thank you have now extend the meeting over to Mr. I'm, a nice Mr. Mike. Please go ahead.

Thank you very much moderator good day, everyone welcome to actually before yearend conference call Happy Friday to us all the.

Armin Martens: Thank you very much, moderator. Good day, everyone, and welcome to our Q4 year-end conference call. Happy Friday to us all. Again, my name is Armin Martens, President and CEO of Artis REIT. With me on this call is Jim Green, our CFO, Tim Roney, our EVP of Investments, Jaclyn Koenig, our SVP of Accounting, and Philip Martens is joining us today as well, EVP of US Operations. Again, thanks for joining us, and we'll start. As always, I'll ask Jim Green to review our financial highlights. Then I'll wrap up with some commentary as well, and then we'll open the lines for questions. Go ahead, Jim.

Okay, My name's arm in margins, President and she'll artist suite, if that is close to generate our CFO.

Well on your easy PV recipes Jackie Craig.

Yeah. They told me it still mark is joining us today as well if you have you guys operation. So again. Thanks for joining also started out as always I'll ask Jim Green to do our financial highlights.

Some commentary is along the lines for questions should go ahead you.

Jim Green: Thanks, Armin, and good afternoon, everyone. Going back to our Q3 earnings press release in November 2018, that seems like it was a long time ago, but it's been a busy time since. We've announced a series of new initiatives at that time for the REIT, and we're now over one year into that plan, and it's been a very busy time executing on the strategy. The impact of executing that strategy continues to impact our metrics and will for a few quarters yet to come. We are nearing the end of it, but we have some more assets yet to sell. We look forward to the continuation of the strategy in future quarters as the next steps will consist mainly of asset sales with the proceeds used for debt reduction. That should demonstrate continued improvement in our balance sheet metrics.

Thanks, everyone and good afternoon, everyone.

So going back to our third quarter earnings press release in November 2018, It seems like it was a long time ago, but.

It's been a busy time said, so we've announced a series of new initiatives at that time for the region and we're now over one year into that plan.

And it's been very busy time executing on the strategy.

The impact of executing that strategy continues to impact our metrics and welfare a few quarters yet to come we are nearing the end of it but we had some more assets you have to sell.

Jim Green: We are nearing the end of it, but we have some more assets yet to sell. We look forward to the continuation of the strategy in future quarters as the next steps will consist mainly of asset sales with the proceeds used for debt reduction. That should demonstrate continued improvement in our balance sheet metrics.

Is it fair to the continuation of the strategy in future quarters as the next steps will consist mainly of asset sales with the proceeds used for debt reduction.

It should demonstrate continued improvement in our balance sheet metrics.

Hi, This is a diversified commercial office retail and industrial Weve assets in five Canadian provinces in six U.S. States.

Jim Green: Artis is a diversified commercial office, retail, and industrial, with assets in five Canadian provinces and six US states. Based on the Q4 NOI, it was 52.3% weighted in Canada and 47.7% in the United States. As the majority of future asset sales will likely be in Canada, we expect this ratio to continue to move such that greater than 50% of our assets will be in the United States. On an asset class basis, we're 48.6% weighted in office, 17.9% weighted in retail, and 33.5% weighted in industrial. Artis continues to be active in both new developments and redevelopment of our existing properties. We have, at the year-end, roughly CAD 103 million invested in projects currently under development.

Based on the Q4 and why.

It was 52.3% weighted in Canada, and 47.7% in the United States.

And as the majority of future asset sales will likely be in Canada. We expect this ratio.

Thank you to move such that greater than 50% of our assets will be in the United States.

But that's a class basis were 48.6% weighted in office, 17.9% wages in retail and 33.5% wages industrial.

I just continues to be active in both new developments and redevelopment of our existing properties.

We have at the year end roughly $103 million invested in projects currently under development.

Jim Green: During the quarter, we invested a further CAD 15 million roughly into the development projects and transferred one property completed at the value of about CAD 42 million from under development to completed properties. As detailed in the MD&A, we have several new development projects that remain underway, including a new mixed-use residential tower at 300 Main Street in Winnipeg, a new industrial space in Houston, and a small retail development as additional density on one of our retail sites in Winnipeg. Also, as detailed in the MD&A, we have several development projects in the pipeline in the planning stages, where construction has not yet actively started, and these projects are progressing well through the development stages. We've been actively marketing our Calgary office properties with the goal of selling into the market at the best prices we can achieve in the current Calgary market.

During the quarter, we invested a further $50 million roughly into the development projects.

Transferred one property completed at the value of about $42 million from under development get completed properties.

As detailed in the Mdna, we have several new development projects that are meet underway, including a new mixed use residential tower at 300 mainstreet, They want a big new industrial space in Houston, and a small retail development as additional density and one of the retail sites and what do they.

Also as detailed in the in DNA, we have several development projects in the pipeline in the planning stages for construction has not yet actively started and these projects are progressing well through the development stages.

Jim Green: Also, as detailed in the MD&A, we have several development projects in the pipeline in the planning stages, where construction has not yet actively started, and these projects are progressing well through the development stages. We've been actively marketing our Calgary office properties with the goal of selling into the market at the best prices we can achieve in the current Calgary market.

We've been actively marketing or Calgary office properties with the goal of selling into the market at the best prices, we can achieve in the current gathering market.

Jim Green: On pro forma, the Q1 2020 dispositions that have now closed, this sector's down to a very small, ballpark 2.1% of our total portfolio NOI. Disposing of assets in the Calgary market today has caused some further write-downs in value. However, we feel it's still the right decision, as we think the Calgary market will require several more years to recover and stabilize before it sees growth again. We've been able to maintain our balance sheet, with debt improving slightly from 52.6% last quarter to 52.3% this quarter. A small change, but moving in the right direction, despite incurring a fair value loss this quarter, caused largely by the sale of those Calgary office properties and also a foreign exchange loss, both of which affected our GBV.

Pro forma that Q1, Twentytwenty disposition says no closed the sectors down to a very small.

Oh, part, 2.1% and their total portfolio and why.

Disposing of assets in the Calgary market today, especially further write downs in value. However, we feel it's still a very decision as we think the Calgary market being a clear several more years to recover and stabilize before it she skills again.

Been able to maintain our balance sheet with debt improving slightly.

52.6% last quarter to 52.3% this quarter, so small change, but moving into right direction.

Despite incurring a fair value loss this quarter caused largely by the sale those kind of their office properties and also a foreign exchange loss.

Both of which affected our GDV.

That the GBB, it's up a bit from 50.6% at December of last year and the main driver of the increase it debt to JV has been the timing of purchases.

Jim Green: Debt to GBV is up a bit from 50.6% at December of last year, and the main driver of the increase in debt to GBV has been the timing of purchases for the planned unit buybacks as opposed to the asset sales, which will continue to happen in future quarters. We continue to target a range of 45% to 48% for debt to GBV over time. Our EBITDA interest coverage also remains healthy despite carrying a bit higher debt at the current time. With debt to GBV improving slightly this quarter, we also achieved an improvement in the debt to EBITDA ratio as well, so pleased to see that trending in the right direction.

Planned unit buybacks as quotas asset sales, which will continue to happen in future quarters.

We continue to target a range of 45% to 48% for debt to GBB overtime.

EBITDA interest coverage also remains healthy despite carrying a bit higher debt at the current time.

That's the GBB improving slightly this quarter. We also achieved an improvement in the debt to EBITDA ratio as well.

We're pleased to see that trending in the right direction.

Despite the dilutive effect of asset sales the unit buyback program combined with good same property growth and completion, if some of our development property is having a positive effect.

Jim Green: Despite the dilutive effect of asset sales, the unit buyback program, combined with good same-property growth and completion of some of our development property, is having a positive effect, and FFO came in at CAD 0.37 this quarter, up from CAD 0.34 last quarter and up from CAD 0.33 in the comparative quarter last year. AFFO for the quarter was CAD 0.25, up a penny from the same quarter last year. Our payout ratios for the year are very conservative, 38.3% of FFO and 51.4% of AFFO. Just coming back to those initiatives for a moment. On 1 November, the series of initiatives announced included increasing unit values by increasing NAV and continuing to focus on the quality of the portfolio.

And that's a full came in at 37 cents. This quarter up from 34 cents last quarter, an up from 33 cents in the comparative quarter last year.

Hey, AFFO for the quarter. This 25 cents up a penny from the same quarter last year.

A payout ratios for the year, probably very conservative, 38.3% of ethical and 51.4% to pencil.

[noise], so just coming back to those initiatives for a moment on November 1st They had a series of initiatives announced included increasing unit values by increasing haven't continuing to focus on the quality of the portfolio.

Jim Green: The distribution was reset at that time to CAD 0.54 annually, resulting in a very conservative payout ratio and freeing up cash to fund our development pipeline. The plan also included non-core asset sales of between CAD 800 million and 1 billion, and this process is well underway. We have completed and closed on CAD 603 million of sales to 31 December and have closed a further CAD 118 million subsequent to the quarter end. We have a further CAD 22 million under unconditional contract set to close in February. The basket of properties as listed as held for sale at 31 December was CAD 222 million, including the properties just mentioned as closed, some furthers that are in various stages of sale with some under conditional contract. We anticipate most of these will sell over the next two to maybe three quarters.

Distribution was reset at that time to 54 cents annually, resulting in a very conservative payout ratio and freeing up cash to fund our development pipeline.

Plan also included noncore asset sales of between 800 million to a billion.

And this process is well underway.

Weve completed and closed on 603 million of sales to December 31st kind of close to further hundred 18 million subsequent to the quarter and.

We have a further $22 million under unconditional contract set to close in February.

Basket of properties.

Jim Green: The basket of properties as listed as held for sale at 31 December was CAD 222 million, including the properties just mentioned as closed, some furthers that are in various stages of sale with some under conditional contract. We anticipate most of these will sell over the next two to maybe three quarters.

Listed as held for sale at December 31st was 222 million, including the properties just mentioned is closed.

And some further is that are in various stages of sale that some under conditional contract.

We anticipate most of these will sell over the next to it it may be three quarters.

Mission is also included using a portion of the sales proceeds to buyback or units under NCB and we accelerated this progress.

Jim Green: Initiative is also included using a portion of the sales proceeds to buy back our units under our NCIB, and we accelerated this progress portion of the plan by starting immediately after the announcement in November in advance of asset sales. From last November to 31 December, we've repurchased almost 60 million units at a cost of just over CAD 173 million. We used our line of credit to fund these purchases and plan on repaying the line as assets are sold. In addition to the NCIB purchases, we redeemed a maturing series of our preferred equity at a cost of CAD 78.4 million. If you include the redemption of preferred equity with the common equity, we basically met our target for equity redemption. Proceeds of asset sales will be focused on debt reduction in the near term.

<unk> of the plan by starting immediately after the announcement in November in advance of asset sales.

And from last November December 31st we've repurchased almost 16 million units.

Cost of just over $173 million.

We used our line of credit to fund these purchases and plan and reaping the line as assets are sold.

In addition to the Nclb purchases, we redeemed a maturing series of all preferred equity at a cost of $78.4 million.

So if you include the redemption of preferred equity with the common equity basically met our target for equity redemption.

Proceeds of asset sales will be focused on debt reduction.

In the near term however, we haven't either and CRB and we are in a position to purchase further equity if circumstances are favorable for that.

Jim Green: However, we have renewed our NCIB, and we are in a position to purchase further equity if circumstances are favorable for that. In our opinion, the plan is on track and ahead of schedule. Touching just for a minute on a couple of operational numbers, and then I'll pass it back to Armin. Fair value of the investment properties on the balance sheet at fair value this quarter was a net adjustment of approximately CAD 20 million. We did record some further gains on our industrial properties. However, it was offset by some reductions needed to get to the net realizable value in today's market of the Calgary office properties. We remain very comfortable with our debt-to-GBV ratio. It's starting to show improvements as we continue to sell properties, and we expect this to continue into future quarters.

In our opinion the plan is on track and ahead of schedule.

Touching just for a minute down a couple of operational numbers and then I'll pass it back darman.

So fair value of the investment properties.

On the balance sheet at fair value. This quarter was a net adjustment of approximately $20 million.

We didnt record some further gains on our industrial properties. However is offset by the some reductions needed to get to the net realizable value in today's market or the Calgary office properties.

We remain very comfortable with our debt to GBP ratio, it's starting to show improvements as we continue to sell properties and we expect this to continue into future quarters.

Jim Green: Still dealing with the temporary effect of using the line of credit to fund our NCIB until such time as purchases are received from asset sales. We also used the line of credit to redeem the Series G preferred units, also planning to repay that from asset sales. We've been gradually paying off mortgages and reducing our secured debt to GBV. As of 31 December 2019, our unencumbered property portfolio was valued at CAD 1.96 billion. On the financing side, we have a CAD 700 million unsecured revolving credit facility with a syndicate of lenders and two non-revolving credit facilities in the aggregate amount of CAD 300 million. Both of the non-revolving facilities are drawn in full, and we place swaps to fix the interest rates on most facilities as we expect they'll be outstanding for the full term.

Still dealing with the temporary effect of using a line of credit to fund our NCB until such time is purchases I received from asset sales.

And we also used a lot of credit to redeem the series G preferred units also planning to repay that from asset sales.

[noise], we've been gradually paying off mortgages and reducing our secured debt to GBP so as that.

December 31st our unencumbered.

Jeopardy portfolio was valued at 1.96 billion [noise].

[noise] on the financing side, we have a 700 million dollar unsecured revolving credit facility that a syndicate of lenders and to non revolving credit facilities in the aggregate amount or 300 million.

Both of the non are evolving facilities are growing in full and we play swaps to fix the interest rates and most facilities as we expect to be outstanding for the full term.

Touching briefly on same property is a great.

Jim Green: Touching briefly on same property, we had a great year and quarter for same property results. For the quarter, the results were +3.2% this quarter in functional currency. When we factor in support and exchange gains, it was +3.3% in Canadian dollars. We also presented a stabilized same property calculation, which eliminates both the properties planned for disposition as well as the Calgary office sector. On this basis, we had growth of 4.4% in functional currency, and it was the same number, 4.4%, once FX was factored in. In our industrial segment continues to show the strongest performance in both countries, with 9.4% growth this quarter in Canada and 6.3% growth in the US.

Your and quarter for same property results. So for the quarter. Other results were positive 3.2% this quarter in functional currency and when we factor in supporting exchange gains that was a positive 3.3% in Canadian dollars.

We'll also presented a stabilized same property calculation, which eliminates both the properties plan for disposition as well as the Calgary office sector and on this basis, we had growth of 4.4% functional currency and it was the same number 4.4% FX was factored in.

[noise] industrial segment continues to struggle the strongest performance in both countries with 9.4% growth this quarter in Canada, and 6.3% growth in the U.S.

Jim Green: This now represents 6 consecutive quarters of positive same property growth for us, and we're very pleased to see that progress. Touching on the net asset value, as we report our investment properties at fair value, we can calculate a net asset value per trust unit, just simply using the equity on our balance sheet, less the equity held by the preferred unit holders and divided by the number of common units outstanding at the end of the quarter. If you do that math, the net asset value per trust unit is CAD 15.56, only a penny from CAD 15.55 at the start of the year. Seems interesting to see only a 1-penny change, but there were a lot of moving parts.

This now represents six consecutive quarters of positive same property growth for us and we're pleased to see that progress.

That's right on the net asset value.

We report our investment properties at fair value, we can calculate a net asset value per trust unit.

Just simply using equity on their balance sheet less the equity held by the preferred unitholders and divided by the number of common units outstanding at the end of the quarters.

So if you do that math, they net asset value upper crust unit is 15 56.

Only a penny from 50 55 at the started the year seems interesting to see only a one penny change, but there were a lot of moving parts.

Jim Green: Foreign exchange for the year contributed a negative impact on net asset value of CAD 0.44, and the fair value loss was a further CAD 0.45. Offsetting that was a gain of roughly CAD 0.40 due to our NCIB purchases and the remaining gain from the fact that our income, excluding fair value and foreign exchange, was in excess of our distributions and also contributed to net growth in NAV. Artis ended the quarter with roughly CAD 51 million cash on hand and CAD 112 million undrawn on our line of credit. We've got several subsequent events detailed in our notes to the statements, which we believe continue to reflect our strategy of intelligent recycling of capital. We plan to continue our focus on a strong balance sheet and the overall quality of our portfolio. That completes my financial review.

Foreign exchange for the year contribute a negative impact on.

Net asset value 44 cents and the fair value loss was a further 45 cents.

I'm studying that was a gain of the roughly 40 cents due to our instead be purchases.

And the remaining gain from the fact that our income.

Excluding fair value and foreign exchange was in excess of I distributions and also contributed to net growth enough.

So let us ended the quarter with roughly $51 million cash on hand, and 112 million Undrawn on our line of credit and we've got several subsequent events detailed in our notes to the statements, which we believe continue to reflect our strategy of intelligent recycling of capital.

Jim Green: We plan to continue our focus on a strong balance sheet and the overall quality of our portfolio. That completes my financial review. We feel the initiatives announced in November 2018 will make Artis a better and stronger lessor, and we look forward to demonstrating that in future quarters. I'll pass it back to Armin for a little more.

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

That completes my financial review you feel the initiatives announced in November of 2018, well make artists are better and stronger.

Jim Green: We feel the initiatives announced in November 2018 will make Artis a better and stronger lessor, and we look forward to demonstrating that in future quarters. I'll pass it back to Armin for a little more.

You know towards the demonstrating that in future quarters, So I suspect I'm in for a little more okay. Thanks, Jim Lusk, we've had this like commentary for me.

Armin Martens: Okay. Thanks, Jim. Also just a comment here from me. Again, folks, on balance, we feel we've done very well this year over last year, delivering a total return to our investors of about 35%. We've made good progress on all fronts and delivered strong performance metrics for our unitholders. Excuse me. We've printed, as Jim mentioned, 6 consecutive quarters of same property NOI growth. Our weighted average rental increases are healthy. Our FFO and AFFO per unit are all solid numbers and growth and growing well. Our debt metrics improved just a little bit quarter over quarter. Looking ahead, given our very conservative payout ratio and the progress we've made on our strategic initiatives, debt reduction will be a top priority for us.

Again folks on balance we feel we've done very well this year over last year delivering it totally returned to investors of about 35%.

We've made good progress on all fronts and delivered strong performing performance metrics to unit holders.

So I believe printed I've, just mentioned six consecutive quarters of same property and why growth our weighted average rental increases are healthy ever bought your footprint. It well solid numbers, we won't get again well I.

Debt metrics improve just a little bit quarter over quarter I love you hadn't given our very conservative people duration.

Progress we've made on their strategic initiatives debt reduction will be a top priority for us we do feel that by the ended this year you can bring it down to 45% to 47% or.

Armin Martens: We do feel that by the end of this year, we can bring it down to 45% to 47% of our book value. That should be well received by the investment community. Again, you'll recall some key strategic initiatives we announced over a year ago, and of course, we've made very good progress on all fronts. The distribution continues to be ultra low and conservative and bulletproof, especially in these times when investors may be nervous for a lot of reasons. There are therefore a lot of reasons to take a hard look at Artis given our bulletproof payout ratio. Our unit buyback program went very well. Our property disposition program, of course, went very well and continues. It is business as usual.

Kelly.

And that's it should be that you've delivered that should be well received by the investment community.

Again, you'll recall some key strategic initiatives announced over a year ago and of course, we made very good progress on all fronts distribution continues to be ultra low and conservative and both especially these times going just as maybe nervous for a lot of reasons.

There are obviously a lot of really take a hard look at artist given our bulletproof penetration.

Buyback program went very well I, probably disposition program of course went very well continues it is beneath business as usual, we announced at 800 million $2 billion. It of dispositions and we're not there yet, but we've completed 759 on kind on on tries to coal correspond with the I address NAV to 50050 cents.

Armin Martens: We announced CAD 800 million to 1 billion of dispositions, and we're not there yet. We've completed CAD 750 million on time and on price to correspond with our IFRS NAV of CAD 15.50. A very good number which compared, of course, very well to our unit price. We're talking about assets that are tough to sell. I mean, the low-hanging fruit is still ahead of us. I think we continue to demonstrate very good value as we progress with our disposition program. It's important to note, of course, that as our financial metrics improve, so does our portfolio of properties. It is about real estate. We're reducing our office and retail weighting, increasing our ownership of industrial properties. Also reducing the number of secondary markets we're in. We're undiversifying, if you will.

Hey, good number which compared to of course, very well to our unit you had price.

We're talking but I have to kinda talk itself I mean, the easier low hanging fruit is still ahead of us. So I think we've demonstrated that means continue to demonstrate very good value as we progress with our disposition program.

It's important to note of course that I've got financial metrics improve so as our portfolio of properties. It it's about real estate, reducing our offices. We told me increase your ownership of industrial property also reducing another secondary dairy markets where anyway.

Diversify if you will I kind of your office exposure to consistently shrinking will be 2% at the end of Q1 and by the ending this year it will be down to zero.

Armin Martens: Our Calgary office exposure is consistently shrinking, will be 2% at the end of Q1, and by the end of this year it'll be down to zero. Our remaining retail investments will be open-air service sector properties in Western Canada only, which we feel is a very good focus for us. Meanwhile, our overall portfolio is performing well, and our industrial development pipeline is on track to deliver excellent results also. We invite you to look at our MD&A investor presentations for more color here. Looking ahead, folks, we will continue to work hard to keep our buildings full while bringing the rents up to markets and consistently streamlining and improving our portfolio of real estate. To be clear, the integrity of our balance sheet, our earnings growth, and implementing our strategic initiatives continues to be of utmost importance to us.

Really retail you baskets will be open air service sector properties in Western Canada, only which we feel is a very good focus for us.

No our overall portfolio is performing well.

And I got your development pipeline is on track to deliver excellent results also invite you to look at her mdna investor presentations for more color here.

Armin Martens: We invite you to look at our MD&A investor presentations for more color here. Looking ahead, folks, we will continue to work hard to keep our buildings full while bringing the rents up to markets and consistently streamlining and improving our portfolio of real estate. To be clear, the integrity of our balance sheet, our earnings growth, and implementing our strategic initiatives continues to be of utmost importance to us. That's our report for this quarter and year. We're pleased with the results and the progress we are making on all fronts, and I'll ask the moderator to take over and field your questions.

So looking ahead for fleets will continue to work hard to keep our building sold wants bringing the rents up to markets and consistently streamline and improving our portfolio. It feels good to be clear the integrity of our balance sheet or earnings growth.

Implementing a strategic initiatives continues to be about most importance to us.

So that's all reports for this quarter and here, we're pleased with results and the progress we're making on all fronts.

Armin Martens: That's our report for this quarter and year. We're pleased with the results and the progress we are making on all fronts, and I'll ask the moderator to take over and field your questions.

The longest moderated to kick off the field your questions.

Thank you.

Operator 1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question is from Jonathan Kelcher from TD Securities. Please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question is from Jonathan Kelcher from TD Securities. Please go ahead.

Ladies and gentlemen, we will now begin the question answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear my three contracts acknowledging everquest and it seems that speakerphone. Please let the handset before addressing any Keith.

Your first question if some Jonathan culture from TD Securities. Please go ahead.

Jonathan Kelcher: Thanks. Good afternoon.

Thanks, Good afternoon.

Yes, all that.

Armin Martens: Yes. Good afternoon.

Jonathan Kelcher: First question, just on the, I guess, there's CAD 100 million or so left held for sale on the balance sheet. Once you guys sell that, will that effectively end the asset disposition program?

First question just on the I guess, there's a 100 million or so left to held for sale on the balance sheet with that there's a lot of effectively once you guys still a lot effectively and the Oh disposition program.

It'll it'll end, the what was announced under the strategic initiatives, but you know over the years, we have consistently sold anywhere from 200 to do as much as 400 million of assets per year and recycle the capital that plywood probably continue yeah, there's always more research.

Jim Green: It'll end what was announced under the strategic initiatives. You know, over the years, we have consistently sold anywhere from CAD 200 to as much as CAD 400 million of assets per year and recycled the capital. That plan would probably continue.

Armin Martens: Yeah. There's always more recycling to be done, Jonathan. It could be, you know, at that point in time, the board will take a good look and see what the next step is. It could be we'll double down on our strategic initiatives, or it could be we'll just continue as we have in the past, recycling between, say, CAD 200 to 300 million of our properties and improving our portfolio that way.

He could be done John is that I didn't get it could be like that points in time, the board well, let's take a good luck and see what's the next step is it could be will double down on our strategic initiatives or it could be we'll just continue as we have in the past recycling between say to undergo Tonight, I will try properties and improving our portfolio that way.

Okay, but I I'm, assuming that would entail either buying or like if you're going to sell 200, a 300 <unk> looking too.

Jonathan Kelcher: Okay. I'm assuming that would entail either buying or like if you're gonna sell 200 to 300, you'd be looking to put that into either development or new acquisitions.

But I didn't either development or new acquisitions.

Promoted debt reduction, we got to get our debt down that's within 12 missed a much higher price month, but when they do that and we'll get to get down to 45% Len lens selectively growing there will be growing in the industrial sector generally.

Armin Martens: Primarily debt reduction. We've got to get our debt down. That's, we've been promised a much higher price multiple when we do that. If we get that debt down to 45% and then selectively grow, and we'll be growing in the industrial sector primarily.

Okay.

Jonathan Kelcher: Okay. How high a percentage would you like to? Like, industrials are up 30 right now. How high would you wanna get that?

Oh, hi, as a percentage would you like to are you like industrials are up 30, right now how high would you.

I want to get that.

At least up to 40 and after 40, we'll take a second look and maybe bringing up the 50.

Armin Martens: At least up to 40. After 40, we'll take a second look and maybe bring it up to 50.

Oh, Okay. So [laughter] sounds like what you guys did when you went into the U.S.

Jonathan Kelcher: Oh, sounds like what you guys did when you went into the US.

[laughter] kinda like that.

Jim Green: Kind of like.

Armin Martens: Yes. Any opportunity out here, we're actually acquiring additional development sites, industrial development sites right now in Phoenix and Houston and making bids in many offices. We expect to grow our industrial development pipeline. We're still achieving 7% unlevered yields. Buildings that we're building, we're planning them well, we're building them, we're leasing up and delivering great value for our unitholders.

The Judy Judy Judy you Gotta here, where we're actually acquiring additional development sites and that's the development sites right not only in Phoenix and is this deal.

And maybe even in Minneapolis, which that's expected growth industrial development type always killer, Chile, 7% I'll leave the deals I believe.

I think the buildings were planning them well development at least loved delivering great value for its like a unit holders.

Okay, and then just one one little modeling question the Genie was.

Jonathan Kelcher: Okay. Just one little modeling question. The G&A was. It came in pretty good in Q4. What would be a good run rate for G&A for 2020?

It came in pretty good in Q4, <unk>, what would be a good run rate for for GSK for 2020.

Oh, that's always a bit of a tough wonderful Jack I guess it if you take out the the swings that can be created by the unit based compensation fair value number.

Jim Green: Oh, that's always a bit of a tough one to project. I guess if you take out the swings that can be created by the unit-based compensation fair value number-

Jonathan Kelcher: Yep.

Jim Green: take out the special committee, whatever they choose to spend, I would say we'd be running in the CAD 2.5 to 3 million a quarter range.

And that the special Committee.

Jim Green: take out the special committee, whatever they choose to spend, I would say we'd be running in the CAD 2.5 to 3 million a quarter range.

Whatever they choose to spend.

I would say we'd be running in the.

She wouldn't have to $3 million a quarter inch.

Okay. That's the that's it for me I'll turn it back thanks.

Jonathan Kelcher: Okay. That, that's it for me. I'll turn it back. Thanks.

Thank you have the next question comes from Mt. Logan from RBC capital markets. Please go ahead.

Operator 1: Thank you. The next question comes from Matt Logan from RBC Capital Markets. Please go ahead.

Operator: Thank you. The next question comes from Matt Logan from RBC Capital Markets. Please go ahead.

Thank you and good afternoon.

Matt Logan: Thank you, and good afternoon.

Well Matt.

Armin Martens: Hello, Matt.

Matt Logan: Armin, on your comments, you mentioned that you're targeting a 45% to 48% Debt to GBV. Did you say that was by the end of 2020?

Our men on your comments, you mentioned that you're targeting a 45% to 48% debt to GBB do you see that was by the end of Twentytwenty.

Yes, I did.

Armin Martens: Yes, I did.

And so could you help us reconcile that figure with your comments.

Matt Logan: Could you help us reconcile that figure with your comments, for CAD 100 million of dispositions? Because by my back of the napkin math, you probably need to do CAD 300 to 400 million to hit that target.

For $100 million or dispositions because.

Hi, My back of the Napkin math, you probably used to do $3 million to $400 million to hit that target.

Yeah, I think he also mentioned that traditional you do a 20 fits really nicely as well anyway. So that's what again thank you.

Armin Martens: Yeah. I think you heard me also mention that traditionally we do CAD 200 to 300 million a year as well anyways. That's what I'm thinking.

Hi, it's a 100.

Matt Logan: And so-

Armin Martens: We still have about CAD 100 million in our plan, and then you should expect us to do what we've done in the past, another CAD 200 to 300 million.

Glad and then you should expect us to do what we've done the past 92 under generally.

Got it right to get to the 45% is about a further almost 600 million of asset sales.

Matt Logan: I got it.

Armin Martens: Your math is about right. To get to the 45% is about a further almost CAD 600 million of asset sales.

And so $600 million of asset sales or we just kind of what you've gotten held for sale today, plus what you see as normal course dispositions, but without the acquisitions, yes that would be over the next two years, let's say.

Matt Logan: CAD 600 million of asset sales would be just kind of what you've got in held for sale today, plus what you see as normal course dispositions, but without the acquisitions.

Jim Green: Yeah. That would be over the next two years, let's say. You know, I think we can hit that.

I think we can hit that.

[laughter] well, that's not Columbus I like.

Matt Logan: Okay.

Armin Martens: Your math numbers are right.

And maybe just changing gears here a little bit.

Matt Logan: Maybe just changing gears here a little bit. Your Calgary office exposure's, you know, down to just 2%. With that portion of your portfolio effectively in the rearview mirror, do you think negative fair value marks are also a thing of the past?

Your Calgary offs exposures, yeah down to just 2%.

With that portion of your portfolio effectively in the <unk> Rearview Mirror do you think negative fair value marks are also thing of the past.

Getting yep Yep.

Armin Martens: Getting there. Yeah. Yeah. We feel like we're stabilizing in terms of our NOI very nicely and in terms of our NAV.

Yes.

But we feel we're stabilizing in terms of her and Hawaii very nicely and in terms of I love.

And on the animal why it seems like the organic growth is trending ahead of your 2% to 3% a guidance.

Matt Logan: On the NOI, it seems like the organic growth is trending ahead of your 2 to 3% guidance. Do you see any chance that that might actually come in better than that number in 2020?

Do you see any chance that that might actually come in better than that number and 2020.

Yeah, we're optimistic we leave it it's been reluctant to give guidance the faster we're optimistic that we can kill beach.

Armin Martens: You know, yeah, we're optimistic. We've been reluctant to give guidance in the past, but we're optimistic that we can beat.

And would that be driven by the office portfolio, given there's maybe a little more occupancy upside a in that segment of the business.

Matt Logan: Would that be driven by the office portfolio, given there's maybe a little more occupancy upside, in that segment of the business?

Oh.

Armin Martens: Industrial will still continue to lead. Office and our retail, you know, we'll do better this year than last year.

I don't feel that still continue to lead then often I know you Josh.

Well, we'll do better this year last year.

Okay, maybe last one for me in terms of just modeling question you feel like is give us any color on the interest income this quarter.

Matt Logan: Okay, maybe last one from me in terms of just a modeling question. Can you like, just give us any color on the interest income this quarter?

Sure. So we are we carried a vendor take back mortgage on the sale of what 15 young.

Jim Green: Sure. We carried a vendor take-back mortgage on the sale of 415 Yonge, as well as a smaller vendor take-back on the sale of 800 Fifth Avenue, so that's contributing to the extra interest income.

As well as a a smaller undertake back on the.

Sale 850, so that's contributing to the extra interest income.

So should we expect that to be recurring next quarter.

Matt Logan: Should we expect that to be recurring, next quarter?

Yeah, it's a three year term on that TV.

Jim Green: Yeah, it's a three-year term on that VTB.

Okay I appreciate the color that's all for me. Thank you very much.

Matt Logan: Okay, appreciate the color. That's all from me. Thank you very much.

Jim Green: Thank you.

Thank you.

Thank you at the next question is fun much anymore from BMO. Please go ahead.

Operator 1: Thank you. The next question is from Jenny Ma from BMO. Please go ahead.

Operator: Thank you. The next question is from Jenny Ma from BMO. Please go ahead.

Jenny Ma: Thanks. Good afternoon.

Thanks, Good afternoon.

Armin Martens: Hi, Jenny.

So I know the the Calgary Office segment is a is largely behind you, but I just wanted to get some color on how we should look at valuation in terms of the Calgary assets you saw it looks like the cap rate came in at about 9% to 10%, but could you talk to us about to be occupancy and the terms.

Jenny Ma: I know the Calgary office segment is largely behind you, but I just wanted to get some color on, you know, how we should look at valuation. In terms of the Calgary assets you sold, it looks like the cap rate came in at about 9% to 10%. Could you talk to us about the occupancy and the term that's remaining in there and maybe, you know, how pricing was determined? Was it still based on in-place cash flow, or was it more on a price per square foot basis?

That's remaining in there and maybe you know how how pricing was determined with its still based on in place cash flow or was it more on a price per square foot basis.

Armin Martens: You talking about the TransAlta building or the-

You're talking about the Trans Mountain building.

I'm talking about the ones that I did subsequent to yearend actually January the recent ones.

Jenny Ma: I'm talking about the ones that you guys did, subsequent to year-end, actually, January, the recent ones.

Yeah, Okay, Yeah, I mean, I'm going to behind us.

Armin Martens: Yeah. Okay. Yeah, I mean, they're behind us. The TransAlta building is the one that impacted us the most. It was 100% occupied. Three years left to go on the lease, just a shade under three years. They had already given us written notice that they're leaving. I think they're moving very shortly into another building. We just did the math, the sensitivity analysis. We looked at the present value of their lease. We looked at the value of that empty building, how long would it take for us to lease it up, the cost involved, the IRR, and we just came to the conclusion that the price we sold it at was the right price.

The Trans Mountain Valley is one that that.

That's the most was 100% occupied at three years left to go on the lease just a shade under two years. It did I really given that's written notice that you're leaving Dave I think it move is very very shortly to another building and so we just did the math degrade the sensitivity analyses normally.

Look at the present value of their lease we looked at them the value that empty belly, how long would take but I still is set up the cost involved and the IR and we just came to conclusion that the price. We saw that went to like price now. Meanwhile, on a short term leases. It's a high cap rate. We can certainly that's too bad but that Ken was leaving anyway.

Armin Martens: Now meanwhile, on a short-term basis, it's a high cap rate. We're just, you know, that's too bad. But that tenant was leaving anyways, and we were gonna experience some pain. We thought the best time to crystallize a value would be right now, and so that's what we did.

And it really good expense, Japan, we thought the best time to crystallize value would be right now and because that's where we get.

Okay and can you just give us some general color on how how investors are approaching valuation in Calgary office.

Jenny Ma: Oh, okay. Can you just give us some general color on how investors are approaching valuation in Calgary office? Like I said earlier, is it really looking at the in-place cash flow, or is it on a price per square foot basis?

Like I said earlier, it didn't really being paid cash flow or is it on a on a price per square foot basis.

And just case it was a combination I guess you carry an income they carry income there to get paid while they wait Melissa Tan can you give up at least it and I'm, hoping the buyer has a lot of suggest there's a if you have to strategy Lisa to check companies and I don't know, there's a generally it's a price per square foot like for sure I think nine out of 10 times and they're lumpy.

Armin Martens: In this case, it was a combination. You know, there's some carry-in income. The carry-in income there, they get paid while they wait, while they plan to redevelop and lease. I'm hoping the buyer has a lot of success. They have a strategy to lease it to tech companies and others. Generally, it's a price per square foot for sure, I think nine out of ten times. And they're looking then at their leasing cost and how long it takes to lease, not just the cost to buy a tenant and their IRRs. The cost per square foot, I'd say they've come down in Calgary in the last year after year, quarter after quarter. They haven't gone up. I don't think we've seen the bottom yet in terms of valuations.

Let's turn their leasing cost at how long have changed at least not just the cost of by attended and their eyes and the cost per square foot I'd say, they've come down because again the last a year after year quarter, because they haven't gone up I don't think we've seen a bottom yet distributive valuations and you had since you know where they were satisfied we've done the right thing.

Armin Martens: The cost per square foot, I'd say they've come down in Calgary in the last year after year, quarter after quarter. They haven't gone up. I don't think we've seen the bottom yet in terms of valuations. In that sense, you know, we're satisfied we've done the right thing in basically getting out of the Calgary office market.

Armin Martens: In that sense, you know, we're satisfied we've done the right thing in basically getting out of the Calgary office market.

Basically getting onto the kind of the office market.

Jenny Ma: Okay. That's good color. Turning to industrial, I know you've mentioned in past conference calls that you've gotten a lot of unsolicited inbound interest on industrial. Just given markets this week not aside, just given the strength and the demand for industrial assets, and your desire to grow that asset class, I'm just wondering, for a good portion of your industrial assets, is there a price that you would be willing to sell it at, or are you more committed to expanding the strategy that you'd wanna hang on to all of it?

Okay. That's good color on turning to industrial I know you've mentioned in past quite conference calls that you've gotten a lot of unsolicited inbound interest on industrial just given markets. This week not side I'm, just given the strength and the demand for industrial assets I I.

<unk> versus your desire to grow that asset class I'm, just wondering for a good portion of industrial assets is there a price that you would be willing to sell it out or are you more committed to explain that strategy that that your you'd want to hang on to all of that.

Well it becomes a question of how much move on the table.

Armin Martens: Well, it becomes a question of how much we leave on the table. We're printing 8% growth right now. If we bring it down to 4 or 5 and look at our portfolio of CAD 1.8 billion, it goes up to about 2.3 billion in the five-year period, creating NAV, increasing NAV of CAD 3 per unit. That's just our industrial portfolio. If we just manage it optimally and grow it in a conservative manner in the next two years, and never mind building more industrial. Then I say, I mean, the next five years rather. Then what's that growth worth? Like, you know, do we give away all that now? What's the worth today, what's the present value of that? I don't know.

We're printing 8% growth right now feel they adopt a four or five I look at the quality of 1.8 billion. It goes up to about 3.2 point 3 billion in the number five year period.

Creating NAV increased now for $3 per unit, that's just Oh industrial portfolio. If we if we if you just magic optimally and gold in a conservative manner in the next three years I never mind building more industrial and then actually I'm not sure I mean, the next five years rather.

So then what's driving growth words that you'd like it would give away all night away now what's the what's true today whats the p. present value that so I don't know somebody gave us a four cap on Oliver industrial I guess would look I'd like to say, it's five and all of industrial they're gonna stay well, we can do a lot better about what do you imagine ourselves, but we'll give you have a better deal our retail if you want a retail.

Armin Martens: If somebody gave us a 4 cap on all of our industrial, I guess we'd look at. They're saying it's 5 on all of our industrial. You know, we're gonna say, "Well, we can do a lot better by holding and managing ourselves, but we'll give you a better deal on retail if you want our retail.

And what has the.

Jenny Ma: What has the volume of inbound calls been about the same or more or less in industrial?

The volume of inbound calls been about the same are you or more or less.

Well.

Yeah, It's always yeah, I mean, we could sell industrial before dinner Tonight any like any via the weak right. It's always there, but if we were really interesting sorry, just industrial that would be based global marketing process. There. Yeah. I just said, we have conservatively, but 120 billion of industrial it right now.

Armin Martens: Yeah, it's always. I mean, we can sell our industrial before dinnertime tonight, any night, any day of the week, right? It's always there. But if we were really interested in selling just industrial, that would be basically a global marketing process there. Yeah, as I said, we have conservatively about CAD 1.8 billion of industrial right now, and that's a good chunky portfolio. It's a great and well-diversified portfolio in terms of tenant mix and building type. It's an ideal portfolio for anybody. We're not even entertaining it right now.

The good chunky portfolio at the grade.

Well diversified portfolio, just kind of mix, resulting type and if it's an ideal portfolio for anybody so.

So what we're not even entertain you'd like now.

Okay, and then lastly, do you have any update on not any conversations you've had with a strategic review committee.

Jenny Ma: Okay. Then lastly, do you have any updates on any conversations you've had with the strategic review committee? Anything to share with us?

With us.

So that's a fair question do you have a script an answer for sure.

Armin Martens: That's a fair question, and we have a scripted answer for you. Again, none of us on the management team are members of the special committee nor are we spokespeople for the special committee. You can see by our financial statements that they're busy and they're working. We know they've hired advisors, and you can rest assured they're being as productive and efficient as possible, and that as soon as they have something material to announce, they will be doing that. Otherwise, I can't say anymore.

So again, none of us on them as a team on this amendment discuss the Canadian nor are we spokes people think especially if you buy our financial statements that they're busy and they're working in all these high.

Yes, and you can do that they should there be productive and officially as possible and that as soon as you have something material to announce.

He won't new well be doing that.

Otherwise I can't see.

I think previously you had mentioned a timeline sort of mid year is that still the case.

Jenny Ma: I think previously you had mentioned a timeline sort of mid-year. Is that still the case?

Well, if I did I, just I'm not officially truth I cant officially predict anything but they started last year and I think you had the best benchmark you have is to look at industry practice, what I'm, especially pleased has done for 22 weeks and how long how long it takes and use that as a guy let that they've got the got started last year in August and.

Armin Martens: Well, if I did, I can't officially predict anything, but they started last year, and I think the best benchmarking out is to look at industry practice, what other special committees have done for under a week, and how long it takes. You can use that as a guideline. They got started last year in August. I think there's every good reason for investors to be patient and optimistic.

I think there's there's every good reason for investors to patients and optimistic.

Okay, great. Thanks, I'll turn it back.

Jenny Ma: Okay, great. Thanks. I'll turn it back.

Thank you didn't ask question is from Mike My Kids from Desjardins. Please go ahead.

Operator 1: Thank you. The next question is from Mike Markidis from Desjardins. Please go ahead.

Operator: Thank you. The next question is from Mike Markidis from Desjardins. Please go ahead.

Hi, Thanks.

Mike Markidis: Hi. Thanks, everybody. Just on Towne Business Center, I guess the industrial property that came on stream in Q4. Jim, do you have a sense of when like was it a full Q4 contribution for the space that came online, or was it back-end loaded?

Everybody [noise].

Just on a tower business Center I guess, the industrial property that came on stream in the fourth quarter. Jim do you have a sense of when like was it a full quarter contribution for the space that came on line or was it backend loaded.

So tower was.

Armin Martens: Tower was a two-building portfolio. One's 100% leased. The other one is not leased yet. But the first building did come on stream. Phil, can you. I think it was for the whole entire quarter. Is that right? Yeah.

It's too soon yielding portfolio ones, 100% leased the other one is not least yet.

The first building did come Onstream.

Okay I think it was for the hotel quarters area for the fourth quarter, yes.

Philip Martens: For Q4, yes.

Armin Martens: Yes. At the beginning of the quarter?

Beginning.

Philip Martens: Yeah, October.

October.

Okay.

Armin Martens: Okay.

Sorry, so there's two buildings that are leased one came onstream in in the second.

Mike Markidis: Sorry. There's two buildings that are leased. One came on stream, and then the second-

Armin Martens: Two-building portfolio. One's leased, and the-

Two to two building portfolio once leased and okay.

Mike Markidis: Oh, okay.

Armin Martens: Building that leased came on stream.

Came on stream Tempur Sealy took.

Philip Martens: Yeah. Tempur Sealy took the whole of the first building of 289,000 sq ft 1 October. The second building is completed, but it is vacant and we are getting very good traction for our lease activity. We hope to have that leased up this year.

All of the first building up 289000 square feet October one.

And the second building is is completed but it is they can and we are getting very good traction or at least activity. So we hope to have that we've got this year.

Okay.

Mike Markidis: Okay. Beyond that, I mean, in terms of your plan to keep growing the industrial portfolio, I guess the first question would be just looking at your developments that you have underway right now. You've still got a little bit of space left at Park 895 that you could do, but there isn't anything else active. Should we be expecting some more activity to percolate as the year goes on?

And then I'm.

Okay. So beyond that I mean in terms of your you.

And to keep growing the industrial portfolio I guess first question would be you just looking at your developments that you have a underway right now you've still got a little bit space left that Parky 95 that you could do but there wasn't anything else active so should we be expecting them to more activity to percolate earlier goes on.

Yeah, I need somebody just got to face the rest of tolerate leasing out, but you're right. We just bought another 40 acres adjacent to park is show here in Phoenix.

Armin Martens: Yeah. I mean, some we've just got to finish the rest of Tower, like leasing out. But you're right. We just bought another 40 acres adjacent to Park Lucero here in Phoenix. It was at 40 acres, right, Phil?

And it was a four day because like so 37%, yes, and so we've got plans to do about 400000 square feet industrial there.

Philip Martens: 37 precisely.

Armin Martens: Okay. Yeah.

Philip Martens: Yeah.

Armin Martens: We've got plans to do about 500,000sq ft of industrial there. Sorry.

Lastly, I think so it's up to 504 buildings 500000 square feet.

Philip Martens: 500.

Armin Martens: Yeah. Six stories up, 500. Four buildings, 500,000 sq ft. It blends in very well. It gives, it's good efficiency for our Park Lucero. You should see the site plan. We like it a lot. We've got that coming up, and we'll get that ramped up this year, at least to commence whenever we get mobilized. We, you know, we're bidding on properties in other markets that we're in, such as Minneapolis as well. We're a little bit behind, and we're careful with new investments and new developments. We can't overdevelop, we can't underdevelop, because we're also working on paying down our debt.

Blends in very well I think gives a good efficiency far apart. We certainly appreciate you just saw the.

Can you give like a lot. So we've got that's coming up.

Got that ramped up this year at least the commencement of the we're getting mobilized and then we're bidding on our properties and other markets definitely such as many office as well if its little bit behind I would count for what was it with new investments in new developments, we don't know kinda over what we've developed we kinda underdeveloped and because we're also working on paying down again.

Okay.

Mike Markidis: Okay, is your future growth in industrial all planned for US and all planned through development, or are you contemplating acquisitions as well?

And then it is your future growth and industrial all plans for U.S. and all plan through development are you contemplating acquisitions as well.

Yeah, Yeah and back that you look at that point as we get a debt down the about the ramp up our development pipeline right now we're focused on the U.S.

Armin Martens: Back to that point. As we get our debt down, we'll be able to ramp up our development pipeline. Right now, we're focusing on the US, Canada selectively. The barriers to entry are high, and the IRRs are pretty low in Canada. We're doing very well with our US development pipeline. As we pay down our debt, we expect to ramp that up even more and grow it more.

Kansas selectively in the various gentry I realize it pretty long Canada.

But we're doing very well the U.S. development pipeline and I repeat on I guess, we would expect ramped that up into more and more.

Okay.

Mike Markidis: Okay. Just thinking about, obviously, you can't give an update in terms of what the strategic committee is doing. Have you, as a management group, given any thought to, in the event that... Well, I guess as part of the strategic review, you must be proposing one alternative at least, which is course of action if this company is not sold. Would that be correct?

Just just thinking about obviously you can't give an update in terms of what the strategic committee is doing what have you get as management group have you given any thought too.

In the event that.

Well I guess as part of the strategic could be you must be.

Posing.

One alternative at least which is of course of action. If if this company is not so that'd be correct.

That's always a consideration that's it that's definitely a strategic consideration, okay and so.

Armin Martens: That's always a consideration. That's definitely a strategic consideration.

Mike Markidis: Okay.

Armin Martens: On the table.

Mike Markidis: On that, are you able to discuss what your ideas are in the event that it doesn't result in a sale, how you would change? I mean, you've put out a plan that you've executed quite well on. The market arguably hasn't necessarily given you any credit for it or not the credit that you'd wanna see. With that in mind, how does that change or how does that impact your thoughts for the, I won't call it the status quo, for the going concern plan, if in the event that there's no sale transaction?

So on that are you able to discuss what what your ideas are in the event that it doesn't.

Result in the sale with the how you would change when you put out a.

Plan.

That you've executed quite well on the market arguably hasn't necessarily give me any credit for it or not the credit that you'd want to see.

So with that in mind, how does that change or how does that impact your thoughts for the but I won't help status quo for the going concern plan if in the event, there's no a sale transaction.

Sorry, I mean anything anything material would have to be approved by the board before we could you discuss it but it did of course.

Armin Martens: I mean, anything material would have to be approved by the board before we could even discuss it. The path that we're on now is to shrink office selectively, shrink retail selectively, and to grow industrial. Of course, as we dispose of offices to pay down debt, fix the balance sheet, and then once that's fixed and stabilized, you know, we can ramp up growing our industrial. I think that gives a good perspective. I couldn't say much more than that.

I think we're on now is too if you shrink office selectively.

Shrink retail selectively and to grow industrial and of course and and.

As we dispose it has to pay down debt fixed the balance sheet and then once that's fixed is stabilized.

To wrap up going all the industrial.

And so I think that gives a good perspective I couldn't see much more than that.

Mike Markidis: Okay. Just last one for me before I turn it back. You know, just in terms of the sales, obviously you've got assets for sale. We know the CAD 100 or so million, or sorry, I can't remember the exact number, but you've completed some and there's another CAD 100 or so million left to go. Another sort of CAD 600-ish, I think was the number to get down to your planned debt target. I know you're talking about Canada. Can you give us a flavor as in terms of what assets would be included in that other CAD 600? Is it specific markets or regions? I mean, it sounds like industrial isn't one that you wanna look at, but is it specific cities? Is it specific, is it retail versus office?

Okay, and then just last one from me before I turn it back.

Just in terms of the these sales obviously, you've got asked for sale we know the.

Hundreds or so million or sorry, I remember the exact number but to prove to be completed someone is another hundred or so million left to go.

But another sort of six Hundredish I think was the number to get down to your planned that target and I know you're talking about Canada.

So can you give us a flavors in terms of what assets would be included in that other 600.

Is it is it specific markets or regions I mean, it sounds like industrial isn't one that you want to look out but does it specific cities isn't specific <unk> retail versus office given it sounds what you got.

Mike Markidis: Just give me a sense what you got planned.

<unk>.

Armin Martens: Not much more color. I mean, it'll be more office. I mean, here we mentioned we wanted to start Calgary office down to zero, but it'll be more office. I don't wanna tell you which city, but primarily in Canada, more office and then more retail on both case on a select basis. When we get to that point, we'll probably identify the properties quite clearly. At the level we'll get to that at Q1.

So not much more color I'm gonna be adding more often somebody here given actually like Chicago office stepped down to zero.

I will be more often and I I don't want to tie with city, but primarily in Canada.

More office and then and then more we job both kinda select select basis and then when we.

You get to that point was probably identify the properties quite clearly and and I've been then we'll get to that.

Q1.

Okay.

Mike Markidis: Okay. Thank you very much. I'll turn it back.

Thank you very much I'll turn it back.

Thank you and at this time, we have no further questions. Please proceed.

Operator 2: Thank you. At this time, we have no further questions. Please proceed.

Operator: Thank you. At this time, we have no further questions. Please proceed.

Well I go. Thanks again, everyone are happy Friday towards all hope you all the good weekends cranks came about what the markets are doing today, that's such as like I'm sure. We lost come out of this just well. So thanks again for your interest and keeps saying good things about let's keep shortly and interested in order to Sweden and everyone have a good weekend top Justin.

Armin Martens: All right. Well, thank you again, everyone. A happy Friday to us all. Hope you all have a good weekend. Crying shame about what the markets are doing to us, but such is life. I'm sure we will all come out of this just well. Thanks again for your interest and keep saying good things about us. Keep showing an interest in Artis REIT. Everyone, please have a good weekend. Talk to you soon.

Thank you, Sir ladies and gentlemen, just doesn't do control just conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

Operator 2: Thank you, sir. Ladies and gentlemen, this does indeed conclude this conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude this conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.

[music].

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