Q1 2020 Earnings Call

April 30, 2020

Operator: Gentlemen and welcome to the Allied Properties REIT's Q1 2020 Earnings Conference Call. For your information, today's conference is being recorded. I would now like to turn the call over to your host, Mr. Michael Emory. Please go ahead, sir.

<unk> and welcome to the I lied properties Threes first quarter 2020 earnings conference call.

Or your information today's conference is being recorded.

I'd now like to turn the call over to your host Mr. Michael Emery. Please go ahead sorry.

Thank you Alain a good morning, everyone and welcome to our conference call Tom Cecilia and you are on the line with me to discuss Allieds results for the first quarter ended March 31, 2020, we may in the course of this conference call me.

Michael Emory: Thank you, Elaine. Good morning, everyone, and welcome to our conference call. Tom, Cecilia, and Hugh are on the line with me to discuss Allied's results for Q1 ended 31 March 2020. 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 and in our most recent quarterly report. Material assumptions that underpin any forward-looking statements we make include those assumptions described under Forward-Looking Disclaimer in our most recent quarterly report.

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 and in our most recent quarterly report.

Material assumptions that underpin any forward looking statements. We may include those assumptions described under forward looking disclaimer.

Our most recent quarterly report.

As you know a global pandemic overshadowed the first quarter of 2020, forcing people around the world to confront of Sabine and severe public health crisis.

Michael Emory: As you know, a global pandemic overshadowed Q1 2020, forcing people around the world to confront a sudden and severe public health crisis. Governments, businesses, and citizens have implemented extreme physical distancing measures in an effort to mitigate the spread of a novel virus, COVID-19. The physical distancing measures necessary to mitigate the spread of the virus have caused severe economic disruption. Governments and central banks worldwide have provided massive economic stimulus to counter the disruption and are likely to provide additional stimulus going forward. While this bodes well for recovery, there is no way to predict at this time the duration or severity of the current economic downturn. Allied's Q1 results were not impacted by the global pandemic and consequent economic disruption.

Governments' businesses and citizens have implemented extreme physical distancing measures in an effort to mitigate the spread of a novel virus Cobot 19.

The physical distancing measures necessary to mitigate the spread of the virus and cause severe economic disruption.

Governments and central banks worldwide have provided massive economic stimulus to counter the disruption.

And are likely to provide additional stimulus going forward.

While this bodes well for recovery there is no way to predict at this time, the duration or severity of the current economic downturn.

Highlights first quarter results were not impacted by the global pandemic and consequent economic disruption.

Michael Emory: We propelled strong internal and external growth in the quarter with a mid-single-digit percentage increase in same-asset NOI, FFO per unit, and AFFO per unit, and an 11.7% increase in NAV per unit. Cecilia will elaborate on our financial results as well as discuss our balance sheet and our short-term outlook. Tom will follow with an overview of leasing and operations. Hugh will provide a development update. And I'll finish with a few words on our long-term outlook. Now over to Cecilia.

We propelled strong internal and external growth in the quarter.

With the mid single digit percentage increase in the same asset in a wide.

FFO per unit and FFO per unit.

And then 11.7% increase in any the per unit.

To failure will elaborate on our financial results as well as discuss our balance sheet and our short term outlook.

On will follow with an overview of leasing and operations.

He will provide a development update.

And I'll finish with a few words on our long term outlook.

So now overtime soda.

Cecilia Williams: Good morning. I'll summarize our financial results, our balance sheets, and our revised internal forecast for 2020. First, our financial results. This quarter was one of our strongest ever. We achieved CAD 0.58 of FFO per unit, even with CAD 587 thousand of non-recurring condo marketing costs at King Toronto included in the calculation. Our annualized quarterly EBITDA reached a new high of CAD 343 million. Driven by rent growth in Montreal and rent and occupancy growth in Toronto, our same asset NOI in Q1 was up 4.3% from the comparable quarter last year, driving 5.2% growth in our normalized AFFO per unit. Moving to our balance sheet.

Good morning, I'll summarize our financial results, our balance sheet and our revised internal forecast for 2020.

First our financial results.

This quarter was one of our strongest ever we achieved 58 cents FSR per unit, even with $587000 of nonrecurring condo marketing cost backing Toronto, including the calculation.

Our annualized quarterly EBITDA reached a new high of $343 million.

Driven by rank growth in Montreal, and rent and occupancy girls in Toronto, our same asset and a why in the first quarter was up 4.3% from the comparable quarter last year.

Adding 5.2% growth in our normalized AFFO per unit.

Moving to our about shades.

Cecilia Williams: Driven by development, NOI growth, and the strength in our core markets, our NAV per unit at March 31 was up 11.7% from a year ago. At quarter end, our net debt to EBITDA was 6.8x, and our total debt was 27% of IFRS value. Both of these metrics are within our targeted range. Interest coverage was 3.3x and moving towards our goal of 4x. Our ratio of unsecured to secured debt was 2.1x at quarter end, with unsecured debt representing 67% of our total debt. At quarter end, our pool of unencumbered assets was CAD 6 billion, representing 73% of our investment properties. After closing The Landing last week, our pool now sits at CAD 6.2 billion and represents 74% of our investment properties.

Driven by developments and NOI growth and the strength in our core markets or an 80 per unit at March 31st was up 11.7% from a year ago.

At quarter end, our net debt to EBITDA was 6.8 times and our total debt was 27% of IRS value.

Both of these metrics are within our targeted range interest coverage was 3.3 times and moving towards our goal of four times.

Our ratio of unsecured and secured debt was 2.1 times at quarter end with unsecured debt, representing 67% of our total debt.

At quarter end, our pooled unencumbered assets was $6 billion, representing 73% of our investment properties.

After closing the landing last week, our pool now sits at $6.2 billion and represent 74% of our investment properties.

Cecilia Williams: We intend to continue prepaying or repaying mortgages as they come due, with the goal of having the majority of our asset base 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. Moving finally to our short-term outlook. Our Q1 results can't be taken alone in formulating an outlook for the remainder of 2020. We anticipate some downward pressure on our rental revenue in the short term as a result of the global pandemic and consequent economic disruption. Most indicative of what we can expect in Q2 is our rent collection for the month of April, which is the first full month during which physical distancing measures were in place across Canada.

We intend to continue prepaying or repaying mortgages as they come due with the goal of having the majority of our asset base 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.

Moving finally to our short term outlook.

Our first quarter results can't be taken alone in formulating and outlook for the remainder of 2020.

We anticipate some downward pressure on our rental revenue in the short term as a result of the global pandemic and consequent economic disruption.

Most indicative of what we can expect in the second quarter is our rent collection for the month of April which is the first full month during which physical distancing measures were in place across Canada.

Gross monthly rent due in April was $54 million.

Cecilia Williams: Gross monthly rent due in April was CAD 54 million. 74.4% of this is from office use. 15.4% from urban data center use, 7% from retail use, and 3.2% from parking use. In light of the current economic disruption, we have granted a one-month rent deferral to users in genuine financial need, which for us includes a significant portion of our retail users and a very small portion of our office users in early stages of business development. We expect to grant another one-month rent deferral to such users for the month of May. To date, we've collected 90% of the total amount due in April and granted one-month deferrals totaling CAD 4.2 million, which represents 8% of the total amount due. This leaves 2% of the total amount due in April to be collected.

74.4% of this is from office use.

15.4% from urban data center years.

7% from retail use and 3.2% from parking yes.

In light of the current economic disruption, we have granted a one month rent deferral to users in genuine financial need which for US include the significant portion of our retail users and a very small portion of our office users in early stages of business development.

We expect to grant another one month's rent deferral to such users for the month of me.

Today, we collected 90% of the total amount due in April and granted one month deferrals totaling $4.2 million, which represent 8% of the total amount due.

This leaves 2% of the total amount due in April to be collected we're actively pursuing collection of these amounts and expect to be successful in most instances.

Cecilia Williams: We're actively pursuing collection of these amounts and expect to be successful in most instances. Users of our UDC space experienced a surge in activity in late March and throughout April. The use of our meet-me rooms and cross-connection capability is rising accordingly, as is the need for additional power, which we can supply profitably in meaningful quantities. We expect the surge to provide a boost to our earnings in 2020 and a more material boost to our longer-term earnings. We expect to be in a position to quantify this more fully when we report our Q2 results. It's clear from the above that we'll experience some erosion in our rental revenues over the balance of 2020, primarily in the form of turnover vacancy in space we originally expected to be productive throughout 2020.

Users of our you do see space experienced a surgeon activity in late March and throughout April.

The use of our meet me rooms, and cross connection capability is rising accordingly, as is the need for additional power, which we can supply profitably and meaningful quantities.

We expect the surge to provide a boost to our earnings and 2020 and a more material boost to our longer term earnings we expect to be in a position to quantify this more fully when we report our second quarter results.

It's clear from the above that will experience some erosion in our rental revenue over the balance of 2020, primarily in the form of turnover vacancy in space. We originally expected to be productive throughout 2020.

We don't believe the short term erosion will be material, especially when we consider probable positive offsets flowing from or you do you see space and other aspects of our operations.

Cecilia Williams: We don't believe the short-term erosion will be material, especially when we consider probable positive offsets flowing from our UDC space and other aspects of our operations. Our original internal forecast for 2020 called for mid-single-digit percentage growth in each of same-asset NOI, FFO per unit, and AFFO per unit. In light of the global pandemic and consequent economic disruption, our revised internal forecast for 2020 calls for flat to mid-single-digit percentage growth in each of same-asset NOI, FFO per unit, and AFFO per unit. We expect to allocate a large amount of capital in 2020 with the same strategic coherence and discipline we demonstrated in 2019. We're committed to allocating CAD 335 million to development and value-add activity over the course of 2020, and we expect to allocate additional capital to accretive acquisitions.

Our original internal forecast for 2020 called for a mid single digit percentage growth in Egypt same asset I know why F O per unit and AFFO per unit.

In light of the global pandemic and consequent economic disruption our revised internal forecast for 2020 culture flat to mid single digit percentage growth in each of same asset and NOI and FFO per unit and after four per unit.

We expect to allocate a large amount of capital in 2020 with the same strategic coherence and disciplined we demonstrated in 2019.

We're committed to allocating $335 million to development and value at activity over the course of 2020, and we expect to allocate additional capital to accretive acquisitions.

Cecilia Williams: There are material areas of uncertainty with respect to our revised internal forecast, the most significant being the fact that we can't predict the duration of the physical distancing measures that are now in place across Canada. We also can't predict how consumers will respond in the short term when physical distancing measures are lifted or relaxed. I'll now pass the call to Tom for a discussion of our leasing and operating activities.

There are material areas of uncertainty with respect to our revised internal forecast the most significant being the fact that we can't predict the duration of the physical distancing measures that are now in place across Canada.

We also can't predict how consumers will respond in a short term when physical distancing measures are lifted or relaxed.

I'll now pass the call to Tom for a discussion of our leasing and operating activities.

Thank you Cecilia.

Tom: Thank you, Cecilia. Leasing momentum in 2019 continued into Q1, and activity remained strong until mid-March when it began to taper, though many lease negotiations continue. Overall, leased area in our workspace portfolio is at 95%. Average rents on space renew to replace grew substantially in Q1, showing a 24% increase on the affected area. Through the quarter and in April, we completed a number of important renewals and made leasing progress on our development projects. I'll provide brief highlights on leasing activity in our major markets, but wanted to use this call to focus mostly on how the Allied team has operated during this unprecedented time. Following are a few leasing highlights, workspace first, then UDC. Starting in Montreal, we completed a 15,000sq ft lease with Beanfield at 3510 Saint Laurent.

Tom Burns: Thank you, Cecilia. Leasing momentum in 2019 continued into Q1, and activity remained strong until mid-March when it began to taper, though many lease negotiations continue. Overall, leased area in our workspace portfolio is at 95%. Average rents on space renew to replace grew substantially in Q1, showing a 24% increase on the affected area. Through the quarter and in April, we completed a number of important renewals and made leasing progress on our development projects. I'll provide brief highlights on leasing activity in our major markets, but wanted to use this call to focus mostly on how the Allied team has operated during this unprecedented time. Following are a few leasing highlights, workspace first, then UDC. Starting in Montreal, we completed a 15,000sq ft lease with Beanfield at 3510 Saint Laurent.

Leasing momentum in 29 team continued into Q1.

Activity remains strong until mid March when it began to taper duminy lease negotiations continue.

Overall east area and our workspace portfolio is that maybe 5%.

Average wrench on space renewed or replace grew substantially in Q1, showing a 24% increase on the effected area.

Through the quarter in April we completed a number of important renewals and made leasing progress on our development projects.

I'll provide brief highlights on leasing activity in our major markets, but wanted to use this call to focus mostly on helped you Allergan has operated during this unprecedented times.

Following our two leasing highlights workspace first then you DC.

Starting in Montreal, we completed the 15000 square foot lease would be infield at 35 10 Standalone.

Tom: Subsequent to the quarter, Unity committed to a 35,000 sq ft expansion at Nordelec. We continue working with Moment Factory and Gensler on planning the repositioning of 700 De La Gauchetière. At quarter end, our Montreal portfolio was 93% leased. In Toronto, we continued discussions with one of our major tenants about making an additional pre-leasing commitment of 60,000 sq ft at The Well. Our rental portfolio in Toronto is 99% leased. We made good progress in Calgary and are now finalizing a 45,000 sq ft renewal. We are moving toward completion of three leases aggregating 12,000 sq ft at TELUS Sky. Our Calgary portfolio is 90% leased, well above the norm. In Vancouver, two of the tenants who made pre-leasing commitments at 400 West Georgia have exercised options for additional area, and that project is now 95% pre-leased.

Tom Burns: Subsequent to the quarter, Unity committed to a 35,000 sq ft expansion at Nordelec. We continue working with Moment Factory and Gensler on planning the repositioning of 700 De La Gauchetière. At quarter end, our Montreal portfolio was 93% leased. In Toronto, we continued discussions with one of our major tenants about making an additional pre-leasing commitment of 60,000 sq ft at The Well. Our rental portfolio in Toronto is 99% leased. We made good progress in Calgary and are now finalizing a 45,000 sq ft renewal. We are moving toward completion of three leases aggregating 12,000 sq ft at TELUS Sky. Our Calgary portfolio is 90% leased, well above the norm. In Vancouver, two of the tenants who made pre-leasing commitments at 400 West Georgia have exercised options for additional area, and that project is now 95% pre-leased.

Subsequent to the quarter unity committed to a 35000 square foot extension as an automatic.

We continue working with manufacturing Gensler, I'm planning to reposition of 700 DRG.

At quarter end or Montreal portfolio was 93% leased.

In Toronto, we continued discussions with one of our major tenants about making an additional pre leasing commitment of 60000 square feet at the well.

Our rental portfolio in Toronto is 99% leased.

We made good progress in Calgary and are now finalizing a 45000 square foot renewal.

And we are moving toward completion of three leases aggregating 12000 square for you to tell us Guy.

Our Calgary portfolio is 90% leased well above the norm.

In Vancouver, two of the tenants, who made pre leasing commitments at 400, West Georgia have exercise options for additional area and that project is now 95% pre leased.

Tom: Our rental portfolio in Vancouver is also 95% leased. Given the office demand-supply dynamic in Toronto and Vancouver, we expect continued upward pressure on rental rates over the remainder of 2020. We expect demand to remain strong in Montreal, though the demand-supply dynamic there putting less upward pressure on rental rates. Turning to our UDC portfolio, we completed a renewal just after the quarter with our single largest tenant at 250 Front. This 60,000sq ft lease now expires 31 August 2022. As Cecilia mentioned earlier, usage of our data center space has increased during the pandemic. All of the available space at 151 Front is under negotiation. Now to the team. While working through the myriad of issues caused by the global pandemic, the Allied team has stepped up in so many ways. Even though we've been physically separated, our communication has been constant.

Tom Burns: Our rental portfolio in Vancouver is also 95% leased. Given the office demand-supply dynamic in Toronto and Vancouver, we expect continued upward pressure on rental rates over the remainder of 2020. We expect demand to remain strong in Montreal, though the demand-supply dynamic there putting less upward pressure on rental rates. Turning to our UDC portfolio, we completed a renewal just after the quarter with our single largest tenant at 250 Front. This 60,000sq ft lease now expires 31 August 2022. As Cecilia mentioned earlier, usage of our data center space has increased during the pandemic. All of the available space at 151 Front is under negotiation. Now to the team. While working through the myriad of issues caused by the global pandemic, the Allied team has stepped up in so many ways. Even though we've been physically separated, our communication has been constant.

Our rental portfolio in Vancouver is also 95% leased.

Given the office demand supply dynamic in Toronto and Vancouver.

We expect continued upward pressure on rental rates over the remainder of 2020.

We expect demand to remain strong in Montreal.

So this demand supply dynamic there putting less upward pressure on leverage.

Turning to our you do see portfolio, we completed a renewal just after the quarter with our single largest tenant to 50 front.

This 60000 square foot lease now expires August 30, Onest 2022.

Yes, just feel you mentioned earlier usage of our data center space has increased during the pandemic.

All of the available space at 151 front is under negotiation.

Now to the team.

While working through the myriad of issues caused by the global pandemic. The Allied team has stepped up in so many ways, even though we've been physically separated our communication has been constant.

Following our just a few comments about how each of our department continues to contribute.

Tom: Following are just a few comments about how each of our departments continues to contribute. Our technology team have made sure we've had all the right tools to communicate. Our property managers have done an exceptional job answering questions, mostly about security, while collecting rents. Our accounting team have come through big time completing 2019 year-end adjustments and compiling all the numbers for our Q1 report less than 30 days from quarter end. Our UDC team have not missed a beat implementing new protocols for building access in a rigorously controlled environment that needs to remain fully operational in all circumstances. Our experience team has created a weekly newsletter for building users. They've also prepared a comprehensive package identifying all sources of government help to share with our building users. Our asset management team continues to track our performance internally and is also tracking our accounts receivable daily.

Tom Burns: Following are just a few comments about how each of our departments continues to contribute. Our technology team have made sure we've had all the right tools to communicate. Our property managers have done an exceptional job answering questions, mostly about security, while collecting rents. Our accounting team have come through big time completing 2019 year-end adjustments and compiling all the numbers for our Q1 report less than 30 days from quarter end. Our UDC team have not missed a beat implementing new protocols for building access in a rigorously controlled environment that needs to remain fully operational in all circumstances. Our experience team has created a weekly newsletter for building users. They've also prepared a comprehensive package identifying all sources of government help to share with our building users. Our asset management team continues to track our performance internally and is also tracking our accounts receivable daily.

Our technology team has made sure we've had all the right tools to communicate.

Our property managers have done an exceptional job answering questions, mostly about security Wow collecting rents.

Our accounting team have come to big time, completing 2019 year end adjustments and compiling all the numbers for Q1 report less than 30 days from quarter ends.

Are you D.C. team have not missed a beat implementing new protocols for building access.

Rigorously controlled environment that needs to remain fully operational in all circumstances.

Our experience team has created a weekly newsletter for building users. They've also prepared a comprehensive package identifying all sources of government help to share with their building users.

Well I sit management team continues to track or performance internally and has also tracking our accounts receivable daily.

Tom: Our talent team provides us with daily news on the virus in each of our operating regions. The team has also actually hired three new employees during the shutdown. Our leasing team are creating virtual tours of available space to stay in touch with the brokerage community and potential tenants. Dozens of deals are being discussed across the portfolio. Our operations supervisors and building operators are at the properties every single day. Last but not least, we promoted Doug Riches to Senior Vice President, National Operations. As many of you know, Doug has so ably run our UDC operations since 2009. Doug will continue to oversee our urban data centers, but will now turn his attention to systems and policies in our UDC and workspace portfolios, which will become fully integrated. I will now turn the call over to Hugh for an update on development activities.

Tom Burns: Our talent team provides us with daily news on the virus in each of our operating regions. The team has also actually hired three new employees during the shutdown. Our leasing team are creating virtual tours of available space to stay in touch with the brokerage community and potential tenants. Dozens of deals are being discussed across the portfolio. Our operations supervisors and building operators are at the properties every single day. Last but not least, we promoted Doug Riches to Senior Vice President, National Operations. As many of you know, Doug has so ably run our UDC operations since 2009. Doug will continue to oversee our urban data centers, but will now turn his attention to systems and policies in our UDC and workspace portfolios, which will become fully integrated. I will now turn the call over to Hugh for an update on development activities.

Our talent team provides us with daily news on the virus in each of our operating regions.

Team has also actually hired three new employees during the shutdown.

Our leasing team.

Our creating virtual tours available space to stay in touch with the brokerage community and potential tenants.

Dozens of deals are being discussed across the portfolio.

Our operations Supervisors and building operators around the properties every single day.

Last but not least we promoted Doug riches to senior Vice President National operations.

As many of you know, Doug So ably run or you do see operations since 2009.

Doug will continue to oversee our urban data centers, but we'll now turn as attention too.

Isn't policies in our UGC and workspace portfolios will become fully integrated.

I will now turn the call over to you for an update on development activities.

Thanks, Tom well, our construction activity has been affected by covert nights or we have been able to make progress on a number of projects this quarter I.

Hugh: Thanks, Tom. While our construction activity has been affected by COVID-19, we have been able to make progress on a number of projects this quarter. I will begin by giving a brief overview of the effects of the physical distancing on our construction projects. Construction activity. Our ability to make progress in construction projects has varied across the country. In Montreal, we have had to stop all construction activity temporarily, though it now appears it will restart in May. In Toronto, Calgary, and Vancouver, we have had some projects continue with little impact and others continue with more material impact. A few smaller projects have stopped altogether. In Montreal, for both 425 Viger and Nordelec, our base building work was completed prior to the construction moratorium being enacted. This has significantly reduced the impact on Allied.

Hugh Clark: Thanks, Tom. While our construction activity has been affected by COVID-19, we have been able to make progress on a number of projects this quarter. I will begin by giving a brief overview of the effects of the physical distancing on our construction projects. Construction activity. Our ability to make progress in construction projects has varied across the country. In Montreal, we have had to stop all construction activity temporarily, though it now appears it will restart in May. In Toronto, Calgary, and Vancouver, we have had some projects continue with little impact and others continue with more material impact. A few smaller projects have stopped altogether. In Montreal, for both 425 Viger and Nordelec, our base building work was completed prior to the construction moratorium being enacted. This has significantly reduced the impact on Allied.

I will begin by giving a brief overview of the effects of the physical discipline on our construction project.

Got it.

Construction activity.

Our ability to make progress construction projects has varied across the country.

In Montreal, we've had the stock all construction activity temporarily so it now appears it will restart in may.

In Toronto, Calgary, and Vancouver, We've had some projects continue with little impact and others continue with more material impact.

A few smaller projects have stopped all together.

In Montreal.

For both for 25, VJ and Lenore work our base building work was completed prior to the construction moratorium blue enacted.

It's a significantly reduced the impact on our lives.

Hugh: We have some small-scale landlord work projects and relocation projects that have had to be postponed. The team has been working proactively with our consultants and contractors to prepare for the pending recommencement. In Toronto and Kitchener, the majority of our projects fit under the Ontario government's permitted activity. The Well, 19 Duncan, and College and Manning are all mixed-use projects that have all continued to progress, though at a slightly reduced pace. We experienced a temporary drop in manpower when physical distancing measures were first implemented but have seen a rebound over the past couple of weeks. We currently expect there to be approximately 2 to 3 week delay in our schedule for these projects. Our projects at King and Spadina and Brightest Phase 3 have both been impacted. Neither of these projects fit squarely under the province's exemptions.

Hugh Clark: We have some small-scale landlord work projects and relocation projects that have had to be postponed. The team has been working proactively with our consultants and contractors to prepare for the pending recommencement. In Toronto and Kitchener, the majority of our projects fit under the Ontario government's permitted activity. The Well, 19 Duncan, and College and Manning are all mixed-use projects that have all continued to progress, though at a slightly reduced pace. We experienced a temporary drop in manpower when physical distancing measures were first implemented but have seen a rebound over the past couple of weeks. We currently expect there to be approximately 2 to 3 week delay in our schedule for these projects. Our projects at King and Spadina and Brightest Phase 3 have both been impacted. Neither of these projects fit squarely under the province's exemptions.

We have to have some small scale landlord work projects and relocation projects that have had had to be postponed.

Cool has been working proactively with our consultants and contractors to prepare for the pending retirement expense.

In Toronto, and Kitchener, the majority of our projects that under the Ontario governments permitted activity.

The well lighting Duncan and college and many.

Are all mixed use projects that have all continue to progress, though at a slightly reduce pace.

We experienced a temporary dropping manpower when physical distance levers, we're first implemented but has seen a rebound over the past couple of weeks.

We currently expect there to be approximately two to three week delay in our schedule for these projects.

Our projects at close, but either and bright hot phase three have both been impacted.

Neither of these projects that squarely under the provinces exemptions. This has resulted in a reduction of construction activity on sites, we will assess the impact of the R&D project schedules once the moratorium is lifted.

Hugh: This has resulted in a reduction of construction activity on site. We will assess the impact on these project schedules once the moratorium is lifted. In Calgary and Vancouver, construction continues on Telus Sky's residential floors. We have seen a large reduction in manpower, which has resulted in a delay in occupancy for the top of the building. We were able to achieve occupancy for the office floors. The delay on the upper-floor occupancy will affect our residential rental schedule. We have pushed out the anticipated start of that program until the late summer. Work on 400 West Georgia, the Lawhe building, and the restoration of the Sun Tower continues unabated. Planning activity, while the pandemic has had an impact on construction, we have been able to progress on future development planning.

Hugh Clark: This has resulted in a reduction of construction activity on site. We will assess the impact on these project schedules once the moratorium is lifted. In Calgary and Vancouver, construction continues on Telus Sky's residential floors. We have seen a large reduction in manpower, which has resulted in a delay in occupancy for the top of the building. We were able to achieve occupancy for the office floors. The delay on the upper-floor occupancy will affect our residential rental schedule. We have pushed out the anticipated start of that program until the late summer. Work on 400 West Georgia, the Lawhe building, and the restoration of the Sun Tower continues unabated. Planning activity, while the pandemic has had an impact on construction, we have been able to progress on future development planning.

In Calgary in Vancouver, construction continues on pellets guys residential floors.

We've seen a large reduction the man power, which has resulted in delayed occupancy for the top of the building.

We were able to achieve loglisci for the office floors.

The delay on the upper floor occupancy will affect our residential rental schedule, we have pushed out the anticipated startup program until the late summer.

Work on the 400 West, Georgia, the law, who building and the rest tricks of the Sunpower continues unabated.

Grading activity.

Well the pandemic has had an impact on construction, we have been able to progress on future development planning.

Hugh: In Montreal, we are continuing to progress the initial planning for the multi-phase intensification of Nordelec. In Toronto, we're in the final design stages for both King and Brant, and Adelaide and Spadina. While COVID-19 has impacted progress on our construction projects, we have been fortunate that this has been minimal. The third-party contractors that are working on our projects have done a great job making progress, monitoring that workers follow protocols to ensure their safety. I will now turn the call back to Michael.

Hugh Clark: In Montreal, we are continuing to progress the initial planning for the multi-phase intensification of Nordelec. In Toronto, we're in the final design stages for both King and Brant, and Adelaide and Spadina. While COVID-19 has impacted progress on our construction projects, we have been fortunate that this has been minimal. The third-party contractors that are working on our projects have done a great job making progress, monitoring that workers follow protocols to ensure their safety. I will now turn the call back to Michael.

In Montreal, we're continuing to progress the initial planning for the multi phase intensification of linear or lack in Toronto, where in the final stage design stages for both Korean brands and Adelaide and for diner.

Well Kobin Nike has impacted progress on our construction projects, we have been fortunate that this has been minimal.

The third party contractors that are working on our projects.

Done a great job, making progress voluntary and that workers follow protocols to answer their safety.

Ill now turn the call back to Michael.

Thank you Hugh.

Michael Emory: Thank you, Hugh. In my opinion, equity market valuation of public real estate entities is now largely disconnected from underlying real estate values.

In my opinion equity market valuation of public real estate entities is now largely disconnected from underlying real estate values I've seen this occurs several times in Allieds 17 years as a public real estate entities in every instance real estate.

Michael Emory: I've seen this occur several times in Allied's 17 years as a public real estate entity. In every instance, real estate values did not follow the equity markets down, but rather the equity markets caught back up with underlying real estate values in a reasonably short period of time. This is exactly what I expect will happen this time around. We continue to have deep confidence in and commitment to our strategy of consolidating and intensifying distinctive urban workspace and network dense UDCs in Canada's major cities. We firmly believe that our strategy is underpinned by the most important secular trends in Canadian and global real estate, and that these trends will not be altered in any material way by the global pandemic or its aftermath.

Values did not follow the equity markets down, but rather the equity markets caught back up with underlying real estate values in a reasonably short period of time.

This is exactly what I expect will happen this time around.

We continue to have deep confidence in and commitment to our strategy of consolidating and intensifying distinctive urban workspace and network density seems into Canada. This major cities, we firmly believe that our strategy is underpinned by the most importantly secular trends.

In Canadian and global real estate.

And that these trends will not be altered in any material way by the global pandemic or its aftermath.

Michael Emory: We also firmly believe that we have the properties, the financial strength, the people, and the platform necessary to execute our strategy for the ongoing benefit of our unitholders. To conclude, I don't believe any aspect of Allied's vision or mission has been or will be undermined by the global pandemic and its aftermath. People will not retreat from cities, nor will they become less social. We are and always will be social beings. Sensitivity to wellness and sustainability will be more pronounced than ever, but it will not be new in any way to city builders. Perhaps most importantly for our vision and mission, the men and women who constitute knowledge-based organizations are not going to retreat in droves to technologically empowered home offices.

We also currently believe what we have the properties the financial strengths, but people and the platform necessary to execute our strategy for the ongoing benefits of our unitholders to.

To conclude I don't believe any aspect of Allieds vision or mission has been or will be undermined by the global pandemic and its aftermath people will knock retreat. Some cities nor will they become less social we are and always.

We'll be social beans.

Sensitivity to wellness and sustainability will be more pronounced than ever but it will not new in any way to city builders.

Perhaps most importantly for our vision and mission the men and women who constitute knowledge based organizations are not going to retreat in droves, two technologically empowered home offices.

Michael Emory: Indeed, as one perceptive Canadian put it, "The dream of working from home has been destroyed forever by COVID-19." I've never dreamed of working from home, and I never will, but I think that particular Canadian is absolutely correct. I hope this has been a useful and comprehensive update for you in this unusual time. We'd now be pleased to answer any questions you may have.

Indeed, as one perceptive Canadian put it the dream of working from home has been destroyed for ever encoded by improvements.

I've never dreamed of working from home and I never will.

But I think that particular Canadian is absolutely correct.

I hope this has been a useful and comprehensive update for you in this unusual tight.

We'd now be pleased to answer any questions you may have.

Hi key.

Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press the star or asterisk key followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Once again, please press star one to ask a question. We will take our first question today from Jonathan Kelcher of TD Securities. Please go ahead.

Ladies and gentlemen, if you'd like to ask a question.

Please press the star after escape fun up but it did run on your telephone.

Please this year is at the mute function on your telephone is switched off to allow you signaled to reach our equipment.

If you find that your question has already been answered you may remember yourself from the Q by pressing star too.

Once again, please press star one to ask a question.

Let's take our first question say from Jonathan Culture of T. T Securities. Please go ahead.

Thanks, Good morning.

Jonathan Kelcher: Thanks. Good morning.

Michael Emory: Good morning.

Good morning, first first question just on the.

Jonathan Kelcher: First question just on the data centers. I guess you're expecting the increase in the power and the interconnection fees to mostly offset any weakness that you'll see in the rental portfolio. Is that all it is, or do you expect any leasing gains to help there as well?

[music].

Data centers.

I guess, you're expecting need the increase in the power in the interconnection fees to mostly.

Offset any weakness that you'll see in the rental portfolio.

Is that all it is or do you do you expect any.

Leasing gains to help there as well.

Our expectation is primarily that Bu D C.

Michael Emory: Our expectation is primarily that the UDC revenue that we didn't anticipate in 2020 will offset some of the turnover vacancy that we think we may experience over the course of 2020. It would be the principal offset.

Revenues that we Didnt anticipate in Twentytwenty will offset.

Some of the turnover vacancy that we think we may experience over the course of 2020, it would be the principal offset.

Okay, and then would it be fair to say that the interconnection revenues, mostly to 50 fraud to power the increase in power would be from from both to 50 151.

Jonathan Kelcher: Okay. Would it be fair to say that the interconnection revenue is mostly 250 Front and power, the increase in power would be from both 250 Front and 151?

Right.

Michael Emory: The interconnection fees would emanate from 250 Front and 905 King. There is also rack revenue and conduit revenue increases that we would expect from 151 Front. It's a combination of those three things, plus the fact that a number of the users we expect will require additional power, which we have the ability to provide. Of course, the rental rate they pay is based on power as opposed to square footage. We translate it to square footage simply because it's terminology we are most accustomed to using. In fact, it's the amount of power availability that governs how much rent is paid, and as we increase it, more rent is paid by existing users.

The interconnection tedious emanate from 250 fronts.

At least.

No I know five key.

There is also.

Jack revenue and conduit revenue increases, but we would expect from 151 point. So it's a combination of those three things plus the fact that a number of the users.

We expect will require additional power, which we have the ability to provide and of course the rental rates. They pay is based on power as opposed to square footage Retranslated square footage simply because its terminology we.

Most accustomed to using that in fact, it's the amount of power availability that governs how much wrenches paid them as we increase it more ready fees paid by existing users.

Okay, and so we are you benefiting from the time abuse saving set up that Ontario's getting right now.

Jonathan Kelcher: Okay. Are you benefiting from the time of use savings that Ontario is getting right now? Or is that something you pass along?

Or is that something you pass along.

The we might benefit from the hydro reduction, where we're looking at that but most of it would pass through.

Michael Emory: We might benefit from the hydro reduction. We're looking at that, but most of it would pass through. Maybe not all of it, but most of it would pass through for the benefit of the users.

Maybe not all of it most of it would pass through for the benefit of users.

Jonathan Kelcher: Okay. Just secondly, the lease extension that you did close to the quarter, that seems relatively short. Can you maybe give a little bit of color on why it was just sort of a year and a half extension?

Okay, and then just secondly, the the lease extension that that you did close a quarter.

That seems relatively relatively short can you maybe give a little bit of color on on why it was just sort of a year to assets expression.

It's actually two and Tom Tom who oversaw that along with drug which is can speak to it very well that's that's how the the auction was.

Michael Emory: It's actually two. Tom, who oversaw that, along with Doug Riches, can speak to it very well.

Tom: That's how the option was written, Jonathan. They'll be exercised two years. They have three years to go, but they went ahead for two years.

Tom Burns: That's how the option was written, Jonathan. They'll be exercised two years. They have three years to go, but they went ahead for two years.

Britain Jonathan.

So they execute Neely.

Exercise two years, they have three years ago.

But they they went ahead for two years.

Okay. So would you still be working out of that further extension with them.

Jonathan Kelcher: Okay. Would you still be working on a further extension with them?

We will be were not right now, but we really.

Tom: We will be. We're not right now, but we will be.

Tom Burns: We will be. We're not right now, but we will be.

Okay. Thanks, So I think they Jonathan that that particular user.

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

Michael Emory: I think, Jonathan, that particular user plans to bolster the requirements from the facility and was able to execute a two-year extension without engaging in that negotiation with us. We fully expect that user to continue to occupy the premises well beyond the two-year extension, but it will be bolstering its expectations from us and from the operation of the facility over the next two years as part of that. We're fully prepared for that and fully conversant with it. The user didn't want to exercise more than two years of renewal because of that, and it was the only basis on which they could exercise renewal was two years.

Plans.

Two.

Bolster the requirements from that facility and.

Was able to execute a two year extension without.

Engaging in that negotiation with us so we fully expect that user to continue to occupy the premises well beyond the two year extension, but it will be bolstering its expectations from us and from.

The operation of the facility.

Over the next two years as part of that and we're fully.

We're fully prepared to that and and fully conversant with it but to use your didnt want to exercise more than two years.

Of renewal.

Because of bad and it was the only basis on which they could exercise renewal is two years they have flexibility under their lease and they chose that flexibility for those reasons, which isn't.

Michael Emory: They have flexibility under their lease, and they chose that flexibility for those reasons, which isn't a bad omen at all. It actually was designed to help us, and help us work towards a more rigorous facilities management protocol going forward, which will see them there, I believe, for a very long period of time.

It is bad at all it actually was designed to help us.

And and help us work towards a more rigorous.

Facilities management protocols going forward, which we'll see them.

There I believe it for very long period of time.

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

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

Thank you we take our next question from Mario Saric of Deutsche Bank. Please go ahead.

Operator: Thank you. We take our next question from Mario Saric of Deutsche Bank. Please go ahead.

Hi, good morning.

Mario Saric: Hi. Good morning.

Michael Emory: Good morning, Mario. Did you change jobs?

Good morning, Mary did you change jobs.

Apparently a I haven't but.

Mario Saric: Apparently, I haven't, but the question mark persists, I guess. Just on the operational side, the 1 million sq ft that remain to expire through 2020 includes what, 370,000 sq ft each in Montreal and Toronto. It looks like your overall disclosed mark-to-market on that is 17% versus the 24% that you did in Q1. Can you talk about the nature of the discussions that you're having on renewals and perhaps the average lease durations that tenants are thinking about? Are you seeing appetite for shorter term lease extensions in this environment, and how would the 17% you think look on a net effective rent basis?

Yeah.

Figure.

Okay. The.

Just on the on the operational side.

Then square feet remain to expire through them money into bookends of square feet Intermetro trial.

Right I mean for dual vault school Mark to market pharma is 17% versus the 24 ended in Q1 can talk with the nature of the discussions you're having a renewals and then perhaps the average lease durations or other tenants are picking mode or you see appetite for shorter term lease extensions.

In this environment and how far into 17% terrific look on him better productive members.

Merial, sorry, there's a little bit about reverberation.

Michael Emory: Mario, sorry, there's a little bit of a reverberation when you speak. I couldn't hear the question that clearly. I only got parts of it. Could you repeat it? Sorry about that.

When you speak I Couldnt hear the question that clearly could you.

I only have parts of that could you repeat it sorry about that.

Sure I'll try to even better.

Mario Saric: Sure. I'll try again. Is that better?

Michael Emory: Yeah, that's a little better. Maybe just speak a bit loudly. That'd be helpful.

Yeah, that's a little better it maybe just speak a bit loudly that'd be helpful. Okay.

Mario Saric: Okay. The question was just pertaining to your 1 million square feet that are expiring through 2020. I'm just curious on the appetite that tenants are showing in terms of maybe going shorter lease duration on the lease renewals and how the 17% mark-to-market that you have disclosed in the ME, how that may look like on a net effective rent basis.

Mario Saric: Okay. The question was just pertaining to your one million square feet that are expiring through 2020. I'm just curious on the appetite that tenants are showing in terms of maybe going shorter lease duration on the lease renewals and how the 17% mark-to-market that you have disclosed in the ME, how that may look like on a net effective rent basis.

For the question was just pertaining to your million square feet that are expiring or two or through 2020 and I'm. Just curious on the appetite, but tenants are showing in terms of maybe going shorter lease duration on err on the lease renewals and how we are the 70% mark to Mark.

Good job disclosed in the EMEA, how that new looks like on a net effective rent basis.

Right now we have no indication that people.

Michael Emory: Right now, we have no indication that people up for renewal or users up for renewal want to truncate renewal terms. In fact, quite the opposite. Right now, we have no indication that net effective rates on renewal are going to be below our expectation. Everything that we've negotiated through the shutdown has been consistent with our internal forecast. We don't see any evidence yet of users wanting to improve the terms of their renewal in light of what's going on in the global pandemic and consequent economic disruption. I think that makes a lot of sense given the supply-demand dynamics in Montreal, Toronto, and Vancouver. Toronto, there remains almost an element of desperation on the part of those people who need larger office requirements.

Up for renewal or users up for renewal Wanna Truncate renewal terms in fact I'm quite the opposite.

And right now we have no indication.

Net effective rates on renewal.

I was going to be below our expectation.

Everything that Weve.

Negotiated through the shutdown.

Has been consistent with our internal forecast so we don't see any evidence yet.

Of users wanting to improve the terms.

Their renewal in light of what's going on in the global pandemic and consequent economic this disruption I think.

That makes a lot of sense given supply demand dynamics in Montreal, Toronto and Vancouver.

Toronto, There remains almost an element of desperation on that part of those people who lead.

Larger.

Office requirements, and when I say larger I mean.

Michael Emory: When I say larger, I mean 15,000 sq ft and up. They're very hard to come by. A lot of people need them. For that reason, we don't expect any material alteration in the way people are prepared to commit to new space or renew existing space. We've never had pushback during the last 2 or 3 years on the escalating rental rates or on the timeframe that we wanted in relation to the renewal. There's no evidence of that yet. That doesn't mean we won't see such demands occurring. But as of today, there's no indication of that at all.

15000 square feet and.

The very hard to come by a lot of people need them and that for that reason, we don't expect any.

Material alteration in the way people are prepared to commit to new space or renew existing space and we've never had pushed back.

During the last two or three years.

On the escalating rental rates or on the timeframe that we wanted.

In relation to the renewal so theres no evidence of that yet.

That doesn't mean.

We won't see.

Such demands occurring but but as of today, there's no indication that at all.

Right Okay.

Mario Saric: Yeah. Okay. My second question is just on capital deployment. You know, if we look back, it's been almost 10 years since the GFC, and roughly around that time, I think Allied as an entity was thinking about external growth opportunities and thinking about international expansion into kind of typical Class A buildings, which is what they were called at the time, versus expanding the opportunity set within existing market nodes. Sticking to the existing nodes was the path taken at the time. I just wanted to dig a bit more into your comment on the disparity between public and private market valuations, and your expectation for completion of acquisitions during the year.

My second question is are on on capital deployment.

And if we look back it's been almost 10 years or since the gifts C and roughly around that time within Allied has an entity was was thinking vote external growth opportunities.

Opportunities and thinking about international expansion into kind of typical plus our buildings, which is what are called upon.

Versus expanding your opportunity set with American market nodes. So sticking to give you can always was the Pos taken at the time I just wanted to dig a bit more into your comment on the disparity between public and private market valuations and your expectation for completion of acquisition during the year could you maybe provide some context or color in terms of.

Mario Saric: Can you maybe provide some context or color in terms of those comments and whether you feel Allied as an organization could perhaps take advantage of the crisis that you're seeing today to perhaps expand internationally sooner than you otherwise would have anticipated?

For.

Those comments and whether.

You fill out as an organization could perhaps take advantage of or the crisis, what you're seeing today to perhaps to expand internationally earn sooner than you otherwise would have anticipated.

Yes, it's a good question, we certainly see.

Michael Emory: Yeah, it's a good question. We certainly see the economic environment that we're in, and that we expect to be negative for some time now to afford us opportunities that we wouldn't otherwise have seen in a more normal economic environment. I think they will predominantly be infill opportunities in Montreal, Toronto, and Vancouver. Perhaps also in Calgary, although there they will be very small as they have been in the past. I don't see this as a launching pad for Allied to enter other markets. It certainly may create opportunities in those other markets that would be appropriate for Allied to pursue.

The economic environment that we're in and that we expect to be.

Negative for some time now to afford us opportunities that we wouldn't otherwise have seen them in a more normal economic environment.

I think they will predominantly be infill opportunities in Montreal, Toronto and Vancouver.

Perhaps also in Calgary.

Although there are they will be very small as they have been in the past I don't see this as a launching pad for allied to enter.

Other markets.

It certainly may create opportunities in those other markets that would be appropriate for allied to pursue.

Michael Emory: Our feeling is we have so much opportunity in the major Canadian cities that we're focusing on, that it would be a misallocation of capital to look outside of those cities and certainly outside of Canada for growth opportunities in the near term, which I would sort of characterize as 3 to 5 years. I just don't see that as being appropriate for an organization that has such strength in Canada's major cities, and I believe will have continued significant opportunities to grow. Possibly as a result of the economic downturn we're now in, those opportunities might be more favorable financially than they would be in a normal market. No, I mean, to answer the question directly, no, we do not see this as a launching pad to expand our geographic focus.

But our feeling is we have so much opportunity and the major Canadian cities that we're focusing on.

Is that it would be a misallocation of capital.

To to look outside of those cities and certainly outside of Canada.

Growth opportunities in the near term, which I would sort of characterize is three to five years I just don't see that.

As.

The appropriate for an organization that has such strength in new candidates major cities.

And I believe we'll have continued significant opportunities to grow.

And possibly as a result for the economic downturn, we are now in that.

Opportunities might be more favorable financially than they would be in a normal market.

So no I mean to answer the question directly no we do not see this.

As a launching pad to expand.

Our geographic focus.

Understood. Okay, and then maybe just a quick follow up.

Mario Saric: Understood. Okay. Maybe just a quick follow-up on the public versus private discussion. Would you view this as an opportunity then to perhaps repurchase units a bit more aggressively than you have in the past?

On the public versus private.

Discussion or would you view this as an opportunity then to perhaps repurchase units.

The more aggressively than you haven't announced.

Good question and the answer is no we have never use our.

Michael Emory: Good question, and the answer is no. We have never used our NCIB for anything other than our long-term incentive compensation program, and I don't consider that to be an appropriate use of capital by an organization like ours. I think we will be fairly valued within a reasonable timeframe. Historically, that has been the case. We don't believe in buying our units, even if they're discounted in the market at the moment. We feel we can deploy capital to build our business and augment our portfolio that will be much more productive over time. I don't see us doing that.

MPCI before anything other than our long term incentive compensation program and I don't consider that to be an appropriate use of capital by an organization like ours.

I think we will be fairly valued.

Within a reasonable timeframe historically that has been the case and we don't.

I believe.

In by our units.

Even if they're discounted in the market at the moment. So we feel we can deploy capital.

To build out of visitors and augment our portfolio.

That will be much more productive overtime.

So I don't see us doing that.

Okay. My last question was comes back to a view of the data centers and kind of book to bills on Jonathan's question earlier.

Mario Saric: Okay. My last question just comes back to the urban data centers and kind of dovetails on Jonathan's question earlier. You know, the comment was the expectation for material boost to 2020 earnings, but perhaps an even greater longer-term impact on the cash flow stream from UDC coming out of this. Do you think that this crisis in some ways better enables you to lease up the remaining kind of 56,000 sq ft of availability at 250 Front, or are they independent of each other?

The comment was your expectation for material boost to 2020, earning perhaps.

Greater longer term impact.

On the casual street Bdcs coming out of those so.

Do you think that this crisis.

In some ways better enables you to lease up the remaining kind of 56000 square feet of availability or 250 front or the independent of each other.

No I I think it does I think it will increase the demand for space and power and as you know there are intertwined.

Michael Emory: No, I think it does. I think it will increase the demand for space and power. As you know, they're intertwined. I do believe it will allow us to build out the ecosystem at 250 Front. As Tom mentioned, the turnover vacancy that we had at 151 Front, which we signaled, I believe, when we laid our 2020 forecast out on 5 February, that is actually in negotiation with tenants that will augment the 151 Front ecosystem in a very meaningful way, and we would expect the same to occur at 250 Front over time. The answer is yes and yes, I suppose.

And I do believe it will allow us to build out the ecosystem at 250 front as Tom mentioned the turnover vacancy that we had at 151 from which we signaled I believe when we laid out 2020 forecast out on February 5th.

That is actually in negotiation with.

Tenants that will augment the one could do from a consistent in a very very meaningful way and we would expect the same to occur at 250 front overtime. So so the answer is.

Yes, and yes I suppose.

Okay. Thank you that's different.

Mario Saric: Okay. Thank you. That's it for me.

Thanks Mary.

Michael Emory: Thanks, Mario.

Thanks Keith.

Operator: Thank you. We take our next question from Jenny Ma of BMO Capital Markets. Please go ahead.

Thank you we take our next question from Jemima, our CMO capital markets. Please go ahead.

Operator: Thank you. We take our next question from Jenny Ma of BMO Capital Markets. Please go ahead.

Hi, good morning, everyone.

Jenny Ma [Director, Research: Hi. Good morning, everyone.

Jenny Ma: Hi. Good morning, everyone.

Michael Emory: Good morning.

Good morning, following on that the discussion about the data centers. The incremental short terms is that you expect I mean, a from a that sub segment how much of it would you consider to be variable such a card usage and then when you're thinking about how you assume it's going to offset some turnover vacancy in the office flux.

Jenny Ma [Director, Research: Just following on the discussion about the data centers. The incremental short-term boost that you expect from that sub-segment, how much of it would you consider to be variable, such as power usage? When you're thinking about how you assume it's gonna offset some turnover vacancy in the office portfolio, what kind of a, I guess, current situation work from home, shelter in place do you assume in terms of that variable component?

Jenny Ma: Just following on the discussion about the data centers. The incremental short-term boost that you expect from that sub-segment, how much of it would you consider to be variable, such as power usage? When you're thinking about how you assume it's gonna offset some turnover vacancy in the office portfolio, what kind of a, I guess, current situation work from home, shelter in place do you assume in terms of that variable component?

All the L., what kind of Bob like a current situation work from home shelter in place do you assume in terms that variable component.

Well the good news Jenny is none of its variable.

Michael Emory: Well, the good news, Jenny, is none of it's variable. To the extent there's a surge in revenue, it's not variable. It's because either the cost of rack space, conduit space, has gone up, if you will, permanently, or interconnections have been established, theoretically at least permanently. One could always see a reduction in interconnections, but I don't know that that's ever happened. We assume once an interconnection is established, it's more or less a permanent component of the revenue stream. That's why we wanna be very careful in evaluating this, both in terms of its impact on 2020 and in terms of its longer impact on our business and why we're waiting until Q2, which I think we report on 29 July, to provide more granular disclosure in that regard.

So to the extent, there's a surgeon revenue its not variable, it's because either the cost of black space conduit space has gone up if you will permanently.

Or interconnections have been established.

Theoretically at least permanently one could always see a reduction in interconnections.

But I don't know that that's ever happened. So we assume once an interconnection is established it's more or less a permanent component.

The revenue stream, that's why we want to be very carefully in evaluating this both in terms of its impact on 2020 and in terms of its longer impact on the business and why we're waiting until.

The second quarter, which I think we report on July 29.

To provide more granular disclosure.

In that regard.

So it's not a factor I guess because of the surgeon power usage, you're expecting it to either be chart at the high watermark or even if it or you don't expect that usage to go down even if we slowly start to trickle back to the office and work from home become a lower proportion outs workers Im just trying to stand Pat that relationship.

Jenny Ma [Director, Research: I guess because of the surge in power usage, you're expecting it to either be charged at the high watermark or you don't expect that usage to go down, even if we slowly start to trickle back to the office and work from home becomes a lower proportion of workers. I'm just trying to understand that relationship.

Jenny Ma: I guess because of the surge in power usage, you're expecting it to either be charged at the high watermark or you don't expect that usage to go down, even if we slowly start to trickle back to the office and work from home becomes a lower proportion of workers. I'm just trying to understand that relationship.

Michael Emory: I do not expect it to go down as people go back to their normal work environment. No.

I do I do not expect it to go down as people.

Michael Emory: I do not expect it to go down as people go back to their normal work environment. No.

Go back to their normal work environment no.

Okay.

Jenny Ma [Director, Research: Okay, I want to clarify a comment that Tom had made earlier. You mentioned that all the available space at 151 is currently under negotiation. At 90% occupancy, it's for the 10% that's unoccupied at this time?

Jenny Ma: Okay, I want to clarify a comment that Tom had made earlier. You mentioned that all the available space at 151 is currently under negotiation. At 90% occupancy, it's for the 10% that's unoccupied at this time?

And then I want to clarify a comment that Tom had made earlier you mentioned that all the available space. At 151 is currently under negotiation so with the at 90% occupancy is it's for the 10% that's an occupied at this time.

Correct correct.

Michael Emory: Correct.

Tom: Correct.

Tom Burns: Correct.

Jenny Ma [Director, Research: Okay. What kind of a timing do you expect that to come online if the negotiations go as planned?

Jenny Ma: Okay. What kind of a timing do you expect that to come online if the negotiations go as planned?

Okay, and what kind of a timing do you expect that yet to come online if the negotiations go as planned.

The timing of the usage will be phase starting in say spring of 2021.

Tom: The timing or the usage will be phased starting in, say, spring of 2021, through the balance of 2021.

Tom Burns: The timing or the usage will be phased starting in, say, spring of 2021, through the balance of 2021.

Through the balance of 2021.

Mhm.

Jenny Ma [Director, Research: Okay. Great. Thank you. Then, Michael, I wanted to get your thoughts on the CECRA program. You know, where's Allied's position on that program offered by the government? And what percentage of your tenants do you believe would qualify for it, given what we know about it now?

Jenny Ma: Okay. Great. Thank you. Then, Michael, I wanted to get your thoughts on the CECRA program. You know, where's Allied's position on that program offered by the government? And what percentage of your tenants do you believe would qualify for it, given what we know about it now?

Great. Thank you and then Michael I want to get your thoughts on D.C.D.C.R.A. program Where's Allied position on that program offered by the government and what percentage of your tenants do you believe would qualify for a given what we know about it now.

Right no. It's a good question, we haven't mentioned it in any of our disclosures yesterday.

Michael Emory: Right. No, it's a good question. We haven't mentioned it in any of our disclosures yesterday because of the lack of clarity at the moment about the program. Having said that, I think the fundamental objective of the program is well conceived. I think it is right for the federal and provincial governments to assist small and medium-sized users who have had their revenue crushed to zero overnight. I think the notion of having the government bear 50% of the cost, the landlord bear 25% of the cost, and the tenant bear 25% of the cost is inherently equitable. I think a significant number of the users to whom we've afforded deferral would qualify in the sense that they are indeed small or medium-sized enterprises, and they have seen their revenues reduced by 70% or more.

Because of the lack of clarity at the moment about the program, but having said that.

I think.

The fundamental.

Objective of the program is well conceived.

I think it is right for the federal and provincial governments to assist.

Small and medium sized users who have had there.

Revenue.

Crushed.

The euro overnight.

I think the notion of having the government they are 50% of the cost the landlord.

They are 25% of the cost and the tenants there 25% of the cost.

Is inherently equitable.

I think a significant number of the users to whom weve afforded deferral would qualify in the sense that they are easy small or medium sized enterprises and they have seen their revenues reduced.

By 70% or more.

Michael Emory: Unfortunately, there's a lack of clarity now, and I believe this will be addressed. There's a lack of clarity now about a number of things with respect to qualifying for this assistance and with respect to the administration of the program and with respect to provincial involvement, which has actually added to rather than reduced confusion to date. Optimist that I am, I think the governments are well-intentioned. I think a workable program will be established. I think if it is, and it is helpful to the users to whom we've extended deferrals, we will participate.

Unfortunately, there's a lack of clarity now and I believe this will be address.

But there's a lack of clarity now about a number of.

They use with respect to qualifying for this assistance and with respect to the administration.

Of the the program and with respect to provincial involvement, which has actually added to rather than reduced confusion to date.

Optimist that I am I think I think the governments are well intentioned.

I think a workable program will be established and I think if it is.

And it is helpful to the users.

Two of whom we've extended deferrals.

We will participate.

Okay great.

Jenny Ma [Director, Research: Okay, great. When we look out at the May collection, given that it's tomorrow, what kind of color could you give us on what you may be expecting based on the conversations you've had?

Jenny Ma: Okay, great. When we look out at the May collection, given that it's tomorrow, what kind of color could you give us on what you may be expecting based on the conversations you've had?

When we look out at that been May collection, given that it tomorrow, what kind of a color could you give us in them, but you may be expecting based on the conversations you've had.

It's a good question.

Michael Emory: It's a good question. We fully expect to roll the deferrals forward to the month of May, as I think we indicated. We would be striving for results similar in May to the results we achieved in April and have no reason to expect material differences in that regard. Our office users have met their obligations for the most part. The only office users we've extended deferral to are very small early-stage enterprises, mostly in two Montreal buildings, El Pro Lofts and the RCA building, which are buildings we want to reposition two or three years out. We're very prepared to work with those users now and maintain those buildings, as they are buildings serving a large number of very small users.

We fully expect to rolled the deferrals forwarded to the month of May as I think we indicated.

We would be striving for results similar in May to the results we achieved in April.

And have no reason to expect material differences in that regard our office users have.

Met their obligations for the most part the only office users we've extended the full true.

Our.

Very small early stage enterprises, mostly in to Montreal buildings, Alpro NDRC, a building, which are buildings, we want to reposition two or three years out and were very prepare to work with those users now and maintain those buildings.

As they are building serving a large number of very small users and will transform them in due course once we develop division for the transformation of both buildings, which aggregate almost 500000 feet.

Michael Emory: We'll transform them in due course once we develop a vision for the transformation of both buildings, which aggregate almost 500,000 sq ft.

So Rick.

Jenny Ma [Director, Research: Great.

Jenny Ma: Great.

Michael Emory: You know, that's kind of where I see it. I think maybe, you know, it's hard. There are people who try to stare us down, unsuccessfully, ultimately. There are one or two very small situations which are, again, incorporated into the numbers we provided. We might actually take the space back because we can actually more profitably get it out to office users. This would be second-story space, currently used by quasi-retail tenants, that we might turn around and satisfy some of the incredible demand that exists for space over the next two or three years, over the next little while.

Yeah, that's kind of where I see it I think they you know if it gets hard.

There are.

People, who who tried to stare us valley.

And successfully ultimately.

There there are one or two very small situations, which are again incorporated into the numbers we provided.

It actually take the space back because we can actually more profitably get it out to office users. So this would be this would be second story space.

Currently used by quantified in detail.

Tenants that we might.

Turning around and.

Satisfy some of the incredible demand that exists for for space over the next two or three years states luminex otherwise. So maybe we are striving to achieve what we achieved in April and.

Michael Emory: May, we are striving to achieve what we achieved in April. I guess it's a little hard to look forward to June, because I think we may see some changes in terms of the physical distancing measures to which we're all subject in the month of May. You know, we certainly will in Montreal and in Quebec, obviously. I think we might in Ontario and British Columbia as well. May we're striving to achieve what we achieved in April.

I guess, it's a little it's a little hard to look forward to June.

Because I think we may see some changes in terms of the physical distancing.

[noise] measures to which were all subject in the month delay, but but what we certainly willing to Montreal and and then come back obviously I think we might be material in Vancouver in British Columbia, as well, but they were striving to achieve what we achieved in.

In April.

Great. Thank you very much I'll turn it back thank you.

Jenny Ma [Director, Research: Great. Thank you very much. I'll turn it back.

Jenny Ma: Great. Thank you very much. I'll turn it back.

Michael Emory: Thank you.

Jenny Ma [Director, Research: Bye.

Jenny Ma: Bye.

Thank you. Our next question comes from Chris could free up see RBC. Please go ahead.

Operator: Thank you. Our next question comes from Sam Damiani of CIBC. Please go ahead.

Good morning.

Sam Damiani: Good morning. Just following up on the rent deferral. What's the mechanism that you're intending to collect these deferrals? Is it kind of over the course of a certain period of time? Are you adding to the term, or how are you actually deferring the rents?

Just a just following up on the on the rent deferral. So what's the the mechanism that you up you're intending to collect these deferrals is that kind of over the course of a certain period of time, a adding to the term or how are you actually deferring the rents.

It's a good question, Chris and at what we've done is simply granted a deferral. We have made no provision with the user as to how it will be paid back.

Michael Emory: It's a good question, Sam Damiani, and what we've done is simply granted a deferral. We have made no provision with the user as to how it will be paid back, when it will be paid back, and on what terms. We'll do that on a user-by-user basis or on a case-by-case basis, once we all have more visibility in terms of what the slowdown or the shutdown actually represents for those businesses. I think it will vary from user to user. For example, if you look at our retail tenant base today, about 13% of it. It of course represents 7% of our revenue. About 13% of our retail tenant base is what we call early-stage retail outlets that haven't been in our space for a very long period of time.

When it will be paid back in on what turns we'll do that.

On a user by user basis or on a case by case basis.

Once we all have more visibility in terms of what.

The slowdown or the shutdown actually represents for those businesses and I think it will vary from user to user for example, if if you look at our retail tenant base.

Ah today.

About 13% of it and it is it of course represents 7% about revenue about 13% of our retail tenant base is what we call.

Early stage or retail outlets that haven't been in our space for a very long period of time.

Michael Emory: The next category, 49%, are established but largely independent operators who have been in our space for a long period of time and have been there profitably. Finally, about 37% of our retail users are what I would characterize as national or international tenants who have been able to and have supported themselves through this particular crisis. We'll be dealing with primarily retailers in the early-stage category and the established independent category, 13% of the total, 49% of the total, respectively. We'll probably be more flexible with the first category, the 13%, we might even get to the point where the deferral becomes more than a deferral. With the established operators, we'll probably have a different approach.

The next category, 49%.

Our established but largely independent.

Operators, who have been in our space for a long period of time and have been matter profitably.

And then finally about 37%.

Of our retail users are what I would characterize it national or international attendance, who have been able to and have supported themselves through this.

Particular.

Crisis, so you'll be dealing with primarily retailers in the early stage category and the established independent category, 13% of the totaled 49% of total respectively.

Probably the more flexible.

With the first category that 13%, we might even get to the point, where the deferral becomes more than a deferral.

With the established.

Operators will probably have a different approach will you establish and repayment mechanism.

Michael Emory: We'll establish a repayment mechanism over time, recognizing that they will be operating very profitably from the space again. These are the kind of thoughts that we'll be applying as we deal with the specific deferrals to date. We haven't asked anything of anyone. We've sort of given a blank deferral. In theory, we could demand that payment on 1 May. We of course won't do that, but we could do that. That's how we're going to approach it. I think as we approach June, what we're going to do with these deferrals is going to become clearer. Hopefully, the government program will make it easy for a significant portion of our users.

Over time, recognizing that they will be operating very profitably from space again. So these are the kind of.

Thoughts that will be applied.

As we deal with.

The.

The specific.

Deferrals today, so we haven't asked anything of any one we've sort of give them a a blank deferral.

And in theory, we could demand that payment on the person may we of course won't do that but we could do that and so that's how we're going to approach. It I think as we approach June.

What we're going to do with these deferrals is going to become clearer hopefully the government program will make it easy for a significant portion of our users, but even if the government program isn't for some.

Michael Emory: Even if the government program isn't, for some technical reason that would actually make no sense, but nonetheless, for some technical reason, that isn't applicable to our users, we will work with them to help them get through the difficulty they're experiencing through no fault of their own.

Technical.

Reason.

That would actually make no sense, but nonetheless for some technical reason that isn't.

Clickable to our users or we will work with them.

To help them get through.

The difficulty they're experiencing through no fault of their own.

Tons sounds very fair and responsible.

Sam Damiani: Sounds very fair and responsible. Just switching gears, with respect to acquisitions, I think you mentioned that the idea is likely to be focusing on infill opportunities. Would you estimate that if these were going to take place, it's going to most likely be, you know, back half loaded? Secondly, with respect to the partial asset sale in Montreal, is that still on track? Is this something that you're planning to do more of?

And so just switching gears with respect to acquisitions I think you mentioned that the a the idea is made is likely to be focusing on infill opportunities.

It would use estimate that this is if these were going to take place. It's gonna most likely be you know.

I'm back half loaded and then secondly.

With respect to the partial.

Asset sale and Montreal is that still on track and is this something.

You are planning to do more off.

So with respect to the second question first we entered into a formal agreement to purchase each sale with the subsidiary of the Canadian pension fund on the 24.

Michael Emory: With respect to the second question first, we entered into a formal agreement of purchase and sale with a subsidiary of the Canadian Pension Fund on the 24th. It is conditional until 15 June, and after that, we'll be mutually conditional on Competition Act approval. We do expect that transaction to close. We expect it to close in early July. We did actually confirm that in the press release. I don't see that unleashing a plethora of similar transactions in Allied's portfolio. It was very appropriate in the context of acquiring The Landing. It was also very appropriate in terms of establishing a relationship with this particular Canadian pension fund. But I don't think we'll see you know, a sudden surge of such transactions on Allied's part.

It is conditional until June 15.

And after that we'll be mutually conditional on competition Act approval, we do expect that transaction to close we expected to close in early July.

And we did actually confirm that in the press release I.

I don't see that unleashing.

A plethora of similar transactions in the Allieds portfolio.

It was very appropriate in the context of acquiring the landing.

And it was also very appropriate in terms of establishing a relationship with this particular Canadian pension fund.

But I don't think.

You'll see that you know a sudden surge of such transactions on Allieds part, but we do recognize there are circumstances, where.

Michael Emory: We do recognize there are circumstances where that form of, if you will, capital redeployment could be advantageous for Allied. When it is, we'll absolutely entertain it, and I believe have the capability of doing it. In terms of the first question or first part of the question, we have been seeing small infill opportunities even before the global pandemic started. The acquisition we made on the Esplanade basically completes a spectacular assembly that we have between Front Street and the Esplanade. I see more things like that coming our way in Montreal, Toronto, and Vancouver. You know, I wouldn't suggest we're going to run out and buy the world in the second quarter.

That form of.

If you will capital redeployment could be advantageous for allied and when it Israel will absolutely entertain it and I believe has the capability and doing it.

In terms of the first question your first part of the question.

We haven't been see small infill opportunities even before the global pandemic.

Started the acquisition, we made on the Esplanade basically completes its a spectacular assembly that we have between front Street.

And the Esplanade I see more things like that coming our way in Montreal, Toronto, and and and Vancouver and and and.

No.

I wouldn't suggest we're going to run out and by the world in the second quarter, but if you look really good opportunities come our way a and if they are priced better than they might otherwise be we'll certainly look at them.

Michael Emory: If really good opportunities come our way, and if they are priced better than they might otherwise be, we'll certainly look at them.

Got it okay. Thanks a lot.

Sam Damiani: Got it. Okay, thanks a lot.

Michael Emory: No problem.

No problem.

Thank you we take our next question from Mike Marquee. This offtake Maritime. Please go ahead.

Operator: Thank you. We take our next question from Michael Markidis of Desjardins. Please go ahead.

Good morning, everybody.

Michael Markidis: Good morning, everybody. The first question I have is just with respect to the potential cadence of the decline in your outlook. I know there's a lot of uncertainty, but just curious if you see the biggest impact being in Q2 and then it starts to re-ramp in Q3 and Q4 and accelerate into 2021, or if it's supposed to be the opposite way in direction.

First question I have is just with respect to the potential cadence of the decline in your outlook I know, there's a lot of uncertainty, but just curious if you see the biggest impacting into Q and then just or to revamp.

In the third and fourth quarter, and accelerating 2021, or especially the obsolete and direction.

My thinking Mike is.

Michael Emory: My thinking, Mike, is Q2 may not see much of the decline because I think the decline is going to take the form of having to take space back. I don't see us doing that in Q2. I would see that more likely to occur in Q3, if at all. So I think, you know, I expect Q2 will be largely kind of a standstill quarter in the sense that we won't see much erosion, but clearly our receivables will go up because of the deferral we've made. We also may be in a position. By the way, we, as everyone else, will report on that very precisely so that our constituents can see through the deferral numbers well and correlate them perfectly to the receivable increase that they would represent.

Q2.

May not see.

Much of the decline because I think the decline it's going to take the form of having to take space back.

And I don't see us doing that.

In Q2, it I would seem likely to occur.

In Q3, if at all so I think I you know I expect.

Q2 will will be largely.

Kind about a standstill quarter in that sense that we won't see much erosion, but clearly our receivables they'll go up.

Because of the deferral we made.

We also maybe in a position and by the way, we as as everyone else.

We'll report on that very precisely so that.

Our constituents can see through the.

Through the deferral numbers, well and correlate them perfectly to the receivables increased they would represent.

Michael Emory: I kind of see that as sort of a transitional quarter, and then the impact really affecting us in Q3 and Q4. That's kind of how I expect it to play out.

[music].

So I I kind of see bad debts as sort of a transitional quarter and then the impacts.

Michael Emory: I kind of see that as sort of a transitional quarter, and then the impact really affecting us in Q3 and Q4. That's kind of how I expect it to play out.

Really affecting us in Q3 in Q4.

But that's kind of how I expect it to play out.

Okay. That's helpful. Thank you.

Michael Markidis: Okay. That's helpful. Thank you. The CAD 335 million of capital commitments on development value add, was that a full year or remaining 2020 number?

The 335 million of capital commitments under armour value out was that a full year remaining 2020 number.

Michael Emory: Thank you. It's a good question, and the disclosure was maybe not perfect, but it's actually full year, so a good part of that's already been funded.

Thank you if it is it's a good question and the disclosure was maybe not perfect, but it's actually full year. So a good part of that's already been funded.

Okay, and I would say throughout the year. So it it is a full year number not a is not a remainder of the your number yep yep.

Michael Markidis: Okay.

Michael Emory: We did say throughout the year, so it is a full year number, not a-

Michael Markidis: It is a full year number.

Michael Emory: Not a remainder of the year number. Yeah. Yeah.

Michael Markidis: Do you happen to know what the remaining balance of that is, roughly?

And but do you happen to know what the remaining balance about is roughly.

Michael Markidis: Do you happen to know what the remaining balance of that is, roughly?

Cecilia Williams: We've already invested CAD 70 of that CAD 335, Mike.

We've already invested 70 of that Threethirty Hi, Mike.

70, perfect, Okay, Texas there.

Michael Markidis: 70. Perfect. Okay. Thanks, Cecilia. Just with respect to the step change in the power revenue that you have, could you remind us what the power capacity of your three UDCs are and how much room you have to grow that with existing infrastructure?

Just with respect to the step change in the the power or capacity at the power revenue that you have could you remind us what the power capacity of your three Ulysses are and how much room, you have to grow that with existing infrastructure.

He cilia do you have those numbers, we paid we actually had been asked them. We do have those numbers do you have them at hand Cecilia.

Michael Emory: Cecilia, do you have those numbers? We actually have been asked, and we do have those numbers. Do you have them at hand, Cecilia?

Cecilia Williams: Yeah.

Yeah, Hi, sorry to put you on the spot I don't I should but I don't.

Michael Emory: Sorry to put you on the spot. I don't. I should, but I don't. It's very material, but I will have to dig those numbers up, Mike. They're not in the materials.

It is.

It's very material, but I'd.

I will have to.

Dig those numbers have Mike they're not in the material guys I haven't done to me yeah sure to build out.

Michael Markidis: Okay.

Michael Emory: I have in front of me. Yeah. Sorry about that. I should have-

Sure.

Michael Markidis: We can follow up offline if it's not at the tip of your fingertips.

We can that we can follow up offline. If it's out of your two fingers I'm going into last question I have Michael just more of a theoretical one I'm just thinking about your comments with real estate values that were equity values not matching the real estate values Andrew out your comment about potentially being more aggressive if you see prices come down.

Michael Markidis: We can follow up offline if it's not at the tip of your fingertips.

Michael Emory: Yeah.

Michael Markidis: The last question I have, Michael, is just more of a theoretical one. Just thinking about your comments with real estate values, or equity values not matching the real estate values. Your comment about potentially being more aggressive if you see prices come down a little bit than they otherwise would have. How does Allied look at its cost of capital in the shorter term? I mean, with the stock price being down, does that impact your thoughts on funding? Would you look to use your balance sheet strength to take advantage of opportunities with the expectation that the equity price recovers very quickly? I'm just trying to circle the square with respect to your thought process on that.

In a little bit than they otherwise would have.

How does that wed look at its cost of capital and in the shorter term I mean with the stock price being down does that impact.

Your thoughts on funding would you like to use your your balance sheet strength to take advantage of opportunities with the expectation that equity price recovers very quickly. So I'm just trying to certain square with respect to your thought process on them.

Yeah. It's it's it's a good question as well I the way we're looking at it now is.

Michael Emory: Yeah. It's a good question as well. The way we're looking at it now is the bond market appears to have stabilized. I don't wanna talk as though I'm an expert. I'm more a customer than an expert. The bond market appears to have stabilized. Although spreads have increased, the terms on which unsecured debentures can be issued are very attractive. Right there, we have a funding mechanism that is priced in a way that is appealing to us today. The equity capital markets are not pricing Allied in a way that would be attractive to us today. I don't believe we have ever issued-

The bond market has actually or appears to have them I don't want to talk has so I'm an expert.

Or more.

Dimmer than an expert but.

The bond market appears to have stabilized.

And although spreads have increased the terms on which unsecured.

Debentures can be.

Issued are very attractive so.

Right there we have a from the mechanism.

That is price in a way that is appealing to us today.

The equity capital markets.

Our not pricing highlighted in a way that would be attractive to us today, we I don't believe we had ever.

Yes.

Yeah.

Okay.

[music].

Howard Leung: Awesome. Thanks, Cecilia. I think next question would be great.

Our next question.

[music].

Thanks, Karen.

Operator: Thank you. Our next question comes from Howard Leung of Veritas Investment Research. Please go ahead. Your line is open.

[laughter] articular.

Third.

Mentally correct.

Please go ahead during nine Esterel Ben.

Okay.

Howard Leung: Thanks. Good morning. So, forgive me for dwelling on Q1, but just wanted to tie that in with COVID maybe. The renewal rate for trade leases was 61, and that's, I guess, down from last year Q1 and the previous Q1 before that. How much does that have to do with COVID and or is that just more of a coincidence? Yeah. It's a good question, and it is entirely coincidental. We had a non-renewal at 1050 Homer in Vancouver. It was the MINI dealership. Like our MINI dealership here in Toronto on King West, it grew to a point where it needed a more conventional dealership, so had nothing to do with COVID. We had a small tenant leave QRC East.

Good morning.

Yes.

Yeah.

Alright, thank you.

Thanks.

Good morning.

Hi, there.

Yes.

Sure.

Yes.

Okay.

So I guess down from last year Q.

Please queue line before that.

Okay. Thank you.

Okay.

Or is there.

The call.

Yes.

Good question.

And.

Hi.

Coincidental.

We have.

Uhhuh.

In our model in and Kulu inclusive of many dilutive share.

Like our newly insured clearly tool on online on key slabs.

It grew to a point, we're leading the market.

No.

Dealerships so head.

In.

Hello.

We have a small $10.

The Q upstream.

Michael Emory: Again, unrelated or non-renew, I should say. Then The Gap closed its store. It really was coincidental, and there is absolutely no COVID-19 impetus for any of the non-renewals that we had in Q1. Right. Yeah, that makes sense. Yes. Yeah, Q1 is. There's really no effect from COVID. I guess looking to the leases that you announced, the new leases signed in April and the expansions, are you noticing there's any kind of change in how the tenant plans to configure those spaces, maybe with square footage per employee? Is it higher? Is it lower than before? No change or nothing you see at that moment yet? At the moment, nothing in that regard. We haven't noticed people.

And again.

Hey, David or not really large too so.

And then a gap.

Closely.

So it.

Meanwhile, just coincidental.

There is absolutely Colin 19.

In terms or any of them.

The roles.

Yes.

The first quarter.

Right, Yes that makes bamtech, so, yes, 10-Q liners Karen.

At capturing code.

I guess working together in India.

They feel that you announced databases.

Globally.

Okay screens.

Hey noted, saying Theres many tenants.

Jamie.

Our 10.

And to configure those spaces.

Yes.

Squared curve or.

It's been hired so.

For that would change here.

Increase year over year.

At the moment last thing in that regard we need Adam noble.

Okay.

Michael Emory: People want more space for all kinds of reasons, but they have more to do with business expansion than necessarily trying to set up a 6 by 6 grid within the space. That COVID-19 is either inducing people to compress their space because they can have people work from home or to expand their space because they wanna use more square footage per person in order to effect the physical distancing on an ongoing basis. We haven't seen any indication of either. I would anticipate as we go forward, we may see both. We may see some people that feel they can contract their space a little bit. We may see some people who need to expand their space requirements a bit.

One more segments for all kinds of.

Yes.

They have more to do.

His expansion.

Net sales really trying to get set up six sites six limited.

Yes.

So we have been.

Andy Cpgs shipment.

Yes.

[music].

Good night.

Either.

We do see people to compress the slate speak the ATM.

Our work from home or two weeks and Theres.

Maybe one or two.

Yes.

Or square footage purchasing.

In order to fair.

The physical suits.

Since we haven't seen any indication.

The.

Hi.

And kids and adults we drilled pools.

So low.

We may see some important.

[music].

Okay and attractive since it will be the.

And we'll see some.

Crude crude unit two weeks.

So its requirements.

Howard Leung: I don't expect it to be material either way, but only time will tell for sure. Right. Yeah, for sure. It's a lot of uncertainty out there. I guess this is a good segue for kinda my last question. More in a bigger picture view and maybe thinking about tail risk, what does it take, kind of in your view, for the larger users, especially those that lease your space, like large tech, to really shift their preferences and use of office space? Here's my belief. At the end of the day, we as a workspace provider are serving the men and women who constitute the knowledge-based organizations who are technically, if you will, our tenants.

Sure.

I don't expect.

Curio either slowly.

But only time will help ensure.

Right Yeah for sure.

Yeah.

Its fair share there I guess, they're good segue period and last question.

A more in a bigger picture to be around maybe thinking about tail risk where does it take.

Adam in the exceeded for the larger users.

That leads to your stake slight large tax should really share their practices.

And you had said office space.

Right.

Here's a combined.

I will.

At the end.

Yes.

Yes, I would say lower space.

Yeah.

Our server the management.

The constitute too.

The knowledge based storage.

Chains, who are correct.

[music].

In Q 10 points.

And it.

Michael Emory: I believe that it is what those men and women want that will dictate how workspace evolves, and I believe it's what they want that has dictated how workspace has evolved in the last decade or two as the real estate industry became more sensitized to what was really happening with their users. What would be required for a mass exodus from the kind of workspace we provide to the market would be the men and women, the highly educated, highly motivated men and women who have opted to live in the inner cities to decide that from this point forward, they wanna work in a cocoon-like environment in their homes, which is technologically feasible. I don't see that happening. I actually believe the opposite might happen, but I certainly don't see the ultimate users of our space wanting to retreat from it.

Both.

That does while those small medium and long.

Hey.

Our work space, So for all Tonight the leases.

[music].

Adam.

How workspace sensible Didnt elapse.

Dedicated or two.

It's real estate industry.

Candy or some coupon rates.

And to what was removed approximately.

What's the users.

So.

Right.

Look quite good quarter backs X.

Right.

Hi, good works.

[music].

Yes.

To that market.

We believe that standard.

The highly educated.

Highly motivated.

No I know you've learned many who will follow up.

In the University students.

Sorry.

From this point core.

The one over in that.

Okay.

Motor homes.

Technologically feasible.

I don't see.

Hi, I actually believe.

The.

The optimism.

Now.

But I certainly don't see.

The ultimate users of ours beliefs.

Wanted to treat profit.

Michael Emory: I think the employers will always do what is necessary to attract, retain, and motivate their invaluable employees. What it would take would be for those employees to decide en masse or to a very significant degree that they wanna work from home. I think if that happened or if it happens, then the employers would strive to accommodate them, and the demand for the kind of space we provide, in theory, would go down. That's what it would take, in my opinion. It wouldn't be some accountant, thank goodness, thinking, "I can save money by reducing my space and shoveling all my creative people into home offices." That isn't what's gonna happen. The accountants don't run the world as it relates to our workspace anymore.

In the employer groups.

All these deals.

What does that subsidiary to attract retain that date.

There.

The outlook for employees.

So what it would take.

Would be lease employees to this evening.

Our.

Yes, although to a very significant quickly.

A water work for model.

And.

Thank God half I mean.

If it happens.

I will be.

Employees would strive to candidates.

Yes.

And the net.

Its use the provided.

The goes down.

That's what it would take in my opinion.

Yes.

Some of cow.

Good notes.

To indicate that conservative.

[music].

Got a reduced to five states.

And sharply them all might created people into home office facilities that into what's going out the accountants government.

Let's.

Our workspace and even more that squad works has its own.

Howard Leung: That's why our workspace. It's ultimately run by the users, by the men and women who have the capabilities to propel the businesses of our tenants. They're the ones that choose. They're the ones who will determine what happens. My very strong belief, based on years and years of experience, not just because I'm older and an aging baby boomer, is they're not opting for work from home in any appreciable way. Right. Yeah, that was really insightful. Thanks. Speaking as a former accountant and someone who's a little tired of working at home, I understand that. Excellent answer. No problem. No disrespect intended for accountants, but it is important. It's not an economic decision.

Paul.

Good old summit.

The solution in spite of 70 alone.

Who has the capability.

Hello businesses.

Candidates that are there, they're the ones that shoes, they are little more audience.

We will determine what happens.

And by very strong in both the based on leaders in years.

Just because.

On the old the aging baby Boomer.

Is there not updating.

For your component.

In any appreciable.

Right and to add that.

As evidence of the insight banks.

Taking into account.

Application and secondly.

Hi work.

I understand that so it's about half there.

Correct.

No problem loan gets reset.

Good for accountants, but.

But it is important.

Other back in the office facility of course economics, all these matters.

Michael Emory: Of course, economics always matter, but it's not an economic decision. It's a human resource and almost leadership decision now, which is great and which, in my view, gives me confidence that there won't be a material change in how people use workspace going forward as a result of the pandemic. There will be continuous change, just because it's a very human reality and our job is to keep pace with, if not get ahead of, the change. Right. That makes sense. Okay, thanks. My pleasure. All right. Next question.

Economic decision.

[music].

It's a human resource and also leadership solution.

Which is which is great.

Which is gives me confidence.

There will be.

The.

Two children equally.

Equally teams work space going forward.

As a result of the past several global continuous change.

Just because it's it's a very cute.

Yes, our job is to keep pace.

Yes, yes.

Yes.

The challenge.

Okay. Thanks.

My pleasure.

Our next question into current next question.

Operator: Thank you, sir. We take our next question from Matt Kornack of National Bank Financial. Please go ahead.

Okay.

Thanks.

Operator: Thank you, sir. We take our next question from Matt Kornack of National Bank Financial. Please go ahead.

Please take your next question.

Hi, Matt.

Hi, Thanks.

Please go ahead.

Good morning.

Matt Kornack: Good morning, guys. With regards to your retail leasing, do these deferrals necessarily open the discussions on those leases? Could you change the structure of those going forward, and also maybe add sort of percentage rent type possibilities in there so that you could participate on upside as these things reopen?

And.

With that or hurt your.

Sure it's your retail leasing.

These deferrals rarely open the discussion on those leases you change with structure those.

Going forward and maybe.

AD server percentage rent.

Hi.

Profitability than their sleep with purchases.

So.

Things reopened.

Yes, good year.

Michael Emory: It's a good theoretical question. I would probably articulate a couple of principles that we would follow in that regard. Number one, we're not going to reduce rental rates for anyone. We don't believe that is appropriate under the circumstances. If someone is looking to us to reduce their rental rates going forward, we're not going to do it. We'll take the space back. I don't think that'll happen often, but if it does, that's what'll happen. We're also not interested, to be honest, in percentage rent. We never have been, primarily because it's a very difficult entitlement to monitor.

You Rabbit hole.

Question.

I view.

We are clearly that comp.

And supports that.

All right.

Regarding number wise.

We're not going to reduce total rates.

For anyone.

[music].

We don't.

That is appropriate.

Period, the circumstances, so someone is working.

To allow us to reduce their rental rates going forward, we're not going to do it.

And space back.

That will happen offering.

It does that square.

[music].

We're also not interest.

Audits in percentage.

We never have.

Primarily.

[music].

It's very difficult quarter.

Hi.

[music].

Two.

On that shorter.

Michael Emory: Rather than put ourselves in that position, we have always chosen to fix the rental rate and, you know, to allow the tenant to profit if that's how their business evolves, and not to, if you will, enter into a business partnership with our tenants. I don't see us doing that. I think, as I say, it'll be a case-by-case discussion between ourselves and each individual user, the viability of one who doesn't have the ability to be viable going forward. I don't think there are many situations in our portfolio like that. We will expect the users who have profited from our space very significantly over a very long period of time to support their own businesses and their own space ultimately, although we're prepared to help them on a cash flow basis.

And your Adler is.

Put ourselves in that position.

We have always chose to them six the rental rate.

And.

Two of the annual profitability it backs out there basically evolves.

And.

And and so not too.

If you will mature in two ways.

Partnership with Baird Admirals.

So I don't see us doing that.

I am I.

Hi.

And as I say that.

Food supply.

Discussions between so.

Mitch.

Sure.

The buyers there will be reinsurers.

We can't support some 1000.

Related to be viable going forward.

I don't think that lead.

She is in our portfolio like that.

Little bit expect.

The issue Scooted profited from buyers.

The only significantly.

Earnings per diluted common to support that are going to goods machines at very low in the states ultimately.

Although we're prepared to help provide cash flow basis.

Michael Emory: These are the kind of principles, Matt, that will apply as we engage in these discussions. Fortunately, because of Tom and the great operations teams we have across the country, we know our tenants extremely well, and every discussion is personal, and every discussion, I guess, respects the circumstances that prevail in the relationship.

So the age of the kind of principally that that will apply as adults we engage in.

Expansions.

And.

Fortunately the cogent Todd.

Great operations team, which we have across the country media or attendance exclusive.

And Ed Rudy.

Scott action is personal and every discussion.

And again.

Sachs those circumstances.

That prevailed in the relationship.

And again by central audit fees and retail space there.

Matt Kornack: Then I guess by extension, a lot of these retail spaces, there have been escalations in market rents, and presumably some of them are sitting on below market rents. You'll work with them, and is there the ability, I guess, to access a portion of that going forward if you're gonna provide cash flow in the interim?

Great.

The market rents and preserve rate some of them are sitting.

Below market brand.

We're.

And is there to be ability I get crackers orders.

Going forward it here in the current right.

Okay.

And the interim.

Michael Emory: I mean, it could. That might be one of the quid pro quos we ask for in exchange for support we've provided. It could be, you know, we either expect repayment sooner or we might increase the level of rent payable to better reflect the current market rates. I think that is the kind of discussion that will be had. As I say, Tom and the operations teams are simply outstanding in terms of the quality of the relationships they have with our users, who, as you can imagine, are really stressed. I can't even imagine what it would be like to have your revenue go to zero overnight.

With that.

It could add that might be.

One of the quid pro quo routes.

Apps or exchange.

Support we accrued liability so.

Good.

No.

There, we do expect repayment sooner.

All right.

We might increase.

Hey goal.

To to better reflect the current market rates, So I think.

That is that kind of discussion that that will be added.

And I say.

The operations TV.

Our simply outstanding.

The quality of relationships they have good.

Our users who as you can imagine.

The stress.

I can't I can't even the balance sheet thought it would be like to Adam.

Grow this zero.

Right.

Michael Emory: We will work with these people fairly in an effort to balance the interests of our customers with the interests of our unitholders. Ultimately, it's in the interest of our unitholders to have viable rent-paying tenants once the pressure from this pandemic begins to lift. We think it's enlightened self-interest that guides us in these discussions with these users, many of whom we've had a relationship with for years and years and years, and know we can count on to run a good business if they're allowed to do it.

And.

And so.

No no work with these people.

[music].

Okay.

In a lot.

See improves.

Loads with interest supplier unit holders.

Okay.

It's in the interest about individual years.

By the full rent.

No.

Once the pressure group.

And that may be contributes to the letter.

So we ended Q.

Interest.

Guide.

In the east discussions with the CV excuse me.

Added relationship for years and years region No weekend counterparts.

Roger Good business.

With that are allowed to do it.

Fair enough.

Matt Kornack: Fair enough. With regards to the disposition in Montreal, would IFRS fair value account for what the value of that asset was at this point in Q1?

With regard to the disposition of non material.

At the higher for fair value.

Headcount for.

Or what.

Even with that asset was disappointing.

Run.

Hi.

Michael Emory: I'm not quite sure what the question is, but.

I'm not quite sure the crushing.

Michael Emory: I'm not quite sure what the question is, but.

Okay.

Bye bye.

Matt Kornack: Well, was there a mark-to-market, I guess, as a result of that would have been reflected in Q1 results or?

Well it was their environments and Mark and I get the result.

That would occur.

In Q1 results.

Michael Emory: No.

Michael Emory: Was it at market?

It was that that market.

Absolutely that asset that that that asset I believe.

Michael Emory: Actually, one of those two assets did increase in Q1. The ultimate disposition price will more than validate that increase.

The increase.

The progress value.

One of those two assets.

An increase in Q1.

I mean.

And the ultimate.

It should we pride ourselves.

More than our baby.

Increase.

Matt Kornack: Okay. Fair enough. For Cecilia, on straight line rents, is there anything in there with regards to some of the near-term? You're delivering on the development pipeline. Is that number, I guess, a good run rate for the rest of the year?

Okay.

Fair enough and then pursuits.

On straight line rent.

Is there anything in there with your December the near term.

Up to the year delivering on the development pipeline.

And that number I guess a good.

Right, yes there.

Okay.

Hi.

Cecilia Williams: I'm gonna have to check. I can't remember off the top of my head. I'll get back.

Correct.

Hi, Ken.

I remember.

Now.

Okay.

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