Q1 2020 Earnings Call
Before beginning the call HR would like to remind listeners that certain statements, which may include predictions conclusions forecasts or projections.
In the remarks that follow may contain forward looking information, which reflects the current expectations of management regarding future events and performance and speak only of today's date.
Forward looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties.
Actual results could differ materially from the statements in the forward looking information.
And just guessing <unk> financial and operating performance and in responding to your question, we may reference certain financial measures.
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In more detail in 18 hours of public filings, which can be found on our website and on www Dot Si dot com.
I would now like to introduce Mr., Tom Hostetter, Chief Executive Officer, H. and our reach please go ahead Mr. hofstetter.
Good morning, Thank you for joining us today until hostetter sealed the reach and I'd like to welcome everybody to the call joining me today or Larry from our CFO had Sullivan CLL, primarily it's at least Lapointe CEO of land tower.
Let me address the current environment, which includes a great deal of economic uncertainty significant changes in our day to day lives and unfortunately significant pain and suffering for those directly the directly impacted by cope with my team.
Well first priority and safety and well being of all employees tenants and visitors to our properties. We are following all the rest of the recommended behaviors, including social dismissing practicing remote working and frequent creating a space among others. Our team is working closely with our tenants to accommodate all financial and operating solutions to support the success of our properties.
Looking forward to more normal operating environments in near future and are pleased to report that we have adopted are working arrangements to be operating it is close to normalize matter as possible and even even begun to reopen some of our properties that have been ordered close.
Next up Larry will summarize our quarterly and annual financial results at will then provide an update on our retail portfolio, followed by Felipe who will update us on our multi was this portfolio and finally I hopefully with some closing remarks over to you Larry.
Thank you Tony Good morning, everyone. Thank you for joining us today.
Starting with funds from operations. So Q1, 2020 basic and diluted FFO was 45 cents per units compared to 45 cents per unit in Q1 2019.
Included in net income and if so far were no lease termination fees of $200000 in Q1 2020.
It's a 6 million in Q1 2019.
For the quarter normalized AFFO was 46 cents per unit compared to 44 cents per unit in Q1 2019.
We view this is quite an achievement given that we have completed approximately $1 billion of essence sales over the past 15 months compared to approximately 206 million a property acquisitions during the same period.
Our office portfolio occupancy at March 31st was 99.3% and committed occupancy was 99.8%.
Excluding the lease termination fees mentioned previously the same that's a property operating income from the office portfolio increased by 1.2% over Q1 2019.
Our industrial portfolio occupancy at March 31st was 98.9%.
The same that's a property operating income from industrial portfolio increased about 2.8% over Q1 to solve them and non team.
Construction is continuing and talent in Ontario on the 343000 square foot industrial building, we have at least two types of post for 10 years occupancy is expected to commence in Q4 2020.
And as a result of covenant team with temporally suspended all other industrial construction.
That's a property operating income from our retail portfolio decreased by 2.1% as compared to Q1 2019, mainly as a result of Q1 2019 benefiting from certain 2018 final tenant billings.
That's a property operating income from our residential portfolio and U.S. dollar.
Increased by 33% over Q1 2019 due to properties, including Jackson, Paul said worry me so last year.
Excluding these properties and lease up same at the property operating income increased by 8%.
Included in our net loss for the Q4 Q1 is a fair value adjustment on real estate assets of $1.3 billion. This is by far the largest fair value adjustment today.
These adjustments are a result, corvel regularly quarterly operates very process and included the following two friends, resulting from quoted.
One an acceleration of challenging conditions in the retail landscape impacting the market crossing of retail properties.
And to energy sector challenges that have impacted the credit quality of many companies operating in this industry and the related impacts on property market fundamentals in markets significantly influenced by energy and industry employment and profitability.
The operate fair value tunnels retail portfolio has been reduced by approximately $660 million.
With the changes relating primarily to inputs into the full costing of cash flows, including normalized vacancy rates market rental rates tenant retention rates and releasing assumptions.
The robot inputs into this kind of a test for models have resulted in lets say value of market values and higher and part of World Cup right.
In particular quite close more properties.
The opera spread you say if any of its an office portfolio, what's significant energy sector tendencies is proving to be reduced by approximately 680 Madame.
These properties are generally subject to long term leases and as such that'd be limited changes to catch from models, but more significant changes to the discount rates.
Well they've been very few recent transactions for comparable properties. Our valuation team is prudent assumptions affecting pricing signals observed in oil prices and the energy sector corporate credit markets.
These fair value adjustments have hit output forgotten open I thought the hardest assigned by the decline in fair value in a box Oh, no, but oh of approximately 900 million from 3.2 billion at your end to 2.3 billion at March 31st to sell them and tooling.
The fair value adjustment to the primary reason for our net asset value decreasing from 25.7, a $25.79 per unit at your end to $22.26 per unit as at March 30 for 2020.
Management of the board strongly supported taking a more proactive approach to updating fair market values to ensure a prudent financial reporting practices.
Retail industry is cranes will cover and energy industry conditions improve we'll have the opportunity to update surveys.
As at March 31st 2020 debt to total assets was 47.9% compared to 44.4% at December 30 for 2000 and non team.
The increase in debt to total assets is primarily through to the fair value adjustments discussed previously.
In February 2028 to know repaid one of its series piece you need to benches upon maturity for cash payments of 125.
Moving on U.S. dollars.
In March 2020, actually pepper ethanol repaid all of its senior series F debentures upon maturity for cash payment of $175 million.
There are no further debenture maturities this year or in 2021.
Our next adventure maturity will be in May 2022.
And that more to say for 2020 H. in our only had 116.3 million of debt maturing during the remainder of 2020, consisting of 64.8 million in mortgages and the balance from a secured line of credit from a Canadian bank.
Subsequent to March 31st 2020, we bolstered our liquidity by securing a 425 million line of credit from a syndicate of for Canadian banks.
Secured a 100 million dollar mortgage.
The true about previously unencumbered property.
This new credit facility in mortgage will arrange following the onset of close but and demonstrate its most from access to capital.
Right collection has been a key focus during that same dynamic.
And one we believe were performed well, but also accommodating the needs of tenant partners to date I rent selections for April amounted to 85% and.
And rent collections for my amount.
To 80% currently.
I'll now turn the call over to pet to give an update on our retail division.
Thank you Larry and good morning.
During Q during Q1 2020 retail showed a decline in in a way of 2.1% of compared to Q1 2019.
You asked retail showed a 5.4% declined during the quarter, primarily due to Q1 2019 benefiting from certain 2018 final building.
Well enclosed malls showed a 1.2% decline attributed to a large tax refund received the Q1 2019 and timing associated with capitalized costs.
Hi, merits would play that was solid your growth in 2020 due to a number of development projects coming online.
In Q1, 2020, but by opening new stores Sunrun small marks open from 90000 square feet at Mcallister place and over the next six months approximately 140000 square feet, a large format national tenant.
It's scheduled to open from the redevelop dog bought Sears boxes.
A redevelopment work in Remerchandising efforts over the past few years, we're beginning to be reflected possibly in our property sales performance.
For the 12 months ending February same store sales were $549 per square foot, an increase from the $545 per square foot for that period ending December 2019.
For the month of February same store sales showed an increase of 5.4% with the notable increases didn't realize that property them BC, Alberta and New Brunswick.
Since the declaration of the pandemic, we have undertaken significant cost cutting initiatives.
Small commentary expenses were reduced by almost 40%.
Capital expenses were flat like 35% with only necessary capital spending being completed this year.
We expect to maintain cost control protocols in place throughout the remainder of the year and plan to apply cost saving towards rental rare and outstanding deferred rent.
Collections for rents in our enclosed malls, the generally higher and that data by other enclosed mall owners due to the fact that are more typically have a higher waiting towards essential services and a lower fashion component.
We recognize the challenging times based by retailers and it worked diligently to communicate billed directly with as many as possible.
We've been pleased with the contributions made by its Mike small and medium sized business within our portfolio during the month of April.
But this has been somewhat diminished in may at many wait for clarification on the government rent assistance plan.
Within the primary portfolio. We believed there may be a significant number of tenants a qualified for the government small business rental assistance program. However, until such time that the program details are fully defined we cannot quantify the waiting or portfolio.
We recognize that each retailer has a unique financial situation and ability to in during this chaotic period, and we're working with each accordingly.
Moving forward or rental collections today to improve the we negotiate payment terms the tenants and we expect that in addition to rental deferral there'll also be abatements, which is a requirement of the government program for small business.
We fully anticipate that there will be retail failure as a result, or the endemic and there are significant concerns by retailers regarding sales volumes returning over the balance of the or especially well government protocol remain in place.
In this regard we anticipate many retailers will need rental assistance following reopening but in two <unk> until pillager opener operating weekend.
We are uncertain as to what will be required if anything.
Over the past few weeks several ever properties have reopen for business specifically, both your malls I'm going to pay which opened they for and both properties the New Brunswick, which opened may 13th.
Malls in Winnipeg open initially with 30% of stores operating and since it has become a route about fit.
On a new brands at 35% stores opened this week.
Our malls in Alberta opened yesterday, however, Calgary malls opened with restriction, specifically restaurants inherits monster Dot open until may 25th.
Our mall NBC open may 19th.
We have no definitive timeline for a five year, many Morgan, Ontario, and Qubec to reopen.
We've been working in accordance with public health authorities and have instituted number protocols, including elevated the elevated cleaning sign it promoting social distancing limiting the number of entrance is open limited hour and enhance inherent safety procedures and loading garbage area.
In addition to our efforts tenants that tenants have instituted the real measures.
In the short term we expect these measures will negatively impact sales specifically per service providers such as Harris one.
That are not able to fully utilize this space through the social distance in requirements.
Nevertheless, early feedback from tenants that have opened or positive with many reporting comparable sales higher than the period last year.
In closing, we tell a face significant challenges recently with its current prices being the most difficult period, we tell is based in our generation.
The second significant work, we have undertaken to redevelop the merchandise and reposition or market dominant assets will be a tremendous benefit but this when this crisis debate.
This crisis will likely accelerate the trend towards store rationalization due to E. Commerce, however, retailers continue to communicate the importance of bricks and mortar starts for this excess.
We're confident that our assets, where typically the typically the only major enclosed mall in their respective region are well positioned for the long term.
Thank you and I'll now turn it over to sleep.
Good morning, everyone. We've got some notable updates for this quarter related to the last few tumultuous monks, but before I begin to likes express my gratitude to Atlanta or James.
Through all of this turbulence have been able to secure above industry average rental collections.
And mitigate some of the negative followed from coping with you so let us begin when collections.
And surprisingly Kobin 19 has and continues to have major implications toward business, especially in how we operate or properties.
Painfully litterbugs to several early strategic initiatives.
So far has yielded a portfolio as much as possible from the impending economic shock felt throughout or U.S. markets.
Collections were top of mind as we were approaching the inevitable will still be adopted ASU strategies that supported their collections percentage and just as importantly assist sort of residents through this unpredictable period.
I'm incredibly proud of our teams as those proactive strategies have been successful to date.
As evidenced by a receipt of approximately 97% of expected collection for April.
And over 93% as of yesterday for the month to me.
We expect May collections to mirror April by receiving nearly all of our expected rents as we look forward to or somewhere higher leasing season.
For comparison, the national multi housing councils rent payment tracker, which is currently tracking to 11.4 billion apartment units across the was recently released that 80.2% of residents have paid a portion of their me right by May six.
Late tower had collected approximately 90% of its run by the same day, illustrating or success and securing rent payments and underscoring for quality of a renter base.
And it does in addition to the collection incentives that we've implemented and in anticipation of the press of operating performance in the near term.
We've implemented numerous cost cutting measures at the property corporate level.
These measures include renegotiating nearly every service it'd be this contract limiting north mission critical expenses, causing all elective capital expenditures internalizing marketing responsibilities and pivoting to online digital will use.
On the financial front or CMS at quarter end operating income increased the newest dollars from 16.514 million to the first quarter of 29 team.
21.964 million to first quarter 2020.
This equates to CMS a quarter over quarter operating income growth of 32%, which is artificially high due to the inclusion of Jackson parks, we substitutes.
When excluding lease ups or CMS it quarter over quarter operating income growth equates to 8%.
As a percent quarter over quarter operating income growth is primarily due to rental growth and stabilization of a few of our assets in our portfolio.
While much has changed over the last few months some recurring theme subsurface within our industry, namely we've realized the effectiveness of virtual self guided Lisa.
In large part thanks to our marketing Department Landstar was one of the first operators to market. This leasing option right before kobin 19 substantially impaired or ability to use leased units in person.
And we're delighted to announce that are received resounding success.
In light of this we're looking to take advantage of this paradigm shift in how leasing is executed by utilizing technology to decrease or leasing costs, an increase or at least in capacity.
It is our belief that what started out as a tactics doesn't kind of assessing safety has identified the August of next generation of efficient apartment.
As such we will be pursuing the testing and implementation of certain specific technology enhancements to a few lets her properties the better gauge their ROI.
As evidenced by early efforts and and confirming with some of our U.S. publicly traded multifamily peers pick packages have proven to be a major success not only from a maintenance and management perspective, but also from a resident satisfaction.
And leasing desirability point of view.
We want to be intentional with a potential capital investment in or goes to bring a portfolio to the cutting edge or property tuck, thereby increasing our competitive moat within their markets. We look forward to sharing more updates about these initiatives in the coming in the coming quarters.
On the development front the Pearl in Austin, Texas is on track to commence pre leasing in August and deliver later this year.
90 deal in Seattle, Washington is estimated to commence preleasing, but again this year will deliver in the first quarter 2021.
Phase one of our Hercules development in San Francisco has started virtual leasing in phase two got started construction in the first quarter. When it came in as expected to be delivered in the second quarter 2021.
Lastly, surely gateway in long Beach, California is on schedule is expected to be delivered in the summer 2021.
The last few years, we've been approached by strategic investors, mostly consisting of pension funds gives your interest and leveraging Atlanta platform and expertise and to co investing in acquiring more multifamily properties in multi family.
Well, we did not believe department was right for a variety of reasons. We're now closely reviewing those opportunities with the ultimate goal of creating an asset management platform with Atlanta tower, whereby our strategic investors recorded a significant capital alongside our seed capital.
As with most recessions or laws and economic activity value, creating opportunities eventually emerge and this period is no different than while it is very early we have several very interesting opportunities or pipeline. The mirror further review with our partner.
As always we remain very judicious with her investment selection criteria and will be closely analyzing or market to determine which sectors within or asset class yield. The most accretive risk adjusted investment returns and we've done it will pass along the conversations doctor.
Actually before we get our Q M&A I'd like to highlight a few items.
Firstly, our fair value adjustments as you all know the at risk their value process provides paired with the latitude. Our approach has always been at four I ever at fair value to be meaningful it needs to be responsive to changing market dynamics and this objective as possible.
Larry mentioned this quarter included a significant reduction in fair value, reflecting both retailers industry headwinds in energy sector challenges.
So many argue that there haven't been enough transaction to cover any change of values. Our valuation team have concluded that while this may be true both the retail energy sectors have been struggling prior to that depends on it. It is reasonable to expect those trends very least to continue but the reality of accelerated during the dynamic as would be expected.
We feel that writing down valuations to reflect current market conditions, it's not only appropriate but it's also required in keeping with conservative best practice disclosure policy, let me remind everyone that fair values are reviewed every quarter and should market conditions change you should expect corresponding change in fair value.
The fair value process is actually relatively straightforward ask yourself. If you think market values have changed the answer is yes, you should expect to sell yeah fair values to change to reflect that end of story.
Do second.
Our change in our distributions the choices to reduce our distributions is not an easy one we've had many many discussions over the past several weeks on the topic. We know that there will be many opinions to questions about this decision. Let me explain this decision is simply as possible we've been working hard to evolving over the past few years, and we have looked at potential transactions and potential courses of action.
That led to conserve conservation back to the reached a conversation back in two weeks distribution.
Yeah ratio has been on the highest high end of the range that is off a complicated these decisions management at the board have been bouncing objectives. So one reducing the payout ratio with two recycling capital into higher growth assets. Another short terms of options that improve the quality of the risk.
With the onset of the cold in 19 pandemic. It became clear that there would be both short term impact on the income was the reach retail portfolio and also need for more capital to support expected tenant turnover over the next few years.
Once you reach decision to reduce our distribution, we considered all eventuality looked at acquired distributions for tax purposes, I want to make sure that our new distribution was set at a level that is sustainable and all the scenarios. We considered again this was not of the decision, but after much deliberation discussion, we're very comfortable that this action the best long term interest of HR you don't hold.
To help support grow the business.
[noise] I'm sure that I'm sure that a lot of questions I'll wrap it up in a second the koeppen Nike pandemic, it's had a dramatic impact on virtually every aspect of our daily lives. It's created many challenges and a lot of uncertainty tough times to lead the tough decisions. We are confident that we've made good decisions will benefit our unitholders, we have a lot lot.
Great things going on of the portfolio, we're excited about the future and with that I'll turn the line over to the operator for questions.
Thank you as a reminder to ask a question you would need to press star one on your telephone to withdraw your question press the pound or hash key please standby will be compiled the kuni roster.
[noise]. Our first question comes on line of Sam Damiani TD Securities. Please go ahead. Your line is open.
Thanks, and good morning, just wanted to start off with the what do you have for US a value reduction.
I don't believe there is but can you just to clarify if there were any external appraisals or advice received to result in the 1.3 billion dollar reduction.
Hey centenary.
No they were no external appraisals in the assets that we wrote down.
[noise] and what about just sort of advice.
Externally.
Sorry, I didn't hear that.
Did you receive any professional advice of any kind I guess.
Leading you to to this because these are these numbers.
Thank you recommend yeah, when I talked about appraisers basically when we spoke our owners to support obviously and we spoke industry, where it is absolutely expect the fast.
Okay, raising giving appraisals on Academy office market. The administrators you mentioned.
So the reality is if you look at retail across the board only primarily.
All we.
Most of them idea sector right now until isn't.
Got it make sense.
What's already out there now now that asset.
Thank you gave yourself an appropriate unless the time to mark that assets. So let's assume that six month, but we don't want to six months is going up both joined epidemic or will be posted excellent service. So you'll have to write down your assets honestly yourself reflect there has been a difference. The question is what is.
So it's a tough decision to me this is especially with all with the administered as much as we possibly can it's very hard to rise because that's.
So your Dcs of change too you know where reflects a higher discount rate, but also lower cash flows do those more cash health and that's not that's off so I do not reflect a change in cash flows.
Agencies discount it does the discount rate in other words and retail. The difference is you can't look when patients are looking back going backwards in your previous run rate and use a cap rate on that IR discounts or whatever you want to do we actually look forward in the retail to look at Ti pandemic and hopefully we'll spend that we like the vacancy Lisa.
I'll be increase somewhat assuming we're at 95%.
91%, you can expect that to be probably a lot of centers and rental rate you probably have gone down as well. If you look at a residential building. For example, you take the same cap rate, which is probably the wisdom that we're hearing in the marketplace Catholics, we maintain what the vacancy is off the vacancy lot lamps goes up from 95 to nine.
Taking down your eye for Sally.
I have changed.
We have changed.
Okay. So just on.
No industry not the office industrial applications, we have more or less locked at least.
18 years Netscout has 10 years after seven years, so there's that trim over there, it's more or less reflected both the discount rate whether residual yeah. Obviously.
Understood in your comments about the distribution you talked about some capex required for tenant turnover in the mall portfolio. Clearly is all those capex number is reflected in the Q1 area for us value reduction.
Yes.
Okay.
As part of the distribution, it's fishes not only a question of what is immediate capital needs. This is Larry pointed out you. All know we have substantial lines available for that just going forward nobody has to how long is going to last and there will be a lot of opportunities.
Besides the fact is getting even expenses is offices offices reasons as well so when we very cautious with our distributions and with our critical but again, let me remind you that we can always increase those things going forward.
Yeah. So we've done levels, where we think we're saying we don't have a discussion you every single quarter as to what's going on evaluations for Calgary gap, which have the office for let's talk about how why this situation in the retail environment, even post that we've written down to a level that we're pretty comfortable we take a hit and from there.
We have substantial hit the bottom on those assets, we have substantial growth in all the other sectors industrial residential and the architectures. It's basically says the bottom guys from here on it you remember that from our eyes.
Ali downhill after right now to believing that this went up to $22, 20%, which is still a very very comfortable high valuation elsewhere, which anyway.
All right just a quick the second question is on the Bowl what does your intention with respect to the maturity of the bonds over the next three years.
So we have you alternatives, which were currently working on a weekend that we're talking about extending those bonds. We maybe take off those costs. We have time on those bonds add quite frankly, we don't pressure on those losses as you well no. This is skewed by the asset alone. So we have another 13 muscles fire. The first wanted to see troughs those bonds. So we're going.
And wants to Washington, the situation out there with oil and gas Watcher, Entres Creditworthiness, and we'll though we have time and opportunities to deal with it over the next 30 months.
Thank you I'll turn it back.
Our next question comes on line of Ginnie Mae BMO capital markets. Please go ahead. Your line is open.
Thanks, Good morning, I just to continue on the topic of the IRS fair value change within the office sector. I can you comment on how much of that was related to the both specifically and I'm also wondering if the discussions that you've had a few months ago with regards to sale informed any of the valley.
Collation changes you made to it.
No actually back it did just that we turn around the vast with the sale process I wanted to call. The isn't that shut down and then second then you had negative 40 to 40 Bucks on oil, which basically the nail.
There was discussion so I wasn't reflective really of the or the fact that we were a for sale have had some solid interest and as a market that law smallest reflective of where we are right now and where we are right now is questionable. The alagasco. It's very interesting to minus 40, just a few days ago, what does that I wanted to say too.
Thanks, everybody.
So that's a vast improvement you still have about 35 Bucks I believe it's a number that oh visit is using it to break even though although they are hedged for the balance here, we can't really discuss individual asset appraisals. Obviously, we did that that would be really distorting the process valuations with analysts if they take one asset and say this is the value back.
They'll have a mission valley less the portfolio. So it's not really the proper way to go do you have all information, which management has to make the assessment and I guess valuations with all the tools and with all the knowledge or we have to give you you batches and whatnot.
<unk>.
Okay. So turning to retail I mean, I guess I need all the details with the assumption, but how does the the occupancy rates expected the expected market rents how does that.
How does that sit relative to where the portfolio is that today is that is it still above those metrics or at or below just my get a sense, where where that ranks.
All right I don't believe is kind of question.
See you asked how the at risk value for five years list when they close malls was Ah lisanti.
No I I want to know the assumptions that went into the fair value change and how that how those compare to where the metrics are today as far as occupancy and rents.
Oh this is their occupancy buckets, there is 30% quite frankly, that's good relatively close malls, which as you will note to 10% to 20% there's no guarantee that on that at all I don't think anybody's itself biomass, it's predicated on knowing our library of Illinois.
No occupancy occupancy and rents like are you expecting are you still expecting rented declined more than where the portfolio attached and same with occupancy sorry, if I say by the same well take restaurant as an example, that's all thank you.
That's a block ratio.
Then open up slowly and open up a physical dispensing and as such as business is going to be a hammer. So it's a mom and pop you're going to have to go ahead and deferred is not to be deferred anybody.
It's going to be a reduction in rent going forward. You also have on lease rollovers next few years take Yorkdale to Great example, I know very heavily wealth management office minute elsewhere, what they brought ratios kept the supported and they've also have to go head to retool the balance sheet holiday could well be purchased inventory, but lot of existing inventory being obsolete. So I do believe that.
Rental rates will be coming down I believe our rental rate has become less so than the high end lost quite frankly, because where the and Pat has mentioned where they only or the primary haulage marketplace rock ratios never were high ROE supportable. So the red to answer your question specifically the rental rate you know I will come down has come down it was all.
He is expected to come down somewhat and the vacancy rates will go up those tinkering with those numbers are those vacancy rates going up in rental rates come down because there was that result, well did decrease and the I push outs for players.
Okay, and then with regards to the $1.7 million cost related to failed acquisition can you give us any color on that was that related to lunch hour or another asset class.
When I say, that's really been asked the question I'll give you [laughter], so I Oh I can handle that so.
The depending on what the we use for covert actually materialize. Initially we had an acquisition that were in the middle of due diligence we had it not fundable deposit.
It was a 66 really dollar deal a lease up in Orlando Beautiful last said, we're incredibly excited at the habit, but quite honestly, given what we're seeing coming down the pike.
As it relates to covert but also its impact on.
A number one lease ups and in terms of the traffic counts, but more importantly, what it did to the Orlando economy.
We thought it would be much more judicious.
A few simply bail we have an excellent relationship with the seller, a which is carlyle we've done three or four acquisitions with them.
No reason to believe that we would not be able to research Institute the deal at some point of the future, albeit at a much lower basis, we just thought of more appropriate.
So just stewards of the unit holders capital to 'cause centrally belt bail out of that transaction and okay. The next if the several weeks past that were any indication. We're convinced we did the right though.
Okay is there.
Question on the overall residential values value.
And the overall Atlanta portfolio, that's a reflection affect the Disney closed down and this is a kissimmee asset which is a switch services that are that mark. So they may impact is not a cap rate discussion more or less the very type environment, where no visibility into the tourist attractions is a lack of an open or at least up here.
Me too long and that's that's one reason I don't you should extrapolate from Orlando analysis, the saying the same say categories 11.
I would agree and an injury why would what I would add to that is and whatever collections with in April and May.
Generally speaking older properties have been very very well how much other than.
Or or industry average, but there's been no weakness as of right now on the Orlando market from a collections perspective for our stabilized deals we just wars.
In a more to with the idea of going into a lease up I'd up one point.
Okay is there anything in the Landstar pipeline on the acquisition or disposition side at this point.
Oh no.
Okay and then my final question is with regards to that the new financing activity I'm not sure if I missed it but there were a rate provided on the 100 billion dollar mortgage and a 425 million dollar credit facility.
You didn't message we didn't provide it but I don't think thats materials that can give it to you it was 3.8% on the mortgage.
And the credit facility is just policy because its involves our bankers, we do not to spend rights on that it's the fact that it's really syndicated the chairman of the a financing well for the mortgage was 10 years.
Okay, great. Thank you I'll turn it back.
Our next question comes on line of Neil Downey of RBC capital markets. Please go ahead. Your line is open.
Hi, Thank you good morning.
Tom You you worked very much through the the decision process in terms of so why you decided to cut the distribution in half.
Can you maybe add some color as to how you arrived at what the magnitude would be down 50 versus some others percentage.
Yeah, it's not as sophisticated as you would hope the realities, we toy between a number of 40 and 50 and should we ever since we don't always epidemic is going quite frankly, there will be recurrence. We don't definitely we don't want them have too.
Come back again, it's known mathematical Formula I can give you asked that question. It was a comfort gel and saying what's training, we're trading where we're trading at our I phones values 20 to 26 to market was.
Mid double digit shifting 60% return obviously the market received its easier simulations. So we took we should we basically went to the high end of it you can't 40 to 51.
Consideration by 50 as the Magic number because 50 is a magic number that put that bar at the high end bar aspects of tax give consideration to 50 and we just left to go ahead and kind of nice increase if it can ever decreasing and we don't know the weight of where the world is doing.
Okay, Okay, but a range and we just never ended the rent.
Okay Super.
Just to circle back a little bit on the the office fair value marks and I fully appreciate that are you shouldn't be giving us values for individual properties, but.
Maybe just flushing out sort of directionally or which assets were affected it sounds a fairly transparent here that the bow was part of that.
Mark but you'd like.
He totaling gas right, so yeah, what well what about a it's in Houston Uh Huh.
Trans Canada, and and so you know level of nonrecourse debt, we have on the though and you know the track is 10 years left the Germans. It has has a six plus years of churn you know that and everyone else oil and gas market place I'm, just give me [laughter] Olympia figured out probably get ready.
If the oil and gas marketplace. There by definition here about market because the net effect as there always will be lower than the face to face is always going to be in case of academy that makes 18, or 20 Bucks and effective but that sorry, basically that's not net effective. So it took are you starting point is going to be $760 million expiring in 2000 Geos.
21 on the both side and then you can ask something to that to reflect.
Some value the cash flow over and above that the non recourse debt and the rest is allocated between more tests and.
Obviously, then to Transcanada pipeline, that's kinda pipelines and we did the deal selling at a 5.5 captain.
Years, though by the beginning actually the decrease of this the whole meltdown in Calgary.
He brought down the rents by doing a blend and extend the transcanada's transcanada's rents or not or not crazy on the market, where they have tested you should know that 300000 square feet was placed on sublet market around a year and a half a door. So many something that most that space. So they're not occupying entire drilling half sublet some of the space. They wouldn't be looking to do a long term blended.
Extend on that then told it hits and that's where it sits so allocate to transcanada the most and has to the probably the most then has that transition as you would have done any.
Yeah, Okay, and then Transcanada does it relate to the fact that their sub tenants in there because ah.
[laughter] tenants in there and quite frankly do transcanada's for taking up the space as it comes back that's never been an issue and that kind of kind of not be lost much side doesn't like that at all the space is always been fully occupied fully leased that's not issue I think this is their head office or they're comfortable and if they've been giving back it's another billings.
One of them to get back Space example, was telling style, which we sold but they were in there there just leaving their right now and Backfilling back into a task in the pipeline tariffs.
On a fifth the old ESL building they have space, they're just getting back so they're going to told me back into the trans kind of tariff and it's always had sublet space and sublet space, there's not space that was bothering them, which is cases into though it was more or less spaces. They use for their flex for there.
Basically move in and out of.
Comedies are from that's never going to worrisome issues, whether they never once requested us to take back space and they did a blend and extend don't forget on the entire bill.
Yeah.
That was Oh it was a good deal for the right.
Just you know a on the I guess, the top 10 to 10 tenants specifically.
Yeah, there's high degree of credit worthiness, there's lots of term.
On a on those top 10.
Many of those tenants you know whether it be in the last few weeks or a couple of months.
Made any sort of approach or request for changes in rental terms or reduction in rates or anything like that.
I'm just looking at the book right now.
Offensive Dell has new York Giant Eagle Twenty's higher Tc energy course, and lows and finally tell the answers now.
Okay. Thank you lows in actual fact, we actually did blend and extend we I think we about 15 loans or something like that we did ran Dublin and Stansted. You can you terms on those lows, we just actually done and then another one recently so that's put to bed tell syndications. We know we sold academy acid, none of those tenants have asked for and any form of debate.
Okay. Thanks.
No what do we haven't given them.
[laughter].
For the hurdle sorry.
Our next question comes from the line of Gordon Nichols see RBC. Please go ahead. Your line is open.
Thanks, very much but my question was actually answered thank you.
And thank you and our next question comes from the line of Matt Corn Act of National Bank. Please go ahead. Your line is open.
Good morning US with regards to the distribution policy going forward would you be it a at this point that things normalize and who knows what's new normal looks like but that you'd potentially keep to more retention of capital in the <unk> going forward as opposed to increasing back to a level where do you.
Before.
Well you know we evaluated every single quarter I'm, So, we'll see where the world those discover the pandemic first but you'll definitely seeing that's not having no focus to going back to where they were just because that's the way we were it'll be predicated on the conditions situation at that time or anything else they'll payout ratios and how management and the board fields, which probably.
Well, we don't have adult say this dynamic we kind of by 50%.
Next quarter Pandemics over everybody's Baptists, we'll know more physicians were going back there will be predicated on the situation on a quarter by quarter basis.
Fair enough and then with regards to LTV on your mortgage maturities, there's still a pretty reasonable for the next three years 2023 shot up so isn't there was a fair amount value adjustment there.
But but presumably the mortgage markets remain open and there's potentially a financing potential coming out of the mortgages.
There's definitely potentially coming out of the market is without question. The balancing act could reach have to do is backing it on the unsecured market because we all want to increased the level were encumbered pool. So we balance between what is open as far as unsecured versus what's available on the secured and that's a balancing act will always continue.
As you know the actually market started to open up again, all resected assume would rather do unsecured if they can just because it's so much easier and you really gets hard to dance on both of them because the demands are different for both somebody that's good world like a unencumbered pool as much as possible and if we can we'd like to go it continue in that vein [noise].
And presumably the rating agencies and your bondholders like the fact that you're retaining an extra 200 million a year and there's been a few unsecured issuance is in the market that have been well received.
How do you think of that in terms of how much you're carrying on your lives credit versus a reduction in your unsecured book No. There's no question that attitude world opens up again, and it's a it's easy tax instead, we will access it to make they should bring down those lives.
I guess the moral the stories of you'll get the United States, where the Canada as an example.
It's kind of properties to class Snapple, even though it stops hammer doesn't them all business. It has always had substantially unencumbered line lines, you're basically there to give the financial support to the unsecured but the primary source of financing in the unsecured so lines are there to use but not to use as permanent debt I'm sure just thereafter.
And secure.
And I guess time will tell but I assume your spreads like we committed as a result, this booth and then on the underlines our comment with regard to leveraging a JV or commitments from from other partners would that require essentially selling portions of your existing assets or is that all on the commitment.
No that does not.
Well, we haven't $20 million never not freed up and our lines, our cash availability well be able what will be accessing that but we're not thinking doing 50, 50, Coa venturing with when that does not require which with accessing or the capital to work.
Management to go there.
Yeah, I think met the Columbia was more to the fact that.
I I chemical weapons. Your some of your peers, but we did ask from pumped the prime about the obviously, there's a tremendous upside for multifamily we get Oh I get calls from several pension funds asks us what or intrusive and leveraging our platform ledger leveraging our expertise.
And as I alluded in this and be a speech.
It's too premature and candidly for variety of reasons, we did almost like I think now we're going to take or time, we're going to answer those calls we're going to review over auctions and if and when do we like to go forward with this it will be in a controlling edit to you, but with the majority of us.
Because ultimately that's that's the play right. That's that's the leveraging the expertise that we've been able to develop in the last six six years and.
Nor would I like to believes to be our very strong track record.
Okay, great. Thanks.
And our next question comes from the line of Mariano series of Scotiabank. Please go ahead. Your line is open.
Thank you. So we're just following up on New York.
On the learn term.
Discussion I'd just be clearly going forward in terms of partnership with the with the pension funds of the plan would be for HR to do a small cone bust.
These funds going forward.
Correct.
Yeah, I think the I see the plan is for that like I said I think it's premature to discuss the details of what that's going to look like only because candidly what we've discussed in the past has.
I've been very very different than everyone has their own construct but in no case would it be major capital investment number, but how did the day. The reason why we'd be doing this is to lever the platform not to lever our capital to the benefits of other jaeson metric.
Got it and it sounds like the expense.
In terms of funding their coinvestment, they wouldn't come from seating.
Percentage interest in existing accounts, which but rather buying your small interest and you are going forward.
Yeah. The mirror I appreciate you asking the question I I, just think that as of right now it's too premature to translate question in a definitive better.
I, just maybe higher level can these discussions that you've been having.
With the pension funds.
Our understanding in the in the private market is that.
And funding from all funded pretty much shut down in terms of private investments or are you are you getting a sense up here.
Coming back and reviewing.
Potential transaction.
Committees considering alternatives.
Great question more yeah. It's a great question I think it's a little bit early into coated.
Cleveland, but I would say anecdotally, there's definitely the recognition of the work at the multifamily has been and we'll continue to be a very resilient asset class and they think could those who were unaware or didn't have that appreciation for what they certainly do now and so I think it's more stemming from that.
Yes, it's anything else that people will realize the word or pension funds or developments or or whoever else we're talking through.
It's just the recognition that as of right now, especially going through coated.
We're collecting money focus on a revenue knock on wood, we see no reason to believe that that's going to a base or tenant base incredibly strong.
We love declines say multifamily space is actually showing up to be what are the most resilient within or.
We do us multifamily environment.
So I think it's less sum of money being on frozen, but more silver just the general like acknowledgement that.
This is a apprised that's the Clos in one that's a little something a lot of interest.
Okay and then my.
My second question, just with the primary reason I.
I may have missed it and you may not be willing to share, but I thought throat their anyways.
With the reduction in yard for us value or you're going to give us them. So what.
Premiers being.
Well run out on the books there.
As of today.
Yes.
Sorry marry your came out a bit broken out are you asking what the total failure primarily to be fair value on our books, you I'm, asking if you're willing to share or what the of the pool Premier It's fair value and I'm not equity, but is in your 2200 56 cents.
All right for US now this quarter.
Because we haven't put that into I hit the nail financials, we shouldn't.
We would just broken up into retail to figure out how retail as a total isn't R&D Tonight [laughter] not any further than that.
Okay fair enough okay. Thank you.
And there are no further questions. The queue at this time I will turn the call back over to Tom Hofstetter for final remarks.
Thanks, everybody for joining us enjoys a long weekend stay indoors and been watch television have a good luck.
Ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.
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