Q3 2020 Dream Industrial Real Estate Investment Trust Earnings Call
[noise] good morning, ladies and gentlemen, buckets that green Dot <unk> third quarter conference call.
November for 2023.
During this call management trainees that should meet many statements contain important information what the meaning of applicable securities legislation forward looking information based on a number of assumptions and it's subject to a number of risks and uncertainties. Many of which are beyond just sort of meets control could cause actual result.
What's different materially those discussed in or implied by such where that's it for me.
Additional information about these assumptions and risks and uncertainties is contained dream at Dr. <unk> filings with securities regulators, including its latest annual information form and DNA. These filings are also available on <unk>.
That's right.
At Www Dot dream induction read that.
See later in the presentation, we'll have a question and answer session queue up for questions. Please press star one on your telephone keypad. Your host for today will be Mr., Brian calls see Oh Gee that's true.
Mr. Palmer. Please go ahead.
Thank you good morning, everyone. Thank you for joining us today for Dream Industrial reached 2023rd quarter Conference call speaking with me today is Manasquan, our Chief Financial Officer, and Alex at ACOF, Our Chief operating officer.
2020 remains a uniquely challenging year and the COVID-19 pandemic continues to result in widespread uncertainty.
However, our business has been firing on all cylinders and we continue to make progress on a number of strategic fronts.
Our FFO per unit is trending upwards compared to the first half of the year in line with our expectations. Our operations are strong and we are building, both our near term and long term organic growth profile through leasing and redevelopment initiatives.
We continue to deploy our excess liquidity into high quality assets the strength of our balance sheet and business has been endorsed by DBRS with a triple B credit rating and we started executing on our euro debt strategy with the goal of significantly reducing our overall cost of borrowing overtime.
Starting with our operations, our fundamentals remain robust with strong rent growth collections and over 1 million square feet of leasing completed since last quarter and healthy spreads. These operational successes will help build the organic growth profile of the company for 2021 and beyond.
Our ample balance sheet capacity and global acquisition platform allows us to access high quality acquisition opportunities in North America and Europe during.
During the third quarter, we acquired four assets totally totaling $86 million across the G.T.A., Montreal, Germany, and the Netherlands, and we have over $100 million of additional assets under contract or in exclusivity across Canada, Germany, and the Netherlands.
Following these acquisitions, we will have acquired or contracted more than $600 million of high quality industrial product in 2020.
Adding over 5.5 million square feet of well located deal a to our portfolio.
All of these assets fit nicely within our focused investment strategy of acquiring high quality mid to large paid distribution and urban logistics facilities in strong industrial markets.
Over the past three years, we have significantly reduced leverage growing our unencumbered asset pool and improved balance sheet flexibility, while improving overall portfolio quality.
Last month, we received a triple B mid rating from DBRS, which is a strong reflection of our strategic initiatives as well as our superior tenant and geographic diversification.
The investment grade credit.
Rating allows us to execute our debt strategy more efficiently and further improve balance sheet flexibility.
With a strong and flexible balance sheet and favorable fundamentals, we are increasing our focus on our development program. We are equally focused on ground up development and accessing the growth opportunities within our portfolio, where we have a significant urban land position.
In Las Vegas, we are finalizing the planning and permitting process with a target construction commencement date in 2021, we.
We expect to build a 36 foot clear class a 460000 foot distribution facility that will be a great addition to the portfolio.
We are forecasting a development yield of 6%, which is a 100 to 150 basis points higher than comparable stabilized product in the market.
Turning to our income producing portfolio, we have identified over 20 sites with about 70 acres of excess land that can support over 1.5 million square feet of additional gls as well as a handful of redevelopment opportunities, where we could roughly double the existing density to just under 1 million square feet.
These sites are located mainly in the DTA, Montreal and the Randstad in the Netherlands, where availability rates are low and newer high quality space would be in strong demand.
In some cases, we can access the intensification and redevelopment opportunities gradually as leases roll and others such as our site in Richmond Hill, we can pursue the expansion in the next 12 to 18 months.
Overall, we expected our land bank will be a meaningful driver of organic NAV growth over time.
With strong and well cover distributions flexible balance sheet and improved organic growth outlook.
We believe the IR is well positioned to deliver superior total returns to its unitholders I will turn it over to Alex to talk about our operations.
Thank you Brian good morning.
Our portfolio has proven to be resilient as we continue to address the transitory vacancies and response.
Leasing volume has increased significantly in all our markets and we completed more than 1 million square feet of leasing since the end of the second quarter.
We are achieving rental rates that are outperforming even our pandemic expectations.
A 300000 square foot Louisville property is receiving strong interest from prospective occupiers. We're currently in discussions with a fortune 500 tenants for the space and we expect to have a lease finalized by year end 2020 with lease commencement in early 2021.
Our recent leasing activity has addressed over 20% of our vacancies and we are in discussions with another third of our vacancies including will.
Leading to significantly improved organic growth outlook for next year.
We are currently forecasting mid single digit organic NOI growth in 2021.
Many of our new leases commencing our connection between 21 for the fourth quarter. We expect that are in place occupancy will moderately track upwards compared to Q3, leading to directionally improving same property NOI growth.
At the onset of the pandemic, perhaps there was a perception in our portfolio had a significant waiting to where smaller towns and would have struggled during the disruption.
In our Q3 Mdna, we provided additional information on our tenant base.
Over 75% of our revenues derived from 288 tenants with an average size of approximately 7000 square feet deep.
These tenants are from diverse set of industries with no industry accounting for more than 12% of total revenue.
The resiliency of our portfolio is evident in our rent collections that.
Our rent collections for Q2 increased over the course of the quarter to over 99% adjusted for rental Carla crap.
Three we have collected over 98% of brands adjusted for C track and we have not time any material deferrals for the third quarter.
In fact, we have already collected the majority of the different brands from the second quarter.
Seeker participation also declined by 25% in August and September compared to Q2 in July.
Lastly, I collection, so far for October approximately 97% without any rent deferrals or the impact of seeker, which is in line with pre Colin collection rates.
During the quarter the value of our portfolio increased by over 65 million, reflecting the robust demand for industrial assets in our markets strong leasing activity and rental growth.
The outlook for rental growth remains strong and we look forward to engaging in value add initiatives to increase returns and surface additional value from our portfolio.
I will now turn it over to Dennis who will provide a financial update.
Thank you Alex Q3 was an exciting quarter for us as we made significant progress in improving the quality and stability of our balance sheet executing on our announced that strategy.
Financial results for the third quarter were in line with our expectations and limited funds from operations was 18 cents per unit for the quarter.
FFO per unit with modestly lower compared to the prior year quarter, primarily due to dilution and the timing of deployment of our ample acquisition capacity.
Other items impacting epicel per unit for the third quarter total 0.5 cents.
Right, it's a little bit.
Hi team related adjustment and provisions.
Our balance sheet continues to be robust with ample liquidity significantly significant acquisition capacity.
We ended the quarter with net debt to assets at just under 30% net.
Net debt to EBITDA at 5.8 times.
$272 million in liquidity between cash on hand, and Undrawn capacity on our unsecured credit facility.
During the quarter, we commenced the execution of our strategy to transition our borrowings to Europe in order to lower our average cost of borrowing.
At quarter end, we had $18 million or I love to hear us.
Active interest rate at 1.1%.
Average interest rate on our total outstanding debt declined by 7% year over year.
Subsequent to the quarter, we closed on a us $150 million three year unsecured term loan.
After swapping Tahira is expected to bear interest at approximately 90 basis points.
Which at 250 basis points lower than our current average in place interest rate on debt, providing a meaningful driver of Oh per unit growth.
The proceeds are expected to be utilized towards future acquisitions and repay existing debt.
Pro forma the acquisitions that we have under contract or in exclusivity, our leverage will increase to approximately 32% with our unencumbered asset pool totaling $1.4 billion or 44% of our investment property value.
We could acquire about $275 million of additional properties with our available liquidity, which would bring our leverage to the high 30% range.
As we deploy this capacity over the balance of 2020 in early 2021.
Continue to access additional euro denominated debt and our comparative properties in Hawaii increases from our recent leasing momentum we expect our FFO per unit run rate to be stronger in 2021.
In the fourth quarter of 2020, we expect our AFFO per unit to be higher than Q3 2020 in the low single percentage range.
I will turn it back to Brian to wrap up.
Thank you, let us we continue to take significant steps and positioning D. IR as the Premier industrial REIT, and Canada, and delivering attractive overall returns to our unit holders. We will now open it up for questions.
Thank you well now begin the question and answer session.
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Okay Labor for the first question is announced.
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Our first question comes from Chris Harpreet from CBC. Your line is open.
Good morning.
Just wanted to.
Touch on the new development disclosure.
With respect to the portfolio review have you essentially at this point gone over every asset and the amount of development opportunity that you have but thats basically all of that that would exist on the on the current portfolio and just when you think about development.
How are you thinking about yields or returns. Thanks.
Yes, Thanks, Chris So let me start and then I'll ask Alex to follow up but obviously, we've got 460000 feet of Greenfield New development, starting in the city of North Las Vegas, That's near term we've reviewed the whole portfolio and found.
You know a lot of opportunities to expand buildings and.
Not only enhance.
Density, but also redevelopment opportunities. So we think there's probably 100 to 300000 square feet of relatively near term opportunities to.
Either add construction or add density to our properties that don't want to say in the near term cold in the next couple of years, there's much more of that beyond that in the portfolio. We've got a team that consistently looks at opportunities in ways that we can create value and.
And.
Quality to the to the portfolio that we have.
Alex why don't you comment on just what we the exercise we have done to go through the whole portfolio and the opportunity that it represents.
Yep. Thanks Bye.
So.
The land bank that we will quantify.
In our in our disclosure is.
Okay is it is it is first got these are very kind of tangible opportunities.
There are additional opportunities that we not including in in this land bank right now they are primarily in western Canada.
There is quite a bit of excess land in that portfolio as well.
Until the market.
Is that.
Becoming more robust we we didn't include those opportunities have over there.
They are there.
From the yield on cost.
Perspective.
The advantage of developing excess land is.
In many cases, the land is already embedded in our enterprise value.
And if you look at 80 as an example of a project like in Richmond Hill.
We can be building to a yield on cost of well over 8% and that fuel construction cost because that land.
Really cannot be sold as a standalone asset, but it has value to the to the all new and existing income producing property and there are many many more examples like this in the land bank that we've quantified.
So is there a minimum.
Return that Youre looking for before you you would kick off development project.
Well I think what deluxe is saying Chris is that on the expansion on the existing portfolio that Atlanta is already embedded in there so you're getting the land basically for.
We're free to the new construction cost the yield is much higher than if you were starting from scratch. So it's quite accretive when you can add it when you've got underutilized land.
Expanding an existing building is.
So he's going to be accretive so in Richmond Hill. For example, it's a 100 code 110000 foot building ready 40000 feet to it.
Getting a yield on the new costs of 8%. So it enhances the yield of the overall asset.
What.
In terms of acquisitions going forward.
Will you be.
Looking at assets that have.
Looking more assets that have the best development potential future development redevelopment potential.
We certainly take that into consideration when we are reviewing the attributes of.
An acquisition you can see in Europe, we've we've bought some properties that have some expansion potential however, the yield really well in the short term so thats kind of the perfect Bulls eye for us.
If they have expansion ability than we are expansion land than we we find that attractive because we've got the ability to create that value in house. We can that we can underwrite it in house and we can execute on that with our team.
Thank you.
And your next question.
Lynch you Cook Geoff Scotiabank your line is open.
Thank you good morning, Paul.
Leading up to the dignity study.
For men to people. So how are you doing.
And I know that you know some people for 2014 to Holland.
Just wondering with the beacon demanded tools.
Strong.
So does that imply a sizable focusing on.
Okay. That's helpful.
Hey, so I'm, having a hard time hearing your question I know, it's around DTA leasing, but I couldn't hear the specifics of it I'm sorry.
Sure.
So the question was.
The demand is.
So on that important to people who hold up.
Is it possible.
Right.
Hi.
Yes.
Yeah.
Sure. Thank you my question is Alex it all that.
Go ahead, Alex good.
Thanks, Ron Thanks, Im not sure.
We are seeing strong demand in the GCA across the board.
And we seeing raw rents at strengthening I would say across the board.
What we're seeing in terms of relative to that is is it a little bit stronger in India.
In the larger.
Our snack rackets, a 50000 square feet upwards.
The demand is stronger but.
But it's pretty robust pretty robust across the board.
And interesting general and seeing is that there is a stronger demand and higher rents for vacancy. So if you have an asset that is physically vacant units getting much more robust activity on it and then if you are marketing something for occupancy.
Two to three months out so.
It's an interesting phenomena, we are seeing right now in the DJ.
Sure I guess a follow up.
Look will be contractually.
What growth.
Well, we go from here.
Before.
Is it something quite a bit and some of them will be.
One of the last two years.
And also do you think it will be more local than you could have the TV household.
Hello.
Thank you.
I didn't catch everything, but I think your question was around.
Contractual growth and where we think rents are trending.
So on the contractual rental growth side, we are seeing.
A range between 3% to 4.5% and the GCA.
Yes, it is trending to to work towards kind of that upper end of that range.
The recent recent leasing activity.
All of the leases we signed in the GCA are virtually all of them have contractual rent steps in that mid 3% Mark.
We are also seeing that market rents are trending upwards and we continue to have that outlook for.
Not only Toronto, but also.
Coal to broaden GCA markets like Cambridge markets like kitchen. There are also seeing rental growth and b. There is wide expectation that rental growth we're going to continue.
Sure. Thank you. Thank you on it.
Maybe if I was looking for my follow up Andy.
Oh the Netherlands.
The people, who will probably for himself.
Well Bob.
What's that.
How does the gap with competitors.
Well, yes, why was this while the portfolio.
But that move.
Yes.
And actually I guess move in December, but I think your questions around Fred acquisition.
So Brett is that high quality distribution asset was substantially renovated modernize over the last two years.
Really caters to.
Modern distribution and logistics users.
And hence the at the time, we have in there and.
The the kind of the attributes of the building with a clear height that.
Speak for themselves the.
The cap rate is.
Higher because we secured the assets early on in the pandemic and took advantage of of that process. It was tied up previously by another group.
Didnt just decide.
Hi, Debbie.
Decided not to proceed and we had the opportunity to jump in and add yet get the asset at a pretty attractive valuation.
Based on the demand, we're seeing in the Netherlands in Europe as a whole for.
For these kinds of assets that yield.
Be achievable today.
If we were just starting on that process.
Sure. Thank you guys.
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And our next question comes from Leon Chunks Nice Securities. Your line is open.
Hi, just a.
Quick can fly and work with us kind of think of going through the ice Denise and good morning, as such the quick questions from me I think you might have seen that asset and so the first one but I missed the answer so I apologize if you have to briefly reiterate.
You mentioned, the 6% expected yield on the loss there.
Vegas project going as well as the 8% expected yield on the Richmond Hill project, So should we.
So I was wondering if we should consider that 8% to be indicative of what we should expect on other developments and secondly, how would you characterize the trends on those yields today versus pre code.
Sure, let me start and always have Alex chime in as well, but the the 6% is on a greenfield new development, that's on the quarter and 60000 feet that we're building in city of North Las Vegas. The 8% by contrast is an expansion of a building and thats the yield on the new cost to to grow that bill.
So.
The land is already embedded in the existing asset in the new construction costs will returned 8% on that new cost. So it's not necessarily apples to apples in those two.
Those two examples you gave we would expect returns on expansion properties to be similar to the Richmond Hill example, and.
The development yields will will vary depending on which market. We're in if on a ground up development Alex.
Alex what would you add to that.
Just to add so good on the redevelopment front so.
A component of our land banking redevelopment assets are these very standing assets.
That have density potential.
And then from just fiscal year perspective, it's going to be difficult or not very functional to expand these buildings. So the projects that we're working on are to demolish the existing structures and and rebuild these assets don't so the yield on cost there are going to be lower than the Richmond Hill.
Example, because there's obviously a cost of the asset.
Embedded in the calculation, but they are still representing healthy 100, 125 basis point spread to what we could acquire comparable assets in the market today.
And lastly in terms of yield on costs a new.
New land, obviously to 6% and perhaps even lower in the GCA.
What we're seeing today based on where the land is trading at so.
We will look to underwriting a few.
Land opportunity to address the GCA in some cases, Montreal, and obviously land prices have been increasing for.
High quality industrial land and that is a contributing factor to when you're looking at new new land and advice.
That said, we don't have that factor just to the same extended our expansion opportunities.
Okay perfect. Thank you I'll turn it back.
And your next question comes from Alex Leon for DHL.
Okay.
Yep.
Good morning, everyone.
A few questions relating to the collection figures specifically relating to collections from tenants who qualified for.
So I was wondering what you guys were seeing in terms of the collections from the 25% responsible from the tenant.
And how much your remaining grant that currently outstanding would be a AAA attributable to this group.
Yes.
Thank you for the question getting that again and then the alignment and basically are you referring to secret tenant.
Yeah, that's right.
Okay.
So with respect to secret tenant Theres no no no meaningful.
Outstanding amounts from our secret tenants.
So the secret tenants have contributed what they.
The majority of them, where the vast majority of them have contributed what they were meant to contribute pursuant to the program and there are limited amounts outstanding from from these tenants.
And.
We are in general on the collections. If you look at our for example, Q2 statistics for the second quarter, we wish we were about roughly 98%.
Adjusting for deferrals adjusting procedure at the time of.
Publishing our teacher result, and today, we are at over 99%. So what we generally seeing in collections is it.
It's not a matter of if we get if the rents get feel like thats more matter when.
As it sometimes it takes a little bit longer for tenants to contribute and and that we are working with tenants on that.
Lastly, I just want to emphasize that seeker program is over we managed to reduce the participation in the program throughout the third quarter by conducting attend outreach and asking our tenants where they would still like to program and roughly 25% decline that program in August.
And.
Also you, perhaps no theres a new program that had been announced that are directed at tenants.
No details are available yet, but it's going to be incrementally helpful for for some of our tenants or generally the occupiers in the market.
Yeah, I appreciate that and you kind of led onto my next question the Cana emergency rent subsidy program.
How are you thinking about maybe the tenants who qualified for sacra.
And the trends Youre seeing there relating to this new program.
We only had a very small universe of our tenants who qualified for Sandra and needed secret is just over 100 tenants.
It's a relatively small sample size.
And then as we said, yes, some of them didn't need it halfway through the program.
There are no meaningful details available yet on that on the new program.
We are monitoring it very closely.
We are in touch with various.
Government agencies to be on top of it.
Advise all of our tenants that there is there are there additional.
Theres additional support that is available so they are aware of it.
But so far we don't have any any statistics to do to comment on.
Thanks, Alex I'll turn it back thank.
Thank you.
And your next question comes from San Toumani from TD Securities.
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Thank you good morning, everyone.
Three quick questions first on the on the occupancy when we look at the U.S. portfolio sitting at around 90, maybe 2% what do you see as the stabilized occupancy for for that that region and when do you. When do you think you'll get there.
Thank you Sam.
Every every property in our U.S portfolio again, I believe you've seen that many of the assets are high quality functional classes. There is no structural vacancy in these properties.
Louisville is obviously, the most meaningful contributor and we are.
We were in discussion with a tenant and in negotiations of the lease and we expect at least to be finalized.
And this year, so thats going to meaningfully increase our occupancy a second largest pockets of vacancy is in Columbus.
And we've seen very robust touring activity and.
That's quite a bit of prospects for that.
The two buckets there so.
As that gets leased.
We don't see any reason, while the portfolio cannot be running in the high ninetys occupancy over the over the medium term.
Yes.
That's great that's helpful.
And just on the Q4 guidance, which I think the comment was.
Modest positive change in in place occupancy I think was what was said.
Is there or is there a particular region that will drive most of that.
But can you know it was a pretty evenly spread throughout the regions in the fourth quarter.
Relatively evenly relatively evenly spread Sam.
He said the fourth quarter is going to be modestly trending.
Trending upwards that a meaningful contribution will be in a.
In 2021.
Yes that makes sense with all the leasing that says that set to take effect. Then my final question is just on the market rents between the last night's announcement and the in the news.
The news release from a couple of weeks ago, the leasing seems to be achieving rents, perhaps an excess of the market rents that you put in the Mdna I'm just wondering if it's possible that those market rent estimates maybe don't fully capture the change in in the end markets in the last sort of nine months. This one.
During if theres a possibility there that those markets might be a little bit understated given given recent dynamics.
That is fair I think you said good observation.
Oh, sorry, Alex.
I was just going to say, it's a good observation Sam because the rents are moving quickly.
There's certainly no real significant new supply in the Irrs that we were announcing these leases being done. So I think rich is moving fast we're certainly leading the rent growth charge in areas and in Oak Hill in and around the DTA. We've we've got significant spreads to expiring and we're trying to find where market is but it's certainly a lot.
Higher than where it has been and continues to move usually when we're reporting market rents those are backward looking metrics and those are the overtime here thats already past the new leasing.
Announcements that we make are real time, so I think it does continue to.
Continue to move we see certainly more and more runway for rents to continue to go upward.
As.
As demand increases and as the supply demand imbalance continues to grow.
Alex you want to comment further on kind of where you see market rents going.
Yes, Thanks, Ryan So as you said some of our leasing activity that we've we've announced has been post post quarter.
Certainty that the movement and rents have not been reflected in our mdna, yet and generally as we as a company. It also early on the call.
The rents that we are seeing in the GCA in Montreal have exceeded our expectations that we set at the beginning of the year.
And Thats generally a trend that we're seeing and our expectation that also our estimates of the market rents at the time there.
There's there's some of that definitely happening.
Thank you and maybe I'll squeeze in one quick one just on leverage let US you talked about.
The capacity for another I think it was 275 million of acquisitions. It would take leverage up into the high Thirtys. We can you talk about what the current target leverage is on a sort of steady state for the right to.
Let's say six to 12 months from now.
Sure Sam I mean, as I mention Dan we've got about apt acquisition capacity of about 275 million that brings leveraged to the high 30% range.
Kind of bouncing around that that deal ideally would be in that mid to high 30% range as we've got the capacity to get there about that.
In the 37, 38% range it will depend on the acquisition opportunities as they present themselves.
He.
We'll obviously take advantage of good acquisition opportunities and then finally spring and then now we're also monitoring our debt level, the net debt to EBITDA, but certainly within that 3% range were well within our parameters and with the Triple B rating would allow for.
Perfect. Thank you very much.
Your next question comes from eating contest.
My Bank.
Hi, Andy.
Yes Hello.
Your line is open.
Okay.
I wanted to ask a question about Canada could.
Could you provide more details about that from Q1 on the occupancy Cleveland holiday pool.
But that's the dunker possible property practically next year could affect leader Brad.
Given that there is a sizable leases.
Sure.
Thank you for the question.
We have been.
Quite active on the leasing front in the West Weve completed well over 200000 square feet of renewal at rents that are in line with what we're quoting and mdna and since the.
Since the second quarter, we completed over 50.
50000 square feet of new leases.
The transacted.
And we are generally encouraged by that leasing activity.
We are we seeing in the rents are generally holding and are in line with our estimates and we are outperforming the market on average in terms of occupancy.
Just bucket because of the nature of our portfolio.
Our portfolio is urban and these assets tend to stay full.
We as a company have a very long operating history with these assets that dates well well prior to the IPO of industrial read and.
These assets have always staples for many many cycles and we continue to see that in throughout throughout this disruption.
We're not seeing the same rental growth that we're seeing in the GCA or Montreal, but the leasing activity is robust and there is demand for space and we are doing deals. So we are encouraged by that.
We also have promotions on.
Okay.
On the.
A free rent as a I didnt quite catch I think your question was around free rent is that correct.
Yeah.
Yes, we are seeing.
Some free rent in new leases as it has become more customary in markets like Calgary and.
EMS and Henry diner, So we seeing were seeing some but it's not it's not significant it would be a few months for five year term that would be where we are.
What's has become customary in the market.
So big back from maybe Mike.
I can in that geographic region near term.
Yeah, and we've commented on that earlier in the year.
We do intend to recycle some capital in Western Canada and.
No.
It wouldn't only include things like outright sales in some cases, we're talking to users who are looking to buy buildings.
Some cases were looking at converting some of our smaller bay assets to industrial condos.
That are still commanding much higher valuations and are in demand.
Compared to an income producing asset. So we're looking at very at a variety of therapeutic strategies to surface surface value and recycle some capital.
Thanks.
Sure.
On the possible topical question Kelly.
Your next year would it be possible to pass that.
Hi, Carolyn.
At this time.
Yes.
Yes, Alex I would think that you know our leases are our ultra high net leases. So the property taxes are borne by the tenants.
So that would pass through the tenants and certainly have an impact on on what the tenants pay but would not impact the net rents.
Okay.
You had to come back.
To build on that.
But just to get back.
On that on the spectra building I, just want to clarify when not necessarily expecting it to get back we obviously the news of going public.
That.
It was a filing with the suitable eight.
Especially has been paying rent throughout.
Throughout the following the announcement.
And there have been no no issues.
We know that the tenant has invested significant amount of capital already since the announcement in the in the larger bushel asset at which is an encouraging trend that they are committed to the asset and committed to the operations and the assets. We understand that they are operations in our second facility with them about our also.
So robust and there's quite a bit of activity.
So so far there hasn't been any indication that we get it they would be.
Giving back these buildings and.
Everything points to them.
Continuing to invest in their operations and indeed.
In these assets.
Okay. Thank you and then my last question.
Increase in basin Cana.
Canada.
Well, that's driven by some of the weaker tenants by many more can now open the dozen or less of the personality maybe.
Not particularly rats includes that to them.
You should be that the line was breaking would you mind repeating the question.
Alex I think the question was whats been the nature of our our increase in.
In vacancy.
Was that related to tenants moving out because the rents are going up or secret tenants.
No not not necessarily making it.
Lets you go ahead Alex.
Hi, Thanks for thanks for clarifying so what we're seeing in the GCA is a function of is prioritizing rental growth over occupancy. So we have had.
Some opportunities to part with tenants.
Who were paying significantly below market rents are.
Our overall asset is a great example of that.
And we've been managed to release that asset at 50% spread.
There as well.
We've had a few unexpected one or two smaller.
Unexpected vacancies in the U.S. So it was a one tenant that gave back space, but it wasn't a significant time, but because of the portfolio is relatively small compared to the total every 50000 square feet shows up in the occupancy numbers.
With respect to secret tenants, we haven't seen any secret tenants, giving back space and aiming for ways that hasn't been.
They haven't done that trend and yes, and generally there's normal rollover as as a multitenant portfolio would have.
So there's a few factors but.
As hopefully our announcements suggest we are making significant progress on leasing of vacant space at.
At well over prior rents, which will be contributing to our overall performance overtime.
Okay. That's it from me.
[noise] can dance your mind or if you like to enter the queue. Please press Star then one on you touched on some interesting. Thanks My question.
And we have no further questions I will turn the call over to Mr., Brian Posner for final remarks.
Thank you everyone for your time today, we look forward to speaking again soon and in the meantime, please stay healthy and and stay safe take care.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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