Q4 2020 Artis Real Estate Investment Trust Earnings Call
Good afternoon, ladies and gentlemen, my name is on it and I'll be your conference operator today and this is John I would like to welcome everyone to the August reached four quarter and 'twenty 'twenty annual results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question of the master cell.
And she would like to ask your question. During this time simply press Star then the number one on your telephone keypad.
I would like to withdraw your question. Please press Star then the number true.
Now I'd like to turn the meeting over to MS. Heather of nickel Ms. Nicole. Please go ahead.
Thank you and good afternoon, everybody back into August the fourth quarter and year end of 2020 results Conference call with me today and artist as inter N P O Samir Manji and CFO Kim Greene.
The senior management are also with us and may participate on our Q&A session.
Our fourth quarter and year end of 2020 results were disseminated yesterday and are available on SEDAR and on our website. The audiocast of todays call is also available on our website.
A replay of the call will be available later this afternoon until Wednesday April 7th 2021 of the.
The replay numbers and pass code were provided in yesterday's press release and an archived recording of this call will be available on our website.
Before we get started please be reminded that today's call may include forward looking statements such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today.
And have identified such factors and our public filings with the securities regulators and suggest that you were first of all the filings.
As we discuss our performance. Please keep in mind that all figures are in Canadian dollars, unless otherwise noted with that I will turn the call over at the center.
Thank you Heather.
Good morning to those on the West and good afternoon to those and the East welcome and thank you for joining our 2020 annual results conference call.
Before we get to our fourth quarter results I would like to say a few words regarding the global pandemic.
As we all know COVID-19 continues to impact our country and the world We live and.
I would like to thank and acknowledge our courageous on.
Line workers across the country, who have worked tirelessly throughout the pandemic to do everything they can to serve and protect Canadians.
Our thoughts and prayers go to all of those who have lost loved ones true and because of the pandemic.
We are encouraged by the increasing number of vaccines and their availability.
It appears we are heading in the right direction and can look forward to brighter days in the coming months as new case count number of decline and the number of Canadians who have been vaccinated increases.
This will amongst other things help reopen our economy businesses and allow Canadians to see life return to some level of normalcy.
I'll now provide and update on artist as business and operations.
I'd like to start by acknowledging the team at Artis for their hard work and support over the past three months.
Artist has undergone significant changes and I recognize that this has not been easy on many people and our organization.
I have been impressed by the professionalism and commitment of our team, including those based on our Winnipeg head office and others situated in a remote offices across Canada, and the United States.
We have a strong and dedicated team of artists.
Since November 30th 2020, we have completed or substantially advanced all of the initiatives set out publicly by sandpiper, including overhauling the reach governance the <unk>.
<unk> of new and diverse perspectives of 25% reduction and board costs and identifying opportunities for reduction in G&A expenses.
We are all working hard to improve many critical areas of our business, including corporate operations and asset management and deal negotiations.
We are identifying efficiencies.
And lighting processes, and implementing best practices and institutionalizing, our platform and real time with the ultimate goal of maximizing long term value for our unit holders.
In light of the fact that we plan to announce the results of the 100 day review in the coming days I'll keep the remainder of my comments focused on the 2020 annual results.
Look forward to presenting our go forward vision and strategy for artist very soon.
2020 was a challenging year for the real estate industry.
Despite these challenges we are pleased to report improvements to our debt metrics and our ability to maintain significant liquidity throughout the year.
Jim will provide more details on shortly.
Our portfolio continues to demonstrate its strength and resiliency.
Occupancy decreased slightly from December of 2019, but was still strong at 91, 9% at the end of 2020.
Rent collections remained steady throughout the year and were especially strong in the fourth quarter at over 98%.
Our property managers continue to work diligently to support tenants. During this time and our leasing team has adopted now providing virtual tours of vacant space wherever possible and facilitating virtual lease negotiations.
Despite these challenging conditions, one 3 million square feet of new leases and $1 8 million square feet of renewals commenced during 2020.
And the renewals achieved of two 4% increase and rental rates.
During the year. We also completed one industrial development in the U S. R Gate and 90 phase four and two retail development projects and Canada, 330 main and Linden real shopping center too.
Yeah.
During the third quarter, we completed park 890 face for a 100000 square foot build to suit industrial building and the Houston area that is the 100% leased to a multinational tenant.
Artis, along with our joint venture partner has now begun construction on the on the fifth and final phase of the Park 890 development, which is expected to add three additional buildings totaling 677000 square feet of gross leasable area.
The two retail developments completed during the year were densification projects on land already owned by the REIT the <unk>.
And 330 main at day 28000 square foot retail development located at the iconic intersection of Florida job and you and main street and Winnipeg.
The property is situated between the 30 storey office tower at 360 main street and the new apartment development that is under construction at 300 main street and is located above the shops of Winnipeg square, providing indoor access to the city skywalk system that links numerous towers and downtown and amenities.
This property is 94% leased.
At Linden rig shopping center Artis completed a 17000 square foot Densification project that is the 100% leased to national tenants.
The line was acquired in 2013 and is situated in a popular retail node and Winnipeg adjacent to a 193000 square foot retail property that is owned by the REIT.
This new 17000 square foot multi tenant building shares of site with Lowe's Who's building was constructed in 2017 pursuant to a build to suit agreement.
In terms of ongoing development projects and addition to the final phase of Park 890 already mentioned construction of 300 main continues.
In addition to these ongoing projects subsequent to the end of the year, we closed on the purchase of Barclays. Cerro East a 37 acre parcel of land located along the South loop 202 freeway and the Phoenix area.
Artis has a partnership agreement in place to develop three class a state of the art industrial buildings totaling approximately 561000 square feet of leasable area.
<unk> will develop this project as of 10% general partner.
Lastly, I will provide some color on artist suite of disposition activity during the year we.
We sold 13 properties during the year totaling $2 1 million square feet of leasable area and two parcels of development land.
Of the 13 property sales nine were office properties three of our retail and one was the industrial with 11 of the 13 located in Canada and two located in the United States.
The sales price for these assets exceeded the ifr's values by a combined total of $10 $4 million.
We will endeavor to further maximize value on all future dispositions, we pursue understanding that I FRS values don't always a line to real time fair market value.
Subsequent to December 31, 2020.
We sold tower business Center, and industrial property located in the Denver area or $66 four of $5 million U S, which translates to $53 $106 million U S for artist is 80% interest.
The sale represents a $3, 99% cap rate and a significant gain over the construction cost and the reach of <unk> fair value for the property.
We also have an unconditional agreement in place to sell two retail properties and Regina from $45 million, representing a nine 4% cap rate and a portion of our retail property and Fort Mcmurray for $4 6 million, representing a cap rate of seven 7%.
I will now turn to Jim Green, our Chief Financial Officer to provide a summary of our consolidated financial results for the fourth quarter.
Okay.
Yeah.
Thanks, Sameer and good afternoon, and good morning to everyone on the call.
The fourth quarter was certainly an act of one and artists because some of.
You had mentioned the COVID-19 virus is still hitting all countries, including Canada and the U S. Our specific markets with more restrictions and government mandated shutdowns.
During the quarter Artis reached agreement to settle of potential proxy battle with one of our significant investors, which resulted as Samir mentioned and a reconstituted board and changes at the senior management level.
The new board placed all prior strategic initiatives either on hold or terminated to give itself time to review and created a new plan and direction for artis, which some of your referenced in his remarks, and which will be real to the market in the coming weeks.
The settlement and wind up of the prior strategic plans did involve some significant onetime cost to the best of our knowledge of these have all been accounted for in Q4, and there will be nothing that will carry forward into Q1 for these one time costs.
I think this I forget I'm duplicating what are some of those comments, but our rent collections have been strong at 98, 5% of our rent collected and in the fourth quarter and thus far our tenants are weathering the storm quite well.
Artist chose during 2020 to not participate in the CCAR program proposed by the federal government.
However, we have been working with our tenants as needed to provide rent deferrals and in some cases, we've provided rent abatements and exchange for an early renewal or longer term on the lease.
The federal government has announced the new rent relief program for tenants referred to as Sirs Crs with the aid coming directly to the tenant and non involving a rent reduction by the landlord we.
And we feel this is a major improvement as far as the government program goes and are working with our tenants as necessary to help them access this program.
And to the end of December our rents receivable were down to approximately $5 7 million from $8 2 million at the end of September.
And there is a further $4 $9 million due under deferral agreements with our tenants.
This deferred rent balances also down from Q3 as we begin to collect amounts that were deferred during Q2.
While we feel of the majority of both the current rents receivable and the deferrals will ultimately be collected we did book of reserve of approximately $2 million against these balances, which we feel is adequate to cover any potential re rent default.
Leasing activity has been strong.
And the quarter, roughly 250000 square feet renewed.
And on average annual total of $1 8 million square feet.
And again I believe some you mentioned this but weighted average rent increase was two 4%.
Which we feel was very good given the impact of Covid.
On both the overall market and specifically on our tenants.
Based on our Q4.
NOI net operating income the REIT.
Had a 49, 3% weighting and Canada, and 57% and the U S. So almost an equal balance.
Slightly tilting towards the U S.
On an asset class basis, we of 44, 2% weighted in office, and 19, 3% weighted and retail 36, 5% weighted and industrial.
Okay.
For those of you who were on our core Q3 call you may recall that we added some additional disclosure in our MD&A breaking out a lot of our metrics segregated now by asset class and hopefully this disclosure is helpful to the marketplace as investors review, our results and valuations as I know.
And sometimes the diversified REIT can be.
Challenging to value.
Our balance sheet continues to improve our debt to GBP ratio has been gradually coming down.
And now Sid setup on a proportionate share basis at 52% this quarter compared to 51, 9% last quarter and 52, 3% last year and.
Artist has a relatively significant portion of our debt maturing and the next 12 months with $438 million of mortgage debt. In addition to and unsecured debenture for $250 million.
Some of this and the last few years has been kept short term as it relates to assets we plan to sell.
We anticipate no difficulty and what we see and the current market and refinancing the rest and funds are available on our line of credit if needed for any refinancing.
Our NOI this quarter was 67.3 trillion and compared to $71 million last quarter.
The primary driver of the NOI drop was asset dispositions.
However, there was also a swing in.
Last quarter, we had a recovery of bad debt based on on over allowance I guess, maybe call. It in Q2 that was recorded as.
Reversal in Q3 that did not occur this quarter. So there and then there is also slightly lower FX for the results.
Decline and NOI also translated to a decline and <unk> to $45 8 million compared to $50 8 million last quarter roughly comparable to the NOI change.
<unk> came in at 34 cents per unit this quarter compared to 37 last quarter, and 37 and the comparative quarter last year.
Asset sales completed during the year are generally dilutive to.
NOI metrics and that was anticipated and planned for.
So of lower per unit numbers.
Have been aided somewhat by units repurchased under our NCI.
Program.
There is some dilution occurring from the asset sales, but the strengthening of the balance sheet and our opinion is worth it.
We've added disclosure breaking out our <unk> from each asset class using the percentage of NOI is the method of allocation.
And if you do it on that basis, the reader and 15 cents of <unk> from office 12 cents from industrial and seven from retail.
<unk> for the quarter was 23 per unit compared to 27, and Q4 of 19 again, roughly tracking and the changes and <unk>.
Our payout ratios remained very conservative at 38, 3% of <unk> and 52, 9% of <unk>.
Getting a little more granular on a same property basis.
<unk>.
And I'm going to say unfortunately were a negative five 2% this quarter and is of course timing differences, but one of the largest factors and the drop continues to be parking revenue and the office sector as many tenants of cancel parking while they work from home and during Covid.
The general office lease of courses on a longer term lease but parking revenue is generally month to month and of the tenants aren't there they arent paying for it.
The industrial segment continues to show the strongest performance in both countries and <unk>.
Canada did have a slight decline of one 6%.
But the U S had 4.8% growth and.
The decline in Canada is and our opinion, just some temporary occupancy changes that will reverse in future quarters.
On the issue of fair values of our investment properties are valued on our balance sheet at fair value.
It continues to be somewhat challenging to determine and fair value due to the impact of Covid. However, there is no hard evidence that cap rates discount rates on market rents have moved substantially.
You may recall, if you've been following artist quarter by quarter that there was a fairly large decline of $141 8 million in Q1.
Mainly related to retail and some office assets as the pandemic started.
However, we did not feel any significant adjustments were warranted and subsequent quarters and there have been generally some smaller increases and decreases over the subsequent three quarters such the we ended the year with $822 $6 million loss.
Yeah.
As Artis reports our investment properties.
At fair value under Ifr S. We can calculate a net asset value per trust unit figure and on.
The calculation is simply using the equity on our balance sheet less of the equity held by preferred unitholders and divided by the number of common units outstanding at the end of the quarter.
And on that basis, the net asset value per trust unit was $15 three this quarter compared to 15 and 35 last quarter.
So of 32% decline this quarter largely due to FX in fact, more and more of the the necessary due to FX, which on a standalone basis would have decreased the net asset value by 46 cents.
And offsetting that was a gain of 14.
Related to our NCI, b and redemption of deferred and restricted units.
Artist ended the quarter with roughly $35 million of cash on hand, and $575 million Undrawn on our line of credit of about $250 million was drawn on that line and subsequent to year and to repay the series C debentures as they mature.
That was planned out of the series D. Debentures were issued in September of 2020 with the plan to temporarily put the money down on the line of credit and repay the series C debentures.
Based on what we know today, we feel we have adequate liquidity to get us through the remainder of the Covid crisis, and we look forward to more normal times.
And last but certainly at least I would highlight the fact this was public in November that we have implemented a distribution increase of 3% commencing with the distribution that was paid in January of 2020 one.
And that completes the financial review for now happy to answer the questions. If there are some later, but I will pass it back to Samir for further remarks keep safe everyone.
Thank you Jim.
In summary, we would like to reiterate our confidence and our people and our portfolio of assets.
We remain committed to doing everything we can to maximize value for our unit holders, which and the near term includes focusing on optimizing operations and maximizing rents and occupancy and every asset we own.
We will also continue to explore divestitures, we have a lot of interest and various assets and asset classes and this combined with our healthy liquidity position that Jim summarized puts us and a strong negotiating position when considering any asset sales.
As I mentioned at the outset, we look forward to sharing the results of our 100 day review and a few days, which will include our go forward vision and strategy.
This will also include hosting a virtual investor meeting to present, our plan and to engage with our unit holders and other stakeholders.
We hope you and your families all continued to stay healthy and well I'll now turn it back to the operator for Q&A.
Thank you ladies and gentlemen, we will now begin the question answer session should you have a question. Please press the star of followed by the one on you touched on film you will hear and treat them from the acknowledging the request questions will be taken and the order receipt should you wish you withdraw your request. Please press the star followed by the true if.
Youre using the speaker phone please lift the handset before pressing Andy keys, one moment. Please before the first question.
Your first question comes from Jonathan <unk> with TD, Jonathan. Please go ahead.
Thanks, Good afternoon.
First question is just on.
A longer term view and when you put out the the 100 day or the plan and the 100 days and the next.
Couple of weeks or so but near term I was a little surprised to see you guys repurchase shares in the the fourth quarter and maybe give us your thought process behind doing so.
Sure Jonathan.
And I'll simply say that.
Right.
To the comments that Jim made earlier, we have ample liquidity.
We have a high conviction in our disclosed NAV.
And combining the two.
Where the unit price was trading.
For us the N T I D.
Building even into January which was noted as a subsequent event the <unk>.
On CIB represents a very compelling allocation of capital and investment to buyback our units for unit holders.
Okay.
And then I guess, just keeping along the same lines I was also a little surprised and.
This was a subsequent event that you guys put.
The leverage on.
The three unencumbered retail assets I would of thought debt.
You were looking to sell retail assets.
So again there are we've got as you know over 200 assets.
Across our three asset classes and we are looking at upcoming maturing debt. We were looking at where interest rates were and the market and so the ability to swap assets, including those maturities that are upcoming that we would then potentially add to our pool of unencumbered assets was in our view of sound decision.
And again in light of what the prevailing interest rate environment was.
Okay. So it should be can we read anything into that with your future outlook and I guess and the last thing there with.
And with selling and the industrial assets post.
Close to the quarter.
I won't comment on you know what one should read into we will be as has been noted presenting a separate from this call and then from yesterday's press release.
A formal.
The presentation and press release regarding the go forward vision and strategy and within that.
There will be ample color and visibility around items, including capital allocation going forward and what the strategic plan is across the board, but I would say that you know with respect to the divestiture of tower.
It was.
A.
Thankfully very compelling transaction, we had ample.
Temple ample interest and this asset through a formal process and the results I think speaks for itself in terms of what was achieved both.
In terms of cap rate, but also what was achieved relative to cost and the the gain that was was realized.
Okay.
Okay. So the.
It was that.
Was it like an unsolicited bid and then you guys started the process or did you just where did you decide to sell it and the startup process.
We've got our executive Vice President for the U S region. Philip Martin is on the call fill up why don't you take that question.
Thank you.
The the process was for ammonia was not unsolicited we used the.
We went through various different brokerage houses to obtain a book of value and.
And selecting CBRE.
And we went through a formal process and it went through almost four rounds of bidding all receiving the really really great interest and exceeded the expectations for the exit cap, which turned out to be four point of 3%.
Exit yield, which broke all records and Denver for industrial.
The sales.
Okay that is helpful. Thanks, I'll turn it back.
Thanks, Jonathan.
Thank you.
The following question from Michael <unk> with the hair, though Mike. Please go ahead.
Hi, Thanks and.
Good afternoon everybody.
And I was hoping on.
Ben.
The portfolio specifically.
And one quarter doesn't make a trend, but the same property NOI. There was was down significantly but also your occupancy on the office segment because over the last several quarters to kind of bit of a hit so I don't know if its isolated to specific region. If it's more of a broader trend that youre seeing are transitory in nature, but any color on that dynamic would be helpful. Thank you.
Sure. Thanks, Mike we've got a hour.
Executive Vice President of French Sherlock on line I'm going to ask Frank to comment on Canadian Office, and then I'll ask Phil to comment on U S office.
Sure.
And Canada.
The major change for the year on year with the Alberta office.
Office market, our occupancy at the start of 'twenty was about 78, 6% and and.
We ended the year at the <unk>.
66, so that's where we saw the.
Most of the decrease our other office of market or other major office market in Canada is the Manitoba and the occupancy remained flat there for the full year. So we didn't really see any change there.
We had a.
Again, the and Ontario, not as many office buildings and one of which was sold the Concord corporate last year or so really we have four office buildings and and on.
Carryall and again flat, there as well nothing and Saskatchewan.
And in regards to maybe just add.
Sorry go ahead.
Sorry, I was just going to add one further comment is that the office also includes the parking revenue that I referred to as being substantially down from a year ago. So there is a there is a hit on the on parking revenue of course yeah.
Okay. Thank you and in regards to the United States, where we have office and Madison and Minneapolis, Denver and Phoenix.
And generally they've had held stable, although it's been a quiet year and 2020 and we are we are seeing all types of responses to the future some that have been very positive.
And part of it, particularly in Minneapolis, and the third quarter, where we had a good opportunity to extend for long term by providing and early ti while their employees were at home.
So we do see from bright spot, particularly also in the Phoenix, we're seeing a greater amount of activity more than ever and that does still more into into the 2021 with the good news of how vaccines are being distributed in the states.
Madison has remained stable we are we still hope to achieve a few good leases and the upcoming future.
So overall and also in Denver, and it's been quite quiet downtown we.
We did sign of significant leaf and southeast Denver and.
And so we're looking forward to a much better year in 2021 again I think this has a lot to do with the the success of the vaccine distribution of United States.
Okay.
That's helpful. Thank you.
Just with respect to the development that were completed Jim during the quarter with the full NOI from those of being captured in the quarter or is there still and uptick and if so do you happen to know what the incremental contribution would be and Q1.
There was.
I would say, it's not 100% incorporated into Q1, sorry Q4 for sure.
Did you have a comment on that.
And do you think that the part D 90, NOI would be of the full amount for the quarter. Okay 330.
Main street.
And thank the good life commenced Tim.
Total first I think it was delayed a little bit okay, sorry, yes, yes.
Okay.
Excellent and then just lastly, just to confirm on the part D and <unk> 90.
I'm not sure that you've started construction on is.
Is that being done on a speculative basis.
And if so do you have a read on.
Any of leasing activity on the property currently thank you.
And again, we'll pass that over to Philip.
Thank you yes.
And our ability that speculatively.
We're introducing a variety of product on that site that will be of cross dock, which will be our second part of that but it will be larger and then a small rear load and of Frontload. We've had success with the frontload, but overall, we have no pre leasing completed we just broke ground and so we are we have.
Had interest from various parties already marketing headwinds and Doug. So I look forward to giving you more news and the quarter.
Okay and last one from me before I turn it back just on the the two sales that were done subsequently, obviously a record breaking transaction record breaking pardon me transaction on the the Denver assets and to confirm that was two questions. Your chicken from Mac I'll keep that asset was 100% occupied and then the second would be.
Just on the Victoria square transaction and benign forecast looks elevated even compared to what we would consider to be a cap rate for retail and I was just wondering if you could give a little bit more color as to what was the driver and thank you and the I'll turn it back after that and thank you.
Great. Thanks, So yes, the answer to the first part of the question.
And the tower was fully occupied with two significant tenants and then your comment around the upcoming dispositions I think one has to look.
Into this a bit.
And with a bit of of different lens and this represents our last and closed retail shopping center.
And from our vantage point, just based on what we want to focus on strategically we felt that after a fully marketed process exercise.
And that the highest and best offer that was presented was one that we were comfortable.
The negotiating and ultimately landing on transaction.
And.
And as we've conveyed their unconditional and we anticipate that kind of closing.
Okay.
Thank you.
The next question comes from Matt Logan with RBC capital markets. Matt. Please go ahead.
Thank you and good afternoon.
And wondering Samir if you could give us a few of your high level thoughts on your first couple of months on the job.
And what you've learned and.
And how your views of change the boat artists of the business if at all.
Sure, Matt I'm going to keep my comments relatively brief because I think a lot of what we look forward to presenting in the days ahead. Following the 100 day review will respond to that question, but let me, let me start by saying or reinforcing what I conveyed and my earlier.
Remarks, I've had the privilege and opportunity to get to know and many of the incredible individuals.
Who work at Artis over the last few months and.
And we've got a committed dedicated hard working team of individuals.
And I think that.
The second comment I would.
Share is and I touched on this earlier.
And we have strong conviction and the assets.
And our underlying business that we believe our.
For a variety of reasons historically.
And even currently is undervalued and perhaps underappreciated.
By the market.
Third I would say that while.
There are some challenges that we anticipated and we have now confirmed that we're confident that we'll be able to work through those challenges.
And then finally in so far as the opportunities ahead of us.
Including some of the operational efficiencies that we believe we're going to be able to together.
As a unified team.
Materialize and and put in place.
We think that that's going to pave the way for.
You know of positive a positive road ahead. So I'll just keep my comments to those for now and like I said and look forward to sharing more of in the days ahead.
Appreciate the color and maybe just clarify your earlier comments, saying that the IRS values don't always align with fair market values.
Would that mean that you expect to sell assets on average in line with your ire for us now or would that be maybe the office and retail assets might be sold the bit lower and the industrial assets might be sold the bit higher.
How should we think about that and any comments would be appreciated.
Sure.
The the general comment I'll make is not specific to asset class.
We have engaged in.
The negotiations and discussions on specific individual assets.
Cros are each of the asset classes.
And and in many instances.
And when particularly when someone comes forward on and unsolicited basis to express interest and an asset.
And ultimately the market speaks and.
Generally there's never a perfect correlation between the cap rates that we use for IRS purposes, and what in and of practical sense happens.
In the specific market and where the specific assets all of that to say.
Do I think that and $15 and <unk> is an accurate.
And net asset value for artis.
I would say that and I speak on behalf of of the entire management team and the board were very comfortable with $15 and <unk>.
And one can interpret that.
And if they choose.
And maybe just following up on some comments from the prior management team last quarter, who noted that they were still on discussions with potential purchase orders for artis.
For the entire business would that still be the case following the reconstitution of the board.
No as Jim and Jim already mentioned, we've if I understand the question correctly.
And we've suspended all activities that were in place last year as it relates to the strategic review as it relates to the retail spin.
We have undertaken a very exhaustive exercise and.
The the leadership of our board of Trustees.
In the 100 day review that we will be coming back to the market on in the days ahead and.
And the outcome of that.
And we look forward to presenting will include what the go forward vision and strategy is for artists and at this point that go forward vision and strategy does not contemplate putting the company up for sale.
So no plans for sale at the moment.
But we'll hear more on the future of artist and a few weeks would it be fair to say that the.
Those potential purchasers would still be interested and you're simply taking a bit of a step back to reassess at the moment.
<unk>.
Yeah, I can't comment on that we have not in a proactive way are engaged with any parties relate.
Related to a potential sale of the company.
Yeah.
Have you received any inbounds sense.
You've taken or reconstituted the board.
I can't comment on that.
Okay, well I'll leave it there and turn the call back. Thank you very much.
Thank you. Your next question comes from journey map with BMO Jenny. Please go ahead.
Thank you and Hello, everybody.
Sameer I wanted to get your thoughts on the distribution, we've seen some high profile of distribution cuts and.
Very recent past and I know earlier in the fall, but with the deal.
And the distribution by a little debt.
On the back of some of them.
Lower G&A costs.
Net of the distal.
Dubuque Shen.
And I'm getting ahead of it.
How does the Hunter David.
But what.
And you'd look at what are the rates of dawn and we can look at what are the other diversified Reits are trading at in terms of the yields has your full of how do you fill up the philosophy, our approach to the distribution channel and Mike of the.
Past few months.
Thanks Jenny.
I'll provide a couple of comments and then I'll also and by Jim to share his thoughts, but let me simply say that.
We have.
Have we believe a safe distribution and a conservative distribution.
Debt, we are both including on and on on a ratio of two <unk> and <unk> that includes.
The the bump that the predecessor Board announced and management and announced in November.
And on a go forward basis, we are certainly very comfortable with this distribution, we do not intend to reduce the distribution.
And and so far as you know what what may happen.
And with the distribution going and the other direction upwards I think we'll have to just wait and see what what the board determines on the are there and of the 100 Day review and then also obviously, how we perform operationally and financially in the in the quarters ahead, and Jim do you want to add.
The thing.
Yes.
And just very quickly I think the because.
As Samir just mentioned, we remain very comfortable with that 3% distribution increase at the time that was implemented I think it was appropriate and sustainable and.
And the likely could be increased further down the road, but.
And again, we'll have to invite you all to wait for the results of the 100 day review.
Okay, I guess I guess of late.
I wanted to ask about.
Office leasing and the outlook.
On your part you can see what's happening and the Canada and the U S and there's been a lot of talk about on.
The writer.
On the suburban office space and I'm, just wondering if you could talk to US about you know if youre seeing any differences and the approach to any sort of moved to broke and office between Canada and the U S.
And.
And if there's differences across the borders or.
And just basically any color you could share with us.
Sure again, let me, let me invite Frank and Philip to comment prospectively on the Canadian and U S side.
Yeah.
Okay.
Just speaking about the Canada, where our two major office markets in Canada, our Manitoba and Alberta.
We haven't really seen any.
Any movement away from our downtown office and.
And Manitoba.
And again it remains flattish.
At about 86% occupied right now it is small.
As far as.
Our new leasing goes, but we've been very very solid on renewals so and.
And part of the reason why.
We're doing well on renewals with the same reason why its slow on new leasing, it's the cost of new construction and relocating.
And it tenants of our tenant tending to stay put.
And haven't been making any real decisions on.
On relocating or increasing more downsizing for that matter.
In recent quarters.
We don't.
And again and those two markets and.
Any real change.
And our occupancy based on work from home, Alberta has its own problems right now and that's a demand problem for office space and.
In general.
But again.
There may very well be.
The new requirements for more space for employees going forward and especially on the higher density offices more circulation space of larger workstations.
And we have some reason to believe that that could offset any of the <unk>.
And the of the work from home trends that we might see.
Especially on some of our government offices, we're finding that all of that.
The they're already looking at possibly taking more space because of that the spread or the people out of a little bit more.
So hopefully that answers your question.
Yes.
Hey, Jamie and regards to the U S.
Because of where we do have a lot of suburban office and we're and very unique cities. So to speak I can go buy one by one quickly.
The Madison, we are all of them completely suburban office and it's a journey the flu.
And of the quieter market and we do see some level of of the the.
The severity of Covid lockdowns in the downtown area of Medicine.
Has given us a lot more looks and rfps from downtown so not we haven't closed on any deal yet on that but there's been and distinct interest where that's never been before.
And Minneapolis remains the get the center of the political upheavals from last year and that will continue on with the trial of the police officer, starting next week and the overall of Minneapolis market has been quiet.
And Denver, we are starting to see interesting signs, particularly of plenty of Inverness for leasing and.
And also particularly in Phoenix, where our assets ranging from Union Hill of office Plaza to stably, and even Max where do you sort of again, primarily I wouldn't call. It quite suburban Phoenix is a bit different way, but definitely distinct nodes outside of the CBD, we are seeing a quite of bit of active.
<unk> and has been going on from the last couple of quarters, the Phoenix from of suburban standpoint.
And for all our markets is the strongest.
So I guess on Phoenix of case is that.
The slight from downtown or is that just an increase in and demand that would have been oh.
And towards suburban anyway.
Right because of gift Phoenix doesn't have a significantly CBD.
Office product.
It's a combination of of people wanting to of particularly for stable and say the smaller square footage overall for the size of the suites they have not been as.
Covid impacted they still isn't going to work and overall on the market right now I would say of all of the states we're in.
Arizona by far is the most.
And policy and.
And that also has created a lot of it.
And we're seeing actually a lot of in migration from California, Oregon, and Washington State. So that's also been from the quite quite significantly amount of people that are moving and particularly how the COVID-19 fast forward and essentially that potential and we're seeing a lot of new companies coming into the Phoenix.
Okay. That's interesting. Thank you for that color and then my final question relates to the floating rate debt proportion.
A question for Jim you've always maintains batch of question and sort of in that high teens to low 20% range and little bit of the downtick in Q4, but just in light of the back of the yields that we've seen over the very short term has that changed your view on where rates are it looks like.
And that definitely momentum on the both of us.
Do you intend to maintain the proportion of floating rate debt or have you been more active and locking in some of the historically the basic theme.
I would say we have been a little more active and locking in some of the floating rate debt into longer term.
We are keeping things still.
Shorter term.
Depending on the asset if it's an assets that may or may not be subject to the disposition in the relatively near future. Then we keep the debt shorter term to avoid big mortgage penalties, but.
And if it's an asset that is kind of considered core to the REIT, we would be looking to lock in the debt at longer term fixed rates.
So is it fair to say, we might expect a continuation of the downtick in the first couple of quarters of the year on the floor.
And we like that.
Yeah.
Yes, I would say that's likely.
Okay sounds good thank you everyone.
Thanks.
We have a follow on question from my core neck with National Bank, Matt. Please go ahead.
<unk>.
Just wanted to quickly get a sense on the development side. If you could provide any color on the outlays with regards to remaining cost of completes and then how we should think of NOI coming and.
On the residential assets and Winnipeg.
Yeah.
Yeah.
Jim do you want to take the lead on that and then if you want to invite either Kim.
Our sales to add and are pleased yourself.
Sure. So the largest piece of the development is of course, the apartment building thats being built at 300, mainstreet and and Winnipeg.
There is roughly.
I'm going to say $90 million to $100 million left to spend on that project debt.
And we'll be over the two year timeframe. The completed we are expecting roughly 50% completion of that building by the end of this year from <unk>.
Occupancy standpoint, and the balance at the end of 2022.
The tower is progressing well it's.
As I of drove into the office. This morning, they were standing the steel for the sort of 30.
And 37% floor on of 40 storey building so.
We're getting close to top.
Topping it out.
Sure.
On the.
The.
U S developments, there will be the park 90 phase.
Five that we are just commencing.
And do you have a price on what the buzz or do Phil and Chris Hello.
And maybe I'll turn that to kind of on the second and then there is the joint venture with <unk>.
The partner Nuveen and.
In Phoenix, and I'll, let Phil comment on that as well.
Thanks, Jim and regards to park and 90 phase five that would be a $55 million project, where we have 95% ownership and our joint venture with <unk>.
Trammell Crow.
And we have just as I said before broken ground and so and Thats just the beginning now we hope to complete construction.
And the first quarter of next year, maybe even a little bit sooner, but we have had some rain delays and probably hurt and Texas and the last couple of weeks.
And 90 phase.
Sorry, part of the Cerro East as we're calling it is really part of the Cerro East is going to be of $60 million of project and we also are beginning hopefully this month construction so.
That also construction completion is anticipated to be and the first quarter of 2022.
Okay, Thanks, and Jim I don't know if you've disclosed this in the past, but what is the total.
Cost of 300 main and the yield and anticipated on that cost.
It'll be over 200 million yield on costs will be somewhere in the low fours range.
Okay perfect Alright.
Yes.
Sorry.
Thank you.
Sorry, I've been corrected the core.
Those are two of 5% yield on cost.
And when you say, it's 50%.
Is it being done and stages are or is that just the lease up anticipation like it.
So the first the first 20 floors, we're expecting to get a partial occupancy permit by the end of the year and the top 20, Florida there'll be a year later.
Okay. No that's great color I appreciate that last one for me.
And 2021, you have orly persons are maturing and is there any of the status update on on the negotiations for a renewal of the lease.
Okay.
Jim or Frank do you want to comment.
Yes.
And we're going to be moving out.
Okay.
And any any prospects at this point for re leasing the space.
Theres been tours, but nothing on paper yet.
Okay. Thanks, guys I appreciate it.
Yeah.
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