Q2 2021 H&R Real Estate Investment Trust Earnings Call
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Okay.
Well good morning, and welcome to H&R real estate investment trusts 2021 second quarter earnings Conference call.
Before beginning the call H&R would like to remind listeners that certain statements, which may include predictions conclusions forecasts or projections.
Remarks that follow May contain forward looking information, which reflect our current expectations of management regarding future events and performance and speak only as of today's date.
Forward looking information requires management to make assumptions that rely on certain material factors and are subject to inherent risks and uncertainties and actual results could differ materially from the statements and forward looking information.
Okay.
In discussing <unk> financial and operating performance and then responding to your questions. We may reference certain financial measures, which should not have a meaning recognize your standardized under ifr S or Canadian generally accepted accounting principles.
And are therefore unlikely to be comparable to similar measures presented by other reporting issuers.
Non-GAAP measures should not be considered as alternatives to net income are comparable metrics determined in accordance with I have for us as indicators of H&R performance liquidity cash flows and profitability.
<unk> management uses these measures to aid in assessing the REIT underlying performance and provides these additional measures that investors can do the same.
Additional information about the material factors assumptions risks and uncertainties that could cause actual results to differ materially from the statements and the forward looking information.
And the material factors or assumptions that may have been applied in making such statements.
Together with details on <unk> use of non-GAAP financial measures.
Are described in more detail and H&R, it's public filings, which can be found on our website at www dot SEDAR dot com.
I would now like to introduce Mr. Tom Hofstetter, Chief Executive Officer of H&R Research. Please go ahead, Mr House sitter.
Good morning, I'd like to thank everyone for joining us today with me on the call are Larry from our CFO, Patrick Sullivan CLO primary elite loved one CLO of Landauer, Alex Avery Executive Vice President of asset management, and strategic initiatives and Robin Katzenberg Executive Vice President of corporate development.
I'm very pleased to report H&R stable and consistent second quarter financial and operating results, reflecting the quality strength and resilience of our portfolio and balance sheet. We are in exciting times with H&R with impacts of the pandemic fading accelerating lease up of our residential does that mean properties and of course, the execution of our strategic initiatives.
As we detailed in our announcement last week with the $1.5 billion dollar office portfolio sales as though in the Bell office campus. We have laid the foundation for the next steps post transaction H and our pool its tenant concentration profile reduce casually office exposure enhance our strategic flexibility.
And then I'll turn it over to our team to provide details of the second quarter of 2021 financial and operating results. They Leif will review our multi residential operations, followed by Pat who will provide.
An update on our on our retail portfolio. Larry will then provide a brief update on office and industrial pump before providing some context for our financial results and finally I'll make some closing remarks over to you for Lee.
[laughter].
Good morning, everyone I'm delighted to be on this call today to provide you with the latest significant progress made within the Landstar residential platform.
We continue to make strides with our strategic initiatives referenced in the past, while also adding new and innovative strategies to further our mission of becoming amongst the best fully integrated residential operating and development platforms in North America.
On the topic of portfolio performance when excluding Jackson Park same asset property operating income from our portfolio in the U S dollars increased by five 7% and four 9% respectively for the three and six month periods ending on June 30th 'twenty, 'twenty, one compared to their respective twenty-twenty periods.
As you probably have heard from our publicly traded peers in Canada and the U S. The U S.
So I'm sorry, the U S multifamily industry is experiencing explosive leasing momentum.
Appointed by pent up demand and favorable supply and demand fundamentals predominantly in the U S Sunbelt markets.
Towers lease trade outs or the delta between the units previously right. So it's new lease rate has drastically increase over the past few months.
For example, our lease trade out for our entire portfolio.
Excluding Jackson Park was over 18% for the month of July led by the Tampa market at over 30% in the Austin market at over 25%.
Additionally, our same store occupancy as of this week is over 96% compared to 92% in 12 months prior.
While we certainly do not expect this rental rate growth trend to continue at this level for an extended period of time, we are certainly encouraged by the strong demand fundamentals in the residential sector.
Furthermore, we are proud to announce that our Q2 operating income growth represents over 13 consecutive quarters of same as a quarter over quarter of positive NOI growth once again, when excluding Jackson Park.
Fight Covid <unk> impact on our industry in 2020. In addition to the reinstated yet legally questionable C. D. C eviction moratorium led towers ability to produce consecutive quarters of positive growth. During this turmoil is particularly remarkable.
And I'd like to personally thank our property management Division led by Emily Watson and her team who are entitled to most of the credit.
Furthermore, we are especially proud of the Atlanta residential is only one of few publicly traded multifamily platforms that reported positive quarter over quarter net operating income growth throughout 2020 in 2021 when excluding Jackson Park.
On the technology front I'd like to provide an exciting update on our smart apartment strategic initiative program.
By the end of this upcoming September our entire portfolio will have been fully converted to smart apartments. As a reminder, these smart apartment packages include smart locks smart thermostats and leak sensors that will provide the resident full apartment control all from a single App.
The results to date have been nothing short, but exceptional as we are experiencing operational efficiencies and NOI growth, namely thinks that the keyless and remote access unit control as well as the ability to climate control. The few remaining vacant units more efficiently by leveraging the management software.
While we are pleased with the smart apartment packages installed to date, we are continuing to further expand our technology based initiatives to drive NOI growth and further differentiate land towers offerings.
We are in the early stages of implementation of our virtual leasing platform to be rolled out across our entire portfolio, allowing future residents to tour and leasing apartment 24, 7% without requiring a visit to our leasing office.
We are extremely excited about this next strategic initiative as we expect it to yield numerous additional financial and operational benefits.
As mentioned last quarter, our primary strategic growth initiative is our wholly owned development platform with Atlanta Tower. We currently have three active development projects and our U S. Sunbelt markets. Firstly I would like to provide an update on land tower West Love, our infill site in Dallas, Texas with proximity to the Dallas Love Field Airport and medical District.
The five story 413 unit wrap development is expected to break ground around the end of this year.
Also in the works and Dallas, Texas Land Tower, Midtown a 4.2 acre infill site with direct frontage and visibility to the north Central Expressway and it's over 275000 vehicles per day.
We are currently drafting construction drawings on this five storey wrap development that will include approximately 351 units and we expect to break ground the Atlanta Midtown in the first quarter 2022.
Lastly, we are commencing construction drawings for our garden style property called Landstar, Bayside and Tampa, Florida does development with approximately 271 units is adjacent to highway named.
Dominant thoroughfares and all of Pinellas County.
This development is also expected to break ground in the first quarter of 2022.
As a follow up to our ESG initiatives as mentioned in previous quarters. It is worth noting that we are carrying that same focus into Atlanta development efforts.
Related to our development will be pursuing a national Green building standard or N GBS certification.
Which is one of the most prominent and recognized certifications in the residential sector.
In addition to these pipeline developments, we have additional owned sites and sites under contract that will soon join the land to our development pipeline for context, if we continue our projected development pipeline on the developments under our control we will add over 2000 units or over half a billion U S dollars worth of multifamily over the next few years eclipsing.
That 10000 unit portfolio Mark.
From a return perspective, we are targeting development yields between five and a half and 6% for all projected projects and land towers development pipeline.
Do you expect the development yields relative to historically low class a cap rates provides strong value creation and risk adjusted returns.
And with over 175 bps of yield coverage, coupled with the benefit of retaining the upside economics and almost just as importantly, designing to land towers and best in class design and quality standards. Our intent is to continue the expansion of this highly accretive growth strategy for the foreseeable future.
On the land to our river lending front, our leasing pace continues to beat our expectations in the budget as of today, we have 78% occupied and have leased 466 apartments or over 88% leased since September when we opened our doors. We have averaged over 445 leases per month and have increased rents multiple times while simultaneously.
Decreasing leasing concessions without any noticeable reduction in traffic.
On the Jackson parked front, we'd like to share a very promising update as we have disclosed in recent weeks Jackson parks recovery has been nothing short but exceptional.
Signed leases over the last few months have returned a property to stabilization for example, Jackson Park signed a record 456 leases in June which represented the most leases ever signed in a single month of Jackson Park by a large margin for context. The most leases signed in one month during the original 2018 lease up was under.
200 leases.
When including pending applications and leases out for signature of the property is 99% leased as of July 31.
We expect the occupancy to catch up to our lease percentage at the end of the third quarter or the fourth quarter. As this is when the majority of our pre leased units will take occupancy.
On the JV development front, we and our partners have taken advantage of the favorable disposition environment and have successfully marketed for sale a few of our JV developments over the next 60 days, we intend to close on the disposition of Hercules Phase one in Hercules, California, and a stair park in Seattle, Washington market.
With a weighted IRR of nearly 30% and an equity multiple of two <unk>. We are proud to dispose of these two successful developments and redeploy into accretive opportunities we.
We would also like to highlight the hard work of our JV partners and just as importantly, congratulate them a two very successful developments.
As for the JV developments that are not currently on the market the Pearl in Austin, Texas is scheduled to fully deliver in the third quarter of 2021.
Leasing has begun and been met with incredible demand as evidenced by a lease percentage of 42%.
Construction of phase two of our Hercules development named the Grand has remained on schedule and is set to be delivered in the third quarter of 2021.
Lastly, shoreline gateway or a 35 story tower in long Beach, California is also on schedule and expected to obtain final C. O in early September 2021.
In summary, there's lots of good news coming from why it's a residential and I'm excited to deliver more news next quarter and with that I will pass along the conversation to pack.
Yes.
Thank you Felipe.
The 39, 9% increase in retail same asset property operating income for the quarter was primarily due to a material.
Cereal improvement.
From the enclosed mall portfolio.
Same asset NOI rose due to a significant decline in bad debt expense within the enclosed mall portfolio to approximately $6 million down from $22.8 million in Q2.2020.
Q2 same asset NOI was also impacted by lease surrender revenue of $2 million related to a Starbucks termination of two locations in a payment related to the <unk> filing.
On a sequential basis, the retail portfolio delivered continued momentum with Q2 seen asset NOI rising three 9% for the retail division and six 9% for enclosed malls compared to Q1.2021.
Throughout the pandemic our primary focus is to maintain occupancy.
Occupancy at the end of the second quarter was 91, 4% for the retail division as compared to 91, 5% at the end of Q1 and higher than the 95% at the end of Q2.2020.
For enclosed malls occupancy at the end of Q2.2021 remained relatively stable at 87, 1% compared to 87, 2% at the end of Q1.2021.
Improved from the 85, 8% at the end of Q2.2020.
No significant <unk> filings to date in 2021, and we do not anticipate additional filings to occur the remainder of the year.
Moving on to rent collections collections in the retail portfolio continued to trend higher since the low point in May of 2020 in Q2, we collected.
89% from closed malls compared to 94% in Q1.2021.
For Ontario, a mall and our core, Ontario enclosed malls account for just over 20% of gross rent and they were closed for the entire second quarter in June we received 95% of rent.
For malls outside of Ontario, Despite continuing on continued occupant restrictions occupancy restrictions in many provinces and just under 71% for <unk>.
Ranked from rent from malls in Ontario.
With all malls now opening occupancy restrictions lifted and the majority of our markets. We anticipate a return to normal collections moving forward.
With Ontario malls closed during the majority of 2021 and occupancy restrictions in place in other provinces leasing momentum that was realized in Q2 Q1 slowed in Q2 over the past 30 days, our leasing team that's experienced in recovering recovery and leasing activity with a number of national tenants based in eastern Canada, and the United States.
Including fashion tenants.
With restrictions lifted and sales rebounding, we believe that we will continue to improve our occupancy levels throughout the remainder of the year.
Terms of impact, we anticipate approximately $1.1 million incremental contribution from new lease commencement with large format tenants. During the remainder of 2021. In addition, we have completed significant transactions that will create incremental range of growth of over $3.2 million in 2022, including rent from 65000 square feet.
A new tenant leasing that has been.
With medical and office tenants.
Throughout the past year, our suburban malls located primarily in secondary markets have performed well compared to urban centers.
With restrictions easing in the second quarter mall sales in our properties outside of Ontario, Manitoba posted strong sales figures compared to pretax pre pandemic levels in 2019 by way of example in June 2021, <unk> reported sales were 112% of June 19, 2019 amounts.
The most part our malls in Ontario, and Manitoba outside of malls.
Ontario, and Manitoba reported sales for June 2021 that we're 90% or more compared to June 2019, with Ontario malls now open in occupancy restrictions easing in Manitoba, we anticipate sales to rebound.
Levels similar to those generated prior to the pandemic for the remainder of 2021.
While challenges remain for retailers selling goods and services related to work apparel, we have seen strong sales numbers from junior and casual apparel retailers as where its foot as well as footwear retailers.
We have been encouraged by strong sales productivity reported during the past several months by many national fashion tenants as well as tenants in the health and beauty jewelry and footwear categories food court tenants and other fast casual food tenants located in center malls are realizing improved sales and again generally rebounded to 80% or more of their <unk>.
In 19 sales figures.
I'll now move onto an update on several development projects. We've recently sold just over two acres of land at Northland village for approximately $5.8 million to a residential development company. We have commenced construction on a six storey building incorporating approximately 240 residential units.
The overall plan for Northland villages to redevelop the Wal Mart anchored in closed mall into a mixed use open Air Center over the next few years in several phases subject to pre leasing.
July 2019, we submitted combined applications for rezoning and redevelopment for the north end of the property.
Different mall to create different drove village.
The project is anticipated to include approximately 200 residential units.
Discussion discussions with the city are almost complete and we anticipate rezoning and site approval in Q4, 2021 and commencement of construction Q4 of 2022. Upon completion. This redevelopment project will transform is successful.
Established inner city regional shopping center into a vibrant mixed use development.
Thank you and I'll now turn it back to Larry.
Excellent. Thank you Pat and good morning, everyone.
For the second quarter of 2021.
38, <unk> no change from the 38 for Q2.2020.
On last quarter's call. We spoke about a few items, which are expected to influence 2021 financial results and I'd like to now review their impact on Q2.
<unk> results.
Firstly as our other lending development has been completed less interest is being capitalized for the content.
We're getting interest capitalize on all development projects amounted to $554000 for Q2.2021 compared to $5.2 million for Q2.2020.
With accelerated leasing momentum as Philip Man Felipe mentioned, the operating income from revenue lending will begin to offset the interest factor property operating income on a cash basis from relevant revenue lending was $2.3 million U S. Dollars for Q2, 2021, and we expect that to grow to approximately 6 million U S.
Per quarter in 2022.
Secondly, Jackson part in long Island City, New Yorkers perfectly new hard hit by Covid.
But it has begun.
As Philip mentioned as well property operating income from this property in Q2.2021 was approximately $2.3 million U S dollars at <unk> ownership interest compared to $6.9 million U S dollars in Q2 of 2020.
We are encouraged by the recent pickup in leasing activity and the committed occupancy which should result in a return to more normalized operating results from Jackson Park in Q4 first tier.
Thirdly in January 2021, H&R converted a 146 million U S dollar mezzanine loan on a $12 four acre development site from JV study to an equity ownership positions. This is the primary reason for the reduced finance income of $4.3 million earned in Q2.2021.
Two $9.2 million earned in Q2 of 2020.
Finally, bad debts expense decreased dramatically from the $23.5 million recorded last year in Q2 to $1.2 million for Q2 of this year.
As at June 32021, we had a provision for expected credit losses of $14 million against the gross accounts receivables of $29 million.
Turning to our office segment.
Same asset property operating income on a cash basis decreased by nine 9% as compared to Q2.2020 and was primarily due to Hess receiving a seven month free rent period commencing December 2020, as part of a lease extension and amending agreement completed in November 2020 under.
This agreement has agreed to extend the term of its lease on approximately two thirds is evolving for an additional term of 10 years beyond its current expiry of June 32026.
Excluding the impact of the head lease amendment same asset property operating income increased by two 5% for the quarter.
Pre rent period and ended on June 32021, So we will see an improvement in our office segment beginning in Q3.2021.
As Tom had already mentioned last week, we announced the $1.5 billion office portfolio sale, including the <unk> and the Bell office campus.
Once the sales are closed we will have significantly reduced Calgary office exposure includes our tenant concentration risks and improved our credit metrics.
Turning briefly to our industrial segment same asset property operating income on a cash basis decreased three 4% compared to Q2.2020 due to the decrease in occupancy from 99% to 98%.
In June 2021, H&R sold its 50% ownership interest and finally, our profit single tenant.
Industrial properties totaling 215000 square feet located throughout the Atlantic Canada for approximately $21 million. In addition, H&R sold its 50% interest and a 37000 square foot multi tenant and property located in kitchen, Ontario for $12 million.
Subsequent to quarter end H&R sold its 50% ownership interest in a portfolio of non single tenants into cold storage properties located across Canada for $117.5 million.
These industrial transactions resulted in total proceeds of approximately $150 million.
Compared to the offers value of $121 million as at March 31, 2021.
The weighted overall capitalization rate for these dispositions was approximately 4%.
Moving to the balance sheet at quarter end debt to total assets at the reach proportionate share was 50% compared to 51, 1% at the start of the year and unencumbered assets of a package of unsecured debt with 165 times coverage.
And for Q1.
Debt to EBITA was 985 times.
Pro forma second quarter results, taking into account the office property dispositions announced last week and the lease up of Rover landing in Jackson Park, we expect our credit metrics to improve dramatically and our modeling debt to EBITA of eight six times debt to total assets of 43, 7% and unencumbered assets unencumbered.
Of 225 times.
At quarter end, H&R had ample liquidity with cash on hand of approximately $60 million and $919 million available under our unused lines of credit. In addition, we have an unencumbered property pool of approximately $4 billion and with that I will turn it back to Tom.
Thanks, Larry.
It's a challenging 17 months, we are seeing and experiencing signs of recovery.
<unk> has accelerated dramatically lifting occupancy traveling in Jackson Park, and we are seeing strong leasing momentum at our largest recent development River landing in Miami vaccination rates are climbing everyday and where restrictions have been lifted it's in more retail sales have surged over.
Over the last few quarters, we've outlined plans to create at least one new entering 2021 and then this is evidenced by the Bonville office campus sale. We remain on track to achieve that goal. We are currently working through the final stages of this initiative and appreciate the patience and support of our unit holders and investment community. We look forward to providing more details in this regard in the coming week.
And months, we'd now be pleased to answer any questions from the call participants operator, please open the line for questions.
Thank you at this time I'll, just remind everyone if you'd like to ask a question. Please press Star then one on your telephone keypad again star one to ask a question and we'll pause for just a moment to compile the Q&A roster.
Yeah.
And our first question is from <unk> <unk> with CIBC. Your line is open.
Hi, Thanks, good morning.
Just and then disclosures or <unk>.
Tenant inducements were off.
Yes.
There was a reference to a major tenant sign in trial can you share anything about.
Si, which property just anything on the terms of that lease.
Good morning are you, referring to I think what I'm, showing $1.4 million of tenants leasing expenditures in the quarter.
Yes.
I actually don't know offhand I kind of look I'll look cost to it and get back to you on that.
It's not material enough said on offline.
Okay, well give guidance.
Okay, that's fine.
And then just wondering with the reopening and recovery Thats underway in I guess improving prospects for asset values.
Do you intend to revisit their values and the near term are you comfortable with the gains recorded year to date.
It's a regular process of every quarter reevaluating our fair values.
We are comfortable with the positions that we have at June 30.
On September 30th.
Hoping revalued on a regular process content now actually expect it to be but we don't expect material changes.
Okay.
And then just turning to a tower and the strategy. There just maybe a reminder, bars in terms of what's the criteria for what stays and the REIT versus what could be marketed for sale.
Okay.
Are you specifically referencing the JV developments.
Yeah.
So if you'll recall initially the JV developments, we're well we're a great idea for variety of reasons, but really what it boils down to is optionality and so at the time, we decided to do it with a best in class.
Developer in <unk>.
High barrier markets and what it really afforded us the opportunity was to see if we wanted to build a position around the development and ultimately take ownership of the development.
To add to our to our position in that market. What we quickly realized frankly is while those markets are strong in their own respect.
Frankly, we thought it would be a better and probably <unk>.
More worthwhile investment to consolidate our position in the sunbelt markets.
So the JV developments.
Unless a material change in circumstance from Wil will all eventually be marketed for sale.
Okay.
That's helpful. Thank you.
And Tomorrow just before you go I did find that first question you asked about the tenant leasing it was from our property 25 ship et cetera, the renewal of the lease $401 million of tenants and chased inventory leasing.
Incentive spectrum content on that property.
Okay. Thanks, Larry.
Okay.
The next question is from Matt <unk> with National Bank Financial your line is open.
Good morning, guys apologies, if you mentioned this a bit tight on conference calls this morning.
But with regards to the Jackson Park lease up Larry I think you said it is going to be fully stabilized are back to normal in Q4, but can you give us a sense as to I mean, it seems like a pretty massive improvement in occupancy.
From June until August, but when those leases ultimately would commence in is the character of that leasing is at student leasing or young professionals.
Returning to the office in Manhattan.
Okay.
Phillip mentioned Filippo do you want to.
So that question sure sure.
Sure happy to.
Morning, Matt.
So we'll deal with the easiest one I would say, it's a blend of both theres, obviously going to be a healthy representation of international students in.
By all accounts all of the universities and colleges are having in person class in New York and so.
That's an explanation for the frankly the outstanding momentum.
But there is also young professionals, although I think that.
While their impact has been felt the property is 99% leased and so I'm not sure how much more we'll see in the upcoming months, but to.
To answer your question simply it's a it's an interesting blend of both.
And as far as the leases are concerned we think that it's probably going to materialize in the fourth quarter. So by the time some of the concessions or tenant inducements flush out.
The net operating impact will be felt in the fourth quarter.
So sequentially, we should expect kind of flat performance and then it really to ramp up substantially into Q4.
So I'd have to get back into the exact timing because obviously June July September what kind of overlap and so depending on how many you're recognizing at the end of this month in September.
But if you think about conceptually 456 leases being signed in July.
And 99% leased.
It's going to skyrocket fairly fairly quickly.
And so we're delighted and being able to announce that we're back.
It's a regular business, obviously excited to see Jackson Park outperformed the long Island city market as it had prior to Covid.
And then I guess shifting to the enclosed mall portfolio.
Again, I apologize I missed most of your preamble and Im sure. It was pretty detailed so I'll go back and listen to it so don't repeat that but.
Just interested in your thoughts.
Going into the balance of the year, obviously Christmas is going to be important from a sales perspective, we're seeing some normalization.
And shopping patterns I think there's some stats.
Traffic is up in the U S back to pre pandemic levels.
But.
In terms of what Youre thinking in terms of new tenants coming in versus maybe losses, we'd have from <unk>.
Mrs that have been challenged.
Where should we see occupancy kind of trend over the next year or so if you had to guess.
I think that it's going to it's positive I see.
Lot of leasing traction starting.
And we had some pretty good momentum in Q1 at that stalled in Q2, primarily because Ontario was shut down.
We've done we've had a lot of activity in.
The latter part of June into July and typically these are slow months.
We're seeing activity from fashion tenants, we're seeing activity from a bunch of U S. Based tenants who are continuing their expansion in Canada, and some Canadian based tenants as well that debt.
Got it.
Encouraged by the sales the sales reported for June and reviewing them.
The fashion tenants are actually performing very well across the board.
Junior unisex, especially is doing very well footwear, it's doing well these are categories that were rather flat.
Are down for the first day of the first quarter and even the fourth quarter of last year. So they've actually shown some pretty good strength and I think thats going to.
As Ontario opens in a retailer's kind of get back to business in Ontario, I think it's going to put it.
We put a lot of guidance back in motion in terms of their expansion plans.
Okay makes sense.
And then lastly for me on the industrial portfolio, obviously, if you've generated some interest got some good cap rates clearly it is an exceptionally hot sector.
The same property NOI growth is it is it a transitory vacancy I don't know if it was discussed on the last.
Call there and what the expectation is just in terms of how that portfolio will perform.
Okay.
Hey, Matt Yes.
Occupancy dipped a little bit, but we believe that's a good thing is around so we will be able to catch on re leasing will be higher than the tenant leaving.
So we just expect it to be a short term.
Impact.
Which which geography is that in.
It is actually a mix of one property in Calgary and one property in Montana.
Okay perfect. Thanks, guys.
Yeah.
The next question is from Sam Damiani with TD Securities. Your line is open.
Thank you and good morning, just on the BOE and Bell transaction and I know, we had the call last week, but could you just review I guess the impact on on on SSO.
When that goes through with the amortization and also do you anticipate any fair value.
<unk> once that closes.
Good morning, Sam.
So first on the accounting treatment as you mentioned because of the option to repurchase.
Offer at 15 reviews recalls that as if we have not given up complete control of the asset and therefore for accounting purposes, we will still keep that asset tomorrow. We're talking just about the boat market that knockdown furlough thing Ricardo a true sale.
Because of the repurchase option is on a BOE per Paulo stay on our books and we will continue to fair value that every quarter.
Probably being straight lined down over the 17 year old vessel.
We come closer to the end of that 17 year parent.
The proceeds we received from the sale transactions.
We set up as deferred revenue.
Macroeconomy amortize down.
Interest accretion factor.
So that's all happening on our financial statements obviously.
And sorry, and we will continue to record the full impact of full of vintage of lease so the full rent at 100% on our financial statements.
Of course, 85% of that is non cash flow because we said, we will only be receiving 15% of their of the rents as opposed to 85% on our disclosures we will.
Giving you the noncash items that are coming in and we will be adjusting I don't know if were not quite sure. How we're going to do probably a tougher through <unk>.
The non impact of any of the <unk> transaction in terms of our internet interest accretion component for the deferred revenue going down.
So, but overall a good piece of it is that a true sale of containers.
It is a true sale <unk> would drop by.
20.
<unk> sales.
And bell would be talking about.
<unk>.
Hi, Ryan.
So if youre looking through the accounting that's what you should expect to see from the sales.
<unk> of <unk> 20 per annum on a <unk> again, that's largely offset by what we expect to get on the lease ups from rather landing in Jackson Park.
Okay.
Yeah.
And just on Jackson Park.
Is that a core asset or would you just want to sell that and is there any hindrance in selling that with your 50% ownership.
No it's a core asset.
Any plans as disposal.
One of our best assets.
Okay. Thank you I'll turn it back.
It appears that we have no further questions at this time I will turn the call back to Mr. Huff Center for any closing remarks.
Thanks, everybody have a great weekend and enjoy the rest of the summer.
Okay.
Okay.
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