Q3 2021 Boardwalk Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to the Boardwalk real estate investment trusts third quarter 2021 earnings conference call at this time all al.
Listeners are in a listen only mode. Following the presentation, we will conduct a question and answer session, but any time. During this call you require assistance. Please press star zero for the operator. This call is being recorded on November 12, 2021, I would now like to turn the conference over to Mr. Eric Powers. Please go ahead.
Thank you Pam and good morning, and welcome to the Boardwalk greet 2021 third quarter results conference call with me here today are Sam Coleus, Chief Executive Officer, Lisa mandates Chief Financial Officer, James Hart, Vice President of Finance, and Investor Relations and Rick and.
Out of acquisition.
Please note that this call is being broadly disseminated by way of webcast. If you have not already done. So please visit <unk> dot com slash investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements MD&A and supplemental information package.
On slide two we would like to remind our listeners that certain statements in this call and presentation may be considered forward looking statements.
Although the expectations set forth in such statements are based on reasonable assumptions boardwalks future operations and its actual performance may differ materially from those in any forward looking statements additional information that could cause actual results to differ materially from these statements are detailed in board.
<unk> publicly filed documents with that I would like to now turn the call over to Sam <unk>.
Thank you, Eric and welcome everyone to our Q3 conference call starting on slide four today, we are in the right place at the right time with an exciting growth trajectory.
Walks existing exposure to high growth unregulated markets compared with strategic opportunistic acquisitions.
Deliver additional stability high grading diversity and translate into continued at that level of accretion and increased total shareholder return.
Macroeconomic fundamentals are key drivers.
<unk> discount to an increasing replacement cost of our assets significant organic growth as Alberta, and Saskatchewan has come up the most affordable rental rates in the country.
It supplies construction levels remain low relative to historical levels strong demand with increased immigration and a low cost source of capital to execute accretive acquisitions flight.
Slide five our strategy to continue to create value for our stakeholders begins with our people. We are positioned with an amazing team and are so proud of every one of our team members, who innovate and deliver our places of homes for our residents members.
In turn this leads to leading earnings performance, which we believe will continue to result in strong total returns for our stakeholders. Our strategic focus is our significant organic growth from utilizing our proven platform that focuses on operational excellence to optimize.
NOI growth when we pair this with the current improvement in apartment rental market fundamentals, we are well positioned to accelerate our organic growth trend.
Accretive capital recycling focuses on opportunistic investment into acquisitions development and investment into our high quality existing portfolio with the tactical unit buyback.
These opportunistic investments combined with our operational optimization have positioned boardwalk for increasing asset values within boardwalks diversified and high quality multifamily portfolio.
Our solid financial foundation provides flexibility on our balance sheet with our growing free cash flow and with CMA Sea insurance on 98%, our financings, which provides access to low cost financing and reduced renewal risk.
<unk> six our strategy continues to deliver strong results with our Q3 at that full up 79 cents per unit up six 8% versus last year.
We are increasing our full year guidance to a range of $2 89 to $2 95 at that full per unit. This equates to a four year compounded annual growth rate of over 8%.
<unk> seven shows strong economic momentum with job and wage growth from the most recent statistics, Canada release.
Alberta saw significantly improved seven 6% unemployment rate with the national recovery of employment boardwalks current mark to market, which includes the reduction of incentives averages $144 per month and equates to a significant $55 million in revenue opera.
<unk>.
<unk>, a 25 dollar adjustment and our average occupied rents across our portfolio equates to approximately 20 cents in F. F O per unit on an annualized basis.
Slide eight in addition to the positive impact that higher commodity prices are providing to our western Canadian markets. There has been a steady stream of investment and job, creating announcements from the emerging technology and clean energy sectors as the most recent data.
Over 90000 jobs are now vacant and available in Alberta, which is approximately 50% growth in job vacancies since April this year.
Adding bacon job numbers to current employment numbers is a record number of jobs for Alberta.
Alberta leads the nation in economic Judy peak growth projections.
Slide nine our markets and portfolio provide some of the most affordable rents in Canada when comparing to average incomes. In addition average projected population growth in our markets are outpacing new supply leading to strong apartment rental and housing.
Market fundamentals.
Slide 10 shows our retention is increasing with decreasing turnovers and a steady occupancy of approximately 96%.
As per our appendix slide 41.
We are seeing more move ins from out of town as more Canadians moved back to Alberta and Saskatchewan.
Slide 11 show, our key operational metrics with actual occupancy of approximately 96% incentives are dropping occupied rent is increasing vacancy loss is decreasing resulting in higher revenues.
Slide 12 shows a strong trend of improving net rental rates for both new leases and renewals with our total portfolio of new and renewal leases moving into a positive 1.4 and 2.3% updated for this October.
The positive new and renewal leasing spreads reflect the growing strength in our apartment rental fundamentals.
Fissioning us to capture a significant mark to market opportunity.
We would.
Like to now pass the call onto Lisa <unk>, who will provide us with an overview of our portfolio performance operating margins balance sheet and repositioning results Lisa.
Thank you Sam moving to slide 13, we've experienced continued revenue momentum with sequential revenue growth of 8% in Q3 2021 as compared to Q2 2021.
Core Alberta markets are experiencing sequential revenue growth in line with our Ontario, and Quebec portfolio.
With strong occupancy and net effective rents increasing we expect this positive sequential revenue growth to continue.
Our Q3 2021 operating results reflect positive NOI growth in all our major markets with the exception of Quebec in Quebec same property NOI growth was slightly negative however, when excluding the seniors community last week, which is currently being repositioned to a conventional multifamily asset same property NOI growth.
1% in Quebec.
Looking at Q4, 2021, we anticipate positive NOI growth year over year, However, with increased gas prices utilities could be higher on our 25% non hedged portion with the potential increase in non controllable costs, we remain focused on managing our controllable expenses.
On slide 13, the trust remains disciplined and focused on managing controllable expenses despite increases in non controllable cost.
<unk> has resulted in declining controllable expenses year over year, and when coupled with our revenue growth potential will allow margins to continue to improve inflationary pressures may be a potential headwind for expense management, however will positively influence revenue growth.
Yeah.
Slide 15 illustrates boardwalks mortgage maturity schedule, our mortgages are well staggered with approximately 98% of our mortgage balance carrying any J insurance through the Canada mortgage and housing Corporation.
This insurance remains in effect for the full amortization of the mortgage and in addition to carrying the government of Canada backing provides access to low cost financing with the current estimated five year <unk> rate of two 2%, but current rates below the trust maturing rates mortgage financing continues to be a low cost of capital available to the trust.
<unk>.
Slide 16 summarizes our progress on our 2021 mortgage maturities.
To date, we have renewed our forward locked approximately 94% of our 2021 mortgage maturities as well as secured $152 6 million in new financing at low interest rates.
Current underwriting criteria in our most recent submission to see me C and our lenders has remained in line with our historically conservative estimates.
Moving to the right of the slide we provide a summary of boardwalks available liquidity.
<unk> is well positioned with approximately $78 million in cash and subsequently funded financings as well as an undrawn $199 million operating lines.
Approximate 278 million in liquidity provides the trust with a flexible financial position as well as providing the ability to take advantage of opportunities as they present themselves.
Slide 17, the trust debt metrics continue to improve with an interest coverage of 290 in the current quarter discontinuous.
This continuous improvement is a result of strong financial performance led by cash flow growth, coupled with low cost of debt financing.
Slide 18 illustrates the trusts estimated fair value of its investment properties, which totaled $6 3 billion as at September 30th 2021, when including new acquisitions and developments as compared to $5 9 billion at December 31 2020.
The increase in overall fair value is largely the result of decreasing cap rates.
Market transactions and discussions with our external appraisers supported cap rate compression of 25 basis points and the majority of our western Canadian markets with the exception of northern Alberta and Red deer.
With our Ontario portfolio, we have recognized cap rate compression of 50 basis points throughout 2021.
Our Quebec portfolio, which includes our land leased assets experienced cap rate compression of 25 to 50 basis points.
Current estimated fair value of approximately 80 $185000 per door remains significantly below replacement cost.
Slide 19 provides a summary of the recycling of cash flow towards value add improvements to date, we have completed approximately 28% of total suite improvements, while aiming to complete 47% of our total portfolio of common areas and amenity spaces by the end of 2021.
Our focus is to continue to deliver the best products optimizing our capital allocation for our value add program to our targeted resident member demographic. So we can continue to provide the most exceptional elevated experience at an affordable price.
The result of increased market demands exceptional value and appealing returns with sustainable market rent adjustments.
Slide 20 illustrates our stabilized renovation returns for Ocala States located in Calgary, Alberta, and Taylor Heights, and read your Alberta with returns of 10% and 15%, respectively, which have exceeded our internal hurdle rate of 8% our.
Our renovations continue to garner positive resident member testimonials, driving referrals and higher occupancy I would now like to turn the call to <unk> to discuss our recent acquisitions and dispositions Rick.
Thank you Lisa year to date Boardwalk has opportunistically invested $72 million to acquire two communities highlighted on slide 21.
Both mountain view of States Inbounds, and Aurora and Victoria were acquired earlier this year and are performing above our expectations.
Boardwalk is currently in discussions with the municipality of bounds to review the opportunity to utilize the excess land located on the site to develop more housing for this under supplied market.
Aurora also continues to operate at full occupancy and provides a base of operation for Boardwalk and the city Victoria is a market that the trust continues to be active in sourcing accretive and opportunistic opportunities to expand.
Slide 22 provides a brief update on our active development pipeline.
And development continues to progress on time and on budget with the anticipated delivery of the first tower. The 365 unit Marquis community in the fall of 2022.
Recently renamed Aspire development is directly adjacent to our Aurora acquisition in Victoria, and now has a submitted development permit.
We continue to progress on entitlements at our second development in the Victoria area named the Marin.
Slide 23 provides a summary and update of our active capital recycling through the sale of noncore assets. In addition to the two non core sales. The trust has completed year to date in Edmonton Boardwalk has agreed to sell our 50% interest in the saddle with development.
And Mississauga.
Both Rio Ken and we agreed.
That the highest and best use of this site was for the development of condominiums.
With Boardwalk development strategy focused on creating value through the long term ownership and operation of multifamily rental communities Boardwalk was pleased to create a new relationship with Marlin spring, who has acquired our interest.
With the success of our Brio project in Calgary, We are looking forward to our next potential project with real cat.
I would like to pass the call on to James <unk> to discuss our capital allocation.
Thank you Rick and our team's effort tickets to continue to lead in transparency Slide 24 provides our stakeholders with our current view of capital sources and uses.
From a capital source standpoint, we believe that our growing internally generated cash flow low cost seem H C and conventional mortgage financing as well as equity from non core asset dispositions currently represent the most attractive sources of capital.
These sources can be used to fund attractive and accretive capital allocation opportunities such as our continued focus on platform innovation and investment in our own high quality portfolio at a discount to intrinsic value.
Our disciplined value add capital improvement program, new development and opportunistic acquisitions.
As I mentioned earlier, we remain committed to deploying capital toward our goal of leading earnings and NAV growth per unit.
Agent will continue to update its view of capital sources and uses on a regular basis and as market conditions change.
Slide 25 provides detail on the exceptional value that boardwalks current trust units represent.
Boardwalks current trading price of $53 implies a value of approximately 168000 per apartment door and compares favorably to both our own and other recent apartment transactions.
We continue to see transactions in our core markets that compare to boardwalks, most affordable living brand assets.
Our nap of $64 per trust unit equating to 185000 per apartment door represents an exceptional opportunity relative to market pricing and remains well below the increasing cost of replacement.
Utilizing trailing 12 months property NOI on slide 26, boardwalks current trading price equates to an attractive four 9% cap rate and is a significant spread to the cost of available mortgage capital as well as recent capitalization rates seen in transactions in our markets.
With continued sequential revenue and NOI growth in boardwalks portfolio. These cap rates represented an attractive option and the potential for the trusted tactically invest in our own high quality portfolio.
Slide 27 provides an update to our 2021 financial guidance since our reintroduction of guidance earlier. This year, we have seen apartment fundamentals continue to improve and with our teams strong execution, our operating and financial results had been better than originally expected.
The trustees revising upwards at same property NOI growth guidance highlighted by a two to four 5% growth range for the second half of 2021.
In addition, <unk> per unit guidance has been revised upwards to range from $2 89 to $2 95 per trust unit.
The trust is confident in its forecast for the balance of the year. However, please note that a rapid changing conditions may cause these estimates to change.
Boardwalk team is committed to leading in transparency and will update its stakeholders in the advent of any changing conditions that may materially impact our forecast.
On Slide 28, the trust continues to have an industry low payout ratio, providing significant cash flow cash flow reinvestment positioning boardwalk with ample capital for growth.
Our board of trustees regularly reviews, our distribution and with the runway for <unk> growth in our core portfolio, we are well positioned to return to sustainable distribution increases to our unit holders on an annual basis.
Lastly on slide 29, we are pleased to share the results of our recent grads assessment.
Our score of 69 is a significant improvement from our base score of 47 from a year ago.
We continue to scale, our past initiatives as well as incorporate new ESG innovations into our operating platform and are proud to have been recognized earlier this month by the Calgary residential rental Association.
With six awards, including one for industry leadership and environmental Excellence.
We look forward to updating our stakeholders on our progress in the coming quarters and with our 2022 ESG report.
We would like to now open up the phone line for questions Pam.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear three ton prompt acknowledging your request and your questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by you and if they're using a speaker phone. Please lift your hands.
That before pressing any Keith one moment for your first question.
Okay.
Your first question comes from Matt <unk> with National Bank Financial. Please go ahead.
Hey, guys How's it going good morning, Matt.
First off we don't speak about Quebec, very often but.
So just wanted a quick update on the nuns island portfolio. It looked like there was a bit of a dip in occupancy this quarter, but then it rebounded subsequently.
Was that just transitory in nature is there anything in particular.
It's transitory if it's.
As well the big rush in rental fees.
As most know July 1st and and so it's still very solid we are continuing our renovation program at a non violent and all of Quebec, and we offer exceptional product and.
Value service for.
The market and and we have a good results.
In line with Ah.
Our results in our core market. So it's it continues to deliver great sequential revenue.
And that's for Lisa mentioned.
Our Quebec city lifestyle.
Is going through a repositioning to regular.
Regular rental community from a seniors project so our community.
And I saw that one so that that property is about 40% occupied 44% occupied what is the timing on that repositioning program there.
12 months what are.
Yeah.
And then on the financing side the spread between five and 10 year bond yields is compressed a bit here would you anticipate looking.
Hum longer term renewals on mortgages that are coming due are at this point are sticking with five year renewals.
Hey, Matt It's James here are you, 100% rates you know watching you know current five to 10 spread we've seen a nice compression on that over the past.
Several weeks now as always our priority with our mortgage schedule is to ensure we have a nice ladder maturity curve.
Fortunately for 2021, we had a nice gap here in 2026 and was able to take advantage of the sweet spot in the market that we saw for 2020, one which was five year money I think going forward, you'll see us take advantage of opportunities when it comes to individuals.
Individual mortgage pricing as you know we're in the market each and every months and would anticipate that we are doing a good combination of 567 10 year money next into next year.
Yeah, no that makes sense and then obviously there was a pretty substantial change to the positive with regards to your rent spreads are in Alberta, but generated across the portfolio as well how should we look at it I mean, you are in the non rent controlled market. So there's a degree of yield management between occupancy.
And rent growth.
But it seems like you're at a point, where you're willing to push a little bit on the rent front are less concerned on occupancy is that a fair point and how should we think of that in the context of sort of rent incentives in occupancy.
For the balance of the year, but also heading into next year as well.
Hey, Matt It's James here again, I would say from an occupancy standpoint, where we're very happy with our current occupancy position going into a more of a seasonal slowdown period here sitting around 96% really positions us well heading into the winter months.
If we look at our leasing activity so far for the month November. It's it's been quite positive. We've had low turnover rentals are have been quite strong for the first 12 days of this month and so from an occupancy standpoint, we're well positioned there.
I'm, a leasing standpoint to your point, Matt we've seen that inflection across our portfolio as we talked about last since last August we've already we had already seen the early stage trends of that in most of our markets. You know today, we're seeing it in most in the majority of our markets in terms of positive new leasing spreads renewals continue to be.
Positive I think we're really set up well to reduce those incentives and continue that that trend that you're seeing here today.
Great.
Last one a little bit more technical and it's been a bit more volatile, but on the property tax front.
Just quarter to quarter or is there sort of youre, winning appeals in and that's why it would've come down this quarter versus last year has there been a sort of change in tax policy generally.
Fortunately and we anticipated this earlier in the year, Matt property taxes are city Council's here in Alberta have been Cui.
Quite.
Pleasant fourth the residential space in the residential sector and so as we know the first half of our payments and it's a bit of a nuance in terms of property tax payments through the monthly payment programs in each municipality, but the first half of this year had reflected a similar property tax increases that we had last year.
And so the second half of this year as a result of the effective overpayment and the first half we've seen that decline.
For the third quarter the.
Third quarter was fairly clean it looks it looks like that'll be very close to our property tax number for the fourth quarter and as we look forward to next year, we do anticipate a little more information from our city city councils in terms of what that property tax could look like in the coming weeks okay.
Okay, perfect got add another million to my Q4 NOI.
Take care guys.
Thank you Matt.
Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.
Your next question comes from Mario <unk> with Scotiabank. Please go ahead.
Alright, good morning.
Tomorrow morning Mario.
I'll talk to slide 24.
It required that you introduced.
In the supplemental.
So we're just focused on that for a second.
The higher risk adjusted return quadrant.
A large opportunity that you highlighted.
Based on today, how would you rank those for in terms of the truck.
Yes.
Hey, Mario it's James.
I would say all four Ah represents great opportunities it really depends on the opportunities individually as they present themselves I mean right now.
We highlight the NCI B is a new initiative and something that we haven't had for the last four or five years I think today. If you look at our trading price today at $53. It equates to about $165000 per apartment door.
The transactions that we highlight in slide 26 and 27.
We're seeing prices in the apartment markets that are.
Significantly higher than that and so you know the best the best Department deals right now are potentially through our buyback you're at $53.
Okay.
Okay.
Okay.
And then just.
In terms of the fair value uptick in Quebec in particular.
Some of the year.
Industry wide reports didn't really show much quarter to quarter change.
Cap rates in Quebec, So I'm just curious in terms of what the catalyst was.
Sorry for that for the large.
<unk> fair value gain was just simply.
Catching up to what's happened in departments for the past three to six months ago.
You've talked about potentially excess land.
Carbons for Boardwalk put your surface things I'm, just curious in terms of what their what drove that change.
Mario It's James Yeah to your point, our appraisers and a fair value methodology does require you know transactions. It is backwards looking the cap rate compression that you saw this quarter was on the recommendation of our external appraisers to your point. It certainly does reflect some of the activity that we've seen over the past several months.
As you know it's you know the cap rates are reductions that we have taken this quarter had been in some of our markets I would say across all of our markets. We continue to see higher valuations in apartments, we continue to see lower cap rates and we continue to see the opportunity for higher operating income and so that.
That fair value adjustment is really a reflection of what's been going on in the market, so far and on a backwards looking basis.
Okay. My last question just pertains to.
With the recent municipal elections in Calgary and Edmonton.
In particular from a boardwalk perspective, but.
But do you think Oh comfort.
Kind of a free drink strategy.
Core earnings.
The next 12 months in terms of policy shifts.
I would say Mario it's James again for US here are municipal elections, it doesn't really change our outlook. We've had great discussions with a lot of the candidates as well and you know at the end of the day housing affordable housing, especially as an important.
Hum.
Necessity and all of our cities and we do have some great partnerships with many of our municipalities and the importance of affordable housing continues to be.
Top of mind, and we are significant contributors to that and want to continue to be significant contributors to that.
Okay, Okay just to add on.
James are recent.
Announcement that we've heard Amazon web services coming to Calgary, and our new mayor is very keen on continuing our economic diversification as well as championing our clean energy.
Peter ship that our producers are leading the world and producing clean energy and so it's actually a very positive and and fits in with the direction that we've already been going with the great leadership of our premier as well are baked in.
Big projects and hydrogen are have been announced and a net zero carbon capture.
Projects.
Hi.
A lot of investment has been announced billions of dollars have been recently announced that's.
Really a reflection of the thousands and thousands of additional jobs are being created.
And the Ah.
GDP forecast that again lead the nation as a result.
And then you mentioned with respect to the property tax discussion.
More color in the next couple of weeks, but based on your kind of preliminary discussions with the various candidates prior to the election do you foresee any.
Meaningful change in <unk>.
Property tax drag you Christy.
As of right now Mario we're not hearing anything outside of what our normal expectations would be at this juncture.
Perfect. Okay. That's helpful.
Thank you Mario.
Your next question comes from Matt Logan with RBC. Please go ahead.
Thank you and good afternoon.
Good afternoon, Matt.
Just wanted to follow up on some of the post quarter leasing velocity certainly it seems to be trending positively.
And with a view to perhaps maintaining occupancy in and around the 96% level, how does that relate to incentives I mean, they were down about 3% sequentially do you think that trend of incentive bernoff will accelerate in Q4.
Mad at Fam, and we are seeing incentive reductions between the five and 10% level and we want to stress. We are flexible we continue to be.
B, a resident centric and and our retention results is a great reflection of the efforts that we have made to.
To maximize retention and minimize turnover turnovers costly and as a result, we gain much more and retaining and existing resident and being flexible and catering to the needs of our residents are then.
Then any any other strategy and and so we we are definitely seeing things for the first time in.
Some may have missed in the first seven days of November.
In our multiple listing fails.
We saw for the first time in our life, 99% failed to lifting ratio.
And that's a that's a first time in our life observation. So there are.
Significant real time data that reflects a significant movement into our province, there's discussions with builders are premier cited the other day, our builders cannot build homes fast enough for the migration coming from Ontario.
Back to Alberta, and that was mentioned by our Premier a week or two ago and so we are seeing some real time.
Population movement, and our economy is changing by the moment in a positive direction.
Absolutely you can certainly see that in your slide deck on page 41.
When you think about that incentive burnt off does that still translate into high single digit to low double digit organic growth next year.
Well, Matt when we when we assume a 4% and we're tracking approximately 1% sequential revenue, which translates into 4% top line with a margin that is approaching 60% that essentially equates to an 8% NOI.
Hi.
Less.
A 2% increase or 3% increase in expenses, which is a.
Again, a 60% margin would translate into a NOI of approximately 6% to 7% and then have that full yes up double digit because of the financial leverage into the double digit.
<unk> percent.
Range.
Great color.
Maybe just one last question for me.
<unk> seen a number of cycles in Alberta.
Things are on the upswing, what is different about Alberta, and boardwalk today versus prior cycles.
Our economy is much more diversified than it's ever ever been in our lifetime, we have by necessity, which is the mother of invention been forced to look for other other sources of jobs and other other industries and diversified companies.
And we have to give all the credit to our our government leaders.
And all in all levels that focus as is clearly seeing defaults today, especially with a tour at amount of announcements. The last couple of weeks that is absolutely a fruit of many many years.
Of tireless work by not just our government leaders, but buyer municipal business development group.
Groups and in our in our population here that is always looking at ways to improve the jobs and bring economic stimulus to our western regions and so we have to give a lot of credit to a lot of a lot of big shoulders, we're standing on today and so going forward.
Lord our economies much more diversified.
Our producers are leading the world in producing clean energy everybody everything is energy as we all want to or not remember in physics, and so where we're we're seeing a much more progressive economy.
And.
Going forward, where we're seeing a very very bright future for a very long long time.
Well I appreciate the commentary I'll turn the call back thank you.
Thank you.
Your next question comes from Dean Wilkinson with CIBC. Please go ahead.
Thanks, everybody.
I mean.
This must be for James.
James when you're when you're looking at that the potential for share buybacks.
And the capital that you've got committed for the development.
Development.
And just regular spend.
How do you look at the balance sheet, either be where you would go with leverage in terms of borrowing.
Borrowing at that low rate to buy that terrorists like what's the threshold that you'd be willing to take that up to.
Hey, Deane it's James.
From an allocation standpoint, we cannot reiterate enough how our approach in terms of being opportunistic with all of our allocation opportunities. We're going to evaluate every opportunity that presents itself from a leverage standpoint with.
With the benefit of see Mi insurance, you know, where we're very comfortable at our current leverage levels I think going forward for buyback and again, we'll be opportunistic with that allocation opportunity one great place in terms of accessing sources of capital has been a noncore asset dispositions I mean, we are we're able to.
Gain equity from these non core asset dispositions and recycle that capital towards you know allocation growth opportunities such as stock buyback as you mentioned.
Okay, So we should be thinking than.
Any potential stock back.
Stock buyback would be on a leverage neutral basis.
Dependent on the opportunity Dean again, we're gonna be opportunistic right. We have great sources of capital and we have great places to allocate it yes.
So it depends on the opportunity.
Perfect. That's it for me thanks.
Thank you Dean at family and we have a maximum free cash flow distribution policy and our free cash flow is growing significantly and as we've seen and many great business cases free cash flow grows on a compounded X.
Financial basis, and that's the reason, we love our maximization of free cash flow the absolute least expensive access to capital of all stacks. Thanks Deane again.
Body in motion right.
You got it.
Thank you.
Your next question comes from Michael Marquez with Desjardin capital markets. Please go ahead.
Hi, everybody just one question from my perspective, just given your maximum.
Cash flow.
Our strategy seems to lend itself well to.
Development and there's one property under construction now which has been under construction for some time.
Two peaks developments with timing T V. Maybe just chat with us or give us some color in terms of how much larger do you think the development pipeline could get.
And what's your appetite for growing that part of the risk.
Just a quick math it Sam Michael and our quick math is 5% of our total assets are under development and we approximate that will create approximately 10%.
<unk> growth and so that pretty well as the quick quick math around our development program today.
That's where we're at today, okay with the with the expected spend on all the stuff. That's shown on the slide here just to remember that is a correct, 5% and our expected gain will be at 10% addition to our NAV.
Okay. So I should take that to mean that youre not going to expand on it materially until maybe perhaps the railroad.
Today.
Today, that's what it is.
I want to emphasize today, that's what it is and the key word opportunistic we are very opportunistic and are going back to our roots.
Very opportunistic.
Create the maximum value.
Okay. Thank you very much.
Thank you so much Michael.
There are no further questions at this time. Please proceed.
Thank you operator as always if there are any further questions or comments, please do not hesitate to contact us.
With gratitude.
I'd like to thank our amazing team of heroes are great leaders.
Loyal residents seem H C. Our lenders our unit holders and all our stakeholders. It really is all about our people whose huge shoulders, we stand and as leaders. We continue to do everything we can to support continued growth and extraordinary we really can't thank our amazing team and great leaders.
Enough, especially for our recent recognition in our environmental sustainability and governance efforts and grasp score. We're pleased with our improving results on a foundation of exceptional value. We continue to provide a resident members our investors and all our stakeholders our home as much.
More than a place or a location.
Our future is family where love always lamps.
What can be more important when choosing where to call home.
You again, everyone for joining us this morning and God bless.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a great day.
Yeah.
Yeah.