Q4 2021 Artis Real Estate Investment Trust Earnings Call
Good afternoon. My name is Sylvia and I will be your conference operator today at this time I would like to welcome everybody want to the artist real estate investment trusts 2021 annual results conference call.
Note that all lines are placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if you would like to withdraw your question. Please press Star then the number two.
Thank you.
And I would like to turn the conference over to Heather Nickle, Vice President Investor Relations and sustainability. Please go ahead.
Yeah.
Thank you and good afternoon, everyone welcome to artist as fourth quarter and year end 2021 results Conference call with me today is artist as president and CEO sooner and Angie.
D F O Jacqueline conic C O O Kim Reilly and executive Vice President U S region fell Martin.
Our fourth quarter and year end 2021 results were disseminated yesterday and are available on SEDAR and on our website.
Replay of the call will be available until Monday April 4th 2022.
The telephone numbers and pass code for the replay are provided in yesterday's press release and an archived recording of this call will also be made 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.
We have identified such factors in our public filings with the securities regulators and suggest that you refer to those filings.
As we discuss our performance. Please keep in mind that all figures are in Canadian dollars unless otherwise noted with.
With that I will turn the call over to Samir.
Thank you Heather.
Good morning to those of you in the West and good afternoon to those that are in the east.
Welcome and thank you for joining us for our 2021 annual results conference call.
As we've done in previous calls I'll keep my comments today brief before handing it back to the operator to moderate the question and answer session.
I appreciate that most attendees will have already reviewed our Q4 results. So we will not repeat most of the qualitative and financial information you are already familiar with <unk>.
Instead, I will focus the majority of my remarks on the progress we've made in the implementation of the business transformation plan, we announced on March 10th last year.
Let me start by saying what a year it has been both for artists and for the industry as a whole.
When I reflect on the last 12 months since we announced our new vision and strategy time seems to have flown by yet.
Yet when I look at what we've accomplished in that time I'm reminded of the hard work that the board and every member of the team at artist has put in each and every day to help move our vision and strategy forward.
One of the first steps in what I referred to is the linchpin to implementing our strategy was to unlock value through the monetization of certain assets in our portfolio.
This important step provided us with the resources and financial flexibility to execute on other elements of the strategy.
In 2020 , one we sold 41 assets for an aggregate sale price of $858 $6 million.
These dispositions included the sale of our GTA industrial portfolio, which represented a milestone transaction for artists and in Q4, we sold all of our remaining Calgary office properties.
These transactions contributed to improving our debt metrics, while also enabling us to focus on a key aspect of our strategy, specifically our capital our capital allocation plans.
In Q3, we announced our participation in the Investor group to acquire common our REIT.
My apologies.
Q4, we announced our participation in the Investor group to acquire comment our REIT for $11.75 per unit.
We believe is significantly below the intrinsic value of the underlying assets we were acquiring.
Along with the $112 million, we invested in common equity units as part of the transaction. We also invested $100 million in junior preferred units that carrier distribution rate of 18% per annum.
Tractive return for our unit holders.
Since the announcement in October we've been working with our consortium partners towards to closing that happened earlier this week.
During this time, our conviction in the intrinsic value of Communist real estate portfolio.
And a corresponding value creation, we will achieve for our unit holders has only strengthened and solidified further.
During 2021, we also began accumulating a position in dream oarfish, which culminated in the announcement earlier this year.
We together with our joint actors now have a 10% ownership position in Dream office.
We look forward to providing updates on both these important capital allocation initiatives in the quarters to come.
In addition to these investments we continue to reinvest in what to date has been the best investment we can make for our owners our owners.
By October 2021 we had purchased a maximum number of common units allowable under the N CIB until such time as it was renewed on December 17th 2021 .
Following which we continued with our buyback program.
During the year, we acquired over 11 million units for a weighted average price of $11.29 a price well below our year end net asset value per unit of $17.37.
We continue to see our N CIB is a powerful tool for enhancing value for our unit holders and we will not hesitate to continue to use it any time our units trade at a significant discount to net asset value.
The last area of our capital allocation strategy that I wanted to touch on is our development projects.
During the year, we made significant progress at 300 main our 40 story commercial and residential development project in the heart of downtown Winnipeg.
Later, this month <unk> kitchen, and bar will be opening their new location on the ground floor at 300 means we look forward to walking welcoming them to the property.
We also have several industrial development projects underway in the U S, including Blaine 35 in the twin cities area.
The fifth and final Phase of Park 890 in Houston and Park Lucero East in Phoenix.
These projects are generating strong pre leasing interest and we look forward to providing updates on leasing progress at these properties over the next several months.
In general we continue to benefit from significant value creation on development projects as building costs continued to be well below our estimated fair market values upon completion.
Switching gears from capital allocation initiatives to another important component of our go forward vision for artists.
And that is our commitment to creating an ESG minded culture.
This commitment is of Paramount importance to our board and to our management team.
Behind the scenes and incredible amount of work has gone into E. S. G. At artists over the last year from reviewing all Board and committee mandates Chargers and policies to overhauling, our executive compensation framework to align with best practices in performance based compensation.
With the creation of an internal ESG committee that brings together a team of employees across all of our offices that have diverse perspectives and most importantly, a real commitment to ESG.
These are only a few examples of the exciting work we've been doing and we're looking forward to publishing our annual ESG report in the coming months to share updates on the progress we've made over the last year.
So here, we are almost at the one year anniversary of last year's business transformation plan announcement, and we can say with confidence that execution of our plan is well underway.
Artist is not the company today than it was a year ago.
Our debt metrics have improved our net asset value per unit has increased significantly.
And we've taken considerable strides towards transforming artists into a value investing asset management and investment platform.
But there is still lots of work to do.
I'd like to thank our trustees and the strong and dedicated team we have at artists on both sides of the border for their hard work over the last 12 months.
It has been an exciting year and we continue to have strong conviction in our strategy and optimism for the opportunities that lie ahead in 2022.
With that I'll turn it back over to the operator to moderate the question and answer session.
Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a tweet on prompt acknowledging your request and if you would like to withdraw your question simply press star followed by two.
He was on the speaker phone, we do ask that you. Please lift the handset before pressing any keys. Please go ahead and press Star one now if you have a question.
And your first question will be from Jenny Mall at BMO capital markets. Please go ahead.
Thanks, and good morning Slash afternoon.
Hi, Jenny.
With regards to artists as equity ownership in the call of our entity well there'd be a cuomo's distributions associated with the equity ownership and also how do you expect the P&L from that piece to be accounted for within artists.
Isn't it.
Thanks, Jenny I'll cover the first part of the question and pass it over to Jacky for the second part as it relates to distributions.
We will in the coming quarters be providing more information and updates as we make progress in the execution of our plan and strategy with our consortium partners on commentary, we're going to try to do that in a thoughtful way while also respecting the.
Responsibilities in fiduciary duties, we have to our partners in that consortium.
From a.
Information management standpoint, and disclosure standpoint.
Suffice it to say that.
One can one can do the back of the envelope math.
On what the structure looks like with the common our investment.
And the near term focus is going to be on debt reduction versus equity a repatriation <unk> distributions to equity holders. So again more to come on that in the months and quarters to come but we're not anticipating any equity distributions over the course of the certainty next to her.
Three quarters and I'll pass over to Jacky.
Hi, Jenny this investment is going to be an equity accounted investment so it'll show up as a singular line on the balance sheet as well as on our income statement and then disclosure on our proportionate share of the investment will be in our note five of our equity investments.
Oh, Okay. Okay, great. Thank you.
Think about the strategy overall and the business transformation plan made a question. The question is person mirror is there any division or a component or a geography of the portfolio that you would consider to be core to artists REIT I E not something we would really like to sell them.
Or if you can help it or is everything on the table when you consider how to structure the portfolio over the longer term.
Thanks, Jamie So again, we will comment further on the plan and strategy are in time to come.
But suffice it to say our primary motivation here alongside our consortium partners.
Was what I expressed earlier and that is our ability to have a.
Transacted at a value and price well below what we believe the intrinsic value of the roughly 83 assets that we have retained our worth in the private market and we look forward to the value creation that dish is going to provide.
To artists as owners alongside our consortium partners.
Oh, Okay, maybe I wasn't clear I meant artist as current portfolio, putting aside the common at all thank you very much. Thank you for clarifying and so.
From from.
Artist perspective, specifically.
I would say that we will continue.
As we have been working through the implementation of our plan to evaluate where we believe the best growth opportunities lie in our direct ownership.
Ponant of our asset base.
And I would say that and when I think about North America. There there are.
Several markets that continue to have very strong growth factors are in play or gross forces that are bring us confidence and.
The idea that.
Some markets and some assets are will remain core is an interesting one what I would say is generally speaking.
We look at a market like a greater Phoenix, we look at our markets and more specifically asset classes within those markets and.
Such as Western Canada and our.
Our retail assets are industrial assets are in those markets as core.
Having said that we were going to be entrepreneurial and Ah is as stewards of the capital of our owners.
If something preemptive unsolicited comes our way at a minimum you know we have to consider it and we will share that and present that to the board's investment committee for their knowledge and ultimately their deliberation.
And consideration.
Okay great.
Then maybe one last question on the operation side I'm looking at the Mark to market on the in place rent.
Rent versus market and for the industrial portfolio. It seems to be fairly flat I'm. Just wondering why that is the case given how strong.
The industrial market is I know, you've got you know various geographies and sell assets on a smaller side, but maybe a bit of color on why there isn't much of a differential on what you might be expecting over the near term.
Sure. Thanks, Toni I can take that one.
So the industrial rents I would agree with you they are growing in every market and in looking at the detail. It looks like there's a few leases that are coming out that have amortization, that's built into the rates. So those rates that we put in into the table are conservative and obviously African and work with our leasing teams to do the best that we can in the last few leases that.
Have come up we've been able to achieve rates that are higher than the rates that are in place. So we have every confidence that we're going to be able to do better than what's in that that table and again those numbers are just stack conservative.
Can you give us a bit more color on how much better the recent leases have been coming in at.
I don't know if we have a percentage in mind that you know a few percent. It. So this year. Our worry was 4%. So you know hopefully we can be able to achieve something similar going forward industrial rates are increasing in every market literally day by day, we see them getting higher you do a deal at one rate and you know a month later you think you could you could have.
Done it better deal. So I think it's a it's probably a little bit difficult to say exactly what percentage, we could get but given the growth in the industrial market and the strength of the industrial market I think it's a it's easy to say that you know we will be able to do to do better and do as best It again.
Okay, I look forward to seeing that Ben Thank you I'll turn it back thanks.
Thanks Shane.
Question will be from Jonathan culture at TD Securities. Please go ahead.
Thanks.
Just going back to the the common our investment.
The 18%, perhaps how long do you expect those to be outstanding.
Hey, Jonathan Thanks for the question, we have a structured the 18% so that.
We have.
A 1.18, Mike so at a minimum even if that perhaps get 16 wished.
In less than a year and we will achieve the full eight.
18%.
We'll provide a bit more color and disclosure on that as we move forward.
But it is not.
Required to be repaid earlier than a year and in fact has a three year.
Three year term attached to it.
Okay, and that's that's cash.
18%.
I know we have incorporated.
A big provision so there is the option for the consortium.
Two.
Due to our crew and compound.
Okay. So that's the more that's more.
More likely scenario.
In the short term, yes again the.
The overall structure requires for a preference to certain.
Participants in the capital stack from a debt perspective to have priority.
In debt reduction, which we are very comfortable with in light of the AR as I commented earlier.
The intrinsic value of the underlying assets.
Yeah.
Okay.
Then I.
I guess in your 200.
13 million or $14 million into the common our investment or would I be right in thinking that that sandpiper will will get paid just over $1 billion annually.
On the call, but our investment.
How should we think about that.
No. This is no longer a public security investment so artists will not be paying a sandpiper any fees from the investment that artist is made.
Okay.
And then lastly.
Yeah, you announced the stake and in Dream.
How many how many names would be in your public securities portfolio right now.
Jonathan we're not going to comment on that at this point, what we will continue to do as we navigate forward is to disclose.
Either on a need to basis or when we believe it is of strategic value and benefit and I. Appreciate that's not your question, but that will include.
The number of our public securities that we have on our balance sheet.
One can do the back of the napkin math and so far as what we have disclosed to date and the fact that.
The dollar value of those investments are relative to what we announced on the 10%.
Crossing on Dream office represents.
Okay, and then just lastly back to the 18% that it'll be.
And Paul correct, that's income and ethical.
That's correct.
Okay. Thanks, a lot I'll turn it back.
China.
Next question will be from Nick rock at this cadre. Please go ahead.
Alright, thank for taking my question.
Let's see you got leasing spreads going up.
About a 100% over last year, so well done on that one of the indicators are D. S. P. N O Y just curious if you can provide a little color on the plan to get that back into positive territory.
And second question is do you have a sensitivity.
<unk> laid out for S. P. N O widespread you know above or below zero about how much of it's the NAV.
I can address I can address the first question, it's interviewing the spinoff of <unk> over the last year. The main drivers of Tonight or kind of the same as they were last quarter. Most of those properties have been released so in the coming quarters that should be improving there are a couple of pockets in our Minneapolis.
This industrial portfolio that we are working on right now and so we hope to have some positive news on those going forward. So overall in the air looking ahead are there should be significant improvements to S spinoff.
And then could you repeat the second question I'm not sure that we understand.
Understand.
Hi, sorry about that yeah I was wondering if you if you're willing to provide any sensitivities.
As far as SPP NOI relating to net asset value knowing that you know.
When you're a percent below zero versus a percent above zero sort of adds or moves.
Net asset value to the company just curious if you have any color on that but I think you did sort of answered. The question that you expect a significant improvement over the year.
Or are you, saying that that you appear as it appears it tobey you're starting to have positive NOI, our SPP NOI by the end of this year.
Yeah, maybe I'll I'll now that we have that clarity. Thank you for that Nick This does not generally impact our net asset value per unit calculation.
Generally from a valuation standpoint be approached at one uses is to use normalized NOI our market cap rates in a stab and then market cap rates and establishing fair value on our assets and so the.
Short to medium term fluctuation in Hawaii will not have a bearing on net asset value per unit.
Okay. Thank you very much for your answers I appreciate it.
Thank you next question will be from Matt Hornack at National Bank financial.
Hi, guys.
I'm just just a quick follow up on on the combing our.
Questions you got earlier.
Is there a potential or can you kind of speak to your ability or control.
Actually purchased some of the assets and bring them on balance sheet.
Or is this purely kind of.
Realize the discount to NAV story in that vehicle.
Okay.
Thanks for the question, Matt and the opportunity to acquire assets.
Within that portfolio is available to artists as it is to each member of the consortium.
But we anticipate our focus.
In regards to this investment is going to lie more towards the latter scenario that you touched on in a in seeing value creation.
Without having to put any assets onto our balance sheet. It doesn't mean, we won't again, that's open for consideration as we move forward, but that's not going to be the driving factor in the execution of our investment strategy here.
Fair enough and then there are some gems, obviously in and what you got there or are you in the process of selling any of those kind of core assets at this point or is that process.
Yes, you've just closed but what.
What should we think timing wise on that process.
Hi, this is gonna be a multiyear strategy and.
And what I would say and this I think is a reflection of.
What we've commented on earlier insofar as the intrinsic value of what we've acquired.
Together with our consortium partners, but for the benefit of our owners of artists for our pro rata share is that we are.
Leading up to and even in the short period after closing earlier this week.
Have had a significant inbound interest unsolicited with buyers who have interest in I would say a wide range of the individual assets not just the trophies and there are some as you put it a real gems in the portfolio.
There's a quite a mix of assets and again this was part of our thesis.
Both on the artists Sandpiper front, but also as a consortium as a whole.
At there were.
In this portfolio.
Not only are some jewels, but really assets across the spectrum that in the current market environment have significant liquidity.
And value and we look forward to seeing that play out as we move forward.
Okay fair enough.
So for that one as you can imagine, but I'm sure you guys will do well on top of those assets.
On on the Calgary office portfolio.
Portfolio.
That was sold can you just give us a sense I know that there was a large they can see them. So I'm not sure. If there would be your big NOI impact subsequent could.
Could you give a sense as to what the NOI in Q4 attributable to that portfolio would have been.
Okay.
Yeah, I can comment so we can get that number for you. We don't have it right now, but I would say there was a significant amount of vacancy in the portfolio. Overall, so I think it'll be a fairly small impact obviously, there would be an impact but yeah. They are they definitely were not sold on a cap rate basis. It was marina.
Price per square foot basis.
No fair enough yeah, if it's possible just so we don't Miss on the modeling side and in trying to attribute.
The cap rate because it seems like.
It was more of a per square foot number.
And then lastly for me from a from a modeling standpoint, just on 360 main in terms of the remaining capital outlay on that as well as kind of timing I know multifamily in particular can be a little bit lumpy in terms of when it comes on in lease up and then the impact there, but can you give us a sense as to how that's.
Saying, how we should think of lease up and in the NOI contribution there.
Yeah. So we have occupancy as Sumit mentioned our.
<unk> will be opening in the next few weeks, which is which is very exciting. So there will be some NOI contribution.
Towards the end of the year. They have a few months of free rent and then we're looking at occupancy for the first 24 hours kind of towards the latter part of the year. So again NOI coming on late Q3 early Q4, and we're already pre leasing and have a lot of good activity and interest there. So we're excited about that excited to see some NOI.
Coming on in the project are getting closer to completion.
And I guess as we look at 2023.
Is that a fully stabilized here or should we kind of think of it as being stabilized in the second half of 2023.
Yeah definitely the second half of 2023, so the first 24 hours it'll be 2022, still just coming online and lease up progressing in 2023, the second half will come on so the top 20 floors. So they will still be in that leasing stage, probably throughout most of 2023, so kind of towards the end of 2023 hopefully stabilize.
Going in 'twenty 'twenty four okay perfect. Thanks, I appreciate the color guys.
Thank you.
And your next question will be from Jamie Shen at RBC capital markets. Please go ahead.
Hey, guys.
Hi, Jamie just wanted to get a better understanding of the cap structure, then you at any commonality.
Presumably you'll be disclosing that next quarter, but kind of round numbers.
What are the capital stack look like.
It's more interesting commentary then there is an artist on this call, but thank you for the question Jami we.
We are not Oh, we have not disclosed the overall cap structure.
Again can do some back of the envelope math on what our equity.
Ownership interest.
And the corresponding ratio that those daughters represent.
Would reflect in so far as the total equity that has been invested in the privatization and from there one can glean that behind that equity is a significant amount of leverage but it is a level of leverage that the consortium.
Is very comfortable with relative to the intrinsic value of the underlying real estate and so.
It does have multiple components in so far as the debt side of it including mortgages line of credit we still have.
Some work to do and some.
Determination to be confirmed around what the debenture holders wish to do that have the option in the next 30 days to be able to redeem or to maintain their ownership in most of the series are involved within the historic common our structure.
So again, we're very comfortable with what this all translates into we are going to focus as I mentioned earlier.
We're certainly 2022 in reducing significantly the leverage within that overall capital structure.
And that should get us to a far more.
Reasonable overall, our leverage ratio as it relates to a fair value or intrinsic value of the assets. Okay, and then the profit equity beyond the $100 million.
Or what's the size of the total profit equity.
Okay.
Okay.
That's part and parcel of the overall capital structure I actually view.
The junior and senior preface leverage so consider the $100 million and whatever the senior.
Trying to a piece of the structure is consider that is again part of leverage and we anticipate that alongside the other dead elements that idea collectively will continue to reduce our in an accelerated manner over the course of 2022.
Okay.
And sorry, just on the private equity again.
To pick coupon.
Oh can you get term but.
But you can be they.
Can be called earlier than a year. So that's why you're kind of guarantee that 1.8 is that how I think about it and then so then basically from an ethical impact that you've got one year's worth of.
Of.
Income.
That's correct that right okay.
Okay.
And in F. O. Presumably you guys are running kind of leading the charge and making sort of asset allocation decision.
Patients are coming our way because then we'd be you guys.
We alongside our partners have established a formal governance structure.
That includes a nine member board.
Artists has two board seats are within that group of nine Sandpiper has two board seats and so we feel very comfortable in.
In the representation we have.
Within that our decision making body.
Okay.
Okay.
And then just last for me are.
On the office portfolio in the twin cities Madison, maybe can you just talk generally with what's happening in those markets as far as leasing.
And maybe on the investment side of kind of what what what activity are you seeing in those markets.
I can take that question.
Starting with Madison, Wisconsin, we are we've been quite pleased with the amount of activity that we are that we are experiencing we are actually accomplishing leases all at larger leases. We've closed one that's just 42000 feet and we continue to get strong interest from good credit tenants. So pleasantly.
<unk> how it has withstood this past couple of years and so we're we're hoping that will be soon over 90% occupancy. So we're quite pleased with Madison, Wisconsin Minneapolis Office, you have to is there a sense bifurcated between suburban and CBD as no surprise.
And yet we've we've been also very encouraged with our progress on leasing, particularly at Stinson and we can release that more in the next quarter, but we've had some wonderful success.
Re leasing Stinson.
For downtown it remains a struggle I think for for Orlando landlords and yet we are we've always believed we placed seven particularly Kenyan Pacific Plaza in a position to respond quickly. We've got an excellent amenity package that we've been working on and so it's teed up for suburban again.
We had decent activity, particularly six one carlson so we're finding that the office market in Minneapolis suburbs.
Is strengthening.
Okay. Thank you and maybe just if you're seeing any activity on that on the sales side of things.
Hey, Jimmy are you talking just sort of general market conditions, yeah, sorry on the investment side, Yeah, I, just kind of wondering like how high liquidity in the market today, given what's going on.
There have not been a lot of transactions and we are we are watching pay more attention are one example would be the cross some C. P. Pes if history towers and were Washington D C. What pimco and sell are going to do with that asset.
So we're yeah, we're watching but there have not been a lot of transactions people have been watching very closely how articulate with George Floyd.
Scenario that's happened in the last couple of years and see how it plays out for downtown. So we are looking we are watching.
I would just add Jamie are where we have seen liquidity to Phil's earlier point is in the non CBD or suburban markets are there even for artists have been unsolicited.
L O I's that have been received for non CBD assets.
Okay, great. Thank you.
Thanks, Jim.
And your next question will be from Sam ISI had at CIBC. Please go ahead.
Thanks, Hi, everybody.
Just to start off with D. A N C. A b activity. So the stocks had a good run and I think it's close to it.
Three or four year high doesn't that still at a discount to NAV, but wondering what minimum discount. If it's 2015, 10% you would see your units as a compelling investment compared to other opportunities you may be exploring.
Yeah, We we review this every quarter with the investment Committee and the board and establish ranges that we are comfortable with for our auto buyback within the N CIB.
We are not drawing the line at this point on what that number is again, we want that flexibility the board wants that flexibility, what we would say today our.
When artist is trading at a 25% discount to our net asset value roughly we certainly believe it represents a compelling opportunity for unit holders to have the MTI be active.
Okay.
And you touched on this a little bit, but just wondering in terms of your view on what you could execute them this year on asset sales.
And what asset class, what market, you're seeing or would be seen I'm the best prospects for.
Okay.
Yeah, we are from a.
Planning perspective, we are focused on monetizing our certain office assets of ours are in a particularly in the U S. In light of the large Canadian dispositions are large.
Number of Canadian dispositions, we did in 2021.
Having said that as we commented on earlier.
The the opportunity on behalf of unit holders to consider.
Other possibilities.
As things continue to evolve in the overall marketplace, including unsolicited interest that we might receive.
Going to be very open minded and do what the board ultimately believes is in the best interest of the owners.
Okay. Thanks, and just lastly on the investment and Dream office.
Is it fair to characterize that as a strategic but passive investment.
I would say that it is certainly a strategic investment for artists I don't think artists.
We'll ever do something that I would describe as purely passive and so we have had good engagement with.
The.
Representing representatives from Dream office, including Michael Cooper, we like what they're doing we like the opportunities represents again from an intrinsic value perspective.
And so.
So I don't I don't think we will ever be.
Truly passive in any investment we make with our unit holders capital.
Okay. Thanks for the color I'll turn it back.
Thank you Samir.
Your next question will be from Mike Mark Davis. Please.
Please go ahead.
Hi, there.
Just following on <unk> question on dispositions.
Perhaps just a volume ballpark.
Even if it's a wide goalposts, we should be thinking about it in terms of total dispositions is it.
Yeah.
I think that rather than giving you a goalpost I'll certainly give you a floor, we anticipate a minimum of $500 million this year of dispositions.
And again.
I can't none of us can predict the future, including as we touched on already any unsolicited interest if we get interest at values that we believe are compelling.
And would be worthwhile for the board and its investment committee to consider that.
That's a decision that will ultimately arrest.
In those in the hands of those individuals are in obviously collaboration with management and recommendations, we would make to the investment committee and the board, but 500 million would be certainly a floor that one could anticipate.
Okay, great. Thanks, and then I think you mentioned earlier in the call.
I got it wrong.
Phoenix area in Western Canada, retail industrial where sort of you know.
And identified as a core growth.
In terms of direct asset ownership for artists.
Take that to mean that the dispositions would likely be outside of those.
Generally speaking I think that that.
That would be a fair assumption.
Okay. Thank.
Thank you for that.
Hope to be the only person to ask a comment or question. So I'll I'll.
I'll go with that but.
There I guess first off I'm presuming that there is a there's a term in terms of it.
Time of turn to the private vehicle are you able to share.
Share with us what the the finite life would be.
No you know the the consortium.
Led by Kender L. A has made it very clear that the.
That the Investor Group together is very excited about this investment.
And particularly.
Some of the.
Unique.
Inherent.
This development of possibilities within certain assets and any one of course familiar with development knows that's not a short term exercise.
So you know the the structure and some specifics around that.
Again, we want to be thoughtful and respectful of our partners in what we're sharing.
But suffice it to say that you know I think there's going to be.
Certain assets that would have.
A shorter term.
Strategy associated with them and others that.
We will have a longer term.
Plan ahead of us.
Okay and do you.
Is it possible.
With this vehicle that artists.
Aside from potentially because it sounds like you're not going to buy any of the assets are.
But anyway, it's too hard.
With much bigger but is it possible that you'd have to make an additional capital contribution to execute on the strategy or would you say it's done at all.
The capital cost vehicle that you're willing to at this juncture.
We think the.
Probability of having to make an additional capital investment.
Is very low.
Okay.
Thank you and then last one for me on that topic, 18%, that's pretty easy, but perhaps you guys could help us out with just what the <unk>.
That's oney yield on your your.
Common equity piece would be just at least for a run rate basis to model initially that would be helpful.
Yeah, I don't we.
We don't have that visibility at this point again, there's a lot of moving parts with respect to this investment as you know we just closed and are now.
I'm going to have the opportunity through the governance structure I touched on earlier, where we also have an investment committee, we have an audit committee.
Standalone within that structure to really get under the hood and to be able to now navigate forward as the owners of commentary and to the extent that we do have greater visibility on that level of detail moving forward, we will certainly attempt to.
<unk> sure that on future quarterly calls.
But for now you know as a was conveyed earlier this is gonna be a one line item on financials under equity.
Investments and.
We will we will leave it at that.
Okay and back to artist then just as we think of that $500 million floor for <unk>.
Or dispositions, how should we be thinking about the allocation of that capital.
Going forward as it is debt reduction still a priority I'm gonna buybacks clearly at the current level or are on the table.
Maybe your additional comments there would be helpful.
Yeah.
Those would certainly be the two natural areas.
Areas from a capital allocation standpoint, one could anticipate certainly the debt reduction side, where we remain committed to maintaining sub 45% leverage and we may even see that go sub 40, depending on timing issues and capital flow issues of that capital flow related to timing.
And then on the NCI be again, you know, it's going to be largely a product of where our units trade and the discount that we touched on earlier.
That would make keeping the NCI be active.
Gwen when we continue to trade at a significant discount.
In place and then likely looking certainly from an exploratory standpoint add additional invest.
Investment opportunities whether it is in industrial development.
Whether there.
There could be potential opportunistic acquisitions, and then of course, the public security side.
Okay.
When you guys look at the sub 45 leverage is that a look through.
When a proportionately consolidated basis or is it just.
Based on the assets that are on the balance sheet.
No that's on our assets on the balance sheet, having said that you know longer term.
We're not looking to take on.
Higher leverage even off balance sheet.
In the short term when I think about the common our investment.
There there would be elevated leverage there, but I've already touched on the fact and commitment that the consortium.
Has made to seem that materially reduce in 2022 and we're already.
In the first few days of our acquisition, we're already well underway again based on.
Unsolicited LOI is an interest that we have had inbound.
Okay, great. Thanks, very much for the color.
Thank you.
As a reminder, ladies and gentlemen, please press star one if you have any questions and next will be Mario sorry at Scotiabank.
Yeah.
Alright, Thank you for taking my questions.
Alright Julian.
Sure.
A couple on the disclosure sorry.
One of them Coleman or.
You mentioned that it was going to be you're already going to be equity accounted.
Okay.
Is it fair to say that you've just started.
You won't be providing any proportionate.
This closure in the coming quarters or is that still a part of the board.
We adjusted our MD&A in Q4, and this is to address <unk>.
Information provided in the National instrument 50, Q1, 12, So we've moved our MD&A now to report on our consolidated IRS numbers.
That being said we've included a new section, which is our equity accounted investments, where we're providing additional information on those assets separately. So we are no longer providing a proportion share balance sheet income statement that all the relevant information can be found in that's new section.
Right.
Wondering whether Coleman our itself will follow.
And kind of applicable.
Guidelines or whether given the size of your investment or there or we could expect maybe.
More disclosure a bit lost.
We'll get that in the coming quarter as we closed on the deal but in.
In our consolidated financial statements, we are still required and we will be reporting our proportionate share of the balance sheet and income statements you'll have our financial statement information in there as well.
Okay, and then just maybe.
Another question on disclosure or maybe perhaps better soda on me.
With value of.
The company you already mentioned kind of a 25%.
Trading discount through a high for us, which would be you're talking about stabilizing or as opposed to what's the inquiries and award winning.
Probably do the math.
Do you have a sense in terms of what the gap is between kind of the Q4 'twenty one NOI run rate.
Rewards.
Alright.
Sure.
No. We don't we don't have that information, but certainly we can try and see if that's something we can provide offline.
Okay.
That's very helpful.
And then switching gears to <unk>.
Capital recycling environment more of a broader question Kumar supposed to procure.
It's across the geography from you about how how would you how would you characterize where credit markets are the lending environment.
They give them.
Geopolitical risk that we're seeing.
In Europe relative to where it was three or four months ago.
How conducive or the credit markets to you executing on.
Kind of a minimum 500 million in dispositions.
You are targeting future.
Yeah.
Our sense is that generally speaking the credit markets are open our liquid and will.
Support.
The efforts underway and.
You know if we if we look at what's happening just generally outside of certainly artist as world.
It appears that while of course our thoughts.
And our prayers are with the people of Ukraine as they are with people living in other parts of the world, where this instability and conflict has been in place for.
For some time.
The the World will continue.
To function and economies will continue to operate and similarly, we think credit will be available in the in the near to medium term as it has been historically.
It may come depending on <unk>.
Specific circumstances.
And borrowers are at a different costs or spreads, but again, we don't anticipate from a direct impact standpoint.
That that's going to have a material impact on August .
And then when we look at our.
The various asset classes.
But you're involved with are looking to become involved with which off the clock would stand out to you in terms of.
Having the biggest disconnect or public private market valuation of the board.
Okay.
We've certainly seen.
A narrowing of.
That delta across multiple asset classes, if we look at what's happening.
Particularly with cap rates associated with retail.
And office, which had during.
During the pandemic being most dramatically impacted relative to what we saw with industrial and multifamily.
Industrial has come off a little bit as you know.
Certainly in a public market context.
From a private market standpoint.
Industrial continues to be very robust, we continue to see cap rates breaking new records in.
Many markets, including some of the markets that artist operates in.
And again from a private market standpoint, the same could likely be said about multifamily. Despite the fact that when we look at the public space.
Certain multifamily names have come off a little bit from their 52 week highs.
And then again on the other end you know you see.
Certainly with Oh with.
Retail and.
Office.
We've seen a reasonable bounce back and we anticipate that's going to continue.
As the.
North American markets alongside other global markets continue to reopen.
And we certainly hope and look forward to that reopening continuing at a at a reasonable and sustainable pace.
Okay.
Okay. Thank you for the commentary.
Thank you at this time, we have no further questions I would like to turn the call back over to Mr. <unk>.
Okay.
I'll pass it over to Heather. Thank you very much. Thank you very much operator, and thank you all for joining us today, and we wish you and your families health and happiness and a wonderful weekend.
Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask tissue. Please disconnect your lines.
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