Q3 2022 InterRent Real Estate Investment Trust Earnings Call
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Operator: Good morning, ladies and gentlemen, and welcome to InterRent REIT Q3 call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during the call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, November 10th, 2022. I would now like to turn the conference over to Craig Stewart, VP of Finance. Please go ahead.
Following the presentation, we will conduct a question and answer session. If at any time during the call you need assistance. Please press star zero for the operator.
This call is being recorded on Thursday November 10, 2022, I would now like to turn the conference over to Craig Stuart VP of Finance. Please go ahead.
Craig Stewart: Welcome, everybody. Thank you for joining InterRent REIT's Q3 2020 Earnings Call.
Craig Stewart: You can find the presentation to accompany today's call on the Investor Relations section of our website under Events and Presentations. We're pleased to have Brad Cutsey, President and CEO; Curt Millar, CFO; and Dave Nevins, COO, on the line with us today. As usual, the team will present, some prepared remarks and then we'll open it up to questions.
We're pleased to have Brad gutsy, President and CEO , Curt Miller, CFO and Dave <unk> on the line with us today.
As usual, the team will present, some prepared remarks and then we'll open it up to questions.
Craig Stewart: Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. For more information, please refer to the cautionary statements on forward-looking information InterRent's news release and MD&A dated November 10, 2022.
For more information please refer to the cautionary statements on forward looking information and the rights news release and MD&A dated November 10 2022.
Craig Stewart: During the call, management will also refer to certain non-IFRS measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Brad, you're up.
Please see the rates MD&A for additional information regarding non <unk> financial measures, including reconciliations to the nearest <unk> measures Brad Europe .
Brad Cutsey: Thanks, Craig. Let's take a run through the highlights for the third quarter. I'm quite happy to say that we were able to improve our overall occupancy by 50 basis points, compared to Q2, which puts us ahead of where we were last year, going into the fourth quarter.
Brad Cutsey: Let's take a run through the highlights for the third quarter. I'm quite happy to say that we were able to improve our overall occupancy by 50 basis points, compared to Q2, which puts us ahead of where we were last year, going into the fourth quarter.
Brad Cutsey: We are pleased to see both overall and same property portfolio sitting 96%, which is right in line with their expectations and where we were typically around this point in the leasing cycle pre-COVID.
Brad Cutsey: Post Q, we've had continued strong demand across most of our regions and are delighted to see leasing traffic pick up in Montreal and return after the region experienced softness throughout the summer. The continued positive trend in leasing has brought our occupancy levels across the portfolio into the mid-96% for both total and same property portfolios.
Delighted to see leasing traffic picked up in Montreal and return after the region experienced softness throughout the summer.
The continued positive trend in lease and has brought our occupancy levels across the portfolio and to the mid 96% for both total and same property portfolios.
Brad Cutsey: Given the strong demand, we were able to significantly reduce the use of promotions and are pleased to report a reduction in the vacancy and rebates compared to Q3 last year, with the reduction in even split between the 2.
Pleased to report a reduction in the vacancy and rebates compared to Q3 last year.
That's an even split between the two.
Brad Cutsey: As we demonstrated in the past, it takes 12 to 18 months following the strong acquisition period to start to really see the impact of our numbers. Helped by the record acquisition year we had in 2021, we were able to post strong operating revenue and NOI growth print for a total portfolio of approximately 20% year-to-date.
Helped by the record acquisition here, we had in 2021, we were able to post strong operating revenue and NOI growth rates for total portfolio of approximately 20% year to date.
Brad Cutsey: We're also extremely happy with the robust growth figures for our same property portfolio again this year. Since this demonstrates the organic growth potential embedded in our portfolio and the strength of our teams on the ground, Curt will share more details around our balance sheet later in the call.
So this demonstrates the organic growth potential embedded in our portfolio and the strength of our teams on the ground.
Kirk will share more details around our balance sheet later on the call.
Brad Cutsey: But the work that his team has been doing to manage our debt ladder has helped provide stability during a volatile period of sufficient liquidity to allow us to continue to execute on our business model. And finally, at the bottom right, you'll see that our FFO, AFFO growth in Q3 has come in a bit relative to the first half on the back of higher financing costs.
And finally at the bottom right you will see that our <unk> growth in Q3 is coming a bit relative to the first half on the back of higher financing costs.
Brad Cutsey: Operating continues to improve despite inflation and interest rate headwinds. Given the strength of our same-property portfolio again this quarter, we wanted to illustrate a trend for same-property NOI. The takeaway here is that with the exception of 2020 when the pandemic effects were most impactful on the opportunity.
Given the strength of our same property portfolio again this quarter, we wanted to illustrate a trend for same property NOI to.
The takeaway here is that with the exception of 2020, when the pandemic effects were most impactful on the opposite yes.
Brad Cutsey: We have consistently generated revenue growth that has outstripped expense growth. Although we are certainly feeling the impact of inflation in our operating expenses, as you can see by the year-to-date figure, our top-line growth expectations should continue its positive NOI growth trend in 2022 and beyond.
Although we are certainly feeling the impacts of inflation in our operating expenses as you can see by the year to date figure our topline growth expectations should continue its positive NOI growth trend in 2022 and beyond.
Brad Cutsey: We continue to see strength in fundamentals in our sector and saw a 6.9% growth in the average monthly rent in September relative to last year. It is worthwhile to mention that this figure is impacted by mix changes with increased exposure to higher rent markets such as downtown Toronto and Vancouver acts an important factor.
Six 9% growth in the average monthly rent in September relative to last year.
It is worthwhile to mention that this figure is impacted by mix changes with the increase due to higher rent markets, such as downtown Toronto and Vancouver.
As an important factor.
Brad Cutsey: At the regional level, we continue to see steady year-over-year growth in average monthly rent across all regions in September, suggestion that the strengthening fundamentals aren't isolated to specific regional pockets. On the backdrop of these operating results and the continued strong fundamentals, we are also very pleased to report that the Board of Trusses has approved our 11th annual increase to our distribution factor for our November distribution that will be paid out December.
Suggestion that the strengthening fundamentals arent isolated to specific regional pockets.
The backdrop of these operating results in a continued strong fundamentals.
So very pleased to report that the board of Trustees has approved our 11th annual increase to our distribution effective for November distribution that will be paid out December .
Brad Cutsey: Dave, over to you to take us through some of the operating highlights.
Dave Nevins: Thanks, Brad. Looking at Slide 10. As Brad mentioned, we've grown our overall occupancy to 95.6% for the quarter. Given the strong rental demand in most of our markets, we use significantly less promotion throughout the quarter that will provide much less drag on our NOI during the upcoming year.
Given the strong rental demand in most of our markets, we use significantly less promotion throughout the quarter that will provide much less drag on or NOI during the upcoming year.
Dave Nevins: Looking at our repositioned portfolio, we saw our September 2022 occupancy also increased and sits materially at pre-pandemic levels for the month. As previously mentioned, we continue to see softness in the Greater Montreal area throughout the third quarter, and that has caused a slight drag on our occupancy numbers, but we are pleased with the activity post-quarter, which should support an overall improved figure in Q4.
<unk>, which should support an overall improved figure in Q4.
Dave Nevins: Before I turn things over to Curt, I want to touch on our CapEx spend so far for 2022. On the left side of the slide, you can see that our maintenance CapEx in Q3 at an annualized level of $1,028 per suite and is roughly in line with our Q2 reported amounts. You can also see we continue to allocate about 90% of our spend on value-enhancing investments.
Left side of the slide you can see that our maintenance capex in Q3 at an annualized level of 1028 per suite and is roughly in line with our Q2 reported amounts you can also see we continued to allocate about 90% of our spend on value enhancing investments on.
Dave Nevins: On the right-hand side of the slide, we see excellent value creation in our repositioning program, and we will continue to strategically invest in the portfolio. It is worth saying again that our individual suite upgrades follow the cadence of natural resident turnover.
It's worth saying again that our individual suite upgrades follow the cadence of natural resident turnover.
Dave Nevins: Our repositioning program has provided us with a well-maintained portfolio that puts us in a good position to navigate any choppiness in the market. I'll hand it over to Curt to discuss our balance sheet and sustainability efforts.
I'll hand, it over to Kurt to discuss our balance sheet and sustainability efforts.
Curt Millar: Thanks, Dave. With the increasing rate environment, the expectation all around is that at some point, cap rates will adjust. We review the major assumptions around rent, turnover costs and cap rates every quarter with our external appraisers.
We reviewed the major assumptions around rents turnover costs and cap rates every quarter with our external appraisers.
Curt Millar: Based on this review, we have increased our cap rates for various properties or markets, which has resulted in an overall increase in our cap rate of 14 basis points from Q2, and we are currently sitting at a weighted average portfolio cap rate of 3.97%.
Curt Millar: Even with this increase, we recorded a $5.7 million fair value gain for the quarter as a result of our continued strong performance from the operational team. You can see that the REIT continued to be in a healthy financial position. Our debt to GBV on September 30th was essentially flat at 37.4% compared to 37.3% at the end of Q2.
You can see that the REIT continue to be in a healthy financial position.
Debt to <unk> at September 30 was essentially flat at 37, 4% compared to 37 three at the end of Q2.
Curt Millar: As we alluded to last quarter, it was a busy queue on the mortgage front, with a lot of pieces falling into place that we've been working on for some time. Main takeaways are that we had $35.5 million in up financings on $8.2 million of maturing loans. We renewed and extended $141.5 million of maturities and paid down $5.7 million of mortgage debt. We ended the quarter with $1.62 billion in outstanding mortgage debt on our books.
Main takeaways are that we had $35 5 million and up financings on $8 2 million of maturing loans.
We renewed and extended $141.5 million of maturities and paid down $5.7 million of mortgage debt. We ended the quarter with $1.62 billion in outstanding mortgage debt on our books.
We ended the quarter with $1 six 2 billion in outstanding mortgage debt on our books.
Curt Millar: All the financing activity in the quarter, we have maintained the average term to maturity of 4.8 years, increased our CMHC-insured mortgages slightly to 74%, and reduced our overall variable rate exposure to 6%. At the end of the quarter, our weighted average interest rate increased to 3.08%.
At the end of the quarter, our weighted average interest rate increased to three 8%.
Curt Millar: In addition to the activity during Q3, there has been continued activity on the financing front post-quarter end. Looking at what is closed as of the end of October, we have only $64.8 million in 2022 maturities remaining, of which $30 million is already through CMHC, great locked, and scheduled to fund in November.
Looking at what is closed as of the end of October we have only $64 8 million in 2022 maturities remaining of which $30 million is already through CME E rate locked and scheduled to fund in November .
Curt Millar: The impact of these closed and committed mortgages is that the REIT's weighted average interest rate is now 3.15%, up 7 basis points. As previously communicated, we anticipate that with the current market conditions, we expect that our weighted average interest rate at year-end to be in the 3.2% to 3.3% range.
As previously communicated we anticipate that with the current market conditions, we expect that our weighted average interest rate at year end to be in the three two to three three range.
Curt Millar: We also expect to lower our variable rate exposure to be sub 5% by the end of the year and our CMHC-insured mortgages to be around 80% of our mortgage book. Turning our attention to sustainability.
Turning our attention to sustainability.
Curt Millar: We participated for the third year in a row in the Gras real estate assessment, and we are pleased to report a 10% increase in our score compared to 2021. The REIT also earned a Green Star rating, signaling our continued commitment to sustainability and ESG performance across the company. Our climate change work continues. Last quarter, we advised that we had completed the CDP disclosure questionnaire and submitted our CBTI commitment letter.
The REIT also earned a green star rating signaling our continued commitment to sustainability and ESG performance across the company.
Our climate change work continues.
Last quarter, we advised that we had completed the CDP disclosure questionnaire and submitted our CB Ti commitment letter.
Curt Millar: In Q3, we were focused on gathering and ensuring completeness of our data in order to advance our objectives of being able to set science-based goals to reduce our greenhouse gas emissions, and we are still on track to complete the first phase of this work by year-end.
Curt Millar: Last, but definitely not least, we are extremely pleased that this past September, with support of some great partners, we were able to raise $1.4 million at the Mike McCann Charity Golf Figment, all proceeds from the event go to support charities in our communities.
All proceeds from the event go to support charities and our communities.
Curt Millar: Coming off the heels of the global pandemic, it is more important now than ever to support and give back. To date, this one-day event has raised nearly $6.5 million while spotlighting many local charities. As in many things, we continue to set the bar higher every year and challenge ourselves to surpass it. I'll turn things back to Brad to walk through our capital allocation.
While spotlighting many local charities hasnt.
As in many things we continue to set the bar higher every year and challenge ourselves to surpass it.
I'll turn things back to Brad to walk through our capital allocation.
Brad Cutsey: We continue to emphasize that one of the key solutions to solving the housing affordability crisis in Canada. It should bring on a new supply, and we are committed to playing a role in delivering on that solution.
Brad Cutsey: We have received partial occupancy in early October and are progressing well on the remaining office-to-residential conversion at the slate in Ottawa. Marketing began late in Q2, and we're excited that the residents have been moving in over the past month.
Marathon began late in Q2, and we're excited that the residents have been moving and over the past month.
Brad Cutsey: With the near completion of the slate, development has become a bigger part of the REIT story and will only continue this in the coming years. We're working with great partners to bring this supply to market, and we're looking forward to sharing additional details as we get closer to getting shovels in the ground for each of our exciting projects.
Continued just in the coming years, we are working with great partners to bring the supply to market and we're looking forward to sharing additional details as we get closer to getting shovels in the ground for each of our exciting projects.
Brad Cutsey: There has been significant interest rate volatility over this year and has had an impact on expected yield ranges on these projects. We continue to monitor the ongoing rate and economic situation, and we will refine these estimates over time.
It had an impact on the expected yield ranges on these projects we continue to monitor the ongoing great an economic situation that we find these estimates over time.
Brad Cutsey: We want to be transparent in their current expectations. We had a good quarter and encouraged with the leasing activity post-quarter end. No one has been immune to inflationary pressures, but we are keeping a close eye on both our operating and G&A costs. We have continued to be extremely active in managing our mortgage ladder and expect to finish the year with about 80% of our mortgages being CMHC insured, and a sub 5% exposure to variable rates going into 2023.
We had a good quarter and incurred with the leasing activity post quarter end.
No it hasnt been immune to inflationary pressures, but we are keeping a close eye on both our operating and G&A costs. We are continuing to be extremely active in managing our mortgage ladder.
<unk> finished the year with about 80% of our mortgages being GMAC insured.
5% exposure to variable rates going into 2022.
Brad Cutsey: I would also like to say it was great to see many of you in person in this past September in Toronto at the Real Estate Forum and in Ottawa at the Mike McCann charity golf tournament. It's always a pleasure to discuss real estate and our plans with our investors and being able to do so in person makes it that much more enjoyable.
In Ottawa, the Mike Mccann Charity Golf tournament, it's always a pleasure to discuss real estate and our plans with our investors and being able to do so in person.
That much more enjoyable.
Brad Cutsey: Thanks to you all for your continued support, and we look forward to seeing you in person in the near future. Let's open it up for Q&A.
Let's open it up for Q&A.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your Touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys.
Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear likely Tom prompt acknowledging your request.
If you are using a speakerphone, please lift the handset before pressing any keys.
Operator: First question comes from Mike Markidis at BMO. Please go ahead.
Mike Markidis: Hey there everybody. Hope you're doing well. Just 2 quick ones for me, actually. The first would be quite simple. Can you remind me on the nat gas side if you guys have a hedging program in place or not?
Hope you're doing well.
Just 2 quick ones for me, actually. The first would be quite simple. Can you remind me on the nat gas side if you guys have a hedging program in place or not?
First would be quite simple can you remind me.
On the Das side, if you guys have a hedging program in place or not.
Curt Millar: On the natural gas side, Mike, sorry, you cut out for a second there. Did you ask about natural gas?
Mike Markidis: Yeah. Just wondering if you have a natural gas hedging program in place.
Curt Millar: We haven't in the past. We actually have coming into this heating season, rate lock about 50%, 51% of our expected natural gas demand for the next 12 months.
We haven't in the past.
Actually have coming into this heating season right block.
50, 51% of our expected natural gas demand for the next 12 months.
Mike Markidis: For the next 12 months. Okay. And with the price that you achieved, is that consistent with what we've experienced recently? I'm just trying to get a sense of where the rate would be relatively.
Mike Markidis: And with the price that you achieved, is that consistent with what we've experienced recently? I'm just trying to get a sense of where the rate would be relatively.
With.
What we've experienced recently I'm, just trying to get a sense of where the.
Where the rate would be.
Curt Millar: Yes, it's slightly below the current rate being charged by the utilities at the current spot rate. Just we took advantage of a small dip and got locked in at that.
We took advantage of a small loss.
Locked in at that.
Mike Markidis: Sounds good. Thanks for that. And then just more of a technical question, but I just want to make sure I've got the accounting suite for the lease-up of slate. So partial occupancy, you've got tenants moving in. Is that going to be a full decapitalization from an interest expense perspective and op cost perspective in 4Q? Or will it be partial? Because it sounds like you've got partial occupancy at this juncture.
And then just more of a technical question, but just want to make sure I've got the accounting suite.
Straight for the lease up.
Slate.
So partial occupancy you've got tenants moving in.
Is that going to be a full capitalization from an interest expense perspective.
Cost perspective in <unk> or will it be partial.
So it sounds like you've got partial occupancy at this juncture.
Curt Millar: Yes. So the partial occupancy started in October, but it's only the first few years. So full construction won't be complete until Q1, depending on how some of the stuff goes in the winter months, some of it could be tricky outdoors near the end of Q1, depending on what the weather is like. So we expect -- we're hoping to be done by Q1, maybe it slips into first month or Q2 depending on weather. So it wouldn't be fully out of the development outside of the house until we are 90%, 95% complete on that.
Actual occupancy starting in October .
<unk>.
Yes.
Full construction won't be complete until yes.
Yes, Q1, depending on how some of the stuff goes in the winter months some of it can be tricky outdoors.
Near the end of Q1, depending on what the weather's lifestyle.
We expect we're hoping to begin late Q1, maybe it slips into the first month or two as Q2, depending on weather.
So it wouldn't be sort of fully out of the development side of the house until.
995% complete.
Mike Markidis: Okay. And then because of that staged in cycle, you'd be able to slowly decapitalize in stages? Or is it all in one fell swoop?
Slowly decapitalize or in stages or is it is it all in one.
One one fell swoop.
Curt Millar: Typically, we've only done this once before. A few years ago, I believe it was one fell swoop type of piece on that. Technically, what we do is as we lease up, we start to bring the units into the operating side of the house. So we'll have to --
We've only done this once before a few years ago. It was one.
Type a piece on that.
Typically what we do is as we lease up when you start to bring the units into the operating side of the house.
So it will happen soon.
Brad Cutsey: So one other thing too, Michael, just so everybody is aware on this call -- this is Brad here -- is that there is some major construction work going on with REIT outside the slate right now with the city work redoing the main sewer and then they're going to come back and do the pipe -- that street level as they've done in some of the other nodes here in Ottowa. So we're quite fortunate at the end of the day, it's going to be a beautiful, almost natural medium of side front, of course, in Albert.
That street level as they've done in some of the other notes you in Ottawa.
We are quite fortunate I've done in the days can be a beautiful fall almost natural anatomy outside of our core 73 Albert.
Brad Cutsey: However, it has caused some complexities as far as construction with regards to things like water and being able to deliver water, the pressure of water to some of that report. So unfortunately, we are a little bit handicapped at the mercy to their development schedule, and that goes back to Curt saying about the winter -- about how some of this might get done or not get done through the winter.
Some complexities as far as construction.
With regards to things like water and being able to deliver water the pressure of water to some of that support. So unfortunately, we are a little bit handicapped at the mercy to their development schedule and that goes back to Kurt.
Above the winter.
About how some of this Mike Dano not get done through the winter.
Mike Markidis: Okay. Thanks.
Brad Cutsey: That said, we've been extremely happy with the take up that we have had on it. Also in the context that it is a full on construction zone, and the take-up has been quite positive. We're very happy and fortunate with the way that development has progressed.
Happy with the take up that we have had on it also in the context that it is.
I'll pull off construction zone and the take up has been quite positive.
Very happy to forecast that.
Development has progressed.
Mike Markidis: Okay. Great. Thanks for that. And I might, I have one more actually. I might be reading too closely into this because I know you have your anticipated completion date on Burlington GO, but it looks like you expect to pull a permit before the end of this year. Does that mean that shovels in the ground will be sometime in 2023?
Before the end of this year does that mean that.
Shovels in the ground will be sometime in 2023.
Brad Cutsey: Well I think you won't see shelves on the ground in any of our Greenfield projects until we have 90% of the joints complete and where we can get comfort on what we can lock in as far as actual construction dollars. The good thing I would mention on the development side, we have terrific sites as far as location. In our opinion, they're A to AAA-type sites. So there's a lot of comfort and confidence in where we think we can take rents at those sites.
You won't see shovel in the ground in any of our Greenfield projects until we have 90% of the <unk>.
<unk> is complete and why we can get comfort on what we can lock in as far as actual construction dollars.
Good thing I Wouldnt mentioned on the development side.
Terrific sites as far as location.
In our opinion there a to AAA type sites. So there is a lot of comfort and confidence in where we think we can take rents.
Those sites.
Brad Cutsey: And to be honest, the market rents have continued to increase for those locations. So really, it's going to come down to a combination of -- fine, once we get the permits, that's one thing, but really being able to get drives greater than 90% complete so that we can go out and tender and have a really good idea of where the fixed costs are. So we really want to see cost certainly before we break ground.
Congrats on continuing to increase for those locations. So really it's going to come down to a combination of fine once we get the permits that's one thing, but really being able to get kind of drive greater than 90% complete so that we can go out and tender.
They are really good idea of where the costs are so we really wanted to see cost certainly before we break ground.
Mike Markidis: Great. Thanks so much and congrats on a great quarter.
Brad Cutsey: Great. Thanks, Michael. Have a great day.
Curt Millar: Thanks, Mike.
Operator: Next question comes from Jonathan Kelcher at TD Securities. Please go ahead.
Jonathan Kelcher: Thanks. Just to clarify that last thing there, Brad. So do you expect to start any developments in 2023?
Just to clarify that last thing there, Brad. So do you expect to start any developments in 2023?
Brad Cutsey: It could -- not to be too cute Jonathan, maybe. It really will come down to can we get to those costs, certainly. Obviously, yields will come in a little. And a lot of that is due to the financing side of the equation when it comes to the construction. The nice thing is from different talks and understanding our construction costs, they're starting to come down a little in some areas, not in all areas, but in some areas as far as inputs. They're starting to show that there's least in the pressure. So again, it's -- I could vision one of our developments starting in 2023. But again, we won't break ground until we get that cost certainty, and we have things at a 90% plus as far as the groundings. Said differently, I'm hopeful.
To be not to be <unk>, Jonathan maybe.
It really will come down to Kevin get to those costs, certainly obviously yields have come in a little.
A lot of that's kind of due to the financing side of the equation when it comes to the construction.
The nice thing is <unk>.
Tox.
Standing.
Where construction costs they are starting to come down a little in some areas.
But in some areas.
They are starting to show that.
Leased and the pressure so again as I could I could vision.
One of our developments starting in 2023, but again, we won't break ground until we get that cost certainty and we have things kind of 90% plus.
Sure.
As far as the drawings.
Okay said definitely I'm hopeful.
Jonathan Kelcher: Okay, fair enough. Secondly, just the commercial space in Montreal that you're putting some units in. Can you maybe give a little bit of color on that, like which building is it and the expected cost?
Secondly, just the commercial space in Montreal that you're putting some units in. Can you maybe give a little bit of color on that, like which building is it and the expected cost?
The commercial space.
Montreal that you're you're putting units I can maybe give a little bit of color on that.
Like which building is it.
Sure.
<unk> cost.
Curt Millar: Yes. So the nice thing about that, obviously, we wouldn't do it if it wasn't a value add. It's O'rage club in Montreal. So it's a great building. It's the dominant asset in that location. It's really well amenitized. But the office space and the office kinds over there really was closer to a Class C type office, so the rents were a lot lower than what we are going to be able to achieve on a going-forward basis. So we looked at it and at the end of the day, we add this and get incremental NOI, I'd call it, over 300,000-plus replacements. So for us, it really wasn't -- there wasn't much debate do we go forward or not with those 30 to 36 units.
Just thinking about that obviously, we want to do it if it wasn't a value add.
Thanks Cliff.
All right.
Great buildings, the dominant asset in that location.
It's really well monetize.
The office space and the office tenants over there and it really was.
Closer to the economy class C type office of the rents were.
Lot lower than what we are going to be able to achieve on.
On a going forward basis, so we really look at it.
Hey.
Add this in.
Yes incremental NOI of call it over.
Plus replace them so for us it really wasn't.
So there wasn't much debate do we go forward or not with those 30 to 36 units.
Jonathan Kelcher: Okay. And how much will it cost you to do that roughly?
Curt Millar: We don't provide specifics on that, but I think for modeling purposes, you can range in between 100 and 150. I know that's a big range.
The range of between 100 to 150.
I know Thats a big range.
Jonathan Kelcher: Okay. Alright, I can work with that. And then lastly, just -- Curt, on your post-quarter financings, what rates did you get on those?
What rates did you get on those.
Curt Millar: So we were fortunate on those to have been able to lock them in, again, taking advantage of a bit of a dip in the market. The rates were in around 4 to 4.5 between the averaging amount.
On those two.
Being able to lock them in again, taking advantage of a bit of a dip in the markets.
Thanks.
Rates were in around 4% quarter over quarter quarter to quarter between the.
We're averaging in that.
Jonathan Kelcher: Okay. Thanks helpful. I'll turn it back. Thanks.
Helpful I'll turn it back thanks.
Curt Millar: Thanks, Jonathan.
Operator: Next question comes from Kyle Stanley at Desjardins. Please go ahead.
Kyle Stanley: Thanks. Good morning, guys.
Curt Millar: Good morning, Kyle.
Kyle Stanley: So good to see the OpEx inflation get reined in a little bit this quarter. I'm just wondering how you're thinking about that as we head into the winter months, fully realizing you just mentioned that you now hedged about 50% of your InterRent gas. But just want your thoughts generally on how OpEx likely trends into the winter and then maybe into next year.
Reined in a little bit this quarter I'm, just wondering how youre thinking about that as we head into the winter months fully realizing you just mentioned that you're now hedged about 50% of your Nat gas but.
Just wanted your thoughts generally on how opex likely trend into the winter and then maybe into next year.
Yes.
Brad Cutsey: Yes. I think we had a great quarter from an operating cost perspective, but I would caution the investment community and readers that can be lumpy. And different things can come in. There weren't any real one-time exclusion again relative. But I would say we do still see some pressures specifically on the utilities. And I would still say that there's pressures on the wage front of it. I do think some pressures on some other inputs into that line item are relieving a little bit. But looking forward and going into the winter months, we're going to continue to see that line item on a whole increase. Now that said, we firmly that our rent is going to continue at a really robust pace, and they're going to outstrip any increase or any inflationary pressure that we're going to see on our operating cost lines. And I'm very hopeful and confident that we're likely to see flat to modest margin gains going into next year.
I would caution.
The investment community and readers.
Can be lumpy right and different things can come and there weren't any real onetime.
Excluding the gain relative.
I would say.
We do still see.
Some pressures specifically on the utilities and I would still say that there's pressure on the wage front of it I do think some pressures on some other inputs.
Inputs into that line item are leaving a little bit.
Looking forward and going into the winter months, we're going to continuing to see that line item on our hall increase now that said.
We firmly that a rent is going to continue.
Robust pace and they're going to outstrip any increase any inflationary pressure that we are going to see other operating cost lines and I'm.
I'm very.
Hopeful and confident that we'll likely to see flat to modest margin gains going into next year.
Kyle Stanley: Okay. That's good color. Thanks for that. And just looking at Montreal quickly, you mentioned it in the prepared remarks, a bit of a vacancy dip this quarter, which I think you had guided to last quarter, but that you're encouraged by the leasing activity so far in the fourth quarter. So I'm just wondering if you can elaborate a little bit on that and maybe where are your thoughts on how vacancy trends get through the next 12 to 18 months?
And then just looking at Montreal quickly you mentioned in the prepared remarks, a bit of a vacancy dip this quarter, which you I think you kind of guided to last quarter. But that you're encouraged by the leasing activity so far in the fourth quarter. So I'm just wondering if you can elaborate a little bit on that. Maybe what are your thoughts on how vacancy trends kind of through the next 12 to 18 months.
But that you're encouraged by the leasing activity so far in the fourth quarter. So I'm just wondering if you can elaborate a little bit on that. Maybe what are your thoughts on how vacancy trends kind of through the next 12 to 18 months.
Maybe what are your thoughts on how vacancy trends kind of through the next 12 to 18 months.
Brad Cutsey: Yes. So I think I can see we made strong gains across the board, except at the quarter in Montreal. But as we mentioned in our commentary, post-quarter Montreal sitting in the better place today than it was last year. So I'll let you guys go back and do that math. But say the least, we're quite happy with the post-quarter activity in Montreal. It took a lot later to get started, which was unfortunate.
We made strong.
Gains across across the board except at.
At the quarter in Montreal, but as we mentioned in our commentary.
Post quarter, Montreal sitting in a better place today than it was last year. So I'll, let you guys go back and do that math, but.
Sure.
Say the lease we're quite happy with the <unk>.
Quarter activity in Montreal.
A lot later to get started which was unfortunate, but saying that I believe.
Brad Cutsey: But things I believe -- well not believe but they have been picking up and the traffic's been picking up and then it's translated into -- so we feel good about where Montreal is at that at this point. And the ones that I should also mention on that too is, as you've noticed, we've been able to make these ops with gains with some pretty solid rent growth, and that's also been up less promos than last year. I'm not going to say we haven't had to use any, but it was materially down from what we were using a year ago on that note.
Picking up and the traffic and picks it up and that's translated into.
So.
Phil.
<unk> Montreal that.
All right.
Sure.
Okay.
And the ones that I should also mentioned on that too as you've noticed we've been able to make these occupancy gains with some pretty solid.
Rent growth and that's also been up last 12 months.
The last year I'm not going to say, we haven't had to use any but it was materially down from what we were a year ago.
No.
Kyle Stanley: Okay. Great. And then just one last one. With your experience now building slate, I'm just wondering, is this something that you'll look to do a little bit more of, the kind of office for residential conversion? Or have you learned anything that you could use on another project going forward?
With your experience now.
Building slate I'm just wondering.
Is this something that Youll look look to do a little bit more of the kind of office to residential conversion or have you learned anything that that you could use on another project going forward.
Brad Cutsey: Yes. Well, there's a lot of things we love about this. Obviously, the benefits from taking an obsolete office building, converting it to new homes is a great story, and it's great for the city of Ottawa. It's a great part of being the solution to housing affordability crisis that we're currently in. So we love the whole storage solution behind converting our office to residential, but the fact does remain extremely challenging to do. It's not for the ill-hearted. It takes a strong commitment. The nice thing is that we've had teams in place that have been working on this conversion that have done this throughout their careers, and I think is the big advantage because I think you've seen office conversion to multifamily in the past in different regions in the country, and they haven't been maybe as successful as I think the slate will prove to be. But with that said, there's been a lot of challenges that we have faced, and we've been able to overcome, but it's -- they're challenging.
There's a lot of things we love about this obviously the benefits.
Taking on obsolete office building converting to new homes.
Is a great story.
Great Bob.
The city of Ottawa.
Great part of the solution to housing affordability crisis that we're currently in.
We love.
The whole.
The whole storage solution behind converting office to residential but the fact does remain extremely challenging to do it's not for the hard it takes.
Strong commitment the nice thing is that we've had.
Teams in place that have been working on this conversion done this throughout their careers.
The big advantage, because I think.
You've seen office conversion to multifamily in the past in different regions in the country and they haven't been maybe as successful.
The slate will prove to be but with that said there's been a lot of challenges.
We have phase and we've been able to overcome but it's.
It's challenging.
Brad Cutsey: But nevertheless, they’re worthwhile for so many reasons. One being taking an existing infrastructure and being able to repurpose it, I think, goes a long way to help build the communities that we invest in. And then it will have a return that will consummate with their capital providers. So long-winded to, yes, we would look at doing further, but they are challenging.
So many reasons.
<unk> <unk>.
Taking taken on existing infrastructure and being able to re purposes.
It goes a long ways.
<unk> build the communities that we.
<unk> invested in it.
It will have a return that will consummate with there.
With our capital providers.
So.
Long long winded two yes, we would look at doing further but there.
Their challenge.
Multiple speakers: [Kyle Stanley] Yes. And just to add to that, not every office building converts easily to rental. You really have to take a good look at that floor plate and how the natural layout is to work with. 473 Albert, given the rectangular shape of it was a very good candidate for that conversion. [Brad Cutsey] Yes. And that's a great point. And it goes without saying, it's obviously a lot easier to do a greenfield from the ground up, but it might not have as many stripe as far as achievement.
Obviously, a lot easier to do a greenfield ground up but it might not have as many.
As far as.
Cheap.
Yes.
Kyle Stanley: Okay. No I think that makes a lot of sense. Thanks for all the color. I'll turn it back. Thanks.
Operator: Thank you. Next question comes from Brad Sturges at Raymond James. Please go ahead.
Brad Sturges: Hi, guys. Just to go back to the Montreal conversation there, obviously the pickup in demand post-quarter, does that include you seeing better demand coming from international students and seeing more of a benefit to your more student-focused buildings?
Brad Sturges: Just to go back to the Montreal conversation there, obviously the pickup in demand post-quarter, does that include you seeing better demand coming from international students and seeing more of a benefit to your more student-focused buildings?
So just to go back to the Montreal conversation there.
Now obviously the pick up in demand post quarter does that include.
Are you seeing better demand coming from international students and.
See more of a benefit to your more student focus buildings.
Multiple speakers: [Bradley Cutsey] Yes. We definitely have. I'll turn it over to Dave as well to let Dave comment on that as well. [Dave Nevins] Yes. No, definitely, the demand from the Ford students came back strong, I guess, later in the season than we're normally used to. But we see it across the board that the pickup. The areas inside of the student areas were doing really well. It was just really the student areas, but it's come back to basic, almost normal now. We're in a good spot.
Definitely.
Ill turn it over to Dave the Walter let Dave comment on that as well, yes, Hello definitely the the demand from the port students came back strong.
I guess later in the later later in the season than we're normally used to so but we see it across the board that would pick up the areas outside of the student areas, we're doing really well.
Just really the suite in areas, but.
Come back to <unk>.
Basic almost normal now.
We're in a good spot.
Brad Cutsey: And also, Brad, just to add a little color on that, and it's not just Montreal, from different conversations here in Ottawa with universities, we're hearing that this will be one of the bigger influxes for January enrollment that they've seen, I think, on record. So I think that goes to speak to the pent-up demand that's been building up in the system just not getting study permits approved in time. So there might be an actual offshoot even further additional demand from this demand group.
Well different conversations here in Ottawa.
Universities, we're hearing that this will be one of the bigger boxes for January .
Well, Matt is that <unk> seen I think on record.
I think that goes to speak to.
Kind of the pent up demand thats been kind of been building up.
And the assistant just not getting steady permanent.
Approved in time.
So there might be an actual off shoot of even further or additional demand from this.
I agree.
Brad Sturges: That's good to hear. And then when you think about the 30% gap between in-place and market, I assume that's more broad across the portfolio, but are there certain markets that stand out to be relatively wider than others?
And then when you think about the 30%.
Gap between in place and end market.
I assume that's more broad across the portfolio, but are there certain markets that kind of a standout.
To be relatively wider than others.
Dave Nevins: Yes. We don't get into the color too, too much on that, but there definitely is a bit of a slip. The bigger split, as you'd imagine, just given our model is between repositioned and non-repositioned in the portfolio and you get a sense of that from when you look at that disclosure in the MD&A.
I mean, we don't we don't get into the color too too much on that but there definitely is a bit of a split the bigger split as you'd imagine just sort of given our model is between repositioned and non reposition in the portfolio. When you kind of get a sense of that from when you look at that disclosure in the MD&A.
Dave Nevins: The other thing I would say is that, when you look at the difference between mark-to-market, think about our acquisition program. And typically, it follows suit. So if you look at the markets where we bought the most products in the last 3 or 4 years, that will be the markets also that have the biggest potential gain to lease.
The other thing I would say is that.
When you look at the difference between Mark to market think about our acquisition program and typically followed suit. So if you look at the markets, where we bought the most products in the last three or four years.
That'll be the market's also that have the biggest.
<unk> gained beliefs.
Brad Sturges: Okay. That's helpful. The last question, I think you guys talked about it for a few quarters, but certainly you've considered selling assets within the portfolio. I guess where would you be on that front right now? Is there still potential to see some asset sales in the next 12 to 24 months?
The last last question.
I think you guys talked about it for a few quarters, but.
Certainly.
You've considered selling assets.
Within the portfolio I guess, where would you be on that front right. Now is is there still.
Still potential and see some asset sales.
You know in the next 12 months to 24 months.
Brad Cutsey: Yes. I think there is, Brad. I think it's just -- the transaction market is quite thin right now. I think there's a lot of buyers with pen down. I don't necessarily think it's because they don't believe in the fundamentals. I don't believe that they want to increase their exposure to the asset class. I think quite the opposite. I do think there's a period of a wait-and-see where the dust settles as far as more clarity on where interest rates can settle and has the vendor's expectations - are they coming in to where something can get done?
The transaction market is quite thin right now.
Thanks.
There is a lot of buyers with the pen down at all.
Terry is because they believe in the fundamentals I don't believe so.
To increase their exposure to the asset class I think quite the opposite I do think there is a period of a wait and see where the dust settles as far as more clarity on where interest rates today is subtle and.
Has the.
<unk>.
Yeah.
Vendors expectations.
Alright.
Are they coming into where something can get done.
Brad Cutsey: So unfortunately, for some of the non-core assets, for us, they're likely private buyers and the steep run-up in interest rates has thrown a challenge as far as how do they go about to finance acquisition. There's lots of interest for sure. It's just some of these private buyers have to figure out how they can transact. The good news for us is we've got a lot of capacity on our balance sheet. The team has done a really good job of putting us in a position where we can continue to act on opportunities.
Unfortunately for some of the noncore assets.
For us they're likely private buyers.
And the <unk>.
Steep run up in interest rates has drawn a challenge as far as how do they go about finance.
Acquisition.
There is lots of interest for sure. It's just some of these private buyers have to figure out how they can that trend that the good news for us is.
We've got a lot of capacity on our balance sheet. The team has done a really good job of putting us in a position where we can continue to act on opportunities, albeit.
Brad Cutsey: Albeit, I think you'll see us be a lot more modest on disbursing capital at this point, at least for acquisitions and produce, it will be more probably likely with the joint venture partner to spread that capital over more. But I think right now on the disposition front, it's pretty quiet as far as transacting not quite from interested but from how can people complete the deal. And really, it's coming up to the financing. And you're going to see a lot of that in our belief with the profit higher.
On disbursing capital.
Thats quite a lease for acquisitions.
And if we do so it would be more than <unk>.
Probably likely with the joint venture partner to us, it's kind of spread that.
Capital over more.
But I think right now on the disposition front.
It's pretty it's pretty quiet as far as transacting not acquired.
Interested but how can people.
Some people to complete the deal right and really it's coming off of the financing and youre going to see that a lot of that and I believe with the buyer.
Brad Sturges: Yes, that makes sense. I appreciate that. I will turn it back.
Yes.
Operator: Thank you. Next question comes from Jimmy Shan at RBC Capital Markets. Please go ahead.
Jimmy Shan: Thank you. Bradley, maybe just a clarification on the Montreal. So you mentioned it's improved better first quarter to where it was in September of last year. Is that what you referred to?
You mentioned, it's improved better.
Fourth quarter, two to where it was in September of last year.
Is that what you referred to.
Brad Cutsey: No. What I mentioned is that Montreal where we sit today post-quarter is in a better position where we ended last year. So that's an easy one for you to do by pulling up last year.
Is that Montreal, where we sit today post quarter isn't.
There is an embedded position wherever we ended last year.
So that's an easy one for you to do by pulling up last year.
Jimmy Shan: So last year was 6%, so you're saying better than 6%.
Brad Cutsey: I'm saying yes. I'm saying we're very happy with what -- put it this way, we're very happy with where Montreal sits today.
And we're very happy with.
Put it this way, we're very happy with where our Montreal sits today.
Okay.
Dave Nevins: And rentals are still strong.
Okay.
Brad Cutsey: And I don't know if you guys heard that, but Dave's commentary was and still renting strong. Like the leasing season has definitely been extended over and above what would be normal at this time of the year.
Leasing season has definitely been extended over and above what would be normal at this time of year.
Jimmy Shan: Okay. So it doesn't sound like you missed especially for the buildings for the students, you've missed the window in leasing because of the January influx. And so big balance, you don't have to wait for another year for you to see that in those buildings. Is that fair?
Thank you for the buildings with students you've missed the window in leasing because of the January influx until.
Big balance you'll have to wait for another year. If you just see that in those buildings.
Yeah.
Brad Cutsey: Sorry, I'm not understanding the question. Say that again.
Jimmy Shan: Well yeah, because certain buildings are student dependent and because you didn't get the lease-up done for the fall of this year --
Because you didn't get the lease up for the fall of this year, yes.
Brad Cutsey: No, I wouldn't lead into that, Jim. I wouldn't lead into that and not necessarily would lead into that. I would assume that maybe some people got here late and then arranged their combination. So meaning they were international students. They were just late in getting here, and they're in.
I wouldnt lead into that not necessarily would lead into that I would assume that maybe some people got here late.
And then arrange their combination so meaning they were international students.
We're just late in getting here.
And they are in.
Dave Nevins: We know from commentary, both from the federal government that there was delay in processing student applications through visas. And we also know that McGill, for example, was out there saying that they were behind in processing applications for the September start. And I think that's why you saw not the normal July 1st, July influx or August, we saw wait a little longer because they didn't get their notifications in time to be here early August and looking for September.
I think Thats why you saw the normal July one July influx or August .
Wait a little longer because they didn't get their notifications in time to be here.
Brad Cutsey: And Montreal is a little different, too. Montreal typically tends to be more -- you land, you search for 2 weeks, so you go in a short-term accommodations and then you find your longer-term accommodation, whereas international students in our experience in Ottawa and southwestern Ontario has being a little more preorganized, like before they actually come, they'll arrange their combinations.
Southwestern Ontario, as being a little more.
Pre organized site.
Before that she come they'll set a deal a range of combinations.
Jimmy Shan: Okay. Okay and then my second question is really --
Okay and then my second question is yes.
Brad Cutsey: But yes. I wouldn't lead in that we missed that certain buildings, that we've missed the international students because that's quite contrary.
Certain billions that we miss the international students.
That's quite contrary.
Jimmy Shan: Okay. Understood. I wonder if you could just comment on the turnover rate trends you're seeing, and I'm actually more interested in Vancouver seeing that it sounds like a lot of the gain to lease is coming from that market. Maybe if you could comment on Vancouver as well.
I Wonder if you can just comment on.
The turnover rate trends, you're seeing in actually more interested in kind of Vancouver.
It sounds like the lot of the gain to lease was coming from that market.
If you could comment on Vancouver as well.
Dave Nevins: Well, we've maintained all the way through. We've been lucky enough that we were able to get that pull hold during COVID and we've been quite fortunate. That market has continued just consistently done better and better, and it's extremely tight.
Maintain all the way through we've been lucky enough that we were able to get that total drilling Colbert and we've been quite fortunate that market. It has continue just consistently.
Consistently.
We've done better.
And better and its.
It's extremely tight sorry.
Jimmy Shan: So what about the turnover rate in those markets?
Dave Nevins: The turnover -- you're asking if the turnover rate has come in?
Ben.
Jimmy Shan: Yes, the churn --
Dave Nevins: Yes. Jimmy, just to be clear, so we used to see the churn or the turnover rate be in and around typically 30% and we had that running historically for quite a while. And Brad and I are on record for several quarters saying it's going to come back, and we expect it to trend down. We have seen that this year. We are in that mid-ish-20 range. But we do expect, given what we've seen in the broader market, that that will continue to trend down from the mid-20s to maybe even the mid-low to low 20s.
We expect it to trend down.
<unk> seen that this year.
We are sort of in that mid ish 20 range.
But we do expect given what we've seen in the broader market that that will continue to trend down from the mid twenty's to navy, even that sort of mid low to low twenty's.
Jimmy Shan: Okay. Thanks, guys.
Thanks, guys.
Operator: Thank you. Next question comes from Matt Kornack at National Bank Financial. Please go ahead.
Matt Kornack: Hi guys. I'm sorry to beat a dead horse on Montreal. But just the occupancy statement is pretty clear. But you did well on rate sequentially in the market. So should we expect, as you lease some of the vacancy that rate would be stable? Or are you expecting that you're actually going to see an increase in the aggregate rental rate across that portfolio as well?
Sorry to beat a dead horse on Montreal, but.
Just the occupancy statement, it's pretty clear that you did well on rate sequentially in the market. So should we expect as you lease some of the vacancy that that rate would be stable or or are you expecting that you are actually going to see.
An increase in the aggregate rental rate across that portfolio as well.
Brad Cutsey: If I think I understand your question, we maintained the integrity of our rate in Montreal all the way through, even though it was probably our most challenging market in the pandemic and it was the slowest to come out. We've always maintained that this was a temporary let, and we've always been extremely bullish. I'm not sure, for a lot of different reasons. And I'm glad we had maintained that rate.
We paid the integrity of our rate in Montreal, all the way through even though.
It was it was probably a more challenging markets.
<unk> <unk> and it was the slowest to come out we've always maintained that this was a temporary.
And we've always been extremely bullish.
I'm not sure all for a lot of different reasons and I'm glad we had maintained that rate and we to.
Brad Cutsey: For the product that we did -- for the little bit of absorption that we did see in the quarter, we were hitting rents that were higher than the previous year. So that really led us to believe that really -- and knowing in discussion with our leasing team is knowing that the traffic just wasn't back to the same levels that we saw pre-COVID as far as the foreign international student. That is to believe that when that demand pool would come back, we would easily achieve the rent growth, and it has proven out.
Rents that were higher than the previous year, so that really led us to believe that really the.
And noise and discussion with our leasing team is kind of annoying that trap with just wondering back to the same levels that we saw pre COVID-19 as far as support international stood it led us to believe that.
Not demand pool come back we would easily achieve the Banco.
It has proven out.
Curt Millar: And I guess, presumably, I think, if I remember correctly, even though they may be smaller units that they tend to be a little bit more premium in terms of what international students would pay for the accommodation so it may actually be higher in terms of the vacancy that's coming on relative to the overall portfolio.
I think if I remember correctly, even though they may be smaller units.
They tend to be a little bit more premium in terms of what international students would pay for the accommodation. So it may actually.
The higher in terms of the vacancy that's coming on relative to the overall portfolio.
Dave Nevins: I mean, those buildings, the student-specific buildings in Montreal are definitely liked buildings and they're very well-amenitized. The rents there are at the higher end of the market, for sure, for student rental. [Dave Nevins] Hence why we love the international student crowd. And you've seen them, Matt.They're extremely well located. And Curt's point, they're extremely well amenitized. So there is a section of the student population where they can afford those rents. And yes, it allows us to treat premium relative to, I would call out the student accommodation for sure.
Okay.
The rents there are at the higher end of the market for sure for rental.
Hence why why we loved it international.
<unk> crowd.
And you've seen them that they're extremely well located as Ed correct.
They're extremely well monetize so there is a.
So there is a section of the student population where they can.
For those rents and yes.
This is Jim premium relative to I would call out the student accommodation for sure.
Okay.
Matt Kornack: Okay. No, that's fair. On the financing side, just a few clarifications. You were very active. So deferred financing fees did go up from an amortization standpoint. There was 100,000 write-off, I believe, in the quarter, however. But how should we think about deferred financing costs? Is the number ex the write-off a good run rate? And then also the interest rates quoted, are those effective? Or is that just the contractual rate?
On the financing side.
Just a few clarifications.
You were very active so deferred financing fees did go up from an amortization standpoint, there was 100000 write off I believe in the quarter. However.
But how should we think of that deferred financing costs as the b number ex the write off a good kind of.
Run rate and then also the interest rates quoted are those effective or is that.
Just the contractual rate.
Dave Nevins: So let me just hit the first part of that, the deferred financing team, Matt. The run rate that we have and that we expect to see would be in that 500 to 5.25 range per cube. There will be variations like we've seen in the past around if we take a property out that's sitting there with some deferred financing set up on it.
Certain financing to bad debt.
The run rate that we have and then we sort of expect to.
To see would.
It would be in that 500 to five and a quarter range.
For Q.
There will be variations like we've seen in the past around if we take a property.
Yeah.
Deferred financing set up on it.
Dave Nevins: So as a normal course, I'd say if you're doing 500 to 5.25% you're in the right range. We did have -- by year-end, we'll probably be about $1 million of write-offs. And given what's on our books for next year, it will be lumpy as to what skews that hit, but you can probably expect another $500,000 to $700,000 a hit at some point through the year, just given what's in our mortgage lot of maturities for next year.
Yes.
And given what's on our books for next year.
It will be lumpy as to what skews that it like you can probably expect.
Another.
Five to 700000.
At some point through the year, just given what's in our mortgage latter maturities for next year.
Matt Kornack: Okay. I usually back those out, but you highlighted it this time around. I assume you'll highlight it going forward as well.
I, usually back those out but you.
You highlighted it this time around I assume you'll highlight it.
Going forward as well.
Dave Nevins: Yes, that's for sure. We always highlight that number. And then the second part of your question, when you were talking about the effective interest rate, are you talking about the rate in the mortgage ladder, like the overall rate that we --
Right in the mortgage later like the overall.
Yes.
Matt Kornack: 3.08, does that include the amortization of deferred financing costs? Or is that just the contractual rate before the amortization?
Contractual rate before the amortization.
Dave Nevins: Yes, that's the contracted rate before the amortization. Correct.
Amortization correct.
Matt Kornack: And the last accounting one on - -
Brad Cutsey: Sorry, Matt. Just to be clear to you on that one because we did provide some extra color because we all know financing costs have been hitting all of us, and they hurt. And we want to try to make sure we fully give you guys as much information as we can on that. So we did disclose that as of October 31st, we're about 3.15% as a contracted rate average and that we still stand by what we said in Q2 that we believe that by year-end, we'll be in that 3.2% to 3.3% range. And I just want to make that clear because I know that's a big line for going forward compared to what it's been in the last few years.
Hitting all of us and they hurt.
Want to try and make sure it can be as.
Have you guys as much information as we can on that so we did disclose that as of October 31 were about three 5%.
As a contracted rate average and that we still.
Standby, what we said at Q2 that we believe that by year end, we'll be in that three 2% to three three range I just wanted to get cleared.
A big line for.
Going forward compared to what it's been in the last few years.
Matt Kornack: Sure, yes. And I think we're reflecting that at this point. So I appreciate that, though. That's good color. And just on the G&A side, I guess it was high in Q2, but looks normal this quarter. I think there's some seasonality aspects in Q4 but is this quarter a pretty clean quarter from a G&A standpoint?
And just on the G&A side I guess it was.
Hi in Q2, but kind of looks normal this quarter I think theres some seasonality aspects in Q4, but.
Is this quarter, a pretty clean quarter from a G&A standpoint.
Brad Cutsey: What we said, I think, previously, is 4% to 4.25% for G&A. I would stick with that. It might be towards the 4% more than the 4.25%, but I think that 4% to 4.25% range is still accurate. There is definitely lumpiness to the G&A number. Things like our golf tournament in the summer affect Q2, things like certain events year-end or different times of when things hit. And then there's also just different sustainability costs that happened throughout the year at different points. So from a modeling perspective, I'd say stick to the 4% to 4.25%.
The G&A I would stick with that towards that for more than a quarter to quarter, but I think thats.
Our range is still accurate there is definitely lumpiness to the G&A number.
Things like our golf tournament in the summer Q2 things like certain since year end or different times that when things hit.
And then there is also just different sustainability cause that sort of happened throughout the year different points. So from a modeling.
Selling perspective, I'd say, Florida for the quarter.
Matt Kornack: Okay. That's perfect. Thanks, guys.
Perfect. Thanks, guys.
Dave Nevins: Thanks, Matt. And we know you're a home town guy to Montreal, Matt. So we expect the Montreal questions, no worries.
Operator: Thank you. Next question comes from Johann Rodrigues at Industrial Alliance. Please go ahead.
Industrial lines. Please go ahead.
Johann Rodrigues: Actually, I'm good. All my questions have been answered.
Brad Cutsey: Thanks, Johann.
Operator: Thank you. At this time, there are no other questions. You may proceed.
Brad Cutsey: Well, that's great. Thanks, everyone, and I look forward to Q4, but I don't mind the longer break in between. I hope everybody has a great day, and we'll hopefully see everybody in Toronto at the real estate forum. Take care. Thanks, everyone.
Q4, but I don't mind the longer break in between.
I hope everybody has a great day and.
We will hopefully see everybody in trying out the real estate.
Yeah.
Take care thanks, everyone.
Operator: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you please disconnect your lines.