Q3 2022 H&R Real Estate Investment Trust Earnings Call
Good morning, and welcome to H&R Real estate investment Trust 2022 third quarter earnings Conference call.
Before beginning the call Ed and I would like to remind our listeners that certain statements, which may include predictions conclusions forecast or projections.
Euronext that follow May contain forward looking information, which reflect our current expectations of management regarding future events and performance and speak only as of today's date.
For drinking information requires management to make assumptions I rely on certain material factors and are subject to inherent risks and uncertainties and actual results could differ materially from the statements and the forward looking information.
And discussing <unk> financial and operating performance and then responding to your questions.
May reference certain financial measures, which do not that meaning recognize our center is under I F. R. S. A Canadian generally accepted accounting principles and are therefore unlikely to be comparable to similar measures presented by other reporting issuers.
non-GAAP measures should not be considered as alternatives to net income are comparable metrics determined in accordance with I F. R. S. S indicators of <unk> performance.
<unk> cash flows and profitability.
Management uses these measures trade assessments to reach underlying performance and provides these additional measures. So the investors can do the same.
Additional information about the material factors.
<unk>.
Oh gentes that could cause actual results to differ materially from the statements and the forward looking information and.
And the material factors or assumptions that may have been applied in making such statements together with details on <unk> use of non-GAAP financial measures.
I described in more detail.
<unk> public filings, which can be found omnichannel its websites and apps triple double you that cedar docs com.
I would now like to introduce Mr. Sun, a stutter chief Executive officer of H&R.
Please go ahead Mr <unk>.
Good morning, everyone.
And I'd like to thank you for joining us today to discuss our third quarter financial and operating results.
The call our Felipe Cohen, President, although from our Chief Financial Officer.
Year to date, our teams have been executing against our repositioning Guam plan that we laid out in the investment community just over a year ago today.
February 27, 2021, we have made great progress and are moving towards our desired outcome of becoming a streamlined growth oriented REIT a radio company looks very different than it did over a year ago as is evidenced by our asset composition and balance sheet in same property net operating income growth.
Last year and a half we've moved over $5 billion of lower growth office, and retail properties and reallocated that capital into higher growth Sunbelt and gateways to the residential alongside buying back our own units at a significant discount to NAV.
Our year to date results and performance highlights the quality of our properties and the embedded growth that we are servicing as a result of this transformation.
Continuing our progress with dispositions announced to date furthering our portfolio simplification strategy.
Capital allocation remains our top priority as we drive our plan forward and where our focus remains years year to date, we have recycled capital out of $455 million of office retail and other noncore asset sales and reallocating that capital to the repurchase and cancellation of almost $300 million worth of our units.
Or to $22 9 million units at a 42 discounts to NAV and CIB has been very accretive to unitholders, creating 72 cents on that per unit.
In August we completed the sale of four office property and ads and retail properties totaling $167 8 million and after quarter end, we sold an additional three properties totaling 40 $49 million comprised of two automotive tenant and retail properties in Arizona and a weighted average cap rate of five eight.
And the vacant single tenant office property in Burlington, Ontario for $26 million. These sales are in line with our values, providing further support to our net asset value and aligning to our repositioning plan and lastly is the $9, 1% distribution increase that we announced yesterday supported by our very strong.
Year to date performance and our positive outlook for the future. This increases the monthly distribution to five cents per unit commencing in January 2023, with today's strong quarterly results. We are on our way to creating a simplified growth oriented company.
Surface significant value to our unit holders and with that I will turn it over to Philippe.
Thank you and good morning, everyone I'm happy to be on this call to discuss our Q3 updates and to go over our quarterly highlights.
But before I do I'd like to pause for a moment and highlight some of the recent enhancements that have been made at the H&R board level.
Other ESG accomplishments.
In accordance with H&R is policies governing board tenure four new independent trustees were elected in 2021 upon the retirement of two members there.
Their collective expertise combined with the existing trustees is create a well diversified independents and experienced board, we shouldnt enhance investor confidence and governance sentiment.
Additionally, women currently represent 38% of our board, marking progress on the board's diversity commitments and achieving the kind of the clubs aim for better gender balance.
The majority independent board and nature of our management team are fully committed to continuing to enhance corporate governance and increase unit holder value.
Another material ESG step we made this year was participating in a growth view real estate assessment, which is an investor driven global ESG benchmark and reporting framework that enables us to understand our performance against peers and to provide investors with information they require to make thoughtful investment decisions.
In addition to our earnings announcement last night, we also released our annual sustainability report that outlines some of our recent progress.
We're also proud to report that 50% of our executives are women.
Third consecutive year H&R replaced on a global meals women lease year benchmark of executive gender diversity.
We understand that health and safety employment engagement diversity equity and inclusion and engagement with our tenants and communities are critical for our long term success as an industry, leading real estate organization and to that end, we look forward to updating our stakeholders of that progress.
I'll answer the last of our portfolio the U S Sunbelt and gateway markets continue to experience strong supply demand fundamentals for multifamily rentals and additional tailwind that we expect to accelerate those fundamentals as the increase in mortgage rates with a rate of over 7% for the most typical mortgage the rent versus buy decision will likely.
This more households into the rental space.
For context, our same store tenant move outs due to buying a whole decrease from approximately 20% in the second quarter to 12% to the third quarter a trend that we anticipate will continue.
Additionally, this year same store Q3 traffic in completed applications are actually higher than the third quarter of last year.
Lastly, our sunbelt portfolio has continued to register double digit renewals and new lease trade outs as a blender rate for new leases and renewals equated over 15% of third quarter.
Therefore, while the rental rate growth acceleration may are based in the coming quarters. Our top line growth is still substantially outpacing expense growth and also supporting existing fair market valuations despite potential future increases in cap rates.
Moving on to Jackson, Parc positive trends in the amount of traffic renewal rates and number of leases executed have continued through the third quarter at the end of the third quarter Jackson park's occupancy was 99, 5%, reflecting yet another quarter of tremendous operating results from the asset.
On the development front lights, our west La and Dallas, Texas is on schedule and on budget with a second level of concrete pours on a podium parking garage occurred this week.
Also in Dallas, Texas, Landstar Midtown is on schedule and on budget with site were completed in the powertrain being erected by next week.
We expect limited if any variance in the overall budget based on how we're tracking.
Westwood's hard costs are 99% bought out by a general contractor, while Midtown is 90% bought out with our GMP contracts.
While we have elected to postpone the construction starts of some of our development pipeline. We have continued progressing through the different phases of design drawings permitting as our hope is to be fully prepared to capitalize our development pipeline based on our conviction at the appropriate time.
While the JV development front in Hercules, California Phase II called the Gram Bayfront is 64%.
And surely gateway, one peaches colas residential power 35 stores.
Stronger rental demand is now 80% leased with rents that are matching pro forma.
Lastly, before I hand, it over to Larry I want to acknowledge the land tower residential one national marketing and advertising award presented by multifamily Executive magazine, which is widely recognized as one of the most influential multifamily publications in the U S.
Congratulations are in order for the light tower operations team for a notable achievement led by CEO , Emily Watson and prop president of property management, calling Brian .
<unk> is yet another mark on a path to maintaining our best in class operating platform.
With that I will pass along the compensation pillar.
Thank you Felipe and good morning, everyone.
As Tom mentioned, we are excited to report our results this quarter, which are affecting our simplified portfolio strategy and alignment to higher crop.
Growth is clear from our year to date results. Our same property net operating income on a cash basis, which grew 16, 6% compared with the first nine months of 2021.
In addition to our careful capital allocation initiatives.
Portfolio produced strong third quarter results with total same property net operating income on a cash basis, increasing by 11, 5% compared with the same quarter last year.
Our residential division led the way with a 36, 5% increase primarily driven by an increase in occupancy at Jackson Park in New York.
Excluding Jackson Pollock, Lance how is growth in U S dollars.
11, 2% for the quarter.
Felipe has already discussed Nantel residential continues to see significant demand for our sunbelt residential property, leading to substantial substantial rent increases on new leases and renewals.
Same property NOI on a cash basis from office properties increased five 2% compared to Q3 2021.
On the early due to a $2 3 million lease termination fee exclude.
Excluding the lease termination fee same property NOI growth was 0.6%.
Our office properties located in strong urban center with a weighted average lease term of seven seven year and leased to strong credit worthy tenants.
Only five 3% of our total office square footage is expiring between now and the end of 2023.
14000 square feet expiring during the remainder of 2022 and 349000 square feet expiring in 2023.
Retail same property net operating income on a cash basis increased by four 2% compared to Q3 2021, primarily driven by the strengthening of the U S. Dollar.
Industrial same property NOI on a cash basis increased by six 9% compared to Q3 2021, driven by increased occupancy and contractual rental escalations.
For Q3, 2022, <unk> was 32 cents per units and <unk> was $25.05 per unit.
Excluding the lease termination fees of $2 3 million <unk>.
<unk> would have been $29.04 per unit and <unk> would have been 24 seven cents per units.
Based on our distributions of $13 10.
$13 seven per unit for the quarter.
Our payout ratio was a very healthy 53, 7%.
Based on our announced distribution increase to <unk> 60 per annum set to begin in 2023.
Our <unk> payout ratio for the quarter would have been 50% if the distribution increase had already been in effect and the <unk> payout ratio would have been 59%.
I'd like to mention that during the quarter, we received $85 7 million U S dollar as a repayment of a mortgage receivable.
As a result interest income in Q3 decreased by $650000 from Q2, 2022, and we are expecting a further decrease of $1 1 million in Q4.
Debt to total assets at quarter end was 43, 6% with total liquidity of $712 million.
Our unencumbered asset pool continues to grow and is currently $5 billion up from $4 6 billion at Q2.
Notwithstanding our fair value adjustments, which resulted in our real estate assets decreasing by $307 million.
Net asset value per unit grew from $22 14 at June 32022 to.
To $22 58 at September 32022, primarily due to the strengthening of the US dollar and the purchase and cancellation of $22 9 million units under our normal course issuer bid yesterday.
In summary, we are very pleased with our Q3 results.
High quality portfolio of properties are well positioned to produce strong operating results going forward and with that I'd like to turn the call back to sleep.
Thank you Eric in closing I want to thank our investors for their time patience and feedback we have spent a lot of time with the investment community communicating our strategy and plan and listening to investor feedback.
Despite the persistent volatility in the markets. Our strategy is resonating and investors are positive on our plan our execution to date and the direction in which we're heading.
Recognizing that there is still significant import of work ahead of US we are well on our way to creating a simplified growth oriented company that will surface significant value for our shareholders.
We'd now be pleased to answer any questions from call participants operator, please open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Do you have a question. Please press the star followed by the number one on your Touchtone phone. If you would like to withdraw your question. Please press the star followed by the two.
If you are using a speaker phone please lift the handset before.
Pressing any keys.
One moment. Please for your first question.
Your first question comes from Sam <unk>.
Any from TD Securities. Please go ahead.
Thank you and good morning, everyone.
Congratulations on a good quarter in the distribution bump.
Maybe just to clarify the background to the distribution increase and particularly the special actually was.
Was that driven by the transaction activity in 2022, specifically or is this something from a tax perspective, the REIT will be facing pressure on in future years.
Good morning, Sam.
The special distribution was a result of the capital dispositions that we've done during the year.
And the results they are having to distribute it to shareholders.
The increase for next year was more result of our operating results to date, and our low payout ratio, which we're targeting of around 50%, 50% on <unk> basis.
Okay. Good that's good and maybe another one for you Larry just on the debt refinancing activity today, and what you see for the remainder of 'twenty two and into next year.
What sort of coupons are you seeing in the marketplace between commercial property and apartments as.
As we go forward over the next several quarters.
So for commercial properties, we've seen pumping spreads.
And between $1 90 to 220 bps over a five year.
Mortgage renewal. So those are kind of would give you guidelines of what we currently can finance that.
On the apartments, we haven't had one come up for a while I don't really know on apartments in the U S. Fleets do you have any sure. If we did depending on LTV would be somewhere in the ballpark of 150 to 200 basis points above.
Whichever index was ultimately used.
And does the REIT have any capacity to source debt on your land tower assets over the next year or so or is most of the refinancing going to be happening at the corporate or commercial property level.
I think it has its capacity whether it has its willingness I think we're going to be judicious and seeking the best cost of capital.
But we certainly have the capacity to do so in the U S.
Okay.
Last one for me I was wondering if you can just comment on transaction activity in the marketplace supporting.
The change in valuations that you put through in the third quarter.
Generally and specifically on the industrial and residential side.
All I can see them.
On the multifamily the problem that we're having with everyone, having including our U S. Peers is the lack of visibility in transactions and so obviously the treasury has increased.
As of late decreased substantially but still is elevated.
I think it's anyone's guess.
Safe to say that cap rates have certainly expanded we thought it would be.
Prudent and conservative to expand the cap rate that we used for a fair market value of that.
Frankly.
Every one of US is in price discovery mode.
As it stands right there unless you have to sell or you have to buy you are not transacting, which makes visibility tremendously difficult.
Is that generally are specific to the apartment side of the business.
No that comment was for the U S multifamily, but I would suggest it's probably fair to say that.
It's a comment that is fair for just about any asset class right now.
Okay. Thank you I'll turn it back.
Your next question comes from Matt <unk> from National Bank Financial. Please go ahead.
Hey, guys.
A few for Larry to start with regards to the Calvert and development properties leases don't commence until later this year, but can you can you tell us is there any income in the current results.
And presumably the capitalize interest has come off.
Good morning, Matt Yes.
For the properties that we moved into income producing properties that really came in at the end of the quarter. So there was no income no NOI.
<unk> associated with them in the quarter and the capitalization of interest has peaked in the quarter.
The team pretty sharp interest capitalized and desktop for Q3.
Okay, No that's fair enough and then.
On the Montreal transaction.
With regards to that lease termination in four years is that a property that you would see potentially developing yourself or is that something that you will ultimately get go through the process look at the city and their master plan.
Then sell it.
That termination comes to fruition or maybe sometime in advance.
While wilco.
Maybe I'm speaking out of panel turn it over to Tom offers that I think will go through the process, which will take quite a number of years first.
We will get the rezoning and go through that process now.
With regard to 2026th full bell leads that property.
So we've got quite a way off to decide.
I think Matt the important part of that transaction as it provides us additional flexibility and optionality at some point in the future and so at the time when we obtained zoning, we'll make a risk assessment, depending on where we stand with the capital market standard where the potential for redevelopment is and make a decision and then more specifically that there was not really the accurate answers the accurate answers it's in zone.
<unk> it will be completed by the end of 2020 floor, it's going to be resolved for 850, townhouses and $1 1 million square feet of high rise six to eight stories. The question is are we going to be building it and that we probably will not but we don't have to decide that.
<unk> zone.
The combination of the lease termination and the value that we're expecting on the rezoning using <unk>.
Very conservative value of $25, a square foot will achieve a higher value in the asset is worth prior to doing that transaction and that's why that transaction was done.
Okay fair enough and presumably you can sell it before and the $70 million termination income in 2026 would accrue to the buyer.
At the time of the cancellation.
No no I wouldn't say that I wouldn't say, presumably it let's say.
Okay.
And then wood.
With regards to the removal of <unk>.
Bayside in Tampa.
And then maybe a broader comment with regards to your appetite to continue to develop U S. Multifamily in the current environment can you give us a sense as to why.
By that specific asset was removed and then.
Just broader sense on the prospects for continuing the development.
For U S sunbelt multifamily assets.
Yes, there is a kind of two part answer the first answer is frankly.
Don't have tremendous visibility as to what 2023 has in store for us and so out of an abundance of precaution. We found it best to pause based side and get a better read on where the market is more frankly, where the financing markets are where cap rates are and more importantly, where the development.
Delta would be between the development yield and a stabilized product with it and so we're still very bullish on the property as a matter of fact, we're very bullish on our entire pipeline.
Again.
111, less exercise some caution.
In the environment in which we find ourselves.
The other frankly.
The reason why we are positive we found and we.
Firmly believe that there is no more compelling investment then buy your own shares and at this point in time moving forward, we've been if not the most active the second most but I think we're the most active and CIB participant in Canada in the REIT space.
And so for us it really comes down to ultimately an allocation of capital.
Sorry, Matt.
Yes go ahead, that's perfect I guess, just as a follow up.
I would presume you guys are not the only ones potentially putting new development on pause or reassessing the market.
Can you give us a sense as to how that may play out with regards to the fundamentals.
For your existing assets a few years, though if development doesn't go ahead in the broader market.
It's a great. It's a great question.
This marks my 30 call it <unk> reach and I would tell you that I have never been this bullish on our space, namely because of think supplies about to fall off a cliff not only us, but the publicly traded REIT. The private cinema gives a rather the private developers the U S merchant developers.
Everyone has.
Stopped.
Any developments or generally speaking any developments that have not been ongoing and so the 23 deliveries in 'twenty four deliveries are somewhat because it takes two and a half years to kind of get going but I would submit that in the second half of 24% to 25%. This persistent remains we're going to see the U S market, specifically the U S multifamily market.
Which is already under supplied being down much more dramatically under supplied which leads us to believe that we are in for another healthy runaway of increase in rental growth.
Okay, no that makes sense and last one for me I guess, it's maybe.
For you as well as <unk>.
Larry but on Jackson Parc.
I didn't parse the exact numbers, but I'm just looking at the equity accounted figures. It looks like there is a sequential increase in rent but costs are up is there still some of that kind of higher transaction expense.
In this quarter with regards to NOI from Jackson parks. So should we expect kind of Q4 to get back to prior peak levels or maybe a bit higher from an NOI standpoint.
Yes, because of the large turnover in Q3.
A lot of turnover at the property and launched renewals. So there was higher commissions.
Yes.
Incentives for leasing so yes, we are expecting I'm expecting Q4 to be higher than Q3 months in terms of NOI standpoint, and certainly from a year over year basis, 23 should prove to be a we're healthier or significantly healthier NOI year than 2022.
Okay.
Just for additional context, the property is no longer offering any marketing incentives to tenants.
No renova inducements or concessions, which were a significant expense in 2022 as we are returning in the property.
Okay. So Q4 onwards, it's kind of back to a normal.
Normal asset from from a sequential standpoint year over year, it'll still be year over year, I think it actually be back to normal as well.
Right.
Okay fair enough. Thanks, Ed.
Your next question comes from Jenny miles from BMO capital markets. Please go ahead.
Thank you good morning.
I think earlier in the year, you talked about development spend of about $200 million for 2023, or so wondering if you could provide an update on what the 2020.
Could provide an update on that outlook and maybe venture.
Estimates for 2024 as well.
Yes.
Good morning, Jamie.
That 250 million that we had indicated in the past has decreased as we've put on hold.
Hi.
I believe we have in our disclosure I was expecting the balance could be and I believe the balance of 2023 is about 117 million U S. Saar Jenny you said 2024, but the mid 'twenty three.
Well I'd love to hear it.
<unk> thousand three and and.
It looks like what would be great too.
So I can give you on 23, reflecting a $117 million spent on our U S developments for 2000.
How much were not sure yet by 'twenty four is going to hold but that is what we're expecting for 2000 and I think it would be too premature to.
To give a figure for 24 at this point.
So based on the commentary.
Directionally, perhaps a little bit less in 'twenty three might be a.
I appreciate I'll look at this point.
I have a journey you have industrial buildings since we have two under construction we.
We have another property and massage, which we may or may not commence in 'twenty, three but you're really looking at your numbers is therefore, the commitments that we've made that can take us in 'twenty three and what you are speculating on where spec cling on is what are the new commitments that we can't answer at this point in time. So we can only asked answered that contractually we have the two industrial.
<unk>, we have the two residential and we probably have more than likely the Mississauga industrials going forward beyond that we can't give you any numbers any commitments because it's too far into the future. We will see what the world is at that point in time, where our stock is trading what the best use of our funds are.
Okay, that's fair.
On the industrial leasing that you're doing particularly on the metals al can you comment on what kind of annual rent steps youre achieving in the current market conditions.
Right now the.
Rents rental rates of $17 50 to $19 a square foot.
We're trying to achieve 4% have achieved 4% on one and the other was somewhere between three and four on an annual basis.
These are 10 year deals.
These are all 10 year deals.
Okay, great that's great to hear.
Turning to dispositions I'm just wondering if you could comment on what youre seeing in the marketplace in terms of transaction volume than it had been.
So slowing down, but maybe you can give us some more color on what asset classes, what markets Youre seeing activity in.
And then what Youre expecting for the next let's say 12 to 24 months on the disposition volume.
So we're on a specific to H&R as far as disposition goes we're still.
Tempting to do too.
Stick to our plan.
Sadly trading out of office and retail.
It really depends on the market strength and at this point in time the market is very weak all of the office.
Deals that are happening are structured deals with <unk>.
Prices are all over the map and a lot of the deals are not happening in the deals that are on the market right now there. It's been an awful lot dropped so going into 2022, we have no visibility as to as to the strength of the market is going to get better or not in the office glass industrial has weakened as well there are far less industrial trades happening we don't.
Clients have any dispositions in the industrial and the industrial.
And retail again has weakened but not to the same extent as office retail for the most part has weakened the rights are not acquiring the pension funds insurance companies are not acquiring retail and office and industrials are I think are more specific to whether it's value added hot but the core industrials are.
Also struggling to achieve the pricing to achieve around a year ago. So it's kind of sloppy out there lots going to be predicated on where interest rates lie.
Because right now the interest rates stay at the current level, let's call it 6% and Canada, even hiring United States, it's underwater as far as where cap rates are so not a great a lot of visibility of what the real pricing is going to look like next year again predicated on if we're going to enter a recession and where interest rates are on a.
Yes, Jenny if I may if I can answer the question differently I would just say we absolutely remain committed to the plan what will change due to the volatility and where we find ourselves in the capital markets is the sequencing and the dispositions may be a little bit choppy than we anticipated.
However, there is absolutely no wavering away from.
From the plan.
It's just the sequencing may change as a result of that.
Okay Youre kind of answered my next question, so you're committed to the plan.
Is it fair to say that you would.
Have more wiggle room on timing and push out some of the dispositions.
Later on in your five year plan birthdays.
Compromising on pricing is that a fair comment.
Yes, I think when we put the plan that we set five years it could take less certainly won't take more what we wanted to.
Upon everyone Who's on this call as we were a large REIT, we're in unprecedented times and we want to be mindful of the unit holder value nothing is for sale. We're not pressed the sale were committed to simplifying this reason, but not at any cost and so I believe our unit holders want us to be careful and mindful of their investment but also to.
Be opportunistic when the opportunity presents itself, but I think I speak for total every night when I say right now I don't think the opportunities presenting itself, but were very attentive to anything and everything and we hope to have some news.
On upcoming dispositions at some point in the future.
Okay, great. Thank you very much I'll turn it back.
Ladies and gentlemen, as a reminder, do you have a question. Please press the star followed by the one.
Our next question comes from Jeremy Chen from RBC capital markets. Please go ahead.
Thanks, Good morning.
For Mary just on the debt refinancing.
You have a debenture coming due in 2023 entities.
How are you thinking about.
Got it.
The paper.
Good morning, Jimmy Yes, you are right to have a debenture of $250 million coming due in 2023.
We actually have talks with our bankers.
Bankers to give us term loans, so the unsecured term loans.
To replace that dimension.
Interest rates will be around.
All in around <unk>, 5%, but that's still subject to fluctuations going forward between now and when we close.
Okay got it and then the interest income comment you made a $1 1 million for the quarter declined not annualized decline rate from Q3.
Sorry, I couldnt cannot be used.
You said that you said in Q4, the interest income will decline by $1 1 million.
Yes, I did.
That is correct. It will decline further by $1 one for the quarter and look at the orders okay.
Okay.
And then just lastly on land tower. So maybe two questions. There just what is what is the lost to these look like currently.
And then in light of your comment about the cost of debt.
As well as.
Your bullishness on the development pipeline still can how are you thinking about the.
Development hurdle rate today for you to push through.
On mortgage.
More developments here.
I think I.
Hi, Jamie.
Ill answer the second part of your question first I think the hurdle rate on development.
It kind of ties into my earlier comment which is.
We as an industry have a lack of visibility of stabilized cap rates. It becomes very difficult to answer the question on hurdle rates for development yields my bullishness stems on the fact that we have bought what I believe to be a plus sites at below market pricing, which allows us to sit on this pipeline for a few years kudos to our team in Dallas.
For those acquisitions.
But in terms of what yields we would have to.
Achieve for us to be.
Developing those assets certainly I don't have the visibility nor do I think anyone has currently which is probably why theres been.
And almost complete the resting of all development activity.
That hasnt begun.
As an industry as you're asking for the loss to lease of the earn in.
Our our earn in a similar to our U S peers in the ballpark of 5% to 7%.
Anticipate as it relates to us we're in we're in the ballpark.
Okay, Thanks, and sorry, just one more on the industrial Canadian industrial portfolio.
I think the in place rents it's about $8.
And I think I heard.
You're doing these deals and the.
High teens.
Would be fair to say that the $8.
The market ran equivalent would be in the mid to high teens.
And since as a generalization of what what's obviously specific to each individual asset.
Okay.
Blended basis, where would you put the market rent.
For the portfolio.
Oh.
That's.
You're asking the question is those across Canada intra provincial with different markets.
Lets me more specific once our assets are located in Toronto, Ontario, GTA Toronto. There you are talking rents as high as $19 50, but let's say for the older older properties 15 to Max of 19 Thats. The range you are seeing healthy steady, 3% to 4% annual growth.
In Vancouver, BC, youre going to see even higher numbers, but thats, but we don't have a lot of product there and Calgary Youre, probably going to see I would say is where we see 19 over here they probably see 15 or we see <unk>, probably seen 11, so probably four to $5 difference.
<unk>.
Alberta marketing East Eastern Canada, and you have a whole bunch of older product assets, it's really all over the map hard to give you an answer on a national basis, but really specific to where your properties are since ours are so heavily weighted to Ontario, we're going to see a higher level of rental rates. Then you will see what the average across Canada suffice it to say Jamie that now.
Youre seeing why we're so confident they run out of and excited about our in CIB activity and why we think that where we're trading now is a significant discount to where we think the property values are.
Right.
Okay. Thank you.
Okay.
Your next question comes from Sam Damiani from TD Securities. Please go ahead.
Thank you just one additional follow up on the on the industrial development program. The REIT has been quite successful quickly.
Quickly.
Buildings leasing them at higher rents and hurting attractive development yield clipping sizable gains.
Going forward, how do you look at the pipeline on balance sheet for land that you could continue to develop in that regard are you happy with it or do you see the need to to add with the opportunity to see add more land to the balance sheet and is a good time to do that today.
That's a very good question because the real answer is we have we are adjusting now in the industrial world for the recession forwards for the higher interest rates. The land values are coming up have come off and will continue to come off of 2023 and rental rates. If you look across the national average, including the United States and expectation is that rental rates will start easing.
Out there as well, especially with the big users such as Amazon not only ceasing to absorb more space, but actually getting back more space into the market.
Not a good time to buy land at this point in time I think your let's call. It $3 $5 million, an acre is probably going to trend down a bit I think that pension funds are loaded up with land <unk> balance sheet will allow us to buy the land, but the buying land at today's market value probably is not the right thing to do so in 2023 same as residential.
So I think we basically build out what we have and we take a pause to see towards to re analyze where we will be going forward with further commitments I wouldn't buy a land today.
For the 2020 for lunch.
Okay, that's helpful and sorry, how much how much more <unk>.
Could you could you.
We commenced construction on your existing Lance, it's just bits and pieces on the except for the Mayfield piece, which we haven't made a commitment to whether we're going to be selling it to the to the province, or not which is a 100 acres. We have just bits and pieces here. There is nothing of any huge consequence around half a million square feet.
Mississauga property that.
Second to launch later on in 2023.
Okay. Thank you.
Okay.
Presenters there are no further questions at this time. Please proceed.
Thank you everyone for joining us today, we look forward to continuing our updates or to update you would rather on our progress over the upcoming quarters. Thank you and goodbye.
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Okay.