Q4 2022 Allied Properties Real Estate Investment Trust Earnings Call
Good morning, and welcome to the Allied properties fourth quarter and year end 2022 financial results conference call.
All participants are in a listen only mode. After the speaker's presentation, we will conduct a question and answer session.
Ask a question you will need to press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Michael Emery Chief Executive Officer. Thank you. Please go ahead Mr. Emery.
Thank you operator, and I'm delighted to be starting this conference call on time. Unlike the last conference call. So good morning, everyone and welcome to our timely conference call. Tom Cecilia. It's you are here with me to discuss allied's results for.
The fourth quarter and year ended December 31, 2022.
Anthony our incoming CFO is also with us today.
We may in the course of this conference call will make forward looking statements about future events or future performance.
These statements by their nature are subject to risks and uncertainties that may cause actual events or results to differ materially including those risks described under the heading risks and uncertainties in our most recently filed annual information form.
And in our most recent quarterly report.
Material assumptions that underpin any forward looking statements. We make include those assumptions described under forward looking disclaimer in our most recent quarterly report.
Allied's operating performance in 2022 was strong.
Our <unk> per unit was up 4% from the prior year.
Underpinning our 11th consecutive annual distribution increase.
And providing a takeoff point for our 2023 outlook.
Low to mid single digit growth in same asset NOI.
Oh per unit and ASF Boe per unit.
Cecilia will summarize our financial results.
Tom will follow with an overview of leasing and operations team.
<unk> will provide a development update.
And I'll finish with our current thinking about allied's future.
So now over to Cecilia.
Good morning, I'll highlight key operating metrics, our financial position and progress on ESG, our operating metrics remain healthy.
Our workspace portfolio, we had increasing average in place net rent per occupied square foot of $23.10 up from Q3, 2022 and up 5% from $21.98 a year ago. We also continued to see strong rent growth on renewing space.
Miss in the quarter, which was six 1% on an ending just starting basis and 15, 6% on an average to average basis.
This seemingly contradicting data around leasing activity that we mentioned last quarter materialized more positively than could've been expected Tom will provide details on that.
We're pleased with our financial position, we allocated $264 million of capital in the quarter to revenue enhancing activity and development completions, which is what we'll continue focusing on for the foreseeable future.
Assuming we're successful in selling the U D. C portfolio, we will allocate the majority of the proceeds to pay off debt pushing our debt metrics back within our targeted ranges, we do not intend to allocate any capital to discretionary activities, including acquisitions in the coming year.
Onto ESG, we're committed to the continuous advancement of our ESG program in 2023. This year, we're continuing to evaluate our possible pathways to net zero carbon and are in the process of finalizing an internal shadow price of carbon we're also implementing a new pre.
<unk> to review the environmental performance of our portfolio on a quarterly basis to more proactively address potential performance deficiency issues of our assets.
We're advancing our physical climate risk assessment framework to include sites specific climate risks and adoption opportunities progressively expanding this evaluation across our portfolio.
We'll continue to disclose our climate related risks and opportunities against the task force on climate related financial disclosures or T. C. F. D recommendation in our ESG report, which is expected to be released by July of this year well.
We will also continue to work to support allied's users and achieving our shared ESG goals, we recognize the tremendous potential of our community to advance ESG by learning and working in partnership.
Across the country, we're focused on serving our users and completing upgrade and development work to propel operating capabilities, our team and our operating platform has never been stronger with that I'll pass the call to Tom.
Thank you Cecilia.
We had a good Q4.
Leasing 520000 square feet of space and totaling $1 9 million square feet of space leased in our rental portfolio in 2022.
We leased another 210000 square feet over the course of the year and our properties under development.
Average rents achieved in the quarter on renewals were $15, 6% higher than average rents in the expiring term and 13, 2% higher over 2022.
Average in place rents in the rental portfolio have increased every quarter for 13 consecutive quarters.
Activity is good in each of our markets, particularly in units under 10000 square feet, which have been built out.
We have created separate leasing strategies for every building in the portfolio and we have just the right brokerage team for each of our buildings listed and are very motivated in house leasing team heading into 2023.
I will now provide an update on leasing activity.
And our 2023 leasing priorities for our major markets, Montreal, Toronto, Calgary and Vancouver.
I will also provide an update on some retail leasing initiatives.
Montreal continues to be our most active market with the team completing 442 transactions in Q4.
Our focus in 2023, we'll be leasing 111, Robert Breza.
One Robert Breza, as well as plus car Vijay we.
We expect to finalize a 60000 square foot deal at plus scar Vijay in the next few days getting the euro off to a good start.
In Toronto, we completed 32 transactions totaling 214000 square feet over the quarter upgrade.
Upgrade work at 180 fives for Dana and $4 68, King is nearing completion.
And now underway at 135 Liberty leasing. These three properties are a high priority for the Toronto team this year planning.
Planning work to reposition 175, Bloor and 110 young is progressing nicely.
In Calgary the team has done an excellent job, meaning maintaining an 88, 2% leased area.
Which relative to the market is solid.
Our focus for this year will be to lease the low heat building and to complete the leasing of Telus Sky.
As for Vancouver, where 94% leased with only 62000 square feet available for lease comprised entirely of small units. Our focus for 2023, we'll be leasing the landing Sunpower and 10 40 Hamilton.
Turning to retail I thought it would be useful to highlight some recent initiatives.
Amenities can make the difference in an office users decision to lease space and we've always made an effort to provide unique offerings in the retail portion of our portfolio.
In Montreal, we are finalizing a deal with a global food and beverage company, we're trying something different.
26000 square feet of space at CCM M will be transformed into multiple independent chef operated food specialty units together with an event venue utilizing a large portion of the common area of the building.
This will become a great amenity to our building and the neighborhood, but it will also become a destination for tourists and downtown residents.
<unk> opening of spring 2025.
Also our Montreal, we're planning the re merchandising of the retail operating at 1001, Robert Breza to include food fitness and upgrade service uses.
Projected completion fall 2025.
In Toronto, we continue to upgrade the amenity offerings on King West and King Toronto retail will be a huge addition to the neighborhood. We are negotiating a 40000 square foot food and beverage restaurant entertainment and event venues a unique offering in Canada and ensure to become an anchor for this neighborhood.
The balance of the 120000 square feet of retail space will be leased to upscale retail restaurant and service amenities.
Interest in this project not surprisingly is very high.
Projected opening as Q2 2025.
While these users are not imminent the leasing and planning will all happen. This year, we will keep you apprised of our progress.
Now I'll turn the call over to Hugh Thanks.
Thanks, Tom this quarter, we have been able to make progress on both current construction projects as well as our planning for future progress.
I'll begin by giving you an overview of our major projects and then we'll follow that with an update on work we have done in our development pipeline.
Beginning in Montreal, the team has been able to advance the rehabilitation work at both 35 75, San law and the RCA building and the transformation of a 1001 Robert Bourassa.
With the close on 700, saying you bear part of the Garden Vijay complex, we have begun the landlord's work component of the work.
This work will further distinguish the space available in the building you hope to have the work complete in Q2 of this year.
In Toronto, we have made progress on all of our active construction projects, we were able to achieve a significant milestone at both our Adelaide and Duncan and expansion of curious U S projects in.
In December we achieved the first phase of occupancy for the office tower at Abilene Duncan.
The second phase should occur in Q2 of this year and the phased residential occupancies will occur in late 2023 in early 2024.
Accuracy Wes just subsequent to year end report the last floor.
<unk> and masonry work has begun to inflows to building the.
The team is gaining momentum on the project and should be able to turn the space over to our tenant in Q3 of this year.
We continue to make progress at the well and King Toronto at King Toronto, We have poured up to the fourth floor with progress on site. We are beginning to have discussions with potential tenants for some of the commercial spaces as Tim and Tom just alluded to.
In Vancouver, our joint venture partner West Bank continues to advance work at main Ali we're climbing out of the hole and anticipate reaching grade early in Q2 and topping off by the end of the year.
This quarter. The team has been focused on execution of active development and redevelopment projects and work on our vacant suite upgrade program.
Overall, the team has made solid progress across all of our development activity.
Team has taken advantage of the work done in previous quarters on our new development approvals to focus advancing work on the vacant suite upgrades redevelopment projects and major development projects I will now turn the call back to Michael.
Thanks you.
Allied has proven from its inception to be resilient and we have every reason to be confident that this will continue.
In the past three years, we deepened strengthened and integrated the numerous and diverse members of the allied team across the country.
We continued the renewal and diversification of our board of trustees.
We implemented a longstanding succession plan for senior leaders.
We made significant and measurable strides in improving our ESG practices.
And we took decisive steps toward reaffirming our vision and maintaining our commitment to the balance sheet.
These elements of resilience signal, our strategic and tactical direction going forward.
Stablish, a solid foundation for our future.
The last element of Brazilians that I mentioned involves the sale of our U D C portfolio.
I believe we've done a good job of explaining our reasons for making this decision.
The comprehensive sale process is being launched today and will extend over three to four months.
We will not be able to comment further on the process until it's complete.
But we'll obviously advise you.
As soon as the outcome is known.
Now many of you on the call know that I can easily be enticed into talking too much about allied's affairs.
What I would ask you in this instance, with respect to our D. C portfolio is that you will not ask me or any other member.
The Allied team about the progress were making until we offer a concrete.
Result to report on I would really appreciate that and I will not be enticed into speaking too much in this circumstance.
I hope this has been a useful and comprehensive update for you. We'd now be pleased to answer any questions you may have.
As a reminder to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again.
Our first question comes from Jonathan <unk> from TD Securities. Please go ahead. Your line is open.
Thanks, Good morning, and congrats Cecilia.
Tom.
John Thank you.
First question just on the the leasing done in the quarter.
And you guys haven't given this data for a long time, but the average term to maturity of three to five years on new leases and two five years on renewals.
The lowest since you guys started reporting that it seems a little low to me can you maybe give a little bit of color on that.
It's probably some short term deals done to facilitate longer term leasing.
We've done a lot of shorter term deals in Montreal.
Portfolio to facilitate longer terms.
Longer planning at <unk> at our CA.
At $35 75, I think that Theres, a number of buildings, where we've done these shorter term deals to plan for our future.
Okay. So it's not a function of tenants kind of just sort of kicking any speed.
<unk> decisions down the down the road in a softer and a softer market.
It is not.
Okay.
And then secondly, just on on the well.
A couple of questions here first maybe can you give us an update on on retail leasing.
We will leave it to Rio can to do that Jonathan.
In its upcoming conference call, which which I am sure they will do.
Good progress continues to be made.
But rio can is leading that effort.
Very pleased with the progress, but I think it's best that they report to the market on that specifically, okay figured as much but I thought I'd try.
And then and.
And then just on the Shopify.
Sublease space.
How do you see that playing out and do you think thats something that sort of comes to fruition.
Some point in 2023.
We have long experience dealing with good customers.
Who need or want for various reasons to sublease their space.
And we've worked collaboratively and successfully with almost all of our customers in that regard.
We consider shopify to be a valued long term customer of allied.
And we will work with Shopify.
In its effort to sublease that space at the well.
It's highly probable that any one sub leasing for a very long term will want direct privity of contract with the owner and again, we have in many instances.
<unk> been able to accommodate our users in that regard and we fully expect to be able to do that here, although we've got to address it.
On a case by case basis, but we are committed to work with shopify in achieving.
Its goals.
They have a real advantage in my opinion.
Because of the very low lease rate.
They have the benefit of which was established in 2018 as part of our lead tenancy.
That I think is going to assist them in their efforts greatly.
And as I say, we will collaborate fully.
In an effort to help them get out from under this particular obligation.
I don't want to I don't want to predict Jonathan whether it will get done this year next year or the year after.
Because theres nothing but downside for me in making that prediction.
Fortunately for US there is no economic implications.
Two the timing, but I.
If I had to guess I.
Think what shopify has to offer.
Is very desirable.
To a significant number of potential users and.
I would expect them to be successful, but I.
I, certainly don't want to predict a timeframe, especially in this uncertain environment.
Okay do you think having that space out there on the sublease market impacts any of your other leasing initiatives in the same area.
Not in the least.
Okay and then just lastly, you had them you have shop fit out is one 1% of total revenue does that are you know counting the well.
As part of that or.
Yes, they are paying rent there so that would be part of the stack.
Okay. Thanks, I'll turn it back.
Our next question comes from Scott <unk> from CIBC. Please go ahead. Your line is open.
Thanks, very much and congratulations Cynthia.
As well as <unk>.
Michael for.
<unk>.
His new role.
Yeah.
Sure.
No it will be on the strategic side.
But anyway, just turning back to the to the well you've done.
Good job on talking about the shop, but I was just wondering if.
Shopify and torstar are there any other users putting space back to the market.
Okay.
The only possibility there Scott to my knowledge would be.
That the tech tenants.
<unk> Index exchange I think they may be.
But again, it's kind of soft and it's kind of vague at the moment.
And quadrangle have a very small piece.
Bill.
Okay, Thanks, so including that other space available.
Do you have a current figure for the percentage of the portfolio that is available for sublease.
I think we reported on Q4 I don't know if we'd have a current ones I would estimate it.
On closer to 5% we had $3 three.
No you know what it'd probably be about 4% because our share of the space at the well is only 50% Scott.
Closer to four than closer to three.
Right Okay. Thanks.
That's helpful and so it's not really that significant.
And just on the.
The debt refinancing.
I mean, I suppose it really depends on what happens with the UTC so but.
In the absence of.
That manav being monetize within the calendar year.
Your availability on the unsecured facility is kind of running a bit low do you expect to refinance.
Our battery or are there other plans for refinancing.
Including the $200 million choice note.
We certainly will if we have to Scott, but we don't anticipate having to do that at all.
That's great I'll turn it back thank you.
Our next question comes from Lorne Kalmar from Deutsche Bank. Please go ahead. Your line is open.
Thanks, Good morning, and congrats everyone and I know <unk> got left off salt authentic congratulations over there.
Thank you maybe just maybe just sticking with the debt side of things are you guys able to prepay any unsecured debentures.
In the coming year.
There's a lot we can prepay without penalty and we will I don't think any of it.
As unsecured debenture financing, yes, it will be more the unsecured term loans that we would have our ion.
Okay, Great. That's very helpful. And then on 700, saying you bear I think it was.
24% leased and I believe that sort of where it was when you guys made the announcement, what's sort of the outlook for getting that asset leased up.
The outlook is extremely positive we are.
Days away from 60000 square feet being completed and there is a.
40000 square foot tenant that we're negotiating with as well so that building.
We're hoping to get leased up.
Before halfway through the year.
Hello, Okay great.
And then maybe just flipping over I guess sticking with leasing.
What kind of like what sort of groups are you seeing demand from right now.
It's a mix we have tech tenants we have academic.
Institutions, we have gaming we have media advertising, we have professional services, it's a real mix.
Okay. So there's not really one one segment of the market that's been stronger than others for you guys right now.
No I would say not.
And it all and then malls within what we consider to be knowledge based organizations that that is that is our core constituency with respect to.
Using urban workspace and continues to be.
Of course, and then maybe just last one from me I know there is no expectation undertake any significant acquisition activity I'm assuming that.
It doesn't include 400, West Georgia correct.
Yes, I mean that that is simply completing.
A process that was started a long time ago and in all likelihood will represent a net return of capital to us as opposed to a net outflow.
So yes. It does technically include 400, west, Georgia, but as we say, we don't consider that a discretionary acquisition, we committed to that.
Four years ago or so.
But but rest assured.
We have no intention.
Of making material.
Acquisitions in 2023, and indeed, I think it's highly unlikely we'll make any of consequence at all.
We're not even seeing the small infill acquisitions right now that we saw in such.
Magnitude during the pandemic in which we took advantage of but.
No discretionary acquisitions are off the table for 2023.
That was one way to make it.
Yes, I think you've made yourself extremely clear.
Okay. Thanks, Brian So I'll turn it back.
Okay.
Our next question comes from Mario <unk> from Scotiabank. Please go ahead. Your line is open.
Alright, Thank you and good morning, everyone.
I wanted to.
Initially focus on the occupancy.
It was flat quarter over quarter, but if we buckled UDC requests.
30% to 40 basis points quarter over quarter in Q4.
So based on kind of some of the leasing discussions Tom that you referenced in terms of diversity.
Do you internally feel comfortable labeling Q3, 'twenty to occupancy of the trough in the cycle.
Yeah.
Hope so.
We've gotten lots on the goal.
Do have some nonrenewals that we're facing we know about them.
We are aggressively addressing them.
But I hope that Q3 2022 was the bottom.
Okay, great, Okay and then.
Can you comment on that 60000 square foot deal Garvey.
Material is that just to clarify is that net new 60000 square feet.
Yes. It is.
Okay.
And then when I look at the guidance.
For 'twenty, three what what's kind of embedded occupancy range in that low to mid single digit.
<unk> guidance.
Mario we are not going there again.
I did that in 2022, and I I lived to regret it.
But we're not going there again, we stand by our forecast of low to mid single digit growth.
But we're not going to extract and isolate.
Other metrics that are embedded in that forecast.
Because the metrics will change over the course of the year, some will get better some will get worse.
But we are confident of our ability to deliver within those parameters.
And I would add one more thing.
I think the market's obsession with occupancy and our vacancy depending on how you want to express it.
Misses the point radically.
But I do understand it it is a concrete number.
To which people can attach their view.
But it's.
It's only minimally reflective of the underlying reality of our business.
Having said that.
Most importantly, we are just not prepared to establish a target for occupancy gain in 2023.
We stand firmly behind.
Our outlook with respect to same asset NOI <unk> <unk> per unit and that peso per unit.
Got it okay, just out of curiosity, just coming back to the comment Michael If you think that or do you feel that the markets will.
It really obsessing with with occupancy metrics, what do you think the market is underappreciated in terms of <unk>.
<unk> key performance metrics today.
Well it really is the market doesn't understand and cant frankly appreciate.
The reality of operating.
A portfolio like ours, it can only be understood.
At the ground level it can only be understood in relation to the demand that can only be understood in the context of our continuously upgrading our asset base and frankly, it can only be understood in the context of us being in a preferred or advantageous position.
Relative to whatever is occurring in the office market as you know I have a very clear view that nothing sexy.
Secular has changed with respect to the use of urban workspace others disagree.
That's perfectly fine.
But thinking that a number like they can see.
Expressed.
<unk>.
Tells a story in and of itself is just wrong.
I noticed for example that people talk about vacancy across the country.
That's.
Almost comical.
Because.
It it doesn't segment the different markets within the urban environments.
And just isn't in and of itself indicative.
You really have to look at downtown West in Toronto downtown East in Toronto.
<unk> got to look at mile and Montreal, you've got to look at old Montreal.
So on and so on and so forth those are numbers that tell more.
And more accurately reflect what's actually happening in our portfolio because we're dominant in all of those.
Submarkets, if you will so generalized vacancy numbers I mean, they can't be ignored they are indicative of something.
But they certainly are nowhere near sufficient understanding what's going on in our portfolio and frankly in fairness to the market and I'm not trying to be critical I'm really not but you've got to live and breathe. This on a daily basis to understand what's happening.
And that's our job and we're doing it to the best of our ability and based on that.
We have continued confidence in the viability of the kind of office space, we provide to the market and we know.
From the experience, we're dealing with on a daily basis.
Our buildings not only.
Our viable going forward, but indeed may be more differentiated and more preferred going forward.
Even than they were pre pandemic and they very definitely were pre pandemic.
So.
Again.
I mean, no criticism or or <unk>.
You have no offense, but a vacancy stat is.
As.
And the empty number out of context.
Okay no. Thanks, Michael for the ultimate answer.
Just two more really quick ones on my end.
Maybe one for <unk>.
Just a clarification on the shopify.
Just within the guidance in terms of expected capitalized interest and G&A for 2003.
There a range that you can provide for each or is that something that.
Maybe take offline.
With some additional details.
The interest will be impacted by the timing of the UGC sale. So you cant totally comment on that.
And on.
On G&A.
There would be a modest increase in G&A from 2022 to 2023.
Okay. So a modest increase in the G&A as opposed to a modest increase in the capitalized G&A.
Alright.
Correct, yes.
Okay, and then just lastly on the Shopify.
Michael I appreciate your comments in terms of how that may evolve.
In the past with.
Sublet space I believe our I'd mentioned that kind of any excess and kind of achieved rent in relation to.
The contractual rent with good worldwide is.
Is that the case here.
Something you can comment on.
It is but we don't expect to profit in that way in this instance, we think the smart move for Shopify, which we fully support is to offer to the market the very favorable.
Net rental rate they have the benefit of and that will increase our optimize their ability to get out from under this obligation.
So while we have in the past profited from <unk>.
Rent escalation that sooner than.
Expected through sub leasing, we don't expect that to happen here.
And were happy not to profit.
Here.
We want to help shopify get it space out as.
As efficiently as possible and that means basically offering the face rate the very favorable face rate to sub users or sub tenants. If you will or tenants that ultimately go into contract with us and we're not going to try and extract anything additional from those tenants were going to be attentive to their <unk>.
If they have a great covenant.
We'll enter into.
Contract with them, which will be helpful to shopify.
We don't expect to profit on.
On the sublease of the Shopify space.
Great Okay.
Okay that makes sense.
Congratulations everyone on more robustly.
Yes.
Thanks, Thank you.
Our next question comes from Matt <unk> from National Bank Financial. Please go ahead. Your line is open.
Hey, guys.
Just quickly on the guidance.
Does did I hear correctly I think in your answer to Mario's questions. You indicated that it may contemplate the sale of the UTC portfolio in that.
Figure or are you assuming that you hold the UTC portfolio for the entire time.
Yes.
No. It does contemplate closing on on that transaction in 2023 that doesn't affect the same master NOI guidance because that doesn't.
EDC, but it would impact the <unk> per unit.
Because of UDC, there was a potential transitory vacancy I guess in that portfolio.
Would have impacted things, but will it impact things, while you hold it and not thereafter, obviously.
It's a question of how you deploy the proceeds ultimately, but all of that is figured into your guidance at this point for the year for <unk>.
Yes, correct.
Fair enough and then on the interest income this quarter the rate that at least based on what we impute. It has gone up are those is that because there's a variable component to that or was there something newer additional in terms of interest income associated with those.
Loan receivables.
Yes, there was one loan receivable in particular that the maturity was extended and based on the terms of the agreement.
It was at a different rate than the original term.
Okay and that would persist I guess through the balance of 2023.
Correct Okay.
Uh huh.
On 700 thing he there for.
For the 60040 thousand square feet that are in negotiations are those similar sort of biopharma type tenancies or is there a broader appeal that youre getting for that for that new property.
Okay.
One of them is.
Tech tenant the.
The other is more related to health care.
Okay.
That's interesting and then on $35 75.
We've discussed the asset.
In the past there was a known vacancy and it was a project is slated to do some work out do you have a tenant at this point.
To take the new space or is this going to be sort of a spec repositioning.
We don't have a new tenant for that building yet.
And is the idea.
Is it fully is it going to be fully vacated or could you find a single tenant for the whole thing or is the idea to define.
To fight and some smaller.
The dual tenants to take some of the space Thats being repositioned.
It will be multi tenanted.
Some of this space is coming back to us already in some of the space will be coming back while we do the work, but there will be tenants that will live through some of the upgrade.
Okay perfect. Thanks, guys.
Our next question comes from Gaurav Mathur from IAA capital markets. Please go ahead. Your line is open.
Thank you and good morning, everyone. A couple of quick questions on my end.
Firstly, when you're looking at the sales cycle and leasing tours have you seen any change in sentiment from the last quarter as far as new potential tenants.
Actually the tours have been pretty consistent.
Averaging around 250 tours a quarter.
And it's been pretty consistent and that seems to be taking place now and in 2023 as well.
There was a little bit of a lull at Christmas in the first week or two of January but tour activity is pretty good.
Okay fantastic.
And then just lastly last quarter you also have this cost, adding approximately $82 million to the EBITDA line over the next few years once that allotment in the pipeline are completed now.
Now that the deal.
The proceeds from the proposed UDC sale potentially shorten that timeline.
No because its really based on on the completion of the developments that it wasn't dependent on us accessing capital so no that timing wouldn't be impacted.
Okay.
Thank you for the color I'll turn it back to the operator.
As a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Our next question comes from <unk> <unk> from RBC capital markets. Please go ahead. Your line is open.
Thanks, Good morning, just maybe on the back of the last question. There on tours I think last quarter, you mentioned that leasing traction or sorry, the lease commitments were taking longer just curious.
Has that changed at all or are you seeing those timeframe is kind of consistent or has it narrowed a bit.
It does seem that traffic has picked up across markets in terms of actual foot traffic and returned to return to the office.
I think I'd say, its probably accelerated a little bit into 2023 only because.
As it happened there was a few deals that actually just got pushed into 2023.
Coming closer to year end, Okay, let's deal with this in January February .
So I think I think the cycle has been a little bit compressed early this year.
<unk>.
Yeah.
But it's still taking longer than we want to get deals done we always want them to be done.
At top speed.
The trick for US is to have what's going so that we get our share.
Got it just maybe coming back to the the same property NOI guidance does.
Does the guidance incorporate any shifts at all in terms of the properties.
Net income producing two developments or anything of that nature or is this.
Apples to apples this portfolio that you've closed the year with is really what is in the guidance outlook.
So the the guidance on same asset NOI is on the rental portfolio, only and even with things moving in and out of the rental portfolio between the development portfolio.
Because it wouldn't be a full year it wouldn't impact the same asset NOI.
From a rental perspective, so I think it's pretty apples to apples.
Okay got it and then just.
Yes, you.
Comment.
Just to clarify that the same property NOI guidance does not include the data centers in there.
Correct that's right.
Got it.
And then just in terms of the incentives and allowances can you just talk about what youre seeing there and how maybe it's maybe it's still a bit early in the year, but I'm just curious how your what your thoughts are in terms of how those will trend over the course of the next 12 months.
Okay.
So how are inducements changing leasehold in allowance.
Yeah.
Yes, I don't think theyre going to be much different than they were last year.
They are up a touch but rents are also up.
Yes.
And the odds are more or less the same.
Hi.
Okay got it.
And then just lastly, I don't know if this is going to fall into the spectrum of the no no questions but.
In terms of the data center sale.
Sales or the planned sale of the portfolio are there any tax implications that.
Sale could trigger.
Sorry.
Thanks.
Well.
We certainly have done our homework with respect to special distributions.
And we are very conversant with structuring opportunities that exist in that regard we can't make a definitive comments about it until we know exactly what kind of deal were going to do with whom under what circumstances.
But we feel very confident of our ability to manage that implication.
Selling the UTC portfolio in a way that will be at least neutral.
To our unit holders <unk>.
Including ourselves all of whom are unitholders and very interested in that implication.
Yeah.
Got it and then just last one from me again on the data centers.
Messaging has been pretty clear that the.
Proceeds will be directed towards reducing debt.
I guess is it fair to say that.
Unit buybacks are at the lower end of the perhaps probable uses at this stage.
I don't want to curtail our flexibility.
With respect to that option.
Option at all.
We used the words may elect very deliberately and I can imagine.
A series of circumstances, where we might be more inclined to elect to do that and I can imagine a set of circumstances, where we might be less inclined.
But I can't predict now what the circumstances will be.
When we expect to close this transaction.
So I wouldn't take it off the table and I wouldnt.
Cedar is a certainty it really will be something management and the board will decide upon depending on the state of circumstances. Once the outcome of the process is known to us.
Got it. Thank you for clarifying I will turn it back.
We have no further questions in queue I would like to turn the conference over to Michael Emery for closing remarks.
Thank you operator, and thanks to each of you for participating in our conference call I Hope. This has been helpful and we look forward to keeping you apprised of our progress on all fronts at appropriate points in time talk to you soon.
Yes.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
[music].
Okay.