Q4 2022 Minto Apartment Real Estate Investment Trust Earnings Call
Good morning, My name is Michelle and I will be your conference coordinator today.
At this time I would like to welcome everyone to the mental apartment real estate investment Trust 2022 fourth quarter financial results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the Star then the number two.
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.
Please refer to the cautionary statements on forward looking information in the news release and MD&A dated March eight 2023 for more information.
During the call management will also reference certain non-GAAP financial 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 GAAP.
Please see the rights MD&A for additional information regarding non-GAAP financial measures, including reconciliations to the nearest GAAP measures.
Thank you.
Mr Waters, you may begin your conference.
Thank you Michelle and good morning, everyone.
Michael water, Chief Executive officer of mutual apartments.
I'm joined on the call today by Jonathan Lee, Our President and Chief Operating Officer, Edward <unk>, Our Chief Financial Officer.
I'll begin the call by providing an overview of our fourth quarter and full year financial results and other corporate developments and he will review our financial results in detail and John will discuss our operating performance and growth initiatives.
Conclude with our business outlook and then would you. Please take your question.
For the full year, our operating performance improved significantly and Canadian urban rental market strength we.
Generated strong same property NOI growth of seven 5%.
Reflecting solid growth in rental rates and increased occupancy.
Average monthly rent increased by four 6% for the same property portfolio and revenue grew eight 3%.
Our <unk> increased by 12, 3% compared to the prior year and <unk> per unit increased by three 4%.
Moving on to other highlights from the year.
As you are likely aware, we increased our annual cash distribution by three 2% to <unk> 49 per unit.
That is a result of increasing our distributions in each of the five years since the REIT was created.
Were added to the S&P FX Canadian dividend aristocrats index in January 2023.
We acquired two premium downtown properties Nagger West in Toronto in the international and calibrated consistent with the REIT strategy to own high quality assets in urban locations.
And EOG continues to be an important strategic priority and we're very proud of the banking results outlined in our 2021 ESG report, which was published in October 2022.
Finally, we made significant advances on our Cedar leadership succession plan in January John Lee was appointed to be our next CEO will assume the role effective April three in addition, any food was selected as the next CFO and took over the role from few of them already in January These are critical steps in our recent internalization.
Plan as John and Andy are both full time employees at the REIT. The REIT now has a similar management structure to many of the grocery chain sponsors and retail sponsored reached at the time of their IPO.
John and Andy have proven to be outstanding leaders and I'm confident that we have the right people in place to Shepherd the reach into its next stage of growth.
I will now review our fourth quarter operating performance on slide four it was another strong quarter in what was typically a slower time of year.
Average monthly rent for the same property portfolio increased four 6% year over year and average occupancy increased by 210 basis points to 97, 1% year end occupancy was even higher topping 97, 6%.
We achieved a gain to lease in the quarter of 16, 6%, which was our highest quarterly gains since the onset of the pandemic and the second highest in the REIT history.
Strong double digit rate growth in all of our markets.
Our annualized gain to reach potential increased to 13, 6%.
NOI for the same property portfolio improved by seven 2% compared to Q4 of last year.
Same property NOI margin dropped by 30 basis points, reflecting cost pressures.
Total portfolio annualized turnover was 21, 5% for the quarter, reflecting typical seasonal decline in strong market fundamentals.
We believe turnover will continue to moderate due to a shortage of affordable housing alternatives.
Moving to slide five where I want to cover a few other highlights.
Firstly, we collaborated with four other publicly traded apartment Reits to launch the website for affordable dossier in November we thought it was important to dispel myths about how we operate and spreads back then policy ideas about how we can help address the housing supply and affordability prices in Canada.
NOI growth was strong in the fourth quarter <unk> and <unk> per unit declined primarily as a result.
Increased floating interest rates.
Finally, just two days ago on March 7th we completed the sale of high level place one.
One of our three properties in Edmonton the sale was completed as part of our capital recycling strategy.
The sale price was approximately $10 million in line with our Q4 2022 fair value for the asset.
I'd now like to invite <unk> to discuss our fourth quarter financial and operating performance in greater detail.
I am pleased to have the opportunity to speak with all of you on earnings call for the first half.
Turning to slide six please.
Same property portfolio revenue increased by seven 6% year over year, reflecting higher occupancy higher average rates and reduced amortization of promotions.
Same property portfolio NOI grew by seven 2% from Q4 last year, a margin of 61, 2%.
A quick win per unit in Q4, 2022 with $19 six.
A reduction of eight 7% in <unk>.
EBITDA per BOE per unit declined 10, 1% to 17 per unit, reflecting higher finance costs spurred by the impact of rising interest rates on variable rate mortgages and increased draws in interest rates on our credit facilities, partially offset by higher NOI.
Average monthly rent in Q4, 2022 was one $738 for the same property portfolio, representing an increase of four 6%.
Average occupancy was 97, 1% for the total portfolio.
210 basis points from 95% in Q4 last year.
I'll now turn it over to John to review, our operating performance and growth initiatives John .
Thank you Eddie.
Moving to slide seven the upper chart shows that gain to lease an average monthly rent trended very positively over the last several quarters as the Canadian urban rental market has steadily recovered from the negative impact of dependent.
On the lower chart, we breakout rents by geography.
In addition, our rental product continues to be an affordable alternative to homeownership.
Moving to slide eight as Michael noted, we generated double digit gains will be in all of our markets.
The average rent on new leases increased 16, 6% to $1981 per suite that was the second largest quarterly gain in their history.
Furthermore, as a result of increasing rents the embedded gain to lease potential of our portfolio increased to 13, 6%.
On slide nine strong rental demand is driving higher occupancy for the REIT.
Contrary to seasonal trends move ins have exceeded move outs in six of the last seven quarters.
On slide 10 average monthly rent for the furnished suites has improved materially with only a slight decline in occupancy relative to last year as travel has returned to normal levels, particularly in the film industry and business Executive States.
On slide 11 property operating costs in the fourth quarter increased due in part to higher labor costs, feeling staffing vacancies and higher repair and maintenance cost.
Higher natural gas costs were a key contributor to increased operating expenses as rates increased 47% year over year with consumption in line with the prior year. So far in 2023 gas prices have dropped significantly.
We are working hard to minimize operating costs and we are pleased to see that inflationary pressures showed signs of slowing by the end of the year.
On slide 12, we renovated and leased a total of 41 suites in the fourth quarter, which generated an ROI of 11, 3% on our proportionate share.
We repositioned 259 suites in 2022, and expect repositioned between 80, and 120 suite in 2023, reflecting lower anticipated turnover.
On slide 13 in 2022, we made initial advances on the University Heights convertible development loan to Minto properties, Inc. Supporting an exciting development of a large mixed use residential property and the greater Victoria area.
Overall, we have eight projects in our pipeline five of which are under construction and one of which is stabilized.
Five of our investments consist of convertible development loans with exclusive purchase options upon stabilization and three our direct investments in properties.
These projects have the potential to increase the reach growth suite count by 2302 suites by 2029.
On slide 14, we will provide a status update on two of our development.
Beginning with different banking Ottawa it is highly unlikely the exercises its purchase option in the near future and therefore NPI in the REIT are currently in discussions to extend it.
Mondale square has the potential to be the first foray into the strong greater Vancouver market. It was topped off in December as stabilization is expected to occur in the first quarter of 2024.
Now I will turn it back over to Andy to review, our debt financing and liquidity.
Thanks, Sean turning to slide 16.
A core element to our strategy is to maintain a conservative leverage ratio and a balanced debt maturity schedule.
The chart shows our debt maturities are nicely staggered through 2020, and the debt coming due this year provides opportunities to maintain a balanced maturity schedule.
As we discussed earlier in the call our <unk> in the fourth quarter were impacted by higher interest rates on our variable rate debt.
At the end of 2022, we were carrying $265 5 million of variable rate debt with a weighted average interest rate of 687%.
We expect to refinance $108 4 million of variable rate mortgages with fixed rate CNBC insured mortgages for an anchor was and the international in early Q2.
By closing these loans, our proportion of fixed rate debt, which increased 86% with the CMC portion rising to 73%.
In addition, we plan to further mitigate our exposure to variable rate debt through proceeds from upward debt refinancing and other deleveraging strategies.
Finally, I want to note that total liquidity was approximately $115 million at the end of December 2022, and debt to gross book value was 46%.
I will now turn it over to Michael.
Thanks Eddie.
I'll conclude with our business outlook on slide seven team before we take your questions. Our performance in 2022 reflected a strong recovery in Canadian urban rental market conditions. Following the negative impact of COVID-19.
Looking ahead, we believe that we're positioned to further strong performance as the fundamentals underpinning this sector remain very robust.
These include a further deterioration in housing affordability due to rising interest rates continued growth in the immigration inelastic housing supply, it's not surprising that an increasing proportion of Canadians are opting to rent a home instead of only one in this environment.
To achieve long term success, we remain focused on five key strategies.
Growing NOI and.
The strategic allocation of capital, which may include reducing variable rate debt and or buying back units.
Generating capital to internal sources to fund our growth pipeline the execution of our intensification development pipeline and prudent balance sheet and liquidity management.
We believe that executing on our value will position us for solid growth in <unk> per unit.
Finally, this is the last time I'll be speaking with you all on an earnings call. It's been a pleasure and a privilege to serve as the CEO of mental apartment REIT since its formation in IPO.
I am very confident that through our succession planning, we have the right team in place to lead the REIT to further success and.
And drive strong returns for unitholders.
That concludes our presentation. This morning, John at Eni would now be pleased to answer your questions.
Yes.
Ladies and gentlemen, we will now begin the question and answer session.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
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And if you are using a speaker phone please lift the handset before pressing net's one moment. Please for your first question.
Your first question will come from Xyrem Srinivas of core Mark Securities. Please go ahead.
Thank you operator, Michael it's been a pleasure working with you and all the very best for the next steps for you John Eddie Let me forward to working with you guys as well.
So James I think thank you for the additional disclosure in the quarter. This was really helpful. My first question is primarily on organic growth.
How do you see the Mcculloch with Green County, three and how should we be thinking about the progress been like Dortmund the sale.
Okay.
Yes, so Brian its John <unk>.
For the time.
Youre asking sort of overall growth for 2023 is that what I heard.
Yes, that's right.
Okay. So just at a high level I think our revenue growth, we expect to be consistent with what it has been recently so we are hopeful we can get high single digit growth in revenue.
We suspect revenue growth will outpace.
Our expense growth.
Not by a ton, but a little bit and we're optimistic that we'll get a little bit of a NOI margin improvement over the course of the year.
So John would you say that maybe.
In line with high single digit so high single digit NOI itself.
Correct.
Alright, Okay that makes sense.
Thank you. The next question is kind of tied to a couple of aspects I mean, thats essentially out of recycling.
And any data point about using there'll be an even great exposure for the <unk> panel actually executing back and could you comment on the recycling aspect of the program as well.
Yes, so we are.
Considering.
We are evaluating lots of other transactions that we can generate equity capital internally.
I think the high probability of that will likely be further asset sales.
And we will recycle the proceeds of those asset sales into <unk>.
Either higher growth assets or paying down our variable rate debt or buying back units.
And today with the high cost of our variable rate debt I think it makes a lot of sense for us to payback.
Financially attractive.
We're not going to provide guidance on which assets.
Going to look to sell or their locations, because we think that will best position us to maximize proceeds and maximize option tension and keep it confidential and we don't want to put an expectation out there in the market.
Just right now look the execution risk of selling these assets in this cycle in this market is.
Hi.
It's not it's not a slam dunk to sell some of the assets, we're looking to sell and we're cognizant of that and so we're going to we're going to look for attractive deals.
A bunch of different assets.
See when we come back with that we'll update the market once we have something to update the market.
Yes.
And Thats fair John Thanks, Bob.
On the refinancing once.
Once you see NFC any financing how do you see.
And those fleets coming in that.
You are asking.
What do we see in terms of the rate.
Yes, so yes.
Yes, sorry go ahead.
So you might see it is priced off of our CMP and we're looking at let's say a 10 year term.
Currently the pricing with Florida.
For the quarter to four 5%.
Alright, I actually thought that's not associated with Gan.
And I think my last question Jensen, Joseph don't know what I know that's been a good.
The slowdown in last couple of years now.
How do you see portfolio, Don or trending in 'twenty three.
Yes.
We ended the quarter in the low 20% 21, 5%, let's not forget that Q4 is a typically lower turnover.
Quarter, what we're seeing in January and February and March to date, I'd say again Q1 is also a slower turnover quarter.
Moderating even lower than that 21, 5%.
So that's what we're seeing it's really.
Really not surprising.
It's very.
It's different in different markets.
Obviously, Calgary is slightly higher than some of our affordable properties in Toronto are much much lower.
The good news is as we have between.
Between 15 and 20%.
Our portfolio is not subject to rent control.
That helps.
And.
But let's face it we think turnover is moderating.
Yes.
Hello, John I'll turn it back thank you.
Thanks.
Your next question comes from Jonathan Kellner at TD Cowen. Please go ahead.
Good morning.
Just to clarify first on the potential asset sales would you would you would assume youre also looking you'd be looking at partial sales showing an interest in properties.
Yes look I think.
It's probably it wouldn't surprise you that a lot of the assets were trying to sell or likely are older assets.
Combination of high rise low rise.
Finding institutional partners for those.
We could but I think plan a would be for us to sell those outright.
We were looking to partner on potentially some newer assets that were higher growth.
I think partnering with the JV partners would be easier to execute on those but I think thats also plant.
So for US plan, a would be likely to sell our older assets that are under rent control in certain markets, maybe even some of our low rise.
That would be planning.
Okay Fair enough and then just on the slowdown in expected suite repositioning.
Is that fully a function of lower turnover or some part of that.
Just that the market is strong enough that you can still get a very good rent uplift without with <unk>.
Going through the repositioning expense.
Yes, it's a good question, Jonathan and then I think the way we're thinking about it as a lot of it is driven by both the reduced turnover that we're expecting as well as the overall, though our lower vacancy in our portfolio.
It's just a less white space for us to do these renovations.
That's number one and two and then number three the opportunity cost of taking unit offline for three to four months has increased substantially with rental rates increasing in the market demand that we're seeing.
Our asset management team reviews every single unit, that's coming back to US a couple of months before once we get the notice and we're running the math on alright, well what does it look like if we simply put a new tenants in that market.
Our standard term that takes three days to for new paint et cetera versus taking it offline for three to four months, putting 50 grand into it and losing that opportunity costs of three months of market rent. So so we're doing that analysis on a suite by suite basis and are making a determination based on return based on that.
And so it kind of a combination of all three of those things.
Which is driving us down to 80 to 120.
Put into context, it is not a lot of dollars right like our repositioning program.
As a whole is less than $10 million for 2023.
Okay. That's helpful. And then lastly, just on the financing of $108 million.
On International and Niagara Street.
Since you bought those I am guessing the NOI has improved.
Nicely.
Do you think you can get more on the fixed rate debt. When you go and do that in some financing there.
Yes, so on.
Hi IRA.
The reality is we part of what explains the delays that we had to have 12 months of.
Stabilized performance for <unk> to look at and that clock didn't start until November 2021.
So we didn't submit until November 2022.
And by that time, yes, a lot of the rental rate improvement that we experienced was part of our submission.
And on the international we actually purposefully resubmitted in December of last year because of that exact reason.
The loan amount that we got or that we submitted in December .
$15 million higher than what we originally underwrote back when we purchased it.
Okay. So just to be clear, how much fixed rate debt or you're expecting to get it.
And the end of March beginning of April .
$109 million.
Okay. Thanks, I'll turn it back.
Your next question comes from Brad Sturges at Raymond James. Please go ahead.
Hi, good morning.
Just on the on the capital recycling.
Obviously.
Youre not giving guidance on that specifically, but just curious if you have a quantum or a dollar amount you think could be achievable in terms of asset sales. This year as you think about.
It's under review right now.
Yes, I don't think were going to be giving you a target Brad Unfortunately.
We have a number of assets that we've identified.
There are assets that we think are higher probability execution than others.
And it's just too big of a range and so.
I think you can kind of look at what our capital needs are over the course of the next two years.
Think about what's in the pipeline you can look at how much variable rate debt, we have left to pay down and as you can triangulate in terms of what our target.
From there.
Okay.
You would expect I guess at the very least the Abington assets remaining would go back on the market for sale at some point in the spring or summer perhaps.
Yes, I think that's right and I guess, we didn't we haven't addressed it specifically on this call. So we did sell a high level of our $10 billion. We were happy with that sale price. There are two remaining assets.
We are going to put the other two were going to take them off the market, but we are going to relaunch them at some point.
There is interest in the properties they are attractive buildings, but what we're observing is our.
Negotiating leverage is not optimal today as buyer pools remain relatively soon.
To be quite honest, we're just not happy with the pricing that we have today and the Edmonton market continues to improve week by week vacancy is getting better.
For smaller promotion usage now is euro.
<unk> remains a relatively affordable market compared to other markets. So for US there's no reason to sell at suboptimal pricing or what we think is sub optimal pricing today and we're in no rush to sell so we will relaunch it but we think theres more auction tension in the market.
Buyers will be more aggressive than what we're seeing today.
Okay.
Good.
<unk> Bank obviously.
Discuss there is the potential for an extension there on the purchase option what would that look like would that be another six month extension to the end of the year or would there be a different framework in mind.
Maybe I'll tackle that one.
I think what we're looking at is.
It's probably up further extension, perhaps as late as the end of the year.
I think that MPI speak Luke.
<unk> wants to support the REIT bonds to be constructive.
For the week and.
And given the unit pricing on capital.
Availability I think that we'd like to give it another six months. So that's our approach.
Postal that John and I are working on right now.
To take it to MPI and get approval to use that to extend it further.
It's a process it's been very collaborative.
The safety MPI wanted.
I want to be constructive and support the region.
We'll undertake that process and hopefully have some more information on that or.
For the market in that in the <unk>.
Very near future.
I would also add that from the REIT perspective.
We're trying we're going to remain disciplined.
Going to buy it anytime soon.
Because the cost of debt would be higher than the cap rate.
And I think FERC for us that doesn't really work.
MPI can't hold it forever.
To be quite honest, Michael there's a lot of data, but they can sell it immediately for a higher price than <unk>.
Tomorrow.
Yes.
We very much appreciate that they're working with us and.
And we hope to you, but we're going to remain disciplined.
We're kicking the can down the road.
Yes.
So for the for the option to make more sense of the REIT effectively it sounds like you would have to have good line of sight on capital recycling to the point, where you can pay down debt, but also it makes more sense to exercise that option.
Yeah, I mean, I wouldn't disagree with anything you said, it's not the only thing we're looking at but.
That is a framework.
Consistent with the framework that we were thinking.
Okay, Great I'll turn it back.
Thanks, Brad.
Okay.
Your next question comes from Jamie Shen at RBC capital markets. Please go ahead.
Thanks.
Follow up on the Niagara and international.
At least financing.
That you submitted to CME C. In November December of 'twenty, two is it normal for it to take four to five months.
Sam you see to get through the underwriting process or are they becoming a little bit more stringent and just kind of curious as to.
We're there.
If theres anything to read from the delay in getting approvals.
Yeah I know.
Thanks, Jamie it's John here so.
The plain Vanilla agency financing and will take anywhere from.
Three to four months.
Both of these assets are not unfortunately plain vanilla and Theyre actually in the bucket of cm HD that is the new construction budget.
Internationally, the full repositioning our conversion from a hotel so it doesn't it's not plain vanilla and thereby.
The Niagara Wes.
Loan and an extremely large law and it's big enough that it actually is there a threshold that it needs to go all the way up to their credit Committee.
And there's just lots of eyeballs on it and it's a complicated time for anyone to underwrite an asset with rent growth has gone up very very quickly in a very short period of time and so there's just lots of back and forth with respect to that asset in particular.
We expect to turn both of these out.
At the very early part of Q2.
Okay, but you feel fairly confident that that will given given the two factors you mentioned that you'd be able to get the the amount and.
The $108 million isn't it.
We're as confident as we can see with respect to dealing with.
So okay.
And then just just a follow up.
Follow up on this system bank.
So was that asset.
Put out in the market at all you seem very confident that you can sell it at a good price today higher than what you would sell it to them.
Curious as to whether you've had soft discussions on.
On potential say on that so I guess from the NPI perspective.
No MPI not not had any discussions on that.
We obviously get a lot of interest.
Yes.
A lot of the assets that we hold in certain areas.
Strong appetite I'll say from large institutional investors in multi brands in Canada.
So there is.
All of them sort of a regular dialogue going on.
Actual prospect.
We've not had any discussions about chat selling and bank <unk> trust and shift in banking.
As.
We can engineer it to sell that asset into the REIT.
So again, that's part of the ongoing dialogue that Johnny and I are happy about that asset and see if we can find a way to do it in a way that works for unit holders.
Very mindful of the REIT capital position its cost of capital.
And in finding ways to make that work so.
But the asset continues to you.
Performed very well, it's 100% leased.
Is that not a rent controlled assets.
<unk>.
We are very very tight submarket.
And internet and attractive.
Active property for prospective tenants.
We continue to.
See that that asset.
<unk> performed very well and I think that's one of the reasons. We're excited if we can find a way to get it into the REIT ultimately.
But that type of sort of how we've been looking at it.
Okay. Thank you.
Your next question comes from Matt <unk> at National Bank. Please go ahead.
Hey, guys.
Just wondering if your thought process around development both through the loan extension process, but also on book.
Has changed and how you think about long dated projects and the concept of where interest rates are I mean, you've got some time to think about why park village, but thats, a pretty sizable development opportunity at some point in the future.
But also you're in process on a few other projects just interested in how you see those projects.
Progressing.
Okay.
Yeah. Thanks, Thanks, Matt.
What we're seeing in at least that are at our properties.
Yes.
The increase in development costs charges, and timeline extension, but all of that stuff, which is well known to the market.
Generally are being offset.
Completely if not a little bit more than the increase.
For the increase of rental rate.
And so our kind of overall project yields have been very consistent.
Fight what folks are seeing in terms of elevated costs.
And project schedules so.
That's what we're seeing for those projects now you appointed a high part villages.
It is it is large it is a long dated.
We're constantly looking at our best uses of capital.
Should things change materially between now and then we always reassess we are a partner there that owns more than us.
For that for that property is to want to take that into consideration in terms of any of our our decisions obviously so.
But again, we think development over the long term it is very attractive.
If we are financing it with 7% interest rate and then yes, we don't love that.
We're going to look for other ways to fund a lot of our development as we're talking about.
Okay.
Makes sense.
And I understand that.
Shrinking portion of the overall portfolio, but can you give us a sense as to I.
I mean, it's been volatile through the pandemic, how the furnished suites.
Portfolio is trending in Q1 I think occupants.
Occupancy was a little bit.
Weaker than what we were expecting in Q4, but rents rents were strong so I know that's.
There is an optimization aspect to it but just the auto I mean, where is occupancy trending in Q1.
I think for us.
It might not talk to Q1, but if you think about where we think a reasonable run rate and it's for this very small portion of our portfolio.
As you know call it 80% occupancy.
And it's we're using it as a bit of a yield management tool.
It is volatile as like short duration of these leases but.
To be quite Frank I would love to be emphasized this in terms of how much we've talked about it relative to <unk>.
Proportionate NOI that it represents.
I guess, we put it out there so it's tough to get off that treadmill.
After they are announced.
And certainly in the early days of the crisis. It was an outsized contributor to the year over year variance SP NOI.
But then of course, if the market improves.
Either way, but as we continue to shrink that portfolio down I think we're down to 188 or something sweet math to work.
Where we've signaled to the market, we would be last year.
Or even 2021, our long term plan to get into that range.
I think to John's point.
<unk>. This is something that we don't want to overemphasize that.
I think that 80% target is kind of where where we sort of look at it and really emphasize the yield management benefits of it because they are short duration leases.
It's a strong contributor in that.
Steady or rising market, where we're in right now.
That makes sense and honestly, it's just a I only ask Q1 because of the last two years, it's shocking, but we were in some level of lockdown impacted occupancy.
But.
I guess.
On the flip side as you look at capital recycling and I know you don't want to speak to specific assets, but would properties with this component in them.
Is it something that you'd look to potentially get off of because presumably.
This type of shorter duration product, probably does well in the environment. We're in.
I mean, I would not put out there that we're going to be selling things do in yorkville.
So real estate is irreplaceable and we will never get that back.
And a similar comment about 185 in Ottawa.
It's right downtown as we have another building and that's right across the street, we have a nice scale there.
And we.
We own the office building that is attached to or we.
<unk> the office building.
Attached to so probably not getting rid of that one either.
Okay fair enough thanks, guys.
Ladies and gentlemen, once again, if you would like to ask a question. Please press star one at this time.
Your next question will come from Gaurav Mehta at IAA capital markets. Please go ahead.
Thank you and good morning, everyone.
Given the execution risk, which you've mentioned, India and a slight increase in cap rates.
I think there is more price discovery, that's yet to hopkinton.
I'll leave the later innings of a modulation really taking some time.
No I don't think that.
We're saying that there's risk in terms of the pricing.
We're gonna be able to get pricing that we want it's just.
With the buyer pools with a read out of the market and other folks currently out of the market because cost of funding is just too high.
We'd rather have four or five people clamoring to buy something versus dealing on a one on one negotiation with one party.
I think it's as simple as that.
Okay, Great and just last question on my end.
On the refinancing Trump can you discuss how you're thinking about staggering.
Now going forward.
Sure a better year.
As already discussed the Niagara weapon.
International when it comes to our 2023 maturities.
Mortgages coming due this year, which gives us a good opportunity to look at the balance of our.
Our maturities either stabilized properties.
<unk> sure.
So we've already started that process too.
Earlier on the call I talked about pricing be spot.
Seem agency rates that are.
CIB plus spread that we would be looking at somewhere between about Florida quarter to four 5%.
Walking today as an example.
And Gaurav just to add to that I think as we look at our upcoming refinancings.
I don't think youre going to see us try to like plain funding business with short term debt to try to play reductions.
The interest rate environment, I think what we're going to prioritize his term and just cash flow certainty.
Because were already taken.
Taking a bet with the amount of variable rate debt that we have on our balance sheet now and I think that.
Actually represent potential.
Potential upside should interest rates come down from where they are today.
So I think if we can get a lock in what we have coming up in the short term with long term debt at fixed rate that's great.
To the extent that interest rates come down you know.
From here.
Hopefully a little bit of upside to our cash flow per unit.
We're looking at whether we can.
Refinance some of these obviously, we're still reviewing them.
The potential is to upsize.
Yes, we did.
Ploy that additional progress and I would just make sense to use that to pay down our floating rate debt, which is obviously carrying it.
Yes.
One 7%.
Correct.
Great. Thank you for the color John coming back to the operator.
Thank you.
Your next question comes from Mike Mercatus at BMO capital markets. Please go ahead.
Hello, everyone.
Couple of quick ones for me pardon.
Pardon me.
Just following up on the potential for upward.
Financing.
And I don't know if you said it or not but do you have like a rough range of the potential quantum capital you could pull out of that program.
Sure.
Say the approximate quantum yes.
Yes.
Yeah. So so were terming out terming out, but we're refinancing it's approximately $160 million.
The six properties.
It's still preliminary so.
Great thought one to value debt service cover debt service coverage.
Yes.
And this is just an estimate needs, we're engaging somewhere around a $50 to $60 million potential.
And then.
Yes.
Okay. That's helpful and certainly not going to hold it to a certain point understand things are moving around all the time so.
But that's that's helpful and just in terms of the cadence of the maturities as it is it relatively spread out over the year or is it front end or backend loaded.
The first ones will start occurring around April time frame and then it's fairly balanced throughout the rest of the year.
Okay.
That's helpful. Thank you.
Just with respect to potentially kicking the can down the road on the option would get them back I understand that there is a proposal being made to MTI.
With that discussion potentially contemplate giving up something in terms of maybe.
A lesser coupon or a lower discount on purchased in order to affect that.
No.
Not.
Not currently in the cards.
There'd be no concessions from the REIT.
Okay awesome.
Free expansion.
What we're talking about got it okay.
That's good to know thank you for that.
And then just last one for me.
Understand.
And buyer pools that are out there and the decision to sort of relaunch Edmonton down the road.
But maybe if you guys could just comment.
How the market with the buyer pool depth in Edmonton would compare to <unk>.
Calgary, Edmonton, Calgary Toronto Montreal.
That would be helpful and also put that in there.
Yeah I.
I mean I think.
I think the buyer pool in Edmonton, it's probably.
Shallower than all those other markets that you just mentioned.
I think that.
The buyers that are looking to.
Increased their exposure in Alberta are tending to look at Calgary and Edmonton, So I think that kind of shrink the book a little bit and.
Again, just the cost of financing is a challenge for everyone everywhere.
And so.
That's what we're seeing I don't think.
I think the buyer pools that we're seeing in other markets are slightly deeper but again.
With all the regions kind of on the sidelines.
That takes out a good chunk of the buyer pool.
The high quality sophisticated buyer pool right. So.
Got it.
That's good color I appreciate that.
I like I have one more.
Just with Montreal lagging on the on the occupancy front.
But realize you guys got some good momentum there.
Does that but is the vacancy there.
Is it specific to any one of the four properties that you own in the market or is it fairly broad based.
That's a good question and its actually shifted a little bit I think overall, it's a <unk>.
Market that.
It's still a net migration out of the province that we're experiencing I think new immigrants seem to be going to other cities and they have other alternatives, especially Calgary I think youre seeing a lot of that.
A very tight labor market. So it's hard to find skilled workers on a timely basis, but you know our portfolio continues to improve occupancy now above 94%.
And we don't mind carrying a little bit of vacancy coming into this.
Leasing season embedded rents in the market are double digits over 11% I would say, though to try to answer your question.
We're seeing there is slightly more.
You can see in 4300 right now that's typical for this time of the year as the very affluent market and a lot of the folks that would be potential renters are actually down south. So we're hope we hope that that comes back very soon.
We're seeing some nice.
Uptick in La Hill Park.
In fact, <unk> signed a number of leases in the last couple of weeks and that's a nice that's a repositioning asset as you know so I think that will help with our cash flow going forward.
<unk>.
And so that's in rock Hill, it's been kind of a nice steady increase.
For us and so we see a little bit of upside in the whole portfolio hopefully catching up from an occupancy perspective to the rest of our cities.
With the comments on the four to 300.
Perhaps Paul.
Or is it a different pitch.
No it's a little different.
Adding all of them very diverse set of tenants.
And we are experiencing quite a lot stronger occupancy at all right now.
Terrific, Thanks very much.
Thanks.
There are no further questions from the phone line. So I will turn the call back to Michael waters for any closing remarks.
Hello, Thank you very much everyone for your attendance on the call today, we appreciate your interests infill apartment REIT.
I look forward to chatting with you all again after we release, our Q1 results I will be listening intently not participating.
Ben.
<unk> worked with all of you and I really appreciate the time, we spent together over the last five years, so with that I will call. The end of this teleconference. Thank you very much.
Ladies and gentlemen, this does conclude the conference call for this morning.
We'd like to thank you all for participating and ask you to please disconnect your lines.
Yes.
[music].
Yes.
Okay.