Q2 2023 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 Minto apartment REIT 2023.
Second 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 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 August eight 2023 for more information.
During the call management will also reference certain non ifr S 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 I FRS.
See the MD&A for additional information regarding non I FRS financial measures, including reconciliations to the nearest I FRS measures.
Thank you Mr. Lee you May begin your conference.
Thank you operator, and good morning, everyone I'm, Jonathan Lee President and Chief Executive Officer at Minto apartment REIT I'm joined on the call by <unk>, Our CFO and Paul Barron, our SVP operations.
I will begin the call with an overview of some highlights from our second quarter, Eddie will review our financial results in detail and I will end with our development pipeline and business outlook. Then we will be pleased to take your questions.
We delivered strong operating performance in the second quarter supported by our high quality urban portfolio and strong demand for rental housing in all of our markets.
We successfully executed on our strategy to reduce our variable rate debt exposure from 26% to 11% of our debt stack a reduction of $165 9 million.
Importantly, the refinancing initiatives have helped us deliver positive <unk> and <unk> per unit growth for the first time in a number of quarters after adjusting for nonrecurring items.
It is also notable that the measures were implemented partway through the quarter and only had a partial impact on <unk> and <unk> per unit during Q2.
The full impact will be achieved beginning in Q3 onwards.
In addition, we continue to evaluate other opportunities that are accretive to <unk> per unit, including upward refinancing mortgages maturing in January 2024, and further capital recycling we.
We are committed to maximizing <unk> per unit performance and we will remain disciplined in our capital allocation decisions to achieve this goal.
Turning to slide four we refinanced seven mortgages during the quarter, including two variable rate mortgages and five fixed rate mortgages with new C. MHC insured fixed rate mortgages.
In total as a result of the seven refinancings, we realized an interest rate reduction of over 350 basis points on the two variable rate refinancings, our variable rate debt as a percentage of total debt declined from 26% to 11% and we generated $73 $8 million of incremental refinancing proceeds that we use.
To pay down the credit facility.
Subsequent to the end of the quarter, we upward refinanced maturing term debt generating incremental proceeds of $24 2 million, which we use to further repay the credit facility.
In addition, we are exploring upward refinancing of three properties with mortgages maturing in early 2024 that have potential to generate between 55 and $65 million of incremental proceeds that we expect to use to pay down the credit facility.
Moving to slide five given the current capital market conditions and interest rates, we remain disciplined as it relates to capital allocation decisions.
During the quarter, we made three important decisions that highlight this one we agreed to terminate the purchase option on the fifth third bank property too we waived on our right of first opportunity for three attractive development opportunities that were presented to the REIT by Minto properties.
And three together with our investment partner, we postponed the construction start of the high Park village and Densification the rationale for which is detailed on the slide.
I'll now invite any food to discuss our second quarter financial and operating performance in greater detail Eddie.
Thank you John turning to slide six.
Same property portfolio revenue was $36 7 million, an increase of nine 3% from Q2 last year, reflecting higher occupancy and higher average rates.
Same property portfolio, NOI increased 11, 8% year over year to $23 $1 million.
NOI margin increased by 140 basis points to 62, 8%.
The increase in NOI reflected the higher revenue, which outpaced higher operating expenses.
The <unk> and <unk> reflected nonrecurring items.
After adjusting for these normalized <unk> and <unk> per unit in the quarter increased by one 2% and one 1% to 21 <unk> and.
And 18, 6% respectively.
The normalized <unk> payout ratio in the quarter was 65, 9%.
Turning to slide seven this chart demonstrates the steady quarterly increases we've generated an average monthly rent as well as our very strong gain on lease performance in recent quarters.
You can see that gain on lease was temporarily impacted by the pandemic in 2020 at 2021.
But it has now been in the mid double digit range for four consecutive quarters.
Moving to slide eight we signed 495, new leases in the quarter. The average monthly rent on new leases increased 16, 2% to $2066 with significant double digit gain on lease realized in all markets.
The embedded gain to lease potential at quarter end increased to 16, 1% representing $22 1 million of annualized incremental revenue growth.
On slide nine we break down quarterly suite turnover and occupancy for the same property portfolio.
Turnover of 22% on an annualized basis in the second quarter with a sequential increase compared to the first quarter as Q2 is a busier leasing season.
But it is below historical norms as more tenants are choosing to stay in place due to tight rental market conditions.
Occupancy has been at least 97% for three straight quarters.
Moving to slide 10 operating expenses for the same property portfolio increased five 4% compared to Q2 last year.
Property operating costs increased due to higher salaries and wages as well as severance cost as we pursue efficiencies.
Higher electricity and water expenses reflect rate increases and increased consumption.
And finally natural gas expenses dropped significantly due to lower rates as well as lower consumption due to the warm spring weather.
On slide 11, we repositioned a total of 33 suites in the second quarter generating an ROI of nine 4%.
We expect to reposition 80 to 120 suites. This year a reduction from 259 last year due to reduced turnover and higher occupancy.
Turning to slide 12, you will find our key debt statistics the.
The maturity schedule of our term debt reflects our recent refinancings and remains balance.
As of June 32023, the weighted average term to maturity on our debt was $5 eight seven years with a weighted average interest rate of three 2% to 3%.
89% of debt was fixed rate and 76% with Siem HC ensured an increase from 74% and 61% respectively just last quarter.
Total liquidity was approximately $163 million at quarter end and debt to gross book value was 42, 2%.
I will now turn it back over to John .
Thanks, Eddie moving to slide 13, we have an overview of our development pipeline. We currently have two intensification projects under construction, one redevelopment and Densification and five convertible development loans or Cdls that include purchase options.
While we terminated the purchase option on <unk> bank. The other four remain in place.
We will remain disciplined with our capital allocation and evaluate each opportunity carefully in the context of the prevailing market conditions.
Stabilization of all the projects currently under construction is expected between 2024 and 2026.
Would add 1459 suites to our portfolio were 1020 at our proportionate share.
Youll find some updated information and photos of the projects in our pipeline over the next two slides.
Ill conclude with our business outlook on slide 16, before we take your questions.
Our operating results have been strong in recent quarters supported by very solid fundamentals in the Canadian urban rental market. We believe these fundamentals are poised to remain in place for the foreseeable future housing.
Housing affordability has become an increasingly serious issue due in part to rising interest rates.
Canada is expansive immigration policy and elastic supply of new housing that is not projected to keep up with demand.
We are not surprised to see an increased public willingness to rent in this environment and it is reflected in our strong rent growth and high occupancy.
Given these positive fundamentals and our high quality portfolio, we are highly focused on the following.
One maximizing SFO and <unk> per unit to strategic and highly disciplined allocation of capital three minimizing our revolver balance given the high current interest rate environment.
For exploring alternatives to fund our growth, while minimizing any dilution to cash flow per unit.
We are confident that these strategies will deliver strong returns for unitholders. Despite the external challenges our industry is facing from high interest rates and more constrained access to equity capital.
That concludes our presentation. This morning.
And I would now be pleased to answer any questions. You may have operator, please open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
You will hear a three tone prompt acknowledging your request.
Should you wish to remove yourself from the queue. Please press star two.
If youre using a speaker phone please lift the handset before pressing any keys.
One moment. Please for your first question.
The first question comes from Mike <unk> of BMO capital markets. Please go ahead.
Thank you operator, good morning, guys and.
Nice to see some appropriate unit growth finally coming through the system. So congrats on that.
Thanks, so much for the incremental disclosure on the on the ROFO.
You've waived.
In the past few quarters.
<unk>, maybe you could just give us some color as to whether or not these developments.
I've actually.
Progressed and if other capital partners were found.
If youre able to answer that.
Yeah, Hi, Michael.
Thanks for the question can you hear me okay.
Dan.
Okay great.
I'm here with Ed.
And Paul in any way.
John losses in Mexico as well.
So we're excited to be.
Here. So yeah, we're happy to give you some more detail on.
We have waived opportunities you know MTI has a tremendous partner.
Are okay with us disclosing.
More detail.
There are five towers that they have.
Sorry to five properties.
And.
Seven towers.
Comprising of about 1000 suites and Vancouver alone.
In Toronto, they've got three sites five towers in <unk>.
<unk> hundred suites.
In Toronto.
Yeah.
They have a mix of partners.
Property and Theyre going to go at it alone.
They're all in they're spending money at all of these.
The construction will probably start anywhere from Q3 of 2024 onwards actually one of them, maybe Q1 'twenty 'twenty four.
They have institutional partners on 1234.
Between four and five.
Yes.
Who are who are signed up.
Ready to go into them.
Okay. So for hopefully adults.
Actually at least.
Ownership come back into or at least where it'll be presented an opportunity hopefully in the future now they don't they don't have to duplicate.
We're hopeful avail.
The option for the region going forward at some point.
So so the seven opportunities it sounds like there might be a couple more I missed the number of properties in Toronto.
<unk>.
That might come through.
There might be offered.
Yes.
It's kind of there's an abundance of opportunities that NPI.
They've shown that these arent just tied up.
It made up and so so even in addition to these we know they're out there looking at others as well that are in various stages of.
The process and so.
We're pretty excited about at.
At least what they are doing well see if the REIT.
To take advantage of and it will be dependent on lots of things, including market conditions and thoughts of capital and access to capital.
Okay. Thanks for that and can you remind me. So I mean, you are not participating in the development or the government funding.
In any way so you don't have a.
It was the same structure as the existing CDL program you'd have a discount purchase option, but in the event.
When these are developed at Minto looks.
Monetize its equity stake in these properties does that ROFO still apply.
If it's wholly owned if it's wholly owned then we think yet if there is a partner.
We waived everything.
So.
But notwithstanding what you said I suspect that.
Joe will be pretty motivated to get what they can in terms of ownership.
And obviously there'd be no discounting Derek we don't want them any money.
<unk>.
But it is possible that even through the development process that.
Both parties decided.
Then starting another CEO CDL at market terms makes sense. If that's the case, then there'll likely be a discount associated with anything.
Great.
Okay.
Nice to see.
At least just given the environment to the environment, but nice to see that your partner was willing to work with you and postpone.
The planned intensification of high Park village I think it's less New York Mills is that the one that is still in redevelopment question that'd be the first part of the question and then the second part where it is there any thought to potentially postponing that one.
Yes.
On balance sheet developments that we have Leslie York Mills, Rich Grove, and Hi, Barton village, but both of which drove an 11 New York those are already under development. We basically moved the parking garage is on both of them out of the way. So that we can dig a hole and start building. So we're actually at that stage now for both Rich Grove and Leslie Yorkville was a big hole in the ground.
If you drive by you can see and I think we're gonna start shoring.
Relatively soon on both of them.
So that was we can't stop.
Have a partner on <unk>.
We own 100% of average growth.
Park village is the one that we can and we do have control over it and.
If I just can't comment on that Michael.
We're disappointed and it's because our country needs more housing right and it needs. It now and then.
A tremendous candidate to add I think it's like 700 suites, our new housing units in the heart of Toronto.
On major transit adjacent to high parks.
So.
It's too bad to get start.
But the reality of the situation as we have competing demands for our capital and our capital is not unlimited. So we have to be disciplined and prioritize our future spend.
When we had to make some difficult decisions.
So at this time.
That's for us to defer this.
And concentrate what's already in process.
What's directly in front of us and that includes not only our on balance sheet development that I just went through.
But also includes our CDL commitment.
I will add that.
Returns and yields for this development for art for Hi Fi village, they still make sense in this environment for us.
But we don't have unlimited access to capital.
Got to be factored into our decision making.
That makes a lot of sense. Thank you and then last one for me before I turn it back on.
Maximizing cash flow per unit growth as being the number one sort of priority given the current environment.
I mean, simplistically does that mean that as long as you've got a balance outstanding on your credit facility.
Any source of equity capital would be used to pay that down.
I think simplistically, that's probably the case I think.
You know, we do have capital capital requirements.
So as I, just said right CDL development opportunities on.
On balance sheet development, and Capex lots electric Capex right. So we're going to take care of those first and then any excess capital or cash that we have in excess of that.
We will likely use to pay down our revolver because.
That is.
The most accretive thing that we can do even even more then.
Buying back our units even more than some development yields right like we're getting a payback over 7% money with that so.
I think thats, a pretty reasonable reasonable guess now.
Yes.
Yeah.
If there were if there wasn't an amazing acquisition opportunity.
Good.
We had five of them then leverages in a good spot and it made sense strategically for us to do it when we have to have a zero revolver balance to do that probably not but obviously, we're thinking about all of this holistically.
And then we're concentrated on bond develop on delivering.
<unk> per unit growth.
Sure and just can you just remind me is there any more equity required for the two on balance sheet developments or has that been fully taken care of.
Now theres, a little bit let's call. It about 6 million Bucks for the both of them combined for the rest of 2020.
Three and another about six for the both of them for 2024.
And then you've got construction financing for the balance.
That's right.
Got it.
Enough more than enough time, thanks, I'll turn it back.
Thanks, Michael.
Thank you. The next question comes from Jonathan Culture of TD Cowen. Please go ahead.
Thanks, Good morning.
I guess, just sort of sticking with the balance sheet and where you guys have made.
Really good progress on the floating rate debt.
Given the progress or asset sales the lesser priority now than they may have been three or six months ago, and I guess related to that.
What are you seeing in the market in terms of opportunities for some asset sales.
Hey, Jonathan.
Sure.
So on the asset sale front I guess there are a few comments.
We can make.
<unk>.
To answer your question.
Yeah.
Correct.
We feel like.
You've kind of nailed it at.
The end of the day.
The good news for Us now.
We know quote unquote need to sell anything.
No pressure for us to do it given all the good financing work.
He and his team have done.
In recent months and the and the revised that we actually have ahead of us for the balance of this year and the rest and enter 2024, so that really helps us.
Vis vis <unk>.
Pricing discussions with potential buyers theres no real impetus for us what will happen to sell anything and I think that that will help us going forward.
We haven't taken our foot off the pedal in terms of asset sales guys. They are still accretive.
For the most part right like if we can sell something for a five cap and paydown of 7% revolver like that's accretive. So so we're continuing on that path.
We're making the Edmonton process is still ongoing for our remaining two asset I would say.
The mortgage assumption approval process with <unk>, just generally is extremely slow today, given given the capacity constraints that they have.
Given the huge volume of applications that came in right before the fee increase went into effect in June .
So that's slowed down everything so they're drowning.
But there are there are a great organization fantastic partners, we're really thankful that they are worth.
So hard, but the reality is everything including evidence, including Adam fail approvals, including normal applications that including everything else came in at just slowing everything now.
<unk>.
And so we don't have great visibility on the timing for the remaining Edmonton.
We're simply waiting for the final approval.
But.
We're hopeful that again I'll, just put a bogey out there.
Before the end of September we're hopeful that that'll happen.
And so.
So that's not that much.
And then we continue to.
Work on a handful of other of other sales.
That are at various stages.
Bye.
Buyer activity has been slower for larger assets.
Call it $50 million.
Because there are fewer buyers and those buyers.
Leverage and so they are being more selective.
But there does seem to be some liquidity in smaller asset sort of $20 million of lessons.
Is that an.
Our peers are seeing that and we're just seeing that with other transactions that have been announced so.
We continue our discussions we hope that there is a good outcome, but.
But nothing is guaranteed and as I said, I think I think things will take longer due to the capacity constraints with CMA.
That kind of is what it is.
Okay. That's lots of color there and then I guess, just switching gears a little bit you guys.
Deferred the high Park.
Development.
But if we look out three to six months in your cost of capital improves.
It starts to make sense.
Quickly could you sort of change gears and move forward with that.
Yeah. So we are and I think as we announced we are continuing the pre development work over the next 12 months.
You know, it's probably a small budget in like the low very low single digits.
For 100% of the portfolio for 100% of the project for us to keep spending some money to.
No prepay.
There are the side, Florida to really get the renderings done.
Get everything ready for tender so when we finish that work, which will take I don't know eight to 12 months.
We will be in a position that when we say go we'd hopefully you just have to go through the tendering process and can start shovels.
About six months after we decided to say go.
Okay.
That's it for me I'll turn it back thanks.
Okay.
Thank you. The next question comes from Matt <unk> of National Bank Financial. Please go ahead.
Hey, guys.
Just switching to operations the gain to lease opportunity increased a bit this quarter.
But leasing spreads were kind of flat how should we think of the trajectory of those two understanding that your turnover is a bit higher.
Because you have some non rent controlled assets, but in Alberta exposure, but just a sense as to where you see that gain to lease moving.
So maybe over the next 12 months or so.
Sure Hey, Matt Thanks, So.
You know I think a couple of comments on the on the gain to lease I think our rents are higher.
$800 rents on average so.
I don't think we can grow that at 16% into perpetuity.
I think we saw.
You know, 9% to 13% gains obesity pre pandemic.
And we think that the fundamentals in the market today are stronger than they were pre pandemic.
Which leads us to slightly higher than 9% to 13, maybe it's low double 10% to 15 or low double digits.
It is a reasonable assumption for our gain to lease going forward.
You know what that means long term if you will.
Sue them by a low double digit growth on our on our new leases that you assume three to three 5% on our renewal that still gets you to a 5% to 6% revenue growth.
And we think now that we've right sized or at least fixed some of our balance sheet.
All that even if we generate five or 6% revenue growth.
You can translate that and then some.
Cash flow per unit growth, if you add leverage to that so we still think thats, an okay place to be over the long term.
And I guess the last point.
If you think about our 16%.
Don't forget that about 1800 rate or at a much higher rent. So that is if you just do that math of 16% tied to 1800 that I don't know 200.
80, or 290 odd million.
Right.
Per month on a rent and that if you take that 280 or so at a much lower starting base.
Much higher percentage gain to lease so.
I don't want to lose sight of that.
No fair enough that makes that makes sense and then I guess the only other aspect of the maths there would be just cost escalations. It seems like you guys and your peers are starting to see some reprieve on that front utilities were down now granted it may have been usage plus costs, but.
Year over year, and I guess, we may be in better shape. This winter, but on on that front is margin expansion.
It seems like it's happening, but how should we think about that going forward.
I think we've been pretty consistent with with telling people, what we think at least for 2023.
<unk>.
And that is we expect our revenue to outpace our revenue growth to outpace our expense growth were.
If you just think overall about our expenses I think I think the new inflationary increase for us is probably 5% to 6%.
So you can expect inflationary increases for many line items right.
Right water hydro.
Insurance.
Maybe you know property taxes, a bit lumpy, but so far it's a little lower than that.
But we are experiencing higher growth on salaries.
So high single digit maybe even double digit growth on that.
And then where we're getting better is on and on.
Natural gas, where we remain unhedged.
I think the cost for the rest of at least the next two or three quarters.
We're likely going to be faced with favorable from a pricing perspective at least.
I don't know about usage, but.
So when you take all of that together, we think kind of like.
Five six.
Percent growth on the expense side, maybe a little higher than that.
It's probably going to happen, but we're hopeful that revenue will outpace it.
Okay that makes sense and then lastly for me on the occupancy front.
Just general seasonality, it's a more active times.
Move ins and move outs. So sequentially. It was it was fairly stable at 97% Montreal still looks a little light at 94, and I know you've got the 4300 that you're dealing with there, but how should we think about kind of the the second half of the year from an occupancy standpoint, and and for you what is in <unk>.
<unk> occupancy number you are you kind of yield maximizing.
To some extent and keeping a bit of vacancy.
Yeah.
The other like the our major markets other than Montreal are all between 97 and a half from 98, 9% occupancy and we feel like that's a good place to be for those markets.
We're getting pricing power, we're able to drive yield.
Pretty good about that.
And any upside in our occupancy will likely come from Montreal.
So like you just said it's been pretty slow.
We're hopeful that it catches up to the rest, but where we are experiencing our vacancy in our Montreal portfolio I think.
And I think you've asked this question before is in our.
Higher rent penthouses in rock Hill, as well as a number of units in La <unk> 300, which as you know is just a much more expensive building at higher rents and so.
That's where the vacancies in our portfolio and we're working hard on it but.
Management has been a lot of time out there.
You wouldn't say, there's been a step change in demand at this point in that but still hopeful that that you had some progress there and would you capitulated an unrated all to fill it or are you. Just you don't want to go there right now.
I mean, the only promotion that we have in our portfolio.
<unk>.
And so we.
Given the time of the year today, we're probably less inclined to give the far away on promotion, but as we approached the more difficult leasing season and the winter.
We will look at it a little bit differently. So that we're at least full through a slower time of the year.
But we're not there yet and I think there's a lot of.
For the fourth 300 that node is quite unique and that folks need to sell their homes in western now for $3 million to $4 million to fund.
A stream of rental payments going forward. So that's not an easy decision.
And it's not easy to execute in terms of selling your house. So we are cautiously optimistic.
To answer a little bit more of your question you.
Yes, you did mentioned we are seeing a lot more students doctors.
Not just in Montreal, but everywhere, but in our Montreal portfolio, We don't you know.
Students can't afford the the unit that are making unless you put five students in one apartment, which probably isn't it.
Buddy.
No.
So that's kind of what we're dealing with there.
No that makes sense.
The color thanks, guys.
Thank you. The next question comes from Brad Sturges of Raymond James. Please go ahead.
Hi, good morning.
Just two.
Yes, thanks for the color on the.
The asset sale process or progress just curious if.
If you had to pencil in timing.
Still expect.
An announcement or a deal to be done by the end of the year.
Well I think I just mentioned so on on.
And Edmonton.
I think I would just put the bogey out there and kind of hopefully end of September .
And all the other stuff that we're working on I would not be anticipating any announcements in 2023 given the.
The backup that is currently at GMAC with approvals.
Got it that's helpful.
Just based on let's say Edmondson getting completed plus.
Some of your plants refinancings that.
Generate some incremental proceeds.
Where do you see a floating rate debt exposure penciling out of that is that going to be I think you hinted at last quarter like mid single digits as a percentage of that.
Yeah I think.
Thank bye.
Because I guess, we do have ongoing capital commitments for the rest of the year. So we won't just be standing still we will be drawing down.
So I think by the end of 2023 will be kind of close to where we are today right.
But with some refinancings that we have in the pipe in early 'twenty 'twenty four we expect that to come down slightly from there.
Right.
As you are getting closer to your target does that make it easier to shift our capital allocation strategy back towards adding a little bit more.
Focus on growth such as maybe funding some of those acquisitions through the CDL program.
I mean, it helps but it's not just the only factor there's lots of factors that we're considering.
You know what what are the relative cap rates realm.
Relative to our cost of capital.
You know could we sell some assets.
Match fund and maybe.
High grade the portfolio you know are we entering a new market that we really want to get into because there is a path to <unk>.
A lot more in those markets you know, there's a there's a whole bunch of strategic reason.
The reason as to why we may or may not do that acquisition.
We want to get into a position where we have the option.
To do as many things as possible and with our capital and I think reducing the revolver them out to the extent we can helps.
Helps us get to that position, where we have the flexibility and the optionality.
You know do what we can do with our with our capital at the time, where it makes sense.
That makes sense. Thanks, a lot for that I'll turn it back.
Thank you.
Thank you. The next question comes from Jimmy Chen of RBC Capital markets. Please go ahead.
Thanks, Yes, so just a couple of question for me.
Are you able to speak to the development economics on the opportunities that you passed on.
And.
And secondly, maybe speaking theoretical if you were to do them.
One of those CDO on any of these opportunities.
Do you think the rate would look like relative to what you're currently earning them.
Okay.
Okay I got it.
I'll try to answer your first question, but then you'll have to repeat the second question because I didn't quite get it.
But on the first question the ones that we pass on the economics for the development of our extremely good.
No they are in the.
I mean some of them are.
Our above 5% yields.
And many are high teens low twenty's IRR.
But we just don't have the capital to do it so it's too bad.
And.
The proof in the putting there is that there are part of <unk> partners.
That's money alongside of them.
At those returns so even with cost Escalations and.
Interest rate increases and everything else you know rent rent grant assumptions.
Given where market rents are.
The development yields for all those all those all those developments are are.
At a point where <unk>.
<unk> institutional money is.
He's willing to go forward.
High teens, IRR Levered I assume right.
Yep.
Okay.
Yes. My second question was if you were to.
Do a convertible loan.
With the rate would be materially different from what you're currently earning.
Yeah, Yeah for sure I mean, we joke about that right. We're like okay, well, if we were in a reset a new CD out like what does that look like.
The deals that we've struck that are currently yielding 6% to 7% I think the base rate. It was like sub 2% at that time that they struck those deals.
So that's quite a nice equity spread I'm, not I'm, not saying, we get 4% to 5% on top of six or seven but.
It will be a there'll be a positive equity spread I think if we struck a new one.
It will be at market terms just yeah.
End market trends would be probably closer to.
High single digits.
Yeah, I mean look I I don't know what I don't want to I don't want to negotiate.
Anything on here, but it's a spread to our revolver or some other base rate I think makes some sense.
Basically.
Bad debt that is guaranteed by a partner. So if you think bad debt is low double digits like this is better than that.
Plus you get the 5% discount, which you need to factor in.
So it's in that sort of you know.
Higher than what it is.
I don't again, I don't want to negotiate with MPI without MPI at the table here.
Fair enough and then.
One quick follow up to the mid twos.
Their institutional partners, who are going out on these development projects would they be candidates as partners for you on the existing assets, which are currently selling.
We're looking to sell it or maybe selling a house interest at some point or anything like that.
Yes.
Okay.
So that's it.
<unk> opportunity.
On your asset sale initiatives.
Yep potentially.
I love, but we're not looking to sell a brand new assets, though right. That's the difference here like the capital that's chasing the new developments.
They want brand new urban.
Some of the assets were looking at selling is not that.
But if we got to a point, where we wanted to buy one of the PDL opportunities.
Finding a partner like there's lots of options that we're considering and I'll just throw one out as if we find a partner reduces the equity check we get the management fees that validates the purchase price.
You know that that could make sense.
But everything's on the table.
Yes.
Thanks, guys.
Thank you.
There are no further questions at this time I will turn the call back to Jonathan Lee for closing remarks.
Thank you Michelle and thank you everyone for your time, we appreciate it and we will see you next quarter take care.
Ladies and gentlemen, this does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
[music].