Q3 2023 Allied Properties Real Estate Investment Trust Earnings Call
Good morning, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the Allied properties REIT third quarter 2023 earnings conference call.
Speaker 1: transcript
Speaker 1: Good morning. My name is Rob and I will be your conference operator today. At this time, I'd like to welcome everyone to the Allied Properties REIT third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. Thank you. Cecilia Williams, President and CEO , you may begin your conference.
Things have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again prestige Starwood. Thank you Cecelia Williams, President and CEO you May begin your conference.
Thanks, Rob and good morning, everyone and welcome to our conference call.
Speaker 2: transcript
Speaker 2: Thanks, Rob. Good morning everyone and welcome to our conference call. I'll discuss the Q3 highlights briefly. Michael, Nan and JP are with me to answer questions that follow.
I'll discuss the Q3 highlights briefly Michael name is James here with me to answer your question as I follow up with.
Speaker 2: transcript
Speaker 2: We may in the course of this conference call 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 2022 A&M report and our most recent quarterly report.
Ladies of course of this conference call maybe 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 red right.
Risks and uncertainties in our 2022 annual report and our most recent quarterly report.
Speaker 2: transcript
Speaker 2: Material assumptions that underpin any forward looking statements we make include those assumptions described under forward looking statements in our most recent quarterly report.
Material assumptions that underpin any forward looking statements, we make including those assumptions described under forward looking statements in our most recent quarterly report.
In Q3, we accomplished an overriding goal the successful sale of our U D. C portfolio. We can now focus exclusively on your workstation portfolio Windows unit, completing upgrade and development activity optimizing renewals and leasing vacant space over the remainder of the year 'twenty 'twenty four.
Speaker 2: transcript
Speaker 2: In Q3, we accomplished an overriding goal, the successful fail of our UBC portfolio. We can now focus exclusively on our workspace portfolio with the view that completing upgrade and development activity, optimizing renewals and leasing vacant space over the remainder of the year through 2024.
Speaker 2: transcript
Speaker 2: Our net debt as a multiple of annualized adjusted EBITDA at the end of Q3 was 7.9 times and our available liquidity was $1.4 billion. We expect our net debt as a multiple of annualized adjusted EBITDA will decline over the next three years as developments are completed and begin to generate material amounts of EBITDA.
Our net debt.
Annualized adjusted EBITDA at the end of Q3 was 719 times.
They are all liquidity was $1 $4 billion, we expect our net debt as a multiple of annualized adjusted EBITDA will decline over the next three years and developments that are completed and begin to generate material amounts of EBITDA.
Speaker 2: transcript
Speaker 2: We remain committed to our investment grade rating and to improving it over time.
We remain committed to our investment grade rating and you're improving overtime.
The process of transferring development completions to the rental portfolio continued in Q3 with 365430 square feet of GLA moving from D. C. She was the rest of the portfolio.
Speaker 2: transcript
Speaker 2: The process of transferring development completion to the rental portfolio continued in Q3 with 365,413 square feet of GLA moving from PUD to the rental portfolio at average net rent per square foot of $34.28, reducing the cost of PUD as a percentage of gross book value to 11.6% at the end of the third quarter.
Average net rent per square foot of $34 in 2008.
Reducing the cost of <unk> as a percentage of gross book value to 11, 6% at the end of the third quarter. This.
Speaker 2: transcript
Speaker 2: This will add to our annual Ebersol run rate by approximately 12 million dollars from the beginning of 2024 onwards.
This will add to our annual EBITDA run rate by approximately $12 million from the beginning of 'twenty 'twenty four onward.
Speaker 2: transcript
Speaker 2: We'll continue to transfer material amounts of GLA from PUD to the rental portfolio over the remainder of the year and throughout 2024 and 2025.
Well continue to transfer material amounts of GLA from P. D to the rental portfolio over the remainder of the year.
2024 and 2020.
Speaker 2: transcript
Speaker 2: This will, one, reduce the cost PUC as a percentage of gross low-value to approximately 4.5% by the end of 2025.
This well one reduce the cost as a percentage of gross book value to approximately 4.5% by the end of 2025 huge increase average in place net rent per occupied square foot in our rental portfolio and three and to our annual EBITDA run rate.
Speaker 2: transcript
Speaker 2: to increase average inflate net rent for stocking by a square foot in our rental portfolio. And three, add to our annual EBITDA run rate by approximately $46 million dollars from the beginning of 2026 onwards.
<unk> by approximately $46 million from the beginning of 2026 onward.
Speaker 2: transcript
Speaker 2: As disclosed in our NVNA, leasing activity this quarter was strong. We expect sustained and successful leasing activity for the remainder of the year and into 2024. We'd now be happy to...
As disclosed in our MD&A leasing activity. This quarter was strong we expect sustained and successful leasing activity for the remainder of the year and into 2024.
We'd now be happy to answer any questions.
Speaker 1: transcript
Speaker 1: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from a line up, Jonathan Keltchert from Kedi Cowan. Your line is open. Thanks, good morning.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and your first question comes from the line of Jonathan Culture from Gd Cowen. Your line is open thanks good morning.
Speaker 3: transcript
Speaker 3: First question, just in your press release, you talked about not using the line of credit over the next five years. Does that contemplate using some of the broader range of funding opportunities that you also talked about in the press release and maybe provide a little bit of color on what those are?
First question just in your press release, you talked about not using the line of credit over the next five years.
Does that contemplate using some of the broader range of funding opportunities that you also talked about in the press release.
A little bit of color on what those are.
Speaker 2: transcript
Speaker 2: No, Jonathan, it will primarily, we'll be using the cash that we currently have on hand and to meet our commitments. And we won't have the need to either use our line or cap into other sources of capital.
No John I think it will primarily we'll be using the cash that we currently have on hand to meet our commitments.
We won't have the need to.
Your line or tap into other sources of capital.
Okay with that.
Speaker 3: transcript
Speaker 3: Okay, would that suggest that then, like if I look at the revenue enhancing CAPEX program and I know you sort of include it with the development, but how much of that is really under your control in terms of being able to sort of slow it down or what are you basically expecting to spend on that over?
I would suggest.
If I if I look at the revenue enhancing Capex program.
You sort of included with the development, but how much of that.
Is really under your control in terms of being able to sort of slow it down or what do you. What are you basically expecting to spend on that over the next couple of years.
Speaker 2: transcript
Speaker 2: Yeah, that is completely in our control and like I mentioned the PUD percentage, which includes that redevelopment activity will be dropping sharply.
Yeah that is completely in our control and like I mentioned, the <unk> percent range, which includes that redevelopment activity will be dropping sharply.
Okay.
Speaker 3: transcript
Speaker 3: and then just switching gears to occupancy.
And then just switching gears to occupancy.
Speaker 3: transcript
Speaker 3: based on what you're seeing right now and what you have in your pipeline and what you know about next year's maturity.
Based on based on what Youre seeing right now and what you have in your pipeline and what you know about next year's maturities.
Speaker 3: transcript
Speaker 3: You see I can see trending up over the next two quarters
Do you see occupancy trending up over the next few quarters.
Okay.
Speaker 2: transcript
Speaker 2: We do feel that we could be at an inflection point right now. We want to see how deal that we currently have under negotiation, materialize over the course of Q4 and Q1. We have over 1.1 million sort of fee that we're currently negotiating across the, the part city portfolio. So we'll see how those could pertute down the deals, but we're feeling pretty confident about things right now.
We do feel that we could be in an inflection point right now we want to see how deal that we currently have under negotiation materialize over the course of Q4, I think Q1, we have over $1 1 million square feet that were currently negotiating across the city portfolios, though.
We'll see how those cause apart.
But we're feeling pretty confident about things right now.
And that $1 1 million square feet, how much how would that break down between renewables and the space is currently occupied.
Speaker 3: transcript
Speaker 3: Okay, and at 1.1 million square feet, how would that break down between renewals and spaces currently on a...
Speaker 2: transcript
Speaker 2: I would say roughly half a cup. Okay.
I would say roughly half of that.
Okay. Thanks, that's helpful I'll turn it back.
Thank you.
Speaker 1: transcript
Speaker 1: Your next question comes from Alina Bradsturges from Raymond James. Your line is open.
Your next question comes from the line of Brad Sturges from Raymond James Your line is open.
Hey, good morning.
Speaker 4: transcript
Speaker 4: Just to follow on to John's question, just when you're thinking about your, I guess taking an early look at your 2024 maturities here, just are there any material non-renules you're expecting at this point in the year?
Just to follow on to Jonathan's question, just what are you thinking about your I guess taken on.
An early look at your 2024 maturities here just are there any material non-renewals youre expecting at this point in the year.
Speaker 2: transcript
Speaker 2: We're expecting to have a higher rate of revealed in 2024 than what happened in 2023.
No we're expecting to have a higher rate of renewals in 2024, and then what happened in 2023.
Okay.
Speaker 4: transcript
Speaker 4: Okay, and I think in previous calls you've talked about least negotiation timelines being generally more extended is that.
I think in previous calls you've talked about lease negotiation timelines being.
Generally more extended is that.
Has that trend changed at all are you you're talking about perhaps at an inflection point on.
Speaker 4: transcript
Speaker 4: That trend changes already, you know, you're talking about perhaps an inflection point on leasing activity, just curious if the negotiating timelines that you were experiencing have changed.
Leasing activity I'm, just curious if the.
The negotiating timelines that you're you were experiencing have changed at all.
They haven't changed and that they haven't Boston Lager, and we haven't yet.
Speaker 2: transcript
Speaker 2: They haven't changed and they haven't gone longer and we haven't yet seen them shortened, but we do expect that to start happening if we are indeed at a deflection point.
But we do expect that.
What's happening in R&D at an inflection point.
Got it.
Speaker 4: transcript
Speaker 4: And from a capital allocation perspective, I think you've been a little bit active on the NTIB just given where you're
And finally from a capital allocation perspective.
I think you've been a little bit active on the NCI, just given where.
Your stock price has moved to.
Speaker 4: transcript
Speaker 4: Is that part of the decision making terms of maybe being a little bit more active or would the strategy be more focused on cash preservation?
Is that part of the decision, making in terms of maybe being a little bit more active or with the SEC.
Strategy be more focus on cash preservation.
No. We we have now been active in the CIB and we do not intend to buy back stock. We have a capital program that we are committed to you that will be yielding committed EBITDA and that's where we will be focusing our capital.
Speaker 2: transcript
Speaker 2: No, we have now been active in the NCIE and we do not intend to buy back stock. We have a capital program that we're committed to that will be yielding committed evida and that's where we will be focusing our capital.
Speaker 4: transcript
Speaker 4: Last last question, just on the comment around committed to the distribution program, can you just expand upon that comment in the press release in terms of is that just committed to the level of distribution today or is there more to that statement?
Last question just on the comment around committed to the distribution program can you just expand upon upon that comment in the press release in terms of is that just committed to the level of distribution today or is there more to that statement.
No what I would say is that we don't want to reduce our distribution and we don't need to do to reduce our distribution, which I think is a very important point our decision around how much we are going to increase it by <unk> will be made with our board at our December meeting.
Speaker 2: transcript
Speaker 2: want to reduce our distribution and we don't need to reduce our distribution, which I think is a very important point. Our decision around how much we are going to increase it by will be made with our board at our December meeting, which is as per usual, and we will be announcing it at that time based on the decision made.
As usual and we will be announcing and at that time based on the decision making.
Speaker 2: transcript
Speaker 2: We have been increasing our distribution for 17 of the last 20 years, only ever holding it flat during the global financial crisis. So I think we have a very strong record of distribution increases. And we do see as an important mandate for us with our unit holders to increase the distribution regularly. Okay.
Ben Inc. Our distribution for 17 of the last 20 years only at the holding it flat during the global financial crisis, I think we have a very strong record of distribution increases and we do see as an important mandate for us with our unit holders to increase the distribution.
Great Good evening.
Yeah, Okay. Thanks, a lot I appreciate it I'll turn it back.
Your next question comes from the line of <unk> from RBC capital markets. Your line is open.
Speaker 1: transcript
Speaker 1: Your next question comes from a line of Pammy Burr from RBC Capital Markets. Your line is open.
Speaker 5: transcript
Speaker 5: Thanks, good morning. Just on FFO, I think, you know, you're tracking down about 3% year-to-date, but you've guided the year at, I guess, flat to slightly positive. Just to get there, I think you'd need, I guess, a fairly strong Q4. Can you maybe just comment on what are some of the drivers that you're expecting in order to hit that target for the year?
Hey, good morning, just on <unk>, I think youre tracking down about 3% year to date, but you've guided the year at.
Flat to slightly positive.
Just to get there I think you would need to I guess, a fairly strong Q4 can you maybe just comment on what are some of the drivers that youre expecting in order to hit that target for the year.
We're still targeting.
Speaker 2: transcript
Speaker 2: We're still targeting the outlook of a black to low on both FFB, AMFB, and same asset and Y. And it was come from operational results.
The logos.
Flat to low on both SFO.
And same asset NOI.
It would come from operational results.
Speaker 5: transcript
Speaker 5: So if you're sitting today, I guess, at in-place occupancy of just under 87%, what sort of occupancy would that imply by year-end?
So if you're sitting today I guess.
In place occupancy of just under 87% what sort of occupancy would that imply by by year end.
I it would imply that we finished the year higher than we started and we will report on our results at the end of January.
Speaker 2: transcript
Speaker 2: I, it would imply that we finished the year higher than we started and we will report on our results at the end of January .
Speaker 5: transcript
Speaker 5: Okay. Just with respect to maybe conversations with tenants at this stage, you know, it sounds like the leasing pipeline, I think you mentioned, Cecilia, 1.1 million square feet. What are some of the issues or what are some of the maybe feedback you're getting from tenants in terms of getting leases over the line in terms of, you know, is it slowing the economy, higher rates, or just trying to understand their space needs? Just curious what those conversations are like at this point.
Okay.
Just with respect to maybe conversations with tenants at this stage.
It sounds like the leasing pipeline I think you mentioned facility of $1 1 million square feet.
Rob: Good morning. My name is Rob, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Allied Properties Read third quarter of 2023 earnings conference call.
What are some of the issues or what are some of the maybe feedback youre getting from from tenants in terms of getting leases over the line in terms of is it slowing economy higher rates or just trying to understand their space needs.
Rob: 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one.
Curious what those conversations are like at this point.
Finally as Michael.
Speaker 6: transcript
Speaker 6: Pommy, it's Michael. The feedback is consistent across our markets, and it is quite simply what it has always been. The debate or the negotiation is almost never about price.
The feedback is consistent across our markets and it is quite simply what it has always been.
Cecilia Williams: Thank you, Cecilia Williams, President and CEO. You may begin your conference. Thanks, Rob.
Cecilia Williams: Good morning, everyone, and welcome to our conference call. I'll discuss the keys we highlight briefly. Michael, Nan and JP are with me to answer questions that follow.
The debate or the negotiation is almost never about price.
Speaker 6: transcript
Speaker 6: and almost always about the suitability of the space for the user's needs, and that is
Almost always about the suitability of the spin.
For the users' needs and that is <unk>.
Cecilia Williams: We may in the course of this conference call, make forward-looking statements about future events or future performance. These statements by their nature are subject to risk and uncertainties that may cause actual events or results to differ materially. Including those risks described under the heading, risks and uncertainties in our 2022 annual report and our most recent quarterly report. Material assumptions that underpin any forward-looking statements we may include those assumptions described under forward-looking statements in our most recent quarterly report.
Speaker 6: transcript
Speaker 6: Absolutely, the overriding consideration of people we serve. We are not a low-cost provider.
Absolutely.
Overriding consideration of the people we serve.
We are not a low cost provider.
Speaker 6: transcript
Speaker 6: of distinctive urban workspace. We do not compete based on price. We compete based on the suitability of our space and our mixed-use, amenity-rich urban neighborhoods. And that has been the case for years now, and it hasn't changed.
To state deferred in workspace, we do not compete based on price.
Compete based on the suitability of our space and our mixed use amenity rich urban neighborhoods and that has been the case for years now and it hasnt changed.
Speaker 6: transcript
Speaker 6: As Cecilia mentioned, people are taking a little more time these days to make their decisions.
As soon as you mentioned people are taking a little more time these days to make their decisions.
Cecilia Williams: In Q3, we accomplished an overriding goal, the successful fail of our UCC portfolio. We can now focus exclusively on our workspace portfolio with a view that completing upgrade and development activity, optimizing renewals and leasing vacant space over the remainder of the year through 2024. Our net debt as a possible of annualized adjusted EBITDA at the end of Q3 was 7.9 times and our available liquidity was $1.4 billion. We expect our net debt as a multiple of annualized adjusted EBITDA will decline over the next three years as developments are completed and begin to generate material amounts of EBITDA.
Speaker 6: transcript
Speaker 6: and business leaders and boards are being more...
And business leaders and boards RMB eight more.
Speaker 6: transcript
Speaker 6: focus in terms of giving approval for longer-term commitment.
Focus in.
In terms of GSE approval for longer term commitments.
Speaker 6: transcript
Speaker 6: But for us, the differentiator is always the extent to which the space suits the needs of the user.
And for Us.
The differentiator is always the extent to which the space suits the needs of.
The user and not the prices space.
Speaker 6: transcript
Speaker 6: Of course, the users try to.
Of course, the users try to.
Use their leverage.
Speaker 6: transcript
Speaker 6: to extract better financial terms from us. And in most circumstances, we are willing and able to resist that and put them to
To extract better financial terms from us.
And in most circumstances, we are willing and able to resist.
Cecilia Williams: We remain committed to our investment grade rating and to improving it over time. The process of transferring development completions to the rental portfolio continued in Q3 was 365,413 square feet of GLA moving from CUD to the rental portfolio at average net rent per square foot of $34.28. Reducing the cost of PUD as a percentage of gross of value to 11.6% at the end of the third quarter. This will add to our annual EBITDA run rate by approximately $12 million in the beginning of 2024 onward.
And put them too.
The choice choose.
Speaker 6: transcript
Speaker 6: the choice of choosing our space or cheaper space.
Using our space or cheaper space.
So.
There is nothing new we and how tenants are behaving towards us.
Speaker 6: transcript
Speaker 6: There is nothing new in how tenants are behaving for us.
Speaker 6: transcript
Speaker 6: There is only more time being taken in making the ultimate commitment to us because those commitments are big.
There is only.
More time being taken in making the ultimate commitment to us because those commitments.
Speaker 6: transcript
Speaker 6: you extrapolate them out over five or 10-year terms, they are significant commitments. But the basis for decision-making hasn't changed one iota.
You extrapolate that out over five or 10 year terms they are significant commitments.
But the basis for decision, making hasn't changed one iota.
Got it thanks Michael.
Speaker 5: transcript
Speaker 5: Got it. Thanks, Michael. Last one for me. Leasing costs do seem to have, on a per square foot basis, did seem to have stabilized a bit in the quarter, I guess, as a percentage of the face rent. Can you just comment maybe on what maybe drove that improvement perhaps relative to last quarter, meaning Q2? And then, you know, is that maybe a one-off or do you expect to maybe to revert higher over the next, call it, year or so?
Cecilia Williams: We'll continue to transfer material amounts of GLA from PUD to the rental portfolio over the remainder of the year and throughout 2024 and 2025. This will, one, reduce the cost PUD as a percentage of gross of value to approximately 4.5% by the end of 2025. To increase average inflate net rent per square foot in our rental portfolio, and to our annual EBITDA run rate by approximately $46 million from the beginning of 2026 onward.
Last one for me leasing costs do seem to have on a per square foot basis did seem to have stabilized a bit in the quarter.
As a percentage of the.
The face rent can you just comment maybe on.
What maybe drove that improvement, perhaps relative to last quarter, meaning Q2 and then.
Maybe a one off or do you expect maybe to revert higher over the next call it year or so.
Well I mean, there was an anomalous couple of deals in Q2 that inflated.
Speaker 6: transcript
Speaker 6: Tommy, there was an anomalous couple of deals in Q2 that inflated our leasing costs. So what you see in Q3 is a more normalized level without anomalous transactions inflating the costs. So Q3 is a much better reflection of the norm than Q2 was.
Our leasing costs. So what you see in Q3 is a more normalized level without.
Without anomalous transactions inflating the cost. So Q3 is a much better reflection of the normal Q2 us.
Thanks, very much I'll turn it back.
Rob: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.
Your next question comes from the line of <unk> from CIBC. Your line is open.
Speaker 1: transcript
Speaker 1: Your next question comes from the line of Samaya Sayed from CIBC. Your line is open.
Speaker 7: transcript
Speaker 7: Thanks. Good morning. I just want to start off by touching on some of your renewal leasing in the quarter. Looks like the term was a bit lower and it spreads a bit lower versus what you've accomplished historically. Any color on renewal in the quarter?
Thanks, Good morning, I, just wanted to start off by touching on some of your renewal leasing in the quarter. It looks like the term was a bit lower and the spreads a bit lower versus what you've accomplished historically.
Jonathan Kelcher: And your first question comes from a line of Jonathan Kelcher from Kedi Cowan. Your line is open. Thanks.
Cecilia Williams: Good morning. First question, just in your press release you talked about not using the line of credit over the next five years. Does that contemplate using some of the broader range of funding opportunities that you also talked about in the press release and maybe provide a little bit of color on what those are? No, Jonathan, it will primarily will be using the cash that we currently have on hand and to meet our commitment and we won't have the need to either use our line or tap into other sources of capital.
Color on renewals in the quarter.
Yeah.
Sure.
Speaker 8: transcript
Speaker 8: They're pretty deal specific in terms of the renewal that happened in the period. I can't think of anything in particular to highlight in terms of renewals in Q3.
Specific in terms of the.
The renewal that happens in the period I can't think of anything.
Thank you I want to highlight in terms of Npls in Q3.
Okay. So over time, you expect to revert to your sort of historical five year average lease term on future future leasing.
Speaker 7: transcript
Speaker 7: Okay, so we're trying to expect to revert to your sort of historical five year average, at least in one future future leasing.
Speaker 8: transcript
Speaker 8: Absolutely. The weighted average term of our leases has actually been pretty steady over the last few years, so I wouldn't expect the Q3 renewal terms to impact that.
And so literally the weighted average.
Several of our leases has actually been.
Pretty steady over the last few years, so I wouldn't expect the Q3 revenue hold tight to that.
Cecilia Williams: Okay, would that suggest that then like if I look at the revenue enhancing CapEx program and it's, I know you sort of include it with the development, but how much of that is really under your control in terms of being able to sort of slow it down or what are you, what are you basically expecting to dispend on not over the next couple of years? Yeah, that is completely in our control and like I mentioned, the PUD percentage, which includes that redevelopment activity will be dropping sharply.
Okay great.
Speaker 7: transcript
Speaker 7: Okay, great. And just to kind of touch more on your comments on us being at an inflection point, what would you say is the biggest change you've seen versus, I guess, recent quarters to sort of support that comment?
And just to kind of touch more on your comment on us being at an inflection point what would you say is the biggest change you've seen versus I guess recent quarters to sort of to support that that comment.
We have a very high level of tour activity and we'll see you soon.
Speaker 2: transcript
Speaker 2: We had a very high level of chore activity in Q3, higher than I would have expected.
The higher than I would've expected given the <unk>.
Speaker 8: transcript
Speaker 8: Given the, you know, August tends to be a slower month, but we had 306 tours in the quarter well above our quarterly average of 250. and so that really for us is something we keep a close eye on because it is a leading indicator for us.
August tends to be a slower mines. So we had 306 tours in the quarter well above our quarterly average of 250, and so that really for us its something we keep a close eye on because it is a leading indicator for us and so we continue to be encouraged by the level of interest.
Cecilia Williams: Okay. And then just switching gears to occupancy based on based on what you're seeing right now and what you have in your pipeline and what you know about next year's maturitys. Do you see occupancy trending up over the next few quarters? We do feel that we could be at an inflection point right now. We want to see how deals that we currently have under negotiation materialized over the course of Q4 and Q1.
Speaker 8: transcript
Speaker 8: And so we continue to be encouraged by by the level of interest. I mean, we clearly have the space that employers want and need in terms of attracting and retaining.
We clearly have the space that employers want and need.
10%.
Attracting and retaining.
Speaker 2: transcript
Speaker 2: you know, the talent that they need to run their businesses. So, and it's pretty consistent across the country.
The talent that they need to run their businesses, so and it's pretty consistent across the country.
Cecilia Williams: We have over 1.1 million sore feet that we're currently negotiating across the far city portfolio, so we'll see how those could work to down the deals, but we're feeling pretty confident about things right now. Okay, and at 1.1 million square feet, how much how would that break down between renewals and spaces currently unoccupied? I would say roughly half a month. Okay, thanks. That's helpful. I'll turn it back.
Speaker 7: transcript
Speaker 7: Okay. And just lastly, I wanted to ask about your expectations for development EBITDA and you have line of sight to 2026. Is that based on your original performers or policing you've achieved? Just wondering how much do current market conditions factor into those developer DNOI expectations.
Okay, and just lastly, I wanted to ask about your expectations for development EBITDA and you have line of sight to 'twenty 'twenty six.
Based on your original pro forma is.
Leasing you've achieved just wondering how much of the current market conditions factor into those step up with NOI expectations.
Cecilia Williams: Thank you.
Speaker 8: transcript
Speaker 8: Most of that would be legally committed because the developments that were transferring from PUD to rental were highly pre-leased, so there isn't but it's mostly legally committed, leave it at that.
Most of that would be legally committed because the development that we're transferring from P&G to rental or highly create niche.
Are there areas.
Alina Bradsturges: Your next question comes from Alina Bradsturges from Raymond James. Your line is open. Hey, good morning. Just to follow on to Jonathan's question, just when you're thinking about your, I guess taking on an early look at your 2024 maturities here, just are there any material non renewals you're expecting at this point in the year? You know, we're expecting to have a higher rate of revealed in 2024 than what happened in 2023.
It's mostly legally committed EBITDA.
Okay. Thank you I'll turn it back.
Yes.
Your next question comes from the line of Mccormack from National Bank Financial Your line is open.
Speaker 1: transcript
Speaker 1: Your next question comes from the line of Matt Kornack from National Bank Financial. Your line is open.
Good morning, guys.
Speaker 3: transcript
Speaker 3: Good morning, guys, just just following up on my question with regards to the 46 million. Can you give us a little color as to the cadence of how that comes on? Maybe for the balance of 23 and 2024. I haven't rolled out my 2025 estimates yet. So I want to ask you for that. But just just get a sense of how much of that 46Million we should see over the next 12 to 18 months.
And just just following up on my last question with regards to the 46 million can you give us a little color as to the cadence of how that comes on maybe for the balance of 'twenty three.
In 2024, I haven't rolled out by 2025 estimates yet so I wanted to ask you for that.
Alina Bradsturges: Okay, and I think in previous calls, you've talked about lease negotiation timelines being generally more extended, is that trend changed at all? Are you talking about perhaps an inflection point on leasing activity, just curious if the negotiating timelines that you were experiencing have changed at all? They haven't changed, and they haven't gone longer, and we haven't yet seen them short, but we do expect that to start happening if we are indeed at an inflection point.
Just to get a sense of how much of that $46 million, we should see over the next 12 months to 18 months.
Speaker 2: transcript
Speaker 2: Sure, it's roughly half and half between 24 and 25 leading up to the 46 million by early 2026.
Sure.
The conference has between 24 and 25, leading up to them.
The $46 million by early 2026.
Okay. That's that's very helpful.
Speaker 3: transcript
Speaker 3: That's very helpful. And this is a small one, but there's a small residual ground lease, but the ground lease payment seems to have gone to around zero. Is there any residual payment there or should we just run that line item to zero at this point?
And this is a small one but for there is a small residual ground lease, but the ground lease payment seems to have gone to round. There is there any residual payment there should we just run that line item to zero at this point.
Alina Bradsturges: Got it. From a couple of allocation perspectives, I think you've been a little bit active on the NCAABE, just given where your stock crisis moved, is that part of the decision making terms of maybe being a little bit more active? Or would the strategy be more focused on cash preservation? No, we have now been active in the NCAA, and we do not intend to buy back stock. We have a capital program that we're committed to that will be yielding committed evidence, and that's where we will be focusing our capital.
Speaker 3: transcript
Speaker 3: Sorry, I'm not sure I can answer your question. Sorry, not, not, not Grammly's.
Sorry, I'm not sure I understood. Thank you.
Question sorry.
Ground lease.
But it's a lease lease liabilities the amortization of it I guess the most of it went away with the sale of the UTC portfolio.
Speaker 3: transcript
Speaker 3: I had the least liability, like the amortization of it, I guess. The most of it went away with the sale of the UDC portfolio, but it looked like it was negative 56,000 maybe in the quarter.
But.
It looked like it was negative 56.
And maybe in the quarter.
Anyway.
Neither here nor there if you don't have it in front of you.
Speaker 9: transcript
Speaker 9: Okay, you know what, let me let me check into that and we'll call you. Okay, and then on.
Okay, let.
Let me, let me check into that and we will call you.
Okay, and then on yes.
Not material.
Alina Bradsturges: Last question, just on the comment around committed to the distribution program, can you just expand upon that comment in the press lease in terms of is that committed to the level of distribution today, or is there more to that statement? No, what I would say is that we don't want to reduce our distribution, and we don't need to reduce our distribution, which I think is a very important point. Our decision around how much we are going to increase it by will be made with our board at our December meeting, which is as per usual, and we will be announcing it at that time, based on the decision made.
Speaker 3: transcript
Speaker 3: On 810 St. Antoine, I noticed that you've added the residential component of that project. Can you give us a little bit more colour on that? Would you do that on your own? Would it be rental or would you look to partner with somebody to build that out over time?
On an 810 and Antoine.
I noticed that you've added the residential component of that project.
Can you give us a little bit more color on that and what.
Would you would you do that on your own and it would it be rental or.
Would you look to partner with somebody to build that out overtime.
Okay.
Speaker 6: transcript
Speaker 6: Matt, it's Michael. That's a really lovely development site. It is adjacent to the Plastgard, DJ Complex, which has unfolded so favorably for us since we acquired it. Initially, we were going to explore the possibility of creating...
Matt It's Michael that's a really lovely development site that is adjacent to the platts scar DJ complex, which has unfolded so favorably for us since we acquired it.
Initially we were going to explore the possibility of creating.
Alina Bradsturges: We have been increasing our distribution for 17 of the last 20 years, only ever holding a plot during the global financial crisis. I think we have a very strong record of distribution increases, and we do see as an important mandate for us with our unit holders to increase the distribution regularly. Okay, thanks a lot. I appreciate it.
Speaker 6: transcript
Speaker 6: lab space on that site and we haven't completely
Lab space on that site.
And we haven't completely.
Speaker 6: transcript
Speaker 6: sideline that possibility, but in order to do that, we would actually need a zoning amendment.
Sidelined that possibility, but in order to do that we would actually need a zoning amendment and that is a rather lengthy and never certain process and the city of Montreal, We do and we can as the right build rental residential and that area.
Speaker 6: transcript
Speaker 6: and that is a rather lengthy and never certain process in the city of Montreal. We do and we can, as of right, build rental residential and that area to the east is evolving as a very significant.
Cecilia Williams: I'll turn it back.
Pammi Burr: Your next question comes from Alina, Pammy Burr from RBC Capital Market. Your line is open. Thanks, morning. Just on FFO, I think you're tracking down about 3% year to date, but you've guided the year at, I guess, flat to slightly positive. Just to get there, I think you need a fairly strong Q4. Can you maybe just comment on what are some of the drivers that you're expecting in order to hit that target for the year?
To the east is evolving as a very significant.
Speaker 6: transcript
Speaker 6: inner-city residential area in Montreal so we think the better approach and the one that's sort of more consistent with the zoning that's in place is to
Your city residential area in Montreal, So we think the better approach and the one that sort of more consistent with the zoning that's in place.
Is too.
Speaker 6: transcript
Speaker 6: certainly get approval for rental residential development. And yes, we are more than competent to execute both the development and the ongoing management of rental residential in any of the cities we operate in.
Certainly get approval for rental residential development.
And yes, we are more than compensated to execute both the development and the ongoing.
Pammi Burr: We're still targeting the outlook of a flat to low on both FFO, AMFO, and same asset and Y, and it would come from operational results. So if you're sitting today, I guess, in place occupancy of just under 87%, what sort of occupancy would that imply by your end? I think they would imply that we've been in the year higher than we started, and we will report on our results at the end of January.
Management of rental residential in any of the cities we operate in.
Okay fair enough.
Speaker 10: transcript
Speaker 10: Oh, fair enough. And just the last one for me, and maybe you answered it in your response to Jonathan's earlier question, but I didn't quite catch it. But when you know the broader range of funding opportunities, is that different types of debt? Or is that dispositions? Or what should we expect on that?
And just a last one for me and maybe you answered it in your response to Jonathan's earlier question, but I didn't quite catch it but when you know broader.
Range of fungi funding opportunities is that does that different types of debt or is that dispositions are what what should we expect on that front.
Speaker 6: transcript
Speaker 6: Again, what we're trying to illustrate is that we are not going to be as dependent on the equity capital markets going forward as we have been historically.
Again, what we're trying to illustrate is that we are not going to be as dependent on the equity capital markets going forward as we have been historically.
Pammi Burr: Okay. Just with respect to maybe conversations with the tenants at this stage, you know, it sounds like the leasing pipeline, I think you mentioned Cecilia 1.1 million square feet. What are some of the issues, or what are some of the maybe feedback you're getting from tenants in terms of getting leases over the line in terms of, you know, is it, you know, slowing economy higher rates or just trying to understand their space needs, just curious what those conversations are like at this point.
Speaker 6: transcript
Speaker 6: There are multiple avenues open to us for other types of funding, selling non-managing half interests in existing assets, of course, is one of them, leveraging our platform.
There are multiple avenues open to us for other types of funding selling non managing half interest in existing assets of course is one of them.
Leveraging our platform.
Speaker 6: transcript
Speaker 6: is another collaborating with people who have local development expertise but also can provide funding to us based on the fact that we own the land and we own the density. So I think
Is another collaborating with people who have local development expertise, but also we can provide.
Pammi Burr: Pammi is, Michael, the feedback is consistent across our markets, and it is quite simply what it has always been, the debate or the negotiation is almost never about price, and almost always about the suitability, about the space for the user's needs. And that is absolutely the overriding consideration of people we serve. We are not a low cost provider of the state to earn in work space. We do not compete based on price.
The two us based on the fact that we own the land.
The density so I think these are things we wanted to explore before the pandemic as you know and we we were essentially.
Speaker 6: transcript
Speaker 6: These are things we wanted to explore before the pandemic, as you know, and we, we were essentially forced to focus on operations through the pandemic and through the downturn that we're now operating.
Forced to focus on operations through the pandemic and through the downturn that we're now operating in that going forward.
Speaker 6: transcript
Speaker 6: But going forward, we want to lever our operating and development platform.
We want to lever, our our operating and development platform more efficiently than we have in the past in the past, we basically levered, our access to capital and we did for a period of time.
Speaker 6: transcript
Speaker 6: more efficiently than we have in the past. In the past, we basically levered our access to capital and we did for a period of time have good access to low cost debt and equity. But we do want to lever our platform going forward so we can grow without the same degree of reliance on the equity capital markets and the debt capital markets.
Pammi Burr: We compete based on the suitability of our space and our mixed use of any richer of the neighborhoods, and that has been the case for years now, and it hasn't changed. As Cecilia mentioned, people are taking a little more time these days to make their decisions. And business leaders and boards are being more focused in terms of giving approval for longer term commitments. But for us, the differentiator is always the extent to which the space suits the needs of the user and not the price of space.
Have good access to low cost debt to equity.
But we do want to lever our platform going forward. So we can grow without the same degree of reliance on the equity capital markets of the debt capital markets.
Yeah.
Speaker 10: transcript
Speaker 10: That's very helpful. And I guess it should be think of this in terms of maybe sourcing capital from one specific project to invest in others, or would the idea be that you'd contribute your property as kind of the equity for anything, and the partner would put in the capital to build out the project.
That's that's very helpful and I guess should we think of this in terms of maybe sourcing capital from one specific project to invest in others or would the idea would be that you would contribute your property is kind of the equity for anything in the partner would put in there.
Capital to build out the project or does it.
Speaker 11: transcript
Speaker 11: Is it any number of potential possibilities? We actually believe, Matt, that we have incredible optionality in that regard.
Is it any number of potential possibilities we have.
We believe that that we have incredible optionality in that regard.
Pammi Burr: Of course, the users try to use their leverage to extract better financial terms from us. And in most circumstances, we are willing and able to resist that and put them to the choice of choosing our space or cheaper space. So there is nothing new in how tenants are behaving for us. There is only more time being taken in making the ultimate commitment to us. Because those commitments are made, you extrapolate them out over five or ten year terms.
Speaker 11: transcript
Speaker 11: And so there are assets where we could simply, our contribution becomes a land and the density and our more passive partner provide.
So.
There are assets, where we could simply our contribution becomes the land and the density and our more passive partner provides.
Speaker 6: transcript
Speaker 6: the bulk of if not all of the capital in order to execute on the intensification or the development. So yes, there is in our view, especially when the market restabilizes, and it will, there are in our view tremendous amounts of optionality that we have by virtue of what we already control and the concentrations we already have. And we are
Bulk if not all the capital in order to execute on the intensification of the development.
So yes, there are there is in our view.
Firstly, when the market re stabilizes and it will.
<unk> in our view trim.
Tremendous amounts of Optionality that we have by virtue of what we already control and the concentrations we already have.
And we are.
We were intent on exploiting that pre pandemic, but of course the pandemic.
Speaker 11: transcript
Speaker 11: We were intent on exploiting that pre-pandemic, but of course the pandemic delayed our ability to do that and the current cyclical downturn will delay it further. But as we look out into the future, we're going to be exploring those funding options.
Made our ability to do that in the current cyclical downturn will delay it further but as we look out into the future we're going to be exploring those funds.
Pammi Burr: They are significant commitments. But the basis for decision-making hasn't changed one eye over them. Got it. Thanks, Michael. Last one for me. I'm leasing costs. I do seem to have, on a per square foot basis, did seem to have stabilized a bit in the quarter. I guess as a percentage of the face rents. Can you just comment maybe on what may be drove that improvement, perhaps relative to last quarter, meaning Q2?
Funding options.
Speaker 6: transcript
Speaker 6: energetically, assiduously, and well.
Energetically.
What's the.
And.
With preference.
Pammi Burr: And then that may be a one-off or do you expect them to revert higher over the next year or so? Tommy, there was an anomalous couple of deals in Q2 that inflated our leasing costs. So what you see in Q3 is a more normalized level without anomalous transactions inflating the costs. So Q3 is a much better reflection of the norm than Q2 was. Thanks very much. I'll turn it back.
Speaker 6: transcript
Speaker 6: to the conventional form of funding that we've resorted to.
Two.
The conventional form of funding that we have resorted to.
Okay, no that absolutely makes sense I appreciate the color guys.
Speaker 1: transcript
Speaker 1: And again, if you'd like to ask a question, it's Star One on your telephone keypad. Your next question comes to line of Lauren Kelmar from Desjardins. Your line is open.
And again, if you'd like to ask a question at Star one on your telephone Keypad. Your next question comes from the line of Lorne Kalmar from James Hardie Youre line is open.
Speaker 3: transcript
Speaker 3: Thank you very much. Firstly, I just wanted to touch on the special distribution. I appreciate you guys included the cash component expected to be paid, but I was wondering if you'd give us sort of an idea of what you expected to be in aggregate if you factor in the units as well.
Thank you very much.
Firstly I just wanted to touch on the special distribution I appreciate you guys.
The cash component expected to be paid but I was wondering if could give us sort of an idea of what you expect it to be in aggregate. If you if you factor in the units as well.
Sumayya Saed: Your next question comes from a line of Sumayya Saed from CIBC. Your line is open. Thanks.
Okay.
Speaker 6: transcript
Speaker 6: We don't think it's relevant to our unit holders now to quantify what I'll call the non-cash component, primarily because it isn't a number that can be finalized until we're much closer to the end of the year. And also,
We we don't think it's relevant to our unitholders now to quantify what I'll call. The non cash component, primarily because it isn't a number that can be finalized until we're much closer to the end of the year and also.
Sumayya Saed: Good morning. I just want to start off by touching on some of your renewal leasing in the quarter. Looks like the term was a bit lower and the spread's a bit lower versus what you've accomplished historically. Any color on the rule in the quarter? The pretty deals specifically in terms of the renewal that happened in the period. I can't think of anything in particular to highlight terms of renewals in Q3. Okay, so we're trying to expect to revert to your historical five-year average, at least one future leasing. Absolutely. The weighted average term of our leasing has actually been pretty steady over the last few years. So I wouldn't expect the Q3 renewal terms to end past that. Okay, great.
When we publish that number we want to make sure that it is the result of the.
Speaker 11: transcript
Speaker 11: When we publish that number, we want to make sure that it is the result of the most diligent tax scrutiny possible. The VWC has been helping us in this regard, and we certainly are at the point where we deal, we can tell our unit hope there's what the cash component will be. The share component or the unit component.
The most diligent.
Tax scrutiny possible Pwc has been helping us.
In this regard and we certainly are at the point, where we feel we can tell our unitholders what the cash component will be.
The share component or the unit component.
Speaker 11: transcript
Speaker 11: has no immediate impact on our unit holders, as you know. It will actually boost their cost base a bit. But again, we don't wanna get into getting tax advice to our unit holders, although we're very intent.
Has no immediate impact on our unit holders as you know it will actually boost their cost base a bit but.
Again, we don't want to get into.
The tax advice to our unitholders, although we're very intent.
Sumayya Saed: I'm just going to touch more on your comments on being at an inflection point. What would you say is the biggest change you've seen versus, I guess recent quarters to support that comment? We had a very high level of tour activity in Q3. Higher than I would have expected given the, you know, August tends to be a slower month, but we had 306 tours in the quarter, well above our quarterly average of 250.
Speaker 11: transcript
Speaker 11: on protecting our unit holders to the extent we can and should with respect to tax liability. So we did discuss that and decided it was most prudent not to disclose it and it isn't something that is meaningful to our unit holders now or even when the ultimate share of considerations is quantified.
On protecting our unitholders to the extent, we can and should with respect to tax liability. So.
We did discuss that and decided it was most prudent not to disclose it and it isn't something that is meaningful to our unitholders.
Now or even when the ultimate share considerations is quantify.
Okay fair enough.
Speaker 12: transcript
Speaker 12: Okay, fair enough. And then, you know, we talked a little about inflection point. I think Cecilia mentioned, you know, you're a little bit more confident in renewal rates or in the rate of renewals in 2024 than 2023. And I was just sort of wondering, you know, with the potential recession on or economic slowdown on the horizon, you know, how does that sort of factor into the outlook? And what do you expect, you know, should a recession materialize the impact on office leasing momentum to be?
And then.
Talk a little bit of an inflection point I think Cecilia mentioned.
Sumayya Saed: And so that's really for us is something we keep a close eye on because it is a leading indicator for us. And so we continue to be encouraged by the level of interest. I mean, we clearly have the space that employers want in need in terms of attracting and retaining, you know, the talent that they need to run their businesses. So, and it's pretty consistent across the country. Okay.
We're a little bit more confident and renewal rates are in the rate of renewals. In 2024, then 2023 and I was just sort of wondering meal with potential recession or an economic slowdown on the horizon.
How does that sort of factor into the outlook and what do you expect should a recession materialize the impact on office leasing momentum to be.
We always do well in a downturn.
Speaker 11: transcript
Speaker 11: We have four years, both as a private entity prior to 2003 and subsequent lead. We did well in Calvary during the downturn. We obviously pouted, but we did much better than most. I am not concerned about...
We have four years, both as a private entity prior to 2003 and subsequent lead we did well in Calgary during the downturn, we obviously counted but we did much better than most.
Sumayya Saed: And this last day, I wanted to ask about your expectations for developing the data and you have line of sight to 2026. Is that based on your original performers or policing you've achieved, just wondering how much do current market conditions factor into those developer, don't I expectations? Most of that would be legally committed because the development that we're transferring from the end to rental or highly pre-leased, so there is a, it's mostly legally committed.
Cecilia Williams: Thank you, I'll turn it back.
I am not concerned.
About the.
Speaker 11: transcript
Speaker 11: in the recession, or indeed the recession we're in, having
The recession or indeed, the recession we're in.
Having.
Materially different impact on our users.
Speaker 11: transcript
Speaker 11: materially different impact on RE.
Speaker 11: transcript
Speaker 11: I think we're seeing real demand both in terms of...
I think we're seeing real demand.
In terms of actual indicators, leading indicators and I expect that will continue.
Speaker 11: transcript
Speaker 11: actual indicators and leading indicators, and I expect that will continue. Frankly, the environment for demand today is probably as bad as it could be. The sentiment is probably as negative as it could be. The misperception about office space is probably as profound as it could be. And notwithstanding all that, we're seeing demand. So we expect it to continue unless we enter a depression.
Matt Korak: Your next question comes from a line of Matt Korak from National Bank Financial. Your line is open. Good morning, guys. Just following up on my question with regard to the 46 million, can you give us a little color as to the cadence of how that comes on, maybe for the balance of 23 and 2024? I haven't rolled out my 2025 estimates yet, so I want to ask you for that, but just get a sense at how much is that 46 million?
Frankly, the environment for demand today is probably as bad as it could be the sentiment is probably as negative as it could be the misperception about office space is probably as profound as it could be and notwithstanding all of that we're seeing demand. So we.
We expect it to continue.
Unless we enter a depression like we did in the first half of the 19 nineties, but that is not in our opinion in the cards at all so we expect to continue to do well as we always have in a downturn.
Speaker 11: transcript
Speaker 11: like we did in the first half of the 1990s, but that is not in our opinion that ours at all. So we expect to continue to do well as we always have in a downturn.
Matt Korak: We should see over the next 12 to 18 months. Sure, it roughly comes in class between 24 and 25, leading up to the 46 million by early 2026. Okay, that's very helpful. And this is a small one, but for there's a small residual ground least, but the ground least payment seems to have gone to around zero. Is there any residual payment there, or should we just run that line item two? That's zero at this point.
Okay.
Speaker 12: transcript
Speaker 12: Okay. And then, I know I'm sure the Moody's downgrade was a bit of a surprise. I know the severity of it was a bit of surprise to us. I'm sure a lot of people on the street. And just given the discrepancy between Moody's and DPRS, has there been any consideration to potentially dropping Moody's as a rating agency?
And then I know I'm sure. The Moody's downgrade was a bit of a surprise I know the severity of it was a bit of a surprise to us I'm sure a lot of people on the street and just given the disc.
Discrepancy between Moody's and <unk> has there been any consideration to.
Dropping Moody's a rating agency.
Speaker 8: transcript
Speaker 8: It's just silly. I certainly normally is a one notch difference between movies and DVRF. So I wouldn't characterize it as a discrepancy. I think that's actually...
It's a fairly.
Normally is.
Notch difference between Moody's and DVR asked I would characterize it.
Matt Korak: Sorry, I'm not sure I can take this question. Sorry, not ground least. It's the least liability, like the amortization of it, I guess. The most of it went away with the sale of the UDC portfolio, but it looked like it was negative 56,000 maybe in the quarter. Anyway, it's neither here nor there if you don't have it in front of you. Okay, let me check into that and we'll call you. Okay, and then on, yeah, not material.
<unk> I think that's actually just pilot.
Speaker 2: transcript
Speaker 2: how those two rating agencies normally differ in terms of their assessments. And we remain committed to our investment grade rating. And like I said in my comments, we will be working towards improving it.
How those two rating agencies normally differ in terms of their assessments.
And we remain committed to our investment grade rating and like I said in my comments, we will be working towards improving yet.
Okay, and then just last one I'd be interested to get your thoughts on the outcome or I guess, maybe the lack thereof.
Speaker 12: transcript
Speaker 12: Okay, and then just last one, I'd be interested to get your thoughts on the outcome, where I guess maybe the lack thereof on Oxford's, I guess, attempted sale of 401 West George and 402 Dunsmear and Vancouver and sort of what you think maybe the re-throughs are from that on for valuation.
Oxford Vegas attempted sale of.
<unk> hundred Onewest, Georgia, and Florida, Dungeoneering Vancouver in and sort of what do you think maybe the read throughs are from from that on for valuations.
Matt Korak: So, on 810 San Antoine, I noticed that you've added the residential component of that project. Can you give us a little bit more color on that? And would you would you do that on your own? And it would it be rental or would you look to partner with somebody to build that out over time? Matt, it's Michael. That's a really lovely development site. It is adjacent to the flat scar DJ complex, which has unfolded so favorably for us since we acquired it.
Well I think.
Speaker 11: transcript
Speaker 11: Well, I think your question is premature because that deal from what I understand will get done and there will be a positive read through for office salience. So that deal is not dead. And indeed, there has been a great deal of...
Your question is premature because that deal from what I understand.
Will get done and there will be a positive read through for office values. So that deal is not dead.
And indeed.
There has been a great deal of <unk>.
Speaker 11: transcript
Speaker 11: there and from what I understand and again.
Traction there.
And from what I understand and again.
I can't.
Speaker 11: transcript
Speaker 11: I can't corroborate this, but from what I understand from a very good source, that deal is moving and exorably toward.
I can't corroborate this but from what I understand from a very good source.
Matt Korak: Initially, we were going to explore the possibility of creating the lab space on that site, and we haven't completely sidelined that possibility. But in order to do that, we would actually need a zoning amendment, and that is a rather lengthy and never certain process in the city of Montreal. We do, and we can, as of right, build rental residential and that area to the east is evolving as a very significant inner city residential area in Montreal.
That deal is moving an extra leap towards.
Speaker 11: transcript
Speaker 11: finalization and that the read-through will be positive. Now what I don't know
Finalization.
That the read through will be positive now what I don't know.
Speaker 6: transcript
Speaker 6: is what positive means to the person I was speaking with. Out.
What positive means to the person I was speaking with.
No.
Yes.
Speaker 13: transcript
Speaker 13: But I, I, I'm rather suspect that neither Oxford nor CPBID are going to let it go. That said, go at a price that is inappropriate given the quality of the asset they're trading.
I, rather suspect that neither Oxford, North CPP IV are going to let a good asset at a price that is inappropriate.
<unk>.
Given the.
The quality of the asset Theyre trading.
Matt Korak: So, we think the better approach and the one that's sort of more consistent with the zoning that's in place is to certainly get approval for rental residential development. And yes, we are more than competent to execute both the development and the ongoing management of rental residential in any of the cities we operate. Fair enough. And just the last one for me, and maybe you answered it in your response to Jonathan's early question, but I didn't quite catch it.
Okay that was a that was all very helpful. Thank you both so much.
Your next question comes from the line of Mario <unk> from Scotiabank. Your line is open.
Speaker 1: transcript
Speaker 1: Your next question comes from a line of Mario Sarak from Scotia Bank. Your line is open.
Speaker 14: transcript
Speaker 14: Thanks, good morning and thanks for taking my question. Just a couple of clarification questions. First on the occupancy comment by year-end getting back to where you started the year, which I believe was around 91% least versus the 88% Q3. So call it a 300 basis point increase. Is that expected pure occupancy gains or could it be influenced by expected PUD reclases that you mentioned would continue to be active going into 24?
Thanks, Good morning, and thanks for taking my questions just a couple of clarification questions.
First on the occupancy comment by year end and getting back toward you started the year, which I believe was around 91% leased versus the 88% in Q3, so call. It a 300 basis point increase is that.
<unk> pure occupancy gains or it could be influenced by expected re classes kind of that you mentioned would continue to be active going into 'twenty four.
Matt Korak: But when you know the broader range of funding, funding opportunities, is that, is that different types of debt or is that disposition or what should we expect from that front? Again, what we're trying to illustrate is that we are not going to be as dependent on the equity capital markets, going forward as we have been historically. There are multiple avenues open to us for other types of funding, selling non-managing half-interest in existing assets, of course, is one of them, leveraging our platform is another collaborating with people who have local development expertise, but also can provide funding to us based on the fact that we own the land and we own the density.
Hi, Gary its Cecilia it's based online is not based on Ped sensors based on the deals that we currently have under negotiation.
Speaker 8: transcript
Speaker 8: It's just silly. It's based on, it's not based on PV transfers. It's based on the, the, the deal that we currently have under negotiation and, and just the fact that if they get done, then we will achieve our target. And it's a n if because we're still working on it, but there is certainly a possibility that we will still end the year and higher than we started.
And just the fact that they get done then we will achieve our target and then his because we're still working on it but there is certainly a possibility that we will still end the year and higher than we expected.
Speaker 13: transcript
Speaker 13: Yeah, I think if 30% of the deals land, and that's a pretty good ratio, so there's no guarantee. If 30% of deals land, roughly, we get where we...
Yes, I think it's 30% yields land and Thats a pretty good ratio. So there's no guarantee if 30% of deals land roughly we get where we.
Aspire to be by year end, yes.
Speaker 13: transcript
Speaker 13: aspire to be by your end. Yeah. If it was 50%, I'd be gasping. 30% is still not in the bag, but it's achieved.
If it was 50%.
It'd be gasping, 30% is still not in the bag, but it's achievable.
Speaker 2: transcript
Speaker 2: Yeah, the square feet that will be transferred from to you need to the rental portfolio queue for won't have a material impact on our leased area.
Yes, the square feet that will be transferred from T&D to the rental portfolio.
Matt Korak: So I think these are things we wanted to explore before the pandemic, as you know. And we were essentially forced to focus on operations through the pandemic and through the downturn that we're now operating in. But going forward, we want to lever our operating and development platform more efficiently than we have in the past. In the past, we basically levered our access to capital. And we did for a period of time have good access to low cost debt equity, but we do want to lever our platform going forward so we can grow without the same degree of reliance on the equity capital markets and the debt capital markets.
Q4 <unk>.
Have a material impact on our on our from each area.
Okay, Okay, and then I guess similarly any potential.
Speaker 14: transcript
Speaker 14: Okay, and then similarly, any potential transfer from rental into PUD would similarly not have an impact.
Transfer from rental into <unk> would similarly, not have an impact in Q4.
Yes.
Speaker 2: transcript
Speaker 2: No, and I can't think of anything that will be going into PUD or even barcode.
I think if anything that will be going into <unk>.
<unk>.
Okay.
Speaker 14: transcript
Speaker 14: Okay. And then just coming back to the retention ratio, 56% this quarter, 52% last quarter, Cecilia, I think you mentioned the expectation that it's moving higher in 24 relative to 23, does that plan involved getting back to historical average, which I think has been kind of the 70% range or just simply kind of higher than 20%.
Okay.
And then just coming back to the retention ratio.
56% this quarter, 52% last quarter Cecilia I think you mentioned the expectation that it's moving higher.
In 24 relative to 23 does that plan involves getting back to historical average, which I think has been kind of in the 70% range or just simply kind of higher than 23.
Speaker 8: transcript
Speaker 8: No, it'll be higher than 2023, but not quite back to our historical average, but moving in that direction. That would be our expectation for 2024.
No.
Matt Korak: That's very helpful. And I guess it should be think of this in terms of maybe sourcing capital from one specific project to invest in others or would the idea be that you'd contribute your property is kind of the equity for anything and the partner would put in the capital to build out the project or is it any number of potential possibilities? We actually believe that we have incredible optionality in that regard.
It'll be higher than 2023, but not quite back to our historical average, but moving in that direction that would be our expectation for 2024.
Speaker 14: transcript
Speaker 14: Okay. On the development EBIDA of 46 million that you referenced at the start of 26, how should we think about the FFO impact from that 46 million kind of assuming interest rates remain where they are today for the next two years? Just in terms of just trying to understand because the capitalized interest has kind of moved down a little bit. So if you had an FFO or an expected FFO at the start of 26 from development collections from now, that you were using a FFO yourself.
Got it okay.
On the development EBITDA of $46 million that you referenced at the start of 2006, how should we think about the <unk> impact from that 46 million kind of assuming interest rates remain where they are today for the next two years.
Just in terms of just trying to understand because the capitalized interest is kind of a downward move around a little bit. So if you had an <unk> or an expected <unk> at the start of 2006 from development completions from now that would be helpful.
Matt Korak: And so there are assets where we could simply our contribution becomes the land and the density and our more passive partner provides the bulk of if not all the capital in order to execute on the intensification of the development. So yes, there are there is in our view, especially when the market restabilizes and it will, there are in our view, tremendous amounts of optionality that we have by virtue of what we already control and the concentrations we already have.
Speaker 2: transcript
Speaker 2: Yeah, that's something that will be outlining as part of our year and outlook. I think January 31st is our call. Marios will be providing more call that around the F and FO impact, but that's point.
Yes, it was that something that will be outlining as targeted buyers at year end outlook.
Jesse January 31st at our call.
So we'll be providing more color around the <unk> impact at that point.
Okay, Yes.
Speaker 11: transcript
Speaker 11: Okay. Yeah. And we do have obviously an estimate, but there are more puts and takes.
Ill.
We do have obviously an estimate.
But there are more puts and takes on the <unk> as you know than there are on EBITDA. So we're very confident about the EBITDA number.
Speaker 13: transcript
Speaker 13: On FFO, as you know, then there are on EBITDA. So we're very confident about the EBITDA number. But when you get to FFO, you've got to determine the impact of decalpitalization of interest and a number of other variables. So there are more assumptions built into the FFO number. That said,
Matt Korak: And we are. We were intent on exploiting that pre-pandemic, but of course the pandemic delayed our ability to do that and the current cyclical downturn will delay it further. But as we look out into the future, we're going to be exploring those funding options energetically, assiduously, and with preference to the conventional form of funding that we've resorted to. That absolutely makes sense. I appreciate the color. And again, if you'd like to ask a question, it's star one on your telephone keypad.
When you get to asset <unk> got to determine the impact of the capitalization of interest and a number of other variables. So there are more assumptions built into the <unk> number that said, we feel for our own purposes and for our constituents.
Speaker 6: transcript
Speaker 6: We feel for our own purposes and for our constituents, we should endeavor to...
Should endeavor to revise that number.
Speaker 13: transcript
Speaker 13: provide that number in conjunction with our year end statements and we will.
In conjunction with our year end statements and we will.
Yes, I would agree with that sentiment. So thank you for that.
Speaker 14: transcript
Speaker 14: I would agree with that sentiment. So thank you for that. And then the last question for Michael. Yeah, you talked about the Vancouver asset and that potentially moving forward. You also talked about increased kind of appetite or increased.
And then maybe last question for Michael.
But you thought you talked about.
The Vancouver asset and that potentially moving forward.
You also talked about increased kind of appetite or increased.
Lorne Kalmar: Your next question comes to line of Lorne Kalmar from Desjardins. Your line is open. Thank you very much.
Speaker 14: transcript
Speaker 14: sources of funding going forward, part of which could be JVs that you discussed.
Sources of funding going forward part of which could be jv's.
You discussed pre pandemic.
Lorne Kalmar: Firstly, I just wanted to touch on the special distribution. I appreciate you guys included the cash component. I want you to give us sort of an idea of what you expected to be an aggregate if you factor in the units as well. We don't think it's relevant to our unit holders now to quantify what I'll call the non-tash component, primarily because it isn't a number that can be finalized until we're much closer to the end of the year.
Speaker 14: transcript
Speaker 14: The perception, I would say, in the market, is that all the transactions just can't be done today. When you look at your portfolio and you think about bringing on JV partners for select assets,
The the perception I would say in the market is that office transactions just can't be done today.
Today, so the Gwen and when you look at your portfolio and you think about bringing on JV partners for select assets.
Speaker 14: transcript
Speaker 14: What is the impediment to doing so? Is it price? Is it just lack of appetite? Maybe just a bit of color in terms of how you perceive institutional appetite for allot.
What is the impediment to doing so because it is it price is it just lack of appetite maybe just a bit of color in terms of how you perceive institutional appetite for allied portfolio.
Yes, it's interesting Mario that perception is wrong of course.
Speaker 6: transcript
Speaker 6: Yeah, it's interesting, Mario, the perception is wrong.
Lorne Kalmar: And also, when we publish that number, we want to make sure that it is the result of the most diligent tax scrutiny possible. The VWC has been helping us in this regard, and we certainly are at the point where we feel we can tell our unit holders what the cash component will be. The share component or the unit component has no immediate impact on our unit holders, as you know. We'll actually boost their cost base a bit.
Speaker 13: transcript
Speaker 13: Office pays our executive.
Office trades are executable.
Speaker 13: transcript
Speaker 13: We sold eight plus the commerce and Montreal, which is an office asset. It was part portfolio.
We sold eight plus the commerce in Montreal, which is an office asset.
It was part of portfolio.
Speaker 13: transcript
Speaker 13: acquisition we made five or six years ago. It was a property we didn't like. We loved the other three, but we didn't like eight plastic corners. And we allocated about eight and a half million to that acquisition then, and we sold it for 20 million. So office assets can be...
Acquisition, we made five or six years ago. It was a property that we didnt like we love the other three we didnt like 856 years.
And we allocated about $8 5 million to that acquisition then we sold it for $20 million. So office assets can be sold there was a trade on King Street West.
Speaker 11: transcript
Speaker 11: There was a trade on King Street West, a little building near our King's Worms Center, that someone tried to flog to us many, many times. It traded stock by, I believe, or in a half-ish or so, and it's nowhere near of the quality of allies portfolio.
A little building near our key important center.
Lorne Kalmar: But again, we don't want to get into giving tax advice to our unit holders, although we're very intent on protecting our unit holders to the extent we can and should with respect to tax liability. So we did discuss that and decided it was most prudent not to disclose it, and it isn't something that is meaningful to our unit holders now, or even when the ultimate share considerations is one of five. Okay, fair enough.
Debt.
Someone tried to flock to us.
Many many times.
It traded.
Five I believe four and a half ish or so and it's nowhere near of the quality of Allied portfolio.
Speaker 13: transcript
Speaker 13: assets can and do trade. They trade more quietly than they have in the past. Nobody wants to be in the position we were in with respect to our UDC portfolio, having to tell the world that we're going out to sell something, but there are trades that do occur. Bye.
Assets can and do trade they trade more quietly.
And they have in the past nobody.
Wants to be in the position we were in with respect to our UTC portfolio having to.
Michael Emory: And then you talk about an inflection point, I think Cecilia mentioned you're a little more confident in renewal rates and the rate of renewals in 2024 than 2023. And I was just sort of wondering, you know, with the potential recession on our economic slowdown on the horizon, you know, how does that sort of factor into the outlook, and what do you expect, you know, should a recession materialize the impact on obviously some momentum to be.
But we're going out to sell something.
But there are trades that do occur.
But.
Speaker 11: transcript
Speaker 11: More importantly, when I articulate...
More importantly, when I articulate this aspiration.
Speaker 13: transcript
Speaker 13: this aspiration, I see it sort of not even materializing for the next couple of years. The next couple of years, the entire team is going to be focused, innocently, on completing the developments and completing the upgrades to which we are irretrievably committed to all. That is our focus, as well as leasing the vacant space. So I don't even imagine
See it sort of not even materializing for the next couple of years. The next couple of years.
The entire team can be focused sensuously on completing the development and completing the upgrades to which we are irretrievably committed today that is our focus as well as leasing the vacant space. So I don't even imagined.
Michael Emory: We always do well in a downturn. We have four years, both as a private entity prior to 2003 and subsequent lead. We did well in Calvary during the downturn. We obviously pelted, but we did much better than most. I am not concerned about. The pending recession, or indeed the recession were in, having materially different impact on our users. I think we're seeing real demand, both in terms of actual indicators and leading indicators, and I expect that will continue.
Looking for new capital.
Speaker 13: transcript
Speaker 13: looking for a new capital in 24 and 25. Now, look at some great opportunity comes along. We may...
24% 25, now look at some great opportunity comes along.
We may we may look at it but I don't expect that to happen and frankly, we're not going to be predisposed to looking at those opportunities in the next two years.
Speaker 13: transcript
Speaker 13: We may look at it, but I don't expect that to happen. And frankly, we're not going to be predisposed to looking at those opportunities in the next.
Speaker 13: transcript
Speaker 13: two years, they won't be forthcoming and we're not gonna be looking for them or looking at them even in the unlikely event that they are.
They won't be forthcoming and we're not going to be looking for them or looking at even in the unlikely event that they are coming because the stuff. We want is in strong hands. So it's not coming out.
Speaker 13: transcript
Speaker 13: because the stuff we want is in strong hands. So it's not coming out at a discount. More importantly, our overriding commitment.
At a discount more importantly, our overriding commitment for.
Michael Emory: Frankly, the environment for demand today is probably as bad as it could be, the sentiment is probably as negative as it could be, the misperception about office base is probably as profound as it could be, and I'm standing all that, we're seeing demand. So we, we expected to continue, unless we enter a depression, like we did in the first half of the 1990s, but that is not in our opinion, in ours at all. So we expect to continue to do well, as we always have in a downturn.
Speaker 13: transcript
Speaker 13: for 24 and 25 is to complete the developments which are on the cusp of completion now happily.
For 'twenty four 'twenty five is to complete the developments, which are on the cusp of completion now happily.
Speaker 11: transcript
Speaker 11: and to complete the upgrades. The upgrades, of course, are in Montreal. The developments predominantly in Toronto and the upgrades in Montreal are going extraordinarily well, but we need to bring them home and that requires concerted effort. So I don't see us looking for capital in the next couple of minutes.
And to complete the upgrades the upgrades of course are in Montreal, the developments predominantly in Toronto and the upgrades in Montreal is going extraordinarily well.
We need to bring them home and that requires concerted effort. So I don't see us looking for capital in the next couple of years.
Speaker 11: transcript
Speaker 11: I really don't, but you know, if we get out three years, if we be then,
I really don't but if.
Cecilia Williams: Okay, and then I know, I'm sure the Moody's downgrade was a bit of a surprise, I know the severity of it was a bit of a surprise to us, I'm sure a lot of people on the street, and just given the discrepancy between Moody's and DVRS, has there been any consideration to potentially dropping Moody's as a rating agency? It's just silly, there normally is a one notch difference between Moody's and DVRS, so I wouldn't characterize it as a discrepancy, I think that's actually just how those two rating agencies normally differ in terms of their assessment, and we remain committed to our investment grade rating, and like I said in my comments, we will be working towards improving it.
We get out three years it would be then.
We would be.
Speaker 13: transcript
Speaker 13: exploring alternative sources of capital. And I do expect the market then will be at least more stable and perhaps more transparent or at least less body than it is now. But what gives us the most amount of comfort is, is really we've set the stage for five years.
Exploring alternative sources of capital.
And I do expect the market then we will be at least more stable.
And perhaps more transparent or at least less quality than it is now.
But what gives us the most amount of comfort is really we've set the stage for five years.
Sure.
Speaker 11: transcript
Speaker 11: of real stability on completion of growth that's embedded in our portfolio today and in our development program. But so.
Real stability on completion of growth that's embedded in our portfolio today and in our development program, but so.
Assets are trading and assets are tradable, we wouldn't other than noncore assets or unique situations, we wouldn't be looking to trade any.
Speaker 6: transcript
Speaker 6: assets are trading and assets are tradeable. We wouldn't other than non-core assets or unique situations, we wouldn't be looking to trade anything the next time.
Michael Emory: Okay, and then just last one, I'd be interested to get your thoughts on the outcome, where I guess maybe the lack thereof on Oxford's, I guess, attempted sale of 401 West Georgia and 402 Dunsmear and Vancouver, and sort of what you think maybe the breakthroughs are from that on for valuations. Well, I think your question is premature, because that deal from what I understand will get done, and there will be a positive read through for office salience, so that deal is not dead, and indeed there has been a great deal of traction there, and from what I understand, and again, I can't corroborate this, but from what I understand from a very good source, that deal is moving and exorably towards finalization, and that the read through will be positive.
In the next couple of years.
Got it okay.
Speaker 14: transcript
Speaker 14: Okay, thank you and Cecilia for the color.
Okay. Thank you and Cecilia for the color.
Okay.
Hello.
Speaker 1: transcript
Speaker 1: And there are no further questions at this time. I will turn the call back over to Cecilia Williams for some final closing remarks.
And there are no further questions at this time I will turn the call back over to Cecilia Williams for some final closing remarks.
Speaker 2: transcript
Speaker 2: Thanks, Robin, and thanks everyone for joining our conference call. We'll keep you updated on our progress going forward.
Thanks, Rob and thanks, everyone for joining our conference call, we'll keep you updated on our progress going forward.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker 1: transcript
Speaker 1: This concludes today's conference call. Thank you for your participation. You may now disconnect.
[music].
Michael Emory: Now, what I don't know is what positive means to the person I was speaking with. But I rather suspect that neither Oxford nor CPVID are going to let it go that set go, at a price that is inappropriate, given... The quality of the asset they're trading.
Michael Emory: Okay, that was, that was all very helpful. Thank you both so much.
Mario Saric: Your next question comes from a line of Mario Saric from Scotia Bank. Your line is open. Thanks.
Cecilia Williams: Good morning and thanks for taking my question. Just a couple of clarification questions. First on the occupancy comment by year-end getting back to where you started the year, which I believe was around 91% released versus the 88% in Q3. So call it a 300 basis point increase. Is that expected pure occupancy gains or could it be influenced by expected PUD re-classes kind of that you mentioned would continue to be active going at the 24?
Cecilia Williams: Hi, Mario. It's Cecilia. It's based on, is not based on PUD transfers. It's based on the, the deal that we currently have under negotiation and, and just the fact that if they get done, then we will achieve our target. And it's an if because we're still working on it, but there is certainly a possibility that we will still end the year higher than we started. Yeah, I think if 30% of the deals land and that's a pretty good ratio.
Cecilia Williams: So there's no guarantee if 30% of deals land roughly, we get where we aspire to be by year-end. Yeah. If it was 50%, I'd be gasping. 30% is still not in the bag, but it's achievable. Yeah, the square feet that will be transferred from PUD to the rental portfolio Q4 will have a material impact on our, on our leased area. Okay. And then similarly, any potential transfer from rental into PUD would similarly not have an impact in Q4.
Cecilia Williams: No, and I can't think of anything that will be going into PUD or even more. Yeah. Okay. And then just coming back to the retention ratio 56% this quarter, 52% last quarter, Cecilia, I think you mentioned the expectation that it's moving higher in 24 relative to 23. Does that plan involve getting back the historical average, which I think has been kind of the 70% range or just simply kind of higher than 23?
Cecilia Williams: No, it'll be higher than 2023, but not quite fast to our historical average, but moving in that direction. That would be our expectation for 2024. Okay. On the development EBIDA of 46 million that you referenced at the start of 26, how should we think about the FFO impact from that 46 million kind of assuming interest rates remain where they are today for the next two years. Just in terms of trying to understand because the capitalized interest has kind of moved down a little bit.
Cecilia Williams: So if you had an FFO or an expected FFO at the start of 26 from development completions from now, that would be helpful. Yeah. Well, that's something that will be outlining as part of our year and outlook. I think January 31st is our call, Mario, so we'll be providing our call that around the FFO impact at that point. We do have, obviously, an estimate, but there are more puts and takes on FFO, as you know, than there are on EBITDA.
Cecilia Williams: So we're very confident about the EBITDA number. But when you get to FFO, you've got to determine the impact of de-capitalization of interest and a number of other variables. So there are more assumptions built into the FFO number. That said, we feel for our own purposes and for our constituents, we should endeavor to provide that number in conjunction with our hearing statements, and we will. Yeah, I would agree with that sentiment, so thank you for that.
Michael Emory: And then the last question for Michael. You talked about the Vancouver asset and that potentially moving forward. You've also talked about increased appetite or increased sources of funding going forward, part of which could be JVs that you discussed pre-pandemic. The perception, I would say, in the market is that office transactions just can't be done today. So when you look at your portfolio and you think about bringing on JV partners for select assets, what is the impediment to doing so?
Michael Emory: Is it price? Is it just lack of appetite? Maybe just a bit of color in terms of how you perceive institutional appetite for Allied portfolio? Yeah, it's interesting the perception is wrong, of course. Office trades are executable. We sold eight plus the commerce and Montreal, which is an office asset. It was part portfolio acquisition we made five or six years ago. It was a property we didn't like. We loved the other three, but we didn't like eight plus the commerce.
Michael Emory: And we allocated about eight and a half million to that acquisition then, and we sold it for 20 million. So office assets can be sold. There was a trade on King Street West, a little building near our key working center that someone tried to flog to us many, many times. It traded five, I believe, or in a half-ish or so. And it's nowhere near of the quality of Allied portfolio. So assets can and do trade.
Michael Emory: They trade more quietly than they have in the past. Nobody wants to be in the position we were in with respect to our UDC portfolio, having to tell the words that we're going out and selling something. But there are trades that do occur. But more importantly, when I articulate this aspiration, I see it sort of not even materializing for the next couple of years. The next couple of years, the entire team is going to be focused innocently on completing the development and completing the upgrades to which we are irretrievably committed to all that is our focus, as well as leasing the vacant space.
Michael Emory: So I don't even imagine looking for a new capital in 24 and 25. Now look, if some great opportunity comes along, we may look at it, but I don't expect that to happen. And frankly, we're not going to be predisposed to looking at those opportunities in the next two years. They won't be forthcoming, and we're not going to be looking for them. We're looking at them even in the unlikely event that they are, because the stuff we want is in strong hands, so it's not coming out at a discount.
Michael Emory: More importantly, our overriding commitment for 24 and 25 is to complete the developments, which are on the cusp of completion now happily and to complete the upgrades. The upgrades, of course, are in Montreal, the developments predominantly in Toronto and the upgrades in Montreal are going extraordinarily well, but we need to bring them home and that requires a concerted effort. So I don't see us looking for capital in the next couple of years.
Michael Emory: I really don't, but if we get out three years, it would be then that we would be exploring alternative sources of capital, and I do expect the market then will be at least more stable and perhaps more transparent or at least less body than it is now. But what gives us, the most about a comfort is really we've set the stage for five years of real stability on completion of growth that's embedded in our portfolio today and in our development program. But so assets are trading and assets are tradeable. We wouldn't, other than non-core assets or unique situations, we wouldn't be looking to trade any extra meters.
Michael Emory: Got it. Okay, thank you and Cecilia for the color.
Cecilia Williams: And there are no further questions at this time. I will turn the call back over to Cecilia Williams for some final closing remarks. Thanks, Robin. Thanks everyone for joining our conference call. We'll keep you updated on our progress going forward. This concludes today's conference call. Thank you for your participation. You may now disconnect.