Q3 2023 InterRent Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to the MTO N Q3, 2023 earnings call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and.
Anthony session.
During this call you are quite immediate assistance. Please press star zero for the operator.
It is being recorded on Wednesday November 1st 'twenty 'twenty thing.
I would now like to turn the conference over to Renee way. Please go ahead.
Welcome everyone and thank you for joining <unk> Q3, 2023 earnings call. My name is when a way director of Investor Relations and sustainability you can find a presentation to accompany today's call on the Investor Relations section of our website under events and presentations.
We're pleased to have Bob Patsy, President and CEO, Curt Miller, CFO and Dave levels feel on the line today. The team will provide some prepared remarks and I will open it up to questions.
Before we begin I want to remind listeners that certain statements about future events stayed on this conference call are forward looking in nature.
Any such information is subject to risks uncertainties and assumptions that could cause actual results to differ materially.
For more information please refer to the cost stay statements all forward looking information in the news release and MD&A dated November one 2023.
During the call management will also refer to certain non ifr's measures. Although their REIT believes these measures provide useful supplemental information about its financial performance. They are not recognized measures 19, not have standardized meanings under armour.
Please see the risk MD&A for additional information regarding the non <unk> financial measures, including reconciliations to the nearest ifr as measures.
But over to you thanks, Renee and good afternoon, everyone.
Let's get started with an overview of our operational performance on slide five.
As you can see a track record of growing average monthly rent continued its positive momentum during the quarter.
For our total portfolio EMR increased by seven 8% year over year and seven 3% on the same property basis.
This robust EMR growth was underpinned by strong increases consistently observed across all markets.
While we did experience a margin dip in occupancy by 40 basis points compared to the previous year for both total and same operating portfolios.
Occupancy rate remains steady at 95, 2% in.
In line with our historical performance strategic approach.
We're pleased to see strong leasing momentum in our Montreal portfolio, which accounts for about a quarter of our total portfolio.
I can see in the greater Montreal region decreased by 380 basis points year over year, driven by sustained recovery in downtown and urban locations.
The uptick in the portfolio wide vacancy was primarily concentrated with those specific submarkets our portfolio where.
Price discovery program to not adjust quickly enough when seasonal demand studies to ship.
Notably these markets created drama on Hamilton area, Greater Vancouver area, and other Ontario took the lead in the EMR growth for the quarter with each one achieving growth rates of 8% or higher.
Originally we are witnessing robust leasing activity in the first half with Q4, and we are confident that the occupancy levels will revert to their historical norms.
Into 2024.
Dave will provide more details on this later in the call.
Over to slide seven for an overview of our financial performance.
<unk> report, yet again double digit.
Same property NOI growth at 10, 5%.
Our operating margins increased by a healthy 140 basis points year over year to 67, 6% the highest level since Q3, 2019 and firmly return to pre pandemic levels. This was driven by consistent revenue expansion, coupled with our disciplined management of operating expenses.
Despite the persistent new reality of higher financing costs, our topline improvements have been able to slow down to enhance bottom line performance as seen on the chart on the right hand side.
<unk> increased four 9% to $21 3 million.
On a per unit basis was up four 3% to 14.6.
Our third consecutive quarter.
<unk> growth.
<unk> increased six 3% to $18 9 million or four 9% increase to $12.09 on a per unit basis.
Taking a closer look at our balance sheet.
Solid financial position, our debt to gross book value at 38, 6% as favorably position that the board and within the industry.
We have a comfortable level of 268 million of available liquidity as of October 25th.
Stable available liquidity and they significantly enhance that profile, where in a robust position to pursue our strategic initiatives, even in the face of market fluctuations and challenges.
Dave over to you just take us through some of the operating highlights.
Thanks, Brad as Brad previously mentioned vacancy in September while in line with our strategic approach experienced a slight uptick.
This was mainly isolated to specific suburban markets with our GTH ha and other Ontario portfolios.
Our proactive approach, where we deploy revenue maximization program to explore price elasticity across our diverse regions has enabled us to consistently deliver outside rent growth.
Our pricing strategy as flexible as we continuously evaluate and adapt in this case, we have implemented targeted adjustments on submarket specific level.
It's important to emphasize that we continue to strategically except slightly higher vacancy to position ourselves for optimal revenue growth, particularly considering the industry wide trend of reduced turnover.
Encouragingly, we have been seeing positive developments pointing to robust leasing activities.
For the remainder of the year in September we observed a substantial increase in the number of leads across all regions and the number of tours has seen a significant growth in areas with greater availability.
And the GTH, a and other Ontario regions tours have nearly doubled compared to the previous year early trends indicate that vacancy will be absorbed and we are well on course to end the year with over 96% occupancy without compromising our average monthly rental growth.
Slide 11 shows a breakdown of our operating expenses, which came in at $19 $3 million for the quarter operating expenses for the quarter are up 4% year over year, while operating revenue grew by eight 6% on a per suite basis. Our operating expenses came in at $1515 an increase of three 8%.
Compared to the third quarter of last year. This improvement was driven by reduced utility costs, which were $1 million lower year over year or 60 basis point reduction as a percentage of revenue.
During the quarter, we achieved 14% savings on natural gas costs due to a combination of lower gas prices and decreased usage.
Thanks to our effective energy efficiency programs electricity costs are also down slightly over last year. Despite the larger portfolio under ownership, we continue to manage electricity costs through our hydro sub metering initiative, which reduced electricity costs by 37, 9% for the quarter.
Property taxes for the quarter increased by <unk> $3 million year over year to $6 $3 million as a result of our expanding suite count and minor annual rate increases we are constantly reviewing property tax assessments and making individual property tax appeals when necessary.
Turning to slide 12, we maintained a highly strategic approach to our capital expenditures year to date, we've directed 11% of our capital expenditure to maintenance capex, ensuring our communities remain clean safe and well managed offering our residents a sense of pride in their homes.
Over the course of this year, 89% of our capital expenditures have been allocated to value add opportunities consistent with our historical norms or reposition suites as demonstrated at the right hand side of the slide continue to deliver substantial benefits in terms of both occupancy and NOI margin.
<unk> non reposition suites as of September 32598 suites, consisting of 20% of our portfolio are at various stages in the repositioning programs representing significant future potential for rental growth.
Turning to slide 13, a quick update on the slate are first office conversion project during the quarter, we completed all interior renovations, including all of the entities on the rooftop and a lounge area and have now made them available to our residents leasing activities are progressing well despite ongoing construction on broad Street.
By the city of Ottawa lease rate has already surpassed 84%.
As of the end of October and we are confident that our trajectory towards stabilization, which we expect to achieve before the year's end.
With its central location, just steps to the Parliament Hill and close to two other stations the slate remains a desirable destination for students and young professionals.
With that I'll hand, it over to Kurt to discuss our balance sheet and sustainability efforts.
Thanks, Steve.
As expected and based on our quarterly review with our external appraisers, we have witnessed upward adjustments in cap rates during the quarter.
Our weighted average is currently at four 2% an increase of 15 basis points from the last quarter driven by moderate cap rate expansion across all regions.
The bank of Canada, 10 year bond yield has increased more than 80 basis points since the year's outset, including a 50 basis point increase in September alone.
As a result, the transaction market is experiencing minimal activity.
Despite subdued transaction activities, we've adjusted our cap rates in anticipation that rates are not set to revert in the near term.
We'll continue to monitor market dynamics and collaborate with our external appraisers to adjust our cap rates accordingly.
Since the fourth quarter of 2022.
When removing the impact of the Ottawa properties sold in the quarter, we have adjusted cap rates by 19 basis points through the first three quarters of this year.
Slide 16 shows the staggered maturity profile of our mortgages, we continue to pursue this strategy to enhance our flexibility and mitigate our exposure to renewal rates.
No more than 14% of our mortgage debt is coming due in the next four years.
For the remainder of this year, we had $61 3 billion of mortgages maturing with an average interest rate of five 9%.
Our 2024 maturities carry a weighted average interest rate of 533%.
And as such we anticipate our 2024 mortgages being renewed at or below this range.
Which will significantly reduce the headwind we've been facing over the last year.
Our floating rate exposure continues to move in the right direction, finishing the quarter at five 7%, including our line of credit debt a moderate decrease from the same period last year, which was up seven 9%.
By continuing to fix our interest rate cost, we're actively mitigating our exposure to market volatility and proactively managing our interest rate expense.
We are excited to highlight some remarkable sustainability milestones from the quarter.
In September our annual Mike Mccann Charity Golf tournament took place, bringing together hundreds of supportive partners from various organizations.
<unk> successfully raised an incredible $167 million, bringing our cumulative total to $8 2 million since the inception of the tournament.
All proceeds from this event will be directed to support various charities within our communities, including the boys and girls club habitat for humanity and shepherds of good hope just to name a few.
While those who joined US at the event, we once again extend our heartfelt gratitude for your support and generosity.
We're also making significant headway in our building certification efforts in October we announced the successful certification of our initial six communities through the Canadian rental building program.
During this process. We've also met the requirements for corporate level documentation and employee training paving the way for further certifications in the near future.
This achievement is a well deserved testament to the excellence of our buildings and the dedication of our onsite teams.
We are committed to expanding our CRB program and anticipate more announcements and more certifications in the months ahead.
Earlier. This month, we also received our 2023 grasp of results.
Where we successfully improved our score from the previous year and maintained the Green Star designation.
We've also earned an a rating on aggressive public disclosure survey.
Performing the global average and our comparison group average.
I'll turn things back to Brad to walk through our capital allocation.
Thanks, Curt turning to slide 20, we're pleased to provide an update on our recent strategic moves last quarter. We shared news about the successful sell about 54 suite property in Ottawa, bringing total proceeds of $11 5 million.
This transaction was finalized on August 30th approximately 2 million of the proceeds were allocated from our NCI B program.
Allowing us to acquire a total of 157200 units at a weighted average price per unit of $12 71.
As disclosed in Q2, we had identified bears assets that align with our strategic disposition criteria. However, the investment community overall sentiment has been cautious resulted in muted deal volumes.
Additionally, the recent fluctuations in the bond market hub influences the prospects for dispositions in the immediate term.
Despite these factors we remain committed to maintaining a disciplined approach when evaluating capital recycling opportunities.
Moving to slide 21, we announced last quarter, our commitment to purchase 25% in the second office conversion project and the Ottawa.
Why did the share light on this exciting new project.
To a development pipeline.
360, Lloyd's our second office comparison downtown Ottawa.
I will add 139 residential homes, two addresses that ongoing shortage for rental units.
Currently the adaptive reuse projects as in the site plan approval process, having already secured approval for minor variances from the city of Ottawa in October.
We anticipate full site plan approval in Q4, this year with preliminary investigative demolition and progress full demolition is scheduled for Q1 next year, followed by the reconstruction starting in Q2 with.
We're taking all of this project with pride and confidence alongside a trusted partner C. L B group and a respected institutional partner.
Well done on the valuable experiences and lessons learned from the slate, we're well prepared to meet the new project. A success, we're encouraged to see the commitment of the federal government to.
GST on new rental building construction in multiple provinces announcing their intention to remove the credential portion of the HST.
360, Laurie as an office conversion project, we will see substantial benefit with savings expected to be close to 8%. Our development pipeline that is important to us and we remain committed to contribute to the solution for Canada's housing shortage by introducing a much needed housing suites to the market.
Nevertheless, we are acutely aware of the persistent challenges, we face, including ryzen and soft costs, along with constraints some financing.
We are proactively examining a range of financing alternatives, including <unk> and our CFO.
We will continue to exercise prudence in development opportunities on them with our broader capital allocation strategy.
Turning to slide 23.
<unk> approach the conclusion of our presentation I would like to draw your attention to them heron strength and resilience in green and the fundamentals of the multifamily residential industry.
Despite recent interest rate fluctuations and economic uncertainties, we are confident that the strong, but our models, but I'm getting a robust operational performance will continue to serve as tailwind in the foreseeable future.
We're seeing housing affordability being further magnified by rising interest rates and an increased shift away from home ownership that is especially pronounced among young professionals and empty nesters when.
When coupled with.
Systemic and the historic nature of housing supply constraints. These trends will continue to drive sustained rental demand in our portfolio.
While multifamily has always been a strong out to class across various economic conditions has historically shown unique resilience to macroeconomic volatility with demand remaining relatively strong and rents recovering faster than many other property types.
As you can see in this chart going back to 19 nineties during the past three recessions in Canada.
<unk> multifamily beta threes never exceeded 90 basis points.
Any given year.
Furthermore of the sector has also demonstrated strong performance general recovery assessable.
Expand superior fallen recessions.
Finally, I'd like to conclude but saying that we're very pleased with our strong Q3 results and our conviction about continued strong NOI and <unk> growth in the future backed.
Backed by three compelling reasons.
One the fundamentals in the Canadian rental market remains solid and will continue to support operational outperformance.
To our operating platform our best in class team continued to build on our strong track record of generating organic growth while reining in costs.
Three we are on solid financial footing with a conservative and flexible balance sheet that empowers us to.
Confidently pursue our strategic goals.
Finally, as previously disclosed we are working hard to develop a fresh new brand identity.
Better Airlines with who we are.
Our vision for growth.
We're happy to report significant progress and are eager to share our new branding with you in the coming weeks.
With that let's open it up for Q&A.
Thank you ladies and gentlemen, we will now begin the question and answer session.
So do you have a question. Please press star followed by the number one on your Touchtone fine.
<unk> com's acknowledging your request and your questions will be posed any order Darren Steve.
Should you wish to decline from the cooling process. Please press star followed by the number too.
You are using a speaker phone please lift your handset before pressing on it.
Our first question comes from the line of Brad Langdale from Laurentian Bank Securities. Please go ahead.
Thank you and good afternoon.
Just looking at the fair value adjustments I was wondering if you could give us your views on cap rates from here.
Do you feel like is it fair to say that we reached somewhat of a plateau here in terms of cap rate increases or where you see a bit more volatility entering.
The new year.
Okay.
Good afternoon.
Thanks for the question.
Yes.
We've seen we haven't seen a lot of market transactions. So a lot of it is based on very slim market, especially with the trade cases.
The market.
Lifting the cap rates.
If interest rates stay where they are and if you can believe it or not.
I think there might be a little more pressure.
How much that is.
No at this point that would be another five to 10 basis points 15 potentially.
If things start to turn and we see interest rates flat.
Just to get a belief that they're going to come down again.
It might be the top end.
It's really hard to say at this point.
Unless you get a real firm view on what's going to happen to interest rates in the next 12 to 18 months.
Hey, Chris.
It's Brad.
Okay.
To add to that.
Yes.
The investment American really is.
Frozen is all developments like everybody has.
On all sides right now.
Thank you really have seen this kind of.
Increase in the longer end of the curve, but I think you got to go back to the early nineties.
And not to mentioned the volatility.
Any given day, there's been points, where we've seen that the long end of the curve.
Would you say the medium to the longer tenure.
Move as much as anywhere between 10 to 20 basis points of the day and the training et cetera, and we've seen that occurrence.
More than one so that volatility is really playing havoc with a lot of people.
Short term outlet. So everybody has really put the pen down on anything when it comes to China project.
A level of financing. So so not only is the best and largest quite frozen you're hearing a lot of developers out there.
That might otherwise be.
Glenn what their projects on hold.
Operator: Good morning, ladies and gentlemen, and welcome to the InterRent Q3 2023 earnings call! At this time, all lines are in a lesson only mode Following the presentation, we will conduct a question and answer this session If at any time during this call you require immediate assistance, please press star zero for the operator This call is being recorded on Wednesday, November 1, 2023 I would now like to turn the conference over to Renee Wei.
No. That's helpful. Thank you and then just looking in terms.
Of your ox.
Occupancy objectives, it looks like Youre trying.
Trying to.
A bit more.
Proactive on that front.
How should we view the.
Capex Capex budgeting for 2020 funding do you feel any particular pressures here.
Especially I guess, especially given the current rental rate levels.
Renee Wei: Please go ahead Welcome everyone and thank you for joining InterRent Q3 2023 earnings call My name is Renee Wei, Director of Investor Relations and Sustainability You can find the presentation to accompany today's call on Investor Relations section of our website under events and presentations We're pleased to have Brat Cutsey, President CEO, Curt Millar, CFO, and Dave Nevins, CEO on the line today The team will present some prepared remarks and then we'll open it up to questions Before we begin, I want to remind listeners that certain statements about future events based on this conference call are forward-looking in nature Any such information is subject to risks and certain deepened assumptions that could cause actual results to differ materially For more information, please refer to the cautionary statements on forward-looking information in the reads News Release and MDNA did in November 1, 2023 During a call, management will also refer to certain non-IFRS measures, although the reads believe these measures provide useful supplemental information about its financial performance They're not recognized measures and do not have standardized meanings under our IFRS Please see the reads MDNA for additional information regarding the non-IFRS financial measures, including reconciliations to the nearest IFRS measures Brat, over to you Thanks for today and good afternoon everyone Let's get started with an overview of our operational performance of Slide 5 As you can see, a track record of growing our average monthly rent continues as positive momentum during the quarter For a total portfolio, AMR increased by 7.8% year-over-year and 7.3% on the same property basis This robust AMR growth was underpinned by strong increases consistently observed across all markets While we did experience a marginal dip in occupancy by 40 basis points compared to the previous year for both total and same property portfolios Our occupancy rate remained at a steady 95.2% in line with our historical performance a strategic approach We're pleased to see strong release of momentum in a Montreal portfolio, which accounts for about a quarter of a total portfolio Vacancy in the greater Montreal region decreased by 380 basis points year-over-year, driven by sustained recovery in downtown and urban locations The uptake of the portfolio wide vacancy was primarily concentrated with the specific submarkets of the portfolio where price discovery programs did not adjust quickly enough when seasonal demand started to shift Notably, these markets created Toronto and Hamilton area, Greater Vancouver area, and other Ontario ticked a lead in AMR growth for the quarter With each one achieving growth rates of 8% or higher Encouraging, we are witnessing robust leasing activities in the first half of Q4 And we are confident that the occupancy levels will revert to their historical numbers in terms as removed into 2024.
Yes, I'll answer because it's kind of a.
Try to unpack that.
And I have two questions.
And wasn't there I'll ask the last one first about the capex, but good news.
Like everybody is pretty aware that <unk> has.
Spent a lot on the capital expenditure program through the years and we've always believed.
You should always be containing and bring their bringing new communities to a certain level and then we've always done that.
Typically have led to.
Are we above average capital expenditure.
When you look across the industry.
I think we've done a lot of the work that has needed to be done.
Iowa.
Without any.
Terminal.
Terminal.
Opportunities brought on it than you did.
Picture, a scenario, where youll see that capex coming obviously from a capital allocation perspective on repositioning some of our best returns are really.
So related to the repositioning and whatnot.
This is kind of linked to the natural cadence of turnover.
But that said I think a lot of the heavy lifting within our portfolio as far as capital.
So on to building improvements and whatnot has been dealt with so I think.
To that scenario.
Status quo scenario, you can start to see that that line item come in I don't know Im sorry, do you want to add anything to that.
I think you've covered it.
And then and then to answer the first part of your question Fred.
With regard to vacancy we have a little higher <unk>.
At this point in the quarter than history.
Historically and versus last year.
Some of that just at the.
Is that too, but not by design, but.
Management I wouldn't look into it.
The indicator or tried to takeaway from that.
Just to do with the market, that's really and that's price discovery.
The process then.
China, see where where the maximization of where we can take some of those events and we might have gone a little too hard in certain regions in the space, but Jessica.
We are quite happy with what we have seen.
Post quarter end, where we are where we are at today relative to where we would be call. It.
At this point in previous years.
Oh, that's great. Thank you so much and then maybe one last quick one from me I was wondering if you could if you are starting to come across any industry support charities on your acquisition radar and even maybe distressed development projects.
There is no question there is theres a lot of the opportunities out there and I think in this kind of.
Brad Cutsey: Dave will provide more details on this later in the call. Over to slide 7.
The environment we're in.
The.
Brad Cutsey: For an overview of a financial performance, we are a happy report yet again, double digit, same property and a wide growth at 10.5 percent. Our operating margins increased by a healthy 140 basis points year over year to 67.6 percent. The highest levels since Q3 2019 and firmly returned to our pre-pandemic levels. This is driven by consistent revenue expansion coupled with our discipline management of operating expenses. Despite the persistent new reality of higher financing costs, their top-line improvements have been able to flow down to an enhanced bottom line performance as seen in the chart on the right hand side.
More opportunities.
Largely until we kind of see some visibility as to where our cost of capital stabilized out.
Very selective in what we choose to participate in those opportunities Brett because.
Thanks.
Cops capital equation.
Good day, and changing daily and we have to take that into consideration when we look at it all capital allocation. So I think there's going to be a lot of great opportunities I think you're going to have to get creative if you want to participate in some of those opportunities.
We are as a group okay with.
Brad Cutsey: FFO increased 4.9 percent to 21.3 million, and on a pre-unit basis is up 4.3 percent to 14.6 cents, representing our third consecutive recorder of FFO grilled. FFO increased 6.3 percent to 18.9 million, a 4.9 percent increase to 12.9 percent on a pre-unit basis.
Watch it opportunity.
Making sure that we're educating ourselves on what's happening in the market and what's out there, but also very mindful of the fact that there.
Theres a lot of volatility right now on both sides of it on the cost of equity and cost of debt and we're very mindful of that so we're also very happy with the organic growth and the runway that we believe we have in that portfolio just harvesting our apparel.
Brad Cutsey: Taking a closer look at their balance sheet, we are in solid financial position. Our debt to growth bulk value at 38.6 percent is favorably positioned at the lower end within the industry. We have a comfortable level of 268 million of available liquidity as of October 25th, with stable available liquidity and a significantly enhanced debt profile. We are in a robust position to pursue a strategic initiative, even in the face of market fluctuations and challenges.
Sure.
Alright.
Great. That's helpful. Thank you so much I'll leave it here.
Okay.
Your next question comes from the line of Mike <unk>.
From BMO capital. Please go ahead.
Hey, Mike.
Your line is now live please go ahead.
Hi, Mike.
Dave Nevins: Dave, over to you, to take us through some of the operating highlights. Thanks Brad. As Brad previously mentioned, they can see in September, while in line with our strategic approach, experience the slight uptick. This was mainly isolated to specifics of bourbon markets within our GTHA and other Ontario portfolios. Our proactive approach where we deploy revenue maximization programs to explore price elasticity across our diverse regions has enabled us to consistently deliver outside rent growth.
Alright, guys.
Yes.
This conversion from Android to Apple store.
<unk> me every once in a while but.
Thanks, very much for taking my questions just two.
Yeah, just just two for me maybe just the first one.
With respect to the price discovery alluded to and obviously, a very dynamic market.
Is your sense that the.
That the market rent growth trajectory has slowed to some degree over the past several months.
Dave Nevins: However, our pricing strategy is flexible as we continuously evaluate and adapt. In this case, we have implemented targeted adjustments on a sub-market specific level. It's important to emphasize that we continue to strategically accept slightly higher vacancy to position ourselves for optimal revenue growth, particularly considering the industry wide trend of reduced turnover. Encouragingly, we have been seeing positive developments point to robust leasing activities for the remainder of the year. In September, we observed a substantial increase in the number of leads across all regions, and the number of tours has seen a significant growth in areas with greater availability.
Obviously I recognize it's not linear or do you think that we still have.
The momentum here as we enter 2024.
Alright.
Sorry, just to clarify I don't mean, your EMR market rent levels in particular I don't know.
<unk>.
Thanks for the clarification and I'll, Mike I'll give D, but opportunity to us.
My view is I don't think I don't think that necessarily slowed.
Mike No.
Point, Mark the rents on a year over year, it gets tougher and tougher because your year over year comparison.
Dave Nevins: In the GTHA and other Ontario regions, tours have nearly doubled compared to the previous year. Early trends indicate that vacancy will be absorbed, and we are well on course to end the year with over 96% occupancy without compromising our average monthly rental growth.
As high to begin with so just simple math at some point youre going to have to check.
Come in.
That said I don't necessary think it has.
Well I think it was more a question of.
On the price discovery, where could we actually Jacob.
Dave Nevins: Slide 11 shows a breakdown of our operating expenses, which came in at 19.3 million dollars for the quarter. Operating expenses for the quarter are up 4% year-over-year while operating revenue grew by 8.5 million dollars. On a per-suite basis, our operating expenses came in at $1,515 and increased the 3.8% compared to the third quarter last year. This improvement was driven by reduced utility costs, which were $0.1 million lower year over year, or a 60 basis point reduction as a percentage of revenue.
Meaning the rate of exchange, maybe we went a little too aggressive on that.
That helps I don't know Dave.
It's honestly.
The.
Yes.
Okay.
Yes.
And extremely busy in other markets.
Well.
Further it's robin.
Make sure that we're cautious.
Protecting the growth and meeting with some of the markets.
Dave Nevins: During the quarter, we achieved 14% savings on natural gas costs due to a combination of lower gas prices and decreased usage. Thanks to an effective energy efficiency and seat programs. Electricity costs are also down slightly over last year, despite the larger portfolio on your ownership. We continue to manage electricity costs through our hydro sub-bedering initiative, which reduced electricity costs by 37.9% for the quarter. Property taxes for the quarter increased by $0.3 million year over year to $6.3 million as a result of our expanding suite count and minor annual rate increases. We are constantly reviewing property taxes assessments and making individual property tax appeals win necessary.
Sure.
Okay.
Yes.
Okay. Thanks.
And then just the last one for me again kind of a high level question here, but.
It seems like the tone has shifted a little bit just building on <unk> line of questioning with respect to your potential I don't know if distress is the right.
Word, but interesting opportunities that might be forming.
Over the course.
Of course of the next year or so.
Is that a notable shift I guess, what I'm trying to get at is.
How do you how do you view, what youre seeing there versus where you think values are for the existing assets and then lastly, just kind of to tie it altogether.
Given what youre seeing means the NCI view would effectively be on hold and that in the foreseeable future.
Dave Nevins: Turning to slide 12, we maintain a highly strategic approach to our capital expenditures. Year-to-date, we've directed 11% of our capital expenditure to maintenance capex. Ensuring our communities remain clean, safe, and well-managed, offering a resident a sense of pride in their homes. Over the course of this year, 89% of our capital expenditures have been allocated to value-add opportunities. Consistent with our historical norms, our reposition suites, as demonstrated at the right-hand side of the slide, continue to deliver substantial benefits in terms of both occupancy and NLI margins, compared to non-reposition suites. As of September 30th, 2,598 suites consisting of 20% of our portfolio are at various stages in the repositioning programs, representing a significant future potential for rental growth.
Yes, I'm not sure I'm not sure if you're taking the tone is a negative shift turn positive shift, but I don't think my.
My view of the World has changed from a quarter over quarter perspective other than the fact that earlier. This year, we saw some stabilization coming down the rates and you had a much more willingness on opex.
Opportunities on both sides.
From a vendor perspective and from a.
Thanks.
I think given the recent run up in the speed of that run up in the yield curve has caused a lot of people a pause.
And I think from an opportunity perspective, I think that will create even further opportunity. So if anything I think my phone is going to be more positive in the sense that I do.
Dave Nevins: Turning to slide 13, a quick update on the slate, our first office conversion project. During the quarter, we completed all interior renovations including all amenities on the rooftop and a lounge area, and have now made them available to our residents. Leasing activities are progressing well despite ongoing construction on Broadson Street by the City of Ottawa. Lease Raid has already surpassed 84% as of the end of October, and we are confident that our trajectory towards stabilization, which we expect to achieve before the year's end. With its central location just steps to the Parliament Hill and close to 2 LRT stations, the slate remains a desirable destination for students and young professionals.
Do you think.
When.
Financing costs increase as much as it has and there's been some development that's happened.
There's going to be some work to talk through.
So to say.
That said.
The good news about our spaces and Youre seeing it in the operation and you're seeing that through double digit NOI growth.
A lot of visibility on our cash flow size right, but theres a lot of people that are developing new supply.
Curt Millar: With that, I'll hand it over to Kurt to discuss our balance sheet and sustainability efforts. Thanks, Dave. As expected, and based on our quarterly review with our external appraisers, we have witnessed upward adjustments in cap rates during the quarter. Our weighted average is currently at 4.22%, an increase of 15 basis points from the last quarter, driven by moderate cap rate expansion across all regions. The Bank of Canada 10-year bond yield has increased more than 80 basis points since the years out of set, including a 50 basis point increase in September alone.
We're about to develop new supply and their pro forma has changed given where the takeout financing might be given the construction financing has increased and were due cap rate.
Settle out at.
I think encourage remark while you saw that we did increase our cap rate assumptions.
To reiterate theres not a lot of transactions.
Thats being somewhat proactive realizing that there is a correlation between the bond yield and cap rates, but.
Curt Millar: As a result, the transaction market is experiencing minimal activity. Despite sudden transaction activities, we've adjusted our cap rates in anticipation that rates are not set to revert in the near term. We will continue to monitor market dynamics and collaborate with our external appraisers to adjust our cap rates accordingly.
Lot of times on the appraisal is backward looking so we're trying to take a conservative and proactive approach on this but theres not a 100 data points, where you're going to hold the haddon said transactions and cap rates are maybe 25 basis points and therefore, hey, if you're looking at a new opportunity.
Curt Millar: To support the quarter... 2020-22, when removing the impact of the Ottawa property sold in the quarter, we have adjusted cap rates by 19 basis points through the first three-quarters of this year.
On IRR basis of terminal cap rates has moved by Ax right. So one of the reasons why.
The market is pause because there is no real conviction where.
Curt Millar: Slide 16 shows the staggered maturity profile of our mortgages. We continue to pursue this strategy to enhance our flexibility and mitigate our exposure to renewal rates. No more than 14% of our mortgage debt is coming due in the next four years. For the remainder of this year, we have 61.3 million of mortgages maturing, with an average interest rate of 5.19%. Our 2020 formatures carry a weighted average interest rate of 5.33%. And as such, we anticipate our 2024 mortgages being renewed at or below this rate, which will significantly reduce the headwind we have been facing over the last year.
Thanks.
<unk> will shake out at the end of it so well.
With all that said and done I think it does create the environment.
Depending on how your cap wise I think there is going to be some real opportunities.
For people that do have a well capitalized balance sheet now if my tone seems a little more neutral on capital have typically gone through the year.
Because I think we need to see as a group.
We're financing fee.
It's good news shake shake out right.
Curt Millar: Our floating rate exposure continues to move in the right direction, finishing the quarter at 5.7%, including our line of credit debt, a moderate decrease from the same period last year, which was at 7.9%. By continuing to fix our interest rate costs, we're actively mitigating our exposure to market volatility, and proactively managing our interest rate expense.
And I don't think anybody has a real good picture on that today.
That's useful commentary as always thanks.
Thanks, Mike Thanks, Mike.
Yes.
Your next question comes from the line of Jonathan <unk> from TD Cowen. Please go ahead. Thanks.
Curt Millar: We are excited to highlight some remarkable sustainability milestones from the quarter. In September, our annual Mike McCann charity golf tournament took place, bringing together hundreds of supportive partners from various organizations. This event successfully raised an incredible 1.67 million, bringing our cumulative total to 8.2 million since the inception of the tournament. All proceeds from this event will be directed to support various charities within our communities, including the Boys and Girls Club, have that for humanity, and Shepherds of Good Hope, just to name a few. While those who join us at the event, we once again extend our heartfelt gratitude for your support and generosity.
Thanks, Good afternoon.
Sticking with sort of Mike's line of questioning and your answer Sir Brad you guys on the development side. It looks like you took out your expected yields and pushed out some dates and I think you talked about being pencils down.
What how do you guys look at sort of go or no go decisions with sort of targeted returns or how do you really think about that.
When youre looking at starting a new project.
Well I think the thing you've got to look at years Jonathan.
Use of capital across the board in the different buckets, and then look at what you get corporate IRS.
Curt Millar: We're also making significant headway in our building certification efforts. In October, we announced a successful certification of our initial six communities through the Canadian Rental Building Program. During this process, we've also met the requirements for corporate-level documentation and employee training, paving the way for further certifications in the near future. This achievement is a well-deserved testament to the excellence of our buildings and the dedication of our onsite teams. We've committed to expanding our CRB program and anticipate more announcements and more certifications in the month ahead.
Then see what gives you the best Outstrip return relative to your corporate IRR.
I'd say that starting point and I assume as you can rank it kind of your use of capital from there and then prioritize.
As a go or no go decision on something like that development.
Greenfield.
You want to go out and make sure that <unk> got.
Some kind of certainty on your pricing and then some kind of comfort on your ability to finance.
Curt Millar: Earlier this month, we also received our 2023 grads of results, where we successfully improved our score from the previous year and maintained the green two-star designation. We've also earned an A rating on the grads of public disclosure survey, outperforming the global average in our comparison group average.
That development and that distraction.
And see where do we charge pro forma at that point.
Alright.
The fact that we took out the yields on the development page and you know that one of the reasons why we did take that out.
Brad Cutsey: I'll turn things back to Brad to walk through our capital allocation. Thanks, Kirk. Turn in to slide 20.
Is because of the financing all over the map.
Brad Cutsey: We're pleased to provide an update on our recent strategic moves. Last quarter, we shared news about the successful sale of a 54-sweep property in Ottawa, bringing in total proceeds of $11.5 million. This transaction was finalized on August 30th, approximately two million of the proceeds were allocated from our NCIB program. A lot of us require a total of 157,200 units at a weighted average price per unit of $12. [inaudible] Trust Trust Trust Trust Trust Trust Trust Trust Trust Currently the adaptive reuse project is in the site plan control process having already secured approval for minor advances from the City of Ottawa in October.
Could be 7% financing on your line of credit.
It can be sub 4% financing, if you're lucky enough to obtain.
Our CSI alright.
Alright, finance with CMA sea, so that materially changes the outlook to the pro forma and the economics of the development.
No.
<unk>. Thank you go in the ground you really wouldn't want to have certainty on the cost to complete and have a better comfort on how youre.
Finance and development.
Great.
Okay. That's helpful and on 360, Laurie I might've when you were talking about that in your prepared remarks I heard Pete.
8%.
What was that like I'm not sure what that was related to I missed that.
Or did I Miss the whole thing.
Can you repeat that Jonathan I.
I think when you were talking about 360 Laurier in your prepared remarks.
You did say I thought I heard the word 8%.
And there.
I can take that off offline after.
And my second question, Jonathan that's just talking about the savings on the.
Jason Okay fair enough fair enough.
And then what.
Thank you Sir.
No no problem and then.
Secondly, just on it sounds like you.
You remain committed to doing some some dispositions and capital recycling, but the market slow down.
Brad Cutsey: We anticipate full site plan approval in Q4 this year with preliminary investigative demolition in progress. Full demolition is scheduled for Q1 next year, followed by the reconstructions starting with Q2. We're taking on this project with pride and confidence alongside a trusted partner CLB group and a respected institutional partner. Building on the valuable experiences and lessons learned from the slate were well prepared to make the new project a success. We're encouraged to see the commitment of the federal government to invent GST on new rental building construction and multiple promises announcing their intention to remove the provincial portion of the HST.
I think.
What do you expect to happen.
With that over the next say two to three quarters.
Like do you expect to sell it and then I wanted to get in Q4.
I tend to be quite honest I'd tell you it would be quite challenging.
The.
Last quarter, if I saw Q4, I'd still say quite challenging and what are the reasons being is <unk> C is really understand right now given the level of activity coming at it. So there's just still a logjam at CMA sea right or wrong and it's.
Brad Cutsey: 360 Lori, as an Office for Greater Project, will see substantial benefit with savings expected to be close to 8%. Our development and pipeline is important to us and we remain committed to contribute to the solution for Canada's housing shortage by introducing much needed housing suites to the market. Nevertheless, we are clearly aware that the persistent challenges we face including rising hurt and soft costs along with restraints of financing. We are proactively examining a range of financing alternatives including criminalized select and RCFI. We will continue to exercise Putin's development opportunities on them with a broader capital allocation strategy. Turn it into slide 23. I'd rather approach the conclusion of our presentation.
Just taken a lot longer so on the disposition front anybody on the disposition front, we will typically need.
Financing condition and under that scenario, if the best theyre going to be the problem.
We got through and once again this is not me blame and CMA seeds.
In reality, it's probably six months and in this kind of.
Marketplace, when youre seeing the volatility that you've seen in the yield curve that really does does that deal risk to your disposition. So well we continue that.
Stages are in negotiations yes.
Can I can say with confidence that we can be in a position to announce something anytime soon.
Brad Cutsey: I'd like to draw to your attention to the inherent strength of the resilience engraving the fundamentals of the multi-family residential industry. Despite recent interest rate fluctuations in economic uncertainties, we are confident that the strong fundamentals that underpin our robust operational requirements will continue to serve as tailwinds in the foreseeable future. We're seeing housing affordability being further magnified by rising interest rates and an increased shift away from home ownership that is especially pronounced among young professionals and empty masters.
Okay.
That's helpful I'll turn it back thanks.
Yes.
Your next question comes from the line of Kyle Stanley from Deutsche Bank. Please go ahead.
Thanks afternoon, everyone.
Just going back to your price discovery discussion for a second I mean, thanks for the market rent growth commentary in your view going forward I'm just wondering.
Brad Cutsey: When coupled with systemic and historic nature of housing supply constraints, these trends will continue to drive sustained rental demand in our portfolio. While multi-family has always been a strong out-to-class, across-sparing economics. Conditions that has historically shown unique resilience to macroeconomic volatility, but demand remaining relatively strong and runs recovering faster than many other property types. As you can see in this chart, going back to 1990s during the past three recessions in Canada, it includes a multi-family bank of race that has never exceeded 90 basis points in any given year. Furthermore, the sector has also demonstrated strong performance during the recovery, assessment, expansion period, following recessions.
And do you think you're starting to hit maybe an affordability threshold in some markets or is this really just.
You guys kind of feeling out.
Market rents are going at this point.
Alright.
Sure My congrats on the.
We've seen stronger leasing activity than we normally would at this time of the year suggests that all the Americas are still extremely tight and you wouldn't generate that kind of leads.
Somebody acquiring knows what the price they are inquiring about trial, so typically thats a pretty good indication of the law.
Level of interest out there so I would say it's more the latter.
Okay fair enough that makes sense.
Another more I guess high level question, but.
Brad Cutsey: Finally, I'd like to conclude by saying that we're very pleased with our strong Q3 results, and our commission about continued strong NOI and FFO growth that's viewed back by three compelling reasons. One, the fundamentals and the Canadian rental market remains solid and will continue to support operational outperformance. Two, our operating platform and Betton class team continue to build on strong crack record of generating organic growth while raining in costs. Three, we are solid financial footing with a conservative and flexible balance sheet that empowers us to confidently pursue our strategic goals. And finally, that's previously disclosed.
There's been a lot of talk in the last little bit about tuition increasing in Quebec I am just wondering for English language schools. I'm wondering have you had any discussions with some of the University leaders in the province of Quebec, and do you have any indication on.
The potential impacts that may have.
Yeah.
Well I hope it on the bears Jonathan Couch on this call, but both Jonathan and I are.
<unk> are alumni of one of those three schools that got a lot of you mentioned in the press being best ships, just kind of announcements Unfortunately could really hurt ambitious prohibition.
Spectrum was only call it 2500.
Units.
The bigger the bigger issue obviously.
Brad Cutsey: We're working hard to develop a fresh new brand identity for InterRent that better aligns with who we are, or are efficient for growth. We're happy reports of the program progress and are eager to share a new branding with you in the coming weeks.
Don't have any.
Holmes.
Sure Bert.
The bigger question is how does it impact Mcgill.
And how does it impact Concordia.
It does any favors.
Operator: With that, let's open it up for Q&A. Thank you.
On the overall outlook for enticing people.
To come back, but don't want to deal with politics, but I think the reality is I don't think given how tight things are across the board in our focus markets and in Montreal, I don't think Thats announced it might change the composition of <unk>.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should we have a question, please press star followed by the number one on your touchstone phone. You will hear a three-tone prompt acknowledging your request and your questions will be pulled in the order they received. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speaker phone, please lift your handset before pressing any keys.
The Domestics June.
But then the day is still probably cheaper to go to University and at.
Gil <unk> done it as that.
Frederic Blondeau: Our first question comes from the line of Fred Blondu from Laurentian Bank Securities. Please go ahead. Thank you and good afternoon.
University of Ottawa.
Question just.
In House House affordability alone, Okay, and I think thats, a bigger consideration I think when a student goes to study somewhere they'll look at the all in cost and I still don't think that even with the change it will.
Curt Millar: Just looking at the fair value adjustments, I was wondering if you could give us your views on cap rates from here. Do you feel is it fair to say that we reached someone of a platform here in terms of cap rates and creases, or will you see a bit more volatility entering in the new year? Good afternoon, Fred. Thanks for the question, Kurt Miller here. We haven't seen a lot of market transactions, so a lot of this is based on various slim markets, but in discussion with the Frazier's and sort of what's been coming the market, what we've seen, that's what we put the lift in the cap rates.
That's not because of a change in your all in cost and then from a foreign students ability.
I mean, the jury's out on Florence.
Foreign students I still very much believe that.
The price points when you look at our Canadian reputable University relative to.
The University in the U S for similar quality difference already in the <unk>.
Curt Millar: If interest rates sort of stay where they are and people believe they're not going to come down anytime soon, and I think there might be a little more pressure on what's that is. I don't know at this point that the other five or 10 basis points may be 15 potentially. If things start to turn and we see interest rates plateau and we start to get a belief that they're going to come down again, then it might be the top end of it, but it's really hard to say at this point, unless you get a real per-view on what's going to happen to interest rates in the next 12-18 months.
The level of cost of the tuition relative to the value of the tuition you get there's still substantial here.
Here in Quebec, So obviously.
Not a policy.
So we love and that will get behind but at the same token I don't want to over exaggerate.
And the impact it might have.
And lastly, I'll, just say the level of the increase in international students.
Canada over the last three years relative to call it maybe.
Curt Millar: It's Brad and just to ask that the investment market really is frozen as well as the development, like everybody has pensed down on all sides right now. I don't think we've really seen this kind of increase in the long end of the curve. I think you've got to go back to the early 1990s and not to mention the volatility. At any given day, there's been points where we've seen that the long end of the curve, where I should say the medium to the long end, like the 10-year move as much as anywhere between 10 to all of us as much as 20 basis points in a day in the trading session.
The norm 10 years ago is significant okay, like we're talking greater than 20%.
Dan.
Even at that point previously they had a pretty strong impact on the overall so.
Long long winded answer short answer is I don't think its going to happen.
Okay fair enough.
Just two quick housekeeping items. So just the capitalized interest ticked up this quarter I was wondering if you could elaborate on that a little bit just trying to understand.
Have you fully decapitalize, the interest related to slate and maybe what's driving that.
Movement, and where does it trend.
Yes.
Curt Millar: And we've seen that occurrence more than once. So that volatility is really paying havoc with a lot of people's short-term outlook. So everybody's really put their pen down on anything when it comes to trying to project out a level of financing. So not only the investment market is quite frozen, you're hearing a lot of developers out there that might otherwise have been going with their projects on hold.
Yes, Thanks, Ed sector here.
Frederic Blondeau: That's helpful. Thank you.
My best to walk you through as much as I can introduce an imperative.
There was still a little bit of interest capitalization to slate in the quarter.
Definitely come down there was also a little bit about increased pretty minor it related to the 360 Orient that we announced in the quarter.
The bigger variance is just with the way we do this really we interpret the rules around this.
These different mechanisms some of the eastern weighted average interest rate to determine the capitalization of interest expense we tend to use.
Curt Millar: And then just looking in terms of your occupancy objectives, looks like you're trying to be a bit more proactive on that front. How should we view the CAPEX budgeting for 2025? Do you feel any particular pressures here, especially given the current rent or rate levels? Yeah, I'll try to unpack that. I think we've kind of have two questions in the one there. All I asked the last one first about the CAPEX.
The drawn.
You draw on our line of credit or we're not into our line of credit.
Nancy.
So given where our lines of credit lines throughout the quarter second quarter versus third quarter and when we funded certain large.
CME some mortgages.
Fleet itself, which funded in Q3.
Barry can make that vary quite a bit introduced a bit of volatility just based on our capital sourcing tapping into third quarter.
It's mainly coming from prior quarter being more captive to CNBC level financing rates for capitalizing versus this quarter, we are into our credit facility and capitalized.
Curt Millar: The good news is I think everybody's pretty aware that Interred has spent a lot on the CAPEX expenditure programs through the years. And we've always believed you should always be maintaining and bringing your bringing your communities to a certain level. And we've always done that. It's typically have led to probably above average CAPEX expenditure when you look across the industry. That said, I think we've done a lot of the work that hasn't used to be done.
Okay.
<unk>.
That's clear.
Just the last one so G&A was down a bit sequentially. Just wondering would the third quarter number would be a good run rate or best to look at kind of the year to date and take a number like that.
Yes, I think.
<unk> been telling people is born in quarter, four and a half.
Curt Millar: And I would look out without any external opportunities brought on. I think you could picture scenario where you'll see that CAPEX coming in. Obviously from a capital allocation perspective on repositioning, some of our best returns are really related to the reposition and what not and it's kind of linked to the natural cadence of our turnover. But that said, I think a lot of the heavy lifting within a portfolio as far as capital going to building improvements and whatnot has been dealt with.
We still stay in that range.
There's a few things.
It may happen in Q4 being pushed into next year, but I think if you are in that range still.
And I maintain that for next year I E.
Four and a half or.
On a quarter to four and a half for.
Our Q.
Okay.
Yes.
Okay, great. Thanks for all the color I will turn it back.
Thank you I appreciate it.
Thanks, Joe Your next question.
Next question comes from the line of Brad stages from Raymond James. Please go ahead.
Curt Millar: So I think under that scenario, under the status quo scenario, you can start to see that line at and come in. I don't know, I encourage you want to add anything to that. I think you covered it. And then to answer the first part of your question, Fred, just with regards to BAKC, we have a little higher BAKC at this point in the quarter than of historically and versus last year. Some of that's just at the, that's not by design, but it's caused a management.
Hey, guys.
Just on the.
Just to go back to the asset disposition program.
Commentary.
Just just to reconcile from the last quarter is the the plan of the program or the targeted the program still to be net sellers of $75 million through that program.
Once it's once you are able to do so and the opportunity allows us to do so or has that program changed in any way.
No I think I think that the assets, we're married to assets that have below.
Curt Millar: I wouldn't look into it as a indicator or try to take away from that is to do with the market. That's really an inherent in this price discovery process. And Toronto, we see where the maximization of where we can take some of those rents. And we might have gone a little too hard in some regions and the percentage of adjustment. And we are quite happy with what we have seen post-corder and where we are at today, relative to where we would be called at this point in previous years.
Our targeted IRR range over the next five years relative to our corporate IR.
That hasnt change Brett.
Quite good cash flow and quite honestly there is there still a pretty good growth profile.
Doesn't meet our overall growth profile, so it makes sense to recycle.
That capital.
I wanted to be clear.
There is nothing in that portfolio, given the strength of our balance sheet.
And what's coming at us that we need to dispose of anything okay. So we are not sellers, because we have to be sellers of anything.
Frederic Blondeau: Well, that's great. Thank you so much.
Frederic Blondeau: And then maybe one last quick one for me.
Brad Cutsey: I was wondering if you could, if you're starting to come across any distrust opportunities on your acquisition radar and even maybe distrust development projects? There's no question there's a lot of opportunities out there. And I think in this kind of environment, we're going to continue to see more opportunities.
We get the appropriate price.
Strong offer and it meets our threshold and we think we can recycle that capital and recycle that capital.
Better return than what our overall corporate return is that we're going to do it.
But by no means are we in a position where we have to do a b and C in order to do.
Brad Cutsey: Unfortunately, until we kind of see some visibility as to where our cost capital stabilized out, we'll be very selective on what we choose to participate in those opportunities. I think the cost capital equation today is changing daily and we have to take that into consideration when we look at our own capital allocation. So I think there's going to be a lot of great opportunities. I think you're going to have to get creative if you want to participate in some of those opportunities.
Using that.
And I really want to make that clear so.
It's a nice position to be in and that's the position we are in but we have earmarked.
Brad Cutsey: And we are as a group, okay with watching opportunities and making sure that we're educating ourselves on what's happening in the market and what's out there. But also very mindful of the fact that there's a lot of volatility right now on both sides of it on the cost of equity and cost of debt. And we're very mindful of that.
We feel and 75 million of proceeds, but I will caveat that with the fact that there's a lot of volatility in the long end of the curve and I don't think of Washington and get done.
Anybody aside until there is a stabilization of that but that's not to say things won't get done.
And the curve stays here, but it has to stay here for a while.
At comfortable and there might be a reset at this stage here to curts point, if it comes down a little.
And maybe we've seen maybe we've seen the majority of the reset behind us.
Yes, that's great commentary that's quite helpful.
Frederic Blondeau: So we're also very happy with the organic growth and the runway that we believe we have in a portfolio just harvesting our internal growth. That's great. That's helpful. Thank you so much.
And just on the I guess my other question would be just on the expected financing refinancing activity that you have earmarked for the end of the year. It looks like the timeline got pushed out a bit is that just because of the backlog with CMA CEO or is there anything else that's driving that.
Frederic Blondeau: I'll leave it here.
The timing of that towards I guess.
Mike Marquitas: The next question comes from the line of Mike Marquitas from the BMO capital. Please go ahead. Mike. Hi Mike. Sorry guys. Just conversion from Android to Apple Store. The Fuddles made every once in a while. But thanks very much for taking my question. Just two for me. Maybe just the first one. With respect to the price discovery alluded to and obviously a very dynamic market. Is your sense that the market rent growth trajectory has low to some degree over the past several months.
Late Q4 into Q1 early Q1.
Yes, I think it's just more the timing we were we've talked about that Vancouver portfolio before.
That's one of the bigger portfolios, we have other assets that are interested in <unk>. That's one of the bigger portfolios. We were really hoping we could get that through there in Q3 and some time in Q4 have the financing debt by early Q4.
Two of the properties have been picked up so we're glad to see that.
And really hoping that.
Can you just get through everything but at this point, given where we are in the year.
It does very much.
Our supply our best I guess very much it'll actually end up getting funded in Q4.
To me it probably drags in early to mid <unk>.
Mike Marquitas: I mean obviously I recognize it's not linear or do you think that we still have momentum here as we enter 2024? Sorry. Just to clarify. I don't mean your AMR. I mean market rent levels in particular. And I took it as such. Thanks for the clarification. I'll give the opportunity to also give his views. My view is I don't think I don't think they're necessarily slowed. Now at some point market rents on the year over year and gets tougher and tougher right because your year over year comparison is high to begin with.
January ticket timeframe is probably our best case scenario.
And at this point Youre not rate lock on that that's still.
You still have some flexibility around right at this point, depending on where benchmark yields go.
Correct, we're not rate lock so, let's all keep our fingers crossed that it has come down.
Okay. Thanks, a lot I appreciate it I'll turn it back.
My pleasure.
Fred question Ken.
Your next question comes from the line of Jamie Shen from RBC capital. Please go ahead.
Thanks, Hey, guys.
Kurt you mentioned when you were.
Mike Marquitas: So just simple math at some point you're going to have to start to see it come in. That said I don't necessarily think it has slowed. I think it was more a question of us on the price discovery where could we actually take them. And meaning the rate of change maybe we went a little too aggressive on that. That helps. I don't know Dave. I agree with you. It's obviously the volume of these. It's an extremely busy and all the markets. I think one that is just a further is probably just to make sure that we're cautious in protecting the growth and being within the markets. Thanks.
We're determining the Capri assumption, you've taken clues from brokers, bringing products to the market.
I was wondering if you could provide some color on what that pipeline of products look like.
Deal size type of assets.
Any indication that sort of thing.
I can give you a little bit Jimmy because like I said, there's not a lot of deals that are actually closed.
Chatted, a lot but that internally here.
I'll give you sort of another data point to think about also before I answer that is that if you go back and look at the CBRE cap rate reports on the last.
Call It <unk>.
Five years.
From the lows of about 2019 2020.
To where they are in Q3 reports if you look across the major markets, where we're at.
The Delta has been somewhere between 30, and 60 basis points. So decrease of between low and mid 30% high end of 60 basis points across those markets.
Curt Millar: And then just the last one for me, again kind of a high level question here, but you know it seems like the tone has shifted a little bit, just building on Fred's line of questioning with respect to potential, I don't know if distress is the right word but interesting opportunities that might be forming over the maybe the course of the next year or so. Is that a notable shift, I guess what I'm trying to get at is, you know, how do you, how do you view what you're seeing there versus where you think values are for the existing assets and then lastly just kind of tie it all together if given what you're seeing means you know the NCIV would effectively be on hold in the in the foreseeable future.
And if you look at sort of our low point in factor both lay assets would've been at about a 383 and now we're at four <unk>.
<unk> had about a 40 basis point increase on average from our low to where we are today, which kind of lines up pretty well with because <unk> reports for the overall market.
Yes.
Just wanted to give you sort of as bad as a data point.
Think about it also if you will.
From a deal perspective, I mean, there's been.
Curt Millar: Yeah, I'm not sure if I'm not sure if you're taking the tone as a negative shift or a positive shift, but I don't think my my view of the world has changed from a quarter over quarter perspective other than the fact that earlier this year we saw some stabilization coming down the rates and you had a much more willingness on opportunities on both sides from from a vendor perspective and sort of a bit perspective. I think given the recent run up and the speed of that run up in the yield curve has caused a lot of people to pause.
Theres only been one sort of notable transaction that we would compare the GTH AGM last Q that close.
And I was like at over 600000, a door Jimmy.
There's one in Montreal.
Smaller size that.
That was.
Just about 200 or just about 200, a door, but it wasn't an urban it wasn't on the urban core and then there's a.
There's one in the greater Vancouver area, just shy of 500.
The one comment I would add to this is really any deals of size.
Completely off the table.
Curt Millar: And I think from an opportunity perspective, I think that just will create even further opportunities so if anything I think my tone is going to be more positive in the sense that I do think when you're financing costs increase in much as it has and this has been some development that happened. There's going to be some work to work through to say now that said the good news about in our spaces and you're seeing it in an operation and you're seeing it through double digit and a lot of growth.
Right.
All your institutional.
Players really do want to see stabilization.
And youre financing okay.
So.
There are deals getting done that tend to be on the smaller side, probably a little less institutional and probably not as much of a fair reflection.
Value of the publicly listed and then I'll throw in my peers as well of the publicly listed reach versus.
Some of these smaller transactions that.
Or clothing, but even that said even that has come right. It.
Curt Millar: But there's a lot of people that are developing new supply or were about to develop new supply and their performance has changed given where the take out financing might be given the infrastructure financing has increased and where do cap rates settle out at I think encourage remark while you saw that we did increase our cap rate assumptions. We've got to reiterate there's not a lot of transactions. This has been somewhat proactive realizing that there is a correlation between the bond yield and cap rates but a lot of times on these appraisals is backward looking.
They were taken up the majority of the deals that are getting done.
Smaller sized deals.
But even even now.
Last call it four.
<unk>, even though they're becoming farther up here between.
No no there's not a lot of.
Color there for you Jimmy.
It's just the reality of the World we're living in right now it's very much.
It is still like it really is dependent on all sides.
No that's fair.
Than.
And the last question is just on the distribution increase.
I know you guys have that track record, maybe you don't want to break.
Big amount, but I'm wondering if how you guys and the board have thought about it.
Curt Millar: So we're trying to take the conservative and proactive approach on this but there's not 100 data points where you're going to hold the hadn't said transactions and cap rates of move 25 basis points. And therefore, hey, if you're looking at a new opportunity on an IR basis eternal cap rates has moved by X. So one of the reasons why I think the market is paused is because there is no real conviction where things maybe will shake out at the end of it.
Increasing distribution versus things like paying down debt buying back stock or.
And I think some of your developments.
No for sure I think I think you hit it it's not a it's not a big amount Jimmy.
We want to send the right signal to the market.
I am hoping I am hoping.
You indicated this to the disclosure documents in this call today, we're very bullish on where we sit today from an operational standpoint.
Curt Millar: With all that said and done, I think it does create an environment, depending on how you are capitalized, I think there is going to be some real opportunities for people that do have a well capitalized balance sheet. Now, if my tone seems a little more neutral on capital activity going through the year, it's because I think we need to see as a group where our financing feels like it's going to shake out, right? And I don't think anybody has a real good picture on that today. That's a useful commentary, as always, thanks. Thanks, Larry. Thanks, thanks.
And I think.
Since we do have such a strong track record of increasing the distribution.
Certainly in mind and being very mindful when we make those increases.
We want to make sure that the market understands that our distribution policy is.
Aligns itself with how we see the future within our operations and we continue to believe there is very robust and our operating operation in the near term and then we in the near term not just the next four quarters.
In the next three years.
So yeah.
Youre right.
You could have higher cost of debt that you might be able to pay down I don't think.
Jonathan Kelcher: Your next question comes from the line of Jonathan Kelcher from T.B. Calvin. Please go ahead. Thanks, good afternoon. Just sticking with Mike's line of questioning and your answers there, Brad. You guys on the development side looks like you took out your expected yields and pushed out some dates, and I think you talked about being pencils down.
A big number Jimmy and that.
The cost of debt will fluctuate, but it can be it can be self assure that we are managing that.
And Barry.
Very causes it.
Our debt levels.
Our variable rate exposure and the cost of.
What our line card and we will take every opportunity to manage that prudently.
Brad Cutsey: How do you guys look at goal or no-go decisions with targeted returns or how do you really think about that when you're looking at starting a new project? Well, I think you've got to look at your IRS, Jonathan, and the use of capital across the board in the different buckets, and then look at what your corporate IRS, and then see what gives you the best outstrip return relative to your corporate IRS.
Hope that answers because I mean, the comments you've made could be a five hour call ups, you really want to.
Got you okay. Thank you if I could just add.
Yes, I think when you look at the quantum Jimmy as you touched on.
Based on that increase you're talking about a total impact of $2 $7 million to $8 million and a cash impact of about one six.
Kevin given the amount of people that participate there.
Brad Cutsey: I think that's starting point, and I think that you can rank it kind of your use of capital from there, and then for our types. As a goal or no-go decision, I think on something like a development and on a green field, I think you want to go out and make sure that you've got some kind of certainty on your pricing, and then some kind of comfort on your ability to finance that development and that construction, and see where the returns perform at that point.
Okay.
It's not a big number but as you know you've followed US for years, you know that we watch we watch every penny that goes out the door very closely.
Yeah.
Okay, great. Thank you.
Okay last question, we have Matt <unk> of National Bank Financial Please go ahead.
Hey, guys I'll try to be quick just with regards to the 360, Laurie I can you give any sense on the cadence and the total outlay at your ownership interest in terms of the spend for that project.
Brad Cutsey: The fact that we took out the yields on the development page and you nailed it, one of the reasons why we did take that out is because of the financing all over the map. It could be 7% financing on the line of credit, or it could be sub 4% financing if you're lucky enough to obtain RCFI, right? Finance for CMHC. So that materially changes the outlook of the portfolio on the economics of the development.
Well look on the total ownership interest it's 25%.
At this point, we're still working through the plan partners and working through the plant design.
Getting pricing financing options.
So a little early to tell.
To give metrics on it I think as we sort of get through this our anticipation is that it would be.
Even more accretive.
Slate.
Just given the design of the building, it's actually lend itself.
Brad Cutsey: So before I think you'd go in the ground, you really would want to have certainly on the cost to complete and have a better comfort on how you're able to finance the development before you would break ground.
Better.
But theres a lot of things to work through over the next few months.
Great.
Yeah.
I was going to answer the exact same way Kurt.
Im trying to be skewed a cheeky but.
Jonathan Kelcher: Okay, that's helpful, and on 360-Lorea, I might have, when you were talking about that in your prepared remarks, I heard 8% in What was that? Like I'm not sure what that was related to, I missed that. Or did I miss the whole thing? Sorry. Can you repeat that, Jonathan? I think when you were talking about 360 Laurier in your prepared remarks, I thought I heard the word 8% in there. I can take that offline after.
We feel we feel quite confident that this is going to be from an economic standpoint.
Even that much greater that slate and we met our targets on slate so take what you want from that.
But you can rest assured we're really excited about the $3 60, and so forth.
Could it be that.
Does it really mean.
Great addition to our overall.
Sure that makes sense.
You can do these pretty quickly based on your target completion date, and where you are in the process. So.
That's a plus and then just on Montreal, you did deliver I think 36, new suites in.
Jonathan Kelcher: And my second question. Jonathan, that's just talking about the savings on the D&J. Okay, fair enough. Fair enough. Sorry, I wanted to speak to you there. No problem. And then, secondly, just on, it sounds like you remain committed to doing some dispositions, some capital recycling, but the markets slowed down. I think. What do you expect to happen with that over the next, say, two, three quarters? Like you expect to sell. I think we're going to give you four. I think to be quite honest, I think it'd be quite challenging. I think if you asked me last quarter, if I thought you four, I'd still say it'd be quite challenging.
Formerly common area space.
Was that the impact on vacancy in the quarter, but it also looks like you push rate quite a bit in the market.
So any color there and also just with regards to additional potential units.
Any disclosure over the next 12 months.
What else you may be adding to the portfolio and suites in common areas.
Yes.
The first part of your question, though.
Population.
You kind of answered it with your own commentary.
But that said, we're extremely happy with where we sit right now.
In Montreal.
And then the last the last part of your.
Question was what that sorry.
Just like in addition to the 36 that you delivered or are there any others kind of in the near term that you'd expect to add to the portfolio.
Brad Cutsey: And what are the reasons being? The C.M.H.C, is really understaffed right now, given the level of activity coming at it. So there's just still a long jam at C.M.H.C., right around. And it's just taken a lot longer. So on the disposition front, anybody on the disposition front will typically need a financing condition. And under that scenario, the best they're going to be able to probably get through. And once again, this is not me blaming C.M.H.C., it's just a reality.
Common areas new suites.
Well the numbers the numbers greater than 36, I wouldn't say more than 30 <unk>.
Necessary Montreal.
As we mentioned before across the portfolio of our ops teams is a really good job of it.
Utilizing that space or recreating space by kind of.
Merchant.
Alright, taking existing space and working with it.
So we are at different levels of planning throughout our portfolio on that.
Brad Cutsey: It's probably six marks. And in this kind of marketplace, when you're seeing the volatility that you see in the yield curve, that really does put that deal risk to your disposition. So will we continue and are we at different stages of negotiations? Yes. Can I say with confidence that we can be in a position to announce something anytime soon? No.
So.
Nothing concrete to add I think.
Thing, but.
As much as a.
Small high rise.
Alright fair enough.
Okay. Thanks for that guys.
So I.
It will take anywhere anytime.
Hey, Thanks, Matt Thanks for the questions.
Okay.
Brad Sturgis: Okay. That's a helpful turn it back. Thanks.
Okay I think.
Thats all the questions I, just like to thank everybody for taking the time for listening.
Kyle Stanley: Your next question comes from the line of Kyle Stanley from Desjardins. Please go ahead. Thanks, afternoon, everyone. Just going back to your price discovery discussion for a second. I mean, thanks for the market rent growth commentary and your view going forward. I'm just wondering.
And for the questions then.
We had a good quarter, but I'm really excited to be quite honest about the future and what.
What the outlook looks like for us in the room.
<unk> 2023, and 2024 and the team's working really hard to make sure that we deliver on what we can control and thats, our organic portfolio and we will continue to monitor the externals that we can't control things like.
Brad Cutsey: Do you think you started to hit maybe an affordability threshold in some markets, or is this really just, you know, you guys kind of feeling out where market rents are going at this point? It's not really where market rents are going. The fact that we've seen strong release and activity than we normally would at this time of year suggests that all the markets are still extremely tight. And you wouldn't generate that kind of leads because somebody, somebody acquiring knows what the price are acquiring about Kyle. So typically that's a pretty good indication of the level of interest out there. So I would say it's more the latter.
Kyle Stanley: Okay, fair enough, that makes sense.
The.
The bond yield in.
Volatility within it so once again, thanks, a lot and we look forward to.
Can you use it.
Thank you, Sir ladies and gentlemen, this concludes your conference call for today.
For participating and ask could you. Please disconnect your lines have a lethal.
Okay.
Brad Cutsey: Another more, I guess, high level question, but there's been a lot of talk in the last little bit about tuition's increasing in Quebec. I'm just wondering for the English language schools, I'm wondering have you had any discussions with some of the university leaders in the problems of Quebec and do you have any indication on the potential impacts that may have? Well, I hope it on the various, Jonathan Kelcher on this call, but both Jonathan and I are alumni of one of those three schools that got a lot of mentioned in the press, being bishops.
Okay.
Hum.
Okay.
Yes.
Okay.
Okay.
Brad Cutsey: This kind of announcement, unfortunately, could really hurt a bishops, but a bishops you've got to put in perspective is only called a 2500 students. The bigger issue, obviously, I mean, we don't have homes in Quebec, sure, but the bigger question of how does it impact McGill and how does it impact Concordia? I don't think it does any favors on the overall outlook for enticing people to Quebec that don't want to deal with politics, but I think the reality is, I don't think, given how tight things are across the board in our focus markets.
Okay.
[music].
Brad Cutsey: And in Montreal, I don't think this announced, but it might change the composition of the domestic students, but at then the day is still probably cheaper to go to university in, I've been killed or Concordia, then it is at university of Ottawa or Western just on house, house affordability alone. And I think that's a bigger consideration. I think when a student goes to study somewhere, they'll look at the all in cost and I still don't think that even with the change, it will be that significant of a change in your all in cost.
Brad Cutsey: And then from a foreign students ability, I mean, the jury's open on foreign students, I still very much believe that the price points when you look at a Canadian, the reputable university relative to a university in the US, the similar quality, the difference already in the, in the level of cost of the tuition relative to the value of tuition you get. But it's still substantial here and back.
Brad Cutsey: So, obviously, it's not a, it's not a policy that we love and that we'll get behind, but in the same token, I don't want to over exaggerate it and the impacts it might have. And lastly, I'll just say the level of increase in international students in Pettana over the last three years relative to call it maybe the norm 10 years ago is significant. Okay, like we're talking greater than 20% and even at that point previously, they had a pretty strong impact on the overall.
Brad Cutsey: So, long, long-winded answer, short answer to this, I don't think it's going to happen.
Curt Millar: Investment Box. Okay, fair enough. Just two quick housekeeping items. So just the capitalized interest picked up this quarter. I wonder if you could elaborate on that a little bit. Just trying to understand, you know, have, have you fully decapitalized the interest related to slate and maybe what's driving that, that movement and, you know, where does it trend? Yeah, thanks. I've heard your, but my best to walk you through as much as I can or do as much clear as I can.
Curt Millar: There was still a little bit of interest capitalization to slate in the quarter, but that definitely summed down. There was also a little bit of an increase pretty minor related to 360-40 that we announced in the quarter. The bigger variance is just with the way we do this, the way we interpret the rules around this. I know people use different mechanisms. Some people use their weighted average interest rate to determine the capitalization of interest expense.
Curt Millar: We tend to use what's been drawn, either on our line of credit or we're not into our line of credit on our most recent financing. So given where our line of credit was throughout the quarter, the second quarter versus where it was for the third quarter. And when we funded certain large CMHC mortgages such as the slate itself, which funded in Q3, it can vary, it can make that very quite a bit.
Curt Millar: Introduce a bit of volatility just based on what capital source are tapping into for the quarter. So it's mainly coming from prior quarter being more tapped into CMHC level financing rates. Thirdly, if we were capitalizing versus this quarter being more into our credit facility and capitalizing the average.
Curt Millar: Okay, no, that I think that that's clear.
Curt Millar: And just the last one, so GNA was down a bit sequentially just wondering, you know, would the third quarter number be a good run rate or best to look at kind of the year to date and take a number like that. Yeah, I think, I think, you know, what we've been telling people is born in quarter to quarter and a half. I think we still stay inside that range. There's a few things that, you know, may happen in Q4 being it looks into the next year, but I think if you're in that range, you're still paying on. And I maintain that for next year. I still think we've got four and a half or four or four or four or a few. We'll be going in next year also.
Curt Millar: Okay, great. Thanks for all the color. I will turn it back. Thank you. Thanks so much.
Brad Sturgis: Your next question. Your next question comes from the line of Brad Sturgis from Raymond James. Please go ahead. Hey, guys. Um, just to go back to the the asset disposition program commentary. Just to reconcile from the last quarter is the plan of the program or the target of the program still to be net sellers of 75 million through that program. Um, once it's once you're able to do so and the opportunity allow to do so or has that program changed in any way.
Brad Sturgis: No, I think I think with the access that we may emerge to assets that have below our target IRR over the next five years relative to our corporate IRR. That hasn't changed, Brad. Um, they're still quite good cash flow and quite honestly, there's still a pretty good growth profile. It just doesn't meet our overall growth profile. So it makes sense to recycle that capital, but I want to be clear. There's nothing in that portfolio given the strength of our balance sheet.
Brad Sturgis: And what's coming on us that we need to dispose of anything. Okay, so we are not sellers because we have to be sellers of anything. If we get the appropriate price and it's a strong offer and it meets our threshold and we think we can recycle that capital and recycle that capital of the better return than what our overall corporate return is, then we're going to do it. But by no means are we in a position where we have to do a B and C in order to do, and easy that.
Brad Sturgis: And I really want to make that clear. So it's the nice position to be in, and that's the position we are in. But we have here, Mark, what we feel is 75 million of proceeds. But I will caveat that with the fact that there's a lot of volatility in the long end of the curve. And I don't think a lot's going to get done on anybody's side until there's a stabilization of that.
Brad Sturgis: That's not to say things won't get done if the long end of the curve stays here. But it has to stay here for a while, comfortable. And it might be a reset if it stays here. To Curt's point, if it comes down a little, then maybe we've seen, maybe we've seen the majority of the reset behind us.
Brad Cutsey: That's great commentary. That's quite helpful. And just on the, I guess my other question would be just on the expected finance and refinancing activity that you have your mark for the end of the year. It looks like the timeline got pushed out a bit. Is that just because of the backlog with CMHC yours or anything else that's driving the timing of that towards the, I guess, the late Q4 and the Q1 early Q1.
Brad Cutsey: Yeah, I think it's just more the time when we were, you know, we talked about that, super portfolio before. And it's, it's one of the bigger portfolios. We have other assets that are in the state of each. She also that's one of the beer for Collins. We were really hoping we could get that through there in Q3 and sometime in Q4 have the financing done by early Q4. Few of the properties have been picked up.
Brad Cutsey: So we're glad to see that and really hoping that. It'll finish getting through everything, but at this point, getting where we are in the year. I don't very much, we're going to try our best, but I don't very much it'll actually end up getting funded in Q4. To me, it probably drives in early to mid January, take a time frame is probably our best case scenario at this point. And at this point, you're not readlocked on that that's still.
Brad Cutsey: You still have some flexibility around rate at this point, depending on where benchmark yields go. Correct, we're not readlocked on again, so let's all keep our figures crossed that these come down. Okay, thanks a lot. Appreciate it.
Jimmy Shen: I'll turn it back.
Jimmy Shen: Rob Markler. Your next question comes from the line of Jimmy Shen from RBC Capitol. Please go ahead. Thanks, you guys. I think you mentioned when you were determining the cap reception, you've taken clues from brokers bringing products to the market. I was wondering if you could provide some color on what that pipeline of products look like, ideal size, type of assets, pricing indication, that sort of thing. I can give you a little bit, Jimmy, because it's like, there's not a lot of deals that have actually closed, and you know, we've chatted a lot about that internally here.
Jimmy Shen: I'll give you a sort of another data point to think about also before I answer that. Is that if you go back and look at the CVRA cap rate reports from the last.., call it tough, five years. From the lows of about 20, you know, 19, 20, 20, to where they are and Q3 reports, if you look across the major markets where we're in, the Delta has been somewhere between 30 and 60 basis points.
Jimmy Shen: So, the increase in between a low end of 30 and high end of 60 basis points across those markets. And if you look at sort of our low point, when you factor a low salay asset, we did it at about a 3.3 and now we're at 4.22. So, we've had about a 40 basis point increase on average from our low to where we are today, which kind of lines up pretty well with those CDR reports for the overall market of the market here.
Jimmy Shen: So, just wanted to give you sort of that as a data point to think about it also, if you will. From a deal perspective, I mean there's been, there's only been one sort of notable transaction that we would compare the PTHA and the last few that's closed. And that was like at over 600,000 a door, Jimmy. There's one in Montreal, a smaller size, that was just about 200 a door. It just put 200 a door, but it wasn't urban.
Jimmy Shen: It wasn't on the 500,000 a door. The one comment I would add to this is really any yield of size is completely off the table right now. Because all your institutional like players really do want to see stabilization in your financing. So, if there are deals getting done that tend to be on a smaller side and probably a little less institutional and probably not as much of a fair reflection of value of the publicly listed.
Jimmy Shen: And I'll throw into my period as well of the publicly listed reaches versus some of these smaller transactions that are closing. But even that said, even that has come right in. They were taken up the majority of the deals that were getting done, were the smaller size deals. But even now in the last call, it's kind of poor reach, even though they're becoming farther into your between. I know there's not a lot of color there for you, Jimmy. But that's just the reality of the world we're living in right now. It's very much I just tell me, but it really is a pen style in all sides.
Brad Cutsey: Okay, no, that's fair. Then my last question is on the distribution increase, and I know you guys have a trucker courage, maybe you don't want to break, and it's not a big amount. But I wonder how you guys as a board of thought about increasing the distribution versus things like paying down debt, buying back stock, or influencing some of your developments? No, for sure. I think I think you had it. It's not a big amount, Jimmy.
Brad Cutsey: Sure, it makes sense, and you can do these pretty quickly based on your target completion date where you are in the process. So that's plus, and then just on Montreal, you did deliver, I think, 36 new suites in formerly common area space. Was that the impact on vacancy in the quarter, but it also looked like you pushed right quite a bit in the market. So any color there, and also just with regards to additional potentially units that any any disclosure over the next 12 months is the what else you may be adding to the portfolio and suites in common areas.
Brad Cutsey: Yeah, the first part of your question, though, that didn't happen lately and you kind of answered it with your own commentary on that, but that said, we were extremely happy with what we said right now in the in Montreal. And then the last part of your question was what's that sorry. Just like in addition to the 36 that you delivered, are there any others kind of in the near term that you'd expect to add to the portfolio in common areas, new suites.
Brad Cutsey: Well, the number is the number is greater than 36. I wouldn't say more than 30 and necessary in Montreal, but as we mentioned before, across the whole of our options does a really good job of visualizing that space or recreating space by kind of merchant are taking existing space and working with it. So we're at different levels of planning, you know, to put a little on that. So nothing concrete to add, I think you just think, but it's as much as a small high rice. Right, yeah, fair enough. Okay, thanks for that guys. They were at two so I won't take any more time. Thanks, thanks for the questions.
Brad Cutsey: Okay, I think that's all the questions. I just like to thank everybody for taking the time for Wilson and for the questions and we had a good quarter, but I'm really excited to be quite honest about the future and what the outlook looks like for us in the remainder of 2023 and 2024 and the team working really hard to make sure that we deliver on what we can't control. And that's our organic portfolio and we will continue to monitor the externals that we can't control things like the bond yield and volatility within it. So once again, thanks a lot and we look forward to talking to you soon. Thank you, sir.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Have a lovely day.
Operator: Thank you.