Q3 2023 Dream Industrial Real Estate Investment Trust Earnings Call
Speaker 1: Welcome to the DREAM Industrial REIT 3rd Quarter 2023 Results Conference Call for Wednesday, November 8, 2023.
Welcome to the Dream Industrial REIT third quarter 2023 results conference call for Wednesday November eight 2023. Please be advised that all participants are currently in listen only mode and the conference is being recorded.
Speaker 1: Please be advised that all participants are currently in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero. During this call management of Dream Industrial REIT may make statements containing forward looking information.
Speaker 1: To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. During this call, management of dream industrial REIT may make statements containing forward looking information within the meaning of applicable securities legislation.
Within the meaning of applicable securities legislation forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties. Many of which are beyond dream industrial rates control that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information additional information about these assumptions.
Speaker 1: Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond dream industrial REITs control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.
Speaker 1: Additional information about these assumptions and risks and uncertainties is contained in dream industrial reads, filings with security regulators, including its latest annual information form and MDNA.
And risks and uncertainties is contained in dream industrial rates filings with securities regulators, including its latest annual information form and M. D. N. A these filings are also available on dream industrial Reits website at Www Dot dream of industrial REIT dossier your host for today will be Dr.
Speaker 1: the filing for all available on dream industrial reply at w w w dream industrially dot yet
Speaker 1: Your host for today will be Dr. Brian Pauls, Chief Executive Officer of Dream Industrial Reed. Dr. Pauls, please...
Brian Pulse Chief Executive Officer of Dream Industrial REIT Mr. Pulse. Please proceed.
Speaker 2: Good afternoon, everyone. Thank you for joining us today for Dream Industrial Read 3rd Quarter 2023 conference call.
Good afternoon, everyone and thank you for joining us today for dreams Industrial REIT third quarter 2023 conference call.
Speaker 2: Speaking with me today is Lennice Kwan, our Chief Financial Officer, and Alex Sanikoff, our President and Chief Operating Officer.
With me today is last Kwon, our Chief Financial Officer, and Alexandra Carse, our President and Chief operating Officer.
Speaker 2: It's truly a pleasure to announce that the most of Alex and Akov to CEO of GIR effective at the beginning of next year. Alex has done an incredible job since joining the GIR team in 2019 and has continued to add value and grow his responsibilities throughout the last four years.
It's truly a pleasure to announce the promotion of Alexandra Carse CEO of DIR effective the beginning of next year.
Alex has done an incredible job since joining the DIR team in 2019 and has continued to add value and grow his responsibilities throughout the last four years.
Speaker 2: DIR is in strong financial shape and is a great management hand to navigate the future to keep the company safe and capitalize on opportunities that materialize. I am delighted to remain close to the team as I transition to focus in other areas.
<unk> is in strong financial shape, and great management enhanced navigate the future to keep the company safe and capitalize on opportunities that materialized.
Delighted to remain close to the team that they can transition to focus in other areas.
Speaker 2: Moving on to our Q3 results, DIR achieved 10.4% comparative properties in a wide growth and FFO per unit growth for the quarter, making the fourth consecutive quarter of double-digit FFO growth.
Moving on to our Q3 results DIR achieved 10, 4% comparative property NOI growth and <unk> per unit growth for the quarter, making our fourth consecutive quarter of double digit growth.
Speaker 2: We remain focused on expanding the dream summit JV in our target markets with the acquisition of 6 assets in the GTA for a total purchase price of approximately $272 million.
We remain focused on expanding the dreams southern JV in our target markets with the acquisition of six assets in the GTA for a total purchase price of approximately $272 million.
Speaker 2: In addition, the venture is in exclusive negotiations or of a contract to acquire two additional assets located in the GTA, totaled 250,000 square feet for approximately $50 million.
In addition, debenture is in exclusive negotiations or under contract to acquire two additional assets located in the GTA totaling 250000 square feet for approximately $50 million.
Speaker 2: The exact positions are all accrued to the reach overall return profile with an expected yield on equity of over 7.5%.
These acquisitions are all accretive to the overall return profile with an expected yield on equity of over seven 5%, while requiring limited equity and hence preserving our balance sheet flexibility.
Speaker 2: while requiring limited equity and hence preserving our balance sheet flexibility.
Speaker 2: Our private capital partnerships continues to generate a strong recurring fee stream that is expected to grow significantly over time with over $6.7 million of net margins generated this year from our property management and leasing platform.
Our private capital partnerships continues to generate a strong recurring fee stream that is expected to grow significantly over time with over $6 7 million of net margins generated this year from our property management and leasing platform.
Speaker 2: From an Occupyre Market standpoint, there has been someone that will buy for Cation in Leasing Momentum. In the small to mid-based segment, Leasing Momentum remains healthy and we are continuing to push rates.
I'm, an occupier market standpoint, there has been somewhat of a bifurcation in leasing momentum in the small to mid space segment leasing momentum remains healthy and we are continuing to push rates.
Speaker 2: However, we are currently seeing a slowdown in leasing velocity in larger big products across our markets compared to 18 months ago.
We are currently seeing a slowdown in leasing velocity in larger baked product across our markets compared to <unk> 18 months ago.
Speaker 2: We've already seen the future development pipelines flow down with limited specs starts this year and a number of projects getting pushed out to future years.
We are already seeing the future development pipeline slow down with limited spend to start this year in a number of projects getting pushed out to future years.
Speaker 2: Development returns have been under pressure due to higher financing costs and we expect it to continue to keep the check on new supply.
Development returns have been under pressure due to higher financing costs and we expect this to continue to keep a check on new supply.
Speaker 2: The outlook for rental rate growth remains healthy with market reps over 30% above in place.
The outlook for rental rate growth remains healthy with market rents over 30% above in place rents.
Speaker 2: We can therefore continue to capture significant organic growth within our portfolio with less reliance on continued market rent growth. I will now turn it over to Alex to provide additional color on our business.
We can therefore continue to capture significant organic growth within our portfolio with less reliance on continued market rent growth.
I will now turn it over to Alex to provide additional color on our business.
Speaker 3: Thank you, Brian . Good afternoon, everyone. I want to take this opportunity to thank Brian for his leadership of GIR over the past six years.
Thank you, Brian and good afternoon, everyone I want to take this opportunity to thank Brian for his leadership of DIR over the past six years.
Speaker 3: and has been a great honor working side by side with him and the entire management team in the true spirit of partnership over the last four years. As we have transformed our business to grow.
Has been a great honor working side by side with him and the entire management team and the true spirit of partnership over the last four years as we have transformed our business to grow.
Speaker 3: We know it's only the largest industrial platform in Canada, but a sizable player in Europe as well. We have a established a significant development program and solidified our balance sheet all while delivering sector leading total returns to our unit.
To be not only the largest industrial platform in Canada, but a sizable player in Europe as well, we have established a significant development program and solidified our balance sheet, all while delivering sector, leading total returns to our unitholders.
Speaker 3: I'm very excited about the prospects of our platform going forward. I will start with our perspective.
I'm very excited about the prospects for our platform going forward.
I will start with our perspective on the current market environment.
Speaker 3: In our key markets in Canada and Europe , we entered the period of riding and stress race with very, very limited supply pipeline.
In our key markets in Canada, and Europe, we entered the period of rising interest rates with very very limited supply pipeline Rex.
Speaker 3: record low availability rates and significant structural demand drivers for industrial space.
Record low availability rates and significant structural demand drivers for industrial space.
Speaker 3: These dynamics, combined with continued population growth in major Canadian urban centres, underpin the continued health of the Occupy market.
These dynamics combined with continued population growth and major Canadian urban centers underpin the continued health and preoccupy markets.
Speaker 3: While availability rates have increased somewhat from the start of the year, the supply pipeline, which is already limited, is shrinking as projects get delivered in weeks-to-week. Limited new spec starts and a substantially lower development pipeline in the near term.
While availability rates have increased somewhat from the start of the year the supply pipeline, which is already limited is shrinking as projects get delivered and we expect limited new spec starts and a substantially lower development pipeline in the near term.
Speaker 3: The headline red growth as published by major market participants has declined compared to prior years in most marketing accounts.
The headline revenue growth as published by major market participants has declined compared to prior years and most markets in Canada. While this is in line with our expectations. We note that most of these research reports are based on average asking one in any given market.
Speaker 3: While this is in line with our expectations, we note that most of these research reports are based on average asking wins in the end given market. As such, the published statistics could be influenced by changes in asking rent and competition of available space.
As such the published statistics could be influenced by changes in asking rents and composition of available space.
Speaker 3: What we see in our business is that rental growth with we projected for 2023 as a whole has already been achieved.
What we see in our business is that rental growth that we projected for 2023 as a whole has already been achieved we have completed nearly 4 million square feet of new leases and renewals in Canada across the DIR and Dream summit portfolios are combined spread averaged approximately 75% meeting or exceeding our.
Speaker 3: We have completed nearly four million square feet of new leases and renewals in Canada across the DIR and Dreamtometh Portfolio.
Speaker 3: Our combined spread averaged approximately 75% need to be more exceeding our budget for the year, which were set with mid-to-high single-piget growth, as well.
Budgets for the year, which were set with mid to high single digit growth assumptions.
Speaker 3: over and above the leasing spreads. We have crystallized, we locked in an average of 4% annual escalator.
Over and above the leasing spreads we have crystallized, we locked in an average of 4% annual escalators.
Speaker 3: The availability rate within our portfolio has increased slightly in the quarter. This increase was in line with our expectations and was factored into the NOI outlook we communicated previously.
The availability availability rate within our portfolio has increased slightly in the quarter. This increase was in line with our expectations and was factored into the NOI outlook, we communicated previously.
Speaker 3: In a multi-tenancy portfolio with staggered lease maturity, such as ours, occupancy rates will always fluctuate slightly over time.
In a multi tenanted portfolio with staggered lease maturities such as ours occupancy rates will always fluctuate slightly over time.
Speaker 3: As Brian commented, we're seeing limited large bay requirements for units over 400,000 square feet in most markets, but small to mid-bay activity remains healthy.
As Brian commented, we're seeing limited large requirements for unions over 400000 square feet in most markets, but small to mid day activity remains healthy.
Speaker 3: Our properties are designed to be flexible and accommodate these changing demand patterns.
Our properties are designed to be flexible and accommodate these changing demand patterns.
Speaker 3: We remain encouraged by the level of new leasing interest for both existing assets and new development projects.
We remain encouraged by the level of new leasing interest for both existing assets and new development projects.
Speaker 3: We're currently engaging with several prospective tenants for our 200,000-square-foot Dixon property in Montreal. We're in discussions with four tenants for our 200,000-square-foot Courtney Park development project in Mississauga. We're continuously responding to requirements for our two developments in Calgary, ranging from 30,000 square feet to 300,000.
We're currently engaging with several prospective tenants for 200000 square foot different property in Montreal, and we're in discussions with four tenants for our 200000 square foot Courtney part development project in Mississauga, we continuously responding to requirements for our two developments in Calgary, ranging from 30000 square feet.
300000 square feet.
Speaker 3: We have recently signed a $20,000 for food conditional lease at our recently completed appetizer development. At rent, 6% higher than the first lease signed this summer.
We have recently signed a 20000 square foot conditional lease at our recently completed Abbott side development at <unk>, 6% higher than the first lease signed this summer.
Speaker 3: In general, we see significant strength in the smaller base segment of the market, especially in the GTA and southwestern Ontario.
In general we see significant strength in the smaller base segment of the market, especially in the GTA and southwestern Ontario.
Speaker 3: So far this year, across our platform, we've completed 800,000 square feet of leasing in these markets. For premises below 50,000 square feet.
So far this year across our platform, we completed 800000 square feet of leasing in these markets for premises below 50000 square feet.
Speaker 3: we achieved over 100,000 percent rental spreads and annual escalators averaging 4.5 percent.
We achieved over 100.
Percent.
Rental spreads and annual escalators, averaging four 5%.
Speaker 3: notably for smaller spaces below 20,000 square feet, annual escalators are 5% on average.
Notably for smaller spaces below 20000 square feet annual escalators or 5% on average.
Speaker 3: Overall, our organic NOI growth outlook for the year remains intact, and we reiterate our prior guidance of 10 to 11 percent CP NOI growth for 2020.
Overall, our organic NOI growth outlook for the year remains intact, and we reiterate our prior guidance of 10% to 11% GP NOI growth for 2023.
Speaker 3: Looking ahead, over the next two years we have nearly $6 million per feet of GLA maturing in Canada, with approximately 74% located in Ontario and Quebec, where average market rent is approximately double the inflation.
Looking ahead over the next two years, we have nearly 6 million square feet of GLA maturing in Canada was approximately 74% located in Ontario, and Quebec, where average market rent is approximately double the in place rent.
Speaker 3: In Europe , we have 2.4 million square feet maturing over the next two years and the current market rents for these European leases is over 10% higher than are in place.
In Europe, we have $2 4 million square feet maturing over the next two years and the current market rents for these European leases is over 10% higher than our in place rents.
Speaker 3: With that, we remain optimistic regarding our mid- and long-term prospects for organic NOI and FFO per unit growth, despite the pressure from interest rates. I will now turn it over to Lennart.
With that we remain optimistic regarding our mid and long term prospects for organic NOI and <unk> per unit growth. Despite the pressure from interest rates.
I will now turn it over to Linda to discuss our financial highlights.
Speaker 1: Thank you, Alex. Our third quarter financial results were strong. Diluted FFO per unit was 25 cents for the quarter, more than 10% higher than the prior year quarter.
Thank you Alex our third quarter financial results were strong diluted <unk> per unit was <unk> <unk> for the quarter more than 10% higher than the prior year quarter.
Speaker 4: The solid year-over-year growth was primarily due to strong comparative properties NOI growth and property management income.
The solid year over year growth was primarily due to strong comparable property NOI growth.
And property management income from our equity investments.
Speaker 4: Our NAV per unit at quarter end remains steady at $16.80.
Our NAV per unit at quarter end remained steady at $16 80.
Speaker 4: We continue to focus on maintaining a strong and flexible balance sheet with ample liquidity.
We continue to focus on maintaining a strong and flexible balance sheet with ample liquidity.
Speaker 4: During the quarter, we closed on 229 million euros of European mortgages with three lenders at a weighted average rate of 4.93% for a term of five years.
During the quarter, we closed on 229 million euros of European mortgages with three lenders at a weighted average rate of $4, 93% term of five years.
Speaker 4: We raised $107 million of capital through our ATM program at an average price of $14.27.
We raised $107 million of capital through our ATM program at an average price of $14 27.
Speaker 4: per unit. These proceeds were immediately used to repay outstanding indebtedness accretively to FFO per unit and reduced our leverage by approximately 100 basis points.
For unit. These proceeds were immediately used to repay outstanding indebtedness accretive <unk> per unit and reduced our leverage by approximately 100 basis points.
Speaker 4: This also created additional balance sheet capacity to ultimately fund our developments and co-investments in private capital partnerships, leading to NAV accretion in the medium term. We've addressed...
This also created additional balance sheet capacity to ultimately fund our development and co investments and private capital partnerships, leading to NAV accretion in the medium term.
Yeah.
We have addressed all of our 2023 debt maturities.
Speaker 4: Looking forward to 2024, we have approximately $300 million of debt maturing at an average rate of 3.5%. 95% of this maturing debt
Looking forward to 2024, we had approximately $300 million of debt maturing at an average rate of three 5%.
95% of this maturing debt is euro denominated.
Speaker 4: We are presently evaluating various financing options with existing relationship lenders at favorable rates that allow us to optimize our cost of debt.
We are presently evaluating various financing options with existing relationship lenders at favorable rates that allow us to optimize our cost of debt.
Speaker 4: We ended the quarter with leverage of 35.1% and debt to EBITDA of 8.2 times.
We ended the quarter with leverage of 35, 1% and debt to EBITDA of eight two times.
Speaker 4: With over $526 million of available liquidity at the end of the quarter plus an additional $250 million accordion on our facility, our balance sheet strength positions us well to continue executing on our strategic initiatives.
With over $526 million of available liquidity at the end of the quarter plus an additional $250 million accordion on our facility our balance sheet strength positions us well to continue executing on our strategic initiatives.
Speaker 4: Looking forward, we expect our 2023 SFO to be in line with our previously updated guidance, which is SFO per unit in the high 90 cent range.
Looking forward, we expect our 2023 <unk> to be in line with our previously updated guidance, which is <unk> per unit in the high 90% range. This.
Speaker 4: This translates into approximately 24 cents for the fourth quarter, assuming FX rate near current level and leveraged largely in line with Q3.
This translates into approximately 24 cents for the fourth quarter, assuming FX rates at current levels and leverage largely in line with Q3.
Speaker 4: and represents FFO per unit growth of approximately 10% year per year.
And represents episodes per unit growth of approximately 10% year over year.
Speaker 4: Just before I turn it back to Brian to wrap up, I'd like to say thanks to Brian for his leadership and guidance over the past six years. I look forward to the continued growth and success of our industrial platform under Alex's leadership.
Just before I turn it back to Brian to wrap up I'd like to say, thanks to Brian for his leadership and guidance over the past six years I look forward to the continued growth and success of our industrial platform under Alex's leadership.
Speaker 2: Thank you, Lenis. It's truly been an honor for me to lead EIR for the past.
Thank you Lance it's truly been an honor for me to lead the IR for the past six years and grateful for all the friendships I've made and I look forward to <unk> continued success, we'll now open it up for questions.
Speaker 2: I'm grateful for all the friendships I've made and I look forward to DIR's continued success. We'll now open it up for questions.
Okay.
Speaker 1: Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any.
Thank you.
We'll now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Speaker 1: To withdraw your question, please press star, then 2. We will pause for a moment as colors join the queue.
We will pause for a moment as callers join the queue.
Speaker 1: Our first question comes from Fred Blondo of Laurentian Bank Securities. Please go ahead.
Our first question comes from Fred bundle of Laurentian Bank Securities. Please go ahead.
Oh, Thank you and good morning, and congratulations Brian and Alex.
Speaker 5: Well, thank you and good morning and congratulations, Brian and Alex.
Speaker 5: First question from me, Alex, we discussed Germany in August , and obviously the portfolio conscience to perform well in Europe . But I was wondering with the increasing macro-adwins in Europe , I was wondering if you're starting to see either signs of stress within your portfolio and or if you're starting also to see either this stress or interesting acquisition opportunities.
So first question for me, Alex will discuss Germany in August and obviously the portfolio continues to perform well in Europe.
But I was wondering with the increasing macro headwinds in Europe.
I was wondering if you're starting to see either signs of stress within your portfolio and or are you just starting also to see either.
<unk> are interesting acquisition opportunities.
Thanks, Brett what we see in Europe is generally supply demand dynamics are pretty.
Speaker 3: Thanks Fred. What we see in Europe is generally supply-demand dynamics are pretty favourable for...
Favorable for landlords.
Speaker 3: in most markets, so that's Germany, Netherlands, France, we see very limited supply and continue to see strong demand across the board, so we are encouraged by the Occupy Fundamentals. One aspect to note about our European portfolio is that our European portfolio is not pure logistics product.
In most markets so.
Germany and Netherlands.
France, we see very limited supply.
And continued to see strong demand.
Across across the board.
So we we are encouraged by the occupier fundamentals.
One aspect to note about our European portfolio as our European portfolio is not pure logistics product.
Speaker 3: Roughly half of our portfolio in Europe is what we would describe as urban and last mile logistics, and the supply-demand dynamics in that segment of the market are even more robust, with virtually no supply that is either on the horizon or has been added recently.
Roughly half of our portfolio in Europe is what we would describe as urban and last mile logistics and the supply demand dynamics in that segment of the market argue even more robust.
Virtually no supply that is.
Either on the horizon or has been added recently.
Speaker 3: translating into rental growth and from occupied funders.
Translating into rental growth and strong occupier fundamentals.
Speaker 3: There's some markets in Europe , particularly in around Barcelona, where we see a little bit more supply compared to other locations. So we're watching that. But Europe is a whole and our portfolio is a whole world.
There are some markets in Europe.
Particularly.
And around Barcelona, where we see a little bit more supply.
Supply compared to other locations. So we are watching that but Europe as a whole in our portfolio as a whole as well positioned as.
Speaker 3: As far as acquisition opportunities, we are starting to see interesting opportunities, especially in that urban logistics and last mile logistics segment of the market, where we expect continued rental growth and continued supply.
As far as acquisition opportunities.
We are starting to see interesting opportunities, especially in that urban logistics.
And last mile logistics segment of the market, where we expect continued rental growth and continued out of supply.
Speaker 5: Great, thank you. One last for me, just in terms of the Dream Summit joint venture. I was wondering, what are you budgeting in terms of expected external growth for 2024?
Great. Thank you and one last for me.
Just in terms of the.
The drone summit joint venture.
I was wondering what are you budgeting in terms of.
Expect the external growth for 2024.
Yeah.
Hum.
Speaker 3: We're not budgeting external growth generally across our businesses. We're not budgeting external growth for DIR, nor are we budgeting for Dream Summit. Having said that, Dream Summit continues to be active in the market, and we continue looking at opportunities as we have so far this year.
We're not budgeting external growth generally across our businesses that are in our budgeting and strong growth of DIR, nor are we budgeting for June summit.
Having said that Dream center continues to be active in the market and we continue.
Looking at opportunities as we have so far this year.
Speaker 3: We generally expect to remain active. The volume is hard to predict.
Yeah.
We expect to remain remain active but the volume is hard to predict.
That's great. Thank you that's it for me thank you.
Speaker 1: Our next question comes from Himanshu Gupta of Scotiabank. Please go ahead.
Our next question comes from Himanshu Gupta of Scotiabank. Please go ahead.
Thank you and good afternoon.
Speaker 6: So my question is regarding the Montreal industrial market, so are you seeing any weakness in the leasing demand in this market in particular? And then if I look at the lease expiries next year, you have a sizable 1.2 million square feet coming due, so any thoughts on the lease expiries?
So my question is regarding the one three on industrial market. So are you seeing any weakness in the leasing demand.
In this market in this market in particular.
And then if I look at the lease expiry is next year, you will have the size it but either one 2 million square feet coming due.
So any any thoughts on the lease expires next year.
Speaker 3: So lease expiries, maybe I'll start with your second question. Lease expiries, especially in a market like Montreal, generally provide an opportunity and we are excited to get the space back and be able to capture that market upside. When it comes to general health of Montreal markets, we remain encouraged by what we see.
Okay.
So lease expiry, so maybe I'll start with your second question lease Expiries are especially in a market like Montreal.
Jim will provide an opportunity.
And we are excited too.
Get the space back and be able to capture that market.
Upside.
When it comes to general health of Montreal market.
We remain encouraged by what we see.
Speaker 3: especially for portfolio like ours, which is very urban. Generally targeting small to midday users and midday in our definition, so 50 to 200,000 support foot range and small ways, everything below 50,000, we remain well positioned and we generally don't compete with some limited new supply that was added to the market, especially in the South Shore.
Especially for a portfolio like ours, which is very urban.
Generally targeting.
Small to mid day users in mid May in our definition. So 50 50 to 200000 square foot range.
And small base everything below 50000.
We remain well positioned and we generally don't compete.
With some limited new supply that was added to the market, especially in the south shore.
<unk>.
Speaker 3: I know that Montreal Market is generally...
I know the Montreal market is generally.
Speaker 3: In the headlines, given some of the recent statistics show sequential negative rental growth, we commented earlier that those statistics need to be interpreted understanding how they are derived. What we are seeing in our portfolio is rental outlook is intact compared to what we expected.
And the headlines given the some of the recent statistics show.
Sequential.
Negative rental growth.
We commented earlier that.
Those statistics needs to be interpreted understanding the how they are derived.
What we are seeing in our portfolio as a rental outlook is intact compared to what we expected.
Speaker 6: And then just on the market vent code, and you know, we keep the statistics aside, what are your thoughts for the market vent code in Montreal?
Right.
<unk>.
And then just on the market cooled.
We're going to keep these total six aside what are your Cogs for the market rent growth in Montreal in the next year do you see that flatten out or do you see you know a chance as well.
Speaker 6: Do you see that platinum out or do you see, you know, chances of a maybe a negative and...
Maybe I'd love it if I'm correct that's correct.
Speaker 3: We would generally expect a comparable rental growth in 24 compared to 23, so in the mid-single digit range.
We would generally expect.
Comparable rental growth and 24 compared to 23, so in the mid.
Mid single digit range.
Speaker 3: What we are seeing in Montreal in particular is that supply-py-plying relative to inventory is very low and our understanding is that the vast majority of market participants are not looking to add new spec start.
What we are seeing in Montreal in particular is that supply pipeline relative to inventory is very low.
And our understanding is that the vast majority of.
Market participants are not looking to add.
New spec starts and we expect that they inevitably that will translate into stronger rental growth over time, it's hard to predict exactly when.
Speaker 3: And we expect that they inevitably that will translate into stronger rental growth over time. So to predict exactly the length, but that supply pipeline that is shrinking will inevitably support the market.
But that supply.
Pipeline.
The shrinking will.
Will inevitably support the market.
Speaker 6: Okay, okay. And maybe the last question Alex you mentioned about you know,
Okay, Okay, and maybe the last question Alex you mentioned about you know achieving.
Speaker 6: 4% rent escalators in the year term. I mean, that's what you have in print. Has that coming down now? As we started to see some normalization of this.
4% rent escalators.
Hum them, that's what you have been printing.
Yeah.
How's that coming down now.
He started to see some normalization of leasing them at and also you know like inflation moderates as well so is that whole like becoming like three or four is pretty intact.
Speaker 6: and also, you know, like inflation moderates as well. So is that hold like becoming like three or like four is good enough?
Speaker 3: So 4% was the average around 4.9 square feet that we've completed this year so far for the industrial platform of the whole. So it's a pretty representative of data sets. It includes leasing in Ontario or the GTA. It's left in Ontario and Montreal and Western Canada. So it's the average for the entire leasing volume.
So 4% was the average around 4 million square feet that we've completed this year, so far for the industrial platform as a whole.
So it's a pretty representative data set includes leasing in Ontario or in the GTA in southwestern Ontario in Montreal in Western Canada. So it's the average for the entire leasing volume.
We commented also that.
Speaker 3: commented also that for the year we completed about a 100,000 split feet of smaller baby thing, with a GTA and so it's Western Ontario achieving a roughly 4.5% miscalculated.
For the year, we completed about 800000 square feet of smaller Bay leasing, let's say in the GTA.
And southwestern Ontario, achieving roughly four 5% escalators. So those are the numbers that we've seen so far in 2023.
Speaker 3: those are the numbers that we've seen so far in 2023. When it comes to go forward, we see, would you see some pressure on escalators, but so far for our portfolio, which is again...
When it comes to go forward.
We see we do see some pressure on escalators, but so far for our.
For our portfolio, which is again.
Speaker 3: Small to midday on average we've been achieving our target.
Small to mid day.
On average we've been achieving our targets.
Speaker 6: Okay, thank you. And maybe just one last follow up. I think you have a vacancy around the port of Montreal and as you mentioned, four tenants or prospective tenants, any thoughts when should we expect to backfill that?
Got it okay. Thank you and maybe just one last follow up I think you have a vacancy around the port of Montreal and.
You mentioned four tenants.
10 minutes.
Any color to them should we expect a bachelor of that vacancy.
Yeah.
Speaker 3: We expected it will be released in the first half of 2024.
We expect that it will be it will be leased and are producing them in in the first half of 2024.
<unk>.
Speaker 3: The exact timing is challenging to predict. As we communicated prior, we are targeting to capture the value for significant land components that this particular site offers. And therefore, the users who are looking at this site are somewhat specific audience that requires that outside storage component for you to the fleet.
Exact timing is.
Challenging to predict.
As we communicated prior.
We are targeting to capture the value for significant land component that the this particular site offers.
And therefore, the users who are looking at this site.
Somewhat specific audience.
That requires that outside storage component.
For either the fleet or.
Speaker 3: trailer storage, etc., and that will inform both the market rent and the timing, and as we communicated previously, we remain confident that we'll achieve those rents, and if we don't, then the site does offer significant development opportunities, which we can capitalize on.
Trailer storage et cetera.
That will inform both the market rent and the timing.
And as we communicated previously we are remain confident that we'll achieve those rents and if we don't then.
It does offer significant development opportunities, which we can capitalize on.
Alright fair enough. Thank you so much and I'll turn it back.
Speaker 1: Our next question comes from Brad Sturgis of Raymond James. Please go ahead.
Our next question comes from Brad Sturges of Raymond James. Please go ahead.
Hey, good afternoon.
<unk>.
Speaker 7: I think they continue on to discussion around leasing. Given, I guess 75% of your lease and trades over the next couple of years are on Cherokee Beckett, is it just curious to get a sense of or what you would be forecasting in terms of retention rates for the space holding? Would it be similar to his or her flower?
Just to continue on the discussion around leasing.
Given given I.
75% of your lease maturities over the next couple of years or Ontario, Quebec.
Just curious to get a sense of or what you would be forecasting in terms of retention rates for the space Rolling would it be similar to historical averages.
Yeah.
Okay.
Speaker 3: Thank you Brett. So if you look at our investigation, we disclose our long, long-term track record retention ratio, you will see that retention ratio generally average is around 70%.
Thanks, Brett So if you look at our Investor presentation, we disclose our long long term track record retention ratio you will see that our retention ratio generally averages around $77 75 per cent for us over over the past 10 years.
Speaker 3: 75% for us over the past 10 years.
Speaker 3: We have seen somewhat of an increase so far this year in retention as occupiers generally decide to stay within the existing footprint. It remains to be seen whether that elevated retention ratio will persist or whether it will revert back to normal.
We have seen somewhat of an increase so far this year and retention.
As occupiers generally decide to stay within the existing footprint.
It remains to be seen whether that.
<unk> retention ratio.
Persist or whether we will revert back to normal.
<unk>.
Speaker 3: For modern purposes, you can assume the long term average. That's the direction of the question.
For modeling purposes, you can assume the long term average if that's the direction of the question.
Speaker 7: because it makes sense. I appreciate the comment, the market commentary around market rent growth on Montreal. I'm curious if you're expecting market rent growth in Toronto to be similar in 2024 as 2023 as well.
Okay that makes sense.
And I appreciate the comment the market commentary around market rent growth on Montreal, I'm curious, if you're expecting market rent growth in trauma to be similar in 2020 for US is 2023 as well.
Speaker 3: Yeah, we generally modeling single digit rental growth and changements.
Yeah, we generally modeling.
Single digit rental growth in 2024 in most markets.
Speaker 7: Okay, so, okay. And my last question would be just on the... Putting in the GTA. In the GTA, okay. With the commentary around your certain seats and more opportunity within Europe for acquisition.
Okay.
And my last question would be just on the putting in the GTA.
Okay.
With with the commentary around you're starting to see some more opportunity within Europe for acquisitions.
Speaker 7: Can you comment on where evaluation metrics in Europe for the target markets you're looking at and the type of assets that meet your investment criteria, where cap rates or price per square foot would be today?
Can you comment on.
We're evaluation metrics in Europe for the target markets Youre looking on.
To meet your investment criteria, where where cap rates or price per square foot would be today.
Speaker 3: Thanks, Beth. What we continue to like in Europe is these...
Thanks, Brett.
What we we continue to like in Europe.
Speaker 3: urban industrial, urban logistics, last mile type assets, which we have significant exposure to in our portfolio. We continue to see strong rental growth in that segment. If you look historically, rental growth for urban assets in Europe has outpaced the big box logistics.
Urban industrial urban logistics last mile.
<unk> assets.
Which would have significant exposure to in our portfolio.
We continue to see strong rental growth in that segment.
If you look historically, our rental growth for urban assets in Europe has outpaced our big box logistics and we expect that that trend will continue as far as metrics, we generally starting to see opportunities that translate into <unk>.
Speaker 3: and we expected that trend will continue. As far as metrics, we generally starting to see opportunities that translate into...
Speaker 3: double digit, low double digit or high single digit total return on an unleaver basis. The going in metrics can vary depending on the least term and the rents in place, in the end case scenario is required to the In Spaß section, which is part of foyer entry of the footwork section. In the end case scenario is required to the In Spaß section, which is part of foyer entry of the footwork section.
Double digit low double digit or high single digit total return.
On an unlevered basis, they're growing in metrics can vary depending on the lease term and.
Rents in place rents relative to market.
Sure.
The mark to market rents, which is.
Speaker 3: market grants over capital value would be comparable on average to what our portfolio is marked at and provide attractive opportunities.
Market rents over capital value would be comparable on average to what.
Our portfolio is marked at and.
They will provide attractive opportunities patrol overtime.
Yeah.
Okay. That's helpful I'll turn it back.
Okay.
Speaker 8: Our next question comes from Mike Marquitos of BMO Capital Markets. Please go ahead. Thank you, operator.
Our next question comes from Mike markets.
BMO capital markets. Please go ahead.
Thank you operator.
I guess, just we've talked a lot about the market rent growth.
Speaker 8: So I guess to a two part question here for next year.
So I guess two two part question here for next year.
Speaker 8: How are you guys thinking about maybe occupancy? Just giving the environment and expecting maybe a little bit of a trickle down over the next 12-18 months. And I guess I'd also be curious to hear. Now let's ask your comments on how strong and the small and the day tenants or product types has been. If you've seen any increase or getting a little bit more incrementally worried, I would say about potential time failures over the next 12-18 months.
How are you guys thinking about maybe occupancy I'm just given the environment are you expecting maybe a little bit of a trickle down over the next 12 to 18 months and I guess I'd also be curious to hear.
Notwithstanding your comments on how.
Strong in the small and mid day tenants or or product type has been.
If you've seen any increase youre getting a little bit more incrementally worried I would say about a potential tenant failures over the next.
About 18 months.
Yeah.
Thanks, Mike.
Speaker 3: With respect to occupancy, we will be providing guidance, as you know, in February , and that will include the outlook for the following year in terms of NOI and occupancy. We generally see some lease-up opportunities within the portfolio, including some of the
With respect to occupancy we will be providing guidance as you know in February and that will include the outlook for the year for the following year in terms of NOI and occupancy.
We generally see some lease up opportunities within the portfolio, including.
So the.
Speaker 3: So the development projects such as Abitside are distant property and Montreal, etc. So there's going to be a...
Some of the development projects, such as Abbott side are different property and Montreal et cetera.
Theres going to be here.
Speaker 3: Upward possibility for occupancy, but then as we commented earlier we do have some expires so we expect sort of natural natural normal renewal there. So there will be ups and downs in terms of occupancy outlook but on average our portfolio has always been stable in the high-night.
Upward possibility for occupancy, but then as we commented earlier, we do have some expiry. So we expect sort of Nashville.
Actual nonrenewals there so there will be.
Ups and downs in terms of occupancy outlook.
But on average our portfolio has always remained stable in the high 90% range over a very long period of time as we also disclosed in our.
Speaker 3: range over a very long period of time, as we also disclose in our
Speaker 3: And so we don't expect that there's we don't see anything that that would change that long
Materials and so we don't expect that there's we don't see anything that would change that long term trajectory.
Speaker 3: for jeffery. When it comes to...
When it comes to.
Speaker 3: tenets health we would generally continue to see
Our tenants health, we generally continue to see.
Speaker 3: health from tenants. We're not concerned about any particular group. I would do see some subleasing activity from 3PL users in particular, but that's reflected in the overall availability rate in the market.
Health from tenants, we're not concerned about any particular group, we do see some.
Sub leasing activity from our three PL.
Users in particular, but that's reflected in the overall availability rate than the market.
Speaker 3: Generally speaking, we're still able to capitalize on those opportunities when tenants need to give back space. We're able to capture the upside that is not budgeted, if you will, because we didn't count on that space coming back to us. We're working through a few cases like this, where tenants approach this either in the IR portfolio, June 7th portfolio, looking for less space.
And generally speaking, we're still able to capitalize on.
Those opportunities when tenants into give back space, we're able to capture the upside.
That is not.
Budgeted if you will because we are we didn't count on that space coming back to us and we're working through a few cases like this where tenants approached us either in Jr. Portfolio Gen seven portfolio looking for less space and we immediately found a replacement tenant.
Speaker 3: immediately found replacement tenants at significantly higher rents to take their
At significantly higher rents.
Two to take their space.
Speaker 3: So we do see some of that but again, usually a result in an opportunity in the last.
We do see some of that but again you usually have resulted in an opportunity in the web site.
Speaker 8: Okay, thanks for that. Maybe just over to Linus.
Okay. Thanks for that.
Maybe just over to lend us.
Speaker 8: You know, you major coming about 24 maturities and working with lenders and you were able to do a, you know, have achieved a good outcome on the last refinancing that you did, but maybe in the last couple of months have you seen any sort of change in the lending environment at all or would you expect barry anymore with volatility in the long end of the curve or is your expectation that you'll be able to achieve a similar outcome in 2024 as you just did in the last last maturity.
You made a comment about 24 maturities and working with lenders and you were able to do a you don't have to achieve a good outcome on the the last refinancing that you did but.
Maybe in the last couple of months have you seen any sort of change in the lending environment at all or would you expect.
Barring any more with <unk>.
Utility and the long end of the curve or is your expectation that you'll be able to achieve a similar outcome.
In 2024 as you just did in the last the last maturity.
Speaker 4: There's a few questions in their mic. I think in terms of the lender lending market, don't think we see.
And then just a few questions in there Mike.
You can turn around.
The lender lending market.
I think we've seen I just want make sure I answer all your questions I don't think we've seen it.
Speaker 4: I just want to make sure I answer all your questions. I don't think we've seen a significant change from cured lenders. Uncured debt market seems to be functioning open and healthy. So no concern or no we're not seeing any cause for concerns in any of those markets.
Significant change from secured lenders.
Unsecured debt market seems to me I'm staying open unhealthy.
So no concerns there.
Not seeing any cause for concerns in any of those markets.
Speaker 4: in terms of what we think we can achieve for next year, obviously. You know.
In terms of what we think we can achieve for for next year obviously.
No.
Speaker 4: We all re- sort of work with what the outlook is for future interest rates. But I think I had mentioned that of the debt maternity next year, it's an average rate of 3.5%. The more we just closed and are 95% of that debt maternity in the year old.
We've all been sort of working with the outlet outlook is for future interest rates, but I think I had mentioned that of the debt maturing next year at an average rate of three 5% the mortgages that we just closed.
And 95% of that debt maturing in euros.
Speaker 4: The euro mortgages that we did close were just below 5%, so we expect to do something similar in that range if we were to replace euro mortgages. If we were to look at unsecured market, I think that's up to euros would be in the low 5.
The year on mortgages that we didn't close or just below 5%. So we expect something similar in that range. If we are to replace your mortgages.
If we were to look at unsecured market and in that sense to euros.
I'm again.
Speaker 4: So again, any guidance that we will be providing in early next year will incorporate similar.
Any guidance that we really providing in early next year, we will incorporate a similar assumption.
Speaker 8: Okay. And then just timing wise, is that, is that burglarly spread out? Is it more of a bullet maturity in the way to...
Okay.
And then just timing wise is that is that.
Briggs Luisa spread out is it or is it more of a bullet maturity and.
Weighted to a specific part of the year.
Speaker 4: So we do have an unsecured adventure returning the middle of next year, as well as the two-thirds of next year's and the rest are fairly spread out there mortgages.
And so we do have an unsecured debenture maturing the middle of next year.
Two thirds of next year's maturities and the rest are fairly spread out their mortgages.
Got it.
Awesome. Thanks, so much.
Okay.
Our next question comes from <unk>.
Speaker 1: Our next question comes from Pammy Beer of RBC Capital Markets. Please go ahead.
RBC capital markets. Please go ahead.
Speaker 3: Thanks, I everyone. Just coming back to your comments on the slower large day leasing velocity, are there any known sort of large vacancies that you're aware of that are coming back to you or the next call it hits monster or even year, if you know that far out.
Thanks, everyone.
Coming back to your comments on the on the slower large de leasing velocity are there any sort.
Sort of large vacancies that you're aware of that are coming back to you over the next call. It six.
Months or even years.
Alright.
Yes.
Speaker 3: Within J-H4-Fuller there's 100,000 square-foot space in GTA that is going to be coming back to us. And we're working through releasing that unit other than that. There's nothing significant.
Within your portfolio, there's 100 pounds per foot.
Space and DTA that is going to be coming back to us.
We're working through a leasing that unit.
Other than that there's nothing nothing nothing significant.
That is unknown.
Okay.
Speaker 9: Sorry Alex, did you say that was in the summit JV portfolio or?
Hey, Alex did you say that was in the <unk> JV portfolio or.
No within the DIR on balance sheet portfolio, Okay, Alright, Im sorry is that is that coming in Q4 or 2024.
Speaker 9: Okay, all right. And sorry, is that coming in to court or 2024? No, Herr.
In Q4.
Okay.
Speaker 9: And then just coming back to the commentary around the maturities for the weeks, the expiry for next year, getting weighted to Ontario and Quebec and there is a big mark to mark the opportunity there. And then just maybe layering your comments together on around the leasing velocity, et cetera. Perhaps anything that might be peed from your standpoint, the ability to put up high single digits.
And then just coming back to the commentary around you know the maturities lease Expiries for next year getting weighted to Ontario, Quebec, and there is a big mark to market opportunity there.
And then just maybe layering youre your comments together.
Around the leasing velocity et cetera is there.
Sure.
Is there, perhaps anything that might be Pete.
Standpoint, the ability to put up high.
High single digits.
Speaker 9: the organic growth on an NNY basis, you know, as you think about the next call in 12 months, or would that be unrealistic based on what you're seeing today?
Organic growth on an NOI basis.
As you think about the next call it 12 months or.
Or would that be unrealistic based on what youre seeing today.
Okay.
Speaker 3: Tommy, thank you for the question. As we said, we generally provide guidance, more specific guidance, in February . And we try to summarize the ingredients for organic growth for us for the next 12 months and 24 months. So I think the conclusion that you are getting to is...
And thank you for the question.
As we said we generally.
Providing guidance more specific guidance in February.
And we were trying to.
To summarize the ingredients for organic growth for us for the next 12 months or 24 months.
So I think the conclusion you that you are.
Getting to us.
Speaker 3: probably informed by some of our disclosure. We will provide more color for the next movement.
Probably informed by some of our disclosure and we will provide more color for the next 12 months in February.
Speaker 3: Okay, all right. I hope this help, this helpful answer.
Okay, Alright, I hope this helps this is helpful.
Yeah.
Yes.
Speaker 9: Yeah, we can-I guess we'll wait for the full update in a few months. And just, you know, with respect to the ATM, you know, just given where the unit price is and where leverage is, you know, what are your thoughts on further use at this point?
Okay.
Yes, we came down I guess, we'll wait for the for the full update a few months.
And just with respect to the ATM, just given where the unit prices and where leverage is.
What are your thoughts on sort of use at this point.
Yeah.
Yeah.
Speaker 3: Pome, your line get cut out for about 30 seconds. So we missed a part of the commentary, but we did get the question about ATM. Should we switch to that or do you want to? Yeah. Like to commentary.
Pardon me your line got cut off for about 30 seconds.
But so we missed a part of the part of the commentary, but we didn't get the question about ATM should we switch to that or do you want to.
Yes, thanks for your commentary.
Sure can you hear me now.
Okay.
Speaker 9: Yes, we can hear you. Yeah, okay. It was just really a question around the BATM use, just given, you know, where the leverage is and where the unit price is. Just curious how you're thinking about the BATM use going forward.
Yes, we can hear you.
Yes, Okay. It was just really a question around the ATM use just given where the leverage is in various unit prices just curious how you're thinking about the ATM use going forward.
Yeah.
Speaker 3: Yeah. So as long as it comes into the benchmarks, we, when we use HM and
Yes.
So as long as commented in her remarks, we when we use the ATM and.
Speaker 3: Late August , we had great news of proceeds. That was a creature set for full, pretty uned immediately, improved leverage.
Late August.
We had great use of proceeds.
That was accretive to set up a full pre.
For unit immediately.
Leverage and why are they accretive to NAV.
Speaker 3: and was accretive to NAV in near to midterm, and we haven't, as you have seen from our disclosure, we haven't used the ATM since then, and as we commented previously, we will remain very disciplined in terms of using the ATM vis-a-vis the use of proceeds and obviously the price.
In the near to midterm.
And we have as you have seen from our exposure we haven't used the ATM. Since then and as we've commented previously we will remain very disciplined in terms of using the ATM.
These are these proceeds and obviously the price.
Speaker 3: So, yes, there's no immediate...
So.
Yes, there is no immediate.
Speaker 3: users of the HM plan given the current
The usage of the ATM plan given the current unit price.
Speaker 9: But last one for me, just on the on the calendar development, what's your sense of timing of getting the balance of that, that's like these stuff.
Got it last one for me just on the on the calendar in development.
What's your sense of timing of getting the balance of that leased up.
Speaker 3: So we have one conditional lease signed already, which is finalizing the actual lease, and then we expect it before we report next time, we will have the balance.
Yes, so we have.
One condition will be signed.
Already we're just finalizing the actual lease and then.
We expect that.
Before.
Our report next time, we will have the balance.
Speaker 3: least at least from in terms of having the document signed.
At least at least from the.
In terms of having the document side.
Thanks, very much I'll turn it back.
Yeah.
Speaker 1: Our next question comes from Sumayya Saeed of CIBC, please go ahead.
Our next question comes from semis side of CIBC. Please go ahead.
Speaker 4: Thanks, good afternoon. I just wanted to touch on the leasing activity in the quarter in terms of what are the average leased terms you're doing, and if there's been any change in trend from the pyreleases.
Thanks, Good afternoon.
I wanted to touch on the leasing activity in the quarter in terms of what are the.
Average lease terms youre doing and if there's been any change in trend from prior.
<unk> leasing.
Okay.
Speaker 3: Thanks, Amaya. It's a genuine line there. We're signing anywhere between five to 10 year visas with escalators. We haven't seen any sort of significant changes. These are the, with a,
Thanks, so much.
It's generally in line there we are assigning anywhere between five to 10 year leases with.
With escalators, we haven't seen.
Any sort of significant changes.
This vision will be.
The return.
Speaker 3: all deletists. It's generally informed by the tends requirements, the the investments that they would like to pursue in the premises.
All of the leases generally informed by the tenants requirements.
The investments that they would like to pursue in the premises.
Speaker 8: Those are the main factors for our occupiers.
And that those are the main factors for for our occupiers.
Speaker 10: Okay. And then just also on your occupancy, you dipped a bit, I guess, you know, you're being more strategic in going after the rent lift. To what extent would you be okay with it dipping a bit more or going lower than 97, or is that sort of the floor in terms of your occupancy target?
Okay.
And then just also on your occupancy dipped a bit I guess, you know you're being more strategic and now going after the rent lift.
What extent would you be okay with it dipping a bit more guang, Florida, 97 or is that sort of the floor in terms of your occupancy targets.
Speaker 8: We don't necessarily set floors or ceilings vis-a-vis occupancy. We generally approach it from the perspective of what's the highest and best.
Okay.
We don't necessarily.
Set floors or ceilings.
These are the.
Occupancy, we generally approach it from the perspective of what's the.
But the highest and best.
Speaker 3: use for the space, what's our return we are getting, or foregoing by pursuing knowing, occupancy versus r word.
Used for the space.
What sort of return, we are getting or foregoing by pursuing occupancy versus rate.
Speaker 3: for any given asset and giving any given
For any given asset and given any given.
Speaker 8: space for certain spaces that are...
Space for certain spaces that are perhaps more customized.
Speaker 8: Perhaps more customized and may have a higher degree of 10 specific bit out. We would...
I have kind.
Kind of a high degree of tenants.
Tenant specific fit out.
It would maybe be less.
Speaker 8: be less open to getting that space back compared to some other units. So that's how we generally approach it. So as we commented.
Open too.
Getting that space back compared to some other units. So that's how we generally approach it so.
As we commented.
Earlier.
Speaker 3: On average, over the long term, our occupancy is going to be in line with our-
On average over the over the long term our occupancy has been in line with our.
Speaker 8: historic averages, and it will fluctuate over time with any given maturities or any given
Historic averages and it will fluctuate over time with any given maturities or any given situation.
Speaker 10: Okay. The last thing I wanted to touch on the acquisition activity, you have with the GV and the quarter interest. Any more info on what pricing looks like and cap rates on the recent transactions.
Okay.
And lastly, I wanted to touch on the acquisition activity you have with the JV in the quarter and just any.
More info on what pricing looks like and cap rates on the recent transactions.
Speaker 3: We generally haven't been kind of disclosing the acquisition metric of and what's in the press release in terms of the return parameters, prices for a foot. So we would refer you to that. Generally speaking,
We generally.
Haven't been disclosing the acquisition metrics other than what's what's in the press release in terms of the return parameters prices per square foot. So we.
For you to do that.
Generally speaking.
Speaker 3: When we look at market cap rates that we are achieving on these acquisitions, they're kind of in the...
When we talk looking at Mark to market cap rates.
That we are achieving on these acquisitions there.
<unk>.
Speaker 8: because high-sixes are on average for the properties that we've tied up so far.
Call It high <unk> on average.
For the properties that we have.
Tied up so far.
Okay. That's it for me thank you.
Speaker 1: Our next question comes from Matt Kormack of National Bank Financial. Please go ahead.
Our next question comes from Matt Cormack of National Bank Financial. Please go ahead.
Yeah.
Speaker 11: Hell, um, and just with regards to the bacon
Just with regard to the vacancies in the quarter, namely the one in Spain for 216000 square feet.
Speaker 11: the quarter, namely the one in Spain for 216,000 square.
Speaker 11: and then the 300,000 square foot expiry in Edmonton with the Dream Summit, JV. Do you have prospects on those? You disclosed that they were below market rent, but any interest there? And also it looked like there was.
And then the 300000 square foot expiry in Edmonton.
Dream Summit JV do you have prospects on those you disclose but they were below market rents.
Any interest there and also it looked like there was.
Speaker 11: Sort of another hundred bits, slip the ginoccurancy and Montreal did that relate to multiple tenants or that are single tenants.
Sort of another 100 bps slippage in occupancy in Montreal does that relate to multiple tenants or single tenant.
Speaker 3: Thanks Matt. So the assets in Spain is going through a minor refurbishment So we were expecting to get this building back for some time
Thanks, Matt.
Assets in Spain is going through a miner refurbishment. So we were expecting to get the building back for some time.
Speaker 3: The tent that was occupying it was extending for a shorter period as we were getting ready for our refurbishment program. So we're going through that currently, and as that program gets finished, we expect to see more activity on that particular unit.
The 10th.
That was occupying it was extending for shorter periods as we were getting ready for our refurbishment program. So we're going through that.
Currently in.
That program.
Get finished though we expect to see more and more activity on that particular unit.
Speaker 3: The property in Edmonton is currently being marketed. It's being marketed as...
The.
The property in Edmonton.
Just trying to get into the market. It is being marketed as a one project one one contiguous unit or as subdivide option.
Speaker 8: one project, one contiguous unit or a subdivide option.
Speaker 8: And we expect to see some activity there over the next.
And we expect to see some activity there over the next.
Speaker 8: quarter the vacancy in Montreal is really multiple and nothing significant in particular to point to. Okay.
Quarter.
The vacancy in Montreal is really in multiple tenants and nothing nothing significant in particular to point to.
Okay, No that makes sense and then I guess.
Speaker 11: It looks like, from your disclosure standpoint, you held market rents flat for this quarter across the board. You had had growth. Your debate on that?
It looks like from your disclosure standpoint to help market rent slots for for this quarter across the board.
AD growth year to date already.
Speaker 11: But the one that I guess is maybe a little bit surprising just given what's going on in the market is Western Canada and you did move rent up a bit in Europe , but should we expect those two geographies to be the place that you potentially get more market-rengroves of light? Sorry, I should say.
But the one that I guess is maybe a little bit surprising just given what's gone on in the market as Western Canada, and and you did move rents up a bit in Europe, but.
Should we expect those two geographies to be the place that you potentially get more market rent growth of late Oh, I'm, sorry, I should say in the near future.
Speaker 8: We are generally encouraged by the fundamentals in Western Canada, and we expect to see continued rental growth there, and same for Europe . So in Europe , as you know, we're starting with a much lower basis, so as we get more data points in Europe , we'll continuously adjust our market rate estimates.
We are generally encouraged by the by the fundamentals in Western Canada, and we expect to see continued rental growth there.
And at the same central Europe. So in Europe as you know, we're starting with a much lower basis. So as we get more data points in Europe will continuously adjust our.
Market estimates.
Speaker 11: And then maybe quickly let us with regards to the guidance for the year and just the sequential FFO per unit decline. Is that a function of kind of the timing of some of the vacancies impacting NOI? Or is it something else I assume there's an aspect of just GNA seasonality as well?
Okay Fair enough and then maybe quickly learnt us with regards to the guidance for the year and just the sequential.
<unk> per unit decline is that a function of kind of the timing of some of these vacancies impacting NOI.
Or is it something else I assume there's there's an aspect of just the G&A.
G&A seasonality as well.
Speaker 4: No, I think I believe in the prepared remarks, Alex shed some color there. I think some of these transitory vacancies were expected and included in our in our forecast. So that's really the biggest driver of that.
No I think I believe in the prepared remarks, Alex shed some color there I think some of them tend towards agencies were expected and included in our in our forecast. So that's really the.
The biggest driver of that.
Okay fair enough thanks, guys.
Yeah.
Speaker 1: Our next question comes from Sam Demani of TD Cowan. Please go ahead.
Our next question comes from Sam Damiani of.
TD Cowen. Please go ahead.
Speaker 12: Thank you and good afternoon, everyone. First question just on the pre leasing of the development pipeline. You talked about Caledon being put to bed early next year. Is that the kind of timeline you're thinking for the other half dozen or so developments that are active currently sort of being fully leased up six, nine months post completion?
Thank you and good afternoon, everyone. First question is just on the pre leasing of the development pipeline.
You talked about Calvert and okay.
Put to bed early next year is that is that the kind of timeline, you're thinking for the other half dozen or so developments that are active currently sort of being fully leased up six nine months post completion.
Yeah.
Okay.
Speaker 8: Thanks. Yeah, we generally see that there's a bit of a normalization in the market in terms of how new development gets absorbed. What we've seen coming out of the pandemic is not normal occupy behavior where new development gets absorbed prior to completion, not normal, it would be historic contact.
Yes, we can.
We see that there is a bit of a normalization in the market in terms of how new development gets absorbed.
What we've seen.
<unk> out of the pandemic is not a normal occupy behavior, where new development gets absorbed prior to completion not normal vis vis historic context.
Speaker 8: And what we are seeing now is that building get delivered and that's when the agent will get at least, so that six month on average is at the regional level.
<unk>.
What we're seeing now is that buildings get delivered then thats when they generally get.
At least so that six months on average is.
As a reasonable estimate.
Speaker 12: Okay, and the last one for me is just on the balance sheet. With the leverage coming down, absent any major transaction that we've seen on occasion over the last few years, but absent those, should we expect leverage to continue to moderate lower into 2024?
Okay and last one for me is just on the balance sheet.
The leverage coming down.
Absent any major transaction.
Like we've seen.
On occasion over the last few years, but absent those should we expect leverage to continue to moderate lower into 2024.
Lewis.
Okay.
Okay.
Speaker 4: So one of our capital allocation priorities is to complete the development pipeline that's underway. So that could in the near term,
So one of our capital allocation priority is to complete the development underway so that could.
In the near term.
Speaker 4: that results in the leverage taking up a little bit, but obviously we're generating free cash flow. And capital recycling is only something that is on our radar as well. So it could move up and down, but I think just in this environment, I think we have spoken before that having leverage in the longer term on the lower end of our targeted range is probably pretty much just given the higher rate environment.
The resulting leverage ticking up a little bit, but obviously, we're generating free cash flow.
And.
Capital recycling is only something that is on our radar as well.
It could move up and down.
But I think just in this environment.
We have spoken before that having leverage.
Longer term on the lower end of our targeted range probably prudent.
Just given the higher rate environment.
That's great that's it for me thank you.
Speaker 1: Our next question comes from Hamanchu Gupta, a Scotiabank. Please go ahead.
Our next question comes from Himanshu Gupta with Scotiabank. Please go ahead.
Speaker 6: Thank you. I just have a follow-up question. So any thoughts on how CPI indexation in Europe will look like next year? And obviously, you know, this is one of the key drivers for safe property and wine growth in Europe .
Thank you I just have a follow up question.
So any thoughts on how CPI indexation in Europe look like next year.
And obviously this is one of the key driver for same property NOI growth.
Got it.
So any questions.
Speaker 8: Thank you, my true. As we come to before CPI adjustments in Europe are generally backwards looking. So what we see in a given period is the reflection of CPI over.
Thank you Andrew.
As we commented before CPI adjustments and Europe generally backwards looking.
So what we see in any given period is a reflection of.
CPI over.
Speaker 8: prior 12 months, or in case of the German leases, it can be a cumulative effect of a few prior years, and so we expect to see that in 2024, so there's a delay effect as inflation comes down. There's going to be a delay effect in terms of what comes through our...
Prior 12 months or in case of let's.
But the German leases it can be accumulative effect of.
A few prior years.
We expect to see to see that.
In 2024, so there is a delay effect as inflation comes down there is theres going to be a delay effect in terms of what's coming through our.
Net rents.
Speaker 6: So Alex, you know sitting in the member right now, for the reason coming to you in January , you would already have a sense of how that, you know, look back 12 months will look like. So any sense that is there a material deviation for 24 versus 23 so far?
Okay.
So honestly I you know sitting in November right now for the leases coming due in January.
Would already have a sense of holiday.
Look back 12 months look like so any sense that is there a material deviation for 24 versus 23, so far.
So we expect it's going forward will be lower than 2003.
Speaker 8: So we think it's 24 will be lower than 23. As you know, the rate of CPI change has been coming down.
CPI.
Right of CPI change has been coming down.
In most European markets.
Speaker 6: But we don't have a sense of how much lower it could be.
Okay, Okay, but we don't have a sense of how much lower it could be fun.
Yeah.
Speaker 8: Well, since you have our modeling, it's generally reflecting the slowdown in pace of inflation in Germany, Netherlands, and France.
We obviously do our modeling.
It is generally reflecting the.
The slowdown in pace of inflation in Germany, Netherlands.
In France, So I think.
Our outlook is.
Speaker 8: is generally informed by the same research that everyone in the market would be looking.
As Jimmy informed by the same same.
Same research that to.
Everyone in the market would be looking at.
Speaker 8: And we'll obviously incorporate the CPI out and our guidance for next year. Okay.
And we'll obviously incorporate this CPI outlook and our guidance for next year.
Okay. Okay fair enough. Okay. Thank you so much.
Yes.
Speaker 1: Once again, if you have a question, please press star then one.
Thanks once again once again, if you have a question. Please press Star then one.
Speaker 1: Our next question comes from Kyle Stanley of Desjardins. Please go ahead.
Our next question comes from Kyle Stanley of Desjardins. Please go ahead.
Speaker 13: Thanks. Afternoon, everyone. Just one quick one for me. You mentioned in your disclosures that you are actively exploring several disposition opportunities. Just wondering if you can elaborate on that a little bit. You know, is there specific markets or asset types that you might be looking to recycle out of? And then further, you know, is there any expectation on timing or quantum of deal flow?
Thanks afternoon, everyone. Just one quick one for me you mentioned in your disclosures that you are actively exploring several disposition opportunities.
I was wondering if you can elaborate on that a little bit is there a specific markets or asset types that you might be looking to recycle out of.
And then further is there any expectation on timing or quantum of deal flow.
Okay.
Yes.
Speaker 3: Thank you, Kyle. We generally see two types of dispositions. There are opportunistic dispositions where we are getting significant volume of inbound interest on select properties, primarily from private buyers or users.
Thank you.
<unk> generally seen two types of dispositions.
There are opportunistic dispositions, where we are getting significant volume of.
Inbound interest on select properties, primarily from private.
Buyers or or users.
Speaker 8: And those properties are not necessarily targeted for disposition, but at the right price, we would consider it and we would generally model those properties.
And those properties are not necessarily targeted for disposition, but at.
At the right price, we would consider it and we would generally modeled those proper.
Properties.
Speaker 8: in terms of go forward return at the proposed price and look at our redest and alternatives and we want to make sure that we're selling assets at a creative return.
In terms of go forward return AD the proposed price.
Looking at our reinvestment.
Reinvestment alternatives and we want to make sure that.
We're selling assets.
Returns.
Speaker 3: And then there's a second category, which is not strategic assets where we are gradually engaging with market participants in terms of disposition of those properties. The filter is the same. These assets are performing or are in performing market.
And then there's a second category, which are non strategic assets, where we are gradually engaging with market participants in terms of.
Disposition of those properties. The filters. The same these assets are performing or are in performing markets and therefore, where we're not looking to partner with them at a price we're looking to partner with them at the right price whereby we can reinvest the proceeds increasingly.
Speaker 8: And therefore we're not looking to park with them. I think price we're looking to park with them. The right price whereby we can read us the proceeds accretedly from a net of hope perspective for return perspective.
From an <unk> perspective from a return perspective et cetera.
Speaker 3: Quantum-wise, it's generally challenging to predict.
Quantum wise.
It is generally challenging to predict.
Speaker 8: We've, I think we've commented on it previously and timing of these decisions, especially given we're frequently working with private buyers and in many cases off market discussions, it's hard to predict because some of these discussions may not result in a trend.
We've.
We've commented on previously.
And timing of these dispositions, especially given we are frequently.
Working with.
Private buyers.
Hum.
Many cases off market discussions it's.
Hard to predict because some of the discussions may or may or may not result in a transaction.
Speaker 8: So we're engaging, as we commented in our disclosure, we are engaging in a number of discussions. Some of these discussions may or may not materialize.
So we're engaging as we commented.
Disclosure, we are engaging in a number of discussions some of these discussions may or may not materialize.
Okay, great. Thanks for the color I'll turn it back.
Speaker 3: So, as soon as we have more concrete updates, we'll, yes, thank you.
So as soon as we have more concrete update.
Thank you Phil.
Yeah.
Speaker 1: This concludes the question and answer session. I would like to turn the conference back over to Mr. Pauls for any closing remarks.
This concludes the question and answer session I would like to turn the conference back over to Mr. Paul <unk> for any closing remarks.
Speaker 2: Thanks so much. I'd like to thank everybody for your time today and look forward to speaking again soon. Take care.
Thanks, So much I would like to thank everybody for your time today and look forward to speaking again soon take care.
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Speaker 14: ¶. ¶. ¶.
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