Q4 2023 InterRent Real Estate Investment Trust Earnings Call

Good morning, ladies and gentlemen, and welcome to the inter in Q4 2020 earnings Conference call. At this time all lines are in a listen only mode. Following the presentation.

Operator: Good morning, ladies and gentlemen, and welcome to the InterRent Q4 2023 earnings conference call. At this time, all lines are in a listen-only mode.

Operator: Following the presentation, we will conduct a question-and-answer 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 Thursday, February 29, 2024. I would now like to turn the conference over to Renee Wei, Director of Investor Relations. Welcome, everyone. Thank you for joining InterRent REIT's Q4 2023 Earnings Call. My name is Renee Wei, Director of Investor Relations and Sustainability. You can find the presentation to accompany today's call in the Investor Relations section of our website under Events. We're pleased to have Brad Cutsey, President and CEO, Curt Millar, CFO, and Dave Nevins, COO, on the line today. As usual, the team will present some prepared remarks, and then we'll open it up.

We will conduct a question and answer session. If at any time during this call you're quite you may get assistance. Please press star zero pretty operator. This call is being recorded on Thursday February 29, 2024, I would now like to turn the conference over to Renee Wei Director of Investor Relations. Please go ahead.

Welcome everyone and thank you for joining indirect rates Q4, 2023 earnings call. My name is where their way director of Investor Relations of sustainability. He 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 Brad Klutzy, President and CEO, Curt Miller, CFO and Dave Evans seal on the line today.

Usual the team will present, some prepared remarks, and then we'll open it up to questions.

Operator: Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking statements. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ. For more information, please refer to the cautionary statements on forward-looking information in the Reeves News Release and MD&A dated February 29, 2016. During the call, management will also refer to certain non-IFRS financial measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REITs MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS.

Before we begin I want to remind listeners that certain statements about future events made on this conference call are forward looking in nature and as such information is subject to risks uncertainties and assumptions that could cause actual results to differ materially for more information. Please refer to the cautionary statements. All forward looking information and the reason it was released at M. D. N. A date at February 29, 2024 during the call.

Management will also refer to certain non ifr's measures. Although they read believes these measures provide useful supplemental information about its financial performance. They are not recognized measures and do not have standardized meanings under ifr. It when you see that reads MD&A for additional information regarding non ifr's financial measures, including reconciliations to the nearest ifr's measures, but over to you.

Renee Wei: Brad, over to you. Thanks for. We ended 2023 on a strong Board. The total portfolio occupancy level at 97% marked the best, a breakdown by repositioned and non-repositioned portfolios. A notable concentration which aligns with our business model of seeking greater upside. Average market rents across a portfolio gain further momentum, 7.9% our highest growth. [inaudible] strong growth in all regions, especially in the GTHA and others with both total and same property. Dave will give more information about regional rent and options later. Strong AEMR growth and Oxley Field of Revenue and Renewable Energy. Total Operating Revenues increased by 8.8% to $21.9 million for the quarter.

Ya.

Thanks Renee.

In 2023 on a strong note.

We look at total and same coffee are cute, but I didnt 80 basis points from G. G 2020 to 20 basis points from Q4 2022.

Total portfolio occupancy level of 97, something like that that's being one into a new year.

When you break down basically by repositioning our repositioned portfolios notable concentration of vacancies.

M D.

Yeah.

Which aligns with our business model.

Upside potential in these suites.

Yes.

Average market rents across our portfolio gained further momentum reached seven 9% year over year.

Our highest growth to date in Chicago to Delek levels.

We've seen strong growth in all regions, especially in the G. T H eight and other Algerian each exceeding 8% for both total and same copy.

Gabe will give them more information, but we do all of that and I'll queue later in the call.

Strong hey, Embar growth adoption fueled our revenue and then the white.

<unk> operating revenues increased by eight 8% to $61 9 million for the court.

Bradley Cutsey: 10% to $238.2, for the year, reviewed on the same property basis operating by eight to $60.6 million for the. $233.8 million for the year, demonstrating the strong organic growth potential of. Throughout 2023, we consistently delivered double-digit NOI growth every quarter, including Q4. Same property NOI for the quarter was $39.7 million.

10% to $238 2 million for the year ended 2023.

We viewed on a same property basis, our operating revenues have increased by eight 2% to $60 6 million for the quarter, 9% to $233 8 million for the year, demonstrating the strong organic growth potential.

Throughout 2022 we consistently delivered double digit NOI growth every quarter.

Q4 same property NOI for the quarter was $39 7 million at.

Bradley Cutsey: 10.5, Total portfolio NOI was $40.6 million, and 11.1. On an annual basis, same property NOI reached 153.4, and Total portfolio ANY was $156.3 billion. Representing an 11.8% and 12.9% improvement. We close out the year with an in-line marriage. Pride.

10, 5% increase total portfolio NOI was $40 6 million down 11, 1%.

On an annual basis same property NOI Beach on Jupiter $3 4 million in total portfolio NOI was $56 3 million, representing an 11, 8% 12, 9% improvement.

So 2022.

We closed out the year with that NOI imagine 65, 6% in line with the strong level, we achieved prior to the pandemic.

Bradley Cutsey: Join the four quarters of strong and wide growth. Interest Costs and Steel Delivered Bottom Line continue to strengthen. Region 20.8, 14.2 cents per year for. We delivered $80.6 million in FFO for the full year at $55.1 cents, and for folks with a full year, achieved a new record high of 4.5% overall or 3.4%.

During the fourth quarter, the strong NOI growth that we produced was able to absorb the increased interest costs and still deliver bottom line growth.

First of all growth.

To strengthen throughout the year, reaching $20 8 million, a 14 point T. That's per unit in Q4, reflecting the 11, 2% and 1% respectively.

Respectively.

With $80 6 million in F O for the full year at $55. One sets on a per unit basis, surpassing beat the Dummitt high watermarks and for folks with the full year achieved a new record high up 4.5% overall, a three 4% on a per unit basis to reach 48 point.

Two sets.

Bradley Cutsey: We've also seen strong momentum building throughout the year with the AFFO for Q4. 13.1% to $18.1 million and up 12.7% to $12.4. Taking a closer look at our balance sheet, we ended the year in a solid position. Curt will provide more details later in the call, but I'd like to highlight some post-quarter activities that have further enhanced our. So far in 2024, we successfully financed $183.5 million of maturing mortgages with a weighted average rate of 4.25%. Our overall weighted average cost of mortgage debt is now sitting at $3.37 billion.

We've also seen strong momentum building throughout the year with episodes of Q4.

13.1% to $18 1 million and up $12 seven.

At $12.04 per unit.

Taking a closer look at our balance sheet ended the year in a solid financial position.

It will provide more details later in the call I like to highlight some post quarter activities that have further enhanced our positioning.

So far in 2024, we successfully financed under the Navy T five, noting that maturing mortgages with a weighted average rate slow 0.25% compared to maturing a weighted average rate of six 6%.

Our overall weighted average cost of mortgage debt is now sitting at 3.37%.

Dave Nevins: Dave, it's over to you to take us through some of the operating highlights. Thanks, Brad. We're pleased to report the positive leasing trends we discussed last quarter continue to materialize this quarter. Occupancy ended the year on a strong note alongside robust average market rent. This is driven by rent growth from a mix of lease renewals and sweet turns over expiring rent. On an annual basis, we achieve a 3.3% average rental lift on lease renewals and a 21% increase on new leases. The mark-to-market gap is approximately 30%.

Dave over to you to take us through some of the operating highlights.

Thanks, Brett we're pleased to report the positive leasing trends, we've discussed last quarter continue to materialize this quarter.

Occupancy ended the year on a strong note alongside robust average market rent growth. This was driven by rent growth from a mix of lease renewals as suite turns over expiring rents on an annual basis, we achieved three 3% average rent to lift on lease renewals and 21% increase on new leases.

Mark to market cap is approximately 30%.

Dave Nevins: As previously disclosed and in line with industry norms, turnover has been trending lower over the past few years, according to Tate Rental Markets. Total portfolio turnover in 2023 was $24.8 billion. A repositioned portfolio had a vacancy of $2.7 billion, vacancy set at 4.3% as of December. As you know, we anticipate higher vacancy in our non-repositioned portfolio as we work through our value-add CapEx. All properties in our entire Vancouver portfolio, representing 4% of Q4 NOI, are currently undergoing repositioning. As of December, vacancy in Vancouver increased 340 bases, year-over-year, primarily due to planned upgrades and recently vacant units. As we finish our work on these and bring them back online, we're seeing strong demand for the renovated... We expect vacancy in Vancouver to normalize in subsequent quarters. We're also keeping a close eye on the transition of Airbnb units to long-term rentals ahead of new regulations set to take effect in the spring. However, we believe any potential impact will be short-lived.

As previously disclosed and in line with industry norms turnover has been trending lower over the past few years.

The tight rental market conditions total portfolio of turnover in 2023 was 24, 8%.

Our repositioned portfolio had a vacancy of two 7% and our non reposition vacancy sat at four 3% as of December.

As you know, we anticipate higher vacancy and our repositioned portfolio as we work through our value add Capex program.

All properties in our entire Vancouver portfolio, representing 4% of our Q4 NOI is currently undergoing repositioning.

As of December vacancy in Vancouver increased 340 basis points year over year, primarily due to planned upgrades and recently vacated suites.

As we finished our work on these suites and bring them back online we're seeing strong demand for the renovated suites, we expect vacancy in Vancouver to normalize in subsequent quarters. We're also keeping a close eye on transition of Airbnb units to long term rentals.

New regulations set to take effect in the spring of B C.

We believe any potential impact will be short lived so.

Dave Nevins: CMHC projected that the housing supply gap will exceed half a million units in British Columbia by 2030, and the province's constrained rental market suggests that a relatively modest..., will quickly become. However, we're closely monitoring rent levels in Vancouver and will remain agile in a revenue strategy to adapt to any changes. Our operating expenses came in at $21.3 million for the quarter, up 4.8% year-over-year, while operating revenue grew by 8.8%. Operating expenses as a percentage of revenue were $34.4%, a decrease of 130 basis points compared to the fourth quarter last year.

You may see projected that housing supply gap will exceed half a million units in British Columbia by 2030 and.

And in the provinces constrained rental market suggests that a relatively modest increase in supply from short term rentals will quickly be absorbed however, we're closely monitoring rent levels of Vancouver, and where we're at.

Remain agile in our revenue strategy to adapt to any changes in market conditions quickly.

Our operating expenses came in at $21.3 million for the quarter up four 8% year over year, while operating revenue grew by eight 8%.

Operating expenses as a percentage of revenue was 34, 4% a decrease of 130 basis points compared to the fourth quarter last year.

Dave Nevins: On an annual basis, operating expenses as a percentage of revenue decreased by 160 basis points, on a weighted average per suite basis, while our annual rental revenue grew. Persuade, by 8.5%. Operating expenses per suite only increased 3.5%, reflecting our ability to manage expenses effectively to drive long-term value for investment, or 7.6% of revenue for the year. Compared to 2022, utility costs decreased by $0.1 million, or 80 basis points as a percentage of operating costs. During the quarter, we achieved a 10% decrease in natural gas... due to a combination of lower heating degree days and our effective energy efficiency. Electricity costs are consistent with last year despite the larger portfolio under ownership. We continue to manage our electricity costs through our Hydro Submetering Initiative, which reduced electricity costs by 27.1% or $2.1 million. Property taxes for the year increased by $1.7 million year-over-year.

Annual basis operating expenses as a percentage of revenue decreased by 160 basis points to 34, 4% auto.

On a weighted average per suite basis, while our annual rental revenue grew.

Her suite by eight 5%.

Operating expenses per sweep only increased three 5%, reflecting our ability to manage expenses effectively to drive long term value for investors.

Utility costs came in at $18 1 million or seven 6% of revenue for the year.

Compared to 2022 utility costs decreased by <unk> $1 million or 80 basis points as a percentage of operating revenue.

During the quarter, we achieved 10% decrease in natural gas usage due to a combination of lower heating degree days and our effective energy efficiency programs electricity costs are consistent with last year. Despite the larger portfolio under our ownership. We continued to manage our electricity costs through our hydro sub metering initiative, which reduced electricity costs.

By 27, 1% or $2 $1 million for the year.

Property taxes for the year increased by $1 $7 million year over year.

Dave Nevins: $25.6 million as a result of higher suite count and annual. As a percentage of operating revenues, property taxes actually decreased by $30 billion. We are consistently reviewing our property tax assessments and making individual property tax appeals when necessary. We invest in our portfolio to drive growth and deliver sustainable retirement. For 2023, our maintenance capex came in at $1,005 per suite, which has come down slightly from 2022. The vast majority of our spend, close to $90 per week, was spent on maintenance.

$225 6 million as a result of higher suite count and annual rate increases.

As a percentage of operating revenues property taxes actually decreased by 30 basis points.

We are consistently reviewing our property tax assessments and making individual property tax appeals when necessary.

We invested in our portfolio to drive growth and deliver sustainable returns.

For 2023, our maintenance Capex came in at $1005 per suite, which has come down slightly from 2022. The vast majority of our spend close to 90% is directed towards investments aimed at enhancing value.

Dave Nevins: As you can see on the right side of the slide, our repositioning program, which remains at the core of our business, has been a significant driver of value creation for us. As of this year, about one-fifth of our portfolio is at various stages in its root positioning program, representing a significant potential for continued organic growth. Before I hand it over to Curt to discuss our Balance Sheet and Sustainability Program, I'd like to provide a final update on the agenda. Our first office conversion project...

As you can see on the right hand of the slide our repositioning program, which remains at the core of our business strategy has been a significant driver of value creation for us.

As of this year about one fifth of our portfolio is at various stages and they're repositioning program, representing a significant potential for continued organic growth.

Before I hand, it over to Kurt to discuss our balance sheet and sustainability programs.

I'd like to provide a final update on the slate are first office conversion project.

Dave Nevins: Lease upgrade has surpassed 90% as of February this year. We're proud of what we've accomplished. Not only do we manage to deliver crucial housing supply quickly, but we've also built a vibrant community right in the heart of downtown Ottawa. [inaudible] by reusing the structure.

Lease up rate has surpassed 90% as of February of this year.

We're proud of what we've accomplished not only do we managed to deliver crucial housing supply quickly, but we've also built a vibrant community right in the heart of downtown Ottawa, all while achieving a 55% savings in greenhouse gas emissions by reusing the structure.

With that over to you Kurt.

Thanks, Steve.

As part of our year end review, we worked with our external appraiser to conduct a portfolio wide valuation and fine tuned our key assumptions around rent turnover input costs and cap rates.

Curt Millar: With that, over to you, Curt. Thanks, Steve. As part of our year-end review, we work with our external appraiser to conduct a portfolio-wide value and fine-tune our key assumptions around rents, turnover, input costs, and capital. After this review, we are keeping our Q4 cap rate unchanged at 4%. For some context, you may recall that our cap rates have increased 40 basis points from their lowest point in Q1 of. The Minor Changes Within Region, see on this slide, reflect changes related to NOI on a property. For the quarter, we recorded a $14.8 million proportionate fair value, driven by continued strong and sound financial These had a maturing balance of $144.9. This work netted $34 million of proceeds, which were used to further reduce the RE Following these transactions, the REIT has a weighted average cost of mortgage.

After this review we are keeping our Q4 cap rate unchanged at $4 two 2%.

For some context, you may recall that our cap rates have increased 40 basis points from their lowest point in Q1 of 2022.

A minor changes within regions that you see on this slide reflect changes related to NOI at a property level and the resulting impact on the average for the region.

For the quarter, we recorded a $14 $8 million proportionate fair value gain driven by continued strong operational performance.

Our sound financial position continues to strengthen.

We're pleased to report that following the end of the year, we successfully financed mortgages totaling $183 5 million with a weighted average interest rate of $4 two 5%.

He's had a maturing balance of $144 9 million with a weighted average rate of 6.06% and will translate into significant interest expense savings.

This work netted 34 million of proceeds which were used to further reduce the reach total variable exposure, which currently sits at less than 1%.

Following these transactions the REIT has a weighted average cost of mortgage debt of $3 three 7%.

Curt Millar: 3.37. The remaining balance of 2024 mortgages, which are in the second half, carry a weighted average for. We will continue to focus on managing financing activities carefully and anticipate our Given the activity in the first two months, Moving to slide. Earlier this year, we established a sustainability committee at the board level to enhance governance oversight and drive sustainability, to further enhance the collective climate. Rental.

The remaining balance of 'twenty 'twenty four mortgages mature in the second half of the year and carry a weighted average interest rate of four 9% we.

We will continue to focus on managing financing activities carefully and anticipate our interest expense for 2024 to be in line with 2023, given the activity in the first two months and the current market conditions.

Moving to slide 18.

Earlier this year, we established a sustainability committee at the board level to enhanced governance oversight and drive sustainability initiatives forward.

To further enhance collective climate understanding and commitment throughout our organization, we introduced mandatory climate training for our board of trustees and across our entire team.

Curt Millar: We introduced mandatory climate training for our board of directors and established our ISO 5001 Aligned Energy Management System to better guide our operations. Greenhouse Gas Toward the end of the year, we collaborated with external advisors to integrate climate considerations into our acquisitions and capital expenditure models to add climate risk or evaluate potential new. Finally... has been recognized with more than 70% of our total suites now certified under the Certified Rental Building Program, and the remainder. I'll now turn things back to Brad to walk through our capital. Thanks, Curt. Join the quarter, you will be the last.

We established our ISO 5001 aligned energy management system to better guide, our operational efficiency initiatives and reduce greenhouse gas emissions.

Towards the end of the year, we collaborated with external advisors to integrate climate considerations into our acquisitions and capital expenditure models.

It has been and will continue to add climate considerations, when reviewing our existing portfolio or evaluating potential new acquisitions.

Finally.

The strong operational performance of our teams with our different communities has been recognized with more than 70% of our total suites now certified under the certified rental building program and the remainder anticipated to receive certification within the next few months.

I'll now turn things back to Brad to walk through our capital allocation.

Thanks, Curt joined the quarter, we continue to pursue strategic dispositions as part of our broader capital allocation strategy.

Two last year, we communicated that we identified certain noncore repositioned to access the meter disposition criteria to potentially provide net proceeds of over 17 5 million relative to other assets in local Colo. We believe we have done an excellent job of maximizing revenue.

Bradley Cutsey: App, an excellent job of, although relatively lower versus a copy. We have also carefully considered operational scale. You're in the corner.

And our projected forward, which are comparatively low versus the cost of capital.

We have also carefully consider operational scale and efficiencies during the quarter.

Bradley Cutsey: [inaudible] After the quorum, this transaction is successful, and that proceeds from the profit process from strategic [inaudible] As seen on this slide, we finished the year with four development projects. Our Development Pipeline, but not only contributing much needed new housing supply, but we'll also add. Exceptional quality to our portfolio. Drive energy appreciation.

224 suite proposal, it's just in the five properties in closing anything greater Montreal area itself.

Well place a $46 million, which is above do I for us values.

After the court this transaction successfully closed with net proceeds of a possible early 'twenty 2 million after repaying it plays mortgages.

Coaches from strategic dispositions will be used to reduce or Lubbock pardon bares capital allocation priorities for the year.

As seen on this slide we finished the year with four development projects underway totaling over 4000 suites are in various stages of development.

Our development pipeline will not only contribute a much needed new housing supply will outside exceptional quality to our portfolio driver out it'd be accretion contributed to our <unk> growth in the years to come.

Bradley Cutsey: [inaudible] We are optimistic about our second office conversion project, 360 Loray in Ottawa. Demolition is currently under way, and we're gearing up to start construction, with the goal to complete construction by. Keeping a close eye on development costs and capital constraints, be careful. Over to the slide.

We are optimistic about her second my office conversion project to 60, Laurie and the Ottawa Demolitions currently under the way we're gearing up to start construction in late Q2. This year with a goal to complete construction by Q3 2025.

Keeping a close eye on development costs and capital strength to carefully manage the page of each project.

Yeah I understand.

Since upsizing opportunity and executing on prudent strategic investments to enhance the quality and scale of our portfolio over the long run.

Over to slide 23.

Bradley Cutsey: With the recently introduced new measures to limit undergrad and international student, About 15% of our residents are students, and over half of them live in our communities located within two kilometers of well-established post-secondary housing. Not all rental markets will be impacted. The National Tap.

With the recently introduced new measures to limit the undergraduate international students and paid we wanted to shed some light on the student base about 15% of our residents are students and over half of them live in our communities located within two kilometers of well established post secondary institutions.

Not all rental markets will be impacted equally and Nashville cap based on provincial population shares as more constraining in Ontario, and B C.

Bradley Cutsey: More restrictive in Ontario. We have a higher concentration of student residents in Quebec, where the cap exceeds the current, approximately one third of our students. International students residing in Canada have surpassed one million as of last year, the record in plus. 2020. They participated to support the student property for the next two years, for Elk Globe is back. During this period, we are expecting growth of the international student population. [inaudible] Canada's high population growth has often been cited as a key support factor for the multi-family. However, our analysis suggests that Canada's housing deficit will..., even in a scenario where immigration... Pre-COVID levels and 2.3 million new homes are built, and Elkham Dean is highly unlikely. In fact, CMHC projects a housing shortfall of over 3 million units in this low-economic, Wealth Today.

We have a higher concentration of student residents and come back with a cap exceeds the current intake of international students.

One third of our student residents or in our GMA Egypt.

International students residing in Canada surpassed 1 million as of last year the record influx of the mouse to 'twenty two.

Three years 'twenty to 'twenty two is anticipated to support the student population in Canada over the next two years before outflow was expected to pick up.

During this period, we were expecting growth of international student population.

But at a more moderate pace.

It has high population growth has often been cited as a key support factor.

Tami industry fundamentals. However, our analysis suggests the cantos housing deficit will cause this even in this era, where immigration returns to pre COVID-19 levels and 2.3 million new homes are built about 2030 and I'll come in highly unlikely by the CMA exceed it.

So you may see protect the housing shortfall of over 3 million units and this low economic growth scenario with the gap widened to Green 0.4, 5 billion in the baseline scenario.

Bradley Cutsey: The Gap, Widening 2. As you can see on this slide, more than 85% of the Supply Dept. Supply Shortage. We are steadfast in our commitment to expanding the housing stock; methods such as intensification and Office Convergences are being developed.

As you can see on this slide more than 85% of the supply deficit is concentrated in three provinces, where we operate.

To tackle this persistent supply shortage, we are steadfast in our commitment to expanding the housing stock through methods such as in transportation options convergence or development at.

Bradley Cutsey: At the same time, we are focused on strategic investments in their properties to sharpen our competitive edge. To sum up, 2023 has been a fantastic year for us. We have consistently delivered top-notch operational performance and generated significant value through our repositioning, with the industry on solid ground as strong and flexible, and our employees and dedicated. When considering how tight the rental market has been and the forecasted supply and demand for the next few years, it lays out a path for 6% to 8% same-store revenue. I wanted to thank everyone who came.

At the same time, we are focused on strategic investments in our properties to sharpen our competitive edge.

Positioning ourselves for a future where supply gradually aligned with demand.

To sum up 2023, he hasn't been a fantastic year for US we have consistently delivered top notch operational performance and generate significant value.

Volume through our repositioning programs.

With the industry on solid ground, a strong and flexible financial position and our experienced and dedicated team couldn't be more optimistic about what 'twenty 'twenty four old.

When considering how tight the welcome Mark and has been in the forecast the supply and demand for the next few years. It lays out a path for 6% to 8% same store revenue growth, which leads to a high single low double digit same store NOI growth.

I wanted to thank everyone for your continued support I would like to encourage you to go to our website and check out her interact in the annual report to learn more about <unk>.

Operator: I would like to encourage you to go to our website and check out our interactive annual report to learn more about our community. Now, we open it up for Q&A. Thank you. And Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number 1 on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number 2.

This year, let's open it up for Q&A.

Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad.

We have Tom Victor hand, that's been raised should you wish to decline from the polling process, especially the star followed by the number two and if you're using a speaker phone. Please keep your handset before pressing any key one moment. Please for your first question.

Operator: And if you're using a speakerphone, please keep the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Kyle Stanley from Daytordan. Your line is open. Guys. Hey, Kyle.

Your first question comes from the line of Kyle Stanley from Baker, Dan Your line is open.

Okay.

Hey, Kyle.

Dave I just wanted to clarify I think some of your commentary earlier.

Dave Nevins: Dave, I just wanted to clarify some of your commentary earlier, just on the rent growth on turnover and renewal, would you be able to repeat that? Sure, no problem. Thanks, Kyle. We were at 3.3% rent growth on renewals and 21% on new leases. Okay, so 21 on new leases. How do you think about that, I guess, trending as we kind of push through 2024, I guess, in the context of, you know, the commentary in the MD&A about, you know, continuing to see turnover slow? Yeah, I think, you know, looking at the numbers, we're looking at renewals probably in that 3 to 3.5% range for 2024, and turnovers probably will stay consistent in that, you know, low 20s to mid 20s percent range.

Just on the rent growth and turnover and renewal would you be able to repeat that.

Sure No problem. Thanks, Pat we're at three 3%.

Rent growth on renewals and 21% on new leases.

Okay. So 21 on new leases, how how do you think about that I guess trending.

As we kind of pushed through 2024, I guess in the context of.

The commentary in the MD&A about continuing to see turnover slow as well.

Yeah, I think look in looking at the numbers, we're looking at renewables probably in that three to three 5% range for 2024 and turnover is probably stay consistent.

Low twenty's to mid 20% range yeah. So so.

Bradley Cutsey: Yeah, so it's up to you. You can model what you want to model for turnover. Obviously, it is the wild card when it comes to the value and the value add. Curt and I have been saying to our stakeholder base for quite some time now that we didn't expect turnover to come in, and I think it is coming in. You see that through the different publications and whatnot, but it hasn't materially changed on a year-over-year basis for us. Yes, it's come in from the low 30s historically, but as we've disclosed, it's in the mid-20s range. We do anticipate that it will probably continue to come in a little, but surprisingly, it's been a little more stubborn than one would imagine. We think it has to do with the fact that our urban portfolio and where it's situated, close to technology ecosystems, life sciences, hospitals, and post-secondary institutions, why we garner higher than average turnover. Okay, now that makes sense. And I do believe that's new disclosure. So, very much appreciated.

It's up to you you can model, what you want to model the turnover obviously turnover.

Is the wildcard.

When it comes to the value the value add.

Jordan I think been saying to our stakeholder base for quite some time now.

Do you expect turnover.

They come in and I think it is coming in and you see that through the different publications and whatnot, but it hasn't materially changed on a year over year basis, Brett yes, its come in from low Thirty's historically.

But as we disclosed this in the mid twenties range, we do anticipate that well.

We'll probably continue to come in a little but surprisingly it was getting a little more stubborn than one would imagine.

We think has to do with the fact of our urban portfolio. We're situated.

Close to a technology ecosystems life Sciences hospitals Postsecondary institution, why we garner.

The average turnover rate.

Okay, now that makes sense and I do believe that's new disclosure so very much I appreciate it.

Bradley Cutsey: Secondly, just, you know, within the portfolio, are you seeing certain unit configurations, whether that might be, you know, bachelor one bed, two bed, or finish quality outperforming others? And maybe if so, like, how are you thinking about those ones that might be a little less in demand today? Or what's driving that? And how do you manage through that?

Secondly, just within the portfolio are you seeing certain unit configurations, whether that might be you know Bachelor one bed two bed or finished quality outperforming others and maybe if so like how are you thinking about those ones that might be a little lessened demand today or whats driving that and how do you manage through that.

Yeah.

Yeah well.

Bradley Cutsey: Yeah, well, Kyle, I guess maybe what you're getting at is, as the fundamentals are so tight, and I think I can see for everybody around the table here, we haven't seen these kind of fundamentals ever, so we remain quite optimistic and bullish on the fundamentals for the outlook across Canada and specifically for the markets and the nodes that we operate in. When you look outside of Canada, and it's really a Canadian phenomenon, having the right to kind of own your own home, you look at a lot of different places around the world, it's not uncommon to move out of your parents' place and look for a roommate that you maybe have never even known. So, you kind of take that viewpoint from an affordability perspective; the majority of our portfolio, when you look at household income, is affordable.

I guess, what maybe what youre getting that is.

The fundamentals are still tight and I think I can speak for all everybody around the table here, we haven't seen these kind of fundamentals ever. So we remain quite optimistic and bullish on the fundamentals for the outlook across Canada specific leads the market in the nodes that we operate them.

I think where the question you're leading team is towards affordability.

Yes, you're welcome continue push up so there are going to be somebody else and some layoffs.

They also will tend to be do better just by the very nature.

That's somebody who can take on a roommate or an additional person to help with the rents.

When you look outside of Canada.

Really a Canadian phenomenon.

The rate ticked out of your own home you look at a lot of different places around the world. It's not uncommon to move out of your parents plays and look for a roommate, but you maybe have never even been known.

So you kind of take that viewpoint from an affordability perspective, the majority of our portfolio. When you look at the household income is affordable.

So.

Bradley Cutsey: In some regions where rents are continuing to see increased pressure and starting to butt up to an area, I do think the two bedrooms start to outperform the one bedrooms, and all of a sudden, kind of the rent pressures that all housing is experiencing right now are a lot more manageable from a credit underwriting perspective. Okay, I hope that makes sense. I think that's what you're getting at. Yeah, yeah, definitely. Definitely. That's it.

In some regions, where rents are continuing to see increased pressure and starting to bump up.

Yes, I do think the two bedrooms start to outperform the one bedrooms and all of a sudden.

Kind of the rent pressures that.

Oh hi.

Housing is experience right now.

A lot more manageable.

Our credit underwriting perspective.

Okay.

Thank you.

Youre getting that yeah.

Yeah, Yeah definitely definitely that's that's it and that's a good answer thank you for that.

Bradley Cutsey: And that's a good answer. Thank you for that. Just a last question. Good progress on the capital recycling. Would you say there's still about 50 million of net proceeds targeted for the next little while? And, you know, I think your disclosure said, you know, use of proceeds funding capital requirements, reducing leverage, and buying back stock. Would that be in the order of preference?

Just a last question good progress on the capital recycling would you say theres still about $50 million of net proceeds targeted for the next little while and I think your disclosure said.

Use of proceeds funding capital requirements, reducing leverage and buying back stock is that would that be in the order of preference.

I don't think it's in the order of preference I think we weigh all capital allocation decisions.

Bradley Cutsey: I don't think it's in order of preference. I think we weigh all capital allocation decisions against the different opportunities that are in front of us, and then we weigh which one has a better overall outlook. Sometimes you might do something for strategic reasons as well, Kyle. So I think our track record speaks for itself as far as being pretty, pretty prudent when it comes to capital allocation, and we're definitely going to maintain that discipline. So yes, to your first question, I think we're on pace to meet the previous disclosure of $75 million in net proceeds, and quite honestly, we're hopeful that we're actually going to generate a little more. You can be assured that whatever we are allocating back into is going to have higher potential risk-adjusted returns than what the proceeds generated had been forecasted for. Obviously, the name of the game is really managing your cash balance, and I think that's when NCIB comes into play. Our unit price continues to stay well below where we believe our intrinsic value is, and we don't have an opportunity at the current moment to redeploy that and recycle that capital. I think that it's a great tool.

Different opportunities are in front of US and then we way, which one has a better overall outlook, sometimes you might do something for strategic reasons as well Kyle So I think our track record speaks for itself as far as being pretty.

Pretty prudent when it comes to capital allocation, we're definitely.

Maintain that discipline. So yes to your first question I think we're on pace to meet the previous disclosure of $75 million in that proceeding quite honestly, where might we are hopeful that perhaps you're going to generate a little more.

You can you can be assured that whatever we are allocating back into its going to be at the higher potential risk adjusted returns.

Then.

And then what's the proceeds generated had been forecasted before.

Obviously.

The name of the game is really managing the cash balance and I think that's from NCI would be coming into play for you going to face continuing to staying well below of where we believe our intrinsic value is.

And we don't have an opportunity at the current moment too.

Redeployed and recycle that capital into I'd say, that's a great tool. However, if we are working on an opportunity, which we have a forecast that those return thresholds.

Bradley Cutsey: However, if we are working on opportunities for which we forecast that those return thresholds are greater than our internal cost of capital, then we'll reserve that, and we will manage that, and recycle that into those opportunities. As you know, though, there are timing delays that typically happen when you're looking at either development or external opportunities. It takes time for different deals to come through to fruition, different timing when it comes to development of the tendering process and the impediment process. We look at all of those opportunities, but I think the no-brainer obviously is that as cash comes in, you do pay down your credit facilities because that's pretty expensive here. Call the high six, low seven. Okay, no, that's a great color.

Greater than our internal cost of capital then we'll reserve that and we will manage.

Amazon and recycle that into those opportunities as you know, though theres timing delays.

We happen when you're looking at either development or external opportunities. It takes time.

For different deals.

That's.

Progression.

Timing and when it comes to development for the tendering process and then tell them that process. So we looked at all of those opportunities, but I think the no brainer. Obviously is as cash comes in you do pay down the credit facilities, because that's a pretty expensive here all the high six low seven.

Okay no.

That's great color I will turn it back thanks guys.

Bradley Cutsey: I will turn it back. Thanks, guys. Thanks, Kyle.

Thanks Chuck.

Thank you and your next question comes from the line of Brad Sturges from Raymond James Your line is open.

Operator: Thank you. And your next question comes from the line of Brad Sturges from Raymond James. Your line is open. Hey Braggers!

Okay.

Hey, Brian.

Bradley Cutsey: Um, I appreciate the commentary on the international student cap. I'm curious, based on your analysis and expectations for turnover rate, would you expect the caps to have any material impact on your turnover rate? Or is it more to do with, I guess, how tight the rental conditions are within your market? Yeah, it's a good question. I think, to be quite honest, I don't think it's going to affect the turnover that much unless, maybe, you are leaving, unless you're leaving and coming in.

Appreciate the commentary on the student international student cap I'm curious I'm.

Just.

Based on your analysis.

And expectations for turnover rate would you expect the caps.

Any material impact on on your turnover rate or is it more to do with I guess how tight.

So rental conditions are within your markets.

Yeah, It's a good question.

To be quite honest I don't think it was doing played that much on the turnover unless maybe you are well evening.

Unless you're leaving in the coming in but for the first couple of years. We don't turn the caps are actually I think it's going to be quite neutral, we don't really see the cap affecting.

Bradley Cutsey: But for the first couple of years, we don't think the cap is going to be quite neutral. We don't really see the cap affecting anything. Our current base is probably three years out because the existing student population base, at least to where our communities have that exposure to, will burn off because it might be this year, year three, next year, then year four. Obviously, the cap doesn't apply, not obviously, but the cap doesn't apply to graduate studies.

Our current base, there's probably two or three years out because the existing.

Student population base at least to where our communities have that exposure to well burn often because it might be this year.

<unk> three next year, then the airport obviously the cap doesn't apply not obviously, but the cap doesn't apply to the graduate studies. So that's good news as well we've taken a lot of we've taken a lot of comfort in the fact that where our communities are located there.

Bradley Cutsey: So that's good news as well. We take a lot of comfort in the fact that where our communities are located, they're in prime Location relative to some of the best post-secondary institutions in this country. Irrespective of the CAP, we think we're extremely well located to get the cream of the crop to begin with. That said, a good portion, and as you know Brad, a good portion of our student exposure is in Montreal, and we have an extremely urban core portfolio in Montreal and is very close, a lot of our exposure is close to McGill and Concordia. The CAP doesn't apply to Quebec, okay, so that's good news. So we'll have to take a wait and see approach. Typically, unfortunately, it's great having foreign students. We love having that part of the exposure. The only thing that comes with it is that you don't have a lot of visibility.

I'm location relative to some of the best post secondary institutions in this country. So.

Irregardless of the cap, we think we're extremely well located to get the cream of the crop.

And with <unk>.

That said a good portion of them as you know Brad a good portion of our student and exposure is in Montreal, and then we have in it.

Really.

Urban core portfolio of Montreal, and in very close a lot of our exposures closely.

Ill and Concordia.

<unk> doesn't apply to Quebec, Okay. So that's good news.

So well have to taken a wait and see approach typically unfortunately, it's great having the foreign students we loved that.

Having a bad part of the exposure the only thing that comes with it you don't have a lot of visibility and caught up it's kind of a wait and see until August you do everything you can to get the early birds that are looking at.

Bradley Cutsey: You kind of have to, it's kind of a wait and see until August. You do everything you can to get the early birds that are looking ahead of that, so you try to secure that, but the reality is, when it comes to our Montreal portfolio, you really have to wait and see until August. That said, around this table, there's consensus that we don't anticipate, it might be naive, but we don't anticipate we're going to see a big change and trend when it comes to the student population. It is more Ontario and BC that are impacted, but we feel pretty confident with our exposure that we're going to continue to be able to perform on that basis. Okay, that's great, Collar. I appreciate that.

I'd add to that so you try to secure that but the reality is when it comes to our Montreal portfolio.

Do you really wait wait and see till August.

Sad around this table there is consensus that we don't anticipate might be naive, but we don't anticipate we're going to see a big change in trend when it comes to the student population.

There's more Ontario, and BC, that's impacted but we feel pretty confident with our auto.

Auto exposure that we're going to continue to be able to perform on that basis.

Okay now that's great color I appreciate that.

Operator: In terms of... Thank you. Thank you. It was a pleasure.

In terms of.

Bradley Cutsey: Redeploying capital, you know, from the capital rotation or capital recycling you're doing and you're assessing potential external opportunities. I guess I'm curious to get an update on what you're seeing in terms of the acquisition market today, whether in terms of the opportunities across your markets and in either the value add category or others. Yeah, we're in a really interesting time.

Redeploying capital out of it.

You know from the copper rotation of account recycling youre doing and Youre assessing.

Potential external opportunities I guess I'm curious to get an update on in terms of what you're seeing in terms of the acquisition.

Today, it's hum.

In terms of.

The opportunities across your markets and in the either the value add category or are there kind of.

Total return opportunities that could make sense for the REIT.

Yeah, we're in a really interesting time and I think if we had a cost of capital that we had prior to COVID-19, we'd be salivating right now it.

Bradley Cutsey: I think if we had a cost of capital that we had prior to COVID, we'd be salivating right now. It is definitely not as competitive of a market as it was pre-COVID when it comes to competing. But I don't want to take that commentary that there isn't capital earmarked for the fast class. There very much is.

It is definitely not as competitive market as it was pre COVID-19.

Screening I don't watch it.

Take that.

Commentary that there isn't capital.

Earmarked for the SaaS faster very much as we.

Bradley Cutsey: We don't have any problem when it comes to looking for private capital, institutional quality partners that want to increase their exposure to the asset class. That said, there haven't been a lot of transactions, so really, it's not a wait and see moment, maybe a tad on seeing the bond yield stabilized. When the bond yield towards the end of the year last year came down as low as it did, there was definitely a lot more activity, and a lot more people were underwriting.

We don't have any problem when it comes to looking for private capital or institutional quality.

Partners.

I don't want to increase their exposure to the asset class.

That said there hasn't been a lot of transactions so really.

It's not a wait and see mode.

Maybe a tad on scene.

Bond yields stabilize when the bond deal that that towards the end of the year loss share came down as well as the dead. So there's definitely a lot more activity and a lot more people.

People are underwriting.

Bradley Cutsey: It is a buyer's market, I do think we have to put into context the overall investable set in Canada is still very much controlled by the smaller private owner, which is a real advantage to the institutions and to the publicly listed reach, in the sense that we have a much longer time horizon. And as this private ownership group gets older, and they've seen visibility in a low interest rate environment for such a long period, and now we roll back last year, it's created some uncertainty So I do think there are opportunities to be had out there, and I do think the bid-ask spread will continue to come in.

It is a buyers' market I do think we have to put into context. The overall vegetable set in Canada is still very much controlled by the private smaller owner, which is a real advantage to the institutions and to the publicly listed REIT.

In the sense that we have a much longer time horizons and as this progress.

Ownership group gets older and that we're seeing.

Visibility in a low interest rate environment for such a long period and now we roll back last year has created some uncertainty into their generational planning and now I've been doing much more of a willingness to maybe maybe now is the time.

Start to think about secession a state planning. So I do think there are opportunities to be had out there and I do think the bid ask spread will continue to come in.

Bradley Cutsey: In our own portfolio for smaller ticket items, we're seeing some good interest from private buyers. So there is private competition from private buyers who are more wealthy, I would say more wealth preservation type capital out there looking to really increase the exposure, which to me, I think it's a very opportune time to be doing this because I couldn't think of a better inflation hedge asset class than our asset class given how undersupplied the market is, hence being if you can wade through the near term volatility in the interest rate cycle, you' Obviously, the public market is trading below where private valuations are.

We in our own portfolio for smaller ticket.

Alright, I mean, we're seeing some good interest from private buyers. So there is.

Private competition.

Competition from private buyers, who are more well I would say more wealth preservation type capital out there looking at a really increasingly slower here, which to me I think it's a very opportune time to be doing that because I couldn't think of a better.

Placing the hedge asset class than our asset class given how under supply of America. This has been if you can wait through the near term although volatility in the interest rate cycle, you're going to do extremely well private or publicly obviously the public market is trading below where the private valuation.

We're starting to see that gap close, but I still think there's a ways to go.

Bradley Cutsey: We're starting to see that gap close, but I still think there's a ways to go. So, if you were to execute right now, and there's a really compelling opportunity, would it be more likely or less likely to pursue it through a JV with a partner or just through... We'd be more likely to do it, and we'd be more likely to do it by continuing to use joint venture partners. We've got to spread our capital across the many opportunities that we feel fit and that align with our strategic plan. I think that's just prudent business. There are opportunities we would love to own 100% of. But, given that our capital pool right now, while we believe we have great liquidity, it is limited. And since it is limited, we've got to be very choosy with how we allocate that capital. And if we can participate and have a toehold and scale our operations by using like-minded partners, we're going to continue to do so. That's great. I'll turn it back.

So if you were to execute right now and there's a really compelling opportunity would it be more likely or less likely to pursue it through a JV with a partner or does.

Oh really.

Likely to do.

We'd be more likely to do continuing to use joint venture partners.

Spreader capital.

Across many of the opportunities that we bill.

That fits.

And then our alignment with our strategic plan.

I think that's just prudent business there are opportunity, we would love to own 100% Oh, given that our our capital pool right now while we believe we have great liquidity. It is limited and what this does to this is limited we thought it would be very choosy with how we allocate that capital and if we can.

And participate in have a toehold and scale our operations.

With easing.

Likeminded partners, we're going to continue to do so.

Okay, that's great I'll turn it back to Michael.

Yeah.

Yes.

Thank you and your next question comes from the line of Mike <unk> from BMO capital markets. Your line is open.

Operator: Thank you. And your next question comes from the line of Mike Markidis from BMO Capital Markets. Your line is open. Thank you, operator. Good morning, everybody. Can you guys hear me?

Hi, yes. Thank you operator, good morning, everybody and.

Maybe just starting on the.

Can you hear me.

Yep, Okay, great sorry, I just starting on.

Operator: Yep. Okay, good. Sorry.

Dave Nevins: Just starting on the dispositions, I guess, a concentration of stuff in Côte Saint-Luc, and maybe tying this back to your comment on the international students and not thinking it's much of an impact, the federal cap, but there's a provincial change in your Côte Saint-Luc properties are, I think, close to Concordia. So maybe you could just shed some light on whether that, you know, that concern was part of the reason for the disposition of those properties, or am I just getting too much time on my hands and thinking too much over here? No, I think first of all, just on the sort of second part of that question, Mike, about their proximity to Concordia, those wouldn't be very close to Concordia. They're sort of more out of the downtown core.

The dispositions I guess, a concentration of stuffing close St. Luke and maybe tying this back to your comment on the international students and not thinking it's much of an impact of federal cat, but provincial change them in your coat St. Louis properties or I think close to Concordia. So maybe if you could just shed some light on whether that.

You know that concern was part of the reason for the disposition of those properties or am I, just got too much time on my hands and I think it would be much over here.

No I think well I think first of all just on the sort of second part of that question, Mike about their proximity to Concordia those wouldn't be.

Close to cardiac there's sort of more out of the downtown core.

Dave Nevins: They're not within that sort of corridor where we have quite a few assets that sort of serve as both McGill and Concordia to figure out a little further. The other thing I would say, and it's consistent with what we've communicated in the past, when we look at what we're disposing of, we kind of look at the opportunities organically within our company and how does this community stack up relative. And to be honest, I think we've done a really good job of operating this community. It's bittersweet, to be really honest.

They're not within that sort of corridor, where we have quite a few assets that sort of service both Mcgill ADT Korea.

A little further.

The other thing I would stay tuned.

Consistent with what we've communicated in the past when we look at what you're disposing of it.

To look at opportunities organically within our within our company and how does.

This community stack up relative.

And to be honest I think we've done a really good job of operating as a community. It's a bittersweet to be really honest some beautiful community.

Dave Nevins: It's a beautiful community. I'm very proud of what we've built and invested in that community. When we took it over, and compared to what the current buyer is receiving, they're receiving an amazing asset, a great community in a very well-located area of code safety. That said, the projected growth for us versus what our overall portfolio is, was below it. And we were starting to bump up against new product rents, and that's not necessarily sustainable if we felt that we could do more with the asset to be competitive with that new supply. So it really came down to a point where we felt that while this buyer will probably do well with it, relative to the context of our overall organic growth profile, it wasn't keeping pace. So it was a good one earmarked for us to dispose of. I think it was a win-win situation.

I'm very proud of what we built and invested in that community and then we took it over in to what the current buyer is receiving there is even though the amazing great community very well located there.

Yeah.

That said.

The projected growth for us versus what our overall portfolios. It was below it and we were starting to bump up against new product rats, and that's not.

There is sustainable if we felt that it was going to do more with the asset to be competitive with that new supply. So it really came down on our part where.

All that while this buyer or probably you do well with it relative to the context of our overall organic growth profile.

Doesn't keep pace. So it was a good one earmark for us to to dispose of it I think it was a win win.

Dave Nevins: Okay, thanks for that. I appreciate it. And then just on the, you know, cap rate for that transaction, should we be thinking something in line with the average of your Montreal portfolio, or would it be somewhat higher than that? I'd say it's a little higher than that. Yeah, it would be Mike, because it is outside of our core in Montreal.

Okay. Thanks for that appreciate it and then just on me.

Yeah on the cap rate for that transaction should we be thinking something in line with the average of your Montreal portfolio or would it be somewhat higher than that.

Yeah, I'd say, it's a little higher than that.

Yes, it would be smart.

It is it is it more outside of our core.

Montreal.

I think I would think for modeling purposes for the call I think mid fours, you're you'll be fine with it.

Dave Nevins: I think for modeling purposes for the call, I think mid-fours you'll be fine with. Great, helpful. Thank you. I guess last one for me before I turn it back. Actually, two last ones, sorry, quick.

That's great helpful. Thank you.

I guess last one for me before I turn it back I'm actually two last ones very quickly. So just to confirm that the renewal and new leasing spreads that you guys gave was that full year or just for the quarter.

Dave Nevins: So just to confirm, the renewal and new leasing spreads that you guys gave earlier in the call, was that full year or just for the quarter? So I say that again, the renewal and turnover spreads that you guys gave earlier in the call are for the full year. Got it. Okay. And then just, Curt, I just want to make sure I caught this correctly.

Yeah.

Sorry say that again.

The renewal and turnover spreads that you guys gave.

For the full year. It's the poll you got it Okay and then just correct just want to make sure I caught this correctly did you say that you expect interest expense or 24 to be flat year over year, given everything that's happened.

Curt Millar: Did you say that you expect interest expense for 24 to be flat year over year, given everything that's happened? Yeah, I think it'll be, depending on what happens with Brad, as mentioned previously, but hopefully, having some dispositions through the year and recycling that capital. I think it'll be flat to plus or minus $500k depending on the timing of dispositions and recycling that capital. If you're modeling flattish, you're probably in the right range.

Yeah, I think it'll be like.

Pending on what happens with liquid rather as mentioned previously about hopefully, having some dispositions through the year and recycling that capital.

Think it'll be flat to plus or minus 500, K, depending on the timing of dispositions and recycling that capital what gives your modeling flattish year, probably in the right range.

Curt Millar: Okay, but is that just contemplating the dispositions that have happened? Or is it anticipating more dispositions? It's anticipating a little bit more dispositions, but very conservatively. That is very helpful. Thank you very much.

But just that's just contemplating the dispositions that have happened or is it anticipating more dispositions.

It's anticipating a little bit more dispositions, but very conservatively.

Okay.

It's very helpful. Thank you very much I'll turn it back.

Operator: We'll turn it back. Thanks, Mike. And your next question comes from the line of Jonathan Kelcher from TD Kawa, and your line is open. Thanks. Good morning. Good morning, Mr. Kelcher. Good morning.

Sure.

Thanks, Mike.

And your next question comes from the line of Jonathan <unk> from TD Cowen Your line is open.

Thanks, Good morning, My name is to culture.

Good morning morning.

Just going back to your one comment Brad on on one of the reasons that you saw.

Operator: Just going back to your one comment, Brad, on one of the reasons that you're selling Close St. Luke is that rents are approaching new product rents. How much of your portfolio would you say is getting close to new product rents? It's a good question. I don't have that handy read off because it's really, really node-specific.

So in closing look as rents for approaching a new.

Rents how much of your portfolio would you say is it was getting close to a new product rents when you're on turnover.

Okay.

It's a good question I don't have that handy right off because it's really really node notes specific.

Bradley Cutsey: So I wouldn't be able to give you a consolidated view on it, said definitely, Jonathan, though, I, I think. When you look at the overall picture, It's measurable, right? I'd probably say, and I'm just going out, it's probably less than 5% of the total. That's helpful, and that would obviously be something when you're looking at which assets you wish to sell going forward. Sorry, I'll say that again, Jonathan.

So I wouldn't be able to give you a consolidated view.

On it.

Said differently, Jonathan though.

I think.

Yeah.

When you when you look on the overall.

This is natural right.

Yes.

I'd, probably say it's like.

Just point out I don't have that it's probably less than 5% of the pool.

Okay. That's that's helpful. And then that would obviously be something in your when you're looking at which assets you you might wish to sell going forward.

Sorry, say that again Jonathan.

Bradley Cutsey: I guess looking where, how much more rent growth you can get would be obviously something that you're looking at, and which assets you're looking to dispose of. For sure, 100%. Now, when you're looking at just staying with capital allocation, have you guys looked at selling partial interests in properties to some of your existing JV partners? I think everything is on the table. And you got to weigh everything that comes with that Johnson.

I guess looking where how much more rent growth you can get would be obviously something that you're looking at at which assets you're looking to dispose of.

Sure understood.

When you're looking at it I'm just staying with capital allocation. When you look have you guys looked at selling partial interest in properties to some of your existing JV partners.

Is that something.

I think everything's on the table.

<unk>.

And you got away everything that comes.

What's that Johnson so.

Bradley Cutsey: So, we would look at that. We have already looked at that. Okay, and then just lastly on the, I don't know if you want to call it guidance, but your last part of your prepared remarks talked about 60% revenue growth. High Single to Low Double Digit Same Property NOI Growth. What do you assume in terms of expense growth for that? Todd, more than inflation, but definitely not what we've been accustomed to over the last couple of years.

We would look at that we have looked at that.

Okay, and then just lastly on the the.

I don't know if you want to call it guidance, but your your last the last part of your prepared remarks talked about 6% to 8% revenue growth.

High single to low double digit same property NOI growth.

What what do you what do you assume in terms of expense growth for that would that be inflation ish or a little bit more than that.

Todd more than inflation, but definitely not what we've been accustomed to over the last couple of years, I think youre going to still come in and you and I could debate when inflation is all day long.

Bradley Cutsey: I think you're going to still come in, and you and I could debate what inflation is all day long. Unfortunately, others might not agree who are set to or trying to manage inflation, but I think, Jonathan, if you kind of model inflation in that four to five percent range, we would feel comfortable. Okay, that's it for me. I'll turn it back. Thank you, and you're next.

Unfortunately.

Others might not agree who set sooner or trying to manage the ablation.

Thanks, Jonathan if you if you kind of model in that 4% to 5% range, we feel comfortable.

Okay. That's it for me I'll turn it back thanks.

Yeah.

Thanks, Jonathan.

Yeah.

Thank you and your next question comes from the line of Jamie Sean from RBC Capital markets. Your line is open.

Operator: Thank you. And your next question comes from the line of Jimmy Sean from RBC Capital Markets. Your line is open. Thank you very much.

Oh excuse me.

Operator: Alright, so just a couple of quick ones. Was there any material costs associated with the rebranding initiative that might have impacted the quarter at all? Yeah, I wouldn't say anything significant. I think we're going to continue to see a little more costs than you normally maybe would in the G&A line, but some of the initial costs, I think it was an additional $200, but I don't think it's enough to call out. Although you just made me call it out.

Alright.

Just a couple of quick ones are there any material costs associated with that we bet right. We're branding initiative that might have impacted the quarter at all.

Yeah, I wouldn't say anything so again I think.

We're going to continue are continuing to see it a little more costs than you normally maybe would it in the G&A line, but the initial some of the initial cost.

And then additional 200, but I don't think it's enough to call out.

Okay. Although you just made me call it out.

[laughter] alright.

With respect to the student comment I think you said that you won't know until August whether you'll see potentially any impact. If any is there anything that you can do or are doing to prepare for or to make sure that your buildings that are geared toward students remain full to the extent that you do see any of that.

Bradley Cutsey: All right. With respect to the student comment, I think you said that you won't know until August whether you'll see potentially an impact, if any. Is there anything that you can do or are doing to prepare for or to make sure that your buildings are geared towards students?

Bradley Cutsey: remain full to the extent that you do see an impact. Well, I think, Jimmy, we're not, I think the communities that we're talking about at the end of the day are not 100% geared to students. There might be two communities within a full portfolio that might have over 90% geared toward students. So at the end of the day, the best way you make sure that you're your community's defensive is by properly amenitizing it and providing the best service possible. And you will also attract additional residents, such as young professionals, right? And I think as you continue to see, It might not be as fast as office owners would like, but as you continue to see different team members come back into the office, we're only going to continue to see more demand from that segment come back into the rental pool as well. Okay, and sorry, just last one Catholics budgets for 24.

<unk>.

Well I think Jamie we're not I've said in the community that we're talking about at the end of the day the knot.

100% geared just doing it it might be two communities within our full portfolio.

Might have over 90% geared toward students. So at the end of the day the best way.

You you make sure that you're.

The community is defensive.

By properly and monetize them and providing the best service possible and you will also attract additional a resident such a young professionals right and I think as you continue to see.

It might not be as fast as office owners would like but as you continue to see different team members come back into the office, we're only going to continue to see more demand from that segment come back into the rental pool as well.

Okay.

Okay.

Okay, and sorry, just last one on Capex budgets for 'twenty for how should we think about that relative to 'twenty three.

Bradley Cutsey: How should we think about that relative to, Yeah, I don't think we're gonna see a major dramatic difference. I think we could see a trend a little lower than what we posted in 2023, which is down a little from 2022. It also, this will also be a factor in our development programs. We are going ahead with 360 Laurier, and Richmond Churchill is currently out for tender.

Yeah, I don't think you're going to see.

A major dramatic change I think we could see a trend a little lower than that.

What we posted in 2023, and which is down a little from 'twenty.

From 'twenty to.

'twenty two.

It also though this will also be a factor of our development programs. We are going ahead with 360 Laurie I.

Richmond Churchill is currently open tenders, so well have to wait and see where that comes back.

Bradley Cutsey: So we'll have to wait and see where that comes back before we see if we're going to spend real hard dollars on that. Thanks. Great, thanks Jimmy. Thanks Jimmy. Your next question comes from the line of Matt Kornack from National Bank Financial. Your line is open.

Before we see if we're going to spend a real hard dollars on that.

Okay.

Thanks, guys.

Great. Thanks, Jamie Thanks, Jamie.

Yeah.

Your next question comes from the line of Matt <unk> from National Bank Financial Your line is open.

Operator: Hey guys, just a follow up to Jimmy's comment on CapEx and just generally the idea of value add within. Um, it seems like there's been a bit of a shift away from value add from some of your peers, but it is core to the InterRent story. Like, are you still seeing that as something?

Hey, guys.

All of them yet.

Just a follow up to Jimmy's comments on Capex and just generally.

The idea of value add within apartment investments.

It seems like there's been a bit of a shift away from value add from some of your peers, but it is core to the entrance story like are you still seeing that that's something that is core to the story going forward and how should we think about.

Bradley Cutsey: That is core to the story going forward, and how should we think about value add within the context of the current rental market. I'll answer this way: Value Add is InterRent. We like to believe anything, anytime we put out a dollar of capital, it's Value Add. And I'm not trying to be cute about that, but it can be Value Add, and you take on a new project. Maybe it's not leased up yet.

Value add within the context of the current rental market.

Well.

I'll answer it this way Matt Yeah, it isn't there and we'd like to believe anything anytime we put out a dollar of capital it's about yeah, and not trying to be cute about that but it can be value add and you take on a new project baby if not leased up.

Bradley Cutsey: We think we have one of the best leasing teams in the business. That's Value Add leveraging off our operating platform. Yes, it's also Value Add taking an asset that was built 55 years ago, and you have in-house team experts that can come in, take a look, and have a vision for an asset and see that, hey, on paper, it says it has 135 suites. By the time we're done with it, it has 145 or 150 suites.

Do you think we have one of the best leasing teams in the business that's value add.

Leveraging off our operating platform. Yes. It's also about your I've taken a asset there was about 55 years ago, and you have and how is the team that experts.

Come in and take a look and have a vision for an asset and see that hey on paper. It says it has 135 suites by the time, we're done with it has 140 550 suites.

Bradley Cutsey: And yes, it's under-rented, and yes, turnover is coming down, but it meets some of our investment criteria that we believe why we have some of the highest turnover in the business is because of where we're located and the communities we're willing to put money in. Maybe that comes in a little, but there are some natural tendencies that go around being around tech ecosystems and hospitals and institutions so that we feel that we can put real dollars into a community to reposition it in order to recover and meet our return thresholds. So, I think everything we approach, we try to make it Value Add. Otherwise, why would you put the dollar out, right?

And yes, just under rented and yes.

Turnover is coming down, but it needs some of our investment criteria that we believe why we have some of the highest turnover in the business just because of where we're located and where we're the communities we're willing to put money in may.

Maybe that comes in a little but there are some natural tendencies.

That goes around being around tech ecosystems, and hospitals and institutions. So that we feel that we can put a real dollars to community to reposition it in order to recover and meet our return thresholds. So.

I think I mean, everything we approach we tried to make it as value add otherwise why put the dollar out right. So you will continue to see us look at vintage.

Bradley Cutsey: So, you will continue to see us look at vintage communities and reinvest in them and bring them back to their glamour that they once were perceived to have when they were newly developed. And we'll do so by weighing the risk-adjusted return relative to other opportunities. You will also see us purchase a new asset that we think is really well located, but there are some design flaws or it is being mismanaged on the lease up. So, you will see us take advantage of those opportunities. I think going forward, I think the big thing you can expect from us is we're going to continue to invest in our platform and our people. And I think that's the big difference between our story. We're in the people business, and it starts with our own people.

And for us to reinvest in them and bring them back to their Lamber. Then once we're perceived to have when they were newly developed and will do so by weighing the risk adjusted return relative to other opportunities. You'll also see us purchase a new asset that we think really well located.

But there's been some design flaws or there's been mismanage on the lease up so you'll see us take advantage of those opportunities I think going forward I think the big thing that you can expect from US is we're going to continuing to invest in our platform and our people and I think that's a big difference.

For our story, we're in the people business and it starts with our own people and really that's where we're going to leverage and continuing to try to add value. So we're not we're not.

Bradley Cutsey: And really, that's where we're going to leverage and continue to try to add value. So we're not deviating from that at all. Okay, no, fair enough. And just given your cost of capital relative to opportunities in the market, understand that you're selling some assets to probably deleverage and fund commitments in the near term, but what should we think about? the growth profile and taking advantage of the platform over the longer term. I mean, I just assume your goal is to get back to a cost of capital where it makes sense to grow the portfolio. Yeah, I mean, we can sit here and have theoretical debates all day long about what the true cost of capital is. That's the great thing about finance. But the one thing I get a lot of comfort from, Matt, is...

D D deviating from that at all.

Okay fair enough and just given your cost of capital relative to kind of opportunities in the market understand that you're selling some assets to probably deleveraging fund commitments in the near term but.

How should we think of the growth profile and taking advantage of the platform longer term I mean I'd assume your goal is to get back to a cost of capital where it makes sense to grow the portfolio.

Yeah, Yeah, I mean, we can sit here and have theoretical debates all day long about what is their true cost of capital. That's the great thing about finance.

But the one thing I get a lot of comfort in.

Matt as well.

Bradley Cutsey: When you're looking, and you're operating within the SaaS class, you see the visibility of this cash flow and see the organic growth profile that we have inherent in our portfolio. That allows us to plan for the external growth with some comfort, right? Now, yes, the bond rates are moving on us. Yes, our cost of equity is not where it needs to be, but we can do things in the near term that are in our control, such as being disposal communities where they are forecast to be under our projected growth rates and recycling them into opportunities that we believe exceed our growth rate. And by the very nature of managing that from a portfolio perspective, we should be able to continue our track record of posting above-industry growth.

When you're looking and you're operating within this asset class has seen the visibility at this cash flow and seen the organic growth profile that we have inherent in our portfolio.

Data allows us to plan for the external growth with some comfort right now yes. The bond rates are moving on us, yes or cost of equity is not where it needs to be what we can do things in the near term that are in our control being disposed of communities, where they are forecast to be under.

Our projected growth rates and recycle them into opportunities that we believe exceed our growth rate.

And by the very nature of managing that from a put up some.

Polyol perspective, we should be able to do it.

To continue our track record.

Above industry, posting above industry growth and in Italy at the end of the day.

Bradley Cutsey: And at the end of the day, that's kind of the approach to it, and we'll continue to do it. If you ask me, are there enough external opportunities that can exceed our current outlook? There are, and for different reasons. And that's a great thing about this. Not everybody's capitalized the same way, and not everybody has access to cash flow the way some of the publicly listed REITs do.

It's kind of.

The approach to it and we'll continue to do it. If you ask me are there enough external opportunities that can exceed our current outlet there is and for different reasons and that's the great thing about us not everybody's capitalize the same way and not everybody has.

Access to cash flow the way some of the publicly listed Reits do it right and I think we're coming into a time, where we're gonna be able to optimize their portfolios and use some of that organic cash flow to our buildup for future growth.

Bradley Cutsey: And I think we're coming into a time when we're going to be able to optimize their portfolios and use some of that organic cash flow to build up for future growth. That's very helpful. Is that different?

Okay, that's very helpful.

Different.

Bradley Cutsey: I probably should want to make sure we get this point across on the call. We're not going to do that. That's expensive.

I, probably shouldn't we wanted to make sure we get this point across on the call.

We're not going to do that extensively with not the balance sheet, though.

Bradley Cutsey: We would not be able to do that. So when we're making these comments, you can assume we're making leverage-neutral capital allocation decisions. Yes, there might be timing blips where we might feel comfortable increasing that leverage for a very short period, but there's a reason behind it that we know about that will bring it back to where we're currently sitting.

So when we're making these when we're making these comments you can assume we're making leveraged neutral capital allocation decisions.

Yes, there might be timing blips, where we might feel comfortable increasing that leverage for a very short period, but theres. A reason behind that we know about that will bring it back to where we're currently sitting.

Yes.

Bradley Cutsey: Okay, no, that makes sense. I appreciate that. Thank you, and we have a follow-up question from Mike Markidis of BMO Capital Markets. Your line is open. Thanks. Just to follow up on Jimmy's question on the CapEx, I guess, Brad, you were talking about it in the context of including development, but if we were just to look at the rental portfolio spend, including the repositioning portfolio, that number has been trending up over the past couple of years.

Got it makes sense I appreciate that.

Thank you and we have a follow up question from Mike Mckenney BMO capital markets. Your line is open.

Thanks, just to follow up on Jamie's question on the Capex I guess, Brad you were talking about it in the context of including development, but if were just to look at the rental portfolio spend including the repositioning portfolio.

That number has been trending up over the past couple of years. So what are your expectations just on I P. P spend for 2024.

Michael Markidis: So what are your expectations just on IPP spend for 2024? I actually think it's down. Mike, I'm not sure what you referred to. We can take it offline if you want. I want to make sure that we're comparing apples to apples. But I... I would, for the year 2024, you can assume that our capex spending, excluding development, will come in. OK. We're not out there saying that there's a significant change in the way we're operating. We're not saying that. Yeah, no, that's fair. Okay. We think for other reasons that we're seeing a little relief in some areas and different things, but, Let's take that offline if you want. It's just not clear.

I see I think is down Oh my God.

I'm not sure.

When you referred to it we can take it offline if you want to make sure that we're comparing apples to apples.

But I.

I would for your 2024 and you can assume.

Our capex spending excluding development will come in.

Okay.

Yeah, alright quite a lot.

We're not out there saying that.

A significant change in the way we're operating.

We're not saying that.

Yeah, No. That's fair Okay. We think for other reasons there that we're seeing we're seeing a little relief in some areas and different things but.

But let's let's take that offline if you want it it's just not fair.

Sounds good sounds good thanks.

Renee Wei: Sounds good. Thanks, Mike. And ladies and gentlemen, we have reached the end of our Q&A session. I'd like to turn it back to Renee Wei, Director of Investor Relations, for closing comments. Thank you everyone again for joining today's call. If you have any additional questions, please feel free to reach out. Have a great day. Thank you, and, Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Thanks, Mike.

And ladies and gentlemen, we have reached the end of break any session I'd like to turn it back to you any Li director of Investor Relations for closing comments.

Thank you everyone again for joining today's call. If you have any additional questions. Please feel free to reach out and have a great day.

Thank you and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Okay.

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Sure.

Yeah.

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