Q1 2024 Allied Properties Real Estate Investment Trust Earnings Call
Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Allied properties first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise.
Regina: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If he would like to withdraw your question Press Star One again I'd now like to turn the conference over she was the failure Williams President and CEO. Please go ahead.
Williams: I'll discuss highlights briefly NAND will highlight our strong financial position and J P will outline are finally seeing tour activity and provide a summary by urban markets than we're pleased to answer questions.
Williams: We may in the course of this conference call maybe forward looking statements about future events or future performance.
Williams: These statements by their nature are subject to risks and uncertainties that may cause actual events or results to differ materially including those risks described under the heading risks and uncertainties in our 2023 annual report and our most recent quarterly report material assumptions underpinning any.
Williams: We're looking statements. We make include those described under forward looking statements and our most recent quarterly report.
Williams: I'll put our Q1 highlights in the context of leasing and portfolio optimization.
Williams: First leasing strong demand continues I'm encouraged by the high level of tour activity across our portfolio. I'm also encouraged by the ongoing productivity of our portfolio and that renewals were at healthy spreads to in place rents.
Williams: It's worth noting that most of these spreads are on rates established at the height of the market in 2018 and 2019.
Williams: I believe we're at an inflection point and leasing momentum will continue through 2024 are high user engagement, which manifest through the critical net promoter scores supports our leasing efforts.
Williams: Onto portfolio portfolio optimization development upgrade and capital reallocation.
Williams: Development and upgrade activity is one way we've optimized the portfolio over the past decade, a quick update on this.
Williams: <unk> thousand one real Barbarossa, 80% of the transformation of greatest complete and open to the public its unique space like no other in the city of Montreal.
Williams: The work to transform specific floors and fulfill leasing requirements for a completed deal that ongoing the second floor in its entirety and space on the 21st Florida will be delivered to two users in June the interior lobby and exterior of the building will be completed in July and August.
Williams: At 19, Dunkin' in Toronto touring for their rental residential suite has commenced and move ins are expected later this summer.
Williams: King Toronto, the 12th level was completed in April and glazing will begin in June.
Williams: The 16 level structure will be completed by the end of 2025, when fixtures and residential pedestrian will commence.
Williams: Two units were sold in April at pricing in line with prior estimates were very excited to complete this part of King West village.
Williams: And for in Vancouver at the concrete structure had been topped off and animal logic will commence occupancy late this year.
Williams: Another way we've optimized the portfolio is two capital reallocation, where effectively trading lower quality assets for higher quality assets. What we've achieved so far this year is a great example of this where accessing capital from lower yielding less strategic assets.
Williams: Typically this quarter, we've identified three assets for disposition in Montreal totaling $77 million of buying fresh value about one third of our target $200 million.
Williams: The expressions of interest have exceeded our expectations over the past few weeks. So we're confident that we can hit our target.
Williams: We're investing that capital and three higher caliber more strategic assets, the first being the rental residential component of <unk> Sky.
Williams: The second being a majority ownership position in one of the most distinctive assets in the country for 100 West Georgia in Vancouver.
Williams: And third an increased ownership position in high quality rental residential and distinctive workspace in 19 Dunkin' in Toronto.
Williams: Soon the Telus Guy in 19 Dunkin' investments. We've also established scale of our urban rental residential portfolio. This is an important complement to our urban office portfolio, playing a similar role to the retail component of our portfolio.
Williams: The residential density will not only support the retail and commercial component, but also add to the ecosystem are urban centers thrive when the concentration of people have access to everything they need in a tight radius. We have the density potential and the operating capability to create.
Williams: Our own mixed use neighborhoods to create our own demand. We've now recommenced this activity and we have decades of opportunity ahead of us.
Williams: Focusing on portfolio optimization doesn't make us indifferent just short term metrics, but we're intensely focused on the long term implications of what we do.
Williams: Portfolio optimization will increase the productivity of our urban portfolio, allowing us to improve our already strong financial position and support our distribution, while growing cash flow per unit over the medium term.
Williams: This is what investors expect and want from commercial real estate.
Williams: Dan will now outline our position of financial strengths, which will enable us to execute our strategy.
Dan: Oh, yeah, good morning, everyone.
Dan: First quarter of 'twenty 'twenty four was in line with our expectations. Our funds from operations per unit for the quarter was 57.8 cents, which was 3% lower than the comparable quarter.
Dan: Adjusted funds from operations per unit for the quarter was $53.07, which was 8% higher than the comparable quarter.
Williams: Same acid NOI off the total portfolio increased by two 9% over the comparable quarter, while at the same asset NOI of the rental portfolio decreased by 2%.
Williams: On April one we closed on the acquisition of 400 West, Georgia in Vancouver, and increased our ownership interest in 19 Dunkin' in Toronto.
Williams: In doing so we traded noncash interest income for cash operating income from high quality assets, which is exactly what we wanted to as owner operators.
Williams: While these acquisitions will put temporary upward pressure on our debt metrics in the near term.
Williams: Proceeds from our disposition activity will offset this pressure has they will be allocated to paying down debt.
Williams: Our planned disposition activity is progressing well with targeted proceeds of up to 200 million of IP.
Williams: <unk> value to be realized.
Williams: At the end of the first quarter, we have more than 730 million in available liquidity.
Williams: And we are fully committed to maintaining a strong balance sheet and retaining our investment grade credit rating I'll now pass the call to J P. Thank you.
J P: Thanks, Dan we remain encouraged by the level of leasing activity across our portfolio, even with longer leasing timelines.
J P: In Q1, we completed more leasing transactions than any quarter in 2023, and the number of leasing transactions was up 32% compared to the prior year.
J P: We are also encouraged by the number of existing users in our portfolio requiring more space.
J P: 18% of new leasing activity in the quarter represented expansions and the amount of expansion space leased in the quarter with greater than the total amount of expansion space leased in all of 2023.
J P: Tour activity continues to be strong and exceeded our expectations for Q1, we observed a 10% increase in tours in the quarter compared to Q4 last year and a 23% increase compared to Q1 last year.
J P: Industries represented by touring organizations continue to feed technology professional services education and medical uses.
J P: The increase in tour activity is particularly encouraging considering over the past few years, we introduced the ability for prospective users to tour our space virtually.
J P: As a result by the time an organization conducts a physical tour of our portfolio. They are already familiar with this space, resulting in enhanced quality of tour activity compared to what we observed previously.
J P: As of today, we have more than 1.05 million square feet of leasing activity under negotiation or at the prospect stage.
J P: I'll now provide a brief overview of each market.
J P: In Montreal, we're seeing an increase in demand from technology users and greater diversification among industries represented by Turing organizations as more and more employers recognize the importance of offering great workplace experiences to attract motivate and retain top talent.
J P: Tour activity in Q1 was in line with our quarterly average.
J P: In Toronto in Kitchener, we are seeing an increase in demand from prospective users with larger space requirements that are greater than 10000 square feet tour activity in the quarter was 21% higher than our quarterly average.
J P: In Calgary, there was renewed activity from the oil and gas industry and we're seeing an increase in demand from professional firms that serve the sector tour activity in Q1 was in line with our quarterly average.
J P: In Vancouver, there has been an influx of new entrants to the market, particularly among technology users in professional services. This is resulting in increased tour activity, which was 71% higher in Q1 than our quarterly average.
J P: In summary, the composition of our portfolio concentrated in amenity rich urban neighborhoods, coupled with the strength of our operating platform and team as validated by our users through our net promoter score, which in 2023 was 250% higher than our peers gives us tremendous confidence in the continue.
J P: Demand for Allied distinctive works workspace across the country.
J P: I'll now turn the call back to Cecilia.
Cecilia: Thanks J P.
Cecilia: Before we open to questions I want to reiterate my confidence that our portfolio will not only hold up well in this economic environment as it has during past downturns, but ultimately emerge in a stronger position for the following reasons one the one of a kind concentration of urban properties, we own and operate.
Cecilia: Two the intensification potential inherent in our portfolio, which represents continued growth and three our team across the country is stronger and better integrated than it's ever been I know that my fellow Allied team members are energized and focused on executing our strategy and I think each of them.
J P: For their hard work creativity and dedication day in and day at these two things are one of a kind concentration of properties in our strong team represent our unbeatable operating platform. This is all in the context of our thriving cities, which continue to attract global talent our cities are in demand.
J P: Manned and continue to grow this growth will lead to demand that we can satisfy and surf it's time to invest in the future of our cities by investing in Allied and we'd now be pleased to answer any questions.
J P: At this time I'd like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. Our first question will come from the line of Jonathan <unk> with TD Cowen. Please go ahead.
Jonathan: Thanks, Good morning.
Jonathan: Good morning, first first question Cecilia I guess just on the you guys highlighting your rental portfolio I know you talked a little bit about it but does that change anything in terms of.
Jonathan: Future projects or what youre doing with the excess density.
Jonathan: No I mean, we've been involved in rental residential development for the last 10 years, Jonathan starting with tell US Sky I think that was in 2015, and then followed very quickly with a 19 Duncan both of which of course now are either completed or are complete.
Jonathan: So it's really about just identifying the residential density the intensification of potential that we have inherent in our portfolio and that we see that as a compliment similar to the retail component of our portfolio, where we're not you know say.
Jonathan: That we're going to be changing our focus away from from office, but we really do see it as a compliment and and you know basically creating our own mixed use neighborhoods in the past we've had to joint venture.
Jonathan: With partners that had rental residential expertise and now we wouldn't need to do that going forward, we have that expertise ourselves.
Jonathan: Okay.
Speaker Change: That's helpful. And then just switching gears on the leasing front. It sounds like you guys have been very active.
Speaker Change: At what point does that start to translate into the occupancy gains.
Speaker Change: It's very hard to predict in this environment and so I think the outlook that we've given in the press release.
Speaker Change: Is a responsible way to address our expectations in this environment. It's we've gotten great feedback from our constituents in terms of how we're laying that out and there's nothing that I have to add to that at this point.
Speaker Change: Okay.
Speaker Change: This slide one more in here.
Speaker Change: There was no real change to your outlook I don't think in the press release.
Speaker Change: You are beginning of the year outlook did that contemplate the west bank transactions.
Speaker Change: It did not it did not contemplate any reorganizations in that regard them, but I think we gave ourselves enough space that we will see how things play out, but we're not changing our outlook.
Speaker Change: Okay. Thanks, I'll turn it back.
Speaker Change: Your next question will come from the line of Mario <unk> with Scotiabank. Please go ahead.
Mario: Hi, good morning.
Mario: Thanks for taking questions.
Mario: So just coming back to the occupancy and a comment that you means that you felt that you were at some inflection point.
Mario: And momentum is expected to continue in 'twenty four was opportunity to occupancy or maybe you can just provide more color on what you meant on Oh go.
Mario: Okay.
Mario: We're sticking with the outlook that we gave in our year end press release.
Mario: <unk> data in January 30th and we have no change to our outlook. We provided color in terms of our expectation of occupancy over the course of 2024 that has not changed.
Speaker Change: Okay absolutely.
Speaker Change: On the collection point was that related to something I'll try to walk into.
Speaker Change: No no. It's just it's just a reflection of how we're feeling about the level of tour activity and leasing that we have in the pipeline.
Speaker Change: Got it okay, it's really hard to predict time Mario So it's hard for me to say you know what is going to land by June 30th versus whats going to land by September 30th given that we report on a quarterly basis.
Speaker Change: Okay.
Speaker Change: How did the the 50 basis point quarter over quarter decline.
Speaker Change: And on the Gulf between Q1, and 69% tenant retention during Q1 compared to your internal expectation concern here.
Speaker Change: They were as we expected.
Speaker Change:
Speaker Change: Okay, and then I think J P. You mentioned that there is a one 5 million square foot leasing pipeline, which is fairly similar to what we've noted in Q4, how much of the 1.15 million square feet relates to the 800000 square feet that is remaining to expire this year.
Merial: About 50% Merial.
Merial: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Just on the assets held for sale.
Speaker Change: <unk> disclosed Cmos with N O Y and Q1 was $1 3 million.
Speaker Change: Would all of the 130 million recorded off what's held for sale be same property assets.
Speaker Change: Yes, they would Mario.
Mario: Okay, and then the $1 3 million for Q1 is it reasonable to just annualize that at 1.3 for a full year NOI.
Speaker Change: Yep that's.
Speaker Change: Approximately correct.
Mario: Okay.
Speaker Change: Last one.
Mario: Reported debt to EBITDA came up a little bit quarter over quarter.
Mario: Mentioned that may come up a little bit more on the back of <unk>.
Mario: The West Bank transaction, the cool people first.
Speaker Change: Do you.
Speaker Change: Do you have a target.
Speaker Change: Don.
Speaker Change: And if so what kind of timeframe should we think of them.
Speaker Change: Nothing we're not we're not disclosing how we expect that to evolve over the next few quarters. We have said that there will be temporary modest upward pressure on those metrics, but they will come down over the course of the next 18 months. So we expect to ultimately remain within our targeted ranges.
Speaker Change: Okay, and so can you just remind me what the target range of 18 months.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: In the eight times range as it relates to debt to EBITDA.
Speaker Change: Okay. That's it for me thank you.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Lorne Kalmar with Desjardins. Please go ahead.
Lorne Kalmar: Thanks, Good morning, everybody.
Lorne Kalmar: I noticed actually sorry, let me restart you mentioned the strong interest for <unk>.
Lorne Kalmar: The assets Youre looking to dispose off is there a scenario where you look to go beyond the $200 million of dispositions.
Speaker Change: Not this year.
Speaker Change: Okay.
Speaker Change: But.
Speaker Change: Maybe just to follow on that wood getting back to that eight times range with wood.
Speaker Change: Would you look to pursue additional dispositions are you finding it little more difficult to do organically.
Speaker Change: Yeah, I mean, we'll consider we'll consider offers that come our way the unsolicited offers and expressions of interest that we received have actually been quite.
Speaker Change: Quite intelligent [laughter] and so we're open to considering everything we're targeting 200 million. This year. If we are able to do more than that we're open to that.
Speaker Change: Not committing to a more than that at this stage, but certainly open to it.
Speaker Change: That's fair.
Speaker Change: Maybe can you just give a little bit of color on the types of buyers that are that are coming forward.
Speaker Change: It's a mix of foreign buyers and local buyers.
Speaker Change: But all all private.
Speaker Change: Oh private okay.
Speaker Change: And then I noticed this quarter you guys I think remove the net effective rent disclosure can you maybe give us a little color as to the decision or the reason behind that decision and maybe what any ours look like on Q1 leasing.
Speaker Change: So I'll answer the first part of your question. We we found that the disclosure isn't helpful. In terms of our leasing negotiations and I think we're also the only.
Speaker Change: Office issuer in Canada that might be disclosing them, so not not helpful to us in leasing, but J P. Can provide an update in terms of the net effective rents realized in Q1 yeah.
J P: <unk> in Q1 were in line with any ours achieved last year.
J P: Yeah.
Speaker Change: Okay sure.
Speaker Change: That's very helpful. Thank you JP and then maybe one last quick one for NAND with the.
J P: The acquisition of the additional 45% of 19 Dunkin'.
Speaker Change: What do you expect to be.
NAND: The incremental increase in capitalized interest should we sort of think of it is the incremental amount on the construction lines with the additional interest in the property.
NAND: Lorne will be reporting on that in Q2, and each quarter going forward as just our normal course of reporting we're not going to be providing any sort of forecast on those.
Speaker Change: Those line items.
Speaker Change: Okay fair enough. Thank you so much for taking my questions I'll turn it back.
Speaker Change: Thanks.
Speaker Change: Your next question will come from the line of Matt Korn Act with National Bank Financial. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: Just just quickly on the dispositions.
Speaker Change: If you looked just quarter over quarter.
Speaker Change: The property list it looks like two of them would've been an old port Montreal.
Speaker Change: But also.
Speaker Change: We noticed that Tencent Antoine is no longer in the property list.
Speaker Change: Selling some.
Speaker Change: Planned that would have been kind of suited for more condo development is that how should we we should read into that.
Speaker Change: And maybe taking that forward into Toronto is that something we would expect kind of between call. It spinner in church on at a later or some of the other residential density that may not be rental appropriate.
Speaker Change: On and I Hope I remember your multipart question on the three assets that we've identified in Montreal and I believe we've listed them with the individual addresses exactly right now yeah. So it does include a 10 and we're really we're focusing on the lower yielding assets that site in particular was our.
Speaker Change: Zoned for rental rush them, but it is a lower yielding asset. So it was something that we were open to considering we're not looking to dispose of.
Speaker Change: All sites that have rental rez potential.
Speaker Change: Potential, but that one was an obvious one for us.
Speaker Change: Okay fair enough.
Speaker Change: And then on just aggregate Capex is as a kind of as opposed to kind of the IPP capex.
Speaker Change: <unk>.
Speaker Change: How should we think about that number it's been around kind of a 100 to 120 million. It was a little higher in Q4 kind of stable this quarter, but the IPP component was lower.
Speaker Change: And then last quarter.
Speaker Change: Can you give us a sense as to kind of Ah I had assumed that the aggregate spend should come down as you finish the development assets or should we expect that given the focus on upgrading the portfolio broadly that may be more assets fall into the redevelopment bucket going forward.
Speaker Change: No I think the table in the MD&A talks about the remaining cost to complete so those will be done mostly by the end of 2020 five.
Speaker Change: And then upgrade capital going forward would be less than what has been our annual investment over the last few years it would be a lower level, but we still will be completing upgrade activity.
Speaker Change: Okay.
Speaker Change: Accounting wise just sequentially quarter over quarter.
Speaker Change: There was an increase in the amortization of Tis and leasing costs are is that just because you're bringing more of the development assets in or or was there anything onetime in nature and I'm just thinking whether recent straight line that number.
Speaker Change: That's correct, it's actually the governments that are coming online with straight line rent in place and amortization of Ti as well.
Speaker Change: Okay.
Speaker Change: And then just lastly on the distribution you guys have been firm and your commitment to it.
Speaker Change: But can you give us a sense as to how you balance kind of retaining that capital to invest in the portfolio versus paying it out to investors and maybe what is your thought on kind of a minimum payout ratio or is there a payout ratio in mind and I know youre looking longer term.
Speaker Change: But just your views on the distributions and.
Speaker Change: Why sustain it in the context of how what your yield is at this point.
Speaker Change: Yeah. So we are absolutely committed to our current level of distribution I'm, an investor everyone. In the room here with me as an investor. So we understand how important that is ultimately like over.
Speaker Change: The medium to longer term.
Speaker Change: We would want that payout ratio to come down to let's call. It the 70% range as a way to your point of retaining.
Speaker Change: More of our lower cost capital, which of course is the capital that we generate internally and that will just come over time as the way with organic growth and.
Speaker Change: And yeah, that's something that you know maybe.
Speaker Change: In the medium to longer term would be what we're targeting.
Speaker Change: Fair enough.
Speaker Change: I appreciate the color guys.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Brad Sturges with Raymond James. Please go ahead.
Bradley Sturges: Hey, good morning.
Bradley Sturges: Just to go back to the comment around lease negotiations take still taking a long time and then trying to.
Bradley Sturges: I guess marry that to the inflection point comment.
Bradley Sturges: Has there been any green shoots on weather.
Bradley Sturges: Those timelines are starting to to shorten up a bit or how.
Speaker Change: How should we think about that inflection point in terms of the confidence going forward in terms of perhaps other green shoots that you're seeing to make that statement.
Speaker Change: Yeah. The the level of tour activity is is really the leading indicator for us Brian So having those at above average quarterly levels is is what gives us the confidence and just the continuing dialogue with with prospective users and existing users frankly, and J P referred to some of the.
Speaker Change: <unk> activity with our portfolio so the.
Speaker Change: Yeah.
Speaker Change: We'll see how the the time to execute a deal changes over the next couple of quarters that that will be quite telling but it's really the level of tour activity that that gives us the confidence that that we're at an inflection point.
Speaker Change: Okay. That's helpful and just on the on the developed pipeline in terms of what's left to complete just maybe I missed it causes.
Speaker Change: But just what's the EBITDA the annualized contribution still love to come online.
Speaker Change: I think we press released that a couple of quarters ago, and it's still in line with that.
Speaker Change: Okay.
Speaker Change: Yeah, we have we refer to the incremental in Atlanta and in the last press release.
Speaker Change: Okay sounds good thanks, a lot I'll turn it back.
Speaker Change: Thanks, Brian.
Speaker Change: Your next question comes from the line of Pammy beer with RBC capital markets. Please go ahead.
Pammi Bir: Thanks, Good morning.
Pammi Bir: Interesting comments on the on the tenant expansions from a leasing standpoint can you maybe just provide more color on what's driving that.
Pammi Bir: Are these unique to those assets or those tenants or is this maybe a bit of a trend that you've seen us maybe returned to office picks up.
Pammi Bir: I think it's a function of both.
Pammi Bir: Growth for the.
Pammi Bir: Organizations in question, but also the need to expand their footprint to accommodate their employee base as they revert back to an office centric model as you referred to.
Pammi Bir: And was that.
Pammi Bir: Noticed with any particular region or is it across the portfolio.
Pammi Bir: It was a diversified representation both type of type of user as well as geography.
Pammi Bir: Okay.
Pammi Bir: Maybe just coming two to 400 West Georgia can you talk about the tenant interest that you've seen there, thus far too and maybe any sense of timing to get.
Pammi Bir: The balance of that space leased up.
Pammi Bir: We have three prospective users looking at.
Pammi Bir: Taking up the remainder of the space there and we're very confident in our ability to meet their needs. So that is ongoing and we will provide you know we can provide an update on as part of our Q2.
Pammi Bir: Conference call.
Speaker Change: Okay I'm sorry.
Speaker Change: Are you do you expect maybe to get these deals done this year.
Speaker Change: Yeah.
Speaker Change: That would be my desire certainly.
Speaker Change: Yeah.
Speaker Change: And that's what we're targeting.
Speaker Change: Last one for me just on the residential leasing 19 Duncan can.
Speaker Change: Can you just comment on maybe what the rents look like there.
Speaker Change: Leasing interest you did mentioned that there has been some leasing interest today and I'm curious if you have any sense of maybe the percentage of units that might be committed at this stage.
Speaker Change: And when do you expect to get that stabilized.
Speaker Change: We've we've just started our leasing program. So we're encouraged by the amount of interest and activity, although it's likely premature given we've just started to give you any meaningful.
Speaker Change: Direction, but we are optimistic with respect to the lease up over the course of this year and rents would be representative of.
Speaker Change: The high watermark.
Speaker Change: Within the market and comparable to what you would expect for a similar product across across the city.
Speaker Change: Got it thanks, very much JP I will turn it back.
Speaker Change: Again for any questions Press Star one and your next question will come from the line of Mark Rothschild with Canaccord Genuity. Please go ahead.
Mark Rothschild: Thanks, and good morning.
Mark Rothschild: Good morning.
Mark Rothschild: Maybe following up on your comments regarding the distribution of the confidence in that.
Mark Rothschild: I'm looking at the numbers and trying to reconcile and understand your comments.
Mark Rothschild: Obviously organic growth is extremely hard here, especially when you consider leasing costs.
Mark Rothschild: There was about $1 5 billion of debit sharing between 25 and 'twenty six 'twenty.
Mark Rothschild: 26 maturities are at very low rates, obviously, we don't know where interest rates are going to be then how are we to expect the payout ratio to come down considerably or any amount materially.
Mark Rothschild: Over the next few years considering that.
Mark Rothschild: The difficulty and refinancing debt and general office properties that you have good property feel you'll be able to access that but.
Mark Rothschild: The rate is likely to go up.
Mark Rothschild: It's hard to have organic growth.
Mark Rothschild: It's not clear how much the accretion is from development completions.
Mark Rothschild: How do we get there within the next two to three years.
Speaker Change: Oh, well I don't expect to achieve a 70% payout ratio in the next two or three years, certainly that would be our long term aspiration.
Speaker Change: You know we'll look at.
Speaker Change: Selling other lower yielding less strategic assets, if we need to we have a lot of ways that we can address our maturing debt. Our next tranche of debt. Our next bond is April of next year for $200 million I'm.
Speaker Change: Not something that we're incredibly concerned about given the amount of liquidity that we have and the options that we have at our disposal to address that so.
Speaker Change: It's not I Didnt mean to imply that we were targeting a 70% payout ratio in the next two or three years that is a longer term aspiration.
Speaker Change: Okay, and then to your comments on asset sales do you believe that if you wanted to sell considerably more at <unk> that.
Speaker Change: The market would be there to do that.
Speaker Change: Yes, I do believe so.
Speaker Change: Okay great.
Speaker Change: Yeah, the unsolicited expressions of interest apart my belief.
Speaker Change: But to be clear, that's not something you're pursuing right now.
Speaker Change: We're open to where we're considering everything that comes our way and we're not saying no to anything preemptively, we'll consider all of our options.
Speaker Change: Okay, Great maybe just last one this is a small one but there was a fee paid a consulting to a trustee is that was that a one time thing or is that going to be I'm just recurring.
Speaker Change: Cost is this someone who is helping out the REIT.
Speaker Change: It's an annual agreement.
Speaker Change: Okay, great. Thank you so much.
CIBC: Your next question will come from the line of the semi side with CIBC. Please go ahead.
Semi: Thanks, Good morning.
Semi: Marty.
Semi: I revisit the leasing conversations so it does sound like tour activity is fairly healthy, but just wondering of the portion of tour that arent converting yet to from a at least if I guess, what's the reason you're hearing why tenants.
CIBC: Don't pursue it is it pushback on rent or is it more so timing and then if it is timing what are you hearing that they need to see before they firm up their decisions to lock it down.
Speaker Change: It really varies semi and it does depend.
Speaker Change: On just they need to make decisions based on the needs of their business.
Speaker Change: Certainly isn't based on on what we're able to offer them. It's it's really on a business like.
Speaker Change: On case by case basis based on their own.
Speaker Change: Business situation.
Speaker Change: Okay.
Speaker Change: And there was good color on I guess expansion trends and your assets are you seeing much downsizing activity and then if so is there a certain type of user that would be.
Speaker Change: For a more downsizing oriented.
Speaker Change: Not any more or less than we've seen in the past and so there wasn't anything to highlight there.
Speaker Change: Okay.
Tomorrow: Tomorrow I'll just I'll just add we survey our users every year and.
Speaker Change: You may recall that last year, there were more users in our portfolio that identified a need to expand then contract. So that that in addition to what Cecilia just outlined is another it's another data point that gives us confidence that the trend around contraction is.
Speaker Change: Is diminishing across our portfolio and more and more users are looking to grow.
Speaker Change: Yeah.
Speaker Change: Okay. That's good color and lastly, just to go back to your comments around your urban rental residential strategy and you talked about expertise you have already in house do you plan to build it out further and just I guess, if you could offer more color around that operating platform that would be helpful.
Speaker Change: We don't I don't think we need to build it out further so the answer would be no.
Speaker Change: Okay. That's all I had thank you guys. Thanks.
Speaker Change: Thanks Amir.
Speaker Change: And we have no further questions at this time I will turn the call back to management for any closing remarks.
Speaker Change: Thanks, Regina and thank you everyone for joining our Q1 conference call. We will keep you updated on our progress going forward.
Speaker Change: Ladies and gentlemen that will conclude today's meeting. Thank you all for joining you may now disconnect.
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