Q2 2024 InterRent Real Estate Investment Trust Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the InterRent REIT second quarter 2024 earnings conference call and webcast. At this time, all lines are in listen-only mode.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the InterRent REIT second quarter 2024 earnings conference call and webcast.
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 Wednesday, August 7th, 2024. I would now like to turn the conference over to Renee Wei. Please go ahead.
Speaker Change: At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.
Speaker Change: If at any time during this call you require immediate assistance, please press star zero for the operator.
Speaker Change: This call is being recorded on Wednesday, August 7th, 2024. I would now like to turn the conference over to Renee Wei. Please go ahead.
Renee Wei: Good morning, everyone. Thank you for joining InterRent REIT's Q2 2024 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 and presentations. We're pleased to have Brad Cutsey, President and CEO, Curt Millar, CFO, and Dave Nevins, COO, on the line today
Renee Wei: Good morning, everyone. Thank you for joining InterRent REIT's Q2 2024 earnings call. My name is Renee Wei, Director of Investor Relations and Sustainability. You can find the presentation to accompany today's call on the Investor Relations section of our website under Events and Presentations.
Speaker Change: 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 to questions.
Renee Wei: As usual, the team will present some prepared remarks, and then we'll open it up to questions. Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risk and certainties and assumptions that could cause actual results to differ materially. For more information, please refer to the cautionary statements and forward-looking information in the REITs news release and MD&A dated August 6, 2024.
Speaker Change: Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risk, uncertainties, and assumptions that could cause actual results to differ materially. For more information, please refer to the cautionary statements on the forward-looking information in the REITs news release and MD&A dated August 6, 2024.
Renee Wei: During the call, management will also refer to certain non-IFRS measures. Although the REIT believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures.
Speaker Change: During the call, management will also refer to certain non-IFRS measures.
Speaker Change: Although the REIT believes these measures provide useful supplemental information about the financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures.
Bradley Cutsey: Thanks, Renee, and welcome everyone. We are pleased to build on our momentum and deliver another quarter of strong financial and operating results. Demand for our quality communities remains elevated across our markets, with occupancy rates increasing year-over-year to 96.2% for both staying property and total portfolios, right in InterRent's optimal range of 96 to 97%. Rental rates continue to show strong growth this quarter, with an 8.4% increase for the total portfolio. 6.8% for the same property. We've seen solid performance in both AMR and occupancy across all regions. Dave will provide more detailed regional insights later in the call. Now, over to slide six.
Brad: Brad, over to you.
Brad: Thanks Renee and welcome everyone. We are pleased to build on the momentum and deliver another quarter of strong financial and operating results.
Brad: Demand for our quality communities remain elevated across our markets, with occupancy rates increasing year-over-year to 96.2%, for both staying property and total portfolios, right in InterRent's optimal range of 96-97%.
Brad: Rental rates continue to show strong growth this quarter with an 8.4% increase for the total portfolio and 6.8% for the same property portfolio.
Brad: We're seeing solid performance in both AMR and occupancy across all regions.
Brad: Dave will provide more detailed regional insights later in the call.
Bradley Cutsey: Strong AMR increases and high occupancy rates drove solid top-line growth. However, total portfolio revenue growth for Q2 was 4.8%, which was impacted by dispositions during the quarter. The same property portfolio revenue increased by 7.6% while operating expenses rose by a more moderate 3.3%, leading to a 130 basis point expansion in NOI margin over the same period last year, reaching 67.7%. Same property on the line for QT was $40.6 million, marking an increase of $9.7 million.
Dave: Over to slide 6. Strong AMR increase and high oxy rates drove solid top-line growth. Total portfolio revenue growth for Q2 was 4.8%.
Dave: which was impacted by dispositions during the quarter. For the same property portfolio, revenue increased by 7.6% while operating expenses rose by a more moderate 3.3%.
Dave: leading to 130 basis point expansion and NOI margin over the same period last year, reaching 67.7%. Same property NOI for Q2 was $40.6 million, marking an increase of 9.7%.
Bradley Cutsey: As highlighted on the right hand side of the slide, we achieved outside FFO and AFFO growth, both on a total and per unit basis. Our FFO and Q2 increased by 17.9% to $23.1 million, representing a 17.2% increase to $0.157 on a per-unit basis. We deliver $20.4 million in AFFO, or $0.138 per unit, reflecting an increase of 20.9% and 19% with special. This growth was driven primarily by increased NOI and reduced finance.
Dave: As highlighted on the right hand of the slide, we achieved outside FFO and AFFO growth, both on a total and per unit basis.
Dave: Our FFO and Q2 increased by 17.9% to $23.1 million, representing a 17.2% increase to $0.157 on a per unit basis.
Dave: We deliver $20.4 million in AFFO, or $0.138 per unit, reflecting an increase of 20.9% and 19% respectively.
Dave: This growth was driven primarily by increased NLI and reduced financial costs.
Bradley Cutsey: This impressive growth was partially offset by dispositions having a negative impact of 0.3 cents for the three months ended June 30th. On a 12-month basis, year-to-date dispositions have had an FFO per unit contribution of $0.00357, see slide seven. Our balance sheet is solid and flexible, with sufficient liquidity from disposition proceeds, credit facilities, and unencumbered assets. We are well positioned to advance our capital allocation priorities, including external growth to operate. You will hear more details on that front later in the call. But first, Dave will take us through some of the operations.
Dave: This impressive growth was partially offset by dispositions having a negative impact of $0.03 for the three months ended June 30th.
Dave: On a 12-month basis, year-to-date dispositions have had an FFO per unit contribution of 3.5 cents.
Speaker Change: Over to slide 7.
Speaker Change: We kept our variable rate exposure, including credit facilities, at below 1% as compared to 8.4% at the same period last year.
Speaker Change: With the successful execution of our refinancing strategy, we're now seeing a tailwind with weighted average interest rates decreasing by six basis points year-over-year to 3.37%.
Speaker Change: better than our financing costs.
Speaker Change: Our balance sheet is solid and flexible, with sufficient liquidity from disposition proceeds, credit facilities, and unencumbered assets. We are well positioned to advance our capital allocation priorities, including external growth opportunities.
Speaker Change: You will hear more details on that front later in the call. But first, Dave will take us through some of the operating highlights.
Dave Nevins: Thanks Brad. Slide 9 highlights our ability to consistently achieve additional gains on leases, building on an already strong outgoing rental rate. We executed 640 new leases during Q2, generating an average gain on lease of 16.1%, which translates into an incremental annualized revenue growth of $2 million, or 0.8% annualized Q2 revenue. Turnover rates remain close to last quarter's levels, with trailing 12-month turnover at 24.3%.
Dave: Thanks, Brad. Slide 9 highlights our ability to consistently achieve additional gains on leases.
Dave: building on an already strong, outgoing rental rates. We executed 640 new leases during Q2, generating an average gain on lease of 16.1%, which translates into an incremental annualized revenue growth of $2 million, or 0.8% annualized Q2 revenue.
Dave: Turnover rates remain close to last quarter's levels with trailing 12-month turnover at 24.3%. We've adopted a flexible pricing strategy to maximize both occupancy and revenue as we gear up for the crucial summer leasing season. This puts us in a great position to make positive market adjustments in some of our communities.
Dave Nevins: We've adopted a flexible pricing strategy to maximize both occupancy and revenue as we gear up for the crucial summer leasing season. This puts us in a great position to make positive market adjustments in some of our communities. Rental market conditions remain resilient, and we estimate that the average market rental gap across our portfolio remains just shy of 30%. Occupancy on average market rent growth has been strong across the board.
Dave: Rental market conditions remain resilient and we estimate that the average market rental gap across our portfolio remains just shy of 30%.
Dave Nevins: Total portfolio and same property occupancy rates were at 96.2% in June, showing improvements of 80 basis points and 70 basis points, respectively, compared to the same period last year. Occupancies improved in all regional markets, except the Greater Vancouver Area, where we saw a small 60 basis point increase in vacancy year over year. As we explained on our last call, Vancouver is part of our non-repositioned portfolio where suites may be turning over for the first time and thereby require more time to make the upgrade to help us achieve higher market rental rates.
Dave: Occupancy on average market rent growth has been strong across the board. Total portfolio and same property occupancy rates were at 96.2% in June , showing improvements of 80 basis points and 70 basis points respectively, compared to the same period last year.
Dave: Occupancies improved in all regional markets except the Greater Vancouver Area where we saw a small 60 basis point increase in vacancy year-over-year.
Speaker Change: As we explained on our last call, Vancouver is part of our non-repositioned portfolio where suites may be turning over for the first time and thereby require more time to make the upgrade to help us achieve the higher market rental rates.
Dave Nevins: During the quarter, Montreal continued to perform well, with occupancy improving by 260 basis points from a year ago to reach 97.3%. In the National Capital Region, when accounting for the disposition of our communities in Ottawa and Elmer, Quebec, our same property average market rent growth is 6.4%. Turning to slide 11, our revenue growth continued to outpace our expense growth.
Dave Nevins: Property operating costs, property taxes, and utility costs have all been reduced as a percentage of revenue. Total operating expenses as a percentage of revenue were 32.5%, reflecting a 120 basis point improvement from a year ago. We continue to benefit from lower utility costs this quarter, which totaled $3.7 million, or 6% of revenue. This represents a decrease of $0.2 million, or 60 basis points, as a percentage of revenue. On a per suite basis, utility costs have decreased 2.3% compared to last year to $300 per suite.
Dave Nevins: This was primarily driven by lower natural gas costs with a 10% decrease in usage coupled with a 13% decrease in rate. Electricity and water usage were both in line with the same period from 2023, but average rates were up 7% and 9%, respectively. Moving to CapEx spends, as you can see on the left side of slide 12, over the last three years, we've been spending about $1,000 per suite on maintenance CapEx. We continue to see excellent value creation through a repositioning program.
Dave Nevins: Through cost-effective capital investments, suites in a repositioned portfolio, on average, had a 50 basis point higher occupancy rate in June, along with an 80 basis point higher NOI margins year-to-date when compared to those in a non-repositioned portfolio.
Speaker Change: We continue to see excellent value creation in a repositioning program through cost-effective capital investments.
Curt Millar: With that, Curt, over to you.
Curt Millar: Thanks Dave. From our discussions with our internal acquisition team and external appraisers, and taking into consideration the somewhat limited recent transactions, we have decided to adjust our cap rates in several of our regional markets. Slide 14 illustrates the quarterly-over-quarter change in cap rates in our GTHA, NCR, and Montreal markets. The net result is an overall increase of 8 basis points, bringing our Q2 Portfolio Cap Rate to 4.25%. The strong operational performance in the quarter was mitigated by the increase in cap rates, which resulted in a fair value loss of $34.6 million. Had the cap rates remained unchanged, we would have seen a fair value gain of $36.5 million.
Curt Millar: We are keeping a close eye on market conditions as transaction activity appears to be picking up. The successful execution of our refinancing strategy puts us in a unique position in our industry to benefit from a lower weighted average interest rate, with expiring rates for the ranger of 2024 being a tailwind. With our current credit facilities undrawn, the liquidity from our dispositions, and our unencumbered assets, we are well positioned to capitalize on growth initiatives both within and outside the organization.
Speaker Change: With our current credit facilities undrawn, the liquidity from our dispositions, and our unencumbered assets, we are well positioned to capitalize on growth initiatives both within and outside the organization.
Curt Millar: Our debt-to-gross book value currently sits at a comfortable level of 37.8%, and as previously mentioned, we are open to moving it up to the low 40s for the right opportunities. We have a proven track record of value creation on acquisitions, and we believe we would be able to organically bring it back below 40% over time. Moving to slide 17.
Speaker Change: Our debt-to-gross book value currently sits at a comfortable level of 37.8%, and as previously mentioned, we are open to moving it up to the low 40s for the right opportunities.
Speaker Change: We have a proven track record of value creation on acquisitions, and we believe we would be able to organically bring it back below the 40% over time.
Curt Millar: We continue to look at sustainability as an important catalyst for value creation and long-term success. Our 2023 Sustainability Report was published in June, and we invite you all to explore it on our Sustainability website. Some of the highlights from the report include investing $3.7 million in energy efficiency initiatives, such as high-efficiency boilers, LED lights, and building automation systems. These investments have helped us cut total Scope 1 and Scope 2 greenhouse gas emissions by 5.6% in 2023, bringing us closer to meeting our sustainability goals while also lowering utility costs.
Speaker Change: We continue to look at sustainability as an important catalyst for value creation and long-term success.
Speaker Change: Our 2023 Sustainability Report was published in June , and we invite you all to explore it on our sustainability website. Some of the highlights from the report include investing $3.7 million in energy efficiency initiatives such as high-efficiency boilers, LED lights, and building automation systems.
Speaker Change: These investments have helped us cut total Scope 1 and Scope 2 greenhouse gas emissions by 5.6% in 2023, bringing us closer to meeting our sustainability goals while also lowering utility costs.
Curt Millar: Additionally, we have achieved a significant increase in building certifications across our portfolio and strengthened our governance by establishing a sustainability committee at the board level. These are just a few highlights of our accomplishments in 2023. So far this year, we have kept up the momentum by continuing to test different GHG reduction initiatives and advancing our building certification program. I want to thank our entire team for their dedication and hard work as we continue to push forward with our sustainability efforts. And with that, I'd like to hand things back over to Brad to walk through our capital allocation. Thanks, Curt.
Speaker Change: Additionally, we have achieved a significant increase in building certifications across our portfolio and strengthened our governance by establishing a sustainability committee at the board level.
Speaker Change: These are just a few highlights of our accomplishments in 2023.
Speaker Change: And with that, I'd like to hand things back over to Brad to walk through our capital allocation.
Bradley Cutsey: Thanks Curt. As you can see on slide 19, our capital recycling program was very active in Q2. Last quarter, we told you about the disposition of a non-corporate community located in Alamir, Quebec. That transaction has been successfully closed for a sale price of $92 million. Additionally, we sold one community with 27 suites in Ottawa for $5.5 million, or $204,000 a door, also above its IFRS value. The net proceeds from these dispositions were partially used to buy back Unis under our NCIB program. After the quarter, we purchased 405,300 units for $5,000,000, or for an average price of $12.33 per unit. All units were purchased for cancellation.
Brad: Last quarter we told you about the disposition of a non-corporate community located in Alamir, Quebec.
Brad: That transaction has been successfully closed for a sale price of $92 million.
Speaker Change: Additionally, we sold one community with 27 suites in Ottawa for $5.5 million, or $204,000 a door, also above its IFRS value. The net proceeds from these dispositions were partially used to buy back Eunice under our NCIB program.
Speaker Change: After the quarter, we purchased 405,300 units for $5 million, or for an average price of $12.33 per unit. All units were purchased for cancellation.
Bradley Cutsey: We continue to carefully assess attractive external opportunities in organic growth post-fat. Meanwhile, liquidity from the remaining proceeds contributed to an increase in interest income of $300,000 near the latter part of the quarter. As Curt explained earlier, we're fortunate to be in a strong financial position that allows us to seize opportunities that can make a big difference in the scale of our portfolio and launch our next phase. We are progressing well on our second office-to-residential conversion project in Ottawa at 360 Laurier.
Speaker Change: We continue to carefully assess attractive external opportunities in organic growth prospects. Meanwhile, liquidity from the remaining proceeds have contributed to an increase in interest income of $300,000 near the later part of the quarter.
Bradley Cutsey: We received full site plan approval in April, and a building permit was issued in July. Full interior demolition is 90% complete, and we are moving into the early stages of construction as we speak. At a Richmond Churchill development in Ottawa, demolition has started as of July and is anticipated to be completed in September.
Bradley Cutsey: We continue to explore various types of heating and cooling technologies that not only position us to qualify for potential government incentives and attractive financing opportunities but also allow us to minimize long-term operating costs and reduce greenhouse gas emissions. In conclusion, we've had a strong quarter and once again extended our track record of excellent NOI and FFO growth, thanks to the strength of our operating platform and the efforts of our team members in the community.
Speaker Change: We continue to explore various types of heating and cooling technologies that not only position us to qualify for potential government incentives and attractive financing opportunities, but allow us to minimize long-term operating costs and reduce greenhouse gas emissions.
Bradley Cutsey: We are encouraged to see strong market fundamentals heading into the busy summer leasing season in Q3 and continue to believe the current demand, supply, and balance rule will remain well into the foreseeable future. Our effective dispositional program has further fortified their financial flexibility and boosted their liquidity. This has not only enabled us to buy back units but also positioned us well to capitalize on opportunities that will drive long-term growth. We will continue to use joint venture partners to pursue external growth opportunities.
Speaker Change: We are encouraged to see strong market fundamentals heading into the busy summer leasing season in Q3 and continue to believe the current demand, supply, and balance rule remain well into the foreseeable future.
Speaker Change: This not only enables us to buy back units, but also positions us well to capitalize on opportunities that will drive long-term growth.
Bradley Cutsey: Today we have taken an ownership interest of anywhere between a minimum of 10% and 50% in these partnerships, allowing us to scale our operations by generating fees to reinvest and by stretching our available capital to participate in a greater number of growth initiatives. I want to thank our team for the continued dedication which has brought us to this position. We're excited about the opportunities to come. With that, let's open it up for Q&A.
Speaker Change: We will continue to use joint venture partners to pursue external growth opportunities. Today we have taken an ownership
Speaker Change: With that, let's open it up for Q&A.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift the handset before pressing any keys.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: If you are using a speakerphone, please make sure to lift the handset before pressing any keys.
Operator: Your first question comes from the line of Kyle Stanley from Desjardins. Please, please go ahead. Thanks.
Speaker Change: Your first question comes from the line of Kyle Stanley from Desjardins. Please go ahead.
Dave Nevins: Good morning. Could you just elaborate a little bit on the flexible leasing strategy you discussed in your prepared remarks? I think this is maybe the first time I've heard this reference, so just curious about maybe what that entails.
Kyle Stanley: Good morning. Could you just elaborate a little bit on the flexible leasing strategy you discussed in your prepared remarks? I think maybe the first time I've heard this reference, so just curious on maybe what that entails.
Dave Nevins: Well, obviously, I think it's just for us to be able to look at what's going on in the different nodes all over, just making sure that we're being dynamic with our pricing and that we're staying on top of, you know, where we can go with our lifts on turn in each of the different regions.
Speaker Change: Well you know obviously I think it's just to for us to be able to look at what's going on in the different nodes all over just making sure that we're being dynamic with their pricing and that we're staying on top of you know
Hanson: Hanson, or we can go with our lists on TURN in each of the different regions.
Bradley Cutsey: Okay, that makes sense. I guess on that note, you know, historically, it does seem like occupancy tends to gain on a sequential basis in the third quarter. So how are you thinking about that for this year, especially, I guess, in the context of, you know, the foreign student visa cap and that coming into effect later this year or already in effect this year, but really impacting the portfolio in Q3. Just curious about your thoughts there.
Hanson: Okay.
Speaker Change: That makes sense, I guess.
Speaker Change: On that note...
Bradley Cutsey: I think we're feeling good about it. All indications are showing that it's going to be a typical year like all others, so everything seems to be shaping up in all regions similar to other Q3s in previous years.
Speaker Change: I think we're feeling good about it. All indications are showing that it's going to be a typical year like all others, so everything seems to be shaping up in all regions similar to other Q3s in previous years.
Bradley Cutsey: Kyle, it's early, it's Brad here, it's early days, right? August is an important month when you talk with those foreign students, especially in Montreal, but we haven't seen any indication to say it won't be similar to previous years.
Brad: Kyle, it's early, it's Brad here, it's early days, right, August is all important month when you talk with those foreign students, especially in Montreal, but we haven't seen any indication.
Kyle Stanley: to say it won't be similar to previous years.
Dave Nevins: Okay, fair enough. Just looking at your turnover spread this quarter at 16%, obviously a little bit lower than last quarter. Just wondering, you know, what the driver there might be? Is it that maybe you're seeing more units that have recently turned kind of coming back and that got the leases a bit smaller? I'm just curious about thoughts and you know, how you expect that to maybe trend as we go forward.
Kyle Stanley: Okay, fair enough.
Kyle Stanley: just...
Speaker Change: Looking at your turnover spread this quarter at 16%, obviously a little bit lower from last quarter. Just wondering, you know, what the driver there might be? Is it that maybe you're seeing more units that have recently turned kind of coming back and that gained a lease a bit smaller? I'm just curious on thoughts and, you know, how you expect that to maybe trend as we go forward.
Dave Nevins: I think, you know, I think you hit it there. It's driven mainly by areas like Ottawa and Montreal, where we have higher turnover. So, you know, and the turnover is higher because most of these buildings are closer to post-secondary institutions. And, you know, definitely, this has given us market-type lifts because they are turning over more often. But if you looked at... if you took out maybe some of our newer constructed buildings... Dave Nevins, Curt Millar, Dave Nevins, Frederic Blondeau, Kyle Stanley, Renee Wei, InterRent Real Estate Investment Trust.
Speaker Change: I think, you know, I think you hit it there. It's driven mainly by areas like Ottawa, Montreal, where we have higher turnover. So, you know, and the turnover is higher because most of these buildings are closer to post-secondary institutions.
Speaker Change: And, you know, definitely this has given us market-type lifts because they are turning over more often. But if you looked at – if you took out some of – maybe some of our newer constructed
Speaker Change: communities like say, Brassard or 236 Richmond, it gets us, you know, the 17.5% on our lifts this quarter. So yeah, I think it definitely, the more lifts in Ottawa and Montreal bring the overall average down just because of the nature of those communities.
Dave Nevins: And for whatever reason, we saw a little more turn in Ottawa than we have typically seen in the past. And Ottawa, as you all know, is our most stabilized portfolio. So we have a higher percentage of returnees within that Ottawa portfolio closest to market.
Dave Nevins: Okay, okay, that's a good color. I will turn it back. Thanks, guys.
Speaker Change: Okay, okay, that's good color. I will turn it back. Thanks guys.
Speaker Change: Your next question comes from the line of Brad Sturges from Raymond James. Please go ahead.
Bradley Cutsey: Hey, good morning. Just to follow on your question on the indicators heading into the August leasing season, I guess you talked about Montreal as it relates to the student demand that you're expecting. Has there been any indications of change for student demand within Ottawa as well, or is that kind of trending similar to historical patterns of the last few years?
Brad Sturges: Hey, good morning. Just to follow on your question on the indicators heading into the August leasing season, I guess you talked about Montreal as it relates to the student demand that you're expecting.
Speaker Change: Has there been any indications of change for the student demand within Ottawa as well, or is that kind of trending similar to historical?
Dave Nevins: Yeah, I'd say it's definitely, it's trending normal, looking at the areas that we're close to, either, you know, Algonquin or the University of Ottawa. Pretty much, it's right on pace with the last, you know, last year for sure and, you know, pre-pandemic years also. I don't know why.
Speaker Change: patterns in the last few years.
Speaker Change: Looking at, you know, the areas that we're close to either, you know, Algonquin or University of Ottawa. You know, pretty much it's right on pace with the last, you know, last year for sure. And, you know, pre-pandemic years also. I don't know why it's like this to you there, Brad, but Ottawa's...
Dave Nevins: I don't know why it's like this either, Brad, but Ottawa tends to have the students tend to come a tad sooner. I wouldn't say it's a lot earlier, but they do tend to see more leasing activity a little sooner in Ottawa for whatever reason. Montreal seems to be a very Landon market in August and then search for your partner. We have leasing activity right through September in Montreal, typically, whereas in Ottawa, you're typically trying to know where you stand.
Brad: tends to, students tend to come a tad sooner. I wouldn't say it's a lot earlier, but they do tend to see more leasing activity a little sooner in Ottawa, for whatever reason. Montreal seems to be a very much.
Landon: land in August and then search for your apartment.
Bradley Cutsey: Okay, that makes sense, but it sounds like you're pretty confident in the Montreal market that the demand for the buildings, particularly around the goal, is still quite strong.
Brad: Okay, that makes sense, but it sounds like you're pretty confident in the Montreal market that the demand for the buildings, particularly around the goal, are still quite strong.
Bradley Cutsey: Well, I think you've seen where our occupancy level sits today. We're in good shape in Montreal. Like I said, guys, we're only, what, seven days into August, right?
Bradley Cutsey: So, yeah, I mean, we've seen a nice pick-up of activity in the communities in which we are closely located to communities that typically have health care or students. So there's no reason for us not to believe that activity will continue. We won't really know till the last, like we've got three weeks left to go. And like I said, sometimes the leasing goes into September, but so far, we're seeing activities similar to normalize type from the student market.
Speaker Change: closely located to communities that typically house our students so there's no reason for us not to believe that activity will continue but
Speaker Change: We won't really know until the last, like we've got three weeks left to go and like I said, sometimes the leasing goes into September , but so far we're seeing
Speaker Change: See normalized type activities from the student market.
Curt Millar: Just, I guess, switching gears on the... Curt, you had some commentary around, obviously you made some cap rate changes, but you also highlighted that you're starting to see some acquisition or transaction activity starting to come back. Just wanted to get a sense of what you're seeing from your perspective, and is there increasing opportunity to maybe deploy capital through a JV strategy, or how do you see the transaction market as it sits today?
Speaker Change: Just, I guess, switching gears on the...
Speaker Change: Curt, you had some commentary around, obviously you made some cap rate changes, but you also highlighted that you're starting to see some acquisition or transaction activity starting to come back. Just wanted to get a sense of what you're seeing from your perspective, and is there...
Speaker Change: increasing opportunity to maybe to deploy capital through a JV strategy or how do you see the transaction market as it sits today?
Curt Millar: I think, and Brad or Asai can jump in if they feel I'm going down a wrong path here on this, but we've seen products coming to market a little bit. We've seen a little more activity, but not a lot of deals have closed yet. And appraisers tend to be backwards looking. They want to see what's happened retroactively in the last six months. So they're still being a little bit cautious in regards to adjustments and tweaking things too early. We look at multiple things. We look at, is the market heating up a little bit? What deals are getting done?
Speaker Change: I think, and Brad or Asad can hop in if they feel I'm going down the wrong path here on this, but we've seen products coming to market a little bit, we've seen a little more activity, but not a lot of deals have closed yet.
Speaker Change: And appraisers tend to be backwards looking. They want to see what's happened, you know, retroactively in the last six months.
Speaker Change: So, you know, they're still being a little bit cautious in regards to adjustments and tweaking things too early.
Speaker Change: We look at multiple things. We look at, is the market heating up a little bit? What deals are getting done at?
Curt Millar: We look at our own portfolio. So as we get things through our repositioning program, and we have less stuff in repositioning now, as we get through that program, your cap rates adjust a little bit because you're starting to achieve some of that market rent. So we'll tweak a little bit based on that. And in areas where we've done really, really well, and our NOI per door leads to a high value per door, we monitor that against market transactions to make sure it's not getting out of whack.
Speaker Change: We look at our own portfolio. So as we get things through our repositioning program, and we have less stuff in repositioning now, as we get through that program, your cap rates adjust a little bit because you're starting to achieve some of that market rent. So we'll tweak a little bit based on that.
Speaker Change: And in areas where we've done really, really well and our NOI per door leads to a high value per door, we monitor that against market transactions to make sure it's not getting out of whack. Even if your cap rate is well within market, buyers still have a sense of a price per door thought concept.
Curt Millar: Even if your cap rate is well within the market, buyers still have a sense of a price per door thinking concept. And if you start getting outside the market, then you start adjusting your cap rate to sort of bring it back in line. So we kind of look at all these factors.
Speaker Change: And if you start getting outside the market, then you start adjusting your cap rate to sort of bring it back in line. So we kind of look at all these factors. I think there'll be more transactions in Q3 and Q4 to give appraisers a lot more sort of firm ground to stand on to suggest changes.
Curt Millar: I think there'll be more transactions in Q3 and Q4 to give appraisers a lot more sort of firm ground to stand on to suggest changes. Could we see more adjustments in the next two quarters? I think we could, but I don't know for sure, because on the flip side of that, we've seen interest rates come in pretty strong. You're now doing, you know, five-year, you can get it from 350 to 360.
Speaker Change: Could we see more adjustments in the next two quarters? I think we could, but I don't know for sure because on the flip side of that, we've seen interest rates come in pretty strong. You're now doing, you know, five-year, you can get it $350,000 to $360,000.
Curt Millar: You can do 10-year for sub-4, well sub-4 right now, so if that keeps happening, could the levels stay where they are today? I think so. There's a lot of moving pieces still, and I think we're just trying to be conscious of staying within the market on our portfolio and not getting out of whack. Yeah, like Lorna Hill and I would add in, there's been a lot of volatility in the equity and the fixed income markets. And given the direct property, the nature of the direct property market,
Speaker Change: You can do 10-year for sub-4, well sub-4 right now.
Speaker Change: If that keeps happening, could the levels stay where they are today? I think so. There's a lot of moving pieces still, and I think we're just trying to be conscious of staying within the market on our portfolio and not getting out of whack.
Curt Millar: Yeah, like Lord and Hilda, I would add, is that there's been a lot of volatility in the equity and the fixed income markets. And given the direct property, the nature of the direct property market, the illiquidity of that type of an asset, volatility in the capital markets doesn't work well for an active transaction market in the private market. So, you really do need to see things stabilize out before you really will start to see people willing to transact.
Speaker Change: Yeah, like, more than what I would add is...
Lornington: There's been a lot of volatility in the equity and the fixed income market and given the direct property, the nature of the direct property market, the illiquidity of that type of an asset,
Speaker Change: Volatility in the capital markets doesn't avoid wealth for
Speaker Change: We're an active transaction market in the private market.
Speaker Change: So you really do need to see things stabilize out.
Speaker Change: where you really will start to see people willing to transact.
Curt Millar: So, from what we've seen, and I'm looking over at Saad, I'll give Saad a chance to give his view, but from what we're seeing, there still remains a little bit of a gap, at least with institutions, maybe not as much with the private buyer, but with institutions, there still remains a little bit of a gap between vendor expectations and where people are willing to purchase. I think some of that just comes down to the volatility that they're seeing in the capital markets.
Speaker Change: So, from what we've seen, and I'm looking over at Sairam, give us that chance to...
Speaker Change: But from what we're seeing is there still remains a little bit of a, at least with institutions, maybe not as much with the private buyer, but
Speaker Change: With the institutions, there still remains a little bit of a gap between vendor expectations and where people are willing to purchase. And I think some of that just comes down to the volatility that they're seeing in the capital markets. But to Curt's point, I agree with Curt. I do think...
Curt Millar: But to Curt's point, I agree with Curt. I do think... The recent two cuts, at least here in Canada and, and the conversations around what the Fed might and likely do, I think, bodes well for the overall transaction market. I don't know if that's what you want to add. See you next time.
Speaker Change: The recent two cuts at least here in Canada and
Speaker Change: And the conversations around what the Fed might and likely do, I think, bodes well for the overall transaction market. I don't know if that's what you want to add.
Speaker Change: See you next time.
Curt: Yeah, I would say the stability and bond yields at these levels should potentially spur activity down the road. The bid-ask spread still persists.
Speaker Change: But we could see that narrowing with a stability in the 10-year. The deal flow is there and there's opportunities for everyone to look at. It's just a question of meeting of the minds between the buyer and the seller and arriving on pricing.
Curt Millar: Okay, that's quite helpful. I'll turn it back. Thanks a lot. The next question comes from the line of Mark Rothschild from Canaccord.
Speaker Change: Okay, that's quite helpful. I'll turn it back to the clockers.
Operator: The next question comes from the line of Mark Rothschild from Canaccord. Please go ahead. Thanks, and good morning, guys.
Speaker Change: Next question comes from the line of Mark Rothschild from Canaccord. Please go ahead.
Operator: Please go ahead. Thanks, and good morning, guys. Morning, Mark. Hey, so
Speaker Change: Thanks, and good morning, guys. Good morning, Mark.
Mark Rothschild: Hey, so we've seen some, obviously, substantial rent growth over the years. Can you just talk a little bit more about maybe the most recent trends you're seeing, if you're seeing some moderation in rent growth? And then maybe from what your perspective is with experience on...
Speaker Change: If immigration slows, do you think that there still is going to be more demand to just keep driving rents higher or are we maybe at a place where it needs to moderate over the next year or two?
Bradley Cutsey: Yeah, it's a good question, Mark, and I think there's been a lot of literature and different reports. According to maybe the second derivative of that rent growth, the pace of rent growth is starting to moderate at maybe a peak a couple of quarters ago. I think it is important to keep in mind that household formation still outstrips new supply being delivered by a wide margin, suggesting that we'll continue to see market pressure on market rents, although it might not be at the double-digit clip that we've been accustomed to over the last, call it, eight quarters. So I would agree that the second derivative is starting to moderate.
Speaker Change: Yeah, it's a good question, Mark, and I think there's been a lot of literature and different reports.
Speaker Change: According to maybe the second derivative of that rent growth, the pace of rent growth is starting to moderate and maybe impede.
Speaker Change: a couple of quarters ago. I think it is important to keep
Speaker Change: in mind that household formation still outstrips
Speaker Change: New supply being delivered by a wide margin, suggesting that we'll continue to see pressure on market rents. It might not be at the double-digit cliff that we've been accustomed to over the last, call it, eight quarters.
Speaker Change: So, I would agree that the second derivative is starting to moderate. I feel quite confident and comfortable that market rates will continue to extend.
Speaker Change: See, at best, inflation, like the minimal inflation, I do think...
Speaker Change: Going back into more of a range of 5% to 7% is quite realistic and reasonable. And you kind of do see it when you're looking at the leads and whatnot.
Speaker Change: These are down to the industry class of board, and I think that's really just a function of...
Speaker Change: affordability. There's not as many people looking for an apartment to rent that are currently renting because unless they
Bradley Cutsey: I feel quite confident and comfortable that market rates will continue to establish that are currently renting because unless they have to move, they're likely not going to move given where rents have gone. Now the good news in that is, for us, of those 640 leases that we've signed, we've actually seen the affordability of rental income ratio actually go up. It's improved by a couple of hundred basis points to the low 30%. So for us, it's good news.
Speaker Change: Afternoon.
Speaker Change: They're likely not going to move, given where rents have gone. Now, the good news in that is, for us, of those 640 leases that we've signed, we're back to seeing our affordability and rental income ratio actually improve.
Speaker Change: It's improved by a couple of hundred basis points to the low 30%. So, for us, it's good news. Our ops team has been working hard and our credit underwriting has been working hard to make sure that we're putting the right residents in their portfolio.
Bradley Cutsey: Our office team has been working hard, and our credit underwriting team has been working hard to make sure that we're putting the right residents in their portfolio. So we still feel quite comfortable with the mark-to-market at 30%. We've seen leases being rented at the market, so we feel comfortable. So it's really just for us. And as you know, we're willing to accept vacancies specifically in a low turnover area and wait for somebody to hit that market rent, meaning we will carry more vacancies than maybe some other owners would in anticipation of waiting for the right residents to come in, especially in a low turnover area. As you know, in higher turnover areas where we think we can get back up the street faster, we will accept or have a higher opportunity. I hope that answers your question, Mark.
Speaker Change: So, we still feel quite comfortable in the mark-to-market, it is at 30%, we've seen leases being rented at market, so we feel comfortable, so it's really just for us, and as you know, we're willing to accept fake seats.
Speaker Change: specifically in a low turnover area and wait for somebody to hit that market rent meaning we will carry
Speaker Change: More in Vegas City than maybe some of other owners would, in anticipation of waiting for the right lenders to come in, especially in a low turnover area. As you know, in higher turnover areas, where we think we can get back at the suite faster, we'll...
Speaker Change: accept or have a higher opposite level.
Speaker Change: I hope that answers your question, Mark.
Mark Rothschild: Yeah, that's helpful. Thanks. I'll turn it back. Thanks so much.
Operator: Your next question comes from the line of Jonathan Kelcher from TD Cowen. Please go ahead.
Speaker Change: Your next question comes from the line of Jonathan Kelcher from TD Cowen. Please go ahead.
Bradley Cutsey: Thanks, good morning. Hey Brad. Just, I guess first on the external opportunities that you're talking about, how much acquisition firepower would you comfortably have on your balance sheet right now?
Jonathan Kelcher: Thanks. Good morning. Hey, Brad. Just, I guess, first on the external opportunities that you're talking about, how much acquisition firepower would you comfortably have on your balance sheet right now?
Bradley Cutsey: Yeah, I think for the right acquisition opportunities, Jonathan, I think for the right acquisition opportunities, general opportunities, I think we'd be willing to bring our debt to value ratio up into the low 40s with the goal of, through value creation and natural attrition, bringing it back to the low 40. So, with that in mind, we have, call it roughly around $360 million of acquisition capacity. And I think we will prefer to continue to do joint ventures to stretch that out even further, which will allow us to kind of scale the operation and allow us to enhance overall returns by generating extra fees.
Bradley Cutsey: Yeah.
Brad: Yeah, I think for the right, and we've said this in the past, Jonathan, I think for the right acquisition opportunities, general opportunities, I think we'd be willing...
Brad: to bring our debt-to-global-value ratio up into the low 40s with the goal of...
Brad: through value creation and natural attrition, bring it back to the low 40s.
Brad: So, with that in mind, we have, call it roughly around $360 million of acquisition capacity, and I think we will prefer to continue to do joint ventures.
Brad: to stretch that out even further, which will allow us to kind of scale the operation and allow us to enhance overall returns by generating extra fees.
Bradley Cutsey: And it'll allow us to replenish our non-reposition bucket, which we all know too is another growth driver for our organic side for the future. So we're pretty optimistic looking over the next 18 months. We still do have a disposition program that we mentioned on our last call. So we've through our first target, and we're kind of in the second phase of that disposition program, and we think we can generate a further $50 million in that proceeds, which will go into these external developments and things like the 360 office conversion that we're currently working on right now in Ottawa.
Brad: And it will allow us to replenish our non-repollution bucket, which we all know, too, is another growth driver for our organic side.
Brad: For the future, so we're pretty optimistic looking over the next 18 months. We still do have a disposition program that we mentioned on our last call, but we're through our first target.
Brad: And we're kind of in the second phase of that disposition program, and we think we can generate a further $50 million in net proceeds, which we'll recycle into these external developments, and things like the 360 office conversion that we're currently working on right now in Ottawa.
Bradley Cutsey: Okay. I guess I'll do a couple follow-ups there.
Speaker Change: Okay, that's helpful. I guess a couple follow-ups there. Do you think you're more of a net buyer or seller over the back half of this year?
Bradley Cutsey: Do you think you're more of a net buyer or seller over the back half of this year? We're more of a net buyer. Okay, and are you looking at any new markets?
Speaker Change: We're more of a net buyer.
Speaker Change: Okay, and are you looking at any new markets?
Bradley Cutsey: Not at this time, Jonathan. I think we'd like to see our cost of capital continue to come in before we would enter a new market. That said, there is one and maybe two markets that we are currently not in that we have kept an eye on over the years, and we will continue to stay educated on them. But we just feel there are enough opportunities in our core markets today, and given the limited amount of capital, while I believe $360,000, with the right to inventory, still affords us the ability to do a lot over the next, call it, 12 to 24 months. I don't think we would want to enter a new market until we saw a significant improvement in our cost cap. Okay, fair enough.
Speaker Change: Not at this time, Jonathan. I think we'd like to see our cost of capital continue to come in before we would enter into a new market.
Bradley Cutsey: Okay, fair enough. I'll turn it back. Thanks.
Speaker Change: That said, there is one and maybe two markets that
Speaker Change: We are currently not in, but we have kept an eye on over the years and we will continue to stay educated on it.
Speaker Change: But we just feel there's enough opportunities in our core markets today, and given the limited amount of capital, while I believe 360 with the right to inventory still affords us the ability to do a lot over the next, call it, 12 to 24 months.
Speaker Change: I don't think we would want to enter a new market until we saw a significant improvement in our cost of capital.
Speaker Change: Okay, fair enough. I'll turn it back. Thanks.
Operator: Your next question comes from the line of Matt Kornack from National Bank Financial. Please go ahead.
Speaker Change: Your next question comes from the line of Matt Kornack from National Bank Financial. Please go ahead.
Bradley Cutsey: Hey guys, just a quick follow-up on that thought process around capital deployment. Would you look to joint venture any of your existing portfolio in order to fund some of your acquisition activity, or would it only be new activity?
Bradley Cutsey: So, no, we would. We would love to monetize, uh, search parts of our portfolio with the right partner if we felt that to use it as a source of funding for the right external non-repossession opportunity, absolutely.
Speaker Change: Search a part of our portfolio with the right partner if we felt that to use it as a source of funding for the right external non-repossession opportunity. Absolutely.
Bradley Cutsey: And then if I look at margins, I mean, it still sounds like if market rent growth is going to be 5% to 7%, you're kind of achieving in and around that number on AMR growth, so your market to market will be sustained. But can you give us a sense of what expense growth seems to have... at www.interrentrealestate.com. Pretty substantial earnings growth going forward.
Matt Kornack: And then, if I look at margins, I mean, it still sounds like if market rent growth is going to be 5% to 7%, you're kind of achieving in and around that number on AMR growth, so your market to market will be sustained, but can you give us a sense, expense growth seems to have...
Bradley Cutsey: Yeah, I'll start with the first, and I'll pass it over to Curt. But I do feel on the expense side, and we've been out there saying this now, probably for four quarters, that we always thought 2024, even in 2022, 2023, 2024, that we would start to see our expense side start to ease at least from the wage pressure. That's a big line item, and we are seeing that ease. And we've been making a lot of investments in our platform for efficiencies from an operating side.
Speaker Change: Pretty substantial earnings growth going forward.
Speaker Change: start to see
Speaker Change: Our expense side start to ease at least from the rate pressure. That's a big line item and we are seeing that easing and we're making a lot of
Speaker Change: investments in our platform.
Speaker Change: for efficiencies from an operating side.
Bradley Cutsey: So I do think, Matt, three to four percent expense growth going forward is very sustainable, and under that scenario, it should generate some margin expansion. I'm getting a little bit of feedback here. Are you getting feedback?
Matt Kornack: So, I do think, Matt, 3-4% expense growth going forward is a very sustainable, and under that scenario, it should generate some margin expansion. I'm getting a little bit of feedback here, are you getting feedback?
Bradley Cutsey: You sound okay to me, and maybe at my end, I'll mute.
Matt Kornack: You sound okay to me. It may be my end though. I'll mute.
Curt Millar: And then just on the mortgage, what would you say, Curt? Yeah, I think like...
Curt Millar: If you look at the rest of the 2024 stuff, there's definitely a bit of a tailwind still, with 5.04% on the expiring mortgages for 2024. 2025 at $3.26 is not too far off of where the market's been heading as of late. So a lot of our 2025 mortgages are sort of more towards the back half of the year. I'm hoping we can sort of get those done pretty much flat or very close to it.
Matt Kornack: And then just on the mortgages, over to you, Curt. Yeah, I think if you look at the rest of the 2024 stuff, there's definitely a bit of a tailwind still, with 5.04% on the expiring mortgages for 2024.
Speaker Change: 2025 at 326 is not too far off of where the market's been heading as of late, so a lot of our 2025 mortgages are sort of more towards the back half than the front half of the year.
Speaker Change: hoping we can sort of get those done pretty much flat or very close to it so under that scenario you definitely don't see what we saw you know last year the year before where a lot of the great work the office team was doing was getting chewed up by extra financing costs and
Curt Millar: So under that scenario, you definitely don't see what we saw last year and the year before, where a lot of the great work the operations team was doing was getting chewed up by extra financing costs, with our variable rate debt now below 1%, with no plans to sort of bring it back up. I think we'll stay in a good position with the mortgage ladder and financing costs. Now, with some of these mortgages coming at us late this year and next year, depending on how we decide to do the refinancing, you may see some one-time costs hit if there are deferred financing write-offs, if you renew certificates, and stuff.
Speaker Change: Now, with some of these mortgages coming at us late this year, next year, depending on how we decide to do the refinancing, you may see some one-time costs hit if there's deferred financing write-offs, if you renew certificates and stuff.
Curt Millar: But that's not really affecting your cash flow and your overall mortgage rate. So there could be some one-time hits here and there just related to the write-off of deferred financing fees. And we'll try to make sure we communicate that to you guys in advance of quarters where that might hit so you can see it well.
Speaker Change: But that's not really affecting your cash flow and your overall mortgage rate. So there could be some one-time hits here and there just related to write-off of deferred financing fees. And we'll try to make sure we communicate that to you guys in advance of quarters where that might hit so you can see it well.
Curt Millar: Okay, now that would be helpful. And then, I guess, as you look to duration on debt, you mentioned there's a bit of daylight between the five-year rate and the 10 year rate at this point. Would you be inclined to go shorter duration or a blend of five and 10, or maybe 10, just because you want to lock in?
Speaker Change: Okay, now that would be helpful. And then, I guess, as you look to duration on debt...
Speaker Change: You mentioned there's a bit of daylight between the 5-year rate and the 10-year rate at this point. Would you be inclined to go shorter duration or a blend of 5 and 10, or maybe 10 just because you want to lock in the certainty?
Curt Millar: Yeah, I think for us right now, we're looking at our overall mortgage ladder and still trying to make sure we have a really well-balanced ladder. We've been working on that for the last year and a half or so. So, the 2024 stuff is probably looking at, you know, 5-year, and that 2029 pocket for us has some room in 2030 and 2031. So, kind of like to work the 5 to 7-year money right now and fill that out and have a really well-balanced mortgage ladder. And then as rates continue to come in, we'll continue to evaluate them, probably pushing stuff into 10 also. I don't see us going really anything shorter than five at this point. It makes sense.
Operator: Makes sense. Thanks, guys.
Speaker Change: So, the 2024 stuff is probably looking at, you know, five years, that 2029 pocket for us has some room, and 2030 and 2031, so.
Speaker Change: Kind of like to work the five to seven year money right now and fill that out and have a really well-balanced mortgage ladder. And then as rates continue to come in, we'll continue to evaluate it.
Speaker Change: and probably pushing stuff into 10 also. I don't see us going really anything shorter than five at this point.
Operator: Your next question comes from the line of Jimmy Shan from RBC Capital Markets. Please go ahead.
Curt Millar: Good morning. Just a quick follow-up on the CMHC debt. So, at 3.5 to 3.6, 50 to 60 basis points is the spread. I guess that's come in. I was a little surprised to hear how spreads are so tight today.
Speaker Change: Good morning. So just a quick follow-up on the CMHC debt. So at 3.5 to 3.6, 50 to 60 basis points is the spread. I guess that's come in. I'm a little surprised to hear how spreads are so tight today.
Curt Millar: Yeah, we're looking, and again, there could be used to be big volatility, right? We've got quotes on mortgages as of yesterday and early this morning, in that range.
Curt Millar: Could it be up 10 basis points tomorrow? Yeah, we've seen a lot of volatility, but it's been pretty consistent below four for the last little while. On the 10-year and sort of below 385 on the five-year, and it'll just depend on how the markets move, but it's definitely removed the micro day-to-day jumps you're seeing. The macro sort of trend line has been down, and it looks like that'll come back. Okay, thanks.
Speaker Change: Could it be up 10 basis points tomorrow? Yeah, we've seen a lot of volatility.
Speaker Change: But it's been pretty consistent below four for the last little while.
Speaker Change: on the 10-year and sort of 3, you know, below 385 on the 5-year.
Speaker Change: and it'll just depend on how the markets move, but it's definitely remove the micro day-to-day jumps you're seeing, the macro sort of trend line has been down and looks like that'll continue.
Operator: Okay, thanks. And then the question is on the CapEx spend, you know, for the first half of the year, it's still pretty materially lower than a year ago. And I think you guys talked about that last quarter. How do we think about the CapEx spend overall, or for the balance of the year?
Speaker Change: Okay, thanks. And then the other question is on the CapEx spend, you know, for the first half of the year, it's still pretty materially lower than a year ago. And I think you guys talked about that last quarter.
Dave Nevins: Yeah, I mean, some of it's a function of.., the where where you're seeing some of the turn right and and what kind of lifts you can achieve Jimmy so like we said we saw a higher number of turns over the last year for this quarter in the Ottawa region which majority of that proposal is already kind of repositioned so that speaks to some of the capex fund lower so really it's a function of where are we getting some of that turn will be a pretty big part A lot of, we've been lucky, a lot of our CapEx has been done over the last four to five years and we've been on the, on the higher side of that. We've been communicating of late that you'll start to see the CapEx Fed come in a tad. It's not that we have changed our business model at all.
Speaker Change: Yeah, I mean, some of it's a function of...
Speaker Change: Where are you seeing some of the turn?
Speaker Change: Right, and what kind of lifts you can achieve, Jimmy. So, like we said, we saw a higher number of turns over the last year for this quarter in the Ottawa region, which the majority of that portfolio is already repositioned, so that speaks to some
Jimmy: of the CapEx fund lower. So really it's a function of where are we getting. Some of that parent will be a pretty big part.
Jimmy: A lot of, we've been lucky, a lot of our CapEx has been done over the last four to five years, and we've been on the
Jimmy: On the higher side of that, we've been communicating of late that you'll start to see the CapEx Fed come in a tad. It's not that we have changed our business model at all. We, as you know, we target 20% return on our investments. So...
Dave Nevins: We, as you know, target a 20% return on our investments. So we're going to continue to put capital out where we think we can meet those kind of returns. But will it be lower than by the year end? Will it be lower than 2023? Yeah.
Jimmy: We're going to continue to put capital out where we think we can meet those kind of returns. Will it be lower than by the year end? Will it be lower than 2023? Yeah, it will be.
Curt Millar: Yeah, especially when you think about it, Jimmy, if you look at the amount of repositioned suites in that portfolio compared to the past, a percentage of our portfolio that is under repositioning still has come in, and that often directly ties to that CapEx number coming in or growing in years where we've been very active. You always see an increase in our CapEx spend right after a very active year, and as you know, we've always said three to five years for us to stabilize, and you always see a pretty big spend following an active year of acquisition. The following three years, you'll see a lot of CapEx out the door, and to be quite honest, I'm very hopeful that we'll get back to a point where we can deploy and recycle some Perversely, you start to see cap eggs go up a little, but that means we're doing what we do really well.
Speaker Change: Yeah, okay.
Speaker Change: Yeah, especially when you think about it, Jimmy, if you look at the amount of repositioned suites in that portfolio compared to past.
Jimmy: Our percentage of our portfolio that is under repositioning still has come in.
Jimmy: And that, you know, often directly ties to that CapEx number coming in or growing in years where we've been very active in. That's the RFC.
Blitz: Blitz, an increase in our CapEx spend right after a very active year and as you know we've always said three to five years for us to stabilize.
Blitz: And you'll always see a pretty big spend following an active year of acquisition. In the following three years, you'll see a lot of CapEx out the door, and to be quite honest...
Blitz: I'm very hopeful that we'll get back to a point where we can deploy and recycle some of this capital from our disposition program and be able to hock up that non-reposition bucket again.
Blitz: Perversely, you start to see cap eggs go up a little, but that means we're doing what we do really well.
Operator: Sorry, I just have one last question. You haven't talked about the NCIB and... You know, you have been active post-quarter and for the first time in a long time. It's kind of how you're thinking about the NCIB program, going forward, and the job. Nothing changed there Jimmy, like obviously...
Blitz: Yeah.
Speaker Change: Sorry, I just had one last. You haven't talked about the NCIB, and you know, you have been active post-quarter and for the first time in a long time. It's kind of how you're thinking about the NCIB program.
Speaker Change: going forward.
Bradley Cutsey: Nothing's changed there, Jimmy. Obviously, our unit price went down into the low 12s. Obviously, for us, there's a lot of value to be had in those suites. We've already said we won't. We will do share buybacks on a lunch neutral basis. We disposed of a community. We took some of those proceeds and bought it back. But we've got a way to buy it back with other opportunities, and it comes down to timing and then comes down to ranking the different opportunities that sit in front of you and what that capital is earmarked for.
Speaker Change: in terms of the data and opportunities.
Speaker Change: Nothing's changed there, Jimmy. Like, obviously, our unit price went down into the low 12s. Obviously, for us, there's a lot of value to be had in those suites. We've already said we won't...
Speaker Change: We will do share buybacks on a large, neutral basis. We disposed of a community. We took some of those proceeds.
Speaker Change: And buy back. But we've got a way to buy back with other opportunities, and it comes down to timing, and it comes down to ranking the different opportunities that sit in front of you.
Bradley Cutsey: But we tend to take a five-year view, and we look out, and we rank all of these different value-add initiatives, such as share buybacks versus development versus external, against each other, and we will earmark that capital accordingly.
Speaker Change: and what that capital is earmarked for.
Speaker Change: But we tend to take a five-year view and we look out and we rank all of these different value-add initiatives such as share buybacks versus development versus external.
Speaker Change: And that's each other and we will earmark that capital accordingly.
Speaker Change: Okay, thanks.
Jimmy: Thanks, Jimmy. Thanks, Jimmy.
Operator: The next question comes from the line of Mike Markidis from BMO. Please go ahead.
Jimmy: Next question comes from the line of Mike Markidis from BMO. Please go ahead.
Operator: Thank you. Good morning, everybody. Brad, I think on the last couple of calls, you had pretty good confidence in a 68% organic revenue trajectory over the next two to three years and just giving your comments on the slowing, albeit still healthy, market rent growth and maybe your comments with respect to potentially seeing more turn at the shorter end of your in terms of shorter deletion leases. Pardon me. Do you see any risk to that outlook, or is that still sort of the outlook that you're looking forward to?
Mike Markidis: Hey, Mike. Thank you. Good morning, everybody.
Mike Markidis: Brad, I think I'm the last couple of...
Mike Markidis: Calls, you had pretty good confidence on a 68% organic revenue trajectory over the next two to three years. I'm just giving your comments on the slowing, albeit still healthy, market rent growth and maybe your comments with respect to potentially seeing more turn at the shorter end of your
Brad: In terms of shorter deletion leases, pardon me, do you see any rest of that outlook or is that still sort of the...
Bradley Cutsey: Listen, I mean, in the 6-8, 5-7, I'm still pretty confident that it's high single-digit, low double-digit NY growth. I think it's somewhat splitting hairs when you look at the bigger picture, Mike.
Speaker Change: the outlook that you're looking
Speaker Change: Looking forward. Listen, I mean, if it's six to eight, five to seven, I'm still pretty confident it's high single-digit, low double-digit NY growth.
Speaker Change: I think somewhat splitting hairs when you look at the bigger picture, Mike, I still feel very confident that the demand-supply fundamentals remain extremely tight on the whole. We're...
Bradley Cutsey: I still feel very confident that the demand-supply fundamentals remain extremely tight on the whole, where you have to get to sometimes is in the tensions in the details, where some of the supply is coming on right, like Ottawa, as we know, has some supply, and I'm quite confident that, over time, Ottawa's supply is going to get absorbed, and it's going to continue to be a marketplace that should do quite well for a population Another example is London.
Mike: Where you've got to get to sometimes is in the attentions and the details, where is some of the supply coming on?
Mike: So it's not like there's no new supply, right?
Mike: And I'm quite confident, over time, Ottawa's supply is going to get absorbed.
Mike: And it's going to continue to be a marketplace that should do quite well for our population growth, given the affordable nature of this marketplace.
Bradley Cutsey: London has close to 4.5% of new supply, and it's close to one of our communities. So as that supply gets absorbed, obviously, we're not going to have the same kind of lift-on-turns. But once it's absorbed, we're quite confident that things will normalize back to the lift-on-turns that we've historically been accustomed to.
Mike: Another example is London. London has...
Speaker Change: Close to call four and a half percent of new supply. So as and it's close to one of our communities. So as
Speaker Change: That supply gets absorbed, obviously we're not going to have the same kind of lift-on turns. But once it's absorbed, we're quite confident that things will normalize back to the lift-on turns that we've historically been accustomed to. So...
Bradley Cutsey: Listen, I don't want to overblow the 16% versus 20%. These numbers are going to jump around depending on where the term comes from and depending on where supply is situated. But I can guarantee you that you won't find any of my colleagues, anyone that was going to say that this market is in equilibrium, that the supply is meeting household formation. It's not. But there's going to be different pockets where things get impacted differently. So I do remain comfortable that we'll continue to see that top revenue line growth as we've communicated in the past.
Speaker Change: listen like I don't want to I don't want to overblow the 16% versus 20% like these numbers are going to jump around depending on where the turn
Speaker Change: comes from and depending on where supply is situated.
Speaker Change: But I can guarantee you won't find any of my colleagues, anyone that was going to say that this market's in equilibrium, that the supply is meeting household formation. It's not. But there's going to be different pockets where things...
Speaker Change: I do remain comfortable that we'll continue to see that top revenue line growth that we've communicated in the past.
Bradley Cutsey: That's helpful. Thanks. And then, I don't know if I heard you correctly, but I think you said that your rent-to-income on the 640 lease for this quarter came in at less than 30%. That's correct.
Speaker Change: That's helpful, thanks. And then, I don't know, I think I heard you correctly, but I think you said that your rent-to-income on the 640 lease of this quarter came in at lower than 30%. Did I pick that up correctly?
Bradley Cutsey: Low 30 percent. Not lower than 30 percent, but low 30 percent. The low 30s.
Speaker Change: low 30% not lower than 30% but low 30s. Got it okay yeah and I mean that's the first time I've heard you reference that like where's that been
Bradley Cutsey: Got it. Okay. And, I mean, that's the first time I've heard you reference that. Like, where has that been? Well, I think I'm referencing that to help give people on this call comfort that while we might sit with an in-place rent higher than market averages, we also pride ourselves on delivering a certain level of experience, and we also pride ourselves on our operations teams and investing in the operating platform. And those things that make a difference, we are able to attract a quality resident that is willing and chooses to rent.
Speaker Change: I think I'm referencing that to help give people on this call comfort that why we might sit with an in-place rent higher than market averages.
Speaker Change: We also pride ourselves on
Speaker Change: delivering a certain level of experience and we also pride ourselves on our operation teams and investing in the operating platform and those things that make a difference we are able to attract a quality resident that is willing and chooses to rent.
Bradley Cutsey: at those levels. Yeah, and I'd say if you look sort of over the last little while, that number hasn't gone up. If anything, it's actually gone down.
Speaker Change: at those levels. Yeah and I'd say if you look sort of over the last little while that number hasn't gone up. If anything it's actually come in marginally.
Bradley Cutsey: Okay, so it's down marginally; it's not like it was massive. Okay, thank you all for the presentation.
Speaker Change: Okay, so it wasn't, it wasn't, it's down marginally, it's not like it was a massive change from what you've seen.
Speaker Change: No, it hasn't gone up. As rents have gone up, it hasn't gone up.
Bradley Cutsey: Turnover is going to continue to come in as an industry as a whole, and our proposal is no different. We've been fortunate that we've been above average as a turnover rate, still kind of in that 24% range, but turnover is going to continue to come in as market rents continue to increase. People, there are going to be less and less people willing to move and look for a new apartment because they just won't be able to afford it.
Speaker Change: Turnovers are going to continue to come in.
Speaker Change: As an industry as a whole, and our proposal is no different, we've been fortunate that we've been above average as a turnover rate, still kind of in that 24% range, but turnover is going to continue to come in as market rents continue to increase.
Speaker Change: There's going to be less and less people willing to move and look for a new apartment because they just won't be able to afford it.
Bradley Cutsey: My comment with that data point is trying to help give you some comfort on the other side that, listen, yes, as a whole, affordability is coming, and there's going to be less turnover, but there is still very much a segment of the population that can afford the market rents at which we are listed. And it goes back to my comment about mark-to-market, that we're comfortable at 30% because we have tested those prices, and we're leasing at those prices. Now, where we see the turn depends.
Speaker Change: My comment with that data point is trying to help give you some comfort on the other side that, listen, like, yes, as a whole, the affordability is coming in, and there's going to be less turnover, but there are still very much a segment of the population.
Speaker Change #100: that can afford the market rents in which we are listed at. And going back to my comment about market to market that we're comfortable at 30% because we have tested those prices and we're leasing at those prices. Now, where we see the turn
Bradley Cutsey: It just depends on the circumstances where you're seeing current or where you're seeing migration patterns and whatnot in the meantime. So that is going to fluctuate. But on the whole, I feel comfortable that we're going to be able to continue to maintain here kind of that 15 and 20, and we'll be able to chip away at the Mark to Market. Now, will the Mark to Market grow back? I don't know.
Speaker Change #101: Depends. It just depends on the circumstances, where you're seeing current and where you're seeing migration patterns and whatnot in the meantime. So that is going to fluctuate, but on the whole.
Speaker Change #101: I feel comfortable that we're going to be able to continue to maintain here, kind of at 15 and 20, and we'll be able to chip away at the mark-to-market. Now, will the mark-to-market grow back?
Bradley Cutsey: That's my comment about the second derivative coming in a little, so we might start to see that gap close a little. The mark-to-marker might start to come in a little as the marker returns. I've grown as fast as they have been in the past.
Speaker Change #101: I don't know. That's my comment about the second derivative coming in a little, so we might start to see that gap.
Speaker Change #101: close low. That mark-to-market might start to come in a little as the market rents aren't as- Grown as fast. As grown as fast as they have been in the past.
Bradley Cutsey: But let's not forget, 30% market to market is still a pretty good spot to be, especially at a 24% turn. Yep, no, absolutely. Okay, and then this last one, I think Brad, you mentioned your second phase of your disposition program. Can you refresh me on if there's any sort of metrics you put around that or what exactly that is? We evaluate all the communities within a portfolio. We have an asset management profile for all of our communities.
Speaker Change #101: But let's not forget, 30% market to market is still a pretty good spot to be, especially at a 24% turn.
Speaker Change #101: And this is the last one. I think, Brad, you mentioned your second phase of your disposition program. Can you refresh if there's any sort of metrics you put around that or what exactly that is?
Brad: We evaluated all the communities within a portfolio. We have an asset management profile for all of those communities.
Bradley Cutsey: We kind of look at the five-year IRRs, and we take other factors into consideration. We kind of look at where our corporate IRR is relative to that. And for those communities that are... So that's the low we're co-operative over the next five years, those are obviously earmarked for communities in which we believe we're going to maximize the value, and then it's going to bring down our overall real estate volume, so those are worthwhile. And then we'll recycle those into opportunities that are significantly higher than our corporate IRR, bringing our overall corporate IRR up also.
Speaker Change #102: We kind of look at five-year IRRs, and we take other factors into consideration, but we kind of look at where corporate IRR is relative to that, and for those communities that are
Speaker Change #102: So definitely, below where a corporate is over the next five years, those are obviously earmarks for communities in which we...
Speaker Change #102: I believe we're going to maximize the value, and then it's going to bring down our overall real-estate costs, so those are worthwhile. And then we'll recycle those into opportunities that are significantly higher than our corporate IRR, bringing up, hopefully, overall, our corporate IRR.
Bradley Cutsey: Okay, I just have you said thanks for that. Have you set a target in terms of volume? I mean, I think it was about a year, a year and a half ago, and you've exceeded that target. So I was wondering if you've refreshed your targets on disposition volume. Oh, sorry. Sorry, Mike. I didn't know. Maybe I just misunderstood your question. We came out last quarter and said that we felt pretty comfortable and gave another 12, 18 month timeframe in which we thought another 50 million of net proceeds was reasonable.
Speaker Change #103: Okay, thanks for that. Have you set a target in terms of volume? I mean, I think it was about a year, a year and a half ago, and you've exceeded that target. So just wondering if you've refreshed targets on disposition volume. Oh, sorry. Sorry, Mike. Maybe I just misunderstood your question. We came out last quarter and said that we felt pretty comfortable and gave another 12, 18-month time frame that we thought another $50 million of net proceeds was reasonable.
Bradley Cutsey: That's a good reminder. Thank you for that. Good for me. Great.
Bradley Cutsey: Great. Thanks, Frank.
Mike: That's a good reminder. Thank you for that. Good for me. Great.
Operator: Your next question comes from the line of Mario Saric from Scotiabank. Please go ahead.
Mike: Your next question comes from the line of Mario Saric from Scotiabank. Please go ahead.
Operator: Hi guys, just a couple of quick follow-ups. On the rent growth discussion, I just wanted to clarify, the 5% to 7% that's being referenced, are you referring to the expected kind of target change in average in-place rent for the portfolio? Or are you saying that you still expect market rents to grow 5% to 7%, for example? The average market rent in Canada is $1,000. Do you think it could make its way to $1,050 to $1,000?
Mario Saric: Hey guys, just a couple of quick follow-ups.
Mario Saric: On the
Mario Saric: On the rent growth discussion, I just wanted to clarify, the 5% to 7% that's being referenced, are you referring to the expected kind of target change in average in-place rent for the portfolio, or are you saying that you expect still market rents?
Speaker Change #105: to grow 5% to 7%. For example, if the average market rent in Canada is $1,000, do you think it could make its way to $1,050 to $1,070?
Curt Millar: I think the comment was more towards where we see our operating revenue or our AMR growing, not the overall market. I mean, the overall market, if you look at the average CMHC producer, others were above it in many markets, right? So, as every market and average can be misleading because you get it all over the place, but that comment was addressed to where we see ours growing.
Speaker Change #106: I think the comment was more towards where we see our operating revenue or our AMR growing, not the overall market.
Speaker Change #107: I mean the overall market were, if you look at the average CMHC producer, others were above it in many markets, right?
Speaker Change #106: As every market and average can be misleading, because you've got it all over the place, but that comment was addressed towards where we see ours growing.
Curt Millar: Okay, I guess the rationale behind the question is that you're seeing some reports out there talking about the market rent stabilizing or flattening, if you will. So just curious if you, given the expectation that demand should continue to exceed supply, if the expectation is for the broader market for the rents to keep coming up.
Speaker Change #108: Okay, I guess the rationale behind the question is that's just because you're seeing some reports out there talking about that market rent stabilizing or flattening, if you will.
Speaker Change #109: So I'm just curious if you, given the expectation that demand should continue to exceed supply, if the expectation is for the broader market for the rents to keep coming up a bit more?
Curt Millar: Yeah, I don't I don't think anyone from any data that anyone is looking at or publishing or that you could reasonably get to, I don't think anyone is seeing that supply is even coming close to demand at this point. It's just how things are shifting; people are doubling up, tripling up, whatever, and sort of changes in that habit.
Speaker Change #110: I don't think anyone from any data that anyone is looking at or publishing or that you could reasonably get to, I don't think anyone is seeing that supply is even coming close to demand at this point.
Speaker Change #111: It's just how are things shifting people are doubling up tripling up whatever and then sort of changes in that habit
Curt Millar: So we're not saying that market rents are gonna grow at that five to seven. We think our AMR will. And I think what Brad was getting at a while ago is, if the market is growing at two or three and our AMR is growing at five to seven, you could see our mark-to-market come in a little bit over time.
Speaker Change #111: So, we're not saying that the market rents are going to grow at that 5 to 7, we think our AMR will.
Speaker Change #111: And I think what Brad was getting to a while ago is if the market is growing at 2 or 3 and our AMR is growing at 5 to 7, you could see our mark-to-market, you know, come in a little bit over time.
Curt Millar: Does that answer it? Understandable. Yeah, that's perfect. Thanks, Curt.
Andrew: Does that answer it?
Bradley Cutsey: And then just my next one, I don't know if you can answer this question, but you mentioned taking a five-year view on capital deployment that included the NCIB activity that you did. You've talked about kind of a minimum 20% ROI on CapEx spend. When you're looking at that five-year outlook, when you're buying back units, what type of five-year IRR do you think you can expect?
Speaker Change #113: Understood. Yeah, that's perfect. Thanks, Curt. And then just my next one, I don't know if you can answer this question, but...
Speaker Change #114: You've mentioned taking a five-year view on capital deployment that included the NCIB activity that you did. You've talked about kind of a minimum 20% ROI on CapEx spend.
Speaker Change #115: When you're looking at that five-year outlook, when you're buying back units, what type of five-year IRR do you think you're achieving?
Bradley Cutsey: Yeah, I'm honored by that. I'm not going to answer that. Mayor, you can take comfort in knowing that we are ranking our buyback relative to the other opportunities we're looking at for sure. Okay. Thanks, man.
Speaker Change #116: I'm not going to answer that, Merrill. You can take comfort, though, that we are ranking our buyback relative to the other opportunities we're looking at, for sure.
Speaker Change #116: Okay.
Meryl: Thank you.
Operator: Your next question comes from the line of Dean Wilkinson from CIBC. Please go ahead.
Speaker Change #118: Your next question comes from the line of Dean Wilkinson from CIBC. Please go ahead.
Dean Wilkinson: Most of everything has been answered, not sure if you can touch on this one or not, Brad. The conversion of the Class B units, is it fair to assume that that was perhaps a tax or an inclusion rate driven decision?
Operator: Yeah, we had two different parties that had Class B units, and when everything got announced around the changes in capital gain rates coming at us, they both reached out and said they'd like to convert. So we worked with them to make sure it was done before the deadline. Got it. And those would be freely trading now.
Speaker Change #120: We had two different parties that had class B units and when everything got announced around the changes in capital gain rates coming at us, they both reached out and said they'd like to convert. So we worked with them to make sure it was done before the deadline.
Speaker Change #121: Got it. And those would be freely trading now, correct?
Operator: Yes, once the conversion is done, yes. Once it's done, yep.
Speaker Change #122: Yes, once the conversion is done, yes.
Speaker Change #121: which is done.
Speaker Change #123: Yep, that's all I had, thanks guys.
Bradley: Go Bradley.
Operator: Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star 1 on your touchtone phone. And if you are using a speakerphone, please lift the handset before pressing any key. Your next question comes from the line of Fred Blondeau from Green Street. Please go ahead. Thank you and good morning.
Speaker Change #125: Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star 1 on your touchtone phone. And if you are using a speakerphone, please lift the handset before pressing any keys.
Speaker Change #125: Your next question comes from the line of Fred Blondeau from Green Street. Please go ahead.
Dave Nevins: I'm sorry, the question is how much of the turnover is student versus overall. Yep.
Operator: Thank you and good morning. Just going back to the turnover discussion, I was wondering if there is any way you could give us a bit more color on how much turnover is attributable to student tenants versus the rest of the tenants.
Fred Blondeau: Thank you and good morning. Just going back to the turnover discussion, I was wondering if there are any way you could give us a bit more color on how much turnover is attributable to student tenants versus the rest of tenants?
Speaker Change #127: Sorry, the question is how much of the turnover is student versus overall?
Dave Nevins: Yeah, so, I mean, we don't break out turnover by region, Fred, so... I don't think we're in a position that we're going to even break it all further, but you can assume for most students, at best, the maximum lease life that they're going to stay is maybe two years. But most people would be 12. 12 months.
Speaker Change #127: Yep.
Speaker Change #128: Yeah, so, I mean, we don't, we don't break out of turnover by region, Fred, so...
Speaker Change #129: I don't think we're in a position that we're going to even break it all further, but you can assume for most students, at best, the maximum lease that they're going to stay is maybe two years, but most people, it would be 12 months.
Dave Nevins: Okay, and then just looking at the realized gain on lease, it looks like it's been trending down from the 23.8% that you guys reported for Q2 2023. I was wondering, notwithstanding seasonality here, what should we be expecting for the second half of 2024 on that?
Fred Blondeau: Okay, got it.
Fred Blondeau: Okay and then just looking at the realized gain on lease, it looks like it's been trending down from the 23.8% that you guys reported for
Speaker Change #130: Q2 2023. I was wondering, notwithstanding seasonality here, what should we be expecting for the second half of 2024 on that?
Dave Nevins: So, are you asking what we're looking at for the rest of the year on our gain on lease? Yep, realized.
Speaker Change #131: So, are you asking what we're looking at for the rest of the year on our gain on lease?
Dave Nevins: Yep, I realized that gambling.
Speaker Change #132: Yep, realized gambling.
Dave Nevins: Fred, it really will be a function of what turns are coming up, so it could be anywhere from Call it the 15% to the 22% that we've seen. We don't provide forward guidance. In the past, we've told you we feel comfortable with the range. Six to eight percent was on the top line.
Speaker Change #132: Fred, it really will be a function of what turns coming up, so it could be anywhere from, call it the 15 to the 22 percent.
Speaker Change #133: that we've seen. We don't provide forward guidance. In the past, we've told you we feel comfortable with the range of 6% to 8% on the top line growth.
Speaker Change #133: We're kind of within there. It could come in towards the end of the year, close to the 6th, I'm not sure, but we feel comfortable with what we've been out there already with.
Dave Nevins: Got it. Maybe it can vary. It can vary.
Speaker Change #134: It can vary a lot. You don't control who comes to market when, so it can vary a lot queue to queue, quite frankly.
Speaker Change #134: I think we take comfort in the fact that our turnover, given the regions we've decided to grow in over the last five, six, seven years.
Speaker Change #134: Our turnover is still higher than average in the market, and it's a function of what we've chosen, and we kind of control that a little bit by where we choose to buy as best we can, but who decides the turn? You can't always control it right.
Curt Millar: And then, of course, I got it. And then maybe one last for you, Curt, on the debt to EBITDA ratio. I was wondering if you had a specific target for the end of 2024, or maybe longer term on that front?
Speaker Change #134: Of course. Got it. And then maybe one last for you, Curt, on the debt to EBITDA ratio. I was wondering if you had a specific target for the end of 2024 or maybe longer term on that front?
Curt Millar: I think what we've communicated to the market is longer term. We would like to get that down definitely below double digits and into that nine-ish, eight-ish range even.
Curt: I think what we've communicated to the market is longer term, we would like to get that down definitely below double digits and into that, you know, nine-ish, eight-ish range even. I think it's just a function again of our repositioning versus our non-repositioning. We provide that breakout on the presentation.
Curt Millar: I think it's just a function, again, of our repositioning versus our non-repositioning. We provide that breakout on the presentation that if you look at just our repositioned portfolio, we're already sub-10. And if we said no more repositioning activity, we'd definitely bring the whole portfolio well below that. Quite frankly, I hope it doesn't because that means we've been active in our repositioning program. We've been able to get more repositioning opportunities into our portfolio.
Curt: If you look at just our repositioned portfolio, we're already sub-10.
Curt: And if we said no more repositioning activity, we'd definitely bring the whole portfolio well below that. Quite frankly, I hope it doesn't because that means we've been active on our repositioning program. We've been able to get more repositioning opportunities into our portfolio.
Curt Millar: And I think we have a proven track record of providing exceptional growth when we've been able to do that. So part of me hopes it doesn't go below because that means we've had a good run on the repositioning side. That's great, thank you, I'll leave it here.
Curt: And I think we have a proven track record of providing exceptional growth when we've been able to do that. So, part of me hopes it doesn't go below because it means we've had a good run on the repositioning side.
Curt Millar: That's great. Thank you. I'll leave it here.
Speaker Change #135: That's great. Thank you. I'll leave it here.
Renee Wei: There are no further questions at this time, so I'll hand the call over to Renee Wei for closing remarks. Ma'am, please go ahead.
Speaker Change #135: There are no further questions at this time, so I'll hand the call over to Renee Wei for closing remarks. Ma'am, please go ahead.
Renee Wei: Thank you everyone for the call, and, as always, if you have any questions or comments, please don't hesitate to reach out.
Renee Wei: Thank you everyone for the call and as always if you have any questions or comments please don't hesitate to reach out. Have a great day!
Speaker Change #136: Ladies and gentlemen, this concludes today's conference. Thank you very much for your participation. You may now disconnect.