Q3 2024 Minto Apartment Real Estate Investment Trust Earnings Call
Good morning. My name is Elle and I will
Speaker Change: At this time, I would like to welcome everyone to the Mintu Apartment RIT 2024 3rd Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, please press star then the number 2.
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.
Speaker Change: Any such information is subject to risk, uncertainties, and assumptions that could cause actual results to differ materially.
Speaker Change: Please refer to the Cautionary Statements on Forward-Looking Information in the RIT News Release and MD&A dated November 12, 2024 for more information.
During the call management, we'll also
Speaker Change: Although, the RIT believes these measures provide useful supplemental information about its financial performance.
Speaker Change: They are not recognized measures and do not have standardized meanings under IFRS.
Speaker Change: Please see the WITS MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Mr. Li, you may begin your conference.
Speaker Change: Thank you and good morning. This is Jonathan Li speaking. With me on the call today are Eddie Fu, our Chief Financial Officer, and Paul Barron, our SVP of Operations.
Speaker Change: In Q3 2024 we continue to generate the strong operating performance that was evident through the first half of the year.
Speaker Change: As illustrated in the table on slide 3, we generated 5.9% growth in average monthly rent for the same property portfolio and closing occupancy remained strong at 97.4%.
Speaker Change: Same property portfolio revenue growth in the unfurnished suite portfolio continued to be strong at 6.9 percent.
Speaker Change: Same Property Portfolio NOI and Same Property Portfolio NOI Margin increased by 8.2% and 130 basis points respectively.
Speaker Change: Importantly, we are effectively translating NOI growth into cash flow per unit growth.
Speaker Change: Normalized FFO and AFFO per unit increased 8.3% and 9.6% respectively as we benefited from prudent capital allocation decisions that resulted in a reduction in interest costs.
Speaker Change: Reflecting our strong results and continued positive outlook, the REITs Board of Trustees has approved a 3.0% increase in our distribution.
Speaker Change: The REIT has increased distributions every year since its IPO in 2018 while simultaneously reducing our AFFO payout ratio.
Speaker Change: On slide 4, we provide an update on some initiatives completed subsequent to quarter end, which upon completion, will further strengthen our balance sheet and increase our financial flexibility.
Speaker Change: We committed to the upward financing of three properties located in Ottawa and are finalizing the upward financing of a property in Toronto for total net proceeds of approximately 91 million dollars. I'll now invite Eddie Fu to discuss our third quarter financial and operating performance in greater detail. Eddie?
Thank you, John. Turning to slide 5.
Partially offset by a decline in commercial revenue.
Speaker Change: Same property portfolio NOI increased 8.2% year-over-year as revenue growth was offset by a modest 2.1% increase in property operating expenses.
Speaker Change: Same property portfolio NOI margin increased 130 basis points year-over-year to a quarterly record of 66.2 percent.
Speaker Change: Average occupancy was consistent at 97.1% and our normalized AFFO payout ratio was 53.8% a reduction of 350 basis points compared to Q3 last year.
Speaker Change: Moving to slide 7, we signed 449 new leases in the third quarter generating realized gain on lease of 10.8 percent.
Speaker Change: Excluding the non-rent controlled Niagara West property, realized gain on lease in Toronto was 14.2% and 11.3% across the portfolio.
Speaker Change: As indicated in the lower table, the embedded gain-to-lease potential at the end of Q3 remains strong at 14.8%.
Speaker Change: Moving to slide 8, the same property portfolio annualized turnover was 26% in the third quarter, which slowed slightly compared to Q3 last year.
Speaker Change: Through the quarter, move-ins outpaced move-outs, resulting in closing occupancy of 97.4%.
Speaker Change: On slide 9, we provide an update on our commercial and furnished suites portfolios.
Speaker Change: Revenue from commercial leases decreased by 35.1% from Q3 last year, reflecting the temporary retail vacancy at Minto Yorkville.
Speaker Change: We are still actively pursuing leasing and anticipate lease payments will begin in 2026.
Speaker Change: Furnished suite revenue increased by 90 basis points from last year due to improved average occupancy.
Speaker Change: Since Q3 2023, we have converted 16 furnished suites to the unfurnished portfolio, 10 of which were at Minto Yorkville.
We expect additional suite conversions as unfurnished demand remains strong.
Turning to slide 10.
Speaker Change: Total same property portfolio operating expenses increased by 2.1% over Q3 2023 as property operating costs increased 3.2% as higher digital advertising expenses and repairs and maintenance outweighed lower compensation due to temporary job vacancies.
Speaker Change: Property taxes rose 2.8% due to increases in assessed values in Calgary and Montreal and rates in Toronto and Ottawa.
Speaker Change: and utility costs were down 2.4% reflecting a decrease in natural gas costs due to lower average rates and decreased consumption across the portfolio.
Speaker Change: Moving to slide 11, we repositioned 16 suites in the third quarter, generating an ROI of 8.8%.
Speaker Change: In the quarter, we completed the repositioning of a penthouse suite in Montreal, which drove up our average cost.
Speaker Change: Over the last four quarters, we repositioned 54 suites and generated an average ROI of 10.2%.
We expect to reposition 40 to 60 suites this year.
Thank you for watching!
Speaker Change: Turning to slide 12, we have provided our key depth statistics.
Our maturity schedule remains balanced.
Speaker Change: As of September 30, 2024, the weighted average term to maturity on a term debt was 5.33 years with a weighted average effective interest rate of 3.53%.
Speaker Change: Upon completion of the 91 million dollars of financings, our variable rate debt as a percentage of total debt will be close to zero.
I'll now turn it back over to John.
John: Thanks Eddie. On slides 13, 14, and 15 you will see a summary of our intensifications and redevelopments.
John: Lonsdale Square in North Vancouver is nearing stabilization. The project comprises 113 rental suites and approximately 8,000 square feet of retail space. We anticipate to make a decision on the purchase option by the end of the year.
John: As we have done in the past, we are evaluating this opportunity in the context of our cost of capital, impact on cash flow per unit, pro-forma leverage, market sentiment, and other factors.
John: On slide 16, you can see we continue to make meaningful progress on our ESG initiatives and we are proud to share some highlights from our 2023 ESG report that was published in September.
I'll conclude with our business outlook on slide 17.
John: We continue to believe that, despite recent immigration policy announcements, industry fundamentals will provide a constructive backdrop for rental housing demand for the foreseeable future.
John: There is obviously some temporary uncertainty facing our industry. However, we will lay out some of the reasons for our constructive outlook.
John: There are three main factors that drive our business. In order of importance, one, an acute housing shortage. Two, rental housing being an affordable option relative to homeownership. And three, population growth.
John: We believe that the first two factors have a much larger direct impact on our business than the third. In Canada today, we do not have enough housing to support the existing population, let alone to support new immigration.
John: In addition, housing starts remain well below target levels since the development map simply doesn't work at this time.
John: And even with the implementation of government programs to spur housing development, it is our belief that the housing shortage will persist for many years.
John: Therefore, even if our population growth temporarily stalls, an acute housing shortage combined with the relative affordability of renting will provide a constructive backdrop for our business over the long term.
John: As a result, we will continue to focus on the strategies that have delivered our solid performance to date listed on the slide.
John: Let's get back to basics. We have a very high quality portfolio. We own excellent real estate in prime locations in the country's largest markets where land values are very high and replacement costs are very high.
John: Additionally, we have materially strengthened our balance sheet and increased our financial flexibility. And when you combine those things with a highly experienced, adaptable, and motivated team and best-in-class operating platform, we are well positioned for what's to come.
Speaker Change: That concludes our prepared marks. Operator, please open the line for questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press the star followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number 2.
Speaker Change: If you are using speakerphone, please lift the handset before pressing any keys.
One moment please for your first question.
Your first question comes from Jonathan
Thanks. Good morning.
Speaker Change: First question, just on, maybe Paul, you can give us a little bit of color on what you're seeing in the downtown Toronto core and most occupancy was up nicely in the quarter. Do you expect to maintain that? What sort of incentives are you using there?
Paul Barron: Yeah, so, thanks Jonathan. Toronto is still characterized by new supply entering in the quarter. We've heard from others and talked about it before, the condo deliveries as well as purpose-built rentals in the core.
Paul Barron: For us specifically, we've done quite well. We've talked about our one-bedroom focus in prior quarters, and very much in Q3 we were able to bring that in line with our overall suite mix. So our efforts on the one-bedroom side have been paying off.
Paul Barron: As it relates to promotions, I have some promotion activity at a few buildings in Toronto. I would say, as we've shared in the past, it's very tactical and down to the specific unit level. It also comes in a few different forms. Where we have excess parking, we're leveraging free parking promotion. Where we have excess storage, we're doing the same. So really trying to have the least financial impact while attracting the greatest breadth of residents.
Thanks for watching!
Speaker Change: Okay, that's helpful. And there's still a good chunk of supply coming on next year, correct?
Speaker Change: Well, that's correct. That's correct. So, that'll kind of come off in 2027, but we are still seeing, even into Q4, I'm looking at condo completions in the City of Toronto. We're seeing 2,900 come on in the former City of Toronto borders. Into 2025, that number is 15,900, Jonathan. So, we'll see that continue.
Speaker Change: But feel, as John described in his opening remarks, that we've got a very resilient portfolio and, as you know, a pretty deep event dread still in the Toronto market.
Yeah, no, for sure.
Speaker Change: Okay, and then just second, Eddie, just like for 2025, what are you guys thinking about in terms of property operating cost growth?
In terms of operating growth, you know, we would,
Speaker Change: Overall I think we're tracking and we think we'd be in a maybe in the mid single digits overall. I think pretty consistent with how we've described our our outlook in our framework previously.
Speaker Change: Jonathan, it's John here. I think, you know, not dissimilar to one of our peers, I mean, I think the way we're thinking about both Q4 of this year and 2025 is somewhat just dependent on the weather.
Speaker Change: and I don't mean to be flippant about it, it really is quite impactful on both R&M as well as utilities.
And if you...
Speaker Change: What we're doing as we're forecasting for the future is kind of preparing for, you know, a more normal winter and so, you know, what we do is we take kind of the average of the last three winters and plug that into some of our models
on the expense side, and that generates...
Speaker Change: kind of some expense growth, and I'd say if we have a
Speaker Change: Winter that's closer to the average of the last three, you know, we're probably going to see OPEX overall growth in that kind of greater than 5%
Hopefully less than kind of six and a half.
Speaker Change: but if we have a winter that's closer to you know what it was last year I think you're going to see those numbers kind of moderate down to that kind of 5% range and maybe a little bit below.
So
Speaker Change: You know, that's kind of how we're thinking about the future.
Speaker Change: You know, a lot weather-related. The other point is we have some vacant salaries.
Speaker Change: that we've carried for this year or most of this year that are probably going to be filled. So that would, you know, that would imply that our kind of the salary line is probably gonna grow at a little bit higher than inflation because of that.
Okay, that is helpful. I'll turn it back.
Thanks, Jonathan.
Speaker Change: Your next question comes from Sairam Sinevez of Calmark Securities. Please go ahead.
Sairam Sinevez: Thank you, Peter. Good morning, guys, and congrats on a good quarter.
Sairam Sinevez: Eddie, this is probably a question for you. On the post-quarter refinancing which is now underway, what are the reads you're looking at over there and how does that compare to the ones you already have on books?
Speaker Change: So on the three that we announced, those are our top up financings, they're five year term with CMHC, and we are locked in at 3.62%.
Speaker Change: In comparison, today's five-year would be around 3.8. So for us, it makes a lot of sense to borrow that, and our intention would be to apply that against a revolver, and our revolver is currently at 5.8%.
Speaker Change: And then on the second one that we've announced there in terms of LYM, that's also giving us an opportunity to...
Speaker Change: Top of the financing on that property, it is conventional, we haven't firmed up the rate yet, but a conventional term right now would be high forward.
Speaker Change: So much cheaper than our revolver, and also that would be more cost effective than trying to max out on our construction financing.
Speaker Change: So for that one we would use to pay down a revolver and with intent also of supporting the ongoing intensification of the LYM program.
Speaker Change: That makes sense. Thank you, Eddie. And John, maybe just looking at the Lansing Square project and just generally looking at the broader transaction market over there, can you just talk about, you know, are there more deals in the market you're seeing there and, you know, like how the value is kind of comparing in that market?
Speaker Change: Hey Sai, yeah sure so you know we obviously keep a pretty
Sairam Sinevez: Close eye on other transactions. There are a couple of transactions that stand out for us, you know, I think There was an asset called the Pendrel Which was in we're hearing kind of in the mid three to maybe just a little higher than mid three cap rate range
Sairam Sinevez: There's also one that Crombie just bought with the Zephyr, which is a beautiful property there, too. I think with a Safeway at the bottom and I guess I've read a couple of research analysts that basically said high 3% cap rate there. So, you know
I think those are representative of...
Sairam Sinevez: You know, the Vancouver market, and it's a really difficult market to get into.
Sairam Sinevez: You know, if you're kind of asking about what we're going to do, with Longsdale Square, you know, leasing is at 92%.
Sairam Sinevez: And so, we're being, we, the private company is being very choosy in terms of
Sairam Sinevez: The last few tenants that they're going to put in there. Obviously, time is our friend as well. But we haven't made a decision. We will make a decision by the end of the year. We are.
considering a wide range of potential structures.
Sairam Sinevez: I guess what I would say is what's changed in our analysis a little bit is that
Sairam Sinevez: on a cash flow basis, kind of in that high single-digit range. I think that's what a lot of people thought we were going to do and the market was going to do. And at that time, with that dynamic, we were probably
Sairam Sinevez: more open to experiencing a little bit of dilution, but still maintaining that mid-single-digit kind of cashflow growth going forward. I think as we think about next year,
Sairam Sinevez: You know that high single-digit growth may be moderating to be mid single-digit Just based on consensus, you know, I think the
Sairam Sinevez: I guess it's fair to say that the bar has changed for us a little bit in that you know one or two percent dilution from a transaction would be a lot to take and I don't think that would be very attractive for us.
So, you know, I think we're being a little bit...
Sairam Sinevez: more, we really want to defend what we have in terms of cash flow growth going forward and and so I don't think you're going to see us go out and do a massively dilutive deal in the context of today's market and what we think the outlook for the business is.
Speaker Change: That's a great call, John. Thanks for that. And maybe my last question is on Lansing Square. Can you talk a bit about the demographics over there in terms of the kind of tendencies you're seeing? And would that be anywhere impacted by, let's say, you know, like whatever you call the student policy or immigration policy or whatever that might be?
Thanks for watching!
Speaker Change: Hey Sy, Paul Baron speaking. So yeah, really a wide variety of residents. I don't know how much you know about Lonsdale Square, but beautiful area of North Vancouver. There's natural amenities, you know, walking distance to the water and certainly shops and groceries etc. So we see a diverse group of residents there, a collection of small number of students, but primarily working professionals and couples that are looking to live that lifestyle. We actually had some relocations from out of province into the building, so really a diverse collection of residents, but an absolutely great community there. I don't know if you've had a chance...
Edward Fu offers $750,000 rebate to pour more money
Speaker Change: That's very colorful. Thank you for that, and I'll be right back.
Thank you. Thanks.
Speaker Change: Your next question comes from Jimmy Shen of RBC Capital Markets. Please go ahead.
Jimmy Shen: Thanks, you gave us a good color on the OPEX growth. What do you expect in terms of revenue growth in 2025?
Speaker Change: Hey Jimmy, thanks for the question. So I think you're probably sick and tired of hearing us talk about kind of the revenue framework that I think we laid out you know 18 months ago or maybe more.
Speaker Change: where very simplistically how we think about our business and our growth is
Speaker Change: You know 80% of our tenants renew and that growth for that chunk is in that three and a half percent range or so plus or minus 25 basis points
and then 20% of our portfolio will turn.
Speaker Change: and historically that growth with the turn was in the high teens. I think we have been very transparent with the market in terms of how we think that that growth probably moderates over time. I think for the last three quarters we've been in the low double digits.
Speaker Change: and so you know when you think about that revenue growth chunk going forward we think 80% is actually quite solid a good foundation for us as we look to 2025 then the question is okay well what what's the gain at least on the turns
Speaker Change: And all of this is obviously assuming occupancy stays the same.
Speaker Change: And, you know, I think if we're low double digits, which is kind of where we are today, that'll imply kind of like a mid-single-digit growth rate, maybe slightly higher than mid-single digits. But if you think the gain at least is going to reduce to 7 or 8 percent, then that probably gets you to just below.
mid-single digits, like in that 4% range or so.
Speaker Change: That's probably the, that's probably kind of like the range that we're thinking about going forward and when you, when you combine that with the OpEx context that we gave you, you know, I think, I think if we, if we have a normal quote-unquote winter, you know, you might see a little bit of margin compression.
Speaker Change: But if we have a kind of similar winter to last year, you know, you might see that margin compression stay relatively flat.
Speaker Change: Okay and what about your confidence on the occupancy side? We talked about the Toronto occupancy improvement this quarter. Do you think you've got sustainable here at this level? And I know you also noted a bit of weakness in Calgary as well. So how do you think about the occupancy?
Speaker Change: Yeah, clearly tough to gauge I'd say. I think we have
Aggressive internal targets
Speaker Change: Like any management team should I think what we're seeing in kind of October in the beginning of November is
Speaker Change: You know, leaves are slowing down like they normally do this time of the year, but we're not really seeing anything alarming.
Speaker Change: Because the weather was so nice last year and we I think there was an abnormally long leasing season so it so it has slowed down a little bit earlier, but it but There's nothing in there to lead us to believe that there's been a step change or or or have us question our occupancy
forecasts.
Okay.
Thanks for that.
Okay, thanks. Thanks Jimmy.
Your next question comes from Brad
Speaker Change: Hey there, good morning. Just to follow up on that commentary, I appreciate the sort of the setup.
Speaker Change: that you provided in terms of revenue outlook. Just in terms of what you're seeing in Q4 to date in terms of new leasing, has there been any moderation or any change in leasing spreads you're seeing this quarter versus what you would have experienced in Q3?
Speaker Change: Note very much on track for the start of the quarter, as we described in the remarks earlier, using promo tactically across the portfolio, but still capturing an expected gain to lease in line with what we thought.
Speaker Change: And look, Brad, we're not trying to be overly rosy here. Like, I think what we're trying to tell you, or tell the market, is that...
Speaker Change: You know, we're preparing for the worst, right? Like, we're preparing for the worst operationally. We are in constant dialogue with leasing, marketing, and asset management teams. You know, we're being highly coordinated as we think about our portfolio.
Speaker Change: All we're saying is like so far what we're seeing to date we haven't really seen any really negative step changes
That may change.
Speaker Change: Next week, next month, we don't know. We're prepared for it. We think we have a strong portfolio. Notwithstanding some of the weakness we're seeing in in the Toronto market in particular, you know, you got rentals.ca, which everyone is latching on to.
Speaker Change: saying rents in Toronto are going down 8-9% year-over-year, our portfolio is down 0.7%. So it's, you know, we don't have the same portfolio composition as the rental.ca information. We operate our business extremely differently for the long term and
Speaker Change: All we can tell you is kind of what we're seeing so far if things get worse going forward We'll update you as soon as we can, but we're just we're not really seeing a massive step change yet
Speaker Change: Yeah, okay. That's helpful. Just on that front, and obviously you've talked about it for a few quarters on some of the competition on the purpose-built rental that's been delivered. In terms of your turnover rates, are you seeing...
Speaker Change: Residents, if they're leaving, are you seeing more competition from the condo, the condo offering where there's more completions and more deliveries happening as well?
Speaker Change: You know, certainly in the Toronto context, Brad, more competition coming from the condo side as well. Purpose-built rentals saw a high number delivered in Q3, so continue to see that competition. I think the good news is our efforts, particularly on the one-bedroom suites in Toronto, have been paying off as we've started to pull that mix back in our vacancy a little bit. So yeah, continued competition, but just continuing to work with it and fight it to see the rentals grow.
Speaker Change: Last question, just obviously a lot of the comments have been a little bit more Toronto focused, I think...
Speaker Change: In your disclosures, you provided a little bit of commentary around Calgary in terms of tactical promotions there as well. Just curious to see, to hear, I guess what you're seeing in the Calgary market specifically as well.
Speaker Change: For our residents are competing for our business is just the new home supply and the fact that new home pricing is quite competitively priced versus other markets in the country. So we do see some of our residents.
Speaker Change: in our move-out surveys indicating that they are purchasing a home. So a little bit of a different dynamic than other markets.
Speaker Change: I'd say a combination of that and really some new inventory coming online in Q3 that has come out with some incentives and we're just trying to ensure that we're marketing and promoting the buildings appropriately to retain occupancy there. We do still have a fairly respectable embedded rent in that market and we are capturing it on turn.
Thanks a lot, appreciate the comments.
Thanks bud. Thank you.
Speaker Change: Your next question comes from Mike Markides of BMO Capital Markets. Please go ahead.
Speaker Change: Thank you, operator. John, you gave some comments earlier on the call just with respect to the strength in pricing in Vancouver. Just curious if you could talk to us about, I guess,
Speaker Change: A, if you're marketing any sort of your legacy assets at the current moment, and if not, are you getting inbound calls that are attractive, would you say, at this point?
Speaker Change: Hi, Mike. Thanks for the question. So, yeah, we're getting quite a number, consistent with what I said or what we said the last couple of quarters.
Speaker Change: The number of inbound calls for our assets is quite robust.
actively marketing anything at the moment.
Speaker Change: but we're all ears for transactions that make strategic sense for us.
Speaker Change: You know, I think Eddie's done a wonderful job to get our, to get our, you know, revolver down to close to zero.
Speaker Change: But, you know, I think the other advantage of, you know, if we do do something on the asset sales side, it'll, you'll, you'll, we're pretty confident it'll be at our book value. And I think...
Speaker Change: I think it should, and it should highlight the massive net asset value discount that we're trading at from a public markets perspective.
Speaker Change: And I just think that it's like some of the public market investors don't care, right? There's kind of, as I think you've said, there's a sell asset trade on right now, sell Canada trade on right now and
Speaker Change: It's hard to swim upstream against that, but we really believe in the high quality of our portfolio, and I think I've said this a number of times, I think we could sell each asset one by one at NAV and get that.
Speaker Change: to see where we're trading. It's also difficult to talk about our future performance.
Speaker Change: and the quality of our assets and not talk about the massive discount that we trade at today.
Speaker Change: both on a multiple and a cap rate perspective and on a NAV perspective.
feels
Very frustrating for us.
Yeah, like I can only imagine.
Speaker Change: You know, you gave an outlook for 4-5% maybe on the, I won't call it worst case, but revenue growth and I can't help but think back to maybe 2018-2019 when the stock was well in excess of $20 and that's what we were thinking about back then.
Speaker Change: Okay and then I guess so if you did pull the trigger if there's anything opposite it would be opportunistic in nature and how does that you know
Speaker Change: I know you've got a lot of balls in the air but let's say Lonsdale doesn't come to fruition, I mean what would you do with some of that excess capital if you were to sell something?
Speaker Change: Yeah, I think the way we think about capital allocation has changed a little bit, clearly, just because some of the variables have changed, and so, you know, it used to be pay down the revolver, that was a no-brainer, because it was, you know, almost 7% money.
Speaker Change: I think what's happened is the revolver balance has come down significantly and the revolver cost has come down from 7% to 5.8% and our share price has gone from 17 to 14.
Speaker Change: So when you take our current AFFO multiple, which is in that 15 times range,
Speaker Change: and you take the inverse of that to get an estimate of our cost of equity, that's over 7% or close to 7%.
So, right now, buying back our stock is...
Speaker Change: shot up the priority list as we think about the future. So to the extent we have excess capital you know I think the NCIB would be would be pretty high on our on our priority list.
Well said, understood. Thank you. Thanks.
Thanks for watching!
Speaker Change: Your next question comes from Mario Sarek of Scotiabank, please go ahead.
Speaker Change: Hey, good morning guys and thank you for taking the questions.
Speaker Change: Maybe Jonathan I'll just I'll start on your last point in terms of the NCIB
Speaker Change: Looking more active, given the trading discount than I have, if you do do some sales
Speaker Change: Historically, there's always been kind of a tension between the size of the company and the discounts and ads being somewhat correlated. So how do you think about that tension now in terms of reducing the size of the company to buy back stock via asset sales relative to a year ago or two years ago, if ultimately the goal is to grow the company, how does that tension feel today versus six, 12 months ago?
Speaker Change: I think the tension is always there. I think the way we think about it is we're already so small, getting a little bit smaller probably doesn't move at all. I think that's kind of some of the conclusions that we came to. It's literally...
Speaker Change: It's it's it's already baked in and we get a little bit smaller It probably doesn't that in and of itself probably doesn't move us down, but we're so cheap that
Speaker Change: Putting your incremental dollar towards that probably makes some sense today.
Speaker Change: and you know leverage is the other the other thing that we think about obviously and and again I think our leverage is in low enough position where even if it ticks up a little bit by buying back some units I think that's okay too.
Speaker Change: Got it. And your comment on the FFO per unit growth outlook, perhaps moderating in 25 versus 24 and having implications for capital allocation. What is your sense in terms of, I think consensus is this plus 6% year-over-year in 25, what is your sense in terms of...
Speaker Change: The streets inclusion of acquiring Longdale Highland, Beechwood and so on and so forth in the 25 estates, do you think most people are reflecting that or not?
Speaker Change: I don't get to say I think other than I think you who actually explicitly say that you do. I'm not sure others do as much.
Speaker Change: Based on the comment that we gave before, I think the scenario where we take 1, 2, or 3% dilution on one of these acquisitions is pretty low.
Speaker Change: our threshold for our cash flow growth per unit is high, right? Like we don't want to disrupt what we've got in front of us and so I think that's changed a little bit too.
Got it. Okay.
Speaker Change: My last question, just turning to the operational environment, specifically looking at the condo environment in Toronto. When you do your mystery shopping and whatnot, what's your sense in terms of what's happening to competitor condo product for you in terms of asking rents month over month?
Speaker Change: you know 450 a square foot going to 4 or 375 and so on or are you seeing asking rents on the condo side in your neighborhood's main road to be firm
Thanks for watching!
Speaker Change: Good question Mario, Paul Baron speaking. I would say not quite that dramatic but more in line with the rentals.ca data.
Speaker Change: So, smaller price decreases, but not the step change that you've described in our market specifically.
Speaker Change: And what would you estimate is the rent per square foot differential between yourselves, again in neighborhoods where condos compete with you, between yourself and condo rents today?
So, sitting rents?
Or are you talking asking Mario?
Uh, either.
Keep it rolling.
Speaker Change: Yeah, so I would say asking rents, so on our Toronto portfolio are about $3.30 a square foot.
Speaker Change: I mean, if you look at urbanization just for the broad City of Toronto, it's 450 a square foot for purpose-built rentals. So I think there's still a fairly significant differential. I think the other thing is just, you know...
Speaker Change: Our prospects are, you know, particularly at the higher end of that pricing, very sophisticated and value professional management. And I think that's kind of come to the forefront in recent years, so added value through that as well. And I think that's driving folks to the purpose-built rental market as well.
Speaker Change: Okay, so you think the 450 square foot broader market for Toronto is a fairly reasonable proxy for your specific neighbourhoods in the city?
[inaudible]
Speaker Change: Yeah, you know, I think, you know, no matter where you are, I think you're competing with Condo Mario, and folks are looking across the city, it's not just specific nodes oftentimes when they are making their choice, so with a broad brush, I think that's probably a fair high-level assessment.
Speaker Change: Okay, last one. On the incentives that were being offered, Paul, you talked about free parking and storage and select properties. In terms of free rent within the portfolio, what would be the breadth of free rent offering in your Toronto portfolio today as it presented to Toll Sweeps?
Thank you. Bye-bye.
TOTAL SUCCESS!
I mean...
Let's give him a question.
Speaker Change: It would be a fairly small portion, it would be a fairly small portion. I'm just thinking it's really based on availability and it's based on particular suite types and we are focused on those one beds still, even though I had mentioned we had made progress.
Speaker Change: I can tell you it's fairly consistent with what we saw in Q3.
Speaker Change: Sorry Paul, I just cut out. Fairly consistent with what you saw. Q3 is fairly consistent with what you saw in Q2.
Speaker Change: Q3 ticked up a little bit, but as we move into Q4, fairly consistent with what we saw at the end of Q3.
That's really helpful, Colin. Thanks.
Thanks, Mario.
Speaker Change: There are no further questions at this time. Please continue, Mr. Jonathan Li.
Speaker Change: Thanks very much, Operator, and wishing everyone a safe and happy holiday season, and looking forward to talking to everyone next year. Take care.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.