Q2 2025 Killam Apartment REIT Earnings Call
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Following the presentation, we will conduct a question and answer session. If at any time. During this call you require assistance. Please press star zero for the operator.
This call is being recorded on August 7th 2025, I would now like to turn the conference over to Mr. Philip Fraser President and CEO. Please go ahead.
Good morning, and thank you for joining killam apartment REIT second quarter 2025 conference call.
I'm here today with Robert Richardson, Executive Vice President Dale Noseworthy, Chief Financial Officer.
In theory, Cleveland Senior Vice President of Finance.
To accompany today's call are available on the Investor Relations section of our website under events and presentations I will now ask Aaron to read our cautionary statement. Thank.
Thank you Philip this presentation may contain forward looking statements with respect to kill them apartment, REIT and its operation strategy financial performance conditions or otherwise.
Actual results and performance of Killam discussed here today could differ materially from those expressed or implied by such statements such statements involve numerous inherent risks and uncertainties.
And although <unk> management believes that the expectations reflected in our forward looking statements are reasonable there can be no assurance that future results levels of activity performance or achievements will occur as anticipated.
Further information about the inherent risks and uncertainties in respect of forward looking statements. Please refer to <unk>. Most recent annual information form and other securities regulatory filings found on SEDAR.
All forward looking statements made today speak only as of the date, which this presentation refers and kill and does not intend to update or revise any such statements unless otherwise required by applicable securities law.
Thank you Eric we are very pleased with our strong financial and operating results for the second quarter of 2025.
Home delivery.
<unk> 32 per unit.
Six 7% increase from 30 <unk> per unit in Q2, 2024, we achieved six 7% same property NOI growth across the portfolio, which included $6 six same property NOI growth in our apartment portfolio pinpoint one same property NOI growth and our manufacturing.
For home community portfolio, and three 4% same property NOI growth for our commercial properties.
The multifamily fundamentals in Canada are still very strong and our same property of carbon occupancy at the end of the second quarter was 97, 5% slightly lower than the 97 eight in Q2 last year.
During the second quarter.
We made meaningful progress towards our strategic targets listed on slide three and we are on track to meet these targets by the end of the year, we remain very optimistic about the future of the Canadian and Permian markets, even if some markets see rental rates move down as supply catches up in the supply demand equilibrium of the particular.
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We will continue to focus on growing our earnings cash flow and the underlying value of our assets.
Dale will now take us through the financial results, followed by Robert who will provide an update on our commercial portfolio.
I will conclude with an update on our current and recent developments in our capital allocation strategy I.
I will now hand, it over to bill.
Thank you Phil key highlights to <unk> Q2 financial performance can be found on slide four <unk>.
<unk> achieved solid earnings growth in Q2, including an increase in same property revenue of 6%.
This topline growth reflects continued demand for apartments in our markets.
While many large metropolitan cities have experienced pressure at the top end of the rental market kilns portfolio has demonstrated its resilience and we continue to see rental increases above historic norms.
In the second quarter as seen on slide five we achieved a combined weighted average rental increase of six 1% was comprised of an average 13% rental lift on units, which turned in the period and an averaged three 7% increase on renewals.
In July we continue to see strong rent growth with 9% rental increases on turnover.
We're confident in our ability to meet our revenue growth target of 5% to 6% for 2025.
Our leasing teams are nimble finding there is strong demand for apartments when priced competitively.
We've seen an uptick in rental incentives as a percentage of total revenue in Q2.
Ontario accounted for almost half of the total incentives with the most significant increase attributable to <unk> 66, which was completed in 2023.
Alberta made up a third of the total incentives with the majority attributable to the lease up of Noland Hill phase two.
Killam aims to strategically maintain occupancy level by offering targeted incentives as required.
Use of rental incentives is expected to continue through the second half of 2025 and select markets and properties.
Kill them with Atlantic markets continued to outperform with New Brunswick, and Nova Scotia, leading the way in occupancy.
Rental rate growth and NOI growth looking ahead, we expect this trend to continue as killing the Atlantic Canadian portfolio benefits from a diversified portfolio offering competitive and affordable rental alternatives.
Slide seven includes our mark to market spread for the portfolio and by region Halifax in Kitchener Waterloo continue to lead with spreads over 20%.
Overall, we estimate our mark to market spread is 13% across the portfolio, which has come in over the last few quarters as asking rents have decreased slightly and following the quarterly rental rate increases achieved.
As expected we are seeing an increase in turnover. This year turnover a year to date is approximately 12% and we anticipate approximately 20% turnover for the year up from 18% in 2024.
In Q2 total same property operating expenses increased by four 5% as detailed on slide eight the most significant cost pressure in the quarter was property taxes up 5% due to higher assessed values and regional mill rates.
Utility costs moderated in Q2 up three 2% compared to seven 9% in Q1.
As we started to realize the impact of the removal of carbon taxes.
Despite higher quarter over quarter natural gas prices in the Maritimes.
After a 6% rise in utility and fuel costs. So far this year killam anticipates lower energy expense pressures for the rest of 2025 and enter 2026 <unk>.
The removal of carbon tax is estimated to reduce natural gas costs through to Q1 2026.
In addition, Killen continues to invest in solar panels, and energy management initiatives to maximize operating margins and offset inflationary pressures.
Year to date kill them same property NOI is up seven 2%.
We anticipate NOI growth closer to 5% during the second half of the year as rent growth gradually moderates overall, we expect same property NOI growth for the year to be above 6%.
As Phil noted, we generated <unk> per unit of <unk> 32 in the quarter up six 7% from the second quarter last year.
The increase was driven by strong NOI growth and the lease up of recently completed developments.
<unk> three most recently completed developments have contributed meaningfully to year to date performance, adding $2 7 million in <unk> growth compared to the first half of 'twenty four.
Offsetting these gains was higher interest expense compared to Q2 2024. However, the increase in interest expense is moderating with a smaller impact on earnings in Q2, this year compared to the increases experienced in 2024 due to lower balances on our credit facility combined with a decrease in variable interest.
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<unk> per unit was up 8% in the quarter to 27.
We expect <unk> growth to continue to exceed <unk> growth looking forward as capital from selling older properties is reinvested in newer more efficient buildings.
Slide nine includes average apartment mortgage rates by year versus prevailing CME C insured mortgage rates.
During Q2, Killen refinanced $94 6 million of maturing mortgages with $119 $2 million of new debt at a weighted average interest rate of three 5% to 2% as.
As part of our debt management strategy. We are actively increased our use of CMA sea insured mortgages at.
At the end of Q2 81, 5% of all mortgage debt across the portfolio with CMA sea insured compared to 94, 6% a year ago.
We expect to continue to increase the amount of CMA sea insured mortgages as non insured mortgages come up for renewal.
We're pleased to show another quarter of strengthening our balance sheet metrics as shown on slide 10.
At June 30 debt as a percentage of total assets was 39, 6%, which represents the sixth consecutive quarter of reducing our debt balance. We've also improved our debt to normalized EBITDA to 958 times.
I will now turn the call over to Robert who will discuss our commercial portfolio initiatives in more detail. Thank you Dale and good morning, everyone in the second quarter <unk> commercial.
Commercial portfolio saw a four 8% revenue growth driven by a 50 basis point increase in commercial occupancy to 94, 6% and higher rental rates on renewals.
Our Q2 2025 net effective rental rate on 17500 square feet of new leasing with $24 per square foot as.
As well for this quarter, we achieved a 16% weighted average increase in rental rates for 8000 square feet of renewing tenants year to date, we have leased 28400 square feet of new space and renewed 33600 square feet.
Tenants for a combined 62000 square feet of activity.
We continue to see strong leasing activity at our commercial properties, including Lulu Lemon first Prince Edward Island location at royalty crossing.
Further establishing royalty crossing the Charlottetown from key retail destination.
Additionally, we leased 17000 square feet for a 10 year term to the Prince Edward Island government for patient Medical care Center as well as the mental Health Alliance office. Consequently, we are now negotiating with a 2500 square foot pharmacy to support these medical services.
We have also signed two food users to 10 year leases for the ground floor retail space at our 171 suite Civic 66 property in Kitchener.
When killing required to 306000 square foot westbound place in Waterloo, Ontario in 2018, please see slide 12.
$16 six acres of development potential with the main attraction.
This and the fact that 82% or for 250000 square feet at a center had a weighted average lease term remaining.
Of eight four years with a following tenants sunlight with 197000 square feet law clause with 33000 square feet and Michaels with 20000 square feet made for a compelling purchase.
Sun life has formally advised killing.
It will vacate westbound place March 31, 2026, we have been working with a national commercial real estate brokerage since the start of 2025, and we are experiencing very strong leasing interest.
Active inquiries include insurance with technology companies professional office users a pharmacy, a grocer large footprint health and fitness users to name a few.
Potential tenants space requirements range from 10000 square feet to over 100000 square feet.
Based on the level of inquiries and given Westmount places prime location with proximity to Uptown Waterloo and surrounding University campuses.
Excellent parking and transit access crown.
Ground floor retail space, having 18 feet clear height width to loading docks and three upper office floors that have abundant natural light from Florida ceiling glazing performer sunlight premise.
Premise as much to offer.
Now that Sunrise lease is ending and sub letting us off the table, Kevin can better attract tenants canvassing the market for near or longer term leasing options.
Most recently late last month, Killen was able to respond to requests for proposals from a large international tenant that could take occupancy in 2026.
No response, yet, but we expect to hear back shortly.
Cylinders budgeting to replace our net operating income generated by the sunlight tendency within 18 to 24 months by leasing 50000 square feet by the end of Q2, 2026, and 50000 square feet each quarter thereafter until full ambitious.
Ambitious, yes, but we were ambitious when we bought 100% of royalty crossing in 2019 to 370000 square foot enclosed mall that was generating $2 2 million net operating income at that time.
Today, it is tracking to deliver $5 5 million.
Net operating income in 2025.
Let's vacant for 2026.
So sunlight space would cost.
Kill them approximately $3 million net operating income however, we expect to attract several high credit tenants before June 32026.
We will be in a better position to update you on our prospects. When we report in Q3 2025, I will now hand, you back to sell up to provide an update on our capital allocation strategy.
Thank you Robert.
During the second quarter, we completed the sale of 318 units and Gander in quarter Brook, Newfoundland for $18 $5 million with net proceeds of $14 $4 million.
And 128 units in Charles town, PDI for $15 $9 million with net proceeds of $9 2 million.
Subsequent to the end of the second quarter on July 3rd kill them sold a 60 unit townhouse complex.
To Kings Square Development Corp.
The nonprofit government funded charity for $9 million.
We expect to close the sale of a portfolio of properties by Friday, Upi to a local buyer containing 521 units for $81 9 million with net proceeds of $43 million.
This will effectively complete our pgi, a Permian disposition program.
Looking ahead to the remainder of the year, we have one firm agreement to sell 99 units and Saint John New Brunswick for $17 million, which is expected to close on or before the end of September 2025.
On July 22nd Killen purchased three buildings containing a 114 units with new Brunswick for $28 7 million from urge AUC properties, Inc.
Killam has purchased several other buildings from this vendors since 2011.
The property contains a mix of one two and three bedroom units with an average size ranging from 839 square feet to 600 square feet.
The average in place rent for the property is $345 per month.
<unk> 32 per square foot.
These units very desirable with a runway for strong organic growth.
On July 29th kill uncompleted.
The purchase of the remaining 50% interest in frontier latitude Lula apartment buildings located in Ottawa from our JV partner <unk>.
The combined purchase price was $136 million, which included the assumption of debt.
We are pleased to report that the first tenants moving during June and that it was substantially complete on July one as of today. The building is 60% leased.
As shown on slides 16, and 17 as kilns first all electric heating and cooling system building.
Using heat pumps and electricity. So theyre building does not require natural gas for day to day operations.
Which leads to higher margins and operational efficiencies.
As shown on slides 18, and 19 construction continues at Eventide are 55 unit building in downtown Halifax <unk>.
<unk> is expected by Q3 2026.
Slides 20 to 22 show progress to date at <unk> are 128 unit wood frame building located in Waterloo adjacent to our existing North field gardens property complete.
Completion is scheduled for June 2026.
Pre leasing for both developments will start in October.
In <unk>, we are working on a 95 unit development in Victoria Gardens in the 150 unit development at our Harlington present community. These developments will utilize taken land.
Our existing sites, creating additional density without displacing existing tenants.
Aimed to begin at least one of the above mentioned developments by the end of the year and we are looking to use ACO financing programs from CMA Sea, which reduces the overall development risk right.
By providing below market interest rate construction loans.
I would like to take a moment to discuss the.
The Kitchener Waterloo, Cambridge market, highlighting our investments in the region and its importance to our long term growth strategy.
We made our first investment in the region by purchasing two apartment buildings in may of 2010.
We have since grown our portfolio to nine properties, including West Mountain place.
These properties contain over 500 units of which we have built one third of them.
In addition to <unk>, we owned land in the region with the development potential to build over 200 units.
We have installed solar panels at five of these nine properties, which currently has a one two megawatts of capacity with an average electrical rate of 13 cents per kilowatt power plus HST. These projects are expected to yield over $180000 in utility coal.
Cost savings annually and their production represents approximately 25% of our common area electrical consumption in the region.
We plan to add solar panels at the other four buildings at Northfield Gardens, and Briarwood is shown on slide 23, increasing our total regional capacity to one eight megawatts, representing 30% of our common area electrical consumption in the region.
To conclude we are very pleased with our Q2 2025 performance, we remain committed to investing in high quality assets and developments executing our overall strategy and creating value for all our unit holders I want to thank our employees for their hard work and dedication I will now open up the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star key followed by the number one on your Touchtone phone you will hear a prompt at your hands has been raised should you wish to decline from the polling process. Please press the star key followed by the number Q. If you are using a <unk>.
Your phone please lift the handset before pressing any keys one moment. Please for your first question.
Your first question comes from Michael Makita of BMO. Your line is now open.
Thank you operator.
Just with respect to <unk> it looks like following the pending sale, you'll be down to about 150 units.
Bill I was just wondering if you could comment on your plan for the rest of the apartments are not in that market and then what that means if anything for royalty crossing as well. Thank you.
Yes, good morning, Mike.
Think once we do this transaction.
Today or tomorrow, we will only really have two apartments at three different locations 814, and a 60 unit.
So we're almost down about half of what you just said.
And with.
The plan is to basically run their motive them from the commercial side as the mall.
In terms of the future of the mall.
We're still working on that we still have huge opportunity in terms to add a little bit in terms of some pad space.
There is still a little bit of vacancy that you can see throat. So we're still working.
Turning to increase the NOI at that center.
Okay. So if I hear you correctly, you have got more runway to go with with royalty crossing.
But the remaining apartments there is the plan to to just divest those in the near future.
Are there any I mean, they are still on the list of sort of sell but I think this big transaction that really does reduce our.
Ownership, they are down to very little.
And in terms of the future of the mall, um, we're still working on that, we still have huge opportunity in terms to add a little bit in terms of um, some pad space.
Right, Okay that makes sense. Thanks.
Just.
Just with respect to the.
Um, there's still a little bit of vacants vacancy throughout so we're still working, um, trying to increase the noi at that Center.
Your renewal spreads I guess last year, we had seen a pretty nice healthy uptick in renewal spreads in Q2 versus Q1, just because of the large proportionate in Ontario, we didn't really see that this year.
But it seems like its total pretty healthy mark to market in.
Okay, so if I hear you correctly, you've got more Runway to go with, uh, with royalty Crossing. Um, but the remaining Apartments, there is the plan to, to just digest those in the near future, or
Certain markets, specifically, Halifax, and New Brunswick. So just curious if you could give some thoughts as to why we didn't see the same uptick in renewal spreads. This year that we did last.
Is there any? Oh yeah. I mean they're still on the the list to sort of sell but I think um this big transaction, it really does reduce our our um ownership there. Down to very little
While <unk>, New Brunswick plays a factor in that I'd say, because we didn't have rent restrictions in new Brunswick last year versus this year.
Right. Okay, so that makes sense. Thanks for that. Um, thank you just just with respect to the, um,
So that's part of it also when we look at Alberta, I mean, Thats one area that we know that.
The Mark to market is not as strong as it had been so although we don't have rent control there.
On the renewal it's not the same story as it was last year in terms of renewal.
Your renewal spreads, I guess, last year, we had seen a pretty nice healthy uptick in renewal spreads in Q2 versus q1, just because of the large proportion in Ontario. We didn't really see that this year but uh, it seems like you still have a pretty healthy Mark to Market in uh certain markets, specifically Halifax and New Brunswick. So just curious if you could give some thoughts as to what
So I think those are overall same with well I guess, we have control of our own controlling basis. So I'd say those are two of the factors that have changed compared to last year.
We see the same uptick in renewal spreads this year that we did last year.
And would you guys will be close to 5% on all hubs.
Yes.
Okay Awesome I'll turn it back thanks, so much.
Thank you.
Your next question comes from Jonathan <unk> of TD Cowen. Your line is now open.
Thanks, Good morning.
First question just on West place.
Yes.
Is there any sub leasing there right now.
Well, partially new bronze League, plays a factor in that, I'd say because we didn't have rent, um, restrictions in New Brunswick last year versus this year. Uh, so that's part of it. Also, when we look in Alberta, I mean, that's 1 area that we know that, um, you know, the mark to Market is not as strong as it had been. So although we don't have rent controls there, uh, on the renewal, it's not the same story as it was last year in terms of renewals. Um, so I think those are overall same with. Well, I guess we have control over and control in BC so I say those are 2 of the factors that have changed compared to last year.
It's an opportunity.
No no Jonathan Biller advantage suddenly fair enough.
And would you guys still be close to 5% on stuff in Halifax?
Okay.
Yes.
Okay and then what.
<unk> was sort of.
Okay, awesome. I'll turn it back. Thanks so much.
Thank you.
Budget do you have for leasing costs and <unk>.
Yes.
Just deciding that I want to share that information to tell you the truth.
Your next question comes from Jonathan kelter of TD Cowen, your line is now open.
So the market will demand what.
We have a mix of office and retail areas. So it will be different but overall I'd like to think that.
Thanks uh, good morning. Um, first question, just on Westmount place. Um, is his son? Is there any sub leasing there right now?
An opportunity for you.
We can get away with.
No, no Jonathan. There is any at least know.
Nothing more than a round number $10 million.
Okay.
That is helpful and then bill just on the.
Okay and then what's um as you lease this up, what sort of um budget do you have for for leasing costs and and TI?
The capital recycling.
I guess the real can stop wasn't really anticipated at the beginning of the year or maybe it was but how should we think about acquisitions versus dispositions or are you.
Are you going to be roughly equal as we go forward over the next.
Just deciding if I want to share that information to tell you the truth. You know, the market will demand what it's we have a mix of office and and Retail there. So it'll be different. But overall, I'd like to think that
I guess one to two years.
We can get away with.
The first part of your question Jonathan It wasn't anticipated.
Nothing more than for round number 10 million dollars.
But we're very happy to sort of look at that opportunity and ended up acquiring all of it.
Okay. Um, that is that is helpful. And then Phil just on the um
And I think again, we would have been seen a year ago that we got this plan for dispositions is the third year and so overall.
Over the three years, we've done about 2500 units.
300 <unk>.
Maybe.
Or $60 million of dispositions and.
Think about Acquisitions versus dispositions are are you, are you going to be roughly equal as we go forward over the next uh, I guess 1 to 2 years?
And so we have still opportunities to sort of sell a number of assets next year and we're almost back to what I would have been seeing a year ago.
Because again it will we will look at it once we do have that cash whether we have any money left on the line whether that whether we're looking at the in CIB or acquisition opportunities.
Um the first part of your question Jonathan um it wasn't anticipated um but we were very happy to sort of look at that opportunity and end up um acquiring all of it.
Okay.
If we skip ahead, a couple of quarters to your strategic targets for next year could we expect to see sort of sell X X dollars worth of non core assets.
And I think again, it's um, we would have been saying a year ago that, you know, we got this plan for dispositions and it's the third year. And so overall, uh, over the 3 years we've done about, um, 2500 units, you know about 300
An acquisition target creep back in there.
You know what it's a little early for that I think.
We will have a better understanding of what we wanted to do by the third quarter from them.
2026 acquisition.
Disposition targets.
And maybe, um, 40 or 60 million dollars of dispositions. And so, we have still opportunities to sort of sell a number of assets next year and we're almost back to what I would have been saying a year ago. Um, because again it will will look at it once we do have that cash. Whether we have any money left on the line, whether the then whether we're looking at the ncib or, um, acquisition opportunities.
Okay.
That's it for me I'll turn it back thanks.
Thank you.
Your next question comes from Jamie Shen of ODT capital market. Your line is now open.
RBC experts.
Okay. So if if I, if we skip the head, a couple quarters to your strategic targets. For next year, could be expected to see sort of sell x x dollars worth of non-core assets and a an acquisition Target. Creep, back in there.
Just with respect to.
Halifax rent.
The new builds I think you had mentioned is coming in north of 2500 girls in mind whats been the recent trend in market rents in terms of the new builds that you've seen.
Um, you know what, it's a little early for that, I think, um, we'll have a better understanding of what we want to do by the third quarter from um you know um 2026 acquisition or disposition targets.
And has it changed dramatically more or less than.
Okay, that's it for me. I'll turn it back. Thanks. Yeah, thank you.
Existing existing apartment buildings.
So sorry, just to clarify you're asking what in the market.
Your next question comes from Jimmy Champs of ODT Capital Market. Your line is now open.
Asking rents have been on new new supply delivered.
Correct.
RBC, I suppose, um uh, just with respect to uh, how the facts rent. Um,
Well being.
We hear that I mean, it's basically a lot of these would have pro forma is that are between 2000 2500, and the best that we sort of engages looking at their websites and see what the asking rents are for all these new products, our buildings and it kind of varies depending on the location and the size of the units.
The the new build I think you mentioned is coming in north of 2500 a month. What's been the recent Trend in Market rents in terms of the new bills that you've seen?
Is it changed dramatically more or less than um you know, existing the existing apartment buildings.
Right.
Basically we know that a lot of the new rents are over $2000 asking in the market and continue at that level.
Oh sorry, just to clarify. You're asking what in the markets? Um, asking rents have been on new sub new Supply delivered.
Correct.
Yes, I guess really what I was trying to get a sense of is whether or not you're seeing a little bit more pressure in the newer builds versus.
Well, I'm being
The existing product.
And certainly a trend that we're seeing here in China. So.
Any comment on with respect to that.
Okay.
we hear that. I mean, it's basically a lot of these would have Pro forhers that are between 2000 and 2500. And the best that we sort of engage is looking at their websites and seeing what they asking rents are for all these new products or buildings and it kind of varies depending on the location and the size of the units. But, um, you know,
I mean, I think we've talked about that the last few quarters and I think it continues that.
As we are asking more and people have more options. So I'd say.
Well, basically, we know that a lot of the new rents are over thousand dollars asking in the market and continue at that level.
There are some incentives being offered by competitors in the market and.
Even select at buildings in this market for us not very many but there are some.
I would say that.
There is more opportunity of course as the rents go down per rent growth. So.
Yeah, I guess really what I was trying to get, uh, a sense of is whether or not, uh, you're seeing a little bit more pressure in the newer builds, um, versus, uh, the existing product. Um, and, and certainly the trend that we're seeing here in Toronto. So,
any comment on with respect to that.
I would say theres more pressure at the top and then then more affordable and I would say, it's been felt pretty consistent for the last couple of quarters on that front.
Okay and within mortgage portfolio.
I mean, I think just, we've talked about this a lot quarters, and I think it continues that, you know, as we're asking more rents, people have more options. So, I'd say, you know,
Yep.
I would say that on the Newbuild various navy.
Bit of a slowdown in the pace of Liza.
So we're seeing that.
There are some incentives being offered by um competitors in the market. And, you know, even select a buildings in this market for us. Not very many but there are some um, and I'd say that.
On the peninsula less stone, but more if your suburban.
There's more opportunity of, of course, as the rents go down for rent growth. So, um,
They see a bit more pressure, but overall marketed absorbing the new product.
Okay.
That's helpful and then within your Halifax portfolio rental incentives.
I I'd say there's there's more pressure at the top end than than more affordable and I say it's been felt pretty consistent for the last couple of quarters on that front.
Okay. And within your portfolio. Yep.
Are there is that still fairly modest amount if any very modest.
I would say that on the new builds, there's Maybe
Okay.
Yes, most of the incentives we are seeing is on Ontario, and the west.
A bit of a Slowdown in the pace of Lisa.
So we're we're seeing that.
Right Okay.
And one more just looking at sorry, and just look at our average Brent that still is in the $15 95.
Hello.
On the peninsula less. So, but more, if you're Suburban, they they see a bit more pressure. But overall the market is absorbing the new product.
Yes.
Okay.
So quite a bit of a buffer.
Yes.
With respect to Carrick.
That performing in line with your budget.
It seems like this has been significantly on a pre leasing it seems like.
That's helpful and then within your Halifax, portfolio rental incentives. Um, are there a is that still fairly modest amount? Um, if any very modest.
Okay.
Leasing up reasonably well.
Yeah, most of the incentives we're seeing is on Ontario in the West.
Yes.
It is leasing up.
<unk>.
It's Lisa sorry, it's leasing up to our NOI pro forma budget for sure.
Right. Okay, and then just look at sorry. Just look at our average friend. If it still is in the 1595 in Halifax
And a lot of that has to do with it we really did start a lot earlier.
Yeah.
This is quite a bit of a buffer.
Then we have in the past and it really has made it a good sort of.
Yes. Um,
Sort of dent into the overall leasing program.
Okay Alright.
Alright, thank you.
With respect to Carrick um is that performing in line with your budget? Um it seemed like that it has been a significant amount of pre-leasing. It seems like
Thanks.
It's leasing up reasonably well.
Yeah, it is. It's it's
Your next caller is Kyle Stanley from des Jordan. Your line is now open.
It's leasing up bit. Um,
Thanks, Good morning, everyone maybe.
Maybe just building on Jimmy's line of questioning in Halifax like what are you seeing from the other operators today is there a general desire to preserve rate or is the focus really shifted.
It's leasing. Sorry it's leasing up to our our noi, proforma budget for sure.
To maintaining occupancy I'm, just trying to determine just given the fact that there are fewer mom and pop condo investors impacting that market relative to maybe some of the others how things progress in the next 12 to 18 months.
And a lot of that has to do with that. We really did start a lot earlier, um, than we have in the past. And it really has made it a good sort of, um, sort of Dent into the overall, uh, leasing program.
Okay.
All right. Thank you.
It's thanks.
Okay.
Your next caller is Kyle. Stanley from dejardin. Your line is now, open.
I think our preserving rate.
Thanks morning.
They don't have to come off it very much. So I think that that is our main goal is to preserve rate and the market seems to be cooperating for the most part.
Okay.
Okay. Thank you for that I.
I didn't see it in the in the presentation, but I think in the past you provided the turnover detail or the breakdown of leases turning.
Thank you everyone. Um maybe just building on uh Jimmy's line of questioning and Halifax like what are you seeing from the other operators today? You know is there a general desire to preserve rate or has the focus really shifted to to maintaining occupancy? You know, just trying to determine, you know, just given the fact that there's fewer mom and pop condo investors impacting, that market relative to maybe some of the others, like how how things progress in in the next, you know, 12 to 18 months.
And the length of stay but I was just wondering is there anything youre seeing in the market today that would suggest maybe the mix of suites that turns over over the next 12 to 24 months.
Hi, I think they're preserving rate.
Could skew a little more to the the ones with the deeper embedded rent or is the view that that kind of mark to market likely stays intact, and maybe rental levels settle a bit lower than where they are today, but still above kind of long term average as a result.
Is they don't have to come off it very much. So I think that that is the main goal is to preserve rate and the market seems to be cooperating for the most part.
I think it's pretty consistent with what we've seen in terms of approximately half of the turns have been.
Tenants for approximately a year. So when we look at what's happening as those units turn we probably have one of the 15% 20% some of them are rolling down.
Which is why we're seeing a decrease in our average that we're able to achieve that mark to market does look at those right that contemplates that when we're looking at that Mark to market of 13 that takes into account both units that we would at least in the last year that would be at or maybe some above market.
Thank you for that. Um, I didn't see it in the, um, in the presentation. But uh, I think in the past, you provided the, the turnover detail or the breakdown of of Lisa's turning. Um, and and the, the length of stay, but I was just wondering, is there anything you're seeing in the market today? That would suggest maybe the mix of sweets that turns over over the next 12 to 24 months, you know, could skew a little more to the, the ones with the deeper embedded rent or is the view that, you know, that that kind of Mark to Market likely stays intact and maybe rental levels settle a bit lower than where they are today, but still above kind of long term average as a result.
But very little if any really rolling down and Halifax are.
Great and I think <unk>, asking about Hello, sorry, sorry, you're right.
Okay.
That's very helpful.
And maybe just the last question.
I think that there is a lot of talk on obviously the revenue growth outlook is still very healthy, but slightly lower than its been over the last few years.
But it looks like Opex will be the lever over the next maybe year or two that can help enhance NOI growth. So I'm just thinking I'm just curious what's your outlook for Opex as we kind of get into 2020 Jackson what.
I think it's pretty consistent with what we've seen in terms of approximately half of the turns have been tenants for approximately a year. So when we look at, um, what's happening as those units turn, we probably have. What is it 15 to 20%? Some of them are rolling down, um, which is why we're seeing, you know, a decrease, in our average that we're able to achieve that Mark to Market does look at those, right? That contemplates, that when we're looking at that Mark to Market of 13 that takes into account, those units that we would have least in the last year, that would be at, or maybe some above Market.
Um, but very little, if any really rolling down in Halifax. Oh, agreed. And I think Kyle's asking about. Oh, sorry. Sorry, you're right.
Are you doing on what more could you potentially do to help with that.
Yes, I mean, I think when we look forward to next year from a utility perspective, but the removal of the carbon flat from having that benefit in Q1 2016 would help.
That we would see that overall utility expense to be lower than what we had this year. The reminder of this year was a very cold winter as well year over year He may benefit.
Yep. Okay, no, that that's, uh, that's very helpful. Um, and maybe just the last question. Um, you know, I think that there's a lot of talk on, obviously, the revenue growth Outlook, and it's still being very healthy but slightly lower than it's been over the last few years.
From that I think on the regular operating expense side theres still opportunities within our portfolio no.
Close to close to manage those expenses and then property taxes that one.
But it looks like Opex will be the lever over the next maybe year or 2 that can help enhance analy growth. So I'm just thinking or just curious, you know, what's your outlook for Opex? As, as we kind of get into 2026 and you know what?
Are you doing or what more could you potentially do to help with that?
Always up in the air but.
I think there may be a bit of opportunity. We're hearing maybe some assessments may fall in certain region Baltimore flat next year, so you'll see that compress a bit as well. So I think there is opportunity and we look to 2006 compared to where from coming in today, even insurance is actually we just start with how to win.
A win on insurance in terms of rate coming down we haven't seen that in.
Quite a while so.
That we're starting to see more leveling off of expense pressure.
Carl The last thing is just as I was talking on the sort of the first part of the call every time, we do a solar installed is reducing those operating expenses on the electricity side and they do save money long term and they do it soon.
Get them up and running so highlighting what we've been doing.
And basically the Kitchener Waterloo is a big plus.
Obviously, we had solar panels and <unk> that we will no longer own, but we're quickly sort of back filling that from a company wide point of view, we've got a number of them are going into new Brunswick right now and also our west in Alberta. So all of that just has a plan to reduce the overall consumption and cost on.
Starting to see more leveling off of expense pressure.
Our expense so that we can control.
And margin expansion to like with the sale NPI, we've seen that margin move up nicely and that should continue to grow which is really going to help in terms of making its way to the NOI line.
Exactly right.
Okay. That's a good point. Thank you for all that very helpful. I will turn it back.
Your next question comes from Matt <unk> of National Bank Financial Your line is now open.
Hey, good morning, guys I apologize if I missed it but is it possible to give a ballpark cap rate on the dispositions.
Yeah and then Kyle the last thing is just as I was talking on the the sort of the first part of the call, every time we do a solar install, it's reducing those operating expenses on electricity side and they do save money long term and they do it as soon as you get them up and running. So highlighting, what we've been doing in and basically the kitchen Waterloo is a big plus um obviously if we had solar panels in PEI that we will no longer own but we're quickly sort of backfilling that from a company line. Point of view. We've got a number of them going in in New Brunswick right now and also a West in Alberta. So all that just is a plan to reduce the overall consumption and cost on their expense side that we can control.
Hi.
Sure five to seven.
That's pretty precise ballpark okay. Thank you.
Margin expansion, too, like with the sale and Pei. You know, we've seen that margin move up nicely, and that should continue to grow, which is really going to help in terms of making its way to the NOI line.
And then just on the Capex side again second quarter in a row, where it's been lower it looks like it's mostly in the building improvements and other not necessarily the sweet area, but that's one thing.
Exactly, right. That's that's okay. That's a that's a good point. Thank you for all that very helpful. I will turn it back.
May your next question comes from, Matt cornick of National Bank Financial. Your line is now open.
That's a function of.
The age of the portfolio or is there a proactive.
Approach to kind of spending less on building improvements at this point.
Good morning, guys. I apologize if I missed it, but is it possible to give a ballpark cap rate on the dispositions and PEI?
um, sure 5.27
Oh sure sure.
Yes.
Did you say that again.
Just in terms of Capex. It seems like building improvement spend down in total capex this year relative to last year, but.
That's a pretty precise ballpark. Okay, thank you. Um, and then, uh, just on the capex side again, second quarter in a row where it's been lower. Uh, it looks like it's mostly in the the building Improvement and other not necessarily sweet area. But is that something?
Relative to kind of historic norms as well.
Just interested in what's driving kind of the lower capex spend at this point.
It's just the timing of the projects.
That's a function of the age of the portfolio, or is there a proactive approach to kind of spending less on building improvements at this point?
We'll finish the year very similar to the.
The last two years in terms of total investment on capital.
Oh, all right. Yeah.
Okay Fair enough and then on on suite repositioning I know in the past you've kind of broken out.
Did you say that again?
The rents you're achieving on.
Kind of standard turns versus the territory youre, putting a little bit of Capex into suite renewal can you give us a sense of the.
Oh, just in terms of capex, it seems like building improvements spend is is down. And I mean, total capex is down, um this year relative to last year, but its relative to kind of historic Norms as well. Uh just interested in in what's driving kind of the the lower cap expense at this point.
How that looks today and your desire or plan to do more or less kind of sweet investment.
Going forward.
Yes, I think we are.
It's just the timing of the projects, we will finish the year, very similar to the last 2 years, in terms of total investment on Capitol.
40% to 50% rent growth in terms of those repositioning.
And there are still opportunity for those I think we will end around $2 50. This year. So but we are we're looking to make sure that that capital investment that we get the return compared to we did a little bit less but we could get so but the ramp and we've done about half of that so far this year, yes. Okay.
Maybe last one I mean, we've gone through a period, where you had outsized rent growth I don't think anybody expected that that would last forever.
Okay, fair enough. And then on on Suite, uh repositioning I know in the past, you kind of broken out, uh the rents you're achieving on uh kind of standard turns versus the turns, where you're putting a little bit of capex into sweet renewal, can you give us a sense as to how that looks today and and your desire or plan to do more or less kind of sweet investment going forward.
yeah, I think we're, you know,
As you think see things kind of normalizing.
Like what is your expectation that the inflation, let's call it two 5%.
Wherever you think rent growth kind of stabilizes that over a medium term basis.
I think three to four.
Medium term.
Okay.
Yeah.
I won't hold you to that but it seems reasonable.
For next year, but looking out a few years, that's where I would expect.
I appreciate it I'll turn it back thanks, Sir.
Okay.
Your next question comes from Mark Rothschild from Khanna of Canaccord Genuity. Please go ahead.
40 to 50% rent growth in terms of those repositioning. And if there's there are still opportunity for those. I think we will end around 250 this year. So but we are, you know, we're looking to make sure that that capital investment that we get the return compared to, uh, if we did a little bit less, what we could get. So, but the rent, uh, and we've done about half of that so far this year. Yeah, thanks maybe. Last 1, I mean, we've gone through a period where you've had outsized rent growth. I don't think anybody expected that that would last forever. Um, but as you think see, things kind of normalizing, like, what is your expectation? If inflation is called a 2 and a half percent to where, where would you think the rent growth kind of stabilizes that?
Medium-term basis.
Thanks, Dan.
I think 3 to 4.
Morning, guys.
Medium-term.
With construction costs coming down in general are you seeing this impacting yields at all on development projects and.
I don't know.
With this possibly lead to maybe a greater emphasis on investing even more in some new projects in the near term.
I won't hold you to that but it seems reasonable know not not for next year but looking out out a few years that's where I would expect.
Appreciate it. I'll turn it back. Thanks.
It can depending on where it's located but also in some locations.
Your next question comes from Mark Ross.
If the cost are going down or you're switching from concrete to wood youre basically even if you've targeted a five all cash yield.
Please go ahead.
With lower cost per door. It just means that you are asking rents starting out has been much lower and easier to sort of be absorbed and more affordable.
Thanks and uh good morning guys um with construction costs coming down in general. Are you seeing this impacting the yields at all on on development projects and
And again, if you're tapped.
Tapping into the <unk> C programs, where there is going to be a component of affordability and then it just makes that overall project got much easier to start to build from a financing construction costs and then a fully leased.
Investing even more in some new projects uh in the near term.
New building.
Okay, Okay, I understand that and then just maybe one other question.
It seems like the potential for a turnover increase.
Is this something that you think is likely to happen and would it be market dependent or property.
Age maybe quality of building dependent and how do you see that impacting perhaps your revenue growth over the next year.
Sorry, Mark what was the first part of that question turnover. It just it seems like there's potential for turnover to increase overall I'm curious if you are actually seeing that or expecting that to happen and how would that vary by market and maybe Asia building.
Um, it can depending on where it's located, but also in in some locations, um, if the costs are going down or you're switching from concrete to Wood, you basically, even if you target a 5 all cash yield, um, with lower cost per door, it just means that you're asking. Rent, starting out is that much lower and easier to sort of be absorbed and more affordable. And again, if you're tapping into the cmhc programs where there is going to be a component of affordability, and then it just makes that overall project that much easier to start to for to, to to build and from a financing construction cost, and then a fully leased out, uh, new building.
Yes, I think your first comment we are seeing where we went down from our pre call that 33% down to 18% last year, and we think we're going to be around 20%. This year. So thats the bottom for us and we're starting to trend upwards.
Like I understand that and then just maybe 1 other question. Um, it seems like it's potential for a turnover to to increase. Um, is this something that you think is is likely to happen? And would it be markets dependent or property? Um, age, maybe the quality of building dependent and how do you see that impacting? Uh, perhaps your Revenue growth over the next year?
And again, if youre looking to break that up obviously I think the highest turnover is still in the Alberta market because at one time that was 50%.
Ontario, probably be on the low end and we are just starting to trend up.
Um, sorry Mark, what was the first part of that question? Turnover – it just seems like there's potential for turnover to increase overall. I'm curious if you're actually seeing that or expecting that to happen. And just how would that vary by market and maybe agent building?
And again in the pit.
Maybe just a quick clarifying about following up on that do you see that potentially helping your revenue growth.
Pick up on next year, maybe offset slower rent growth.
It will in Atlantic, Canada, because again, a lot of the sort of the turnover will be units, where we do have a good healthy mark to market for sure.
Yeah, I think, I mean, your first comment, we are seeing where we went down from our preco at 33% down to 18% last year, and we think we're going to be around 20% this year. So that's the bottom for us and we're, and it's starting to sort of trend upwards. And, and again, if you look in to break that up, um, obviously I think the highest turnover is still in the Alberta Market because at 1 time, that was 50%, um,
Okay, great. Thank you so much.
Thank you.
Your next question comes from Gaurav mature of Green Street. Your line is now open.
Ontario will probably be on the low end, and we are just starting to trend up in Montana.
Thank you and good luck.
Everyone.
Just one question from me just given the conversation around moderating rent growth.
Maybe just clarifying that or following up on that. Do you see that potentially, um, helping your Revenue growth. Um, pick up on the next year maybe offset, um, slower rent growth.
Could you perhaps.
Tell us where you expect mark to markets to be by the end of the and what.
Um, it will in the land of Canada because again, a lot of the sort of the, the, the turnover will be units where we do have a, a good healthy Mark to market, for sure.
And what that effect would be on $10 eight so as well.
Okay, great. Thank you so much.
I mean, I think if were at 13% now I'll add as we continue to rent growth and if we assume market rents stay relatively stable maybe they now over the next.
Thank you.
Your next question comes from goral. Matera of Green Street. Your line is now open.
Six months, we could end the year, maybe it's 12% Mark to market I would say would be my guess and then impact on turnover I mean, I think that what we're seeing now is still just talked about I think we'll end up just over 20%.
We're already seeing.
The impact people have choice today, where they didn't have a year ago two years ago. So.
Thank you and good morning, everyone. Um, just 1 question from me, uh, just given the conversation around moderating rent growth. Uh, could you perhaps, uh, you know, tell us where you expect Mark to markets to be, uh, by the end of the year and, uh, and what what that effect would be on turnover rates as well.
And people can move in and find a place to live. So I think we're already seeing that impact I don't see a big change.
In the next six months.
Alright, Thank you very much I'll turn back to the operator.
Your next question comes from Michael Makita of BMO. Please go ahead. Thanks.
Thanks, Operator, just a couple of follow ups for me.
I might be reading too much into those two I think you said, 3% to 4% sort of your guesstimate for medium term rental growth, but you said not next year and I'm. Just curious if not next year means better than 3% to 4% or more than 34%.
May I think if we're at 13% now, I would, as we continue to rent growth and if we assume Market rents, stay relatively stable, maybe they, you know, over the next, um, 6 months, we could end the year, maybe it's 12%. Mark to Market I'd say would be my guess and then impact on turnover. I mean I think that what we're seeing now is we'll just talked about, I think we'll end up just over 20% and you know we're already seeing
The impact people have Choice today where they didn't have a year ago, 2 years ago. So um, you know, people can move and, and find a place to live, so I think we're already seeing that impact. Um, see a big change.
I think 26 will be better than three to four okay im not as a measure of small Craig.
In the next 6 months.
Right, thank you very much. I'll turn back to the operator.
Yes, our budgets, especially when we look at like when we look at revenue growth because we are.
As we start even this quarter, we're already going to benefit half of the year next year for what we're doing currently.
Your next question comes from Michael Marketo of BMO. Please. Go ahead.
So that's why I think it takes a little while.
Maybe even two years ago.
Yes.
Okay.
I appreciate that thanks makes.
Makes sense, Okay, and then just maybe circling back to Westmount I guess, if I do the math I think you said $3 million of NOI on the 190 <unk>. So that's all.
Thanks operator. Um, just a couple of follow-ups for me. Yeah. Like I might be reading too much into this, but I think you said 3 to 4% sort of be your guesstimate for medium-term rental growth but you said not next year and I'm just curious if not next year. Means better than 3 to 4% or lower than 3 4 percent.
Oh, I think 26 will be better than 3 to 4.
Net rental maybe just a little over 15 box you gave us sort of a ballpark Rob on Capex, but I'm. Just wondering if you could give us sort of a ballpark on where you expect.
French to actually come out.
Okay, I'm not as nice as not, right? Because we're yeah, I will apologize to that. Especially when we look at like, when we look at Revenue growth because we're, you know, as we start, even this quarter, we're already going to benefit half the year next year for what we're doing, currently.
It's also on them.
So what we know in that market the office franchise.
On a gross basis between say, 30% and $32.
On a retail basis that would be excuse me.
Okay.
A 25% to 35.
So that's why I think it takes a little while. Yeah, it's it's maybe even 2 to years out. Yeah. Okay, no. Uh, I appreciate that. Thanks, uh, makes sense, okay. And then just, um, maybe circling back to West Mount, I guess if I do the math, I think you say I said 3 million of noi on the 1 1977 so that's a
And we think that the marks in the market.
What we're seeing right now on the retail side, we're told that the market's about 55% vacant. So we think we can.
Just a little over 15 bucks. Um, you gave us sort of a ballpark Rob on capex but I was just wondering if you give us sort of a ballpark on where you expect uh rents to actually come out. Uh once it's all said and done,
Get to the higher end of that range.
And we have 90000 square feet on the ground floor at this building so there's a real opportunity there and we have a number of inquiries that are geared towards the retail side. So we'll see how that plays out on the office side. We also have quite a few inquiries in fact, we would have made.
um, so what we know in in that market, the office rent is
On a growth basis between $30 and $22.
On a retail basis, it would be, excuse me.
A 25 to 35.
Our response to a request for proposals last week and.
And we think that the marks the market,
It was for a tenant that's over 100000 feet. So.
We're in the range of the market for us.
what we're seeing right now on the retail side, we're told that the Market's about uh, sorry, 5% vacant. So we think we can
Working with the existing rent the delta should be.
Get to the higher end of that range.
The 25% to 50% higher.
When you talk about the net rent.
No that's that's.
Really useful thanks for that so I guess, presumably.
Because I'm just looking at where those sits on the sausage, it's better for you to re lease it as commercial space then to incorporate it and try to get zoning for additional multi.
And we have 90,000 square feet on the ground floor of this building, so there's a real opportunity there. We have a number of inquiries that are geared towards the retail side, so we'll see how that plays out. On the office side, we also have quite a few inquiries. In fact, we would have made...
So the overwhelming.
Yes.
That building is valuable and so not free.
Frankly from a green perspective, it's definitely the right thing to do and so we're happy to work with it.
Uh, a response to a request for proposals last week, and, um, it was for tenants. That's over 100,000 square feet. So, um, we're in the range of the market for us, um, working with the existing rent, the Delta should be.
The 25 to 50% higher.
The former tenants on life maintained at a very well and as a massive generator. So it's something we can work with them and we're seeing like I say.
When we talk about the net rent,
A lot of inbound calls about what we can do there we're pretty we're pretty optimistic.
Okay, and then just given the cadence of the.
I guess, it's just the plan at this juncture, but it sounds like the 3 million annualized impact that certainly won't be what you expect to it too.
No, that's, uh, that's really useful. Thanks for that. So I guess, presumably, um, because I'm just looking at where this sits on the side, it's better for you to release it as commercial spinning, spin to incorporate it, or try to get zoning for additional multi. And so, the overtime there.
For a full year basis, because like I say, we've at the end of them.
March.
Do you expect to get some leasing done in Q2, and then sort of accurate bear out.
Right the tenants in place until the end of March So that's good and we're in the market talking to a number of potential tenants. So we'd like to think we can get that done and I would say.
Yes, yeah. That that building is valuable and so not that, you know, and frankly from a green perspective, it's definitely the right thing to do. And so we're we're happy to work with it. Um, the former tenants on life maintained it very well, it has a massive generator. So it's something we can work with. And, and we're seeing like I say, uh, a lot of inbound calls about what we can do there. We're pretty, we're pretty optimistic.
In terms of the ability to execute here I do look at royalty crossing and we've done a tremendous number of deals there over the last four years five years and.
So we have the ability to do it and and we've proven it. So we're looking forward to this opportunity and.
And again the other thing Mike it's been a very interesting exercise over the last couple of years.
Okay. And then, just given the cadence of the, you know, what your pro and I, I get it. It's just a plan at this juncture, but it sounds like the $3 million annualized impact certainly won't be what you expect to do over a four-year basis, because I guess they leave at the end of March. And then you can expect to get some leasing done in Q2 and then stagger their out.
With the current retail that we have an office in the demand because of the location.
And taking that and comparing it to what we want to do from a from a development on the apartment side. So we've owned it now for almost eight years seven years.
Right, the tenants in place until the end of March. So, that's good. And we're in the market talking to a number of potential tenants. So we'd like to think we can get that done. And I would say,
And we finally got the first building up and open.
We've got plans for and the drawing.
Short term long term phase II and phase III, and we know that we will have enough land to do our 200, plus the building and we've got up and running so it is just the both how we phases and what type of tenants that we want there and how that complements what we're going to be doing on the multi res side, which is our main business.
And overall, we just think that.
<unk>, we didn't know when we bought this center years ago. This is a very good location. So that helps a lot.
I highlighted one margin.
Mike.
When you take a look at the vacancy indicated in the K WC area, it's north of 20% call it 22%.
<unk>.
This asset is located in Waterloo core and it only has three 5% base and Thats about 50000 feet and.
in terms of the ability to execute here, I do, look at royalty Crossing and we've done a tremendous number of deals there, over the last 4 years, 5 years. And um, so we have the ability to do it and, uh, and we've proven it, so we're looking forward to this opportunity. Yeah. And again, the other thing, Mike, it's it's, it's been a very interesting exercise over the last couple of years, um, with the current retail that we have in office in the demand because of the location. Um, and taking that, and comparing it, to what we want to do from a re from a development on the apartment side. So we've owned it now for almost 8 years, 7 years. And, uh, we finally got the first building up and open. Uh, we got plans for, you know, in the drawing, um, short term, long term of phase 2, and phase 3. And we know that we will have enough land to do our 1200 plus the building that we got up and running. So it's just about how we phase this in what type of tenant that we want their
We're not aware of another block of available vacancy.
That is as large as ours that call for a round number 200000 feet. So that may be one of the drivers for some tenants to say.
and how that complements, what we're going to be doing on the
That can work for us and we'd like to take a look at it.
And the 200000 square feet. That's all office because I think you said there were some retail ground for opportunity there as well so.
It's a mix actually the ground floor.
Highlight one more thing on the site, Mike, that when you take a look at the vacancy in the KWC area, it's north of 20-22%. But this asset is located in the Waterloo core and it only has a 3.5% base.
The ground floor of this building was originally.
and that's about 50,000 feet, and
It was a model, but I'm trying to think of the retail the main retail tenant.
Sure.
Yeah. So.
It has that square footage and then it goes up the next three floors are 34000 feet. Each so you've got 100000 feet there and you get the 90000.
Their we're not aware of another block of uh available vacancy that is as large as ours that call for a round number 200,000 ft. So that may be 1 of the drivers for some tenants to say you know what that can work for us and we'd like to take a look at it.
The retail side.
We have flexibility.
Okay got it.
There's the 200,000 square feet, that's all office because I think you said there's some retail ground floor opportunity there as well. So is there a
Okay, and just from an accounting perspective, while youre going through the re leasing.
Will you be able to capitalize the opex, while youre re tenant at that property.
I don't know if you have an answer for that at all.
So very good question Nathan.
<unk>.
We're looking into it.
Okay Alright.
Alright.
Thank you.
There are no further questions at this time I will now turn the call back over to Philip Fraser. Please continue.
The ground floor of this building was originally a mall. So I'm trying to think of the retail, the main retail tenant for groceries. Yeah. So it has that square footage, and then it goes up. The next three floors are 34,000 sq. ft. each, so you get a total of 100,000 sq. ft. there, and you get the 90,000 sq. ft. on the retail side. So we have flexibility.
Thank you. This concludes <unk> Q2, 2025 analysts call. Thank you for listening and participating today, we look forward to reporting our Q3 2025 financial results on November five 2000.
Okay, got it. Um, okay, and just from an accounting perspective, while you're going through the really soon side, will you be able to capitalize the Opex? Uh, while you're retaining that property, it's technical deal? I don't know if you have an answer for that or not.
25.
It's a very good question. Stay tuned.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
We're looking into it. Yeah.
Thanks so much. All right.
Thank you.
There are no further questions at this time. I will now turn the call back over to Philip Fraser. Please continue
Thank you. This concludes kilms Q2 2025 and let's call. Thank you for listening and participating today. We look forward to reporting our Q3 2025 Financial results on November 5th.
2025.
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect