Good morning. Welcome to the Automotive Properties REIT 2021 second quarter financial results conference call and webcast. My name is Michelle, and I will be your conference operator today. At this time, all lines are in listen only mode. Following management remarks, we will conduct a question and answer session. Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the REIT's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties, assumptions relating to forward-looking information, please refer to the REIT's latest MD&A annual information form, which are available on SEDAR. Management may also refer to certain non-IFRS financial measures.
Although the REIT believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Again, please refer to the REIT's latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on Tuesday, August 12th, 2021. I would now like to turn the conference over to Mr. Milton Lamb. Please go ahead, Mr. Lamb.
That's great. Thank you, Michelle. Good morning, everyone, and thank you for joining us. With me today on the call is Andrew Kalra, our Chief Financial Officer. While the automotive dealership industry, including our tenant group, continue to operate under COVID-19 related business restrictions, during Q2, automotive retail sales continued to rebound with significant year-over-year growth to date in 2021, reflecting the resiliency of the industry. According to DesRosiers Automotive Consultants, new automotive sales in Canada were up 33% for six months ending June 30th, compared to the same period last year. This rebound demonstrates the success of the dealership operators in responding to COVID related business restrictions with enhanced e-commerce solutions, customer service offerings, and streamlined operations, combined with the impact of pent-up consumer demand for both new and used vehicles.
Our portfolio remains fully leased, and we've had 100% contractual base rent collection under our leases, plus contractual base rent that was due under the deferral agreements. We generated growth across all of our key performance measures in the quarter. In comparison to Q2 of last year, our property rental revenue grew by 4.1%. Cash NOI increased by 8.6%. Same property cash NOI was up 1.1%, and AFFO per unit diluted increased to CAD 0.221 from CAD 0.205. At quarter end, our debt-to-GBV ratio was 41.3%, down from 43.2% at 2020 year-end, and 44.4% at the end of Q2 last year. We remain well positioned to deploy capital on growth opportunities. The capitalization rate applicable to our entire portfolio was 6.5% at quarter end, a reduction of approximately 10 basis points from Q1.
The reduction of the capitalization rate in the quarter reflects a decrease in discount rates for our properties in the greater Toronto and Montreal areas by approximately 20 basis points during the quarter, primarily due to industry-wide single tenant retail and industrial capitalization reductions. This represents an increase of approximately 2% in IFRS value for our investment properties. As provincial COVID-19 related restrictions continue to ease, we anticipate the pent-up consumer demand will continue to support Canadian new and used auto sales, plus service work performed by our dealerships, providing greater certainty for dealership operators to shift from a defensive strategies towards growth. While the pandemic has also impacted the vehicle supply chain, resulting in constraints on specific parts, models, and brands, we believe these supply constraints are temporary and will not have a material impact on our tenants.
Further, these supply constraints are offset by the strength of dealer margins. The strong performance of the industry and the strength of our portfolio has resulted in continued favorable support from our lending partners. In Q2, we expanded and extended one of our credit facilities to a total of five years to 2026. I'd now like to turn it over to Andrew Kalra to review our financial results and position in more detail. Andrew?
Thanks, Milton. Good morning, everyone. Our property rental revenue for the quarter totaled CAD 19.6 million. The 4.1% increase from Q2 2020 reflects growth from properties acquired subsequent to Q2 last year and contractual annual rent increases. Total cash NOI and same property cash NOI for the quarter totaled CAD 16 million and CAD 15.3 million respectively. Reflecting increases of 8.6% and 1.1% compared to Q2 a year ago. Growth in cash NOI was primarily attributable to acquisitions, contractual rent increases.
Growth in same property cash NOI primarily reflects contractual rent increases. G&A expenses for the quarter were approximately 7.4% of cash NOI compared to 7% in Q2 last year. The higher G&A expense in Q2 this year was attributable to the REIT's growth to the vesting of the previously issued deferred units. Net income for the quarter was CAD 17.9 million, compared to a net loss of CAD 23.4 million in Q2 last year.
Positive variance was primarily due to higher NOI, fair value adjustments for the investment properties which Milton just discussed, fair value adjustments to Class B LP Units, and unit-based compensation. FFO, AFFO for the quarter increased by 10.2% and 11.5% respectively compared to Q2 last year. Excuse me. FFO per unit diluted was CAD 0.236 in the quarter compared to CAD 0.222 in Q2 a year ago, and AFFO per unit diluted increased 7.2% to CAD 0.221 from CAD 0.205 in Q2 a year ago. These growths was primarily due to properties acquired subsequent to Q2 a year ago, bad debt reversal related to the tenant receivables, and contractual rent increases. REIT paid total distributions of CAD 9.85 million, or CAD 0.201 per unit in the quarter, representing an AFFO payout ratio of 91%.
This compares to total distribution paid of CAD 9.6 million or CAD 0.201 per unit in Q2 last year, representing an AFFO payout ratio of 98%. The AFFO payout ratio was lower this quarter, primarily due to bad debt reversal related to the tenant receivables and contractual rent increases. The higher AFFO payout ratio in Q2 2020, last year, also reflected the temporary dilutive effect of the December 2019 equity offering. As at quarter end, we had a strong financial and liquidity position with approximately CAD 8.2 million of cash on hand, CAD 75 million of undrawn credit facilities, seven unencumbered properties with an aggregate value of CAD 101.4 million, providing us with additional financial flexibility and a debt to GBV ratio of 41.3%. We had CAD 401 million of outstanding debt at quarter end, with an effective weighted average interest rate of 3.73%.
We have a well-balanced level of annual maturities and our weighted average interest rate swap and mortgage term is 5.5 years. The weighted average term maturity of debt increased to 3.3 years from 2.7 years in Q1 this year, which was a result of the extension and increase of one of our credit facilities. I'd like to turn the call back to Milton for his closing remarks. Thank you very much.
Great. Thanks, Andrew. We've continued to collect 100% of our rent in July and August of 2021, plus rent due under the deferral agreements. We've not received any additional deferral requests. With business restrictions easing on our tenants, in line with significant increase with vaccinations for Canadians, the strength of our auto industry, and economic conditions stabilizing, we feel confident that industry consolidation has started to accelerate and we should be presented with attractive opportunities for us to continue expanding our portfolio and drive growth in AFFO per unit. Given our strong balance sheet position, we can pursue acquisitions on a strategic basis through debt financing and available liquidity. We believe we are also better positioned to access capital through the equity markets at this time. This concludes our remarks, and we'd now like to open the lines for questions. Michelle, please go ahead.
Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear three tone prompt acknowledging your request, and your questions will be pooled in the order they are received. Should you wish to decline from the pooling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Your first question comes from Scott Fromson from CIBC.
Thank you, operator, and good morning, gentlemen.
Good morning.
Given that it's a pretty uneventful quarter.
Which is good. I would turn attention to acquisitions. Obviously you're doing what you can within the context, but just wondering, given the cap rate compression in the major urban markets you're looking at?
Yep.
I'm thinking Toronto, Vancouver, and Montreal. Are you having a hard time making deal economics work? Are dealership owners hanging onto properties until retirement when they can sell the whole package, including potential rezoning for the real estate?
A couple levels on that question. The first one is, interest rates, cap rates are very low right now. That doesn't tend to be what's getting in our way. We are starting to see and expecting to hear some deals within the dealership community announced. The activity we thought would start unfolding in the back half of 2021 and into 2022, we're still confident that is going to start to unfold. That's more when we get the opportunities as opposed to buying existing marketing assets. A lot of the stuff we buy is off-market associated with M&A. Certainly the Toronto, Montreals, Vancouvers, the cap rates across all industries seem to have gone down. That's part of the reason why we reflected a bit of that in this quarter.
The second part with regards to retirement development, we've always said that if it's imminent development, dealers face a conundrum on do they sell their operations and real estate, or do they just collapse the dealership and then sell the asset for immediate redevelopment? We don't tend to play in the world where someone's going to collapse their dealership and develop it right away. That's going to go at a cap rate that is low single digits, kind of 1% or 2% holding income and then developed. That's really not our business. We certainly like lands that have a higher and better use underlying, but they tend to be on mid to long-term leases if we do a sale-leaseback. Dealers are always faced with the conundrum, do I sell the package and get value for operations and value for real estate?
In certain locations, is the value of the real estate just too great, and therefore they sell it specifically for higher density use.
Thanks. That's helpful. Just a follow-up on the sale of ongoing businesses where they're not looking for rezoning opportunities. Do you see dealers having a tough time making their own economics work just due to the higher rent payments that would be needed to support lower cap rates?
Well, the lower cap rates probably actually helps their rental income. Sorry, their rent overhead for obvious reasons. Yeah, the price for acreage in a Toronto, Vancouver, Montreal is not minimal. It's gone up and will continue to go up. You're starting to see some locations that have the spoke model where you have retail that is a bit of a smaller footprint with the back, which is service, which obviously is where a lot of the dealers make their money, and an additional service location that is in a secondary location, not on a major artery. They're a bare retail presence that allows them to reduce their real estate costs. Certainly, the use of off-site compounds is very prevalent in those three markets, and I would even say in the Calgaries and Edmontons. Real estate is just too valuable just to park cars on.
It's better to have it at a secondary location and just valet it in when the order comes in.
That's great. That's helpful, Milton. I'll turn it over. Thank you.
Thanks.
Your next question comes from Mark Rothschild from Canaccord Genuity. Please go ahead, Mark.
Thanks. Good morning, guys.
Good morning.
Maybe just following up a little bit on what you were talking about with the acquisition market.
Yeah.
Are you getting outbid on any properties? To what extent does the IFRS value you're using now, and you made a small adjustment, but nothing too significant, reflect what's actually going on in the private market?
The short answer is no, we're not getting outbid. We've always had it that the lenders tend to be our biggest competition. In some ways, we are looking at providing long-term money because we're doing 10, 15, 20-year terms versus dealers looking at short-term money with banks that are at low rates. It's not that we're getting outbid, certainly we expect a bit more activity as we go forward, it's always been, we tend to get a last-minute call saying, "Come on in, let's do a deal quickly," as opposed to a long runway or a traditional industrial or retail marketed, grabbing a CBRE, Colliers and saying we'll do a bid date in six weeks. That's not how dealers work and that allows us to be there on the last-minute.
That also means there's not as much visibility of when the deals are going to occur.
Okay, great. Thanks. Maybe just one more. You're not getting outbid, and clearly you have capacity to acquire a number of assets. You've been pretty disciplined in the markets that you're focused on. Is there any discussion or interest in maybe expanding that, whether it's to smaller markets in Canada that you've kind of avoided or into maybe other large markets in the U.S. where you haven't really felt a need to go yet?
We like metropolitan markets, and certainly there's some very strong metropolitan markets in the U.S. and there's other, I don't even want to call them secondary markets, but the Kitchener-Waterloos, the Kelownas, the Halifaxes, the Sherbrookes, the Winnipegs, all of that we'd certainly look at for the right opportunity, right location, and right operator. So we're not opposed to that, as much as we like Toronto, Montreal, and Vancouver. That is a limited universe. We still think we can play, but that's slightly lower cap rates and high-quality real estate. We also think there's good quality real estate in other markets.
Okay, great. Thanks.
Your next question comes from Li Chen, iA Capital Markets. Please go ahead, Lee.
Hi, good morning, Milton and Andrew.
Good day.
I had a couple questions regarding acquisitions, but they were answered. I guess just a quick one from me. Just regarding the global chip shortage, I was wondering if you could provide more color on dealership car sales. As you mentioned, obviously supply of new vehicles are obviously being scarce, but that's clearly being offset by increased demand for used cars at a higher premium. How do you think that's affected the profitability for the car dealerships over the last few months?
Yeah. If you look at the press releases from some of the automotive retail groups out of the U.S. and even Canada, they seem to all start with record profits. I'd certainly encourage you to take a quick look at some of their press releases, and that'll give you a very good indication. You already touched on it, which is the margins are up because in a weird way, you can buy a one-year-old used car and pay more than a new car because of the lack of availability. Dealers are facing some supply chain issues, but that's allowing them to push pricing or maintain high levels of margins. It's not all bad. I guess what's more important, revenue lines or higher profit lines? They certainly don't seem to be upset at higher profit lines.
Okay, perfect. Thanks. I'll turn it back. Thank you.
Your next question comes from Jonathan Kelcher, TD Securities. Go ahead, Jonathan.
Thanks. Good morning.
Good, yeah.
Just for fun, I'll stick with acquisitions here.
Okay.
It sounds like M&A chatter is picking up in the industry. How would you compare that to pre-COVID levels, say, about the same time in 2019?
I would think in the back half and in 2022, that will accelerate. The need for spend on technology, the need for spend on commerce, lower SG&A combined with availability of capital and retained profits. Existing small dealer groups or dealers, single rooftop dealers are certainly looking at, am I going to reinvest or am I going to take my profits? That's a pretty compelling argument. I think we're going to see some pretty good activity in the M&A world. I think it's going to be at a greater pace than it was in 2018- 2019.
Okay. This chatter, is it more single asset, or are there some decent sized portfolios that could become available?
I think it's going to be both. I think there's going to be singles, and I certainly believe that there's going to be small, mid, and large size dealer groups that may look at M&A activity. I think it's going to be both.
Okay. Just secondly on your distribution, you guys obviously sailed through COVID fairly well in terms of there's going to end up being zero bad debt. Fundamentals are good. You've got a good balance sheet. What's keeping the board from increasing the distribution?
I think we'd like to do some more acquisitions and push AFFO up per unit before we do that. One of the things we've always said is that once we start doing a distribution increase, we would like to be able to do that on a regular basis. It just starts becoming, I don't want to say automatic, but a very regular increase. Our leases primarily have embedded annual rent increases. Once we start doing that, we kind of want to continue to do it consistently. We have a philosophy that a one-off distribution increase, it's nice, but it's not as good as being a regular distribution increase.
Okay.
Short answer, we want to do some more acquisitions and drive AFFO per unit higher, and then it's something that we think investors like and we like overall as well, is looking at increasing our distribution.
Okay. Do you guys have a set AFFO payout ratio that you try to target?
In our strategy meetings and regular meetings, we look at an internal range on when we think that would be a good time to do it, yes. We just haven't announced, and we're not going to announce until we announce that we're going to do the distribution increase.
Okay. No announcement until the announcement.
Exactly.
Okay, thanks. I'll turn it back.
Your next question comes from Matt Logan from RBC. Go ahead, Matt.
Thank you, and good morning.
Good.
Andrew, in terms of the fair value gains this quarter, can you talk a little bit about how much weight you place on single-tenant versus industrial transactions in your market? And what drove the decline in cap rate this quarter?
The drive was basically based on the market evidence. Obviously we can't compare ourselves totally to industrial. We have to look at the overall market and also trades within the market and balance that out. The approach that we took is we've seen the GTA and the GMA, and we looked at our portfolio, and we also looked at previous acquisitions that we had completed in those areas as well. Made adjustments in those specific areas given the fact that there was a difference overall.
To that point, Matt, we kind of triangulated because there's not a lot of specific market evidence in Canada because we tend to be the dominant buyer of income-producing automotive real estate. If you look at single-tenant retail, if you look at industrial, if you look south of the border, if you triangulate that, we felt very comfortable that certainly our Montreal and Toronto area locations deserve a lower cap rate.
Agreed. Based on what you've seen maybe in the market that hasn't closed yet, do you think there is potential for further cap rate compression over the next few quarters?
It's going to be continually reviewed every quarter. It's part of the process. I can't predict where we're going to be in Q3. 6.5 is a very supportable number at this point in time. We'll assess it as we go forward in Q3 and Q4.
We're starting to see pockets of strength in other areas as well. I mean, Alberta's coming back. We certainly still like the Ottawa market. We like what we're seeing out there. We'd just like to see more transactions.
I appreciate the additional color. Maybe changing gears, though. With the U.S. targeting 50% electric vehicle sales by 2030, what type of challenges and opportunities do you think that would present for the REIT if Canada followed suit?
Whether it's a 50% target or otherwise, the short answer is the EV world is going to start unfolding. Certainly, we like and have done transactions with Tesla. There's going to be more EVs coming to the market, both in brands and a push, whether it's Volkswagen, Audi, BMW. A lot of the brands are going to start looking at more and more EV, which means some CapEx upfront. Anytime, whether it's branding or CapEx for EV, anytime a dealer looks at the opportunity to expand and spend money, they're also going to look at, is that a good opportunity to exit, have someone else spend the money and take profits? We think that's going to drive one of the factors that's going to drive further consolidation.
As that rolls over, that's certainly new car sales, but there's also a lot of internal ICE, internal combustion engine, vehicles that are going to be on the road for a long time afterwards and continue to be very much on the sales side and service side.
I appreciate the color. I'll turn the call back. Thank you.
Thank you.
Your next question comes from Himanshu Gupta from Scotiabank.
Thank you, and good morning.
Good.
Just on the cap rate discussion, how's the cap rates moving for U.S. auto dealership properties? I'm assuming there's more activity there's more data available there as well.
Yeah, it's the U.S. There's more of everything there. We're seeing from what we've looked at as far as talking to some of our consultants, et cetera, down in the States, they are seeing some cap rate compression. The industry overall is now viewed as more resilient than it would've been viewed pre-COVID. Essential service, we've talked about we're collecting 100% rent. People are talking about dealership groups having very strong profits. All of that has just reduced any kind of risk factor that people are looking at. Combination of a reduced risk factor in a market that is showing lower yields means you're going to see lower yields and have seen lower yields on the asset sales in the States.
Okay. That's helpful. Just staying to your way of finding the cap rates or looking at the trends. Looks like you're looking at single-tenant retail and industrial properties in your calculation. Have you been looking at these single-tenant industrial properties historically as well, or it's only very recent that you are looking at industrial property valuation?
We have to because of the lack of visibility on pure automotive properties. We certainly have to cast a bit broader net to see where the trend line is going across other industries and how that has an implication on our cap rates. We've always looked at industrial and single-tenant retail on a trend line as well.
Okay. Thanks. Maybe, you were talking previously about the portfolio M&A activity picking up. We read the news that a large U.S. dealer, I think Lithia Motors, is trying to buy Pfaff dealerships in Canada. Any read across or implications for your business?
Yeah. I can't speak specifically on that one, but overall, when you're seeing a large U.S. group that has a very strong e-commerce platform and availability of capital, one thing we've talked about, and this is probably going back a couple of years ago, one of the limitations for Canada was you had some OEMs that wouldn't allow public ownership. Trades like the one you're talking about that potentially can occur, that's just demonstrating that those constraints are no longer there. The success they're having in the States, they are looking to export it and bring it to Canada. That will probably mean groups in Canada are potentially looking at taking profits or are looking at doubling down on their e-commerce and their platforms for omni-channel sales. I think it's a good thing. Anytime we stir it up just a little bit, that keeps everyone on their toes.
Good operators here and good operators from the States is not a bad thing at all.
Yeah. Maybe from my understanding, is Lithia buying just the operating business or they are buying the rooftops as well from Pfaff?
The short answer is.
We don't have it specific so much, yeah.
We got to wait to see what happens when it closes.
Of course.
Rumors and rumors, and I can't really comment until everything's done.
Got it. Okay. Maybe just last question from me. A lot of discussion, obviously, on the acquisition pipeline. Anything specific with Dilawri? Do you know how much you can close with them by the end of the year? Any indications from them where they have been active on?
No, it's not just Dilawri. It's all the dealership groups will call us in late in the process, not early in the process. It's one of the reasons why we want to have, and we do have, the flexibility and the capability to react quickly, is because we're often asked to act quickly. Visibility discussions tend to be in general and then get very specific with a short fuse to it.
Okay. That's helpful. Thank you. I'll turn it back.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the number one on your touch-tone phone. Your next question comes from Brad Sturges from Raymond James. Please go ahead, Brad.
Brad, do we have you?
You got me? I put myself on mute there.
There you go.
Good morning. Just wanted to maybe follow up. You talked a lot about valuation and more about cap rates and maybe a little bit about replacement costs, maybe if you could provide a little bit more granularity in terms of what you think replacement costs could be in some of your major markets, Toronto, Montreal, and Vancouver, specifically.
The short answer is higher than it was a year ago. Yeah, no surprise. Land values have gone up and construction costs have gone up. I haven't put an exact number on that, but you're certain to see both timelines and getting the zoning is longer than it was previously. Costs, development fees, higher. Materials, higher. Services, contractors, higher. The underlying land value's gone up, especially in the markets that you're talking about. We haven't put a specific number on it, but yes, it's up.
Right. In terms of the development approval process, is it becoming really difficult just to get approvals, as you talked about, in terms of it's not really the highest and best use to just put cars on land?
Yeah. Planning offices don't have a love affair with automotive retail. We still look at it and we're proponents because if you look at it is high income, high number of jobs per square foot. It's not minimum wage retail type stuff. They're making real money. We view it very much as employment, and some planners are absolutely agreeing with that. Just whether it's automotive or any other type of development in the major markets, that's a long timeline, complicated, and it doesn't seem to be getting shorter.
Okay.
One of the things we've always said is we like the fact that we have zoning on the existing locations because it's tough to get that zoning.
Makes sense. I'll turn it back. Thanks a lot.
Michelle?
Hi. Sorry about that. We do have one more caller, Tal Woolley from National Bank. Please go ahead.
Hey, good morning, gentlemen. How are you?
Good. Jay?
Good. Maybe in terms of talking with your tenants, are you seeing any variance among the brands or anything right now? As we recover, I know you talked earlier about supply availability, are there maybe certain brands that are maybe having a more difficult time of it, others are doing better?
Yeah, anecdotally, we've heard about it in some of the pickup truck world. A lot of our brands tend to be more commuter, the Honda, BMW, Audis of the world. Some of it's brands, some of it's specific models. It does tend to ebb and flow. I will say that a lot of them have looked at refreshing their product line, and that's creating some good excitement. Some of those did it last year, some are doing it this year, some are doing it next year. As they bring on new models, that tends to drive a bit more excitement. In our world, we're not really seeing it affect one in a negative way and the other one in a positive way. It tends to just be a bit of a rolling.
It's certainly why we like dealing with dealership groups and as you know, a lot of our leases have indemnification from a group that has multiple brands in multiple locations.
Right.
That allows us to sleep at night.
Got it. We've talked a lot about M&A. I'm wondering if, as you look around the landscape, are there other parts of sort of the automotive world that could provide other triple net opportunities to you? I think about here in this country we've got service garage consolidators, parts distributors. Is there opportunities maybe outside of the pure dealership type of real estate?
I think there could be. If you asked me if there's a beautiful Caterpillar location in Vaughan, would we like to own that? Absolutely. I think a lot of people would. I think there are some different ones that have a lot of the same characteristics in our automotive, that we potentially could look at in the right opportunities. I would say we view ourselves as automotive as opposed to just automotive dealership retail. It's one of the reasons why we like dealing with Tesla, because it's the direct OEM, and they have a slightly different model. As that whole industry continues to evolve, we think we're going to see other opportunities as well that may be not the specific dealership, but are backed up with a good covenants, and strong real estate locations.
In the past, you've done some development work. If we're thinking about how automotive retail might shift over the next 10, 20 years with changes in the industry, does that seem like something you're probably going to be doing more of in the future? You were talking earlier in the call about shifting inventory, holding to land offsite, that kind of stuff. Do you think there's going to be more opportunities that come up because of that kind of structure emerging more?
I think it's inevitable and it's not pioneering. You go down to New York, you go over to Europe, you look in Asia. These OEMs are absolutely used to in high density locations being in a smaller retail footprint with an ancillary outside. That smaller dealership footprint may be, and often is, in a mixed-use complex. There's a lot of moving parts to get there, and as long as you do it upfront as opposed to try to squeeze it in after the fact, it is doable, and I think it's inevitable.
Okay. Just lastly, when you guys went public, you sort of came out with a more novel debt structure with multiple credit facilities and then layering the rate hedges in on top.
Yeah.
As you guys have matured in the market, in your conversations with the banks, is there any opportunities to sort of consolidate, simplify, look at maybe potentially more cost-effective solutions on the debt side?
I actually think in many ways what we have is pretty simple, and in many cases, you're seeing some other REITs do it as well. If you've got an unencumbered portfolio that you can put together and get, we're BA plus 150. We think it's a cost-effective use. A and B, we think it adds flexibility. We certainly will look at specific properties and doing long-term mortgages. We announced one last quarter. Short answer is, we really like the fact that we can take advantage of the credit facilities that have the flexibility and the cost of capital that it has. The next level would be unsecured, and you've got to be a certain size.
Yeah.
To get there. You don't want to do that too early, because if it unwinds, it hurts a lot of things.
Yeah. Sorry, Andrew, were you going to say something there? It sounded like you were.
In terms of flexibility, I think over the last five to six years, we've renewed and extended our maturities on the credit facilities, and had a healthy weighted average to maturity on the interest rate swaps. I think the overall structure is working very well.
Yeah, sorry. I wasn't trying to imply that.
No, no. We've added a couple of mortgages in between as well.
Yeah.
I think we've got a very, very good balanced approach to it.
Okay. Yeah. That's perfect. I was just curious if over the time in the public and bankers maybe come to you with different kinds of ideas around that. But that's great.
Yeah. Their ideas are always, can you roll everything together and let us be lead? I understand that strategy. We like to have different groups at the table because you don't want just pure herd mentality. You don't want to just be controlled by one.
All right. I got it. Thanks, Milton. Thanks, Andrew.
Thank you.
As there are no further questions at this time, I will now turn it back to Mr. Lamb.
That's great, everyone. Enjoy the rest of the summer. We look forward to talking to you in Q3. Goodbye.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.