Earnings Call: Q4 2018

Mar 22, 2019

Earnings release

Ladies and gentlemen, and welcome to the Automotive Property Suites Q4 and Year End Conference Call and Webcast. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, March 22, 2019. And I would now like to turn the conference over to Milton Lamb. Please go ahead. Great. Thank you, Gianna. Good morning, and thank you for joining us. With me today on the call is Andrew Kalra, our Chief Financial Officer. Our audited financial statements and MD and A for the quarter year are available on our website and on SEDAR. And please be aware that certain information discussed today may be forward looking and that actual results could differ materially. We will also be discussing certain non IFRS measures. Please refer to our SEDAR filings for additional information on both risk factors and non IFRS measures. When I look back on 2018, I really see a transformational year for APR. We really demonstrated the traction from our strategy of consolidating Canada's automotive dealership properties. We completed approximately $209,000,000 in acquisitions, and this has allowed us to more than double our investment properties in just under 3.5 years, while maintaining our focus on high quality assets, dealer groups in major strategic urban markets. Our Q4 results further demonstrate continued growth in all of our key financial measures. Property rental revenue was up 26.6 percent from Q4 a year ago. Cash NOI has increased 27.5%. Same property NOI was up 1.3 percent and funds from operation and adjusted funds from operations were up 16.820.5, respectively. This growth reflects our continued execution on property acquisition program and contractual annual rent increases across most of our portfolio. During the year, we completed acquisitions of 14 automotive dealership properties, adding approximately 610,000 square feet of GLA for a combined purchase price of approximately $209,000,000 with over 90% of this amount deployed on transactions with new sorry, with new major dealership group tenants. This continued diversification of our tenant base highlights our focus on partnering with Canada's leading automotive dealership operators that are active in the consolidating industry. Our portfolio now includes 6 of the top dealership groups in the country, including the 3 largest groups by dealership franchise count. We had a representation of 2 leading automotive brands to our portfolio with the addition of Subaru and Lexus. Our portfolio now represents 31 global brands. During the year, we also acquired Country Hills Volkswagen dealership property in Calgary from Dilawri, showcasing the continued growth opportunities we have available to us through a strategic alliance agreement with Canada's largest automotive dealership group. Through these transactions, we have extended our weighted average lease term to 13.7 years at 2018 year end, up from 12.9 years a year ago. We remain focused on strategic metropolitan markets in Canada at year end with more than 90% of our portfolio by GLA was in greater metropolitan markets of Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal or VECTOM or the VECTOM markets, Canada's largest urban centers, each of which presents a compelling opportunity for future asset appreciation through continued population growth, commercial development and densification. To help finance our continued growth and diversification, we have successfully completed a $55,000,000 equity offering in 2018, further expanding our Park Capital Market liquidity and unitholder base. During 2018, we also increased and extended 2 of our major credit facilities in 2 separate transactions, which has further insulated us from potential interest rate movements and significantly enhanced our financial flexibility. We're pleased with the continued support and confidence from our senior lenders. Looking ahead, we remain focused on taking advantage of the dealership industry consolidation and expanding our property portfolio in metropolitan markets across Canada, while increasing AFFO in support of unitholder distributions. I'll now turn it over to Andrew Kalra to review our results and financial positions in more detail. Kevin? Thanks, Milton. Good morning, everyone. Property rental revenue increased to $13,700,000 in the quarter, up from $10,900,000 in Q4 last year, reflecting continued growth from our property acquisitions and contractual rent increases. Total and same property cash NOI for the quarter increased to $10,800,000 and $8,400,000 respectively, compared to $8,400,000 $8,300,000 in Q4 a year ago. Cash NOI growth was attributable to acquisitions completed subsequent to Q4 last year as well as contractual rent increases, which also drove growth in our same property cash NOI. G and A expenses for the quarter were Net income for the quarter was $13,700,000 compared to $6,600,000 in Q4 last year. The increase was primarily attributable to growth in NOI and the change in fair value adjustments for the Class B LP units. FFO for the quarter was $7,300,000 or $0.234 per unit diluted compared to $6,200,000 or $0.237 per unit in Q4 last year. Our FFO for the quarter reflects minimal straight line adjustments in rental revenue for our last $180,000,000 in acquisition as the contractual rent escalations are tied to CPI versus the fixed rental escalation. AFFO totaled $6,800,000 or $0.211 per unit, up from $5,600,000 or $0.215 per unit. FFO and AFFO growth was primarily due to the impact of the properties acquired subsequent to Q4 last year. It is important to note that we completed 2 transactions valued at approximately $127,000,000 in December of 2018, and the impact of these portfolio additions is not reflected in our year end results. For Q4 2018, the REIT paid distributions of $6,000,000 to unitholders or 0 point 2 $0.01 per unit, representing an AFFO payout ratio of 91.8 percent. This compares to an AFFO payout ratio attributable to the impact of the properties acquired subsequent to 2017. I'll now briefly summarize our full year results for 2018. I would note that the increase in our key financial metrics in 2018 relative to 2017 are attributable to the same factors that drove our Q4 2018 performance. Property acquisitions completed subsequent to 2017 and contractual rent increases. 2018 revenue was $48,200,000 an increase of 15.4 percent from 2017. Cash NOI and same property cash NOI was $37,800,000 $30,700,000 respectively, up 16.3% and 1.4% from a year ago. Net income for the year was $39,200,000 up 49.1%, primarily reflecting NOI growth and the change in the fair value adjustments for the Class B LP units. FFO and AFFO were $27,200,000 25,000,000 respectively, representing year over year increases of 8.5% 10.5%. FFO per unit and AFFO per unit were $0.99 $0.91 diluted, respectively, compared to $0.97 and $0.88 last year. Finally, REIT's AFFO payout ratio of 88.7% for 2018 decreased from 91.5% from last year. For Q4 2018 and full year 2018, the fair value adjustments in investment properties were as follows. For Q4, there was fair value loss adjustment of 2.3 $1,000,000 which includes a deduction for $3,700,000 of transaction costs resulting from the acquisition in the quarter. For the year, the fair value adjustment of $4,100,000 for 2018 was due to capitalization rate changes and NOI increases, partially offset by approximately $5,000,000 in transaction costs from the 2018 acquisitions. The assessment by the REIT of the portfolio resulted in a 6.6% overall implied capitalization rate at year end. The slight increase in the overall capitalization rate year over year was due to recent acquisition of the AutoCanada Properties, Brimel Toyota property and the MAG portfolio. I'll conclude with our liquidity and capital resources. As Milton noted earlier, during the year, we also increased and extended our credit facilities in 2 separate transactions providing long term rate certainty and greater flexibility. Most recently, we entered into new interest rate swaps totaling $126,000,000 on our credit facility. We also blended and extended our July 2020 interest rate swaps totaling $37,200,000 The above transactions provided a well balanced level of annual maturities with interest rate swap terms ranging between 4 10 years and a weighted average interest rate swap term at 6.7 years, up from 5.3 a year ago. The REIT's weighted average effective interest rate on its debt, excluding revolving credit facility, was 3.79 percent at year end. REIT had $417,000,000 outstanding on its credit facility at year end, resulting in a debt to GBV of 54.7 percent, in line with our target range. I'd like to turn the call back to Milton for closing remarks. Milton? Thanks, Andrew. The quality of tenants we've worked with in 2018 really demonstrates the potential for our strategy of consolidating Canada's automotive dealership industry. Our strong financial performance, growing tenant diversification and increased presence in attractive urban markets across Canada is a testament to our progress in realizing this potential. At the time of our IPO, in July 2015, we had 26 properties in 4 urban markets, and our initial properties were all tenanted by Dilawri dealerships. At 2018 year end, our portfolio has expanded to 55 properties and now has more than 90% of the GLA in Becton markets. And we have 6 major dealership groups as tenants. As a percentage of GLA, Dallari has been reduced to 64% of our portfolio. We look forward to reporting on our 2019 Q1 results, which will begin to show the full impact of our most recent acquisitions. We're now prominently known amongst the dealership groups that are looking for financial liquidity for their real estate for succession planning, directly investing and upgrading in their dealerships or facilitating dealership acquisitions. We enjoy strong support from our senior lenders and we are the only publicly listed vehicle in Canada exclusively focused on the automotive dealership properties. So we're well positioned to access capital to continue executing on our acquisition program. In summary, after a strong 2018, we remain confident in our outlook and focusing on continuing to strengthen our portfolio by capitalizing on accretive consolidation opportunities, growing our cash flow in support of unitholder distributions and building long term value for our unitholders. That concludes our remarks, and we'd now like to open the line for questions. Joanna, please go ahead. Thank you. And your first question is from Jonathan Kelcher at TD Securities. Please go ahead, Jonathan. Thanks. Good morning. Good morning, Jonathan. First question, just on 2018, obviously, a very active year on the acquisition front for you guys. How is the pipeline shaking out for 2019? And specifically, do you think, Pete, the slowdown in auto sales that we've seen is expected will open up more acquisition opportunities for you guys? If we do a flashback a year ago, one of the comments we made was that after record 2015, going to a record 2016, going to a record 2017, that we thought the cooling off and the plateauing in 2018 may drive opportunities. That happened. So now that we're in a state where it's plateauing or slightly decreasing, that combined with the interest rate increases that occurred last year means that money is not free for anyone, including dealerships. And that combined with the clock continues to tick if you're looking at retirement. It's an eventuality that will occur for everyone, including us. But we do think that, that will continue to kind of translate into potential deals. I would say with that comment, sometimes as you're seeing the market change, there can be a gap on buysell, where expectations of where it would have been in 2017 or maybe not achievable now on the dealership valuations. And so that may cause some delays as valuations get adjusted accordingly. But overall, short answer is yes, both the fact that there's cost of capital associated with higher interest rates and the fact that the market itself is plateauing, so people are not getting paid to wait, should be good news for us. Okay. And then just on the operations side, now that you have more than just the Dilawri leases, You did 1.3% same property NOI, I think, in Q4. Is that a good number for 2019? That would be a fair number, given that some of the new leases we've put in place are CPI driven. So that would be a fair number. Not only CPI driven. In a couple of cases, we gave a 1 to 3 year with flat before the escalations with CPI kicked in. Okay. And then just lastly, and I may have missed this, you said Dilawri pro form a is about 64 percent of GLA. What is it on an NOI percentage? We intentionally run GLA. Yes. We tend to stay away from that given it's a little bit forward. But GLA would be representative of cash NOI. So It's certainly indicative. Yes. Your next question is from Brad Sturges at Industrial Alliance. Please go ahead, Brad. Given you had some pretty good portfolio growth, particularly during the last year, how should we think about G and A cost, I guess, looking into 2019? Would we see you add more depth to your team? One of the things we like about this business is that it's very expandable in the fact that a lot of what we're doing is acquisitions, accounting and reporting, the asset management and the property management side less on the tenants. So this is very scalable without having to add significant bodies. As we grow, we may have to add a bit, but it certainly won't be on a prorated basis. Okay. So I guess within Q4, it seemed a little bit higher. Was there any one time items there? How should we think about the run rate for 2019? Sure. Q4 is always higher given the fact that we have year end closing costs for year end audit and tax related costs. On our run rate, we will have inflationary with some of the G and A and also there will be some of the vesting of some of the out that will come into the incentive compensation line. As Mody mentioned, we're not anticipating a significant increase in terms of account or infrastructure at this point. And there were a couple of onetime items there, whether it's consulting or a dead deal cost, which we Which will happen, yes. Occasionally happens. I'm sorry, what would be the run rate going forward if you take out the onetime items? I would anticipate the 2018 with an increase of I wouldn't mind giving a forecast overall, but I'll ask very similar. Very similar. Okay. Sounds good. And then for the cap rate, the portfolio picked up a bit, what was really driving that? Is there a particular area of the portfolio? I would have thought We talked about on the acquisitions, we're not giving exact numbers that we've been able to acquire in the range of 6.6 to 7.5. The most recent ones were somewhere well in the middle of that. So the very nature that those weren't appraised, those were specific transaction cap rates. Obviously, they were done above 6 0.5 and we're able to on $180,000,000 in the last quarter alone, last quarter plus a day, move up that 6.5%. So it's really the acquisition cap rates. Yes. Sounds good. Thank you. Thank you. Your next question comes from Pammi Bir from Scotia Capital. Please go ahead. Thanks. Good morning. Just coming back to the comment around the consulting costs in G and A, can you just expand on that? And have those costs continued in Q1? The costs are not going to continue. As we mentioned, there was some dead deal costs that we had. We chose not to pursue a deal and we expensed them. Also, the big thing on an overall year over year on G and A is the fact that we separated we've got our own separate office in Dolaris and those are the lease costs that we incurred, which will continue to flow through. But the one timers, I do not anticipate them on an ongoing basis. Okay. And then just in interest costs, were there any onetime ish amounts in there as well? The interest cost, there's a portion for the financing putting the financing in place. So we amortized that over the period of the term of the facility. So the fact that we refinanced 2 of our major facilities in Q4, there was about a $40,000 or $50,000 increase in the amortization rate from Q3 to Q4. So they will continue. And if we were to do further refinancing, which we are not anticipating for the facility 1 and 3, but if we do further refinancing, they would be added into that cost. The credit facilities, we find extremely flexible and financially at strong good rates, but there's certainly legal fees and commitment fees involved. Right. And so you've capitalized on, again, a low rate environment just by extending the duration, but that did add to the some of the amortization of those financing costs. Yes. Okay. So that makes sense. We wanted some financing to go and do the acquisitions we did in Q4. It wasn't just although certainly one of the focuses was we had a July 2020 interest rate swap looming. We don't like getting too close to them, so we always like being proactive. Yes. And our weighted average trend just to reiterate, we've gone from 5.3 to 6.7 where they have kind of maturing our overall debt. Our debt is gone from 3.6 to 4.3. Yes. And that's a pretty sizable extension. So just on the coming back to the acquisition market, are there any portfolios out there at the moment that you're interested in? Most of the deals tend to be back end loaded. We've talked about that before. Being at this for 4 years now, I'm still I shouldn't say surprised now, but it is more seasonal than I would have anticipated before the REIT started. Traditionally, real estate has 2 seasons. It seems in this program, it seems to be more leaning towards back end loaded as far as Q3 and Q4 activity, which you can see historically within the REITs as well. Right. Just on the back of Capital Automotive's purchase from AutoCanada, are you seeing them more often at the table on transactions? Or has there been any change in the number of bidders? I think capital Automotive has always been there. It depends on what the focus is and pricing, etcetera, on which markets. That portfolio certainly included properties in the states. Right. And just last one. Any change or you made some comments on the IFRS cap rate being more acquisition driven, but or the change, sorry, was. Are you seeing any changes in terms of pricing for assets that are out there? Any softening or any tightening? Well, if we strip out the new acquisitions, we would have been at 6.5%. So the short answer is if you include Vancouver, those are extremely heavy prices that are in Vancouver. So let's exclude that for the meantime. The rest of it, I mean, one of the things we like about this business is our tenants are exposed to interest rates at the same time as we are. So as I mentioned, the cost of capital, if it goes up, so does their potential motivation, especially looking at new acquisitions. So yes, we've been able to have some of that flow through. We haven't done a 6.6 cap since 2017, 2016. So we're certainly well aware of that. I don't think there's been any dramatic changes, but an extra 10 or 20 basis points here and there certainly is a good thing. And I would say that what we underwrote the last acquisitions at, by the time we ended up stepping into the debt market, the debt was lower than we had anticipated and underwrote, which is always good and has a nice hangover effect for a number of years. Great. Thanks very much. Thank you. Thank you. Your next question is from Kyle Stanley at Desjardins. Please go ahead, Kyle. Good morning, guys. Good morning. So I saw that the tenant at Kitchener in Waterloo started paying rent as of January. I'm just wondering, could you remind us of what yield you're expecting on cost there? We haven't specifically said, but we have said that it's slightly above what we would have anticipated for an outright purchase of an existing tenanted property. So when we talked about a 6.6 to 7.5 range, obviously, it's going to be closer to the upper end of that. Okay. That's good. And then I guess just kind of looking at your experience in doing that redevelopment work, is that something that you'll be looking at doing moving forward? And if so, are you seeing any opportunities currently in the market? Yes. We've stated before and maintained that we don't mind working for a good tenant and a good property. We don't like the idea of spec development, so we're not involved in it. But if we are doing a redevelopment or a build to suit with a long term lease attached to it, yes, we'll certainly we don't mind being involved in that as long as we get paid for doing that. Okay. Thanks. And the Kitchener Waterloo experience, we delivered on time, on budget. So that often makes the next one easier as well. Yes, for sure. Okay, perfect. That's it for me. Thanks. Thank you. Your next question is from Matt Logan from RBC Capital Markets. Please go ahead, Matt. Good morning, gentlemen. Good morning, Matt. Good morning. Just circling back on your credit facilities. Have you given any thought in 2019 to maybe shifting some of the debt that's on the revolving portion of the facility to the non revolving to give yourself a little more liquidity? We balance it out. And given the fact that we want to turn around and do acquisitions and be able to close on acquisitions, we do keep a revolving capacity line that allows us to do that. And that's the balance that we keep. Right now, we're in a position the balance is solid. And what we tend to do, Matt, is we tend to actually some of the times, these are hurry up offenses to get them done. So we like to actually be financing our last acquisition to do the next acquisition as opposed to running around to finance the current acquisition. So some of the properties, namely the KW and the Brimmel, Toyota, don't have financing on them now, but we could certainly, as you said, put financing on that to allow us more flexibility not more flexibility, but to pay off some of the revolver and use it again for acquisitions. So we certainly look at doing that as it's step by step. Just to also comment, if we put it on revolving over the deal, we would actually look on putting it into a non revolver in the future. That's a good color. Maybe on the acquisition financing front, have any of the 3rd party tenants you've been in discussions with expressed interest in maybe taking back some Class B units on future acquisitions? I'd rephrase it a bit. On acquisitions that we've been talking about over the last year, including as we go forward in 2019 2020, the fact that we are now 3.5 well, coming on 4 years, having reports from 10 investment banks, it's providing them a lot more comfort. And so that question mark is that question is coming up a lot more. Certainly, it doesn't work as well for groups that are just looking at working with us as they acquire to expand their operations. But on the flip side, it works extremely well for groups that are looking at legacy and potentially taking some kind of estate planning long term money off the table. The tax advantages really kick in at that point. Makes sense to me. Maybe just on the Miren's portfolio, would you mind giving us a little bit of color on how the transaction came about? And what was the real attraction to the portfolio for you guys? Sure. The Chinese action came about various discussions and then an opportunity. It tends to be one of those that you can't walk in the door last minute. But the attraction, I mean, in my world, it's extremely evident. I love the fact that some of these properties are in very mature areas of Ottawa. BMW, Subaru, Acura, Toyota, the brands are extremely strong. So when you've got strong brands in very strong locations, that allows us to sleep at night. And then you add to it the fact you have a group that has been active in Ottawa, recently got acquired, but that footprint has been there and strong for years. So it didn't matter which way I looked at this deal, it made us feel good. And the last one for me, maybe just taking it up a level. What would you say your top three priorities for 2019 are? Sound like my board yesterday. Top three priorities, we like the fact that we've been driving the tenant diversification. Dilari still remains active. So both left and right there, we feel very good. I want to and you can see that we have been driving acquisitions, but we haven't done that by going into tertiary markets with tenants that are not dealership groups. Focusing on major markets continues to be very much what we want to do. And beyond that, we want to continue to kind of make sure we maintain the quality. We've had an advantage from day 1, which is high quality assets to start with. So our goal is to maintain the quality of those portfolios while expanding as opposed to potentially recycling and upgrading. We didn't walk in with high yielding head scratching assets and then try to rotate up. We started with high quality. Well, I appreciate the color. That's all for me. Thank you very much. Thank you. Your next question comes from Sumayya Hussain from CIBC. Please go ahead. Thanks. Good morning, guys. Good morning. Just kind of want to follow-up on Matt's question about the background sort of to the Ottawa Kingston acquisition. It was about conversations and opportunities. So just roughly, how long did it take? How much convincing was involved? And anything on competition? And who else, if anyone else, was at the table with you guys? It wasn't a bid, if that's what you're asking. I'm sure everyone has a couple of conversations. It really doesn't matter what industry it seems we're in. It tends to be a very long initial process followed by a hurry up process. So whether it was the deal you're asking about in Ottawa or the deal with AutoCanada, It was significant conversations followed by a very short fuse, which was, yes, we now like we've liked what you've said for a while, but now let's go do it, hurry up. So I don't know if that answers your question, but it tends to be a long initial to get their head around do they want to do it. And once they decide to do it, it tends to be a very quick turnaround. I am finding because we've done that with a number of groups that each group is now has a proven road easier and easier on conversations. Okay. That's that looks sounds promising. It would be nice if the tenants left us a bit more time, but that's okay. Yes. And then I guess just kind of following up on your comments about ideal mix ideal mix or target that you would like to get to? Or is it something that just naturally evolves as you guys continue to grow? I think the very nature that Dilawri sold us their initial portfolio means that we will grow with them based on their growth. But that should leave a significantly larger opportunity with other dealership groups because obviously, we didn't acquire everyone else's real estate. So naturally, that will continue to kind of grow on the dealership groups that are non Dilawri. There's not a specific target. This is somewhat opportunity driven as far as mergers and acquisitions and potentially retirement planning. So our biggest focus tends to be geography weighting and really the quality of the asset. Quality the dealers certainly in Dilawri and the groups that we worked with is very strong. So it is what is the asset and how appealing is it. That's probably more important to us than deciding on a Dilawri versus non Dilawri deal just based on a weighting. That's good color. And I'll turn it back now. Thank you. Thank you. Thank you. Your next question is from Tal Woolley from National Bank. Please go ahead, Tal. Hi, good morning. Good morning. Just wanted to talk a little bit about the dealer capital improvements and potential redevelopment opportunities. Like how frequently right now are you talking to your dealers about helping them fund capital improvements? And are we in a part of the business cycle where that might be a little bit more interesting for them to do, given that maybe business is slowing business has slowed a little bit and it would be a good time to sort of refresh the store, so to speak. Can you just talk a little bit about that whole process of trying to get a little bit more organic growth? Yes. The short answer is it's a pretty new portfolio. As it matures, you're going to see both dealers and OEMs wanting to do expansions, capital improvements, a lot of what you're talking about. And potentially in some prime sites either having to do a significantly redevelopment or working with us to relocate to another location, allowing a higher and better use. I think that will take a bit more maturity. We did it with Frost in Brampton. And I think as we mature, you'll see it certainly drop into the portfolio. But the very nature that we bought high quality, new image products for the most part to start with means that there will be a bit of a lag to get to that. Okay. So and that's really like you still prefer like the brand new stuff over maybe trying to target some dealers who might actually, in addition to when I take some money off the table, might need some help? So that's a split on the question. On the flip side of new acquisitions, we are seeing that the capital improvement requirement is potentially driving some opportunities. So to your question, we could easily see the acquisition that is choose a number. We'll buy it for A today knowing that we are investing B in the next 6 to 18 months to get them up to the new image to higher quality standards, and we're good with that. That goes to earlier doing some reimaging, redevelopment expansion. With the higher interest rates, you talked about the environment, it is softening a bit, but it's certainly at still very heavy, nice high numbers. So that we believe will drive some opportunities. And we're certainly very open to working with dealers on that where we buy today to help them reinvest in their property tomorrow. Okay. And just my last question. Again, the overall portfolio of brands that you've got, again, as you sort of try and think about the auto cycle overall, but do you look at the portfolio and you say, hey, like you should really be trying to target, is it more economy stuff, more luxury stuff, like how do you see any sort of obvious holes in the portfolio of brands you have right now? Not holes we don't like. So, no, I mean, you'll notice on the portfolios that we've just bought, it's Audi, it's BMW, it's Volkswagen, it's Toyota, it's Lexus, we like what we're buying. And to your point, we talk more about the positives on what we're buying as opposed to the negatives on what we're not buying. Right. Okay. Perfect. Thank you very much. Thank you. Your next question is from Troy MacLean from BMO Capital Markets. Please go ahead, Troy. Good morning. Just circling back on your comments around buying and redeveloping or investing in a property, would you require a higher return to do that than just a straight acquisition of a stabilized property? Whether it's a redevelopment build to suits expansion, if you're doing more work and it's more complicated, we're of the strong belief you should get paid for it and we want our unitholders to get paid for it. That's not going to be a 7 cap to a 12, percent, but certainly believe that there should be some margin in extra work and extra computation. So like 100 or more bps of spread would be something you think would be reasonable and would be achievable on that kind of deal? I don't know if I'd be going 100 or That's a premium that would most of the dealers we work with have very strong access to capital, which is why we like them as tenants. So we have to remain competitive. If we're user risk, they'll just do it on their own account. And then just on the leases with tenants, would you rather fix steps or CPI for annual adjustments? Are tenants starting to push back or new people that you're dealing with at any of the lease terms? On acquisitions, a number of them like to have a year or 2 to kind of settle in. Most acquisitions, everyone thought is they'll go in and do better. That's the very nature of why you acquire a business. As far as CPI versus fixed step rent, the fixed step rent works nicely on FFO because you don't really see it on CPI, the difference between FFO or straight lining and AFFO. But we focus more on AFFO. So as a result, I would say we like to have a balance of both. And you'll notice in the last year, we've been driving a bit more CPI. There were concerns about inflation. So having a portfolio with a bit of the fixed and a bit of the CPI is a nice hedge where you kind of win in both situations. Pushback? Not really. Most tenants do kind of look at annual as being a good thing. Not only is it good for us as far as predictability and constant same property NOI growth, but it works well for their business because as a group, you probably reward your GM based on profitability. And if we go with the traditional, what would have occurred 5, 10, 15 years ago with bounce every 5 years, it means the 5th year they're a hero and the 6th year they're probably off. So they certainly like the annual increases as well. So that's a win win. And then just my final question. You've talked about your acquisition pipeline, and I know it's probably more active at the end of the year. But how much of the pipeline would you say is off market? Or are you competing for most of the acquisitions you're seeing? I'm trying to think if we've been in a bid situation. With knowledge, we have not been in a bid situation. The question earlier was if they've had conversations, and I'm sure people do have conversations, but at the end of the day, normally, they sit down. And if we can come up with a deal, it gets done. And if we can't, I find it doesn't get done with anyone. We're running the one situation where on the deal cost where there was other promises made that we weren't willing to make. So I guess we could call that a bid situation. It didn't seem like a bid situation. So it's rare for us to go head to head on a bid, very rare. That's it for me. Thank you. I'll turn it back. Thank you. We have no further questions at this time. You may proceed. That's great. Thank you for joining us today. As mentioned, we look forward to our Q1 results as we had a very busy Q4. Again, thank you very much. Enjoy it. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.