Earnings Call: Q4 2020

Feb 19, 2021

Good morning, ladies and gentlemen. Welcome to the Dream Office REIT Year End Conference Call for Friday, February 19, 2021. During this call, management of Dream Office REIT may make statements containing forward looking formation within the meaning of applicable securities legislation. Forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Office REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information. Additional information about these assumptions and risks and Certainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MD and A. These filings are also available on Dream Office REIT's website at www.dreamofficereit. Ca. Later in the presentation, we will have a question and answer session. Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Mr. Cooper, please go ahead. Thank you, operator, and good morning to everybody. Today, I'm with Gord Waughing, the Chief Operating Officer of Dream Office and Jay Jing, the Chief Financial Officer. This has been a challenging time to run any business, and running office buildings in this environment has been really peculiar. We're coming up to 12 months with very few people working out of offices and tremendous amount of Discussions over how people will work in the future. We will not answer that today. Today, we're going to focus on the assets that we own And while we're doing this, ma'am, I would say the following. We spent 5 years repositioning the portfolio so that we would be 85% Assets in Downtown Toronto. We're strong believers in the future of the City of Toronto. The City of Toronto was doing better than it ever did the day before the pandemic hit. And we believe that Toronto will continue to do well after the pandemic is manageable. With regards to the buildings that we own, Buildings of this quality and location over the last 150 years or so have done They're doing well, and we expect that they will do very well in the future. Dream office is 85% downtown Toronto office buildings and 15% outside of downtown Toronto. Outside of downtown Toronto includes Sussex Centre, which is a great building that's been doing very well at 2,200 Atkinson, which is adjacent to a new LRT subway swap that will be opening later this year. We're getting that building with that land rezone. It's 15 acres. We think we'll end up with maybe 2,500,000 square feet of extra density. At $70 a flip, that's about $175,000,000 which would be about $4 a share of additional value. We're also an owner of Dream Industrial stock, which is worth about $340,000,000 which is another $6 So we're currently trading at below $20 And we have $10 a share in our Green Industrial wheat stock. And likely, we'll achieve that The incremental value this year at 2,200 Evanston. That remains that would be $10 a share on all of our office buildings, and We're very excited at this point to be able to announce that we've completed our normal course issuer bid in January. And looking forward, we'll be using our capital to improve our buildings and buy back stock. I'd like to turn it over to Gord to give an update on the operations. After that, Jay will speak about the financials, and then we'd be happy to answer your questions. Gord? Well, thanks, Michael, and good morning. 1st and foremost, I hope everyone in your families are all staying well. It's great to get a chance to connect with you all today. Ultimately, prior to the pandemic, the Toronto leasing market was a very favorable arena For not just our company, but all landlords in general, vacancy was sub 2% and rents were at record highs on both new leases and renewals. Demand for office space from the tech, finance and professional services sector provided tremendous tailwinds for commercial owners in downtown Toronto. The pandemic has resulted in office vacancy for Toronto to increase over 7.5% downtown, a level not seen since the great financial crisis. I knew leasing has slowed a bit, but this is a direct result of the various states of emergency being mandated. And largely as a result of these actions, Many tenants are understandably delaying decisions on their future real estate strategy. Despite all of this, Further despite what you read in the news and various social media hot takes, it was an active year of leasing for Dream Office. And of equal importance, Rents held up very well on the over 500,000 square feet of deals we completed in 2020, and we continue to see real positive momentum And some increasing activity as we get to the spring. During the pandemic and closing of 2020, we completed approximately For some additional context, we did 3 transactions over 25,000 feet and one in approximately 190,000 square feet. So from our perspective, deals of scale are getting done and companies are making commitments. Our rates have been very resilient and it's a testament to the quality and location of the buildings we own, the efforts of our operating team and ultimately staying true to our asset and capital strategy. Net rents have continued to be strong and in line with our business plan at pre pandemic levels. We've also seen steady growth in the NER performance of deals being completed, where on average, we're 21% over budget on an aggregate basis. Like most of our peers, we've had some construction delays and challenges that we're managing through on our Bay Street collection. These are due solely to the mandated shutdowns on interior construction and we're targeting substantial completion by the end of this summer. The feedback from tenants and brokers alike has been tremendous. We really look forward to unveiling it all to you all soon and hopefully we'll get a chance to walk you through in person. The optimism on our Bay Street offering is further supported by the 12 deals that we did in that specific project as strong rents in NERs, 30% higher than budgeted. These are a new class of boutique assets that don't compete with large towers. They're low rise, Walkable, both small private floor plates, all mid based building systems and showcase a level of luxury finishes that are unique to the market. In the current pipeline, we're actively negotiating and trading paper on 20 fields totaling over 215,000 feet. There's a lot of press and focus around shadow vacancy in the state of the sublease market in Toronto. This has not been an issue or something we're seeing in the REIT. Currently, in our portfolio, there's only 103,000 square feet of sublet space available. Or put differently, that's less than 1.8% of our portfolio nationally. In other markets, Saskatchewan and Calgary, occupancy is down a bit due in large part to a few known vacates and one insolvency restructure. Tours and activities in these markets have, however, picked up, and that's due in large part to their phase of the reopening. We very recently received and are responding to 3 RFPs totaling 55,000 feet. Also to note, we've completed a few key deals that haven't taken off occupancy in 1 being a major national bank for 15,000 feet and a large tech firm who are expanding significantly. Our current and committed occupancy is 94.5% in Toronto and approximately 72% in other markets. Collections continue to be strong at 97% for the year with average walks in the portfolio at almost 5.5 years. Early in the pandemic, We dedicated team members, reallocated resources and set our goals to ensure we stay in constant communication with our tenants. This was really to be a resource, a sounding board and ultimately be a partner to help facilitate their occupancy decisions. We've had some great success with this approach on direct renewals, renewals without a broker. This also helps us provide guidance on government subsidies and most importantly, in turn, be an active and empathetic partner on making payment arrangements, which support our collection ratios. Operationally and of great importance, I also want to touch briefly on some of our ESG initiatives here at Dream. While Dream has always been that's emphasized the importance of being a good corporate citizen, we're making it an absolute priority to increase transparency on ESG. More than ever, investors want to know how businesses are incorporating these principles into their operations. Our team recently published a 2019 Sustainability Report. In it, we highlight some of our accomplishments, which include our reductions in energy and waste water consumption, greenhouse gas emissions, as well as a number of highlights on employee development and the overall diversity of our workforce. We also discuss our 5 year plan and targets for sustainability, which we think are a bit ambitious, but achievable. I would encourage everyone who's listening or who's interested To go see our ESG program and our sustainability report on our website, every time you go and click it open, we make a donation to a worthy charity. However, our work doesn't stop there. We're in the process of implementing many initiatives across the business. We built ESG into our corporate goals for the years ahead, ensuring we remain very accountable to the execution and ultimately that our progress is measurable. Our primary goal this year is to submit for the GRESB assessment, the leading sustainability benchmark in the real estate industry. We think this will be a valuable communication tool for our investors. We are also continuing to work towards additional green building certifications, well health and safety certifications and achieving all the best and lead in a number of our buildings. Internally, we established a diversity, inclusion and advancement team to ensure that our entire workforce has equal opportunities to succeed and also that our trades, contractors and service providers align and share their inclusivity policies. This is to ensure everyone we deal with is doing their part to be leaders in inclusion. We also just kicked off our sustainability working groups internally, which will focus on Green Property Operations, sustainability reporting, communication and both employee and tenant engagement. Overall, our goal is to be recognized as one of the top sustainable REITs in Canada, and we look forward to sharing our progress over the coming quarters. Ultimately, I feel good about our portfolio. The quality of improvements we've made to our assets at both the operating and aesthetic level Put us in a very strong position as we come through COVID. But bricks and mortar aside, I couldn't be more pleased with how the team has responded this past year. Their efforts and dedication to not only our company, but to our clients is what I'm most proud of. At the end of the day, It's this combination of having irreplaceable assets, coupled with the quality, high character team of people we have operating and leasing those assets that gives me the greatest confidence going forward into 2021. Thank you, everyone, and I'll turn it over to Jay. Great. Thank you, Laurie. We're pleased to report our Q4 and year end results for 2020. The materials are fairly comprehensive, so we will try to avoid repeating the contents of the Instead, I will speak to our financial position, capital allocation and our internal budget for 2021. We're then happy to answer any questions on the materials afterwards. Despite being in a year long public health crisis, we are pleased with the resiliency that our business has shown, allowing us to support our tenants and employees through COVID. We entered the pandemic having substantially completed our strategic plan to transform the business into a We built a well capitalized balance sheet, which has resulted in a much safer and less volatile business. We feel the strategy works out well when times are good or bad. We reported net asset value per unit of $28.59 which implies an annualized total return of 11% including distributions over 2020. We stated since February of 20 NAV was our focus metric and that has now increased for 15 quarters in a row. Our year end NAV includes independent appraisals for $778,000,000 of property or 31 percent of our portfolio prepared this year. Our units reached a high of $36 last March And dropped to $15 within the month. The average unit price was about $20 from March to year end or roughly a 30% discount between the trading price and where we think is intrinsic value. Our IFRS carrying value applies at 4.8% capital rate or in $5 to $600 And therefore less than $200 per square foot for the rest of the portfolio. We have been monitoring private market Transaction since COVID, which all volume between $650,000 to $1,000 per square foot. And in almost all instances, So at this morning's trading price of roughly $19.30 Based on the 4.8 percent half rate for Jantown Toronto, which we noted above we feel comfortable with based on the private market costs, The market is attributing either stabilized net rents in the low 20s net or structural vacancy in the low 80s. Please note that in our in place rents are currently about $25 and as Gord noted, we did our leases during COVID at 38 net. So we feel there is a good margin of safety. Based on replacement costs to develop today, net spreads need to be in between 40 to 50 net and we believe there will be long term demand for commercial and residential space in the downtown core. Toronto is well positioned to continue to thrive as economic center in Canada, supported by the strong immigration forecast and continuing expansion of multinational organizations. Now obviously, COVID has been a real distraction. Currently, real estate is very thematic and the narrative is unfavorable for office REITs. With lots of opinions about work from home versus returns to the office, We feel that while it's too early to tell how tenants will be capable of pandemic, businesses will continue to meet space to collaborate, meet clients, price sales and provide a separation between the work and the home. As the city opens back up and everything which makes Toronto a world class city return, the people of all. For many businesses, providing a desirable workplace will be critical in talent recruitment and retention. So with all that in consideration, We believe repurchasing our own units represent the best long term investment for every dollar. So we have maximized our normal course issuer bid program and repurchased 5,800,000 units or 9.4 percent of our own company at an average price of $19.08 After the buybacks, our balance sheet remains in very good shape. We are at 41% debt to gross book value, have approximately $150,000,000 of liquidity an unencumbered asset pool of $250,000,000 with no covenant restrictions. Over the next few years, we do not have a lot of capital commitments, So our balance sheet remains flexible. We have approximately $110,000,000 of debt to refinance in 2021 with a weighted average expiry rate of 4.88 We think we will be able to obtain higher net refinancing proceeds and lower the interest rate by about 150 basis points on secured financing based on the base rates. We are also continuing to move forward with applications for our 3 major mixed use development projects, 250 Dundas, 2,200 Eglinton and 212 2018. In 2020, we received council zoning approval at 250 Dundas for which we got appraisal and then $43,000,000 fair value gain in the Q1. All of the projects are still in pre development for 2021, We anticipate approximately $12,000,000 of soft cost to be spent. We think the capital is a great return on investment without adding a lot of risk as we continue to elevate the highest investment use of each site. Gord has already talked about our commitment to the drain collection on Bay Street. Once the construction stoppage is lifted, we will resume our work and anticipate substantial completion in 2021. We spent $20,000,000 to date, which implies $30,000,000 left to spend this year. While we manage our business and financial planning with a very long term view, We acknowledge that everyone on this call wants annual guidance for 2021. So we will share our internal budget. I would proceed with the obvious That lending is challenging because we still do not know the extent or duration of the pandemic, when the economy will reopen, how it will reopen or We anticipate that annual comparative property NOI to be flat to down slightly 2021 as the in place occupancy will likely be lower in the 1st few quarters of 2021 as a result of the state of emergency measures limiting physical tours and leases to be signed. Many of our prospective tenants have identified the space when you wait to finalize the decisions on their lease. We believe many deals in our pipeline will be signed by the second half of twenty twenty one and in place and committed occupancy for the portfolio will trend up and end 20 21 relative to in line with where we are at today. This will position us well for 2022. Our development obligation at 357 Bay in downtown Toronto was completed this quarter and we will commence rent payments in November. We will realize the full year trend in 2021. In addition, we anticipate 1900 Sherwood Place in Regina to be completed on time and potentially exceeding our budget of 8.0 percent development yield by the second half of the year. Both of these projects will contribute to net operating income, but not comparable properties NOI. So we anticipate total properties NOI to be up in 2021. Using rounded numbers, we budget approximately $12,000,000 of general and administrative expenses, relatively flat interest expense, $2,500,000 increase in FFO from our share of Dream Industrial units based on guidance of 5% FP NOI growth and over 10% per unit FFO growth Under management team provided on Wednesday. As a side note, based on current share price, our holdings and agreements are about a third of our market cap. In our budget, we assume no acquisitions or dispositions in the base case. However, we will be marketing certain assets in Western Canada and our loan assets in Overland Park, USA. If we add up all the assumptions I just spoke to on the leverage neutral basis, our FFO per year, Our unit works out to roughly $1.60 per unit for 2021 or about a 4% increase. As mentioned before, we manage our business with a longer term view. We look forward to business as usual in Dream Office, and we will update you all accordingly over the I'll now turn the call back to the moderator. And thank you. We will now begin our question and answer session. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. And I see we have our first question. It comes from Michael Rothschild with Canaccord. Please go ahead, sir. Thanks. Good morning. It's Martha. Thanks. Maybe just expanding on your conversation about the sellers market. There's been definitely no doubt from brokerage reports, but a huge increase in amount of available sublease space. But it seems like No change really as far as your portfolio. Can you give some additional information on why you think that is? What you're seeing overall in the market? And ultimately, do you expect that to have an impact on rental rates? Yes. It's Gord. That's a great question. It's a great question. So in our portfolio, we're not seeing much, if any, sublease availability. And the reason being is a lot of the subleases you're hearing and reading in publications across the market are large users. So there are large contiguous pockets of sublease availability. Our average user size is a lot smaller. So if we have a company that sublease this space, The impact to our portfolio isn't as apparent to some of the other landlords. We've got a lot of smaller users that qualify for the government subsidies. We've made it a real point to contact and discuss with each one of our tenants, what their occupancy plans are to get ahead of them rushing to make a sublease decision. So it's a combination of those factors. And I just think in general, given the size of our average tenant base, Given the size of our buildings, we're just in a better position to weather the exposure of having large tenants sublease space in the market. So some units in Dream Industrial and fully some of that money, if not all of it, went to buyback units in Dream Office. Can you talk maybe more Strategically, how you view the Dream Industrial position? And is it something that you will do from time to time if you see better value in one versus the other? Sure, Mark. I think that we're finding that the Dream Industrial units are very valuable, and it's a real A great source of cash flow. It's free of CapEx. And we expect that industrial will continue to perform well. So it's a great asset to own. We did sell some in the fall to buy back stock. And as Time goes by, we'll probably sell some more from time to time, but nothing dramatic. Okay, great. And then maybe just one last question for Jay. Maybe you want to follow-up after the privately at some of this year. But if you can just give Some additional detail on when some of the new leases that you spoke about in your disclosure on other call will take effect, in particular, maybe at Eigong Dan and Saskatoon Square. Sure. No problem. Basically, you see a lag about 6 8 months between when the lease is signed as to when they take effect. For larger leases, they might take effect longer than a year. So for your question on other markets, I would anticipate most of that to hit in place occupancy in the second half, probably a lot of that in the third Keep in mind, Sherwin SACCO is online in the 3rd quarter as well, but you'll see occupancy lift. Okay, great. Thank you so much. And thank you. We have our next question from Sam Damiani with TD Securities. Thanks. Good morning, everyone. Just on the occupancy drop in in place occupancy drop in Q4, it was a pretty significant drop. Was that fully expected? Or was there any surprises there? Gord? Yes, I can take that question. Good question, Sam. So it was fully expected. We've had this asset strategy over the better part of the last 18 months where we had a lot of small tenants on small floor plates, coming off really low expiry rents. And there's a lot more appeal, especially post COVID, to have dedicated small floors for users. So we've been working through that strategy of strategic vacates And getting full floor. And what I would say, Dusan, is a lot of the buildings where you've seen a drop in the occupancy, these are small buildings. These are buildings that are 40,000 square feet. The average floor plate on some of these buildings is 3,000 square feet. So if we do lose a half floor tenant, it Shows a drop in the occupancy, but really it's by design. So we're just trying to work through some of those lower expiring rents And set ourselves up for success having these smaller full floor plates to take out to the market. Thank you. That's helpful. And just bigger picture looking at the occupancy drop during the year last year, How much of that would have been unexpected versus just slower demand and maybe the physical difficulty and Longer time to get deals done during the economic lockdowns. Just trying to figure out what is going on. And if things aren't going to change From the pandemic in the near term, should we expect some continued erosion in occupancy as a potential? Yes. So maybe I'll jump in here from a budgeting perspective. If you notice that the retention and renewal rates are fairly strong. And so I would say that is generally in line with budget. What's really hurt us is the 2 state of emergencies that were enacted And that sort of really hurt the new leasing momentum in terms of the physical tourism ability for tenants to sign leases. And so what happens is you just have a bigger pipeline. So I'd say that probably without COVID, if we're hitting our budget, our In place occupancy would still be in the high 90s. And then you wouldn't really see the lag in the churn. But nevertheless, I think that gives us the opportunity, as Ward mentioned, in some of these smaller buildings to take back contiguous floors to turn it into turnkey space. And we did a couple of test cases As early as 2019, where we took the rents up from 2018, 2019 all the way into the 40s. So we're still seeing strong rents and good demand for the space. Okay. Just finally, on the Bay Street properties, I think there's a handful, maybe half a dozen buildings where the wall has gone under 2.5 years And some of them have dropped vacancy by over 500 basis points in the Q4. Gord, you kind of talked about this in terms of Some of this being by design, strategic vacates and whatnot. But as 2021 progresses and you reach completion on These redevelopments, how should we look at or how should we expect those buildings to, I guess, perform in terms of reported occupancy And what's over the course of the year? Yes. Great question, Sam. So we have occupancy. We're rapidly negotiating on a number of deals on Bay Street Collection and we've got occupancy rising towards the end of this year. Probably one of the biggest outliers on that building where you've seen the biggest drop in quarter over quarter occupancy has been 366 Bay. And that's a building where we're taking the same approach as 357, right? There's tremendous potential for this building. It's a Small building that we currently have measured at about 38,000 square feet. If that's a building we go to substantially remediate like we've done with 3 We take the rentable area up by about 5,000 square feet. We've got these small turnkey floors. There are some users in the market that are in that 30,000 to 45,000 square foot plate that would get their own standalone building on Bay Street. So we've got a whole holistic building management plan. We're looking at for 366,000 and we think if we can take the rents up by $10 over That's an extra $450,000 in NOI per annum and we think it's a really attractive building. So we see our occupancy going up towards the end of the year And we've got an asset plan for each one. Thank you. I'll turn it back. Thank you, sir. Our next question is from Mario Saric with Scotiabank. Hi, guys. Good morning. Thank you. Maybe the first question for Jade just on the 'twenty one guidance. In that $1.60 FFO per unit, Is there the expectation for any lease termination fees for the year, number 1? And number 2, does the guidance inherently I assume that the government subsidy programs are going to expire in June of 21. Hi, Mario. First question, no, we do not forecast re termination income. We do not anticipate there being material terminations currently. Second question on wage subsidy. It's formulaic and it's right now we Nominal amounts in the Q1 and therefore, the guidance for the formula hasn't really been brought out yet for Q2 and beyond. So I think it's very nominal, but I think like $58,000 is in there. So we do not rely on the subsidy. Okay. In addition to the wage subsidy, I was also thinking about the service program, so just the government assistance programs for Cummins. Yes. I mean, under the old program at Seacrest, we sort of have to try to forecast the provision because they're forgiving 25% of the rent. Under the new program, the tenants are eligible for a higher percentage. So what we would do is maybe forecast a little bit of provisions in there, but our Expectations are that, that program will continue to support our tenants' ability to pay. Our rent collections are continuing to be in the high 90s. And by really the second Q3 of the year, we're going to start to see a recovery and both the time coming back, Businesses to reopen and our parking garages, which actually is a pretty material figure in our NOI to gradually recover as well. Got it. So the parking revenue, as you mentioned, fairly meaningful. Is the expectation that that will fully recover by the end of the year, back in 2019 levels? Yes. I would say that it's really like an inverse curve. You had okay parking in Q1 2020 and then it dropped. In the summer, it came back a little bit, but by the year now, it's really hard to say when we're going to come back. So I think by the summer, we're going to gradually We build the curb back up and by the end of the year, we're going to expect that most of our parking garages will be well utilized. Got it. Okay. Maybe shifting to capital allocation and then the NCIB. Can you remind us of when you can launch The new NCIB and I think Michael you mentioned that the appetite is still there to buyback units given where the stock is trading. Now how would you characterize that appetite today relative to August of 2020, given the balance sheet leverage has ticked up a little bit? And then while there aren't you're not expecting many dollars to be spent on development or redevelopment in 2021, I think you mentioned 12,000,000 Presuming 2022 onwards, that will be an increase in use of capital. So how do you think about the unit buyback with all of that in mind? So I would say that the NTID will get a new one mid August. And I would expect on what we see now, if the stock is where it is, we'll use it all up. I mean, it's nice too because Between now August, we'll get some answers on all the questions that have been raised today. And if we To see that the company is producing higher rents, higher occupancy, getting approvals, we'd be happy to use up the entire normal And we're funded either through increased mortgages. I think we're getting a bunch of gains in our book value, so that We'll offset the capital structure and it's not that much money. So I think we'll continue to buy back stock as much as we can. I mean, one of them is We had 114,000,000 shares at the peak now at about 54,000,000. So we've reduced them by more than 50,000,000 shares. It's kind of like a habit. I got to work on a break. Fair enough. Okay. And then just from a deep from Dream Industrial perspective, in Cheshire Bay, Potentially, you're doing a bit more, not materially so. I'm just wondering from a tax perspective, is there anything that prevents you from More maturity filling down your stake and then redeployment, either redevelopment or your units just from an efficiency perspective. And so the question whether there's anything that prevents us from doing that? Yes. From Is tax inefficiency an obstacle to doing that if you're still inclined to do so? I mean, our view has been that we really like Dream Industrial. I mean, we want to get some liquidity, we would do it. Jay, do you want to go through any numbers on that? Sure. I would to answer your question at a high level, I would say it's a consideration, not an obstacle. In 2020, we sold a little bit. That didn't really have a We monitor our sort of tax basis compliance with these rules and the liquidity concurrently. So we anticipate the sources of capital use for the NCIB will be achievable within the tax structure. Got it. Okay. My last question just pertains to leasing. Of the 450,000 square feet that was leased during the COVID crisis, I think you've already taken care of 420,000 square feet of your 21 weeks expiry, so you're well along your way there. Have you seen any tangible data point pertaining to tenants either shrinking their respective footprint Either work from home strategies going forward or conversely increasing footprints due to new social distancing requirements. Is there anything in the data there Is that what you guys kind of altering your behavior at all? That's a really good question, it's Gord. And we see a couple of different data And as early as yesterday, we had a tenant discussion with a large tenant that was asking for the availability of contiguous space So that they can grow their footprint and make a little bit more space. We haven't seen Let me rephrase that. So I'd say few and far between have been the tenants that are downsizing as a result. And we're starting as we come through this to speak to more and more tenants about potentially growing their footprint. And our client services team, we like to self perform some construction and project management on our side as well too. So we've been using that as an opportunity to talk to our tenants and help plan their space with them. And so we've had a lot of these conversations and I'd say It's marginally more skewed towards people taking more space than it is the opposite of taking less. That's really interesting. Okay. Thanks, Doug. You're welcome. Thank you. And thank you. Our next question is from Matt Kornack with National Bank Financial. Yes. A quick follow-up on that line of questioning With regards to discussions with your tenants, just wondering in terms of some of the vacancy that you've had, were those tenants that ultimately had Financial strains related to COVID. And then maybe in addition to that, if you could discuss kind of your Talks with the government because you've got them in there. You've got some financial services tenants and then maybe what some of the smaller tenants are thinking with regards to space as well. Sure. Thanks, Matt. It's Gord again. Just to unpack your first question. So when we were Speaking to some of the tenants, unfortunately, that haven't weathered COVID as well, I'd say notably the majority of them were people that were traditionally AR issues prior to the pandemic. So I think this just kind of was an inflection point For a number of those tenants that were already struggling a little bit when COVID happened, for the most part, our collections have been tremendous in the high 90s. So the bulk of the tenants that we're dealing with are committed to trying to make their business work, and we're doing whatever we can to help them on the occupancy side. You made a really good point and not a lot of people are asking about the government and large users, but our position in working with the government is they've been tremendous to work with throughout the pandemic. We've done a number of notable renewals with them. We're working on a couple of other deals with them at both the provincial and the federal level. Keep in mind, we did 190,000 square feet with them at one of our buildings at the beginning of the year. And they did what they could To work with us to get the deal done throughout COVID and they were a great partner to deal with. And they're looking at their occupancy strategies as well too from the vein of what their workplace is going to look like. They've gone to Workplace 2.0 this previous year. They're looking at doing another kind of hybrid where they're providing more space to their employees. So we're having these active conversations with them. But for the most part, the government has been staying with us and potentially expanding in some spots. Our larger institutional users, we haven't come to any real occupancy variances with them as of yet. Okay. Fair enough. And then on the lease maturity profile, and I think Jay, you probably highlighted this in your guidance, but I think for other markets, You already anticipate you have commitments in excess of your maturities. But for the Toronto market, I think it's about 60% of total. What would you expect In terms of a retention ratio on maybe both markets, but what are the thoughts on retention at this point? Sure. Retention ratio in Toronto, it's been pretty steady and it hasn't really changed in COVID. We're seeing about 70%, 75%. I think the easiest way to sort of explain the outcome for RONALD is we don't expect a lot of activity given that right now it's almost March for the 1st two quarters, but a lot of the pipeline, the tenants are ready to sign. So we think that in Q3, Q4, We're budgeting about maybe 300 basis points of positive absorption in each of them. In other markets, as you And if you look at the spread between the committed and in place, a lot of that already picked up. When Sherwood comes in, that'll help The occupancy, otherwise, they will commence in sort of the second half of the year. On retention Because the portfolio is only 15% of the business and the buildings are unique to the geographies, it's hard to forecast the retention ratio. It's Block and Tackle. And I would generally say that we are in the business to And we are very open minded and we will get the occupancy up because that improves the liquidity from both the financing or private market perspective. Sure. And at this point, it sounds like rents have held fairly firm. I mean, obviously, that can change, but Definitely in Toronto. Is that a fair characterization? It is, Matt. Yes, they've stayed very consistent in the pre pandemic levels. And maybe this quarter, leasing costs were up a bit. Is that a function of I think it may have just been 357 Bay, but is there something else To that in terms of the pandemic or That was actually unique because the commencement this quarter was weighted or skewed heavily for the Milligan Park We expect occupancy, I think, at the end of the year. Okay. And last question for me. You have some very pretty looking renderings of Some pretty impressive density that you could add on your sites. Do you foresee that being done within Dream Office REIT? Or would it be sold to another entity? Or what would be the time line if it is going to be done within Dream Office? So in reverse order, 212 ks, we have a partner there who started the zoning process. That would likely take 2 years before we had zoning, let alone a site plan approval. So that's pretty distant. 250 Dundas is a really interesting building because It's got a lot of apartments, and it's right in the hospital district. We could have started it sooner, but I think that with all the changes in health care, We're looking at opportunities to get higher returns on that building by working with a hospital. So that's going to take some time. They're really quite busy right now. I think that we have 4 buildings in the healthcare district, and I think that they may surprise on the upside for what they're worth. And then at 2,200 Edglington, as I mentioned, in the Golden Mile study area, we're making a lot of progress. That's probably, I hope from a year away from owning 2 years away from site plan. What's really nice about that one is it's so much land and there's so much density that we can do it in smaller chunks. So 2,200, I think we'll start that the minute we can. 250 Dundas Gord, what do you think? If you were to estimate a start date, when would you do that? About 2 years, Michael, 2.5 years. Yes, 2 or 3 years, I think. And as far as whether we have partners or not, these projects will all be owned by Dream Office going forward. We could look at Britney and Partners, not in 21210, but maybe in 2,200 anything. Okay, perfect. Appreciate the color. Anything further, sir? No. Thank you so much. We have our next question from Jenny Ma with BMO Capital Markets. Thank you and good morning. Why don't you talk a little bit about the what you're seeing in investment markets because, Jade, you mentioned in the guidance that you haven't dispositions, but you also mentioned that you're marketing some Western Canada and the Kansas assets. So I'm just wondering, when you're thinking about that, do you think Right now, there's it's going to be productive to be managing it. And when you're thinking about these, call it, non core assets, Is the desire to maximize the value of these assets or really try to get them off the books and really shore up the Toronto portfolio? Jay, do you want to answer that? Sure. Yes. So there was an earlier remark where I made that improving the occupancy of all the buildings And the other markets will be beneficial for financing. And as we don't sell, we could probably get a pretty good LTV relative to the fair value or carrying value. And if we get the occupancy higher, it also increases the desirability for these properties to be sold. In our budget, just because of uncertainty, it's really hard to forecast both the timing of the acquisition If that happens and what the price would be. So we tend to want to avoid that and also for the purpose we do not want to rely on their liquidity for capital allocation purposes. Overland Park is unique, just as a background, that building was tied to building industrial buildings that are now in the Dream Industrial REIT and the debt is in the CMBS pool. But in April of this year. We can pay it off without a decent cost. So we will market that building shortly. It's got a great covenant. U. S. Bank, We recently signed the 5 year deal that took occupancy or it was a renewal in December. And we're curious to see what that Pricing will come in that, but once again, we do still rely on it. But generally, I'd say that, I mean, other markets, we're able to get the occupancy up. So we're financing it. We think the value is very reasonable on the book. But we're really happy to have sold the assets that we did Over the past 4, 5 years and just focus on downtown Toronto because we think that's where the future is. Okay. So it sounds like Kansas could be something that happened sort of second half of this year and then maybe the other stuff is a little bit more uncertain. Is that fair to say? Hopefully, I mean the other stuff is really kind of random because I mean we have marketed over the past We pulled up majority of it. Excluding 1900 Sherwood, which is feels like a bond right now, which other buildings I'd say Right now, from time to time, we get unsolicited interest and we would take a look at them seriously. But we're open. People definitely know, like these are on the market and if there is good interest, we'll engage, but we'll see. I was asking, have you seen the interest level shift recently, especially on a post vaccine basis? Or is it really just random tire pickers here and there that you've been dealing with for the past couple of years? For most of these properties, I would say it's been quite random And nothing really has changed. But maybe financing is a consideration, but there's so much capital out there right now. So We may be able to sell 1 or 2 buildings this year. Okay. Jamie, can you remind that About half of the other properties are Bodenthorpe and 2,200 Eglinton. So then you add in Overland. Otherwise, We're pretty small under like $50,000,000 being in Saskatoon, maybe $80,000,000 in Calgary. So Overland, we would sell with 1 Strategic to 2 Toronto assets we really, really like. And we sort of go either way on the other assets. Okay, great. And then moving back to the public space, I know it's very small, but I apologize that I missed it. But what is the distribution of that space? Is it fairly reflective The portfolio is more concentrated towards downtown Toronto. I guess the weighted average rent on it is $25 So It's spread out pretty much everywhere, Wendy, we've got some sublet space at Sussex. We've got a couple of very small pockets on Bay Street, Richmond. And then I believe there's another sublet opportunity at Adelaide Place. So it's distributed throughout our portfolio. Okay, great. Thank you very much. Thank you. Our next question is from Mike Markidis with Desjardins Capital Markets. Hi, everyone. Quickly for me, Michael, you piqued my interest with talking about a, essentially, a different use At the Dundas site, I was wondering if you can elaborate on that a little bit. And then secondly, would that require any More negotiation with the council in terms of the zoning, which is pretty tough. No, no. I think what we're looking at is The hospitals are booming. They're going to need more space. So we're looking to see if it makes sense to work with the hospitals to have more To have them take space in our building, whether they need any special requirements for it. And we think that could be good for the hospitals to free up Spaces in their buildings. The other thing is we could look at on the residential, making arrangements at the hospitals and make sure that they've got accommodations for People that work at the hospital within 300 feet. Okay. No, I think I got you there. So instead of conventional office, maybe in an office, you sort of allowed tight space and then on the residential side, maybe some sort of Yes. It's well within the shape of the building you got approved. It shouldn't require anything to go back to the Cine 4. Okay, great. Thanks very much. Thank you. And thank you, sir. And we have no further questions. I will now turn the call back over to Mr. Michael Cooper for closing remarks. Well, I'd like to thank everybody for their continued interest in the company. Please feel free to call Gord, Jay or myself, if you have any further questions. We hope that over the next 90 days, we'll do a lot of leasing, get a lot of answers. But in the meantime, thank you for again spending your time with us. Have a great day. Goodbye.