Earnings Call: Q2 2020

Aug 7, 2020

Good morning, ladies and gentlemen. Welcome to the Dream Office REIT Second Quarter Conference Call for Friday, August 7, 2020. During this call, management of Dream Office REIT may make statements containing forward looking information 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 uncertainties 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 dotdreamofficereit. 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 very much. I'd like to welcome everybody for taking the time to attend our call. I'm very pleased to be here in person with Jay Jing and Gord Wadley. And Jay and I'll make some comments and then Jay Gordon and I are happy to answer questions afterwards. We are in the office. Our office is opening officially on Monday. We'll have about 25% of our employees coming to the office regularly starting then. And we're pleased to be making these steps to get back to a little bit more of normal. It's been 144 days since all our offices were shut down, which is a lot longer than we were expecting. I would say just as a personal note, I probably spent 4 to 5 hours a day reading as much as I can to try to understand what's going on. And I really feel as if so much of the information we've been getting is inaccurate. There's so many opinions that aren't based on fact, just chatter. So on this call, I'm going to try to avoid adding to that dissonance and just try to stick to facts. Our buildings are very well occupied. The tenants are paying rent. We have a lot of renewals happening. We have new leasing. We've had a tremendous improvement in showings over the last 6 to 8 weeks. And I would say generally for our business, we're probably basically looking at our long term plans and figuring about 95% of what we've been planning are still in place. And we're looking maybe at we've been deferring some capital expenditures that we don't think are time sensitive. But notwithstanding how everything is different than we expected, our team has done an incredible job staying close to the tenants, supporting the tenants, getting the buildings ready, taking care of each other and putting our business in great shape. So Jay has got some details, but generally I think that we're doing better than we could have ever imagined given what's happened. And as we look forward, we think that having sold 140 something buildings to get down to 32, having over 85% of our capital in Downtown boutique luxury boutique buildings. I think we're incredibly well positioned. Having low level of debt compared to where we were is very opportunistic. And although everything around us is in turmoil, we're just trying to manage through it as steadily as we can because we kind of set our course from 2016 to last year and we're sticking with what we got. So that's basically where we're at. Jay, do you want to deal with the quarter? Sure. Thanks, Michael. Good morning, everybody. We tried to make the numbers and explanations in our press release and MD and A fulsome this quarter. So rather than repeat some of the numbers and commentary, I'd like to share some observations on the results in light of the pandemic and some discussions on values and liquidity of the business. So first on the quarter, we felt that the FFO per unit of $0.38 ended up in line with pre COVID results and not too far from our internal expectations. So we estimate that the net COVID related impact was about $0.02 in the 2nd quarter. The two main items that reduced FFO in the second quarter was a result of a loss of about $1,100,000 in transient or daily parking and $1,500,000 of provisions against our accounts receivable balance on June 30 to account for the expected 25% abatement from the SECRA program. That's about half the balance and the other half is a reserve for the possibility that not all tenants may be able to repay certain deferral and outstanding balances in the future. We also qualify for approximately $1,200,000 in wage subsidy programs during the quarter that offset a portion of the loss. We are hopeful that Stage 3 reopens in Toronto and as we get back to work, we will gradually receive more traffic in our parking garages and we are not concerned that this will become a long period of loss in income. In the meantime, we are happy to donate these spots to first responders and volunteers at the hospitals to support the community. Our overall collection stats during the quarter have been fairly stable. If we include the cash collected to date plus the SEKRA receivable and deferral arrangements that have been formalized, we are about over 95% for the quarter. We are making good dialogue with a significant portion of the outstanding rents and in some instances have already made verbal agreements for repayment. In addition, on the cumulative deferrals and outstanding rents, we are currently sitting on over $1,000,000 of deposits, which we can settle as needed. Last week, it was announced that the separate program will be extended to August and we're happy to continue our participation to help our tenants recover through the pandemic. On a year over year basis, our FFO is down $0.06 per unit versus the Q2 of 2019. In addition to the estimated $0.02 of loss due to COVID, most of the decrease was attributed to net impact of asset sales in Montreal, Ottawa, North York and London, Ontario. That reduced our leverage from 45% to 38%, but we are left with a much higher quality and resilient portfolio that we believe will drive better performance and a safer business over time with or without COVID. We reported net asset value per unit of $27.61 on June 30, which is about 1.8% higher than the Q1. Our downtown Toronto portfolio increased $20,000,000 supported by independent appraisals that were engaged during the quarter on 5 of our properties. We remain comfortable with a weighted average cap rate of about 4.8% for IFRS valuations on our downtown Toronto portfolio and that's flat quarter over quarter. The increases were attributed to higher in place NOI and higher rents on lease as we have signed. During the COVID period between March to July, we still managed to complete about 20 deals at an average net rent about 37 point $4.1 or that is over 40% above expiry. Our leasing pipeline continues to grow. We are currently working on over 400,000 square feet of new leases and renewals at pre COVID rates. We are also encouraged that the leasing curves have been picking up over the past 2 weeks and we'll continue to do so now that work restrictions are easing. Given the unique circumstances that we are in and the unpredictability on the recovery of the pandemic, we have been very focused on maintaining a strong balance sheet with ample liquidity to address any near term operational challenges. So we have $214,000,000 of liquidity $240,000,000 of unencumbered assets as of June 30 that are unpledged and not subject to any restrictive covenants on our company. Over the past few months, we have deferred $10,000,000 of projects in 2020 then in 2021, we deferred another $14,000,000 These deferrals will not impact any income or value in our properties in the future. Our 2 redevelopment projects at 357 Bay in Downtown Toronto and 1900 Sherwood in Regina are both still on track to be completed on time and on budget. We expect to start collecting rent at 357 Bay in November of this year and for 1900 Sherwood in the second half of twenty twenty one. We are still committed to completing the Financial District Dream Collection on Bay by the spring of 2021. We believe these buildings will be exceptionally well positioned during the post COVID world, the centerized location, smaller floor plates, low rise stories and modernized elevator in HVAC systems. We only have one mortgage renewing in 2020 with a balance of about $15,000,000 1 asset with a carrying value of about $67,000,000 We are currently reviewing our options on refinancing. We think the rate and the term will be attractive given the quality and the location of the asset and our strong relationship with various lenders. So all of the above give us confidence that our company is safe. Our assets will remain valuable for the long term. As long as our share price continues to trade at material discount to net asset value and we are comfortable in our liquidity, we will continue to opportunistically repurchase units in the marketplace. I'll turn it back to Michael now. Thank you. Thank you, Jay. And as I mentioned, Dursinger, Jay, Gordon and I would be happy to answer your questions now. And your first question in queue comes from Mark Rothschild with Canaccord. Your line is open. Thanks and good morning everyone. So Michael, you spoke about how your company is getting back into the office and the percentage that you expect to have in the near term. Can you maybe expand or maybe some Gord could on what you're hearing from tenants as far as their plans for getting back into the office and their needs going forward and maybe if this differs between your smaller and larger tenants? It's a great question. Gordy, can you answer that? Can you also answer what things we're doing to repair the buildings, including our goal box? Yes, of course. So good morning, everyone, and thanks for the question, Mark. So effectively, our goal throughout this whole pandemic has been to over communicate and frankly try to over prepare all of our assets to be ready to receive our tenants. So what we did was we provided micro strategies on our website for each one of our buildings, showcasing new wayfinding markers, egress access, different things to help our clients feel more comfortable throughout our buildings. We implemented a number of COVID specific technologies. As Jay mentioned, a lot of our buildings are low rise buildings. Some of our bigger buildings with lots more elevators and escalators, we installed UV handrails for the escalators that clean constantly. For our larger high rise buildings, we've implemented UV technology and air filters in the elevators. We have foggers that we're doing in all the common areas. We've installed microbial shields in all high touch areas and medical grade and increased cleaning throughout the portfolio. So all of this is outlined. And as a component of talking to our tenants about a lot of the government programs, we also spoke to every single one about what we're doing within the building so that they feel more comfortable. I think unanimously, almost every tenant in the portfolio has reached out to our client services team. This is a dedicated team that fields all requests on operations and is a conduit to provide information to everybody. So we've had great engagement and collaboration with our tenants. A lot of our tenants are already back, Mark, not at full capacities. Usually throughout, we see about 25% to 30%. And we're starting to see a lot more people coming back to the office. And it's bringing a lot of optimism as well. Moving into a different direction. As far as the IFRS NAV, you had a little bit of an increase this quarter. And it seems over the past couple of years or so that your IFRS values have probably been lagging the moves in property values. Do you feel that right now there's you can have confidence in what the real value is and that this is reflective of where cap rates are? Or is it just too little that actually is trading or that will trade in downtown Toronto for your types of properties to have confidence in that value now? And maybe just the second part to that question. You bought back some units this year, I think for the most part at lower prices, your view on buying back units at current levels? Okay. Great questions. Firstly, you use confidence twice in the first part of which we have very little. So other than that, I could have answered the question. What I can tell you is building on Peter Street recently traded a 7 year lease. It traded at sub-three percent because it has development potential. But even with the development, it traded at higher prices than what we carry things at. One Niagara traded, I think was at $6.20 a foot. And again, these are all in the last month. And that building has to be renovated. So we are seeing a limited number of transactions and the transactions are all at very high prices. But again, those are limited. I think that we've got our assets. I think we've Adelaide Place and 30 Adelaide Base at a 4.5 cap. And I think those are on relatively conservative rents. Everything else in downtown Toronto is at 5. And I think we feel that those are reasonable assessments. Having said that, to be blunt about it, we ask the appraisers what they think and we do what they say. So we have our own opinions on real estate. We don't have our own opinions on what appraisers say market value is. So our numbers are what the numbers are, but I think that they're reasonable. So no, I don't have a high degree of confidence about values, but everything that we do see including comparative sales plus recent leases support the values we have. With regards to buybacks to be blunt about it, we're looking at relative value and at $20 buying some stock back, we think is very attractive and we'll continue to look at opportunities to enhance the value of the company. And right now, I think putting off some CapEx that's not necessary to buy back some stock is a great trade. Yes. Just a little bit to add, we typically appraise about 25% to 30% of our portfolio every single year. So over a 4, 5 year cycle, you probably capture everything. Last year, we did around 40 something percent. This year, we picked 5 properties. As a good piece of our portfolio. So it's a pretty rigorous process in terms of IFRS valuation. We follow methodology. We book the values that it comes out, but none of the inputs have really changed. It's just the higher in place income. Okay, great. Thank you so much. Thank you. And your next question in queue comes from Mike Markidis with Desjardins. Your line is open. Thanks. Good morning, guys. I just want to dig into your leasing pipeline a little bit more if possible. I think you mentioned greater than 400,000 square feet of new and renewal leases that you're working on. I think you're 50% tenant retention so far for the first half of 2020 and interestingly higher in Q2. So maybe firstly, just based on where your leasing pipeline is, where do you think retention heads in the back half of this year? Yes. Hi, it's Gord Wadley. Yes, we've got about 18 renewals for about 260,000 square feet in the pipeline that we think is generally 70% or greater probability of getting completed for the bulk of them. Surprisingly, we've had good success on some renewals and some unbudgeted renewals out west in Saskatchewan on one of our assets there. And in Toronto as well, we have a few renewals that we're working on actively right now. We have 7 new deals that are in the pipeline that are 75% greater probability of completing as well for about 42,000 square feet. And one thing I do have a tremendous amount of optimism in is over the course of the last 4 weeks, we've received 6 RFPs nationally, 4 of them are out west and they constitute about 140,000 square feet. So early days on those RFPs, but it is showing some velocity and it's showing some people that are starting to plan going forward for their accommodations. That's really good color. Thank you. Maybe just with respect to the new demand that you're seeing, Gord, is there any sort of commonality amongst the user profile there? For us predominantly on the new interest, one of the larger new interest is that we're seeing out west is a AAA Covenant Bank, which has been positive. That's a net new deal for us for a full floor in one of our buildings. What we're seeing on Bay Street Collection is we're seeing demand for tenants, smaller tech tenants that are looking for smaller floor place, 3000 to 5000 Square feet, and they want the discretion and autonomy to have their own floor plate, which Bay Street Collection can provide. So we're seeing that. The one other thing I'd say, which was interesting is about 4 weeks ago, we were seeing maybe 2 to 3 tours a week. 1 of them would be a virtual tour. And in the last 2 weeks, I was telling this to Michael yesterday, we've seen double digits in tours. So we had I think we had about 11 last week and this week we're up to about 13. So there's been people that are starting to revisit the market. Mike, without an explanation, it's been kind of shocking that in Saskatchewan and Saskatoon, we've had more activity than we've ever had. Don't know why though. Okay. It's interesting. And just last question for me before I turn it back. 357 Bay, I think Jay said rent commences in November. So are they in fixed stream right now? Yes. Yes. Okay, awesome. That's it. Thanks very much. And your next question in queue comes from Sam Damiani with TD Securities. Your line is open. Thanks and good morning. Maybe Gord, just on the HVAC investments that you've been making, Is this something that you're hearing more from tenants in terms of like during COVID that they've been demanding or inquiring about wanting to get comfort on? And if so, are you seeing a need to invest more in the buildings than you previously planned as a result of those desires? No, I think that's a great question. And we've had a number of people, especially on these RFPs and the new tours that are asking those questions. What's the air circulation on the floor? What type of technologies do you have in terms of HVAC? What filters are you using? Are you using MERV 13? Are you putting in any UV light technology? And it's been a great marketing tool for us. Like I said, we really pushed over the last 2 months since we revisited our capital plan and reallocated some funds into COVID Technologies. We've been using it as a marketing tool. It's been helpful. A lot of our sophisticated more sophisticated tenants that have facilities managers are well up to speed. We have a large tenant. Michael mentioned the UV robots. We've got these autonomous UV units that go and circulate through all the common areas and kill 99% of the viruses. We had one of our facilities managers for a very large tenant of ours. We gave a training overview 2 days ago and they were quite pleased with the direction on what we're doing and how we're trying to future proof and protect our buildings. But to your question, everybody unanimously is asking about air circulation, air quality. And we're very fortunate that we have a number of low rise buildings where you can take the stairs and the elevators are all new and being upgraded. But what I'm really pleased with the team and what they've been able to institute is our larger buildings, Adelaide Place, State Street is our elevator UV filtration, which has gotten great feedback from a lot of our clients and prospects. Can you provide some insight on how much is being expensed and whether that offset savings in the operating costs? Sure. Why don't I start or you can chime in. First of all, on the quantum of the capital, for example, Bay Street Village, the elevators and the HVACs were already top of mind because air quality was a focus for bringing the luxury boutiques to top of class. So with regards to prior guidance we gave, we're not increasing the capital just because of that because it's already being done. A significant portion is actually recoverable just because we mentioned last year that the additional rents in a lot of these buildings were significantly below market comparable. So for example, on a per square foot basis, you would have about $6 to $7 that you could really amortize over time. We have communicated all of this to our tenants. They got the pre bills in November, December. Most were very excited about it. And they want to be part of the new village and these are amenities that will improve the tenant experience. So it works out for everybody. That's helpful and good color. Thank you. And just on the pandemic, lots of businesses have started to get into trouble and whatnot. Have you actually seen any of your tenants depart their spaces early? So far? I can tell if they're departing or just not coming in. Courtney and I will take this one. Just on the list, I mean, first we only have just over 530 tenants, so we're able to have very bespoke conversations with every single tenant. You get a good sense of their conversation, especially when it comes to deferrals and etcetera. Now it's more art than science, but typically we would have a watch list of tenants that we may be concerned with based on the feedback that they give. I think as a whole though, it's really only about 1% that's really on the radar. But between the programs and the deferrals and the collaboration, really our goal is to just get them through the pandemic. Yes. The only thing I would add is, when we gave the breakdown of our collections and our recoveries for the quarter, in the outstanding column, the excess 3% that's outstanding, 2 tenants make up over 60% of that allotment, and we're well in advanced negotiations to recover a good portion of that as well. So we're communicating with everybody and we feel like we've got a good handle on our situation. Yes. But I would say that it may take time for the weaker businesses to go under. So we're watching that going forward. But right now, there's a fair amount of support at all levels. So we'll see, but it hasn't been a big issue yet. Thank you. And just my last question you touched on, is the rent collections, which have been, I guess, not charting a specific trend, kind of up and down and up. Is there anything to read into the drop in June, the uptick in July? What are you thinking for August? Yes. So for June, really, I would say for the Q2, it was part of one conversation. So during the early innings of COVID in March April, the tenant relations team would have conversations with the tenants about the whole quarter. So for example, at the time, we had no idea how long this pandemic was going to be. And frankly, I think it was a bit longer than most people anticipated. So we did say that April, May, most tenants were a good through some capital for some of our smaller tenants, we would support them through the to chew through some capital for some of our smaller tenants, we would support them through the deferral programs. Now keep in mind at the time the details of the separate program was also So it was a work in progress from May to June. We're encouraged with July just because a) some of the tenants are coming back now. So the traffic is increasing that will also help with the parking. But really we still don't know a lot of variables going forward on in terms of consumption and how if schools will start and people will be back in the office. But it's a great point on the parking. In our own internal rules for the 25% of the people that are coming back, if they need to take public transportation, they didn't qualify. So some people walk or bike, but other people will be driving. So we're expecting that other tenants may be doing similar things and that parking revenue will increase. Maybe just one last question on the investment market. Michael, you mentioned a couple of buildings that I believe you said closed during the pandemic. I mean, do you have any appetite to acquire or are we purchasing units the more favorable choice at this point? Yes, I don't think we well, so firstly, if you look at apartments and industrials, they're probably trading at or above pre COVID numbers. Office is really uncertain. The trades that are happening are very, very high. We wouldn't touch them at this point at those prices because we can buy the stock back at a much lower price. So that's what we're doing. We're buying back stock to the extent that we feel that we want to use capital on some kind of internal or external growth. Thank you. And your next question in queue comes from Matt Kornack with National Financial. Your line is open. Good morning, guys. With regards to your retail tenancies, I think Seeker is probably helping a bunch of them at the current moment. But how are you thinking about that in terms of taking space back or just floating the existing entities through to the other side hopefully of this crisis? I mean, the office downtown, it's quite sparse these days downtown, but it's done reasonably well outside the core. Just your thoughts on retail in particular? So firstly, there's a lot more people downtown than there was a month ago. I think as I mentioned, we're opening on Monday. I think a lot of other companies weren't ready to open. It was announced last Tuesday or Wednesday saying that Phase 3 would be on Friday. So I think it's going to increase some more. I think after Labor Day, it's going to increase some more. And quite honestly, I found the traffic to be increasing rapidly. The people on the street has been in some cases, I'm stunned by how many people are out. So I'm not sure I agree even downtown. To go a little bit further, when you look at our retail, some of it are big companies and some of it are smaller companies that provide excellent services and some are smaller companies that don't provide important things. But we do a lot of it as amenity space. So we're definitely going to work very closely with the restaurants. They make our buildings better and we'll work with them limping along because it's so difficult for them. But we've got a big chunk that are good covenants, a smaller chunk that are excellent amenities to our buildings and we'll see if some of the other tenants if we can help them or how they do, but we'll see. What do you think Gordon? No, I'd agree. It's we're communicating. We did see and I think a reason why our cash collections ticked up in July was a portion of our retail increase as well to retail income only makes up about 6% of our portfolio income. And we saw an increase in collections that was fairly substantial on the retail side. So we're constantly communicating with them. To Michael's point, a few of our larger retail tenants are great covenants and we've got some independent operators that we're committed to trying to support and work together because we think they offer great amenities to our buildings, which make up predominantly the biggest bulk of our income. I will say as a personal anecdote, I'm more bullish on office having returned to my office, but it was hard being home with a newborn. And but outside of anecdotes, on the Eglinton and Birchmount property with regards to the industrial tenant bankruptcy, I mean, it sounds like you can get a significant uplift on rent, but that's also a potential longer term redevelopment. Will you release that or leave it for redevelopment at some point in the future? Hi, it's Gord again. So we're actively in negotiations right now to release the space. A silver lining on that pocket was the expiring rents for that. So that puts us in a good position to get a deal that's flexible for all the parties. And we've had good interest on it. And I foresee us in the near term coming to terms and being able to announce and agree to something there. Okay, great. Thanks guys. And your next question in queue comes from Nouriel Surik with Scotiabank. Your line is open. Hi, thank you and good morning. Maybe another question for Gord. On the 400,000 square feet of leases under discussion or so and several of them are renewals, has there been any tangible sign of tenants either looking to expand or contract footprint? Or is it simply tenants looking to kind of get back into the space at this stage? And then perhaps secondly, can you maybe discuss the types of average lease terms that are being discussed for the renewals relative to the previously Yes. No. Hi, Mario. Thanks. That's a good question. So a lot of the renewals that we're dealing with right now, you have to keep in mind that the vacancy rate in Downtown Toronto is still by any market measure extremely tight. So I think a lot of the tenants want to preserve the space that they have. I think a lot of people are as committed to we are into making these buildings safe. So they see that we're making progress on our physical assets and how they operate. We haven't had, I'd say, for the most part, out of these renewals, say, there's 12 that are 75 percent or greater. I'd say 10 of them are keeping their same footprint. I'd say it's a small minority that are looking at potentially downsizing and getting some creative terms. But for the most part, it's the status quo. I would say also too that our rental rate preservation has been strong. We haven't deviated from our net rent. Sure. Preservation or the increases that we are expecting. It's very consistent to what we had forecasted previously. Got it. Okay. And then maybe shifting gears, Michael, your comment that 95% of the business plan is proceeding under previous expiration. Is the remaining 5% related to the deferred CapEx that both yourself and Jay highlighted? And secondly, is it likely still too early to conclude any strategic kind of longer term shifts arising from the COVID experience? I would say the CapEx deferral to buyback stock is a change from our plan. Otherwise, we're focused on liquidity where we were before. We're probably a little bit more focused now. We're focused on getting our sites approved and we'll decide when to start, but there's still time for all our development sites. But those approvals are coming along. Certainly at Burnhamthorpe and Eddington, it's coming along. That's going to be a big approval. It's still going to take some time at 212 King. It's going to take a bit longer, but we're pretty excited about that building. So all that stuff is normal. Gord is doing is normal. The fact that there's so much energy going into both qualifying for government programs as well as collecting rents is a bit different. But I would say when we sit down and talk with the company, the conversations are pretty much the same as it would have been a year ago, especially if you get over the next 12 to 18 months. So what I was trying to get at was this is as much interruption of our thinking, but the business plan itself is staying the same. What was the second question? No, no, no, it's on the I guess the follow-up question was whether it was still too early at this stage to kind of really conclude on whether a more meaningful shift in strategy going forward is warranted? No, we won't have a more we won't have a big change. I thought maybe what you were wondering about was are the tenants going to have a big change in how they use office space. And quite bluntly, I think that'll take years to figure out and that's well beyond what we can do, but we're pretty happy that we made the decisions we did to have 85% of the value in 18 buildings in Downtown Toronto. Understood. Okay. And can you remind us of the timing of the process at Eglinton and Birchmount in terms of the zoning and expected constructions started and whatnot over time? No, I can't tell you about construction, I can tell you about the rest. There are 6 landowners that include Choice, Kingset, RioCan, SmartCenters, a private group, but not all units that's 100 acres, it should end up being something like 100,000 residential units. The city wants that to be approved. The city does what it does best, which is make it difficult. A couple of items were delayed from council 2 weeks ago. There's lots of negotiations going on, on the overall plan for the area. Generally, everybody is in agreement that it should be pretty dense developments. It's got where the new transportation is. So I think what we're really dealing with now is the official plan. And once we get that done, which could take another year, even a year after that, so probably 2 years away from having approval. But sometimes when you deal with the city, a developer wants to do something different what the city wants. In this case, the city wants to make this a new area that has all these new apartments. And we're just talking about how much. So I think we're pretty close. But when I say we, I mean all of the developers are I think are getting closer with the city. And we don't for those who care, you can go to the city council agenda and it's probably going to be on the next one or the last one and stuff like that. So there's lots of public information on the whole area. Okay. And then my last question just relates back to the share buyback, the unit buyback. I think, Jay, as you highlighted, Dream has one of the better balance sheets in the universe, plenty of liquidity, value looks quite good here at these levels. How much of a governor would you say is the balance sheet or specifically kind of targeted desired leverage in terms of quantum of repurchases here? Okay. I can maybe first talk about the balance sheet. I think we're pretty much in the ballpark where we're going to have to where we'd like to be. We always targeted close to 40% debt give or take a little bit. Debt over EBITDA is pretty good. Interest coverage is good as well. So I think the balance sheet is good now. So there is some room. The main metric is really liquidity. And in terms of liquidity, what we also look at is the near term commitments internally, externally that we need to do. But right now, it's looking pretty good. And to put in other terms, we had 114,000,000 shares outstanding in 2015. We're at 60,000,000 now. In the winter, we really stopped buying because the stock was in the low to mid-30s. So that's the 5%. We didn't expect that stock available at this price. We're happy to be buying more of the same buildings at discounts, but I don't think it's going to be dramatic like it was in the past. I think we're just picking away at the edges. I think we can buy up to 30,000 a day, lots of days we can't get it. We have a pretty firm limit on how much we're spending as a stock price. So we'll see what comes in, but don't think of the buyback as some dramatic change of course. It's just low hanging fruit. So we're picking up some. Got it. Okay. Thank you. And your next question in queue comes from Jenny Ma with BMO Capital Markets. Your line is open. Thanks. Good morning. So on the 400,000 square feet of deals that you're currently working on, just wondering in terms of time, are your tenants asking for more flexibility and shorter lease terms given the amount of uncertainty? Or are you getting the rent and the terms that you want in the normal course? Hi, Jenny, it's Gord. Yes, no, that's an interesting question. So on a lot of the deals that we're working on right now, on the new deals, you are seeing a little bit more people looking for flexible terms in terms of non financial provisions. We're getting requests for midterm terminations. We're getting requests for potentially the right to downsize in 3 years on a 5 year term. Just looking for more control or flexibility, these conversations are coming up. So good points there. But in terms of the rents, the rents are very much in line with what we were forecasting. A lot of the new deals that we're negotiating now, if we're negotiating 7 new deals for about 45,000 square feet, I'd say maybe 2 or 3 of those deals are looking for Q4 commencements of this year and then the balance of the deals we're seeing kind of Q1 commencements for 2021. The bulk of those RFPs that we're responding to the 150,000 that are out in the market, those are a lot of 2022 commencement dates on some of them. 1 or 2 of them are Q3 of 2021. And then for the most part on the renewals, to your point, some of the smaller tenants, we are seeing shorter term renewals about 3 years, just so that they can make an accommodation decision a little bit more in the near term than traditionally. But for the most part, it's just people trying to leverage some non financial provisions is what we're seeing. So to be clear, they're asking for them, but are you granting them? On a case by case, we'll weigh a lot of different factors, covenant, rent. I wouldn't say we're capitulating in all instances, but if in cases where the tenant is a good fit and we see some value and we see some growth, we will work with them. Especially if we're seeing some new tenancies with good growth forecast. Jay and I review covenants all the time together. And if we see some tenants with good growth forecast, we'd be more inclined to provide an option to terminate or give them more flexible terms. So we have an so we have a 3 year or shorter term runway to really woo them, do a great job and hasn't grown our portfolio. Okay, great. Thanks. Just to be clear, Jenny, we've always provided some tenants with some flexibility depending on the negotiations and we charge them for it. And I think now there's a lot of tenants that it's a typical deal, probably a little bit more that are asking for flexibility. We're happy to deal with them now. I think it might be a little difficult to go to a board to sign a new lease today. So we want to encourage them. But I think what Gord is saying is with good tenants, we actually think we'll end up with more space because they're going to grow. And that's part of the decision as to who we provide flexibility to. That's great color. Thank you. With regards to 357 Bay, the deal is still in place with WeWork, I presume. Has there been any discussions on that or any anticipated changes? And the second part of the question is the enterprise client that's supposed to be moving in. Do you know if they intend to move in at the time that was originally planned? So we have lots of conversations with WeWork. We have a lot of direct conversations with senior people there. We also, as it turns out, we've got a number of employees who are friends with the CEO of WeWork. He used to be at Brookfield. He was at GGP and he knows Toronto very well. They've rerun all the numbers with lower occupancy, lower rents every which way as part of the new look at everything. They love the building and it's profitable very quickly for them. They're 100% committed to it From everything we've seen, they're proceeding very quickly. But we only we don't have anything official on which enterprise tenants they will have. But we spoke to the CEO, we spoke to the Head of America, they're all saying that they think it's going to be very profitable for them as are all of the WeWork locations in downtown Toronto. Okay, great. And then my last question is a bit of housekeeping, probably for Jay. The $1,200,000 wage subsidy that you mentioned, how much of it is a pass through to tenants and how much of it is a net benefit to the REIT on G and A? And also, how much longer do you expect that wage subsidy to persist? Okay. So just some background in early innings March, April, the government came out with various programs. We looked at a bunch of them. And then we did our work and we qualified for a portion. We just got the receipt in July. So right now, I think most of it is in the REIT. In terms of going forward, now these programs continue to evolve and there's a lot of work that needs to be done in order to look at eligibility and amounts. So it is uncertain right now, but I said we will have to close the books at the end of each month. So by September, October for Q3, we'll have a better idea then. But in general, what the government is trying to do is without the CERB, they're trying to use these wage subsidies to gradually up float the businesses, which we think is a great idea. We're going to take a look at all the programs and apply for those that make sense for us. Okay. So most of it is flowing through the REIT right now? Correct. Okay, great. Thank you very much. I'll turn it back. And your next question in queue comes from Sam Damiani with TD Securities. Your line is open. Thanks. Just a couple of quick follow ups. First on 250 Dundas, I think the original plan was to start construction as early as the end of next year. Has that been kind of reassessed or not so far? And also looking at the debt stack today, what are you seeing Jay in terms of market rates for mortgages today? I'll deal with 250 Dundas. We have some pretty essential tenants in that building and they're paying us good rents. So we're actually kind of in a holding pattern. They're essential because they run telehealth. So we think that they might take some more space, others might take like so we're pretty happy with the building. So we're kind of a holding pattern until we get through this. And I don't know what we're going to do, but the rents are great, the building is in great shape and we're making progress on the design development. Jay, you want to talk about mortgage rates? Sure. Just on rates, credit facility for those are floating, benchmarks down about 100 or maybe 25 basis points. So that's a direct benefit. On mortgages, once again, the benchmarks down that much. The spreads might have been up a little bit. We're in the late stages of looking at the one refi that we have. I'm quite excited. Multiple lenders are looking at it as of today. So I don't want to go too much in detail, but we're quite optimistic. We're looking at long term IO with pretty good LTE. Guess that the rate is probably going to be close to 3% all in. That's great. Thank you. And there are no questions at this time. Finally, I'm impressed by the number of questions. I hope that our answers are helpful for you. Once again, I'd like to thank everybody for dedicating the time for our call and the time on our company. Please feel free to call Gord, Jay or I with any follow-up questions. Thank you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.