Earnings Call: Q2 2019

Aug 9, 2019

Good morning, ladies and gentlemen. Welcome to the Dream Office REIT Second Quarter 2019 Conference Call for Friday, August 9, 2019. 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.dreamofficereit. Ca. Later in the presentation, we will have a question and answer session. Your host for today will be Mr. Michael Cooper, CEO of Dream Office REIT. Mr. Cooper, please go ahead. Thank you very much, Paulette. Good morning, everyone, and welcome to Dream's conference call. I'm here today with Jay Jing, the Chief Financial Officer of Dream Office. I think it's been a busy week for most of the listeners, so we're going to provide a pretty basic summary and then we'll be happy to answer your questions. Jade, do you want to start with your report? Sure, Michael. Good morning. In the Q2, we reported FFO of $0.44 per unit relative to the last quarter of $0.43 The increase of $0.01 per unit was mainly attributed to higher comparative properties NOI of $1,000,000 offset by reduction of non recurring income. Relative to the same quarter and prior year of $0.40 per unit, the increase of $0.04 was driven by occupancy and rental increases in downtown Toronto, including the 191,000 square feet lease that commenced at 438 University, reductions in G and A offset by loss of NOI from assets sold since the prior year. Comparative properties NOI was up 9.9% in the quarter, driven by an 18.8% increase in Downtown Toronto, relatively flat in the Greater Toronto area and decrease of 9.8% in our other markets, mainly due to leasing challenges in Saskatoon and Calgary. In Downtown Toronto, 2019 is 91% committed at rents that will commence at an average of 12% higher than expiring. Note that these leases were signed in prior periods and that at the market rent has continued to increase. In 2020 2021, we will have about 600,000 square feet of expiry in Downtown Toronto that is currently uncommitted at average expiring rent of $24 per square foot and we think the market rent today for such space is around $30 net. Assuming no further growth in market rents, we will likely be able to realize a 25% or higher increase on new leases. Given that downtown Toronto is expected to be about 80% of our portfolio by fair value this quarter, we remain optimistic that we will have strong organic growth for the foreseeable future. We reported net asset value per unit of 25 point $4.9 or $0.39 higher than last quarter, driven by net fair value increase in the portfolio from higher rents, retained earnings from operations and increase in value from our ownership of Dream Industrial REIT Units. Our leverage was 45.4% at the end of Q2 with $351,000,000 of available liquidity. Year over year ending June 30, we will have increased FFO per unit by 10.9%, implied total net asset value and distribution return of 10.6% while reducing leverage by 2 70 basis points. Subsequent to quarter end, we have closed the previously announced disposition of 700 Delacochitiers in Montreal and have a firm contract on the sale of 150 Metcalfe in Ottawa. We expect to net over $180,000,000 in aggregate after repaying mortgages and transaction costs. We intend to use the proceeds to pay off our line, fund capital projects, repurchase units and potentially acquire properties in downtown Toronto. We have also completed our financing initiatives for the year by closing on 4 mortgages totaling just under $300,000,000 with a weighted average term of 9 years and an average interest rate of 3.6 percent. We extended our $435,000,000 credit facility to 2022. We have reduced our variable rate debt exposure from over 26% at the beginning of the year to 7% today. And now we have approximately $500,000,000 in liquidity. With everything that has happened in the 1st 6 months, we are now updating our guidance for the remainder of 2019. We expect to end the year with leverage at or around 40%, which was a level that we are comfortable with to manage our business in the near to medium term. Assuming no further transactions, our FFO per unit for the second half of 2019 should be approximately $0.42 each quarter. We expect that the loss of income from the sale of Montreal and Ottawa of just under $5,000,000 per quarter to be offset by higher comparative properties NOI of 10% for the year on our entire portfolio and lower interest expense from lower debt. For the rest of the year and into 2020, we will mainly focus on development and value add projects already identified as the dream collection on Bay Street. The planning and designs are substantially complete and construction work will commence this fall. We expect to be done by the end of 2020. As previously mentioned, we will have approximately $500,000,000 of available liquidity to fund these projects and other opportunities to improve our core assets in Downtown Toronto. We will also have ample flexibility to pursue investment opportunities to complement our existing portfolio when they become available. We remain open minded to recycling capital outside of downtown Toronto where it makes economic sense and may continue to repurchase units so that our growth in FFO and value will have a more meaningful impact on a per unit basis. I will now turn it back to Michael. Thank you, Jay. We made some major changes to the company with so much of our value and income coming out of downtown Toronto. We're very positive in the market, and I think we're also focused on how do we get the most out of every building. We're down to 21 buildings in Downtown Toronto, and we have plans for every one of them, and we see incredible opportunities to make them more valuable. We've started work on the Dream Collection on Bay Street, and we're excited for people to see what we're doing. And then we're going to spread that work around to the remaining buildings and continue to make our buildings more valuable. Think we're really looking to have 22 landmark buildings in downtown Toronto. We've We're very close to closing on 2 acquisitions, both of which are small assets that we think have a strategic value for our business in addition to being at numbers that we think will work. So the second of the 2, we hope to disclose soon, but we don't have any space. It has a 1.5 the average lease term is 1.5 years and we've got an asset planned on. And as soon as that's firmed up and ready to close, we will be approaching tenants that were otherwise unable to accommodate and show them what we're going to do with the building. And I think we're going to have a very special asset. It's been a while since we bought new buildings. We've been quite experienced in selling buildings. I think we sold over 140 buildings in the last couple of years. I thought it was a couple of years since we bought a building. Jay told me that it's been 6 years since we last bought a building. So I would say that's a pretty big change in our outlook and recycling of capital for the business. We sold 7 Hunt Village G and I want to say the net cap is getting close. We've got 2 buildings in Calgary. 1 of them is our head office for our land and housing business. That's a future development site. It's in a great part of town, and we're very bullish on it. The other one is Barclays Square, which is a great location. It was among the best assets we had in downtown Calgary. It's quite well leased, but we're kind of uncertain as to whether that's an asset we would keep or not. In Saskatchewan, Andrew Rial has done a great job with our assets in Regina. They've got long term leases. We're just finishing up some construction to get them ready, and we're going to look to sell those. We've got 3 buildings in Saskatoon. 1 is quite stabilized, we're not too fussed about it. We've got 2 downtown that need some attention. There's London City Center, and that's basically everything other than Toronto. So it's getting to be a very, very focused portfolio, and we're happy with the balance sheet. And we'll probably look to continue to grow in downtown Toronto. There's probably been about 6 or 7 buildings that have sold over the last 5 years that would have been of interest to us. So we say we're interested in building downtown Toronto. It's not like there's anything we can do at any given time, but when the time comes, we'll be very focused on it. So we're pleased with the business. The government of Ontario renewed their lease at 720 Bay, which is one of our 4 buildings in the health district. That means they'll be in the building till the end 2025. That building is directly behind Toronto General. It's amazing what's happening at the hospitals and the amount of capital that's being spent. We're happy to have that building available at the end of 2025 to develop. We'll probably start working on a redevelopment plan for way before that. But we're quite content to have the federal government the provincial government in that building now. And that's something we're seeing. We're seeing a lot of activity with the governments and we're trying to line up really solid income while we develop a couple of buildings, and then we'll get to the next round. So we're happy with that. If there's anything that's going to concentrate on my comments today, I just want to mention a little bit about our PropTech investment in Alake. Alake made or is committed to make about 6 investments. The first one is an app that our property management team identified very early in the beginning of that company. We liked it a lot and we've invested some money in that. And then we just did a second round. That company now has 70,000,000 square feet of office space on their app and it's being used by some of the best real estate firms globally, and we think that could be a real win. We've got an investment in a parking app that's really interesting. It's when you make a reservation for dinner, you can arrange parking and book your parking. There's an interesting one where it's office furniture that you can resell back to the manufacturer, and it's very, very easy to get an office furnished and make changes and stuff like that. So we think that one's pretty exciting. We did invest with our partner Relay in Bird, the scooter company, and we invested a little bit of money on that. That one's pretty interesting. But what was really interesting about that one is we secured the rights to run Bird scooter to own Bird Scooter in Canada. So we've got an operating partner. It's fifty-fifty. Our share Dream Office's share of that business is now 7.5%. And in the last 2 weeks, we've launched in Calgary. So if you're in Calgary and you want to ride a scooter, there's a good chance that's an asset at Dream Offices. And we're working very close with all the different legislatures, both provincial and city, because we've got to get to the change the laws to allow scooters, but we think it's going to happen very quickly. So that's maybe something people haven't been thinking about. That's pretty much my comments. And Paul, Jay and I will be quite content to answer questions. So Thank you. And our first question comes from Mark Rothschild from Canaccord Genuity. Please go ahead. Thanks and good morning guys. In regard to the Toronto acquisition, is it possible just to give us a little more color on what the potential total investment is in these properties? And also, should we look at these as properties that are, not necessarily going to be materially near term accretive or accretive at all on more long term development or redevelopment opportunities? Is there anything more you could say? I'd say we're probably looking at somewhere around maybe $60,000,000 in total. I think they'll be net asset value accretive for sure. I'm not sure how long it'll take. They are income properties, not development properties. Okay, great. And then for the Toronto office market, obviously, you're having some good tims. China wide growth now looks good. What type of occupancy pickup can we expect to see and how strong is the market for some of the smaller spaces you might have over the next year? I can answer that. So we had a space taken back in downtown Toronto. Actually some of it were holding back. We call them strategic vacates, especially if it's in the on the retail side. We thought that it would make sense to have contiguous spacing along the street side front. And over the course, I would say, the rest of the year into 2020, I would expect occupancy to be relatively flat. I think come up, we'll bring it back with some capital and then we'll try to get higher rents. So you'll see increases in NOI, but occupancy should be relatively stable. Okay, great. Thank you very much. Our next question comes from Sam Damiani from TD Securities. Please go ahead. Thanks and good morning. Just on those two acquisitions, what is it about these 2 that you liked perhaps that you may not have liked about some other properties that have traded in the market over the last couple of years? Actually, that's a really interesting question because I don't think it's the right question. The Bank of Canada building traded a few years ago to 3.8% cap, and I don't even like to go down university anymore. We weren't in a position to buy it then. So I don't think the question is like, what do we like about these buildings that we didn't like about others. There's been so few available that now we're in a position that when a special building comes up, we're comfortable buying it. So I mean, that's the big change, not that these buildings are more special than something like the Bank of Canada building. I would say that both these buildings are within 100 feet of other assets we own, And they actually both had a lot of vacancy. They're one of those that it's very, very small, but I think we've released the whole building during due diligence. So that sort of ties into my sorry, go ahead. Go ahead. I was just going to say that sort of ties into my next question, which is how big is this opportunity set for you for the REIT now to grow in down REIT now to grow in Downtown Toronto in this type of asset? I would say that it's very, very small. I mean we're probably looking at by the way, look, if you take a look at transactions that have happened in downtown Toronto in the financial core, we were part of 3 just to do with Scotia Plaza. Cadillac Fairview sold 30% of their building to LP Trust, I think. 7 New York is traded. It's on leased land. That's not that interesting. I think 100 and 45 University is the kind of building we might have been interested in at the time, but we weren't ready. There's a small building that is 141 Adelaide that traded, but there just aren't buildings to trade. Okay, that's helpful. And then so 40% leverage today, is that and you said sort of that's where you'll be sort of near term, but is that where you see running the REIT long term? Yes. I think for the foreseeable future, we've guided to 40% leverage, I think 8 times debt to EBITDA and 3 times interest coverage. And that was end of the year and at the ATM. I think we got there quite quickly because of the 700 to negotiate here. If anything, we eclipsed it. But I think that puts us in a good position going into next year to keep work on the redevelopment of capital projects and it sets up reasonably well for development in the future. So we're pretty happy here. And can you give us sorry. So just on the debt, I look at it a bit differently. I really try to look at I don't know what's going to happen in the future. I kind of like if we we want to have low debt compared to the cap rate. Do you know what I mean? Yes. So if you say all our assets are 1 caps, we would have 10% debt, but that would be very scary. So we kind of look at, well, what would happen in a normalized market and let's say use a 6.5% cap on the product. So we have a 6.5% cap and it turned out that we were 55% And I think, look, we're going to get growth in our assets. We've got 40% debt now. We can talk as much as we want about what somebody thinks assets might be worth. I want to make sure that if cap rates move a lot, these buildings are the whole buildings and the business is really safe and secured. Okay. And just on the Dream Collection redevelopment and renovation work that you say is going to be finished by the end of next year. Can you give us a sense of where things stand today? And just to confirm that all of these sort of 7 buildings that I think we talked about at the AGM are actually going to be finished by the end of next year? So that would be our goal. We showcased, I think, 2 or 3 plans at the AGM. Since then, we have plans for every building now. So to date, most of the costs incurred has been in planning and soft costs. We're going to be hitting the ground with the shovels probably by fall and things are going to go quickly because we're going to have a plan in place and we'll probably do all the facade together, all the wash and common lobby. So there will be a process in place to make it efficient and I think we'll be there by then. Okay, that's great. Michael, you mentioned the government Ontario renewing at 720 Bay. And the way you were talking, it sounded like you're preparing for them to vacate at the end of this term. Is that kind of the plan there? Does the government in that space already have plans to move into another space in 6 years? No, no, no, no. Actually it's quite the opposite. This building I think opened in May 1989 with a $20 rent And it was for 10 years. And then in 1999, they renewed at $14 and we didn't own the building then. We bought it in 2,004. The lease came up in 2,009, the same time the mortgage came up. We paid out the debt. They had renewed, but we had to go to market. We had to go through a process. We went through mediation, they found for us and then the government appealed that, they found for us. And then we entered into a transaction, we added another 10 years. And in that 10 years, they had one last renewal, which would they just exercised had to exercise it by June 30 at $20 So it's a little ironic that the rent starting in 2020 is precisely the rent that was agreed to in 1989. So with this, they have no more rights And maybe we'll work with them after that, and maybe we won't. But it's the first time in the history of this building, the owner of the building has had a choice as to what they want to do with the building. So after this renewal, there's no further right. So that's where we get to decide finally. But I do want to mention one other thing that last year around this time, we did a substantial issuer bid and bought stock at $24 We saw where we repositioned the company, and we wanted to make sure that we capture a lot of value. And we were really quite content with the outcome. Since then, in Toronto, net rents have surpassed in nominal dollars the peak rent of 1989. So if you built a building in 1989, you got $34 rent. You never saw that again until this year. So we're now seeing rents that have gone up a lot, and I think we're pretty well positioned for it. So 720 Bay, we don't have the right of $20 We would have got a lot higher rent if they did have the right, but at least we're getting control of our asset back. Right. Understood. And just on the guidance, I think at the beginning of the year, one component of the guidance was 5% to 6% growth in NAV. Short of you've already done, I think, 6% year to date. How do you feel about that now? I think the way we look at it is we're not predicting cap rates. We really just look at how the NOI goes up as we roll up rents. And I mean, like we're trying to it's kind of a number that may be important to you. I think Jay, if he was being honest, would say, yes, that seems pretty doable, so I'll use it. Agree. Thanks for your honesty. It wasn't his. Our next question comes from Jenny Ma from BMO Capital Markets. Please go ahead. Thanks. Good morning. Good morning. With regards to the government tenant renewal in the Mississauga North York buildings, was there any change in the rental rate for that renewal flash extension? No. I think what happened there was first they did a 1 year extension and then they extended it by another 4 years. But the rents there were already pretty healthy relative to the market. So I think we got it around 20 4 ish. So it was pretty flat to expiring. But the tenants there, I think both of the major tenants, they've been there for 20 years. They're very supportive of the We have a great relationship. And I think just extending the wall in that building will really just help improve the value. Okay. What is your long term view of the 2 suburban assets that are left, just given the focus on downtown Toronto? When you talk about the dearth of opportunities for acquisitions downtown, do you believe that at some point there would be some incremental spillover into suburban and that there is value there? Or is it really just a downtown Toronto focused exclusively going forward? That's a wonderful question, V Sis. 2,200 Edmonton is going to get going for between 23 1,000 residential units. So that's a fantastic asset. We looked at another asset in the last quarter that was right near that in Scarborough that we did put a bid in. It traded for way too high a price. I'm not going to say we wouldn't do something, but that one's quite unique. It was basically land with in place income. So yes, I mean, one thing I'd say is something like 2,200 Edmonton is really interesting for us. We're happy to own it and develop it. In the suburbs, I just don't see us buying any commodity kinds of office buildings ever again. Sussex Center is in the center of a city at 1,300,000 people and 5,001 Young is in the center, another city with 1,300,000 people. We don't really view that as suburban. Sussex Center, we're pretty excited about the opportunity to reposition that asset. I think it's got the highest occupancy it's had in a long, long time. There's a lot of interesting things happening in the retail, and there's probably more redevelopment there. So we are not thinking about, oh, why don't we go spend money outside of downtown Toronto because that would be fun. We would have quite a bit of resistance to do that other than where there's an unusual situation with development. Okay. That's fair. If we do see value start to tick up in the areas outside of downtown, would you consider selling these properties? So now you're asking the opposite question. I think the 2,200 Edmonton we will not sell because it should become a $1,000,000,000 rental project. So I wouldn't say it. I think that's quite different. Sussex Center is really interesting too. We have a partner in that one. That's the kind of asset. And think with 5,001 Young, I think if we got an incredible price, we might consider it. I think in downtown Toronto, the real issue is you can't replace an asset you sold. And we don't feel that same way in the suburbs. Okay. That's fair. And then my last question is, given the occupancy rates that you do have in Toronto, what has been your experience with some of your growing tenants? Have you been able to reshuffle and accommodate them? Or do you find that they've got to move on if they're looking for bigger space? That's a great question. Our retention rate is huge. I think it's over 80% or something like that. So we've been doing pretty good keeping our tenants and we've been working really hard to shovel tenants around. And we'll be getting really healthy rental rate increases. So far it's working pretty smoothly. Okay, great. Thanks. I'll turn it back. Thanks. Our next question comes from Zhan Zhang from CIBC Capital Markets. Please go ahead. Hi, good morning. I just had a few questions on financing and capital allocation. First, I guess, the REIT has been active on the SIB. Just curious to hear your thoughts on how the REIT would prioritize between unit repurchases in the future and convene capital towards new redevelopments? Sure. I'll ask that. So it's not exact science. We look at a couple of things. First, we look at our balance sheet, our liquidity. We're in pretty good shape right now. We mentioned we have $500,000,000 in liquidity. So I don't think it's really one or the other type of thing. We look at the value of the company where it could be versus what we can get in the market today. And if you think about a stock that trades at a high 5 cap versus what you can buy, that's comparable to our portfolio. It's not a bad place to put your capital. But we're looking for opportunities every day and it's going to remain fluid. So we have been buying the market because we thought it was a good opportunity to shrink the unit count a little bit so that the growth can be shared amongst a lower unit base. But going forward, I think we're going to be pretty fluid. Okay. Got it. And I guess in terms of upcoming debt maturities, I was wondering how the upcoming Series C debenture maturity fits into the overall financing strategy. That one will be simple. We're going to pay it back. Okay. Got it. If switching gears to property signed transactions, can we get your outlook for any remaining non core dispositions? Sure. I think I guided $75,000,000 for the year. So, so far with the 3, 2.5 properties we sold, that gets us to be about 50. Or there's an asset in Regina. We're working on it. We're trying to move the debt away to that other building, so we could free ourselves up on the debt settlement cost. I think we're pretty optimistic on that one, but it's not a large asset. Right now, it's August, so we still have a couple more months. But I think we'll come in around that mark for the buildings in Western Canada. And obviously, that will include the DLG and ISA 75, so that's outside of that. Okay. And then just going back to the potential boutique office acquisitions in downtown Toronto, Will the REIT be pursuing more of these in the future potentially outside of the downtown core? Sorry, go ahead. Look, we're only looking at downtown acquisitions in the financial core, like the kind of stuff that we have now. We're pretty reticent to go to the suburbs unless there's some really compelling reason. And I guess on the fringe stuff, it would be driven by the opportunity. We're not really looking, but if there was a combination of income plus development, we could do something. But we spend a lot of effort to get to buildings that are quite special. Each building is quite special. So we're not going to grow to add a building or something like that. It's got to be a very compelling reason. Okay, got it. We've got so much organic growth in what we have. We don't want to dilute that. So we've got a lot of work to do on our assets. And I think we're going to end up with literally one of the I mean, I think we have one of the best portfolios that are owned by anybody in downtown Toronto. And I think Toronto is really coming into its own. So what you end up with is we've got this phenomenal position downtown Toronto. And Toronto is sort of stepping up the ladder of greater and greater cities. So I think we want to be really careful not to be buying the sector, but be focusing on assets that we think we know what to do with. Okay. Sounds good. Thanks. I'll turn it back. Thanks. And we have a follow-up question from Sam Damiani from TD Securities. Please go ahead. Thanks. Just on the 3 57 day, how much of the costs have been fixed or tendered there? And also similar question on the Dream Collection work that's going to go on for the next year as well. Okay. Majority at 357 Bay and sorry, 357 Bay is a lot done. Yes. And then Dream Collection, we're going through the planning process. So we're in the process of engaging construction managers and getting through tenders as we speak. But you would reiterate the kind of cost numbers that you were discussing at the AGM? Yes. Yes, we don't think we're going to have issues with spending more money on the same thing. I think that we're very active in looking and saying, do this, maybe we should do this other thing, too. So we could expand the scope, but I don't think we're fuss at all about the construction cost of 84 bathrooms, 7 facades, 7 lobbies and some HVAC. I think we're pretty confident on that. And just finally, Jay, you mentioned the current leverage is 40%. That was a net debt number or was that before factoring in the cash that's probably sitting on the balance sheet today? We're doing net debt. That's 40% net debt. Okay. Thank you. Our next question comes from Matt Kornack from National Bank Financial. Please go ahead. Hi, guys. You're adding density to some of your sites. Some of this is residential. But given the dynamics you're talking about, would you anticipate potentially getting into the development game adding office density? One of the development sites that we're looking at would be about 50% office, much more office than they have now. So we look at every site and try to determine what mix of uses generates the highest returns where we get an asset that we want to hold for a long time. And a lot of that actually has to do with what it is that we're allowed to do. And then once we know we're allowed to do sort of driving like what does the office look like compared to residential rental. But would you potentially look at buying, I guess, greenfield opportunities or land or even using the platform that you have to potentially develop office product on some of the land you already own in other entities? You know, look, in other entities, 31A Parliament is part of the distillery. It's got 300,000 square feet of commercial, about 240 of it is office and some of it's leased and the rest is under LOI. Under the Donlin project, we think we've got a commercial site just to the east of distillery. So I think what we're seeing now that's changed a lot is you got a retail REIT that owns retail centers and then they look at developing, they develop on them the highest and best use. So for our company, wherever we have land, we try to figure out what the best thing to do with it and then we do it. So I think you've seen a real huge shift from REITs from saying, oh, all I do is retail or all I do is office. Once you start developing, you want to do the best thing you can do with the land. And that's why smart centers are doing 6 different kinds of things. And it's just that's where you get the money now. So we'll definitely develop the best on everything we own. I don't think we'll be doing greenfield. I'd sort of think about that, meaning there was like growing corn there and then we would do something. We don't do that. But I think downtown, that's what we're getting at before. On the fringe, if there's an idea, we could look at buying in the dream office and we could look at developing office there or residential. We'll see. Right. And then in terms of new supply, right now in the next year or 2 in Toronto, if you have a lease coming to maturity, you're pretty much screwed if you're a tenant. But We tend not to think of it that way. As a shareholder, I don't think they would think of it that way either. But what I'm saying is when there's new supply coming on and tenants have a little bit more choice, do you think the rent spreads that are being attained today are realistic in 3 to 5 years? Yes. That's a great question because I had mentioned before that we now have a nominal dollars, the same rent as 1989. I would put it a different way, in real dollars, rent's half of what it was in 1989. At the same time, that there's a labor shortage and the best and the brightest want to work in places that are interesting. So I think that generally sorry, so let's say the rents were $34 in $1989 and now they're $34 again. On top of that, in our buildings, you might have another $25 of operating costs and taxes. So you're at $60 Well, the tenant, they've gone from 48 to 60 in the last 2 years. It's an increase, but it's not as big as you think in terms of what their overall occupancy costs are, nor do I think is it a significant amount of money that affects the profitability of their company. I actually think they're spending more money on real estate now and they're getting something better for it. So I think that I think office space has gone from just a G and A expansion to something that's more meaningful for the companies. I think that's a major change. On the supply side, we're trying to build incredible buildings and we're trying to improve our buildings to be incredible that really appeal to people and help them run their business better. And there's a lot of new supply and a lot of it is needed. I'm not too fussed about that. If you ask me what I would worry about, I would say if 5 Canadian banks decide to do the same thing that Deutsche Bank did, every one of them would give back a whole building. So yes, there's a lot of supply, but it's needed. But the real question is, is there something fundamental is going to happen to the economy, but that happens from time to time, and we want to make sure we have buildings that are going to outperform in a good market over a bad market. So that's our strategy. We talk about debt. That's our strategy is that you don't know when you're right or not, so you make sure that you got the flexibility to handle whatever comes at you. So my favorite part of the quarter is the subsequent part that says we have $500,000,000 of available liquidity. Makes sense. Thanks, Michael. Thanks. And we are showing no further questions. I'll now turn the call over to Mr. Cooper for closing comments. I'd like to thank everybody for participating. Jay and I are available whenever you want, and we're pleased with the quarter, but we think we've got an even better future ahead. Thank you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.