Good morning, ladies and gentlemen. Welcome to the Dream Industrial REIT third quarter conference call for Wednesday, November 4, 2020. During this call, management of Dream Industrial REIT may make statements containing forward-looking information with 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 Industrial REIT's control, that could cause the actual results to differ materially from those considered disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Industrial REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Industrial REIT's website at www.dreamindustrialreit.com. Later in the presentation, we'll have a question and answer session.
To queue up for questions, please press star one on your telephone keypad. Your host for today will be Mr. Brian Pauls, CEO of Dream Industrial REIT. Mr. Pauls, please go ahead.
Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's 2020 third quarter conference call. Speaking with me today is Lenis Quan, our Chief Financial Officer, and Alex Sannikov, our Chief Operating Officer. 2020 remains a uniquely challenging year, and the COVID-19 pandemic continues to result in widespread uncertainty. However, our business has been firing on all cylinders, and we continue to make progress on a number of strategic fronts. Our FFO per unit is trending upwards compared to the first half of the year, in line with our expectations. Our operations are strong, and we are building both our near-term and long-term organic growth profile through leasing and redevelopment initiatives. We continue to deploy our excess liquidity into high-quality assets.
The strength of our balance sheet and business has been endorsed by DBRS with a BBB credit rating. We started executing on our euro debt strategy with the goal of significantly reducing our overall cost of borrowing over time. Starting with our operations, our fundamentals remain robust with strong rent growth collections and over 1 million square feet of leasing completed since last quarter at healthy spreads. These operational successes will help build the organic growth profile of the company for 2021 and beyond. Our ample balance sheet capacity and global acquisition platform allows us to access high-quality acquisition opportunities in North America and Europe. During the third quarter, we acquired four assets totaling CAD 86 million across the GTA, Montreal, Germany, and the Netherlands. We have over CAD 100 million of additional assets under contract or in exclusivity across Canada, Germany, and the Netherlands.
Following these acquisitions, we will have acquired or contracted more than CAD 600 million of high-quality industrial product in 2020, adding over 5.5 million square feet of well-located GLA to our portfolio. All of these assets fit nicely within our focused investment strategy of acquiring high-quality, mid to large bay distribution and urban logistics facilities in strong industrial markets. Over the past three years, we have significantly reduced leverage, grown our uncovered asset pool, and improved balance sheet flexibility while improving overall portfolio quality. Last month, we received a BBB mid rating from DBRS, which is a strong reflection of our strategic initiatives as well as our superior tenant and geographic diversification. The investment-grade credit rating allows us to execute our debt strategy more efficiently and further improve balance sheet flexibility. With a strong and flexible balance sheet and favorable fundamentals, we are increasing our focus on our development program.
We are equally focused on ground-up development and accessing the growth opportunities within our portfolio where we have a significant urban land position. In Las Vegas, we are finalizing the planning and permitting process with a target construction commencement date in 2021. We expect to build a 36-ft clear Class A 460,000-ft distribution facility that will be a great addition to the portfolio. We are forecasting a development yield of 6%, which is 100 to 150 basis points higher than comparable stabilized product in the market. Turning to our income-producing portfolio, we have identified over 20 sites with about 70 acres of excess land that can support over 1.5 million square feet of additional GLA, as well as a handful of redevelopment opportunities where we could roughly double the existing density to just under 1 million square feet.
These sites are located mainly in the GTA, Montreal, and the Randstad in the Netherlands, where availability rates are low and newer high-quality space would be in strong demand. In some cases, we can access the intensification and redevelopment opportunities gradually as leases roll. In others, such as our site in Richmond Hill, we can pursue the expansion in the next 12-18 months. Overall, we expect that our land bank will be a meaningful driver of organic NAV growth over time. With strong and well-covered distributions, flexible balance sheet, and improved organic growth outlook, we believe DIR is well positioned to deliver superior total returns to its unitholders. I'll turn it over to Alex to talk about our operations.
Thank you, Brian. Good morning. Our portfolio has proven to be resilient as we continue to address the transitory vacancies and increased rents. Leasing volume has increased significantly in all our markets, and we completed more than 1 million square feet of leasing since the end of the second quarter. We are achieving rental rates that are outperforming given our pre-pandemic expectations.
300,000 sq ft Louisville property is receiving strong interest from prospective occupiers. We're currently in discussions with a Fortune 500 tenant for the space, and we expect to have a lease finalized by year-end 2020, with lease commencement in early 2021. Our recent leasing activity has addressed over 20% of our vacancies, and we're in discussions with another third of our vacancies, including Louisville, leading to significantly improved organic growth outlook next year. We're currently forecasting mid-single digit organic NOI growth in 2021. Many of our new leases are commencing in 2021. For the fourth quarter, we expect that our in-place occupancy will moderately trend upwards compared to Q3, leading to directionally improving same-property NOI growth. At the onset of the pandemic, perhaps there was a perception that our portfolio had a significant weighting towards smaller tenants and would hence struggle during the disruption.
In our Q3 MD&A, we provided additional information on our tenant base. Over 75% of our revenues derive from 288 tenants with an average size of approximately 70,000 sq ft. These tenants are from a diverse set of industries, with no industry accounting for more than 12% of total revenue. The resiliency of our portfolio is evident in our rent collection stats. Our rent collections for Q2 increased over the course of the quarter to over 99%, adjusted for rent deferrals and CECRA. In Q3, we have collected over 98% of rents, adjusted for CECRA, and we have not signed any material deferrals for the third quarter. In fact, we have already collected the majority of the deferred rents from the second quarter. Our CECRA participation also declined by 25% in August and September compared to Q2 and July.
Lastly, our collections so far for October are at approximately 97% without any rent deferrals or the impact of CECRA, which is in line with pre-COVID-19 collection rates. During the quarter, the value of our portfolio increased by over CAD 65 million, reflecting the robust demand for industrial assets in our market, strong leasing activity, and rental growth. The outlook for rental growth remains strong, and we look forward to engaging in value-add initiatives to increase returns and surface additional value from our portfolio. I will now turn it over to Lenis, who will provide our financial update.
Thank you, Alex. Q3 was an exciting quarter for us as we made significant progress in improving the quality and stability of our balance sheet and executing on our announced debt strategy. Our financial results for the third quarter were in line with our expectations. Diluted funds from operations was CAD 0.18 per unit for the quarter. FFO per unit was modestly lower compared to the prior year comparative quarter, primarily due to dilution from the timing of deployment of our ample acquisition capacity. Other items impacting FFO per unit for the third quarter totaled CAD 0.25 and related to COVID-19 related adjustments and provisions. Our balance sheet continues to be robust with ample liquidity and significant acquisition capacity.
We ended the quarter with net debt to assets at just under 30%, net debt to EBITDA at 5.8 x, and CAD 272 million in liquidity between cash on hand and undrawn capacity on our unsecured credit facility. During the quarter, we commenced the execution of our strategy to transition our borrowings to euros in order to lower our average cost of borrowing. At quarter end, we had EUR 82 million of borrowings swapped to euros with an effective interest rate of 1.1%, and the average interest rate on our total outstanding debt declined by 7% year-over-year.
Subsequent to the quarter, we closed on a US $150 million three-year unsecured term loan, which, after swapping to euros, is expected to bear interest at approximately 90 basis points, which is 250 basis points lower than our current average in-place interest rate on debt, providing a meaningful driver of FFO per unit growth. The proceeds are expected to be utilized towards future acquisitions and repaying existing debt. Pro forma the acquisitions that we have under contract or in exclusivity, our leverage will increase to approximately 32% with our unencumbered asset pool totaling CAD 1.4 billion, or 44% of our investment property value. We could acquire about CAD 275 million of additional properties with our available liquidity, which would bring our leverage to the high 30% range.
As we deploy this capacity over the balance of 2020 and early 2021, continue to access additional euro-denominated debt, and our comparative properties NOI increases from our recent leasing momentum, we expect our FFO per unit run rate to be stronger in 2021. For the fourth quarter of 2020, we expect our FFO per unit to be higher than Q3 2020 in the low single percentage range. I will turn it back to Brian to wrap up.
Thank you, Lenis. We continue to take significant steps in positioning DIR as the premier industrial REIT in Canada and delivering attractive overall returns to our unit holders. We will now open it up for questions.
Thank you. We'll now begin the question and answer session. If you have a question, please press star then one on your touch-tone phone. If you wish to remove or remove from the queue, please press the pound sign or the hash key. There'll be a delay before the first question is announced. If you're using speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then the one on your touch-tone phone. Our first question comes from Chris Couprie from CIBC. Your line is open.
Good morning. Just wanted to touch on the new development disclosure. With respect to the portfolio review, have you essentially, at this point, gone over every asset and the amount of development opportunity that you have, that's basically all of that would exist on the current portfolio? Just when you think about development, how are you thinking about yields or returns? Thanks.
Yeah. Thanks, Chris. Let me start it, and then I'll ask Alex to follow up. Obviously, we've got 460,000 sq ft of greenfield, new development starting in the city of North Las Vegas. That's near term. We've reviewed the whole portfolio and found a lot of opportunities to expand buildings and not only enhance density but also redevelopment opportunities. We think there's probably 100,000 to 300,000 sq ft of relatively near-term opportunities to either add construction or add density to our properties. When I say in the near term, call it in the next couple of years. There's much more of that beyond that in the portfolio. We've got a team that consistently looks at opportunities and ways that we can create value and add quality to the portfolio that we have.
Alex, why don't you comment on just the exercise we've done to go through the whole portfolio and the opportunity that it represents?
Thanks, Brian. The land bank that we would quantify in our disclosure is, first cut, these are very tangible opportunities. There are additional opportunities that we're not including in this land bank right now. They're primarily in Western Canada. There is quite a bit of excess land in that portfolio as well. Until the market is becoming more robust, we didn't include those opportunities. However, they're there. From the yield on cost perspective, the advantage of developing excess land is, in many cases, the land is already embedded in our IFRS value. If you look at an example of a project like in Richmond Hill, we can be building to a yield on cost of well over 8%, and that's yield on construction cost, because that land really cannot be sold as a standalone asset.
It has value to the owner of the existing income-producing property. There are many more examples like this in the land bank that we've quantified.
Is there a minimum return that you're looking for before you would kick off a development project?
I think what Alex is saying, Chris, is that on the expansion, on the existing portfolio, the land's already embedded in there, you're getting the land basically for free. The new construction cost, the yield is much higher than if you were starting from scratch. It's quite accretive when you've got underutilized land. Expanding an existing building is almost always going to be accretive. In Richmond Hill, for example, it's 100, call it 110,000-ft building. We're adding 40,000 ft to it and getting a yield on the new cost of 8%, it enhances the yield of the overall asset.
In terms of acquisitions going forward, will you be looking more at assets that have this future development or redevelopment potential?
We certainly take that into consideration when we're reviewing the attributes of an acquisition. You could see in Europe, we've bought some properties that have some expansion potential. They yield really well in the short term, so that's kind of the perfect bullseye for us. If they have expansion ability, or expansion land, we find that attractive because we've got the ability to create that value in-house. We can underwrite it in-house, we can execute on that with our team.
Thank you.
Okay. The next question comes from Himanshu Gupta from Scotiabank. Your line is open.
Thank you, and good morning. On the leasing activity, you're getting 40%, 50% higher rents in GTA on recent lease agreements. I noticed some of these properties are 50,000 sq ft or higher in size. Just wondering if the leasing demand is so strong for only certain tenant types or size of properties in the GTA or is it across all properties?
Himanshu, I'm having a hard time hearing your question. I know it's around GTA leasing. I couldn't hear the specifics of it. I'm sorry.
Okay. Sorry, Alex. The question was, the demand is strong, you're getting 40%, 50% higher rents. Is it only for certain property types or property sizes, or is it across the properties?
Sure. I think the question is, Alex, and I'll let Go ahead, Alex.
Thanks, Brian. Thanks, Himanshu. We are seeing strong demand in the GTA across the board. We're seeing rents strengthening across the board. What we are seeing in terms of relative demand is it is a little bit stronger in the larger sort of size brackets of 50,000 sq ft upwards. The demand is stronger, but it's pretty robust across the board. Interesting trend we're also seeing is that there is stronger demand and higher rents for vacancies. If you have an asset that is physically vacant, you're just getting much more robust activity on it than if you are marketing something for occupancy two to three months out. It's just an interesting phenomenon we are seeing right now in the GTA.
Sure. Just a follow-up there, we look at the contractual annual rent growth on these leases is anywhere from 3%-3.5%. Is this something higher? I mean, compared to some of the lease deals you have done in the last two years. Also, do you think, if there was no COVID, you could have achieved even higher rent growth of 30%, 50%?
Himanshu, I didn't catch everything, but I think your question was around contractual growth and where we think rents are trending. On the contractual rental growth side, we are seeing the range between 3%-4.5% in the GTA. It is trending towards the upward end of that range in the recent leasing activity. All of the leases we've signed in the GTA, virtually all of them, have contractual rent steps in that mid 3% mark. We are also seeing that market rents are trending upwards and we continue to have that outlook for not only Toronto, but also what we call the broad GTA. Markets like Cambridge, markets like Kitchener are also seeing rental growth, and there's wide expectation that that rental growth is going to continue.
Sure. Thank you, Alex. Maybe final question from my side on the acquisition. In the Netherlands, you completed a 300,000 sq ft property in Breda. What was the cap rate on that property, and how does the cap rate compare to the rest portfolio which you acquired before COVID? Suddenly have the cap rates moved since then.
Himanshu, again, you're a little bit distant, but I think your question is around Breda acquisition. Breda is a high-quality distribution asset, was substantially renovated and modernized over the last two years. It really caters to modern distribution and logistics users, hence the tenants we have in there. The kind of the attributes of the building with the clear height speak for themselves. The cap rate is higher because we secured the asset early on in the COVID-19 pandemic and took advantage of that process. It was tied up previously by another group that as soon as the COVID-19 pandemic hit, decided not to proceed. We had the opportunity to jump in and get the asset at a pretty attractive valuation.
Based on the demand we're seeing in the Netherlands and Europe as a whole for these kinds of assets, that yield wouldn't be achievable today if we were just starting on that process.
Sure. Thank you, guys. I'll turn it back.
Thank you. The next question comes from [Leon Chen] from iA Securities. Your line is open.
Hi, just a quick FYI, Frederic Blondeau at iA Securities. Good morning. Just two quick questions from me. I think you might have answered the first one, but I missed the answer, so I apologize if you have to briefly reiterate. You mentioned the 6% expected yield on the Las Vegas project and as well as the 8% expected yield on the Richmond Hill project. I was wondering if we should consider that 8% to be indicative of what we should expect on other developments. Secondly, how would you characterize the trends on those yields today versus pre-COVID?
Sure. Let me start and I'll also have Alex chime in as well. The 6% is on a greenfield new development that's done the 460,000 sq ft that we're building in the city of North Las Vegas. The 8%, by contrast, is an expansion of a building, and that's the yield on the new cost to grow that building. The land is already embedded in the existing asset, and the new construction cost will return 8% on that new cost. It's not necessarily apples to apples in those two examples you gave. We would expect returns on expansion properties to be similar to the Richmond Hill example. The development yields will vary depending on which market we're in on a ground-up development. Alex, what would you add to that?
Just to add on the redevelopment front. A component of our land bank is the redevelopment assets. These are existing assets that have density potential. From just a physical layout perspective, it's going to be difficult or not very functional to expand these buildings. The projects that we're working on are to demolish the existing structures and rebuild these assets. The yield on costs there are going to be lower than the Richmond Hill example because there's obviously a cost of the asset embedded in the calculation. They are still representing healthy 100, 125 basis point spread to what we could acquire comparable assets in the market today. Lastly, in terms of yield on cost on new land, obviously, the 6% and perhaps even lower in the GTA is what we're seeing just based on where the land is trading.
We're undertaking a few land opportunities across the GTA and in some case in Montreal. Obviously, land prices have been increasing for high-quality industrial land, and that is a contributing factor to when you're looking at new land. As Brian said, we don't have that factor just to the same extent in our expansion opportunities.
Oh, perfect. Thank you. I'll turn it back.
Your next question comes from Alex Leon from Desjardins Capital , the line is open.
Morning, everyone. I have a few questions relating to the collection figures, specifically relating to collections from tenants who qualified for CECRA. I was wondering what you guys were seeing in terms of the collections from the 25% responsible from the tenant, and how much of your remaining rent that's currently outstanding would be attributable to this group?
Thank you for the question. Again, the line isn't very clear. Are you referring to CECRA tenants?
Yeah, that's right.
With respect to CECRA tenants, there's no meaningful outstanding amounts from our CECRA tenants. The CECRA tenants have contributed what they, the majority of them, well, the vast majority of them, have contributed what they were meant to contribute pursuant to the program. There are limited amounts outstanding from these tenants. We are, in general, on the collections, if you look at our, for example, Q2 statistics for the second quarter, we were at roughly 98% adjusting for deferrals, adjusting for CECRA at the time of publishing our Q2 results. Today we are at over 99%. What we're generally seeing in collections is, it's not a matter of if the rent gets collected, it's more a matter of when. Sometimes it takes a little bit longer for tenants to contribute and we're working with tenants on that.
Lastly, I just want to emphasize that CECRA program is over. We managed to reduce the participation in the program throughout the third quarter by conducting a tenant outreach and asking our tenants whether they would still like the program, and roughly 25% of them declined that program in August. Also you perhaps know that there's a new program that has been announced that is directed at tenants. No details are available yet, but it's going to be incrementally helpful for some of our tenants or just generally, the occupiers in the market.
Yeah, I appreciate that. You kind of led on to my next question, the Canada Emergency Rent Subsidy program. How are you thinking about maybe the tenants who qualified for CECRA and the trends you were seeing there relating to this new program?
We only had a very small universe of our tenants who qualified for CECRA and needed CECRA. There's just over 100 tenants. It's a relatively small sample size. As we said, some of them didn't need it halfway through the program. There are no meaningful details available yet on the new program. We are monitoring it very closely. We're in touch with various government agencies to be on top of it. We've advised all of our tenants that there's additional support that is available, so they're aware of it. So far, we don't have any statistics to comment on.
Thanks, Alex. I'll turn it back.
Thank you.
Your next question comes from Sam Damiani from TD Securities.
Thank you. Good morning, everyone. Three quick questions. First, on the occupancy. When we look at the U.S. portfolio sitting at around 92%, what do you see as the stabilized occupancy for that region, and when do you think you'll get there?
Thank you, Sam. Every property in our U.S. portfolio, and I believe you've seen that many of the assets are high-quality functional assets. There's no structural vacancy in these properties. Louisville is obviously the most meaningful contributor, and we're in discussions with the tenants and in negotiations of the lease, and we expect that lease to be finalized this year. That's going to meaningfully increase our occupancy. A second largest pocket to vacancy is in Columbus. We've seen very robust touring activity, and there's quite a bit of prospects for vacancy buckets there. As that gets leased, we don't see any reason why the portfolio cannot be running in the high 90s occupancy over the medium term.
That's great. That's helpful. Just on the Q4 guidance, which I think the comment was a modest positive change in in-place occupancy, I think is what was said. Is there a particular region that will drive most of that gain, or is it pretty evenly spread throughout the regions in the fourth quarter?
Relatively even spread, Sam. As we said, the fourth quarter is going to be moderately trending upwards. The meaningful contribution will be in 2021.
That makes sense with all the leasing that's set to take effect. My final question is just on the market rents. Between last night's announcement and the news release from a couple of weeks ago, the leasing seems to be achieving rents perhaps in excess of the market rents that you put in the MD&A. Wondering if it's possible that those market rent estimates maybe don't fully capture the change in markets in the last nine months. Wondering if there's a possibility there that those market rents might be a little bit understated given recent dynamics.
That is-
Yeah. I think it's a good observation.
Go ahead.
Sorry, Alex. I was just going to say it's a good observation, Sam, because rents are moving quickly. There's certainly no real significant new supply in the areas that we were announcing these leases being done. I think rent is moving fast. We're certainly leading the rent growth charge in areas in Oakville and around the GTA. We've got significant spreads to expiry, and we're trying to find where market is, but it's certainly a lot higher than where it has been and continues to move. Usually, when we're reporting market rents, those are backward-looking metrics, and those are over a time period that's already passed. The new leasing announcements that we make are real-time. I think it does continue to move. We see certainly more and more runway for rents to continue to go upward as demand increases and as the supply-demand imbalance continues to grow.
Alex, you want to comment further on where you see market rents going?
Yes. Thanks, Brian. As you said, some of our leasing activity that we've announced has been post-quarter. The movements in rents have not been reflected in our MD&A yet. Generally, as we commented also early on the call, the rents that we're seeing in the GTA, in Montreal, have exceeded our expectations that we set at the beginning of the year. That's generally a trend that we're seeing in our expectations and also our estimates of the market rents at the time. There's some of that definitely happening.
Thank you. Maybe I'll squeeze in one quick one. Just on leverage, Lenis, she talked about the capacity for another, I think it was CAD 275 million of acquisitions that would take leverage up into the high 30s. Can you talk about what the current target leverage is on a steady state for the REIT, let's say, six, 12 months from now?
Sure, Sam. As I've mentioned, we've got about acquisition capacity of about CAD 275 million. That brings leverage to the high 30% range. We can bounce up and around that. Ideally, we'd be in that mid-to-high 30% range. We've got the capacity to get there, about in the 37%, 38% range. It'll depend on acquisition opportunities as they present themselves and then find ways to bring. We're also monitoring our debt levels of net debt-to-EBITDA, but certainly within that high 30% range, we're well within our parameters and what the BBB rating would allow for.
Perfect. Thank you very much.
Your next question comes from [audio distortion] . Edie?
Yeah, hello?
Your line is open.
Okay. I wanted to ask a question about Western Canada. Could you provide more details about the trends you're seeing there, the occupancy increase, and how do you think they've stressed it under possible property tax increase next year for the future leasing spread, given that there's a sizable leasing to do next year?
Thanks for the question. We have been quite active on the leasing front in the West. We've completed well over 200,000 sq ft of renewals at rents that are in line with what we're quoting in MD&A. Since the second quarter, we've completed over 50,000 sq ft of new leases. Those are leases that transacted. We are generally encouraged by the leasing activity. What we're seeing is the rents are generally holding and are in line with our estimates. We are outperforming the market on average in terms of occupancy. Just because in the nature of our portfolio, our portfolio is urban, and these assets tend to stay full. We, as a company, have a very long operating history with these assets that dates well prior to the IPO of Pure Industrial REIT.
These assets have always stayed full through many, many cycles, and we continue to see that throughout this disruption. We're not seeing the same rental growth that we're seeing in the GTA or Montreal, but the leasing activity is robust and there is demand for space and we are doing deals, so we are encouraged by that.
Do you offer promotions on the kind of free rent on new deals?
Free rent? I didn't quite catch. I think your question was around free rent. Is that correct?
Yeah.
Yeah. We are seeing some free rent in new leases. It has become more customary in markets like Calgary and Edmonton and Regina. We're seeing some, but it's not significant. It would be a few months for a five-year term. That would be kind of what has become customary in the market.
Should we expect some maybe capital recycling in that geographic region in near term?
Again, we've commented on that earlier in the year. We do intend to recycle some capital in Western Canada. It wouldn't only include things like outright sales. In some cases, we're talking to users who are looking to buy buildings. In some cases, we're looking at converting some of the smaller bay assets to industrial condos that are still commanding much higher valuations and are in demand compared to any income-producing asset. We're looking at a variety of creative strategies to surface value and recycle some capital.
Thank you. On the possible property tax increase in Calgary next year, would it be possible to pass that to tenants, or could you have to share that?
Yeah, Alex, I could take that. Our leases are all triple net leases, so the property taxes are borne by the tenants. That would pass through the tenants and certainly have an impact on what the tenants pay but would not impact the net rents.
Okay. Do you have any news on the Spectra Building that you were expecting to get back?
On the Spectra Building, I just want to clarify, we're not necessarily expecting it to get back. The news has been public that there was a filing for CCAA. Spectra has been paying rent following the announcement, and there have been no issues. We know that the tenant has invested a significant amount of capital already since the announcement in the larger Boucherville asset, which is an encouraging trend that they are committed to the asset and committed to the operations in the asset. We understand that their operations in our second facility with them in Laval are also robust, and there's quite a bit of activity. So far, there hasn't been any indication that we get that they would be giving back these buildings, and everything points to them continuing to invest in their operations in these assets.
Okay, thank you. My last question. Increase in vacancy in Canada, was it driven by some of the CECRA tenants finally moving out and vacating the building, or was it driven by something else? Maybe tenants did not agree to rent increase that you proposed to them?
Excuse me, the line was breaking. Would you mind repeating the question?
Alex, I think the question was, what's the nature of our increase in vacancy? Was that related to tenants moving out because the rents are going up or stressed tenants not necessarily making it? I'll let you go ahead, Alex.
Great. Thanks for clarifying. What we're seeing in the GTA, it is a function of us prioritizing rental growth over occupancy. We have had some opportunities to part with tenants who were paying significantly below-market rents. Our Oakville asset is a great example of that. We've then managed to re-lease that asset at 50% spread. We've had one or two smaller unexpected vacancies in the U.S. with one tenant that gave back space. It wasn't a significant tenant, but because the portfolio is relatively small compared to the total, every 50,000 sq ft shows up in the occupancy numbers. With respect to Spectra Premium tenants, we haven't seen any Spectra Premium tenants giving back space in any meaningful way. There hasn't been that trend. Generally, there's normal rollover as a multi-tenant portfolio would have.
There's a few factors, but as hopefully our announcements suggest, we're making significant progress on leasing our vacant space at well over prior rents, which will be contributing to our overall performance over time.
Okay. That's it. Thanks.
We're standing by for more questions. We have no further questions. Alex, turn the call over to Mr. Brian Pauls for final remarks.
Thank you everyone for your time today. We look forward to speaking again soon. In the meantime, please stay healthy and stay safe. Take care.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating, and you now disconnect.