Good morning. Welcome to H&R Real Estate Investment Trust 2022 Fourth Quarter Earnings Conference Call. Before beginning the call, H&R would like to remind listeners that certain statements which may include predictions, conclusions, forecasts, and projections in the remarks that follow may contain forward-looking information which reflect the current expectations of management regarding future events and performance and speak only as of today's date. Forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties. An actual result could differ materially from the statements and in the forward-looking information.
In discussing H&R's financial and operating performance and in responding to your questions, we may reference certain financial measures which do not have meaning recognized or standardized under IFRS or Canadian Generally Accepted Accounting Principles and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H&R's performance, liquidity, cash flows, and profitability. H&R's management uses these measures to aid in assessing the REIT's underlying performance and provides the additional measures so that investors can do the same.
Additional information about the material factors, assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and the material factors or assumptions that may have been applied in making such statements, together with details on H&R's use of non-GAAP financial measures, are described in more detail in H&R's public filings, which can be found on H&R's website and www.sedar.com. I would now like to introduce Mr. Tom Hofstedter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstedter.
Good morning, everyone. I'd like to thank you for joining us today to discuss H&R's fourth quarter financial and operating results. With me on the call are Philippe Lapointe, President; Larry Froom, our CFO; and Matt Kingston, Executive VP, Development and Construction. 2022 was a very important year for us. Despite the volatility in the public markets, our teams accomplished many substantial milestones aligned to our simplification strategy through capital recycling, stock buybacks, a 9.1% distribution increase, and a renewed focus on our investment communication program. Through these actions, we have enhanced our geographical exposure, asset mix, and tenant diversification, driving strong operating and financial results while also strengthening relationships with the investment community. In 2022, we sold over CAD 463 million in non-core properties, reallocating that capital to buy back stock through our NCIB.
During the year, we bought back and canceled almost CAD 300 million of our units or 22.9 million units at a 39% discount to our net asset value, creating 63% per unit in NAV increase. On the development front, our CAD 370 million of industrial and U.S. Sun Belt residential properties are progressing well, and embedded value on growth to be realized over the next two years. Given the current macroeconomic environment and keeping with our prudent capital allocation strategy, we've taken a conservative approach and have paused the majority of our development projects until we have more visibility into future stability. As a result of the heavy lifting our teams have completed during the year to streamline and simplify this company, our 2022 financial and operating results are very strong.
In 2023, we plan to continue to recycle out of the non-core office and retail properties and off to a great start with anticipated CAD 277 million sale of 160 Elgin Street in downtown Ottawa, which is expected to close in April of this year. The disposition program will continue to carefully synchronize property sales to match our capital funding requirements. With today's strong quarter results, we are on our way to creating a simplified growth-oriented company that will serve as significant value for our unitholders. With that, I'll turn it over to Philippe.
Thank you. Good morning, everyone. I'm happy to be on this call to discuss our Q4 updates and to go over our quarterly highlights. I'd like to take a moment to specifically highlight the progress to date of our strategic repositioning plan released in October of 2021. Since announcing our strategic plan, H&R has sold off or spun off over CAD 4.2 billion worth of office and retail, including the Primaris spin-off, and over CAD 1.8 billion, excluding the spin-off, all figures in Canadian dollars. This includes 21 office and retail assets encompassing over 4.2 million sq. ft. of space when excluding the Primaris spin-off. Our office portfolio garners a lot of attention as the legacy asset class at H&R REIT, and thus I'd like to take a moment to help unpack the remaining office portfolio.
From our perspective, H&R's office portfolio consists of three segments totaling approximately CAD 3 billion. The U.S. office segment almost exclusively consists of two high-rises in New York City and Houston, representing approximately CAD 1.3 billion or approximately 42% of the CAD 3 billion office portfolio. The second office segment is Canadian office, currently undergoing rezoning, representing CAD 750 million using current office cap rates, which will be inapplicable once the rezoning is complete, as the value created will push the entire property to be mostly valued on a developable square foot basis. Lastly, our Canadian office segment, not subject to rezoning, represents the remaining CAD 1 billion. Of this CAD 1 billion, 160 Elgin represents 27% of that office segment's fair value and is the only office property located in Ottawa, which is not considered a core market for H&R.
On a square foot basis, 160 Elgin represents nearly 1 million sq. ft. out of 3.2 million sq. ft., or said differently, 160 Elgin represents approximately 30% on a square footage basis of our Canadian office not currently being rezoned. 160 Elgin sale price of CAD 277 million is in line with our IFRS value, further underscoring our conviction in our office IFRS values. It is important to remind that this transaction has not closed, and while we cannot share any more details about the transaction, we look forward to disclosing relevant details post-closing. We hope that this potential transaction further demonstrates to our unitholders of our tireless and steadfast commitment to simplifying our company despite the challenges and headwinds that the market is currently experiencing. Moving on to Lantower Residential's results.
When excluding Jackson Park, same asset property operating income from our portfolio in U.S. dollars increased by 11.8% and 13.6% respectively for the 3 months ending on December 31, 2022, and for the full year 2022 compared to the respective 2021 periods. When including Jackson Park, same asset property operating income from our portfolio in U.S. dollars increased by 6.9% and 25.7% respectively, for the 3 months ending on December 31, 2022, and for the full year 2022 compared to the respective 2021 periods. In recent reports, we have read headlines describing the deceleration rents in many of the U.S. Sun Belt markets. While we are no longer seeing 25%-35% rental rate increases, we are still experiencing healthy and above historical rental rate trade outs.
For context, our trade outs and rental rates in the fourth quarter was nearly 11% when excluding Jackson Park. We do expect this to revert to more sustainable and historical levels in 2023. However, it is important to remember how healthy historical rental rate growth has been in our Sun Belt markets. Secondly, the fact that our rent-to-income levels still have been increased by any meaningful measure since the beginning of COVID, allowing for future headroom and rental growth. Moving on to Jackson Park. At the end of the fourth quarter, Jackson Park's occupancy was nearly 99% occupied and experienced a retention rate of over 50% for the fourth quarter, which reflects another quarter of continued strength in demand fundamentals for the Jackson Park sub-market.
On the development front, Lantower West Love in Dallas, Texas, is on schedule and on budget and started framing work this quarter. Also in Dallas, Texas, Lantower Midtown is on schedule and on budget, with the first building foundation core expected at the end of this month. West Love's hard costs are 99% bought out, while Midtown's are approximately 90% bought out, and we have entered into guaranteed maximum price contracts with very reputable general contractors. Based on this, we expect limited variance in our hard cost budget and timeline. Lastly, a comment on disclosures. As Lantower and the multifamily division of H&R continues on its path to becoming the majority asset class of the REIT, we wanted to provide more visibility into the platform.
To that end, we have expanded the level of disclosures, which can be found on our investor deck posted online as of yesterday. For our 2022 year-end reporting, we are providing additional visibility into our operating fundamentals, such as occupancy, average monthly rent, lease trade outs, and retention rates on an individual market basis and compared to the respective metrics in 2021. With that, I will pass along the conversation to Larry.
Thank you, Philippe, and good morning, everyone. As Tom mentioned, we are excited to report our results this quarter. Our strategy of increasing exposure to residential and industrial properties is bearing fruit. H&R same- property net operating income on a cash basis in 2022 grew by 14.9% compared with the year ended December 31, 2021. Q4 2022's growth over the same quarter last year was 10.9%. Breaking the growth down between our segments. Our residential division led the way with a 30.7% increase for the year and a 16% increase for the quarter compared to the respective periods in 2021, primarily driven by an increase in occupancy at Jackson Park in New York and good growth in rents from our properties in the Sun Belt states.
Industrial same- property NOI on a cash basis increased by 7.2% for the year and 12.1% for the quarter compared to the respective periods in 2021, driven by increased occupancy and rent increases for new and renewing tenants. Office same- property net operating income on a cash basis increased by 13.3% for the year and 3.8% for the quarter compared to respective periods in 2021. Our office properties are in strong urban centers with a weighted average lease term of 7.5 years and leased to strong creditworthy tenants. I would like to point out that only 346,000 sq. ft. of our leases in our office properties expire during 2023, which is approximately 5% of the total square footage in our portfolio.
Lastly, retail same- property NOI on a cash basis increased by 5.8% for the year and 18.7% for the quarter compared to respective periods in 2021, primarily driven by the lease up of River Landing in Miami and the strengthening of the U.S. dollar. For 2023, we are expecting same- property net operating income to grow in the range of 2%-5%. Q4 2021 FFO was CAD 0.35 per unit. Primaris had contributed CAD 0.10 towards that. Excluding Primaris, FFO in Q4 2021 would have been CAD 0.25 per unit compared to the CAD 0.31 to units for Q4 2022, a 24% increase. For 2021, FFO was CAD 1.53 per unit. Primaris had contributed CAD 0.39 toward that.
Excluding Primaris, FFO in 2021 would have been $1.14 per unit compared to $1.17 per unit for the year ended 2022. A 2.6% increase. Our 2022 FFO payout ratio was a very healthy 50%, and our AFFO payout ratio was 60%. For Q4 2022, FFO was $0.31 per unit and AFFO was $0.22 per unit. Our net asset value per unit decreased from $22.58 per unit in September 30th, 2022 to $21.80 at December 31st, 2022, primarily due to Q4 fair value adjustments to our properties, which resulted in our real estate assets decreasing by $187 million.
Most of the decrease in value came from our office portfolio, which now has a weighted overall capitalization rate of 6.43%. Debt to total assets at December 31, 2022 was 44% compared to 46.6% a year ago. At year-end, liquidity was in excess of CAD 1 billion. Last month, we borrowed CAD 250 million on our lines of credit to repay the Series O Senior Debentures. The only remaining debt maturing in 2023 are nine mortgages totaling CAD 144.7 million. These nine encumbered assets have a weighted average loan to value of 25% at December 31.
In terms of development spending for 2023, we expect to spend approximately $140 million on our U.S. development projects and approximately CAD 65 million on our Canadian development projects. In summary, we are pleased with our 2022 results and confident that our high quality properties and strong balance sheet will continue producing good results for 2023. With that, I'll turn the call back to Philippe.
Operator, please, move on to questions.
Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pooled in the order they are received. Should you wish to decline from the pooling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Sam Damiani with TD Securities. Please go ahead.
Thanks. Good morning, everyone. First of all, thanks for the guidance for 2023. Just on that same- property outlook for 2%-5%, can you give a breakdown or a sense as to how it's gonna look by quarter and by segment?
Good morning, Sam. I don't know if we wanna give specific numbers per segment, but maybe I can just share some color that will help you. That growth is gonna be driven by our residential division, which we're expecting, call it low teens growth in 2023, followed by our industrial division, which we're probably expecting the same kind of growth as we saw in 2022. We're expecting our office and retail divisions to probably be pretty much flat. Hopefully, that helps, but I don't wanna give specific numbers to specific segments.
Okay. Kind of the unusual things that were driving some tailwinds, frankly, in 2022 on the same- property, are those gonna be continuing in, at all into the early part of 2023, or is all that pretty much in the past now?
I mean, the first one that comes to mind, Jackson Park, we anticipate that to be somewhat normalized by now. I don't, I don't understand. Are you thinking about any particular tailwinds?
Just with, I guess, River Landing and, obviously that free rent that you had too. Just, yeah, there's sort of the three factors that drove some unusually high, same- property last year.
Most of those factors are not gonna be there. We're not gonna have the same growth in Jackson Park as we had this year. We're not gonna have the same, you know, 2021, we had that free rent period in, on Hess Tower in Houston that led to growth in 2022. We're not gonna have that. All in all, we are still expecting good growth from residential, from industrial, and increasing rents on both those divisions that will lead us to that 2%-5% overall growth that we are expecting in same assets.
Okay. That's helpful. Just over to the dispositions, obviously, great to see another significant office transaction on the block and ready to close. You know, most of the dispositions thus far have been in the office sector. Just wondering how you see the retail portfolio potentially being You know, part of the disposition execution in the near term.
There's no urgency. As we said that we're gonna be matching our dispositions where we require funds. If we pull through on the office, we have a little bit of retail that we expect to sell, and then it'll be slow and steady. There's no reason to sell preemptively at this point in time, and we'll do that as we require funds.
That makes sense. Last one for me is just on capital allocation. You know, with this disposition expected to close in April, you know, you've got some development spending, but, you know, how do you view that versus hitting the leverage or even unit buybacks? How are you looking at 2023 capital allocation?
That's a good question, Sam. Our first course of action, we'd like to buy back our units, but we wanna ensure we do that in a responsible manner. When I say responsible manner, you know, that's ensuring our balance sheet stays strong and that we have enough liquidity for our needs going forward. For example, in 2022, as you know, we bought back almost CAD 300 million of units, but we improved our debt to assets to 44%, and we maintained our liquidity. We'd like to do that, but again, in a responsible manner. That's really gonna depend largely on the amount of dispositions that we are able to achieve in 2023.
Again, our paranoia is, as you'll find the sector, is really on our balance sheet, protecting our balance sheet first and foremost. When we're comfortable we've protected our balance sheet for 2024, then we'll be loosening up and going back to our
Very helpful. Thank you very much, and I'll turn it back.
Your next question comes from Mario Saric with Scotiabank. Please go ahead.
Hi. Thank you and good morning. Just coming back to those two topics, the guidance and then the disposition outlook, what are the primary drivers that comprise the gap in the 2%-5% range? Like that 300 basis points, like what are some of the uncertainties that can result, you think, in the lower end of the range, 2%, versus the higher end of the range at 5%?
The different property segments that consist of H&R REIT. I mean, they have 4 very different growth profiles, and as such, next year they'll offer different NOI growth %. To be honest, we're also, as you've noticed from previous calls, we're also very conservative, and so we've given a conservative range, you know, as best as the visibility has given us.
Mario , just remember that contractually, the long-term leases in office, ironically, it's the reverse. When you have office and industrial with long-term leases, that's contractual, and historically it's always been 2% on a lumpy basis, 10% every 5. That you can actually predict. As you well know, we have very few lease rolls coming off in office industrial. That's not really the issue.
The driver unknowns is where you get to month-to-month, which is more residential oriented. Therefore you need to have some, you just know where the economy's going coming off of healthy growth over the past three years of residential. You need to put a some type of range in there because you just don't know what the 2023 is gonna look like. Office is no lease rolls. Office is very steady. Growth is very tempered at, that's your 2% level. The anything as is industrial and is retail, in our case, we have and retail is very solid. It's really just mostly residential that creates that fluctuation. You need to have that gap. You just can't predict what the world's gonna look like over the course of the next 12 months.
Right.
We're seeing good strong growth right now in residential, and as you know, we just hope that continues throughout the year, but we're not sure that's gonna flow all the way throughout the whole year.
Got it. To paraphrase, kind of the 2%-5% range is really kind of predicated on the uncertainty associated with the U.S. economy in 2023.
I would say yes. Yeah.
Okay. Coming back to Larry Froom, maybe your comment on the growth being good thus far. I appreciated the new disclosure on Lantower in the investor presentation. Can you, I think the lease trade out data was for 2022 in total. Can you provide what those numbers were? It doesn't have to be for each market, but can you give us a rough sense of what the new renewal and blended lease spreads were in Q4 for Lantower and how those are looking in January?
Hi, Mario. We wanna stick to annual 2022 over 2021 metrics. This is the first time of us giving guidance for Lantower. Like I said in the speech, and I think I reiterated on some calls, we will look for additional opportunities to add quarter-over-quarter disclosures throughout the year. As of right now, other than to say somewhat counterintuitively that the renewal rates has been by multiple higher than new leases, I think that's what we're gonna limit ourselves to on this call today.
Got it. Okay. Stepping back more of a broader question. Heading into 2022, you announced this transformational plan and steadily executing on that since. What would you identify as the key 2-3 tangible goals that you've set for the organization for 2023?
I think in summary, it's a continuation of our plan. I think we were very meticulous and careful in kicking out the plan in October of 2021. I think today's results or today's call, yesterday's results, are further evidence of our conviction in that plan. On a relative basis, we had a very strong year last year. We'd like to continue that momentum going into 2023, all the while, despite the fact that we may be in turbulent times, still, creating a tremendous amount of value both in Canada through our rezonings, with Matt Kingston and our development pipeline, both on the two properties that we're developing now, but also the advancement
Of the, for lack of a better word, development readiness of our remaining pipeline.
Okay, great. Maybe one last one for me. On 160 Elgin, I appreciate you provide additional disclosure or detail going forward. Can you give us a sense of what the disposition price was in relation to the Q3 2022 IFRS fair value for the asset as opposed to Q4?
Morning, Mario. Yeah, we're here. We're here, that we've not been able to give all the disclosures we would like to be able to give now. Yeah, I will answer your question, just a bit of back thought. Our fair value adjustment in office was CAD 194 million for the quarter. That was over 18 properties. 160 Elgin was one of those properties, and we wrote down 160 Elgin for CAD 25 million in Q4.
Perfect. Okay. Thanks, Larry. That's great.
Your next question comes from Matt Kornack with National Bank Financial. Please go ahead.
Hi, guys. With regards to, appreciate the guidance for 2023, but looking past that to 2024, you have a fairly sizable amount of industrial lease maturities, and I think about a third of it, maybe 7,900 Airport Road. Can you give us a sense as to what you're expecting mark to market on that? Is there a chance to get to market, or is there a fixed renewal there?
A complicated transaction. I can't give you too much details on it, but we are working on it, so we're not concerned about a vacancy. We're not concerned about the rental rates is significantly-- The market is significantly higher than what we're currently leased at. Regretfully, like, since we are currently working on a transaction and talking, we're not as-- we can't give you too much color on that. That is our significant role. But again, it's no concern of ours
And,[crosstalk] and outside-
It's really one of the state-of-the-art buildings that we have in our portfolio.
Yeah, just generally...
Yeah, that's a great article.
...our market rents on industrial are way below the average rents that are currently in the market. We would expect to get good growth coming forward from that division all the way out while that outlook persists.
Outside of Airport Road, is it, a few other assets in the GTA, that would make up the remaining sort of 600,000 sq. ft. Or so?
of no concern to us. We're not, losing sleep.
Okay, fair enough. With regards to some of the, well, the Dallas High School transaction and the opportunity there on the adjacent land, can you give a bit more color? Maybe also with regards to The Cove, if there's been any progress on that project?
The Cove is in the final stages of completing drawings. We're gonna go for permit application, but we're gonna put pencils down after that. We're not really allocating any funds into development at this point in time, as we mentioned in our speech, until we see a bit of visibility into the economy. It's zoned, as it always was zoned. It's ready to go, but we're gonna wait and see. We're gonna pause on that. That's probably be the next 30 days, that we shall complete all the drawings and do our submissions on The Cove. On Dallas High School, Dallas High School, we purchased the land around Dallas High School for high-rise residential. There is a to be built sometime in the future.
Not willing to put the pull the trigger right now on that development as we are not pulling the trigger really on any development. there's a park that's been newly completed across the street. it's a historical office building, there's historical tax credits involved. It is Lantower's head office. Perkins & Will, one of them, a significant architecture firm, has a long-term lease on substantially most of the balance of the space. the parking lot that is part of the office building is adjacent to the balance of the lands and should be integrated into a high-rise development in the future. High-rise residential development in the future.
I noticed the description of your sort of target markets in the U.S. now includes Sunbelt and gateway markets. I guess you've always been in gateway markets. But is that a sort of, other than buying land in Miami, do you anticipate expanding kind of the residential investments in some of these gateway markets?
No, I think there's more commentary on what we currently own and perhaps anticipated developing. For all intents and purposes, the growth in the U.S. residential segment will be predominantly, if not exclusively, Sunbelt markets other than what we currently own.
We do have relationships with Ledcor, Qualico, our partners in Canada in the gateway cities. We never actually went into gateway cities without partners. It's been opportunistic, so we're not turning down any opportunity that may come up into the future for long-term strategically. We do have relationships, and we do have landholdings with Ledcor, Qualico.
Okay, thanks. Switching over to office, appreciate the disclosure on the fair value that you're holding some of the redevelopment assets at. On my math, that's about CAD 700 bucks per sq. ft, and you have the ability to grow the sq. ft. from 1 million sq . ft. to 2.5 on the office front. I know there's a few retail/industrial assets that I excluded from that. I mean, that seems like a pretty conservative price. Do you have any sense as to what per sq. ft. For the existing sq. ft. You think it might trade for in the market?
On the existing square footage. Sorry, it's Matt. For the existing square footage on the existing office or what the potential rezoning value would be?
Yeah, just if someone's buying it, like, it's 1 million sq. ft. Today.
Right.
$700 per square foot on that 1 million seems cheap, but I guess, do you have a sense as to what it would be per square footage? I understand someone's gonna look at it as a development play, but a price per square foot maybe on the 2.5 million then?
Three of the properties are downtown Toronto, one's in Burnaby. In Toronto, we have seen a big drop in terms of land trade. There was sort of the high water mark on Pleasant Boulevard at Yonge and St. Clair between KingSett and a private developer hitting the CAD 350 a square foot mark for residential mixed use. There have been a few trades this year, one notably at Mount Pleasant and Eglinton through CBRE, which traded about CAD 216 a foot. But the market has really just been quiet. We're not seeing, fire sales. KingSett had a property at Yonge and Wellesley, as well as one at Symington and Bloor. They couldn't attract the price they wanted, so they pulled the deals from the market. I would say prices are still quite high for what is trading.
If people can't achieve the price they want, they are pulling it. In terms of our values, we are being relatively conservative at the moment, partially because 145 Wellington is the only property that has achieved rezoning. Of that million sq. ft., it's about 150,000. On the other properties, we are very close to approval, so we're not taking full upside yet. Does that answer your question?
No, that's at this point, essentially, you're not really giving the benefit to any of the redevelopment potential. Even with 145 Wellington, is there anything in fair value for that or no?
We've taken a partial upside, but not a full one at this time.
The simple answer mathematically is that you don't take an upside predicated on, call it CAD 250 a square foot times the density you get. You just use the market always uses just more of an aggressive cap rate on the commercial. It looks at the commercial, says, "Hey, there's some residential potential over here," but it trades on the basis of a more aggressive cap rate on the commercial rather than an allocation to a price per square foot based on the residential. Because the residential is not here now. Think from an accounting perspective, the industry just doesn't do it.
Fair enough. Nope, that makes sense. Just 2 quick last accounting ones. Larry, sequentially for the joint venture, it was a pretty significant increase in revenues. FX played a part of that. Is that, I guess, is that a normalized figure for Jackson Park for Q4 that would have driven the sequential increase there? Just quickly, the bad debt was elevated this quarter. It seems like it's non-recurring, but any color there?
There was a few questions there. I think your first was on the management fee recovery that we do. Is that right, Matt?
Oh, no. Just joint venture. The sequential performance of the joint venture.
Oh.
portfolio was pretty strong.
Jackson Park actually did have a bit of an increase in bad debts. Other than that, we should have a bit of a lift from Jackson Park next quarter, not much, a little bit. Therefore, thereafter, it should be back to regular growth of 2% to 3%. That is all about our equity joint ventures that was any difference this quarter.
Okay. It's a clean figure. Okay. Thanks, Ed.
Your next question comes from Jimmy Shan with RBC. Please go ahead.
Thanks. Good morning. Larry, on the CAD 250 million debentures redeemed, I assume the line was drawn to pay that down, and then subsequently, the sale, the asset sale will pay down the line. Is that fair?
Morning to me. Yes, that is correct.
Okay. With the net proceeds, it looks like there's no debt on 160 Elgin, so would the net proceeds be similar to what, to what the sale amount is?
We will give more details on that when it closes, but yeah, pretty much the same.
Okay. All right. What would the in-place rent be? Would they be largely in line with market rent at 160 Elgin?
The answer is on average, yes. It's made up of various tenants paying various different rental rates. On average, it's the market rent is there. I wouldn't say it's every tenant paying that rent.
Okay.
Which is kind of.
On a weighted average basis.
Anyone of our multi-tenant assets. Sorry?
I'm sorry, I missed that.
It's very typical of any multi-tenant asset which has leased its staggered periods of times, and some tenants are older rent and some tenants are newer rent, this would be reflective of that.
Okay.
Bell Canada being the largest tenant was there long before the other ones were, so it's gonna have a different profile of rent than the other tenants.
Okay. Then on Lantower, there was from Q3 to Q4, the NOI did increase by about $4 million, give or take. What, like, was there any other than just market conditions, like that's a pretty big change? What would have caused that sequential change?
I think it was just, simply put, it was organic growth in the NOI. I think we had, I'm using round numbers. I'm going back to Mario's question, as it relates to the same store growth of the new leases and renewal leases. In the fourth quarter, I must have misunderstood it. Mary, if you're still on the line, I apologize for misunderstanding your question. I'll give you an example. Our new leases were 5.4% in Q4 and 15.6% on the renewal for a total blended rate of 10.5%.
I would anticipate to have something in that ballpark for the remainder of 2023. If you take a look at those statistics, you'll quickly realize that our revenue is by far outstripping the expense growth, therefore leading to outsized NOI growth. That NOI growth is what you're what you're identifying.
Okay. Maybe just lastly, just on the asset sale, like how would you characterize the level of interest or liquidity of the U.S. office assets? Do you see yourself selling either one of those two assets this year?
The United States market is on pause right now. We actually don't expect to sell it this year. We do have long-term leases, but we still, with the interest rate environment, the office environment, not clear where people are working right now, we don't expect to put it on the market and we don't expect to sell it. I think you're hearing that sentiment from all the office REIT players in the United States.
All right. Okay. Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Dean Wilkinson with CIBC. Please go ahead.
Thanks. Morning, everyone. Just one question for Larry. When you're looking at the debt stack and what's coming up in 2023, how are you thinking about sort of term and maturity and sort of the balance between perhaps going longer at a higher rate? Do you have a view around, or you know, what rates ought to do over the next 12 months and how is that sort of impacting your views there?
Good morning, Dean. With the repayment of the January debentures of CAD 250 million, we've taken the care of just about all our maturities. On the mortgage side, on the secured side, we have around CAD 144 million of mortgages maturing. We will do a refinancing. My guess is refinancing. There's one property that's a multi-res that will be refinanced. That's CAD 77 million. We are looking to do a refinancing of some of our industrial portfolios. More about that to follow, hopefully by the next reporting date. Where interest rates are going, where we take a longer term view, where whatever our long-term view is, the economy will be there, interest rates will be where it is.
We think we have the dispositions coming in in order to repay off a lot of those mortgages maturing. We're in the fortunate position to be able to decide to take out more financing or to just use our bank loans to repay them off. Overall, you know, interest rates have gone up, and our interest costs will go up likewise.
Where do you see that pricing come sort of as we sit today then?
For secured debentures, I think we would look at a five-year pricing in the range.
Un-unsecured.
I'm sorry, unsecured unsecured debentures, a quote we see around from all the banks as of yesterday is about 5.4% all in.
Mm-hmm.
On a secured basis, we'd probably be looking at like a 5% rate.
It's an inverted yield curve. You ask the question on term, and that we can't answer it because five is cheaper, is in line with three or cheaper than three.
Yeah, no, that's the weird part.
It's not only the laddering anymore.
Yeah. Like, how do you...
We don't have a crystal ball.
Do you go shorter and hope that the yield curve normalizes by the front end going down? Which, geez, I hope it does. Or do you just lock in the longer term and say, "Okay, we be okay.
We call up our favorite analyst and we ask them what they think. How do we know?
Lower is better. Thanks, Bob. Thanks, guys.
Dean, also we're trying to manage our balance sheet, so we don't have any large exposures in any one year. We won't go full short at one year. We'll look at our maturities as they come up, and we'll try and take a responsible approach of staggering them out.
Yeah. Thanks, guys.
Thank you.
Thanks, Dean.
There are no further questions at this time. Please proceed.
Thank you for joining us on our Q4 call. We look forward to speaking to you, following quarter. Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect at this time.