Earnings Call: Q2 2021

Aug 9, 2021

Good morning, and welcome to the InterRent REIT Q2 twenty twenty one Financial Results Call. I'll now turn the call over to Sandy Rose, Director of Investor Relations and Sustainability. Welcome, everyone, and thank you for joining Interrent REIT's Q2 2021 earnings call. You can find the presentation to accompany today's call on the Investor Relations section of our website under Events and Presentations. We're pleased to have Mike McGann, CEO Brad Kutsi, President and Curt Miller, CFO on the line today. As usual, the team will present some prepared remarks and then we'll open it up to questions. Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward looking information in the REIT's news release and MD and A dated August 9, 2021 for more information. During the call, management will also refer to certain non IFRS measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD and A for additional information regarding non IFRS measures, including reconciliations to the nearest IFRS measures. Nick, over to you. Thank you, Sandy. I hope everybody is doing very well. Things are much more positive than our last time that we talked. I think everybody is in a much better frame of mind. I can tell you that we are in a very good frame of mind. We see that a lot of the things that we were, I guess, contemplating and discussing over the last few queues Kind of playing out to an extent, maybe not as rapidly as we like. We are seeing with the uptick in the vaccinations And just the opening up of the economy, a lot more positivity out there. Post Q, we're seeing Heavy, we actually were starting to see it in the end of this last Q, but we're seeing now heavy traffic and almost getting back to normal, In some cases, in some properties above normal, which we're really, really excited about because we know we're not really even just we haven't really got the full impact of obviously immigration, international students like those once we get those pieces behind us, boy, there'll be huge tailwinds here. We are happy to see that people are, I guess, kids are leaving their parents' houses and Back out trying to rent and they're trying to obviously enjoy the personal and social engagement with their friends. You can see that the patios And restaurants and many areas are much busier, traffic is very busy, just in general. So a lot of for where we're headed. So we feel very optimistic about rental growth. We're seeing that too. So we really we're happy with our whole strategy. Strategy, we think, from the get go is it's been it's going to work out really well. It's going to work out great for our shareholders. And all of us in the room here are shareholders. We're all very excited. We like what the future looks like. I guess on the I'm just going to maybe I'll just touch on it quickly. I'll get into it later on. There's a lot of product out there right now, but there's a wall of capital chasing it. So it's very, very competitive. But I think you'll see us continue to transact. We've been pretty nimble on some stuff. Some stuff has been off market, Which we really happy to get it. Feel very good about where we're going. We also feel very good about, In particular, I was a little concerned a little bit about Ottawa, and I do see some better take up coming in Ottawa, even really post quarter. Again, not fully it's not fully happening. And to the great degree that we'd like it to come, Still, we don't have the federal government really announcing what they're doing when they're getting back to work. But I have to say is I don't think everybody realizes they think that Ottawa is just a government town. We're very lucky. We have a lot of great tech companies And they're kind of picking up the void and we've got some great universities and colleges here, which are which looks like they're growing too. So that's all it's all been very good news. And in Vancouver, we really like we're hitting some Really top end rents, and we were very excited about that transaction, what we did a couple of Qs ago. And I know some people have asked, but we know this what's going on with the legislation in BC. So it looks like there it's going to be a very Almost the same kind of formula that we have in Ontario with the above guideline increases. It looks like it's going to be almost the same formula there. And we are excited too, Hitting on Ontario that they actually announced that we're going to have guideline increase for 2022 of 1.2%. So we see a lot of good things in the horizon here and we're happy to say that we believe our trough that we hit was in Really, May, early June, and we're seeing very good signs right now. We're not perfect, But we see some really good sunny skies opening up. So at this point, I'm going to pass it over to Brad, and Brad will run through some of the financial pieces with Curt. Thank you. Thanks, Mike, and good morning, everyone, from my side as well. We thought it might be helpful for these calls have a snapshot of our key metrics for the quarter off the top. So that's what you'll find on Slide 7. The top left chart outlines the occupancy trend over the past year for our total portfolio in blue and our same property portfolio in green. You'll see that as of June last year, we were already feeling the pandemic related pressures in the occupancy figures. With the commentary from our last earnings call, our occupancy has stabilized and we're confident that it will continue to climb back toward our historical 95%, 96% level as we move into 2022. If you move to the middle left hand side of the slide, you'll see that external growth in the first half of the year Has propelled double digit revenue and NOI growth figures for our overall portfolio. We are also encouraged to be able to report positive same store growth For Q2 year to date, now that we've seen vacancy start to decline, coupled with continued increase in average monthly rent. The bottom left chart shows that due to the scale effects and cost issuance, these top line improvements are flowing straight to overall FFO and AFFO, which shows strong year over year prints for both the quarter and year to date. Moving to the top right of A quick snapshot of our acquisition track record this year. We are delighted to have closed on the transactions this quarter valued at nearly 1 $134,000,000 of which our share is $124,000,000 bringing our Q2 year to date total to nearly $450,000,000 for just shy of $293,000,000 at our ownership interest. We have also announced a transaction post quarter for our 94th suite property in Mississauga with our joint venture partners, CrestPoint, that offers some great synergies with our recent acquisitions down the road. In the bottom right, you can see that our balance sheet is in great shape and we continue to have ample liquidity to take advantage of external growth opportunities that may arise. So all in all, we are feeling positive about Q2 and certainly about the quarters ahead. Turning to Slide 9, who use that as a quick reference for our portfolio composition in the core regions. I'd like to point out that over 80% of our NOIs in our 4 core markets We're just happen to be Canada's top ranked tech talent markets. Turning to Slide 10, we wanted to Put our current occupancy levels in context. As you know, we bucket our portfolio into reposition suites and those which have been acquired after January 1, 2018, where we still have reposition work to do. As you can see by the black line, we typically carry higher vacancy in the latter category by design, But which is why you won't see us at 98% even in normal times. As you know, we decided early on during COVID not to buy AquaSeq, and continue to believe that was the right decision. All segments and regions of our portfolio have seen steady increases in average rents. We also hope that this chart helps illustrate the opportunity in our non repositioned portfolio, and we continue to execute on our CapEx plans. We continue to see a gap to market of at least 20% across our portfolio. And going back to some of Mike's commentary at the start of the call, We also expect to see market rents grow from here. On that note, let me turn the call back to Mike to walk through our capital spend. Thank you, Brad. Right now, as you can see, I'm on Slide, I believe it's 14, Talking about the our CapEx and our whole repositioning program. And as you can see, we have not Stopped every positioning program and we still got quite a number of suites that were in the process. We keep adding To the amount that we're doing, we see a lot of again, the take up And the rentals and the potential rental growth we think is great. And so we have not slowed down that whole The whole CapEx repositioning program. You can see that we bought a number of buildings. Very happy about where we've been adding to. Great. Again, we'll just keep adding to the same areas that we've been focused on. In Vancouver, just a couple of tuck ins, same with St. Catharine. St. Catherine has been great for us. We've had a couple of properties we've had there for a while that have really seen some really nice Uptake, happy to buy in Oakville, Mississauga. We've also had a further small JV with Crest Point in Mississauga. That was since we were both chasing the same property. We found out and we said we might as well just work together. Very happy with our relationship there with Kevin and Elliot and the team. And As we go forward, you can see that we'll still continue to be happy, but there's a lot of capital out there chasing and really you got to be very nimble. On the development side, we've just started we're just in the process of starting here at our office refit to multifamily. Really like where we're going on that. I think we're going to see some good results there. And as we've talked about from previously, we're in the midst and we keep pushing through on The 900 Albert, Richmond Churchill, our Burlington lands. And We also and I just want everyone to be and I know the people that have traveled with us before, we have a number of sites that we have future densification Prospects and you may start seeing some of those coming as we complete or getting get through some of these other ones that we've been working on Well, so lots of good prospects for as far as the development side and acquisition side, Again, driven by really just deploying our capital properly. And again, we'll even though we are doing development, we'll always be, I guess, really true to ourselves. We've always been A value add creator and we'll continue on doing that. So again, I see some very, very good signs, but it is a competitive market. And I think you're also seeing that in some of the private Market transactions out there that are I don't think they've been fully baked into not only our The values, but any of our peers to be frank with you. It's very competitive out there. But again, we have long standing relationships And I think we're on the ground and we know how to see value and create value. So at this point, I'm going to pass it over to Kurt and Kurt is going to talk about the balance sheet. Thanks, Mike, and good morning, everyone. As we all know, our investment properties make up the bulk of the value on the balance sheet, not only for us, but for most real estate companies. On slide 19, we've provided some more Regarding our weighted average cap rate by region for our investment properties. For the Q2 of 2021, We recorded a fair value gain of $59,500,000 driven by the NOI improvement in our same property portfolio and further cap rate compression. Overall, the cap rate has decreased 8 basis points from Q1. This reduction is a combination of including the Vancouver portfolio in the model as well as a 3 basis point reduction in our cap rate Overall, across the other four regions relative to Q1, we currently sit at a weighted average Portfolio cap rate of 3.98 percent and given the current market environment and discussion with our external advisors, We believe there may be further cap rate compression in the back half of the year. On slide 20, you can see that the REIT is in a very Our debt to GBV on the 30th June was up slightly to 34.4% owing to an increase in our mortgage debt following our Q2 acquisitions. At the end of the quarter, the REIT had mortgages of 1,200,000,000 At an average term to maturity of 3.7 years and a weighted average interest rate of 2.41 percent, reflecting a further 6 basis point reduction in the interest rate from Q1. 2 thirds of our mortgages are CMHC insured, which provides favorable interest rates given the reduction in financing risk for lenders. At June 30, the REIT had approximately 260,000,000 of available liquidity, which along with its Current debt to GBV ratio of 34.4 percent offers ample runway to finance future capital requirements. Before I turn things back over to Mike to wrap up, we wanted to highlight some of the work we've been doing on the ESG side of things. The main thing to take away from Slide 22 is that we are approaching sustainability with the same long term lens that we apply to everything we do. The slide shows some initiatives that bore fruit in Q2. It is important to note that many of these have been worked on for over a year or 2 now. We understand that in order to provide real sustained value, our initiatives need to be well thought out and woven into the fabric of our company. We'll have more to say during our Q3 earnings call alongside with the release of our dedicated sustainability report. So I'll leave it there for today. Mike, back to you for a few closing words. Thanks, Kurt. I appreciate your input. As everybody knows, I just already figured out that when we do these, I don't like to have a script. I kind of Talk off the top of my head, and I'll try to keep it short because I know that in some cases, I go on too long. So first off, really happy with our team. Our team has done really great, great things and they're all getting back, Really back to normality and which is terrific, but I appreciate all the work that they've done, especially the people out in the field that keep the Company going and looking out for all of our very valued residents and our shareholders. They've just been they've been fabulous. I think now as we we're all pretty happy of where things are heading. Again, we have we're not going to say that we're really satisfied with this Q because we're far off from where we'd like to be. But what we do see is there's some very encouraging signs Going forward and not so much in the we obviously will see some good uptake here in 2021, we believe in the back half, We really look at what's coming in 2022. And just with the immigration, international students, We think we're going to just be in amazing shape, great tailwinds for not only Espa like Multifamily in general for the next couple of years. And we also know that our as we've gone through this that We've learned a lot and we've broadened our team. We've got a much deeper team along the way. We've embraced technology. We have and not all of it has even fully deployed yet and but we've been spending a lot of time with it. So I can just see Some of the items that we're working on the analytics side and some of the customer relationship Software that we have, like we just think we're really going to put ourselves in an amazing position as on a go forward basis. We also know that we've since we've been very disciplined, we've kept our balance sheet nice and clean and we're lowly levered We're in a really very, very great position as we go forward. You'll see us continually to transact. We'll be mindful of what we do, and we'll always try to look to see how we can deploy our capital the best. So again, we really appreciate the analyst community and our Board and our shareholders and our valued team And most of all our residents to all the way through this and we are we do look forward. We see that we have So much better position going forward, and we feel very positive about the future. Again, not Super satisfied we're at today, that's for sure. We just see where things are going and the leasing momentum that we're seeing in the last A little bit. We just think it's we're out of the trough, so to speak, and when we're starting to climb up, and That's a great sign for everybody. So, anyways, I will stop at that point. Thank you, everybody. I'm going to open the floor to some questions and we'll do our best to Our first question is from Mike Markidis with Desjardins. Your line is open. Good morning, everybody. With respect well, thanks very much for the data on the leads. That's very useful. And we obviously see your occupancy trend Q2 versus Q1. Just curious if the lead I'm actually wondering if you could comment on the conversion that you're seeing in July. We see the increase in the leads and how's the conversion progression? Yes. No, the July's leads are obviously are higher than what they were in June. We're seeing good conversion. It obviously varies By community, not only just the city, we're extremely happy about what we're seeing in our conversions right now in Vancouver and Ottawa to be frank with you. And it's kind of funny as if you remember a couple of items last quarter, the quarter before That I was a little more concerned about those two areas there. And I said, well, I wasn't really ever concerned about Vancouver, to be frank with you. I was just more thinking of it get pushed a little longer down But it's gone very well. Okay. Yes. I would just add to that. The only observation I would add That Mike just touched on it. It's the fact that Montreal last quarter really picked up some steam and it continues Do well, as we mentioned last quarter. But finally, it seems like Ottawa is now kind of catch trying to catch up to where Montreal was And why not? So it is encouraging, Mike. Okay, great. Thank you. Just with the with regards to Crest Point and fifty-fifty on the new property in Mississauga. Are you guys exploring vending in any existing assets anywhere in the portfolio into further JVs with Crest Point or is it new He's really going to be on new product going forward. It's right now, like we haven't had any discussions at all about vending anything in. It's on new product and We have had discussions about other properties. And to be frank with you, we've offered on other properties. We'll see how that all evolves as we go forward. But no, definitely not sending anything at this moment of time. Okay, great. And then last one for me before I turn it back just on 473, Albert. You guys are making good progress there. It sounds like the Projected IRR is really healthy. Curious if this is a one off or if you guys are seeing any other opportunities to take down a vacant office building and reconvert to resi in the near term. We have looked at some other ones, And we'll continue to look at anything that we think we can create value. I'll pencil through. I think right now it's I mean there's such a wall of capital out there, Mike, that we've got to be creative at times and seeing what can we do Hopefully, maybe outmaneuver or put ourselves in a really good spot that we can create the kind of value that we're used to. So we'll definitely look at that. We'll look at anything to be quite frank with you that makes financial sense. Okay, great. It's good to hear all the positive. The next question is from Mark Rothschild with Canaccord. Your line is open. Thanks and good morning everyone. Clearly, the tone is very positive in regards to values of assets. Are there any thoughts to maybe sell Additional partial interest in properties or even to sell outright assets considering how hot the market is or is your view on fundamentals strengthening more important. Well, I do feel that the fundamentals are going to continue to strengthen, Saying that we've never been afraid to sell off some assets. So I mean there could be some assets sold here over the second half of the year. We're going to analyze Each one, I don't think I'm far from saying before that we've looked at potentially selling Trenton at one point. We've looked at potentially even Aylmer at one point. Saying that they both done incredibly well during this whole COVID, so I guess we got a little bit lucky on those two aspects. But I mean, we'll always look at it. We'll look at Anything. And I don't think that we're again, we're always looking to try to derive the best value for our shareholders. So we'll look at all properties as we go forward. So But I mean, we do feel very, very positive of where the market is going. And we're going to try to be I think you're going to see a couple of pretty good years coming here in the multifamily sector. And Saying that we're positive. We're positive coming off a very low spot too. So I'm not going to say that we're not where we would have been in 2019, But we do see 2022, I think it could be very well could upend the 2019. Okay, great. And on fundamentals, clearly, you sound positive on leasing. To what extent is that based on return of University students and maybe international students or is it more just general trends you're seeing? I think it's university students. I think it's young professionals moving back out of their parents' places. I think I've mentioned that I've had the same. I'm going to use my own home as a litmus test, so that's happening. And I think it's just we have not seen the full brunt of, I'll tell you right now, immigration, obviously, I think almost all the immigration numbers that we're seeing were already people that were here on the ground and that's getting baked into the Current immigration numbers and really we have some international students, but not to the same extent that we've had Before, we're hopeful we'll see more and more arrive here at the end of August. But I don't think that's going to be fully baked until 20 That's just my take. I don't have a crystal ball, but that's just what we're seeing right now. Okay, great. Thanks so much. The next question is from Jonathan Kelcher with TD Securities. Your line is open. Thanks. Good morning. Just going back to Mike's question or I guess related, you said in commentary that you're seeing heavy traffic in some properties were above normal. What regions would you say are strongest for you? Like Which regions are above normal? Which ones are strongest for you right now? I think Mike alluded to it. I think for this quarter, we're seeing really strong traffic of Vancouver, and we're seeing really strong traffic here in the National Capital Region. I just want to also be clear, though. That said, we're also seeing some Robust activity in our 2 other regions as well. So like we've mentioned, at the risk of sounding boring in Q1, All trends are pointing to the right direction, but I think a lot of that rental demand is domestic rental demand. For the most part, we are anecdotally Seeing some new Canadians coming to Canada, but for the most part, it's been domestic. So, one way you can look at that, it's quite encouraging in the sense that We are seeing people wanting to get back to life as normal, no different than people want to get into sporting events and To the stadium, people want to leave their homes with their parents as much as they love them. They want to start their life. And I think that is playing out and as Release that didn't come to fruition. I think Montreal had a head start and I think they were a little ahead of the opening up. So I don't think that should really come as Just surprised. So we're really encouraged for 2022, Jonathan, because I think the domestic demand Has really driven the increase in traffic. So if you believe in everything you're reading and the government opening up and This last week, just really the start of the government really kind of opening up to newcomers. I think 2022 is starting to be set up as a very attractive year from a fundamentals perspective. Okay. And then just, I guess, sticking with 2022 for Ontario, you get the guideline increase. Roughly what percent Of your portfolio, do you think you'll be able to put that guideline increase through on January 1? It's all like mean to be we don't have everybody kind of Coming due and it's all like it's all through different months of the year. A lot of it is more in the summertime, Jonathan, and that's been done more on I guess we've contemplated always to do that. That's the best time and that's why we see a lot more it's a lot more leasing activity in the summertime. So, again, it's staggered through the whole year. But do we what portion we think we'll be able to put through for the whole year? I I think 100%, to be frank with you. I don't see any pushbacks at all. Okay. And then just last question for Kurt. You guys have $250,000,000 of mortgages maturing in the back half of This year, what are your plans on that in terms of short term? How much will be short term and how much maybe you can put long term debt on? Thanks, Jonathan. I mean, we look at that continuously. Our plan, as you know, historically has been to stay relatively short on the repositioning portfolio. And then once it's repositioned, we push that out into longer term CMHC insured financing. What we're seeing right now in the market is that there's actually some good competition on the long term side, and there's people offering product That competes very effectively with CMHC insured mortgages, similar rates, you can get longer terms And they'll look at the properties coming in even if you're not fully repositioned yet a little differently. So it's attractive. There's lots of long term capital out there for this stuff when we are ready to flip it in. And we just keep watching the market and where we're at with our repositioning. We're happy that the rates have come back down a little bit in the last 30, 60 days. But like I said, we keep a close eye on it. And The stuff that is short term doesn't get locked for short term. It's very open to early removal from those pools So that we can take it and throw it into the long term if we see any movement on rates. Okay. Thanks. I'll turn it back. The next question is from Matthew Logan with RBC Capital Markets. Your line is open. Thank you and good morning. Thanks. Can you talk a little bit about the rental incentives that are reflected in your cash flow statement and how that increase And incentive squares off with the increase in leasing demand? Yes. So we obviously baked in some rental incentives Specific around certain, I guess, property, where a lot of those incentives are coming off Now they've and the good thing is they'll burn right off in 2022 and we Again, did not want to get ourselves without the value creation going down the road. So a lot of that is going is getting muted and going down. And in terms of the improving macro environment, how should we be thinking about that Economic vacancy rate over the next 2 or 3 quarters. Sorry, can you repeat that question? Just wondering if you guys have any sense for where the committed occupancy could trend to in September and we're looking at it on an economic basis if You have those. Thanks, Sandy. As you know that we never really try to get We always try to push our rents. And so we've never tried to really push on the I guess I'm trying to get fully occupied. It will I don't know if we'll get to the levels of like say the 96%. We'll hopefully get to the in the 95 or so in that range, maybe 90 we'll see, but that might be in the back half in the last quarter. We do think it's going to be extended leasing cycle and we're really mindful of what kind of the rents we are. We do believe We will be in some really like the way things are going and trending. When immigration and international students come fully back, It will be very, very, very positive in the marketplace. So we're being very mindful of watching As far as our lease rates and that stuff as we go forward. And we roll everything up, how should we be thinking about I don't think it's something that we usually like to put out there personally. I'm looking around the room. And Well, I think I'll answer it this way, Matt. He's going to pass. I'll answer it this way without and not to be not to try to get too cute. But at the end of the day, you just saw what we posted for same store revenue growth right now. We do think We're trending in the right direction. So we do believe that's going to get stronger. So if you assume as we do that and we continue to convert some of the repositionings, And you'll get a better margin. You can see where the NOI growth can go up to, right? And It's not rocket science, so I don't want to peg at it, but we are encouraged that the driver is that top line And we saw a return to that growth as is, and we believe that we'll continue to improve on that. Maybe I'll approach this a little bit differently and say your comments with respect to 2022 potentially exceeding 2019 levels, Would that imply that same property NOI growth next year could be well into the double digit range? I'm not going to say I'm not going to answer that while it's the double digit range, but there is a scenario The foreign newcomers are back and we see the kind of rental pressure that we believe That we're going to see given that there's not enough supply out there, there is definitely potential for high single double digit NOI growth. Appreciate the commentary. Maybe just changing gears in terms of your cap rate. You mentioned that there was only a 3 basis point Change if we exclude the impact of the Vancouver portfolio. How much of what you're seeing in the private market is baked in? And how much Further could that cap rate go over the next couple of quarters? I'll tell you, I think that Just as we've seen recent sales, things that we've bid on and all that, I think there's a wall of capital. I think there's a good possibility you'll see Much further cap rate compression. And you know, Matt, We've talked about this before, but the big piece on that is, the private market tends to lead The appraisal reports and everything else, right. So a lot of the deals we know and see, we've either been active on or at least taken a look at. I agree with Mike. It looks like there's going to be further cap rate compression. We've always been a little conservative on this side and probably will trend tend to stay a little conservative on this side. But everything we've seen in the market as far as activity goes and deals that are getting done, some of the stuff just isn't reported yet, so not in the appraisal reports, but it looks like further cap rate compression is coming at us. Appreciate the color guys. I'll turn the call back. Thank you. The next question is from Mario Saric with Scotiabank. Your line is open. Hi, thank you. Maybe if we go to slide 11 of your conference call presentation where you highlight your average monthly rents for the reposition, NAB reposition and total portfolio. Just maybe a couple of quick questions there. First on the non repeat on the non reposition side, You saw a pretty decent uptick quarter to quarter, Q2 versus Q1. It does seem like the non repositioned Ottawa portfolio, that disclosed rent came down 11% quarter over quarter. Is there anything particular that's driving that? Who does seem like the trends in Ottawa are getting better based on your commentary. Yes. I think the trends in Ottawa are getting better. You did you're right, you did see that Pickup on the repositioned. And when we look through what that's driving or what's driving that, It's coming from just the timing impact. So it's not so much the demand impact. It's the timing of when people moved out and turning over the suites and getting them leased back up. So it is temporary in nature for what we're looking at on that repositioned portfolio. Okay. And you've also been pretty steadfast in trying to maintain rent where possible. The overall portfolio occupancy today, I think it was 91.5% as of June 30. Your overall rent was about $13.39 at Q2. Maybe a difficult question to answer, but how much If you chose a different path and decided to try to maintain occupancy in the 95% range, How much lower do you think the $13.39 would have been at the end of Q2? That's I don't think I can give you a quick answer because I on that one. But I'll tell you what I what we've always felt steadfast about if we did that, We would basically box ourselves in for our future growth, and we always believe that this was temporary in nature. Obviously, it was Much longer than we all hope that this pandemic was going to go on for. We do think that we've chosen completely Right. In choosing this path, it will we won't have boxed ourselves in and we won't have hindered our growth potential. So we look at it and say, Okay. We've got X amount of vacancy. We've got lots of growth potential in there. So we're and We feel really good, especially seeing the activity that we're seeing and knowing where home prices have gone, unfortunately, for the younger people. And I think you're going to see a lot more renters in the game for a longer time. So we feel very, very positive that this was the right, I guess the right way to look at it and really for the next 5 to 7 years down the road That we think it's the right thing to do. So temporary, a little bit of a temporary pause, but we feel very good about what we did. Yes. I don't doubt that. I was just curious. We see what the impact has been on occupancy. I'm just curious to see if there's any range in terms of What the savings would have been on a rent basis for those people? Okay. Maybe Shifting gears to the acquisition pipeline, it sounds fairly active in the market. Like If you were to characterize Yoval activity in the broader market and let's say there was $100 of activity at the start of the year, How would that compare to where you see the broader market activity today? I think it's gone. So if there was a whatever it was $100 of activity, it's probably maybe 1 4150 now, I'm just talking off the top of my head, but I think you're going to see it keep moving up. I think There's a lot there's more new players in the business it seems. I'm surprised by some of the people that I've seen that have Looked at multi family, but I guess there's just a wall of capital out there looking for a home and they see multi Family is being one of the safe havens. Obviously, the industrial sector has done extremely well and I put us as number 2. And arguably, Just because the nature of our lease tenure, we've probably got the most upside potential in the shorter term. So I look at I think a lot of people are looking at it now. And there's a lot more rebalancing from my understanding of different people's portfolio being more heavily weighted towards real estate. So a lot of activity out there and a lot of I would say a lot. We have to work really hard to find deals. And of that $40 to $50 increment, how much of that would you say is new entrants Looking in the market and what types of entrants would those be? Are they international or different domestic? I would say it's maybe about maybe 10 to 15, maybe even a little bit more of new entrants or And then I think it's rest of people just feeling confidence of where the market like where the market's at. Like not everybody bought all the way through this. We were pretty positive where we're going, and we're always doing this for the long run. And we felt a lot of confidence in what we were doing. We knew it was going to be a temporary nature. That's The way we put this whole we've always built the REIT for our shareholders and with lots of support from the Board. And so now we're seeing people that were, I guess, that were not active for about 1 year, 1.5 years are getting active again because they're Starting to see leasing traffic up and then about 10%, 15%, but I keep hearing new people arriving on the scene. So I would add those new people tend to be institutional. Now they might be through private REITs and whatnot, Mariel. So There's definitely more and more capitals that's maybe coming through some of the same platforms, but and that's the point I want to make is In this whole time, we truly still believe that this is a reflection point for this asset class. It is getting institutionalized, and it's getting Two slides at a much faster clip. A lot of that's got to do with the fact that it's a lot harder to operate in the current environment that we just went through. And the good thing that changed through some of that operating environment has been tougher is a good thing for the space. It's made people We invest into the platform, into the technology, virtual leasing, and we're slowly closing the gap with some of the industry participants Around the world and for most part, south of the border, we're doing a lot of these things a lot sooner. And I think really what is for us is there is an arbitrage between the private and the well organized professional operating platforms. So I do think those are going to continue to garner more and more capital and you're going to start to continue to see this after class which is great for us from the sense that there's more opportunities for us to look at and bid on the ones that we I think a really good strategic fit and we can create value, but it hasn't got any easier from a pricing standpoint. Understood. Okay. In terms of this incremental demand, I think you referenced The Ontario guideline increase for 2022 coming through and that's good to see. Would you attribute any of the incremental demand to greater visibility regulatory front going forward. I think people, I guess, getting a little bit more comfortable where we're all going. And obviously, when we this point last year, I don't think there was a lot of comfort from Anybody of where we're going, really happy with the vaccines that we're The take up here in Canada, I think we're one of the leading countries in the world on that, which is terrific. So I just think there's just a lot more positivity completely out there. And I guess and also a little clearer When you see when they come out and announce that, yes, this is the guideline increase, like things are returning. We're not completely normal yet, and I don't think we're going to see full normality until 2022. There's still a number of people that are not back in their offices. We see it here in Ottawa with the federal government not back in the offices. I guess they're doing a little bit of a test case now from what I've read, which is a positive. But I just see like as we get in better and better and better shape, I think that People are feeling very comfortable in transacting a multifamily. Got it. Okay. My last question is more of an operational one. I'm not sure if you have the information or willing to disclose it. Any sense or color in terms of the Rent to income ratio in the portfolio, either in the existing portfolio or on some of the new leads that you're converting, what you underwrite to in terms of our rent to income ratio? Well, that's a lot tougher right now, Mario, given the situation that we're through, right? So there's a lot of people That are current on their rents and they've been able to get help, but maybe they are unserved. So that's a tougher I think to kind of work through and go through. I don't think we'd have comfort in disclosing that number to you right now. But I do feel comfortable in the sense that we've been Quite pleased with where our collection has been and where our receivables stand. So back to Mike's point, this has been a very stable asset class and it's really And our portfolio is no different on that front. So I think if I had to anecdotally tell you where we sit today, I'd say we'd probably mirror What the more macro housing to income ratio looks like? Yes, I would agree with Brad. I am encouraged by in certain areas that we've seen some good, I guess, some, I would say some higher income earners that I would usually see in our portfolio that are buying. And I don't know if that and I think we're going to see I don't know, but I think we're going to see A prolonged amount of time that people will be renters now because the housing costs have gone up a lot. So I really believe that and I was surprised even just I was in Vancouver last week, they're telling me some of the people that are Renting from us and wow, geez. And They're making some big income there, and we're seeing it in like in Ottawa. We're seeing it in different places. So I think you are going to see that's where I talk about tailwinds. I think we go back and start factoring that in. I think we're going to be fairly happy with where we're and I think we're going to start seeing some noticeable Downtrends on or I should say, yes, downtrends on the rent to income more in a positive way, On the amount that they're paying for rent versus their income. So I hope I've articulated that properly. It's interesting. Like I think you've collectively kind of been steadfast in saying this is temporary and The pandemic, is it going to strange the structural long term outlook of the portfolio of the broader rental market? So it's interesting to hear that Maybe rent duration gets extended a little bit coming out of this, but at the end of the day, is there anything else in your view that coming out of this that Structurally changes how you operate the business going forward. I don't know if anything changes how we operate. I think As a firm, we've always been quite progressive as far as investing in the platform. And I think the one thing though maybe, Mario, some of the things that were on our To do list and to revamp and different things like that, it got accelerated. But I don't think it's any different than from a lot of other industries and a lot of different To classes, I think COVID just accelerated some of the trends for sure. The one comment I would make, let's go back to your comment And Mike's comment is I think if you asked our management group that when we were in the Dark to early days of when COVID kind of hit and we went into lockdown. Worked extremely hard in the group. Worked I had to make sure everybody was safe, our team members and our resident base was safe. That was number one priority. But number 2 was what's going to come out of this? So we had to step back and look I think the one thing this group thought for sure was we would have to see a lightened up On the housing affordability issue, we thought the erosion, maybe there's still keep the erosion, but it would decline at the rate of pace. And we couldn't have been more wrong on that. We came out, we thought there would be discounting on housing prices and whatnot. And really what happened was It got accelerated because of the low interest rates and anybody that could or would potentially think about owning a home in the next 5 years, They felt the panic that they had to do it now. And I think the parents stepped into their whatnot, Dave gave the kids a little bit of the inheritance early and that really did create a real strain as we all know On the housing market. And that, I think, will structurally change the ownership level in Canada and Housing going forward, which is A big plus for rentals given that we haven't had the kind of supply, but we have to as an industry act responsible and help encourage new supply at all three levels of the government and be a part of the solution. Great. Thanks, Brad. That's interesting color. Thanks, everyone. The next question is from Joanne Chen with BMO Capital Wealth Markets. Your line is open. Hi, good morning. Maybe just on the occupancy side with The improvement in Montreal, would you attribute most of that just to the earlier reopening? Or is there any other drivers, whether Employment or the student population that kind of drove that improvement? I would attribute a lot of it just to the earlier opening. You're Seeing kids come back, they know they're going to have in person classes there, which is great. I expect we'll still get some we're going to get some more take up here. And I think it's going to be a little bit prolonged. It's still like there is pretty good when I've been in Montreal, pretty good activity Downtown, I just feel like people are being a lot more confident. And though I would say that not all of the not everybody is back in their offices and that. So I think that's going to get keep improving along the way. And I'll specifically, we have I'm really looking forward to the, I guess, immigration happening again because Montreal has done incredibly well Once the immigration opens up again, and I think it will do really exceedingly well. If you look at the prices per To live there versus when you go into the Toronto's and Vancouver, I think you might start seeing higher percentage numbers coming out of Montreal. Okay. That's helpful. Maybe just switching gears back on the acquisition side of things. How should we be thinking How the back half of the year will shape up given how competitive pricing is right now? And within that, are there certain markets that you're seeing Probably the best opportunities at this point. I think we're going to Stick to our same markets. So we do see opportunities. I think one thing that we I think that We're very hands on. So when we start looking at our some of our competitors coming into The market, I think sometimes we see things that maybe just because of years of the experience that we've had and being there that we can see Some different levers that we can pull that make certain properties make more sense than others. So I do believe that we'll be continue to transact. I think We'll be at a fairly and hopefully a fairly steady clip. And to be frank with you, we broadened out our team there for And we're being we're always trying to get anything we can off market. But I think we'll have a I think we're going to you'll be some I think you'll be probably we're going to throw a number out there, Probably potentially higher than what I'd say in $100,000,000 or so in the back half. And I'm just going to add one comment. Hi, Steve. I was going to get in trouble, Joanne, by saying that. I'll just add to that comment. Like, I know we're talking on our name, but it goes back to SASSA classes getting institutionalized. There are only so many operating platforms that can Thank you. Our peers are a great example. They will benefit too. The people that have invested in their platform that have well organized professional platforms, In my opinion, and I believe my colleagues share this opinion, is we're poised to really Benefit over the next 3 years of what we believe the reflection point because there's a lot of institutions so Under allocated to the asset class. And from a risk return perspective, it makes a lot of sense. Okay. And I guess, on the competitive on the acquisition side, but in terms of opportunities to further grow your development Pipeline, should we be thinking about that over the near term? Sorry, I don't think I understood the question. Can you just Sorry, just given how crazy it is, I guess, on the acquisition side is for ITPs, What is the potential for you guys to further grow, I guess, the development pipeline? I think we'll still grow the development pipeline. We may do some We may look at some things like some potentially mezzanine financing for a developer on a forward Kind of purchase that we can convert. We may look at some different pieces, but we're going to be very mindful. We got to always watch our Our balance sheet, we're really we're very happy where we're sitting right now. And again, we were we knew that we would transact through here. So, no, I think you'll see us do more. We'll look at we're going to be careful and prudent with how much development we do at any given time. But as I said earlier on the call, we do have a lot of potential for intensification. And so we'll be mining that as we go forward. And I don't think people have attributed any value to that whole intensification prospects that we have. I know when we brought people around on a tour a few years ago, people were noting it, and I don't think that the market totally appreciates some of the stuff that we have. And that's Somewhat by design, because we're very much about we'll show you the numbers and we'll let the analyst community and the investment community dictate what Kind of value they want to ascribe to that. But going forward, the new developments will play a role in their playbook because at the end of the day, The value creation of the older properties is great. We know what we're buying at a discounted replacement cost. So we can do that math. The risk in that game is the turnover, right, depending on how tight the development gets sorry, how tight the fundamentals get. Well, the nice thing about new developments is no longer about a turnover game. It's about being able to execute, deliver the product and hit your pro form a rents. So like anything you do, we think a well diversified approach to going forward makes a lot of sense. But at the bottom line, what kind of drives this management group and Board, it has to create value. It might not create value in day 1, but it has to create value In a 3 to 5 year time period or it doesn't get us excited. Right. Okay. No, that's helpful. Thanks. I'll turn it back. The next question is from Brad Sturges with Raymond James. Your line is open. Hi there. Just to follow-up on the intensification discussion there, It sounds like the plan is to add a little bit more disclosure on what that intensification potential could be in the portfolio today. If that's so, what would be the rough timeline and maybe seeing a little bit more disclosure on that front? Yes, maybe I missed Play that, Brad. We'll be doing like we're I'm just saying we do have a lot of opportunity to mine stuff. So when you look at it, it's not only just a cash basis. There is potential going forward. So we're happy with our exposure Right now on the development side, we'll never overweight ourselves. We'll have to be we have to be very mindful and careful about what we do, Just of the nature of what the REIT is, but I mean, I just anyways, I talk off the top of my head. Sorry, Brad. Understood. Good and bad sometimes, probably mostly bad, but it's okay. Okay. Maybe on Slide 14, just on the CapEx and repositioning program. You give a range of Full and partial suite renovation costs $15,000 to $40,000 per door. If we're looking at the 3,500 Suite plus in the program, I'm sure there's a range to what's being done, but is it more weighted towards full Renovations or partial renovations and how should we think about the remaining program from a capital spend perspective? It's a real mix bag. I mean, I'll tell you some of the stuff that we transacted on like I was like they were spot on in what they Dan, as far as their CapEx program, so really little things and maybe just be replacing appliances going from white to stainless steel and Maybe changing out a countertop to a quartz or a Caesarstone countertop. So like some of them are done very well. And some of them just even it's just like small things like light fixtures and things of that nature. And again, some of them we need to go Full tilt on. So it really varies and it can even vary in a building. We may have somebody who started on a one program and then whatever they Decided they ran out of money to spend more or they didn't think they were going to get it or whatever reason or had gone the other way where they did a little bit and then they started doing more. So it's got to be very specific to the suites. So it's pretty hard to kind of give you Like a whole here's the average, you know what I mean? Yes. I guess in terms of that range, has that changed much in the last, Call it 6 to 9 months during COVID or is that a pretty consistent spend figure that you would have seen pre COVID? Sorry, I didn't I don't know if you heard that. I was on mute. Did you hear that? No, sorry, David. Okay. So I was going to say, Ed, we I apologize, I was on mute. I Yes, we're all a little tired of hearing that one, be it on mute. But anyways, so we have I found that there is a bit of cost pressures on some of the items. Definitely been Supply issues too as far as the like on our appliances. Like we've been backlogged on some On dishwashers and things of that nature, so it's crept a little bit for sure. No questions. There's 2 observations I'd like to add to Mike. One is and both of you kind of hit on it. Obviously, on the repositioning program, the majority of that is full rentals. But to Mike's point, there is sometimes when you will go in and purchase an asset. And it might not we might not be purchasing it because of the unit. They've had a pretty good renovation program, but maybe they didn't market the building well. But for the most part, still the non repositioned purchases are typically full rentals. But then this is where I want to just kind of hit home the point is on the repositioning. We're getting to a point where we've owned properties for longer than 5 years. And then this goes speaks to what Mike was speaking to. I just want to kind of really hit the point is within those buildings, we're seeing 2nd level repositioning where, hey, at the time, we did a really good renovation program, but now we can go back And I'll bet and stay with the times. And like any real good retailer, we've got to stay with it and have the curve. And obviously, we do that When the returns meet our thresholds, but we are seeing another level of repositioning. 2nd, I would like to say too is On the cost spend, regionally, we've seen some differences. And there's one region in particular where it tends to be a little higher to Do a renovation program. We found during COVID, it was actually a region where we could take advantage of And actually saw some decrease in the prices and we took advantage of that. So but on the whole across the board, we are seeing some Got it. Last question for me. Just to go back to the cap rate compression discussion, I'm sure you're seeing some broad based pressure on cap rates, but is there a market or region that kind of stands out as seeing a little bit more Downward pressure on cap rates right now? I'd say it's across the board to be frank with you. Like I don't see I think we're seeing it everywhere. Okay. That's great. Thanks. I'll turn it back. Our final question for today is from Yashwant Sankpal with Laurentian Bank. Your line is open. Good morning. Good morning, Ash. Just a clarification, I wanted I thought, Mike, you said that your occupancy will be at around 95% by The second half of Q4, is that right? No. What we did say, Ash, It's all indications of the first half of the year is pointing in the positive direction on the momentum and whatnot, and we're encouraged in what we're seeing. And each month, we I think what was said is we'll see if we can get back to 95. We're very confident that 2022 will shape up because we'll see more newcomers and we'll start to see a bigger participation from immigration contribute. That said, if we do have an extended leasing cycle, we'll see. But we're saying that we'd like to we Probably look to get there in 2022, but you never know what 2021 will bring. Yes, we're hopeful we're going to get there, Yas. But We don't have a crystal ball, but we are happy of where we're getting and we've seen, I guess we've hit the trough and we're starting to come back. So as more and more opening comes about and people get back into their offices and start again domestically leaving their parents' house, You see more kids going back into the getting comfortable for, I guess, the in person classes And even just any international student immigration, we just feel it's going to get better and better and better. And we do feel there should be an extended leasing Cycle, that's what we're expecting. But again, these are a little bit uncharted waters. So We're not 100% sure. We'll be able to tell you that on the next call. Okay. And on student leasing, Where is it at this point? Like would you say it is where it was in 2019? Or do you think it is or Is it lower than that? It's not completely there. There's still I mean, it's not 100% there. We are expecting to see more of it in a little bit more of a rush here. But again, we don't have the international students to the same Degree. And the international students, we didn't realize how many that I believe it's like 700,000 international students come into Canada And then when you look at where they usually situate themselves, it's in our primary markets where we have like especially Montreal, McGill, Concordia, we didn't realize how many international students we have. So we look at some of those markets and it's not quite there. It's way better than last year. That's all I got to say. Yes. The only thing I would add, it's better than last year. We're not back to 20 2019, but the one thing will be interest in Yash, and who knows, and I'm just throwing this out as more of a comment than anything. I'm not we're not Budgeting this or forecasting this, but it will be interesting to see if the winter semester has an increase In flops, newcomers, where they didn't couldn't get the paperwork in order for the fall semester, does that Translate into an increased winter semester, which is never typically being strong in our markets. But like I said, we're not banking on it. It's more thrown that out there. I'll be curious to see if that translates into something. Right. Okay. And one last question. How are your 4 markets, which one do you think will be the slowest to recover? From what I'm seeing, it won't be Vancouver. So I guess we're going to see how it all plays out. But the thing is, is just the different times of reopening. In Ottawa, we got the federal government here at play. Montreal, again, like we've got, we're around the university, so we'll see how that It's pretty hard to kind of predict. It really depends. Again, Sometimes it's property specific. And so it just seems like Vans got a lot of steam. So It's got a lot of steam now. I'm wondering where it's going to be in a year or 2 down the road. I think Toronto proper will probably have the So definitely what we covered, but until some of the banks and some of the big head offices start mandating people back to the office, You might see that lag a little, just given where the pricing is for the core, right? So If you're starting out and you had a revelation and you want to change careers and whatnot, I think you'll see a lot of people start to pick maybe the city they want to live into where they want to where the career to be from a housing affordability perspective and livability perspective. So I think if anything, I would have to I think all 4 quarters that we're in are going to do But I would say probably Toronto will be a little lager. But that said, I'm talking core, I'm not talking the bedroom communities of the GTA. Okay. That's good color. Thank you very much. No further questions at this time. I'll turn the call back to the presenters for any closing remarks. Okay. I'd like to say to everybody, thank you very much for taking the time for this morning's call. We appreciate everybody's Continued analysis and questions and we're learning from everybody here during these, I guess very different times, but I am very happy to see that we are heading in the right direction. We have a long way to go. We're not there yet, But we do feel like we're doing a lot of the right things to get to where we would like to get to. And I also want to thank our team. Our team has done a really good And I know that, I mean, without their efforts, we would not be in this, I guess, this Position of being a little bit more positive and just what they've done with our residents. They've been amazing with our residents taking care of them and making sure that they all feel healthy and safe and secure. So we really appreciate our whole team. And on that note, I'll thank everybody again and hope everybody has a great rest of the day and enjoys the rest of the summer. Take care. We'll be looking forward to seeing and talking to a lot of you soon. Thank you. Bye. Thank you. This concludes the InterRent REIT Q2 twenty twenty one financial results call. You may now disconnect.