Earnings Call: Q2 2020

Aug 6, 2020

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Killam Apartment REIT Second Quarter 2020 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Mr. Philip Fraser, President and CEO, you may begin the conference. Hello, and thank you for joining Killam Apartment REIT's Q2 2020 conference call. I am here today with Robert Richardson, Executive Vice President Dale Noseworthy, Chief Financial Officer Aaron Cleveland, Senior Vice President of Finance and Nancy Alexander, Vice President of Investor Relations and Sustainability. Slides to accompany today's call are available on the Investor Relations section of our website under Events and Presentations. I will now ask Nancy to read our cautionary statement. Thanks, Bill. This presentation may contain forward looking statements with respect to Killam Apartment REIT and its operations, strategies, financial performance and conditions. The actual results and performance of Killam Apartment REIT discussed in here could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from expectations include, among other things, risks and uncertainties related to the COVID-nineteen pandemic, general economic and market factors, competition, changes in government regulations and the factors described under Risk Factors in Killam's annual information form and other security regulatory filings. The cautionary statements qualify all forward looking statements attributed to Killam Apartment REIT and the persons acting on its behalf. Unless otherwise stated, all forward looking statements speak only as of the date of which this presentation refers and the parties have no obligation to update such statements. Thank you, Nancy. We are pleased to report solid operating and financial results for the Q2 of 2020. During the quarter, it was not business as usual as we prepared, supported and adjusted to the evolving safety protocols that were put in place. Today, Dale will take us through Killam's Q2 financial highlights and Robert will take the opportunity to give you a current business and operational update. I will then conclude with an update on our acquisition and development progress before opening the call up for questions. I will now hand it over to Dale to take us through our Q2 results. Thanks, Phil. Killam had a successful second quarter, increasing the earnings from our existing portfolio, maintaining a strong balance sheet, completing our 2nd BC acquisition and advancing our development pipeline. Slide 3 highlights our Q2 financial performance. We achieved net income of $21,500,000 and earned funds from operations of $0.26 per unit, a 4% increase from Q2 2019. AFFO at $0.22 per unit was up 10% over Q2 last year. In addition, same property NOI increased 2.7% and our operating margin improved by 70 basis points. Although we experienced deceleration in rental revenue growth due to the waiving of rental increases following the onset of the COVID-nineteen pandemic, we are pleased to report 1.6% growth in same property revenue. Killam's key revenue levers are charted on Slide 4. The weighted average apartment rental increase was 2.9% this quarter. With strong fundamentals persisting, occupancy remained strong at 96.8% and incentive offerings were flat. On the expense side, we recorded a slight uptick in bad debt expense of 20 basis points across the apartment portfolio following an increased allowance for doubtful accounts. As illustrated on Slide 5, overall operating expenses decreased 0.3% in Q2. This reduction was driven by reduced consumption of heating fuels for energy efficiency projects, decreases in natural gas pricing and a decrease in electricity costs as we transition to have fewer units with electricity included as part of the monthly rent. These utility expense savings were partially offset by modest increases in general operating expenses and higher property tax assessments. Looking forward, Killam expects to continue to feel the impact of COVID-nineteen in the second half of the year, mainly due to the waiving of rental increases in July, a delay in the distribution of rental increased notices to tenants and a reduction in revenue at Kiln Seasonal Resorts due to delayed openings and social distancing restrictions. Despite these constraints, demand for units is strong and occupancy levels remain consistent with 2019. Overall, we're expecting modest NOI growth during the second half of the year. In addition to solid operating performance, Killam realized lower interest rates on mortgages refinanced during Q2 and mortgage renewals progressed on schedule. The weighted average interest rate on CMHC insured mortgages refinanced in Q2 was 1.57%, 39 basis points lower than the weighted average rate on the maturing debt. Slide 6 highlights our debt maturity profile, including average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates. Based on current CMHC insured mortgage rates of between 1 point 4% and 1.6%, we expect to continue to refinance at lower rates for mortgages maturing during the remainder of 2020. We continue to manage our balance sheet conservatively as highlighted on Slide 7. Debt as a percentage of total assets was 45.3% at June 30. We entered the pandemic with a strong balance sheet and have further enhanced our position with the closing of the recent $69,000,000 equity raise and subsequent repayment of the outstanding balance on our line of credit. With $100,000,000 of liquidity, we have acquisition capacity of over $200,000,000 and flexibility in the year ahead. Our current debt to total asset ratio post the closing of the equity raise is approximately 43.9%. I will now turn the call over to Robert, who will give more details on rent collection, Killam's key revenue and operating income initiatives. Thank you, Dale. Good morning, everyone. I would like to begin today by acknowledging the dedication and hard work of Killam's employees during the Q2. Faced with very challenging operating conditions, our employees provided exemplary service and focused on the health and safety of Killam's 22,000 resident families and its stakeholders such as commercial tenants, their customers and service providers. Using vigilant cleaning and physical distancing protocols, Killam's employees successfully managed the spread of the virus, keeping everyone healthy and safe. In recognition of the selfless dedication of Killam's 350 frontline employees, starting March 16, 2020, Killam paid its frontline staff an average of $2.50 more per hour. We will continue to pay this $2.50 per hour premium until August 15, 2020, when we will reduce the premium to $1 per hour for the foreseeable future. Canada has done well to minimize the spread of the virus and ideally we will soon be in a position to reopen the economy nationwide. Killam is prepared to do its part in managing the spread of COVID-nineteen. For example, Killam is topping up its supply of face masks, latex gloves and disinfectant in case the anticipated second wave of infection should occur. We are optimistic the broader acceptance of face masks in public, combined with the public's heightened understanding regarding hygiene and social distancing standards, means we can collectively adapt to manage potential virus outbreaks. Rent collection has been top of mind for Killam, its investors and stakeholders during Q2 2020, as detailed on Slide 8 in the upper left hand pie chart. 90% of Killam's revenue is earned from apartment tenants, 4% from MHCs and 6% from commercial tenants. As noted in the blue bar charts, monthly rent collection has been impressively high this quarter. Apartment and MHC rents averaged 99% collected, commercial rents averaged 78% collected and combined the overall average rent collected totaled 98.6%. Throughout Q2 2020, 90% of all rents were collected in the 1st week of each month. Consistent with pre COVID collection rates. The fact is 80% of tenants rents are directly deposited into Killam's bank account via preauthorized payments. Interestingly, physical distancing limits resulted in a significant increase in online tenant payments throughout Q2 2020 compared to the same quarter in 2019. For July 2020, Killam collected more than 99% of July's apartment and MEC rents. As earlier highlighted, rent collection for Killam's commercial tenants averaged 78% in Q2 2020. The July 2020 commercial rents collected total 84 percent likely related to increased business openings since early June when COVID restrictions were relaxed in most provinces. The pie chart on the right hand side shows the breakdown of the commercial rent collection for Q2 2020. Children is participating in the Canada Emergency Commercial Rent Assistance Program, also known as CCRA. Simply put, the Canadian government will pay 50% of an eligible commercial tenant's gross rent for 3 and possibly 4 months provided to landlord, Killam in this case, weighs 25 percent of the tenant's gross rent for the same period. Killam has 35 tenants eligible and participating in the CEQA program and the Q2 cost for Killam totaled $115,000 As well, Killam has in place or is working on rent deferral arrangements for a number of our commercial and residential tenants on a case by case basis. Typically, Killam has agreed to defer rent for up to 2 months. And then in the 3rd month after the deferral ended, the tenant starts paying equal monthly installments for the next 12 to 24 months to repay the deferred amount. Further, Killam has waived any interest charges on the deferred rent. Looking at Slide 9. Killam's long term strategy remains unchanged to increase stakeholders value by increasing funds from operations and net asset value. This is accomplished by focusing on 3 key priorities. 1, increase earnings from the existing portfolio 2, expand the portfolio and diversify geographically through accretive acquisition with an emphasis on newer properties and number 3, the development of new high quality properties in Killam's core markets. Slide 10 charts Killam's rental rate growth in the Q2 of each of the past 4 years, having doubled rental rate growth from 2017 to 2019 from 1.6% to 3.2%, Killam was on track to add to this trend in Q2 2020. However, with the decision to suspend collection of rent renewal increases for Q2 this year due to the pandemic, Q22220 twenty's rental rate growth, although a healthy 2.9%, was 30 basis points lower than 20 nineteen Q2 results. This cost $150,000 in lost revenue. Rental rate growth on turns, which we will discuss more on the next slide, was a healthy 5.9% this quarter. Looking ahead to Q3 2020, Killam made the decision to waive collection of renewal increases for July, but started collecting renewal increases beginning August for all of 15 properties. The majority of these 15 properties are located in Alberta and Luton land and Killam plans to start collecting renewal increases at these addresses effective September 1, 2020. During the pandemic lockdown, March 16, May 31, Killam chose to suspend delivery of rental increase notices for future months, given the stresses already being faced by our tenants. The impact of this decision will be lower renewal rate growth in the 3rd and 4th quarters of 2020. The percentage of kilns apartment units not renewing has consistently averaged 33% for many years. But during the past 2 years, we noted fewer units were turning as markets tightened and average rents on units that turned increased. This is especially true in the rent control Ontario market. Killam's 20 19 apartment portfolio turnover rate was 30.4%, 140 basis points less than fiscal 2018. Based on current data, we estimate Killam's unit turnover may decrease 350 basis points to finish 2020 with a 27% turnover rate. The chart on Slide 11 highlights Killam's portfolio average in place rent compared to the market rental rate for the past 9 months for the last 19 months, all on a dollar per square foot basis. In place rent is the average monthly rent Killam tenants pay, excluding in vacant units. Market rent is the average rent being achieved by Killam on leases to new tenants during that same month. As Ken gets seen with this chart, the opportunity exists to collect a healthy $0.20 to $0.25 per square foot mark to market rent increase across Kiln's apartment portfolio. Said another way, Killam's current monthly rent can move 15% to 20% or roughly $200 per unit. Annualized, this equates to $39,000,000 in mark to market rent potential. At a 5% cap rate, that's $780,000,000 in increased value. Hill monitors its mark to market opportunities by region. In conjunction with occupancy and any incentive offerings to assess the relative strength of each market and adjust Killam's rents accordingly. Demand for Killam's new and newly renovated rental units remains strong across the portfolio and work on these units continues without delay. After completing 300 repositioned units in 2019, Killam's 2020 program is projected to complete between 4 505 100 units as shown on Slide 12. Year to date, 275 units have been repositioned at an average cost of $28,000 per unit, earning a 13% unlevered return on investment. Having recently assessed our portfolio, we are confident there are 5,000 additional units available for repositioning, thereby delivering impressive earnings growth and accelerating returns for Killam's unitholders. Killam's value proposition and market fundamentals remain strong. Slides 35 through 37 in the appendices of this presentation detail the financial performance for each of our markets. Majority of the markets were very strong with a particular shout out to our New Brunswick and Nova Scotia portfolios for leading NOI growth with 5.9% and 5.6% growth this quarter. There were 2 markets that reported negative NOI growth this quarter that I would like to expand on. The Ottawa market experienced a notable decrease in property revenues during the first half of twenty twenty. A 3 30 basis points decline in occupancy was principally driven by a newly completed competitor that came to market in Canada, adjacent kilns Williams Court portfolio. New product has now been absorbed. However, COVID-nineteen has slowed in the leasing traffic. Killam also experienced higher than average vacancy at 2 additional Ottawa properties in Q2 2020. I'm pleased to report both were fully leased in July. Killam's neutral land properties realized the decline in same property revenue as occupancy was 350 basis points lower during the quarter. Lower occupancy in the region is due to economic pressures that have been further compounded by COVID-nineteen issues in St. John's. Reduced activity in the offshore oil sector as well as pressure on other natural resource sectors. Total operating expenses were also higher than normal in this land due to an increase in staffing costs related to expanding the property management and leasing teams as well as higher insurance premiums. Expense management remains a top of mind at Killam. Our investment in energy efficiency continues to pay dividends and the 2020 projects are progressing well. Please turn to Slide 13. Kymel has invested approximately $20,000,000 in efficiency projects over the past 4 years, including installing 11,500 low flow toilets, this annually saves 700,000,000 liters of water. Lighting and retrofits at approximately 90 properties generates an annual savings of 3.7 1,000,000 kilowatt hours kilowatts. And many boiler insulation and thermostat upgrades, Total uptake solar panel installations at Killam has been a big focus over the course of this summer. Slide 14 shows a new install at our Klimpul Court property in Halifax. We have 11 solar arrays installed in progress across various properties in Halifax and Charlottetown. This $1,300,000 total investment should produce 800 Megawatt hours of green energy annually, while simultaneously delivering $150,000 in annual expense savings, generating an 11.5% unlevered return. These projects help reduce Killam's carbon footprint, while mitigating the impact of expense increases from rising energy rates and other inflationary pressures. I will now hand you back to Philip to provide an update on our progress on our development projects and recent acquisitions. Thank you, Robert. Slide 15 summarizes Killam's year to date acquisition activity of 130,500,000 dollars The 2nd quarter acquisition of the Crossing at Belmont was detailed during our May conference call. Slide 16 shows the $60,000,000 156 Unit Property, which is our 2nd apartment purchase in the Greater Victoria area of BC. This project is still in the lease up phase and is currently 90% leased at roughly $2.60 per square foot. We anticipate having it fully leased by the end of the year. With the funds from the equity offering that we closed last week, we currently have $100,000,000 of available liquidity. We are pleased with the $130,000,000 in acquisitions we were able to complete prior to the COVID-nineteen pandemic, and we will continue to seek accretive acquisitions and grow our portfolio geographically. Overall, Canadian real estate transaction activity was down in Q2. The ability to complete future acquisitions in the second half of twenty twenty will depend on the status of the health crisis we are facing across the country and the lifting of travel restrictions. As shown on Slides 18 and 19, Killam's development activity is a key cornerstone in our long term growth strategy. We have a proven record of building energy efficient high quality properties in our core markets over the last 10 years. Development activity progressed in Q2 with construction activity back to normal in late May early June. The temporary delays due to work slowdowns, labor shortages and delays in the supply chain have been modest. We currently have 5 developments underway today plus the Nolan Hill development in Calgary. We also have the newly announced 169 Unit Luma project, our latest fifty-fifty joint venture with RioCan. Renderings of each project are shown on Slide 20. With a 50% interest in 2 Ottawa projects and a 10% interest in a Calgary project, we have a total of 6 24 units or $235,000,000 in developments underway. Our Shorefront development located in Charlottetown is close to completion and tenants are scheduled to move in during September. We started pre leasing during Q2 and we are 25% pre leased to date. We expect good demand for our building in Charlottetown because the overall market has less than 1% vacancy. The solar photovoltaic panels insulation on the roof is expected to produce 110 Megawatt hours annually, which fully offsets Kohn's electricity consumption. Slide 23 shows 10 Harley, a 38 unit building in Charlottetown that is expected to be completed in February of 20 21. Nolan Hill development located in Calgary is shown on Slide 24. Killam has a 10% interest in this development with a commitment to acquire the remaining 90% interest in this 3 building 233 unit complex upon completion in Q1 2021. This project broke ground during Q4 2019 and is progressing along very quickly. The acquisition price upon completion is $55,000,000 and Killam will be pre leasing will begin pre leasing in Q4 2020. Slides 2526 show renderings and progress photos of the Latitude. The second phase of the Gloucester City Center project with RioCan. We are currently 40% complete and the construction concrete structure is up to the penthouse level of this 20 story building. The expected completion date is still late 2021. K in Mississauga broke ground in late 2019 with renderings and progress photos on Slides 27 to 29. This 128 unit development has a $57,000,000 budget with an anticipated 5% all cash yield. Construction financing was secured in Q2 and all the remaining development costs will be funded through this facility. Construction is back on schedule since late May, early June, anticipating completion in Q4, 2021. On July 30, Killam acquired a 50% interest in appraisal land from RioCan to jointly develop 168 unit apartment building adjacent to their grocery anchored Ellenville Shopping Center in Ottawa. We then subsequently invested $9,800,000 to reflect our portion of the construction cost to date. The development cost for Killam's 50% interest is budgeted to be 44,300,000 dollars We broke ground on our 169 unit development known as Civic 66 in Kitchener at the beginning of July as shown on Slide 31. The budget for this development is 69,700,000 dollars with an anticipated all cash yield in the range of 4.75% to 5%. We expect it to take 24 months to build with the completion target from mid-twenty 22. Finally, Slide 32 shows our current development pipeline. To conclude, we acknowledge that the next few quarters will be challenging for all of us as we navigate the ever changing economy in COVID-nineteen pandemic. We have great people, a solid operating platform and a high quality asset base that will continue to produce increased earnings and value for our unitholders. This concludes the formal part of the presentation and we will now open up the call for questions. Thank And your first question will be from Jonathan Kelcher at TD Securities. Please go ahead. Thanks. Good morning. If we go to Slide 11, the 20% bump in the mark to market, that's what you're achieving right now in July? So that's comparing what the rent per square foot that we're getting on leases in July versus our average in place rents for the portfolio. So that 20%, it doesn't mean that we are getting 20% lift. It means that the difference between our in place rents and what we have achieved overall on a per square foot basis is 20%. Okay. Now that's a blend of, I'm assuming repositioned properties and just normal turnover? Yes. Okay. And then on the repositioning for 2021, would 500 sort of plus units be the target again or do you think you can do more than that? I think we'll use that 500 would be a safe number for 2021. Okay. Is that a function of the same it will be 2 units or is it is there anything else there? Sorry, Jonathan, you cut out there. Can you say that again, please? Is just doing 500 a function of only you only think you might be able to get to 500 units that you'd want to do? Or is there anything else that would prevent you from doing more? We don't know at this time. So our thinking is that $500,000,000 is a good number. Just based on what we're seeing this year and how we roll into 2021. So I think as a working number, that's the number. But if things open up materially, and we'd be happy to do more. Okay. Fair enough. And then lastly, just on the expense savings utility fuel savings. Are you able to quantify how much of that was lower prices versus how much of that is due to some of the energy saving initiatives that you guys have undertaken over the last few years? I'd say that a fairly large part is the pricing. Certainly, we are benefiting from the consumption savings. But when you look at the price, especially in Nova Scotia and New Brunswick, pricing has been a fairly large part of that savings year over year. Okay. Thanks all. I'll turn it back. Thank you. Next question will be from Troy MacLean at BMO Capital Markets. Please go ahead. Good morning, everyone. Now that you're passing on rent increases again, is that something you're seeing most competitors do in most of the markets you operate in? I couldn't speak to that. I don't think we've seen their numbers, frankly. And so I would suspect it would be similar to what it's been in the past. Yes, they're passing some on, but we don't know definitively how much or who's doing it. But we're not being isolated or sorry, what I'm looking for is we're not hearing back from those that are renting from us that it's a problem. There's good market acceptance for the increases. So that tells us it's probably fair to broad. And if there were like a large second wave or let you know the lockdown became enhanced again, would you forego rent increases again or is this something that we would just move past and you're going to keep it going? I don't think we can answer that question depending only because we really don't know what the next sort of wave is going to look like and how shut down the economy is going to be. It's hard to imagine that we're going to go through this absolute lockdown for 2 to 3 months when we know that, if everybody just stayed inside for 2 weeks, it would really sort of move the curve down a lot and plus the increased usage of masks. And then same property NOI would have been 5% in the quarter without the impact of COVID. Is that a good target for the second half of this year, what Killam can achieve in same property NOI? I think we've guided that it will be modest NOI growth in the second half. So those impacts on the rent increases, I mean, they do carry over into Q3. And during Q2, we did not deliver rent increases, which take a few months to come into effect. So in fact, in terms of our actual rent growth, Q3, we will likely feel more than we did in Q2 because of the delay in those deliveries, even though the freeze is coming off. So I think that is higher than what we would expect based on a modest NOI growth. Thank you. I'll turn it back. Thank you. Next question will be from Howard Lyon at Veritas Investment Research. Please go ahead. Thanks. I just want to dive into some of the regional differences you've outlined for same property. It seems interesting across the country. There's key differences. I guess I want to start with maybe St. John in Newfoundland. That looks like some of the one of the weaker areas. Are you seeing the employment effect affect any other regions? Or is that really the hardest hit region, which is affecting your occupancy and rent growth? So the 2 oil related economies are certainly feeling it. And so we're seeing that in St. John's. We're seeing it in Alberta as well. But what I would say, just to highlight that the last couple of weeks in the St. John's market in particular, we're seeing an increase in leasing activity. So we're happy to we're signing the leases double digits. That's good news. And hopefully that trend can continue. And I guess to add too in Alberta, when we look outside the downtown core, we have a fair bit of we're seeing some good numbers in our suburban markets outside of Calgary and Edmonton as well. And I guess just on Calgary, in the MD and A mentioned that there's some more rental incentives being put in place. So for your properties, how many months of incentives are you are we talking about? And what are you seeing your competitors doing there? So when we talk about that, it is just a few properties and we're looking at approximately 1 month of incentive. But we do keep an eye on what our peers are doing. So that could change depending on circumstances. Okay. That makes sense. And then I guess the last part is on in Ontario, the Ottawa piece, I think you broke up pretty clearly. For the London piece, I guess there's the 1 student property that you mentioned that was that had the uptick in occupancy. And are you seeing an improvement in leasing activity, I guess, now in the beginning of August? Very much so. Yes, it's moving in the right direction. We think we'll be fine there. Okay. No, that's great. And I think just for Halifax, maybe if you could just add some color into a pretty strong increase in the average rents that would also be helpful. The market is strong here in Halifax, and we're seeing it across the board. Occupancy staying high. So the market is continues to be strong. No risk at this point of oversupply, so we're happy to report that and demand is there. Okay. Perfect. Thanks for answering the questions. I'll turn it back. Thank you. Next question will be from Matt Kornack at National Bank. Please go ahead. Good morning, guys. Good morning. Are you seeing any difference at this point in terms of people's preference for low rise versus high rise or urban versus suburban performance? I mean, your portfolio seems like it's performing pretty well generally, but any inclinations that there's a change in preference because of the current virus on that type of exposure? We haven't heard any reports to that effect actually, Matt. People preferring low rise to high rise, that's not something that's been communicated. Okay. No. Are you asking generally or how much more overall? Yes. I mean, presumably there have been themes that people have been pushing in terms of the urbanization, the idea that people would be afraid of being in high rise because of elevators and higher density, but it sounds like you're not seeing that within your portfolio. And again, a big part of that would be as we really do not have a lot of product in the sort of the large 6 urban centers in Canada, especially the Montreal, Toronto and Vancouver markets. So when I think you're hearing that from those markets when the average size building could be 300, 400 units in 30 to 40 stories. So we're portion, I guess, today that ours is a more suburban and sort of the midsized markets. And Atlantic Canada has done particularly well case wise. So that's a positive for sure. On development, I don't know Nancy if you can send something after this or provide just a bit of color, but do you have a cost incurred to date on these projects just from a modeling standpoint to know what remains to be spent on each of the assets? And then on development financing, any change in lender approach to this? I'd assume multifamily is still a pretty sought after asset class, but wondering considering you've done something recently in this space, whether the approach of lenders has changed at all? The approach from lenders has not changed with regards to construction financing for our developments. And I guess what you're looking for is probably the equity or the cash remaining for the developments because you put your money in 1st and then it's construction financing for the remaining 75%. Right. Yes. No, it's just I mean, cash out to complete the remainder of the project so that we can essentially just do a little mini DCF to see the embedded value is if we subtract the cost to complete out of what would be fair value? That would be helpful. Okay. And that's it for me. Thanks guys. Thank you. Thank you. And your next question will be from Yash Sanktang at Laurentian Bank. Please go ahead. Good morning. I have 2 small questions. First on Slide 4, your apartment bad debt expense. So I see your Q2 number has not moved much. It looks like it is in the range you have seen in the past. So is it fair to assume that there is nothing else? It's just especially from the as compared to the last year, is that just the normal thing? Say that, we would have seen a slight increase in our allowance for doubtful accounts this quarter. But as you will have seen from our collections, which are strong, it is very much in line with what we have seen historically. So I can confirm we did it we took more allowance, but overall it's not a significant change from previous years. Okay. And on Slide 8, your commercial rent collection. Can you explain the difference between the provision deferred and then outstanding rents? So the provision is what we look at from a we look at what's outstanding. You think about outstanding return to be collected. You could put those outstanding and the provision together. And then we look at the expectation of collectability of that pool and we would have separated those out and taken allowance or a provision for those that we thought were at high risk of either not being able to collect or some future abatement that needed to come with those commercial tenants. The outstanding rent to be collected would be ones that are outstanding. There's no deferral agreement in place and we expect to be able to collect. The deferred are those that we have been working with those commercial tenants and we have deferral agreements in place. So we will be collecting the rent that related to the period in Q2 in future months and we have those agreements in place. So those deferrals are something you did on your own. They are not part of the SIGRA program? The SIGRA is separate, correct. Okay. The 8% there. Okay. That's it. Thank you. Thank you. And at this time, Mr. Fraser, we have no other questions. Please proceed. I would like to thank everybody for participating today on our Q2 conference call, and we look forward to being back here for the results of Q3 in early November. Thank you. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.