Good morning. My name is El, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Minto Apartment Real Estate 2024 Third Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. 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&A dated November 12, 2024, for more information. During the call, management will also reference certain non-IFRS financial 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&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Mr. Li, you may begin your conference.
Thank you and good morning. This is Jonathan Li speaking. With me on the call today are Eddie Fu, our Chief Financial Officer, and Paul Baron, our SVP of Operations. In Q3 2024, we continued to generate the strong operating performance that was evident through the first half of the year. As illustrated in the table on slide three, we generated 5.9% growth in average monthly rent for the same property portfolio, and closing occupancy remained strong at 97.4%. Same property portfolio revenue growth in the unfurnished suite portfolio continued to be strong at 6.9%. Same property portfolio NOI and same property portfolio NOI margin increased by 8.2% and 130 basis points, respectively. Importantly, we are effectively translating NOI growth into cash flow per unit growth.
Normalized FFO and AFFO per unit increased 8.3% and 9.6%, respectively, as we benefited from prudent capital allocation decisions that resulted in a reduction in interest costs. Reflecting our strong results and continued positive outlook, the REIT's Board of Trustees has approved a 3.0% increase in our distribution. The REIT has increased distributions every year since its IPO in 2018, while simultaneously reducing our AFFO payout ratio. On slide four, we provide an update on some initiatives completed subsequent to quarter end, which, upon completion, will further strengthen our balance sheet and increase our financial flexibility. We committed to the upward financing of three properties located in Ottawa and are finalizing the upward financing of a property in Toronto for total net proceeds of approximately CAD 91 million. I'll now invite Eddie Fu to discuss our third quarter financial and operating performance in greater detail. Eddie.
Thank you, Jon. Turning to slide five, same property portfolio revenue was CAD 39.8 million. It increased of 6.1% from last year, reflecting a 5.9% increase in average monthly rent to CAD 1,969, partially offset by a decline in commercial revenue. Same property portfolio NOI increased 8.2% year-over-year as revenue growth was offset by a modest 2.1% increase in property operating expenses. Same property portfolio NOI margin increased 130 basis points year-over-year to a quarterly record of 66.2%. Average occupancy was consistent at 97.1%, and our normalized AFFO payout ratio was 53.8%, a reduction of 350 basis points compared to Q3 last year. Turning to slide six, this chart highlights the REIT's steady quarter-over-quarter growth in average monthly rent and strong realized quarterly gain on lease performance, which remained relatively consistent with the prior quarter.
Moving to slide seven, we signed 449 new leases in the third quarter, generating realized gain on lease of 10.8%. In Toronto, our realized gain on lease increased sequentially from 9.2% to 10.5%. Excluding the non-rent controlled Niagara West property, realized gain on lease in Toronto was 14.2% and 11.3% across the portfolio. As indicated in the lower table, the embedded gain to lease potential at the end of Q3 remained strong at 14%. Moving to slide eight, the same property portfolio annualized turnover was 26% in the third quarter, which slowed slightly compared to Q3 last year. Through the quarter, move-ins outpaced move-outs, resulting in closing occupancy of 97.4%. On slide nine, we provide an update on our commercial and furnished suites portfolios. Revenue from commercial leases decreased by 35.1% from Q3 last year, reflecting the temporary retail vacancy at Minto Yorkville.
We are still actively pursuing leasing and anticipate lease payments will begin in 2026. Furnished suite revenue increased by 90 basis points from last year due to improved average occupancy. Since Q3 2023, we have converted 16 furnished suites to the unfurnished portfolio, 10 of which were at Minto Yorkville. We expect additional suite conversions as unfurnished demand remains strong. Turning to slide 10, total same property portfolio operating expenses increased by 2.1% over Q3 2023 as property operating costs increased 3.2% as higher digital advertising expenses and repairs and maintenance outweighed lower compensation due to temporary job vacancies. Property taxes rose 2.8% due to increases in assessed values in Calgary and Montreal and rates in Toronto and Ottawa, and utility costs were down 2.4%, reflecting a decrease in natural gas costs due to lower average rates and decreased consumption across the portfolio.
Moving to slide 11, we repositioned 16 suites in the third quarter, generating an ROI of 8.8%. In the quarter, we completed the repositioning of a penthouse suite in Montreal, which drove up our average cost. Over the last four quarters, we've repositioned 54 suites and generated an average ROI of 10.2%. We expect to reposition 40 suites to 60 suites this year. Turning to slide 12, we have provided our key debt statistics. Our maturity schedule remains balanced. As of September 30, 2024, the weighted average term to maturity on our term debt was 5.33 years, with a weighted average effective interest rate of 3.53%. Upon completion of the CAD 91 million of financings, our variable rate debt as a percentage of total debt will be close to zero. I'll now turn it back over to Jon.
Thanks, Eddie. On slides 13, 14, and 15, you will see a summary of our intensifications and redevelopments. Lonsdale Square in North Vancouver is nearing stabilization. The project comprises 113 rental suites and approximately 8,000 sq ft of retail space. We anticipate to make a decision on the purchase option by the end of the year. As we have done in the past, we are evaluating this opportunity in the context of our cost of capital, impact on cash flow per unit, pro forma leverage, market sentiment, and other factors. On slide 16, you can see we continue to make meaningful progress on our ESG initiatives, and we are proud to share some highlights from our 2023 ESG report that was published in September. I'll conclude with our business outlook on slide 17.
We continue to believe that, despite recent immigration policy announcements, industry fundamentals will provide a constructive backdrop for rental housing demand for the foreseeable future. There is obviously some temporary uncertainty facing our industry. However, we will lay out some of the reasons for our constructive outlook. There are three main factors that drive our business. In order of importance, one, an acute housing shortage, two, rental housing being an affordable option relative to homeownership, and three, population growth. We believe that the first two factors have a much larger direct impact on our business than the third. In Canada today, we do not have enough housing to support the existing population, let alone to support new immigration. In addition, housing starts remain well below target levels since the development math simply doesn't work at this time.
And even with the implementation of government programs to spur housing development, it is our belief that the housing shortage will persist for many years. Therefore, even if our population growth temporarily stalls, an acute housing shortage combined with the relative affordability of renting will provide a constructive backdrop for our business over the long term. As a result, we will continue to focus on the strategies that have delivered our solid performance to date listed on the slide. Let's get back to basics. We have a very high-quality portfolio. We own excellent real estate in prime locations in the country's largest markets where land values are very high and replacement costs are very high. Additionally, we have materially strengthened our balance sheet and increased our financial flexibility.
And when you combine those things with a highly experienced, adaptable and motivated team, and best-in-class operating platform, we are well positioned for what's to come. That concludes our prepared remarks. Operator, please open the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Jonathan Kelcher of TD Cowen. Please go ahead.
Thanks. Good morning. First question, just on maybe Paul, you can give us a little bit of color on what you're seeing in the downtown Toronto core and noticed occupancy was up nicely in the quarter. Do you expect to maintain that? What sort of incentives are you using there?
Yeah, so thanks, Jonathan. Toronto is still characterized by new supply entering in the quarter. We've heard from others and talked about it before, the condo deliveries as well as purpose-built rentals in the core. For us specifically, we've done quite well. We've talked about our one-bedroom focus in prior quarters, and very much in Q3, we're able to bring that in line with our overall suite mix, so our efforts on the one-bedroom side have been paying off. As it relates to promotions, have some promotion activity at a few buildings in Toronto. I would say, as we've shared in the past, it's very tactical and down to the specific unit level, and also comes in a few different forms where we have excess parking. We're leveraging free parking promotion. Where we have excess storage, we're doing the same.
Really trying to have the least financial impact while attracting the greatest breadth of residents.
Okay. That's helpful, and there's still a good chunk of supply coming on next year, correct?
That's correct. That's correct. So that'll kind of come off in 2027. But we are still seeing, even into Q4, I'm looking at condo completions in the city of Toronto. We're seeing 2,900 come on in the former city of Toronto quarters. Into 2025, that number is 15,900, Jonathan. So we'll see that continue. But feel, as Jon described in his opening remarks, that we've got a very resilient portfolio and, as you know, a pretty deep embedded rent still in the Toronto market.
Yeah. No, for sure. Okay. And then just second, Eddie, for 2025, what are you guys thinking about in terms of property operating cost growth?
In terms of operating growth, we would, overall, I think we're tracking and we think we'd be in maybe the mid-single digits overall. I think pretty consistent with how we've described our outlook and our framework previously.
Hey, Jonathan, it's Jon here. I think not dissimilar to one of our peers. I mean, I think the way we're thinking about both Q4 of this year and 2025 is somewhat just dependent on the weather. And I don't mean to be flippant about it. It really is quite impactful on both R&M as well as utilities. And what we're doing as we're forecasting for the future is kind of preparing for a more normal winter. And so what we do is we take kind of the average of the last three winters and plug that into some of our models on the expense side. And that generates kind of some expense growth.
I'd say if we have a winter that's closer to the average of the last three, we're probably going to see OpEx overall growth in that kind of greater than 5%, hopefully less than kind of 6.5%. But if we have a winter that's closer to what it was last year, I think you're going to see those numbers kind of moderate down to that kind of 5% range and maybe a little bit below. That's kind of how we're thinking about the future. A lot weather-related, the other point is we have some vacant salaries that we've carried for this year or most of this year that are probably going to be filled. That would imply that our kind of the salary line is probably going to grow at a little bit higher than inflation because of that.
Okay. That is helpful. I'll turn it back.
Thanks, Jonathan.
Your next question comes from Sairam Srinivas of Cormark Securities. Please go ahead.
Thank you, Arpita. Good morning, guys, and congrats on a good quarter. Eddie, this is probably a question for you. On the post-quarter refinancing that you guys are now, which is now underway, what are the rates you're looking at over there and how does that compare to the ones you already have on books?
All right, so on the three that we announced, we have those are our top-up financings. They're five-year term with CMHC, and we are locked in at 3.62%. And in comparison, today's five-year would be around 3.8%, so for us, it makes a lot of sense to borrow that, and our intention would be to apply that against a revolver, and our revolver is currently at 5.8%. And then on the second one that we've announced there in terms of LYM, that's also giving us an opportunity to top up the financing on that property. It is conventional. We haven't firmed up the rate yet, but a conventional term right now would be high 4s, so much cheaper than our revolver, and also, that would be more cost-effective than trying to max out on our construction financing.
So for that one, we would use to pay down a revolver and with intent also of supporting the ongoing intensification of the LYM project.
That makes sense. Thank you, Eddie. And Jon, maybe just looking at the Lonsdale Square project. And just generally looking at the broader transaction market over there, can you just talk about are there more deals in the market you're seeing there and how the value is kind of comparing in that market?
Hey, Sy. Yeah, sure. We obviously keep a pretty close eye on other transactions. There are a couple of transactions that stand out for us. I think there was an asset called The Pendrell, which was in, we're hearing, kind of in that mid-three to maybe just a little higher than mid-three cap rate range. There's also one that Crombie just bought with The Zephyr, which is a beautiful property there too, I think with a Safeway at the bottom. I guess I've read a couple of research analysts that basically said high 3% cap rate there. Those are representative of the Vancouver market. It's a really difficult market to get into. If you're kind of asking about what we're going to do with Lonsdale Square, leasing is at 92%.
The private company is being very choosy in terms of the last few tenants that they're going to put in there. Obviously, time is our friend as well, but we haven't made a decision. We will make a decision by the end of the year. We are considering a wide range of potential structures. I guess what I would say is what's changed in our analysis a little bit is that when we talked about this transaction a year ago, that was in the context of, I think, consensus analyst growth estimates that were on a cash flow basis kind of in that high single-digit range. I think that's what a lot of people thought we were going to do and the market was going to do.
At that time, with that dynamic, we were probably more open to experiencing a little bit of dilution, but still maintaining that mid-single-digit kind of cash flow growth going forward. I think, as we think about next year, and that high single-digit growth may be moderating to be mid-single-digit just based on consensus. I think, I guess it's fair to say that the bar has changed for us a little bit in that 1% or 2% dilution from a transaction would be a lot to take. I don't think that would be very attractive for us. I think we're being a little bit more. We really want to defend what we have in terms of cash flow growth going forward.
I don't think you're going to see us go out and do a massively dilutive deal in the context of today's market and what we think the outlook for the business is.
That's great, Jon. Thanks for that. And maybe my last question is on Lonsdale Square. Can you talk a bit about the demographics over there in terms of the kind of tenancies you're seeing? And would that be anywhere impacted by, let's say, whatever you call the student policy or immigration policy or whatever that might be?
Hey, Sy. Paul Baron speaking. So yeah, really a wide variety of residents. I don't know how much you know about Lonsdale Square, but beautiful area of North Vancouver. There's natural amenities, walking distance to the water, and certainly shops and groceries, etc. So we see a diverse group of residents there, a collection of a small number of students, but primarily working professionals and couples that are looking to live that lifestyle. We actually had some relocations from out of province into the building. So really a diverse collection of residents, but an absolutely great community there. I don't know if you've had a chance to go online on the website, but it's one of our properties that has a perfect 5.0 Google review rating. So great residents and a great team at that property.
That's very credible. Thank you for that, and I'll turn it back.
Thank you.
Thanks.
Your next question comes from Jimmy Shan of RBC Capital Markets. Please go ahead.
Thanks. You gave us good color on the OpEx growth. What do you expect in terms of revenue growth in 2025?
Hey, Jimmy. Thanks for the question. So I think you're probably sick and tired of hearing us talk about kind of the revenue framework that I think we laid out 18 months ago or maybe more, where very simplistically, how we think about our business and our growth is 80% of our tenants renew. And that growth for that chunk is in that 3.5% range or so, ± 25 basis points. And then 20% of our portfolio will turn. And historically, that growth with the turn was in the high teens. I think we have been very transparent with the market in terms of how we think that that growth probably moderates over time. I think for the last three quarters, we've been in the low double digits.
So when you think about that revenue growth chunk going forward, we think 80% is actually quite solid and good foundation for us as we look to 2025. The question is, okay, well, what's the gain to lease on the turns? All of this is obviously assuming occupancy stays the same. I think if we're low double digits, which is kind of where we are today, that'll imply kind of like a mid-single digit growth rate, maybe slightly higher than mid-single digits. If you think the gain to lease is going to reduce to 7% or 8%, then that probably gets you to just below mid-single digits, like in that 4% range or so. That's probably kind of like the range that we're thinking about going forward.
When you combine that with the OpEx context that we gave you, I think if we have a normal "winter," you might see a little bit of margin compression. If we have a kind of similar winter to last year, you might see that margin compression stay relatively flat.
Okay. And what about your confidence on the occupancy side? We talked about the Toronto occupancy improvement this quarter. Do you think that's sustainable here at this level? And I know you also noted a bit of weakness in Calgary as well. So how do you think about the occupancy?
Yeah. It's clearly tough to gauge, I'd say. I think we have aggressive internal targets like any management team should. I think what we're seeing in kind of October and the beginning of November is leads are slowing down like they normally do this time of the year. But we're not really seeing anything alarming. We're kind of seeing kind of a normal slowdown. And maybe it started a little earlier, the slowdown, than it did last year just because the weather was so nice last year. And I think there was an abnormally long leasing season. So it has slowed down a little bit earlier, but there's nothing in there to lead us to believe that there's been a step change or have us question our occupancy kind of forecasts.
Okay. Thanks for that. Appreciate it.
Okay. Thanks, Jimmy.
Your next question comes from Brad Sturges of Raymond James. Please go ahead.
Hey there. Good morning. Just to follow up on that commentary, I appreciate sort of the setup that you provide in terms of revenue outlook. Just in terms of what you're seeing in Q4 to date in terms of new leasing, has there been any moderation or any change in leasing spreads you're seeing this quarter versus what you would experience in Q3?
Go ahead, Paul.
Hey, Brad. Paul Baron here. No, very much on track for the start of the quarter, as we described in the remarks earlier, using promo tactically across the portfolio, but still capturing an expected gain to lease in line with what we thought.
Hey, look, Brad, we're not trying to be overly rosy here. I think what we're trying to tell you or tell the market is that we're preparing for the worst, right? We're preparing for the worst operationally. We are in constant dialogue with leasing, marketing, and asset management teams. We're being highly coordinated as we think about our portfolio. All we're saying is, so far, what we're seeing to date, we haven't really seen any really negative step changes. That may change next week, next month. We don't know. We're prepared for it. We think we have a strong portfolio. Notwithstanding some of the weakness we're seeing in the Toronto market in particular, you got Rentals.ca, which everyone is latching onto, saying, "Rents in Toronto are going down 8%-9% year-over-year." Our portfolio is down 0.7%.
So we don't have the same portfolio composition as the Rentals.ca information. We operate our business extremely differently for the long term. And all we can tell you is kind of what we're seeing so far. If things get worse going forward, we'll update you as soon as we can. But we're not really seeing a massive step change yet.
Yeah. Okay. That's helpful. Just on that front, and obviously, you've talked about it for a few quarters on some of the competition on the purpose-built rental that's been delivered. In terms of your turnover rates, are you seeing residents, if they're leaving, are you seeing more competition from the condo offering where there's more completions and more deliveries happening as well?
Yeah. Certainly in the Toronto context, Brad, more competition coming from the condo side as well. Purpose-built rentals saw a high number delivered in Q3. So continue to see that competition. I think the good news is our efforts, particularly on the one-bedroom suites in Toronto, have been paying off as we've started to pull that mix back in our vacancy a little bit. So yeah, continued competition, but just continuing to work with it and fight it to see the rental grow.
Last question. Just obviously, a lot of the comments have been a little bit more Toronto-focused. I think in your disclosures, you provided a little bit of commentary around Calgary in terms of tactical promotions there as well. Just curious to hear, I guess, what you're seeing in the Calgary market specifically as well?
Yeah, so can share a little bit on that. I think a little bit of new supply coming online in that market as well, Brad. I think the unique kind of demand generator outside of for our residents are competing for our business is just the new home supply and the fact that new home pricing is quite competitively priced versus other markets in the country, so we do see some of our residents in our move-out surveys indicating that they are purchasing a home, so a little bit of a different dynamic than other markets, but I'd say a combination of that and really some new inventory coming online in Q3 that has come out with some incentives, and we're just trying to ensure that we're marketing and promoting the buildings appropriately to retain occupancy there.
We do still have a fairly respectable embedded rent in that market, and we are capturing it on turn.
Okay. Thanks a lot. Appreciate the comments.
Thanks, Brad.
Thank you.
Your next question comes from Mike Markidis of BMO Capital Markets. Please go ahead.
Thank you, Operator. Jon, you gave some comments earlier on the call just with respect to the strength in pricing in Vancouver. Just curious if you could talk to us about, I guess, A, if you're marketing any sort of your legacy assets at the current moment. And if not, are you getting inbound calls that are attractive, would you say, at this point?
Hi, Mike. Thanks for the question. So yeah, we're getting quite a number. Consistent with what I said or what we said the last couple of quarters is the number of inbound calls for our assets is quite robust. We're not actively marketing anything at the moment, but we're all ears for transactions that make strategic sense for us. I think Eddie's done a wonderful job to get our revolver down to close to zero. But I think the other advantage of if we do do something on the asset sale side, we're pretty confident it'll be at our book value. And I think it should, and it should highlight the massive net asset value discount that we're trading at from a public markets perspective. And I just think that some of the public market investors don't care, right?
There's kind of, as I think you've said, there's a sell asset trade on, right? Sell Canada trade on right now. And it's hard to swim upstream against that, but we really believe in the high quality of our portfolio. And I think I've said this a number of times. I think we could sell each asset one by one at NAV and get that tomorrow. So it's frustrating to see where we're trading. It's also difficult to talk about our future performance and the quality of our assets and not talk about the massive discount that we trade at today, both on a multiple and a cap rate perspective and on a NAV perspective. Just, it feels very frustrating for us.
Yeah. I can only imagine. You gave an outlook for 4%-5% maybe on the. I don't want to call it worst case, but revenue growth. And I can't help but think back to maybe 2018, 2019 when the stock was well in excess of CAD 20, and that's what we were thinking about back then. So, okay. And then I guess, so if you did pull the trigger, if there's anything it would be opportunistic in nature. And how does that. I know you've got a lot of balls in the air, but let's say Lonsdale doesn't come to fruition. I mean, what would you do with some of that excess capital if you were to sell something?
Yeah. I think the way we think about capital allocation has changed a little bit, clearly, just because some of the variables have changed. And so it used to be pay down the revolver. That was a no-brainer because it was almost 7% money. I think what's happened is the revolver balance has come down significantly, and the revolver cost has come down from 7% to 5.8%. And our share price has gone from $17 to $14. So when you take our current AFFO multiple, which is in that 15 times range, and you take the inverse of that to get an estimate of our cost of equity, that's over 7% or close to 7%. So right now, buying back our stock has shot up the priority list as we think about the future.
So to the extent we have excess capital, I think the NCIB would be pretty high on our priority list.
Well said. Understood. Thank you.
Thanks.
Your next question comes from Mario Saric of Scotiabank. Please go ahead.
Hey. Good morning, guys. And thank you for taking the questions. Maybe, Jonathan, I'll start on your last point in terms of the NCIB looking more attractive given the trading discount to NAV if you do do some sales. Historically, there's always been kind of a tension between kind of the size of the company and kind of the discount to NAV being somewhat correlated. So how do you think about that tension now in terms of reducing the size of the company to buy back stock via asset sales relative to a year ago or two years ago? If ultimately the goal is to grow the company, how does that tension feel today versus six, 12 months ago?
Yeah. I think the tension is always there. I think the way we think about it is we're already so small. Getting a little bit smaller probably doesn't move the needle. I think that's kind of some of the conclusions that we came to. It's already baked in, and if we get a little bit smaller, probably that in and of itself probably doesn't move us down, but we're so cheap that putting an incremental dollar towards that probably makes some sense today, and leverage is the other thing that we think about, obviously, and again, I think our leverage is in a low enough position where even if it ticks up a little bit by buying back some units, I think that's okay too.
Got it. And your comment on the portfolio as a whole per-year growth outlook, perhaps moderating in 2025 versus 2024 and not having implications for capital allocation, what is your sense in terms of, I think, consensus is plus 6% year-over-year in 2025? What is your sense in terms of the street's inclusion of acquiring Lonsdale, Highland, Beechwood, and so on and so forth in the 2025 estimates? Do you think most people are reflecting that or not?
I don't get to say. I think other than you who actually explicitly say that you do, I'm not sure others do as much. Maybe your question is like, what do we think about consensus right now? I mean, it seems like kind of in the zone of achievable with or without the acquisitions, to be honest with you. Because I think if based on the comment that we gave before, I think the scenario where we take 1%, 2%, or 3% dilution on one of these acquisitions is pretty low. Our threshold for our cash flow growth per unit is high, right? We don't want to disrupt what we've got in front of us. And so I think that's changed a little bit too.
Got it. Okay. My last question, just turning to the operational environment and specifically looking at the condo environment in Toronto. When you do your mystery shopping and whatnot, what's your sense in terms of what's happening to competitor condo product for you in terms of asking rents month over month? Are you seeing $450 a sq ft going to $400 or $375 and so on? Or are you seeing asking rents on the condo side in your neighborhoods remain relatively firm?
Good question. Mario Saric speaking. I would say not quite that dramatic, but more in line with the Rentals.ca data. So smaller price decreases, but not the step change that you've described in our market specifically.
What would you estimate is the rent per square foot differential between yourselves, again, in neighborhoods where condos compete with you between yourself and condo rents today?
So, sitting rents? Or you're talking asking rents, Mario?
Either. Either one.
Yeah. So I would say asking rents. So on our Toronto portfolio, are about 330 sq ft. I mean, if you look at Urban ation, just for the broad city of Toronto, it's 450 sq ft for purpose-built rentals. So I think there's still a fairly significant differential. I think the other thing is just our prospects are particularly at the higher end of that pricing, very sophisticated and value professional management. And I think that's kind of come to the forefront in recent years. So added value through that as well. And I think that's driving folks to the purpose-built rental market as well.
Got it. Okay. So you think the $450 a sq ft broader market for Toronto is a fairly reasonable proxy for your specific neighborhoods in the city?
Yeah. I think no matter where you are, I think you're competing with condo, Mario, and folks are looking across the city. It's not just specific nodes oftentimes when they are making their choice, so with a broad brush, I think that's probably a fair high-level assessment.
Okay, and just our last one. On the incentives that were being offered, Paul, you talked about free parking and storage and select properties. In terms of free rent within the portfolio, what would be the breadth of free rent offering in your Toronto portfolio today as a percentage of total suites?
Total suites. I mean, it's a good question. It would be a fairly small portion. I'm just thinking it's really based on availability, and it's based on particular suite types. And we are focused on those one-bed still, even though I had mentioned we had made progress. So I can tell you it's fairly consistent with what we saw in Q3.
Sorry, Paul. Just fairly consistent with what you saw. Q3 was fairly consistent with what you saw in Q2?
Q3 ticked up a little bit, but as we move into Q4, fairly consistent with what we saw at the end of Q3.
Got it. Okay. That's really helpful, caller. Thanks.
Thanks, Mario.
There are no further questions at this time. Please continue, Mr. Jonathan Li.
Thanks very much, Operator, and wishing everyone a safe and happy holiday season and looking forward to talking to everyone next year. Take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.