Good morning. My name is Jim, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Minto Apartment REIT 2025 third-quarter financial results conference call. All lines have been placed on mute to prevent any background noise, and 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 the star followed by the digit one on your telephone keypad, and if you would like to withdraw your question, simply repeat the steps of star and one, and that will remove you from our queue. 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 4, 2025, 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. Thank you. Mr. Li, you may begin your conference.
Thank you, operator, and good morning. With me today is Eddie Fu, Chief Financial Officer, and Michelle Calloway, Senior Vice President of Property Operations. We generated solid operating results in the third quarter despite headwinds from elevated supply in several markets and slower population growth. On slide three, our results were underpinned by the steady revenue growth of the unfurnished suite portfolio, which increased by 2.4% as average monthly rent growth of 4.5% was partially offset by lower occupancy and the use of promotions. We were able to drive our leasing activity through targeted strategic initiatives and active management, resulting in a 50 basis point sequential increase in closing occupancy to 96.5%. In the quarter, commercial revenue became a tailwind and increased 10.3% compared to Q3 of last year. Revenue growth for the same property portfolio was 1.6% as lower furnished suite revenue impacted our overall growth.
Same property portfolio NOI increased by 0.7% as higher revenue offset the increase in operating expenses. Normalized FFO and AFFO per unit increased by 0.6% and 0.1% respectively as a result of accretive unit buybacks and lower G&A costs. We achieved this growth despite the impact of a decrease in capitalized interest and lower interest income following the repayment of two convertible development loans. During the quarter, we purchased CAD 3.6 million of units under our NCIB program at a weighted average price of CAD 14.25 per unit. In total, we acquired the maximum number of units allowable under this program at a cost of approximately CAD 43.9 million. On October 1st, we renewed the NCIB program, enabling us to acquire nearly 3.5 million units through September 30th, 2026. Unit buybacks continue to represent an attractive use of capital and are aligned with our capital allocation strategy at current unit price levels.
Finally, we were pleased to announce that our Board of Trustees approved a 2.9% increase to the REIT's distributions. This represents the seventh consecutive year in which the REIT has increased distributions, reflecting the confidence that our team has in the business outlook for 2026. I'll now turn it over to Eddie to review our third-quarter financial and operating performance in greater detail. Eddie.
Thank you, John. Slide four provides some key details about our operating performance. Same property portfolio revenue was CAD 39.1 million, an increase of 1.6% compared to Q3 of last year. This increase in revenue reflects steady growth in our unfurnished suite portfolio and 10.3% growth in our commercial portfolio. These were partially offset by lower average occupancy, use of promotions, and lower revenue from furnished suites. Same property NOI was CAD 25.6 million in Q3 2025, an increase of 0.7% compared to Q3 2024. The increase reflects the same property revenue growth partially offset by a 3.6% increase in operating expenses. Same property NOI margin was 65.5% in Q3 2025 compared to 66.1% in Q3 2024. Normalized FFO and AFFO per unit increased by 0.6% and 0.1% respectively compared to Q3 of last year. Normalized AFFO payout ratio was 55.4%, an increase of 160 basis points from Q3 last year.
I'll move now to slide five. This chart highlights the REIT's consistent quarter-over-quarter growth in average monthly rent. Our realized gain on lease of 3.2% in Q3 was down marginally from Q2 as market rents have declined, and turnover for suites with tenants whose sitting rents are well below current market rents remains low. Moving to slide six, we assigned 549 new leases in the third quarter, generating realized gain on lease of 3.2%, down from 4.7% in the previous quarter. As indicated in the lower table, the embedded gain to lease potential at the end of the third quarter remains solid at 8.2% or CAD 11.6 million. Moving to slide seven, the same property portfolio annualized turnover was 30% in the third quarter, up from 26% last year.
Despite the rise in turnover, closing occupancy increased to 96.5%, up 50 basis points from Q2 2025, as our strategic leasing initiatives led to an increased number of leases signed, allowing move-ins to exceed move-outs. On slide eight, revenue from commercial leases increased by 10.3% from Q3 last year, the result of a new tenant taking occupancy at the Carlisle in the previous quarter. We have two additional commercial leases that will further strengthen occupancy: one at Kaleidoscope in Calgary, which commenced in November, and another at Mint of Yorkville, set to commence in January 2026. With respect to the furnished suite portfolio, revenue decreased 14.5% from Q3 2024 due to a lower number of occupied suites and a decrease in average monthly rent. Since Q3 2024, we have converted 24 furnished suites to the unfurnished portfolio, including 19 at Mint of 185.
We expect to continue reducing the number of furnished suites over time. However, the pace will be subject to local market leasing conditions and cash flow optimization. Turning to the operating expense breakdown on slide nine, same property portfolio operating expenses increased 3.6% due primarily to higher property operating costs, which were the result of filling previously vacant staffing positions and increased marketing costs incurred to drive leasing activity. Same property property taxes were effectively flat as lower asset values and rates in Calgary were offset by increased rates in Montréal, Toronto, and Ottawa. The year-over-year increase in same property utility costs reflected higher average electricity and water rates across the portfolio and higher water consumption in Calgary. These increases were partially offset by a decline in natural gas costs attributable to the cancellation of the carbon tax, partially offset by the increase in supply rates and consumption.
Moving to suite repositioning on slide 10, we repositioned 16 suites in the third quarter, generating an ROI of 11.6%. Over the past four quarters, we repositioned a total of 58 suites and generated an average ROI of 9.3%. We recorded a lower average cost per suite this quarter as a result of suite mix and the location among those renovated as compared to the last two quarters. We expect to reposition a total of 50-70 suites this year compared to 48 last year. Slide 11 highlights our key debt statistics. Our maturity schedule remains well-balanced. As of September 30th, 2025, the weighted average term to maturity on a term debt was approximately 5.1 years, with a weighted average effective interest rate of 3.65%. As of the end of Q3, 97% of our total debt was fixed. Total liquidity at quarter end was approximately CAD 124 million. I'll now turn it back over to John.
Thanks, Eddie. The next two slides detail the current status of our development pipeline. On slide 12, stabilization of 88 Beechwood in Ottawa is expected later in Q4 of this year. At University Heights in Victoria, move-ins have begun at the first building, and leasing has started at the second building. Stabilization of the five building projects is anticipated to occur in 2027. On slide 13, we provide recent pictures of our two on-balance sheet developments, 610 Martin Grove and the Towns at York Mills and Leslie, which continue to progress well. At Martin Grove, occupancy at our affordable suites in partnership with the City of Toronto will begin shortly, and stabilization is expected to occur in Q4 2026. At the Towns, pre-leasing activity is underway for the first phase of suites, and we expect first occupancy to occur early next yea. Stabilization of the second phase is expected to occur at the end of 2027.
On slide 14, you can see we continue to make meaningful progress on our sustainability initiatives, and we are proud to share some highlights from our 2024 sustainability report that was published in September. I'll conclude with our business outlook on slide 15. Despite some near-term uncertainty facing our industry, such as elevated supply in certain markets, slower population growth, and affordability challenges, the long-term fundamentals supporting Canadian urban rental housing demand remain intact. We have been actively managing the portfolio to increase occupancy and optimize rents and are pleased with the progress we made in Q3. The performance of our commercial portfolio has now shifted to being a tailwind, and the wind down of our furnished suite portfolio continues, subject to local market leasing conditions.
We also expect to continue returning capital to unit holders through our accretive unit purchases, as it remains an attractive use of capital at current trading levels. We have undertaken multiple initiatives to strengthen the REIT, including improving the balance sheet, prudently allocating capital, while at the same time high-grading the portfolio. We remain keenly focused on delivering strong returns to unit holders through continued active management of our portfolio, disciplined capital allocation, and balance sheet management. That concludes our prepared remarks. Operator, please open the line for questions.
To our audience joining today over the phones, if you would like to ask a question, simply press star and one on your telephone keypad. Once again, that is star and one, ladies and gentlemen. Star one will also remove you from the queue if you find your question has been asked. We'll hear first today from Sairam Srinivas at Cormark Securities. Please go ahead.
Hey, t hanks for the call in the quarter, guys. Just a question on the condo market. When you talk to your guys on the top Minto Property side of things, how are they seeing the condo market evolve? Do you think that the supply is kind of at an end right now?
Hey, Sai. Thanks for your question. Yeah, it's an interesting time in the condo market, and especially as we have the lens from the private company. I would say. I guess number one, there's very little new starts, obviously, coming to fruition or shovels going into the ground right now. I think certain well-capitalized, experienced developers are starting to see or look into the future and see that in four, five, or six years, there is going to be quite a dearth of supply, especially in Toronto. I think some folks are seeing that as a bit of an opportunity to potentially deliver within that timeframe if they start now. I guess what we're starting to see is, again, a handful of developers who have a long-term view and are well-capitalized that are looking at those new opportunities today, maybe deliver in five or six years.
We're seeing pockets of capital become attracted to that as well. I wouldn't say it's pervasive throughout everyone. I think it is a unique opportunity for some folks to start getting shovels in the ground today with a view that they're probably making some conservative assumptions around what rents do between now and then, what cap rates might be in five years. When they put that all into the melting pot and kind of look at what it looks like, I think it's starting to look a little bit attractive. I think the other kind of interesting nuance that I think is emerging is that new construction lending seems like there's actually quite a bit of that capital out there, and it's quite competitive. When you look at that side of the cost equation for developments, your LTVs are quite attractive and rates are at a point where some of that math, I think, makes a bit more sense.
That's interesting, Jon. When you look at markets across, I'm assuming, considering the concentration of the condo market in Toronto, would that be one of the markets these long-term developers are looking at, or would that be other markets?
We're seeing it mostly in Toronto, a little bit in Ottawa as well. Those are kind of the two markets. Vancouver, a little bit. There's always pockets of capital interested in developing in Vancouver. Calgary, I think a lot of capital in Calgary is focused on kind of the low-rise, kind of out in suburbia. Developments, less high-rise today is kind of what we're seeing.
That makes sense, sir. Maybe just looking at the turnover numbers over here, obviously, it's been trending up. When you kind of look at the leases that have kind of turned over, are you able to comment on the age of these leases? A general breakup would probably be great.
Yeah. Yeah. And we track this. We are seeing the folks basically who have moved in the last two to three years. Those are predominantly the people moving. That is why you are seeing quite the delta between embedded rent and gain on lease b ecause the folks who just moved in are the ones turning. I think it is a bit exacerbated today because folks who signed a lease 12 months ago and 18 months ago, there is quite a large gap between where they agreed to pay rent 12 months ago and where market rents are today, especially in a market like Vancouver, as an example. We are seeing elevated turnover in that kind of cohort who have recently moved, and the gap to market is pretty big downwards. That is where we are seeing some of that turn.
That's great, Jon. Thank you. I'll turn it back.
Thanks, Sai.
Our next question will come from the line of Jonathan Kelcher at TD Cowen.
Thanks. Good morning. Just going back to Sai's first question there. When you were talking, well-capitalized developers, were you talking condos or purpose-built rentals?
I think a lot of folks are looking at those as one and the same and almost option value for them to swap from one to the other. I think purpose-built rental probably that math hangs together a bit better today than just condo. As you know, that can flip relatively quickly. There still is a decent gap on the condo side of things between in place and where kind of pro forma sale prices on a per-foot basis make sense. I would say purpose-built rental.
Okay. Okay. So mostly purpose-built rental because I think you'd still need quite a bit of pre-sales to get condos up and going or.
Yeah, I agree.
Equity.
Agreed. Agreed.
I guess related to that, maybe. Give your thoughts on anything you saw in the budget yesterday and what do you think it means for near-term fundamentals, both, I guess, on the supply side and the demand side?
Yeah. I don't want to be too anticlimactic, but I didn't get my kind of knee-jerk was that there were no major surprises. We heard through the grapevine that the MERBs that they were considering were not going to be included, which was the case. We understood, t hey were going to increase some of the lending and the debt funding. Coffers were going to open those up a little bit, which did occur as they said they're going to put CAD 20 billion more into the CFD market. I think on the immigration front, it was kind of as expected. I think their target of 380,000 per year over the next three makes sense. I think it does make sense, but was consistent with what they had previously announced.
In terms of reducing some of the temporary foreign workers and, sorry, well, international students, consistent with what they've been saying, w e're cautiously optimistic about they mentioned they're targeting certain folks for temporary residence, folks who would be in high-value jobs and in high-demand jobs and going to pay pretty attractive wages. I think that's probably positive on the margin as we have kind of a stickier, more tenant credit, steady tenant or credit steady tenant. Hopefully, that's positive for our market. Having flat to slightly up overall immigration for the next few years is a decent backdrop for how we're thinking about it. No major kind of surprises up or down in the budget, at least from our perspective.
Okay. That is helpful. I'll turn it back. Thanks.
Our next question today will come from Kyle Stanley at Desjardins.
Thanks. Good morning, everyone. Would you say the elevated number of new leases that you signed in the quarter speaks to any shift in market-level demand, or is this more seasonal in nature or maybe driven by the incentives and promotions that you guys are offering to push occupancy?
I think what we're dealing with is turnover is higher because of supply, because people have lots of choice. Higher in our kind of immediate competitive markets just because it's where we compete. I think we've been actively managing our leasing and marketing efforts to drive as much occupancy as we can, especially leading into the colder winter season and Q4. I think that's going to continue on both sides, the demand and our kind of active management. We're internally kind of anticipating a bit more of the same for the next months and few quarters. I don't think there's one thing, Kyle. I think there's a lot to turnover, and we're sprinting from an operations perspective and leasing and management perspective to just drive occupancy. That's kind of what we're doing.
Okay. No, that makes sense. I guess last quarter, you kind of indicated that on turnover, net of incentives, the increase was roughly flat. Just wondering, I guess, where are incentives now? I think last quarter, you'd said about a month, maybe a month and a half of free kind of being offered. And where would that net number be today? Is it much different from kind of what you saw last quarter?
It's pretty consistent over the last two, three months, Kyle. We're not doing in certain units, in certain markets, we're doing a little more. In certain units, certain markets, we're doing a little less. Like Vancouver right now, there's more. That seems to be a market that is just affordability is top of mind. There's a decent amount of supply. The newer buildings where the rents were closer to market 12 months ago, 24 months ago, those are experiencing some pretty high turnover. The older ones where the rents have been under rent control for 15, 20 years, and whose rents are just lower on an absolute dollar basis, those tend to be more full. I think that's one dynamic that we're seeing in Vancouver. In Montréal, Ottawa, it's kind of steady as she goes on the incentive front. I think just overall, our incentive use is probably pretty consistent with what it was last quarter.
Okay. Okay. Fair enough. Just last one, I guess, going back to the budget a little bit, it does look like through now and the end of the decade, there will be some public service cuts. With work from home, that's not necessarily entirely concentrated in Ottawa anymore the way it might have been historically. Your portfolio has been through ebbs and flows in public service and employment in Ottawa. Can you just remind us, have you seen much of an impact over the years when things change in Ottawa, or is it fairly steady?
I think it's been relatively steady. I think the fact that the condo market in Ottawa is such a small portion, it kind of eliminates some of that volatility. The unions are a powerful entity. Ottawa for us has been very steady as she goes over the last number of decades. We don't see too much of a change. I mean, look, on the margin, maybe a little bit, but the advantage for us is our portfolio in Ottawa is quite well positioned from a cost perspective and from a size perspective. That's kind of how we've been coming from a bit of a position of strength. I don't want to oversell it, but it's quite a resilient portfolio that we have.
Okay. No, thanks for that color . I'll turn it back.
Our next question will come from the line of Brad Sturges at Raymond James.
Hey, good morning. Just following up on the leasing discussion here. You touched about it, talked about it a little bit, just on focusing on occupancy, and you're heading into a bit of a slower leasing season from a seasonal perspective. Just curious, d o you think your leasing spreads have stabilized at this level, particularly net of incentives, or could they still come in a bit further? Just given where we are in the cycle of the market?
I think. There's still opportunity for them to come in a little bit. Not a ton, i n our kind of estimation or guesstimation. I feel like if we're not nearing stabilization, we're kind of close. Maybe I hope that answers your question.
Yeah. That helps. My other question would be just from a capital allocation perspective. You obviously have focused on incrementally more capital towards the NCIB. What would you think your, what do you think your balance sheet capacity is to continue to be active on that program? Would that need to be tied to more asset sales, or could you do it just with incremental cash flow being retained today?
I think. We're very comfortable where we are in terms of leverage. I think t here's probably room to go up a little bit if we had to. I don't think that's the goal but w e're comfortable at 45%, w e're comfortable at 47%, w e're comfortable at 48%. Is that where we want to be long, long- term, where if we have unfettered access to capital and everything was hunky-dory? Probably not, w e probably want to be lower. Just given our access to CMHC, given the cost of debt today, we're very comfortable kind of where we are and slightly above that. I think if we were to go materially above that, I think asset sales would probably come into play. The good news is, in a market like this, high-quality, well-located residential real estate is in really high demand in the private market.
We are seeing evidence of that as it relates to inbounds that we keep getting. I would say those inbounds are significantly supportive of our book value or better. Forget about consensus implied cap rates and forget about where our share price is implying cap rates. It is a bit of a joke. There is a significant gap between the private investment market and public markets in residential real estate today. That is one thing that we are trying to deal with. To your point, we are comfortable with leverage. I think unit buybacks is still today, at least, the most attractive thing we can do with our capital. I guess that is how we are looking at the landscape.
All right. Given those inbounds continue to happen, pretty supportive valuations to your book value, would you contemplate more asset sales at this point? I know there's puts and takes to that o n a short-term and longer-term basis. What would be sort of the appetite to continue to sell assets to either fund other growth or to buy back stock?
Yeah. Look, I think it's a balance, right? I think to the extent if we can sell something for a low cap rate and buy something for a higher cap rate, I think that all makes sense. I don't think we're just the prospect of selling something at an attractive cap rate to just "show the market" that we're undervalued. I mean, I think that's been tried and true, and it hasn't really moved the needle. We've sold five of our lowest quality assets for book value or higher. I don't think we were rewarded with any pop in the unit price. Our largest peer, InterRent, was sold. That short-lived euphoria was very short-lived. We kind of come back down. I think just the public markets are kind of, things like that are falling on the public markets' deaf ears right now, I think that's just the reality of where we are. I think any asset sale will likely be linked to something that makes sense on the use of proceeds side, in terms of growing as well.
Makes sense. I'll turn it back. Thank you.
I'll turn it back.
Next question comes from Mario Saric at Scotiabank.
Hi. Good morning, and thank you for taking the questions. Jon, I just want to circle back on the last question with respect to capital allocation. I did note that you included a reference to the high investor demand for quality assets in your outlook section. What would you say is the opportunity set available in terms of selling low cap rate to buy higher cap rate of desired quality? How likely could that be in the next 6- 12 months?
I mean, I think it's possible. Likely and possible. Like I said, we have some pretty, very attractive trophy-like assets. We never, the long-term, the North Star is to grow, but we are very aware of the factors that are at play today and understand that growing in today's market has to make sense, and you can't issue dilutive equity and all that stuff. I think we do have a portfolio that, there are a number of assets that are attractive to many people, and those cap rates are today lower than what acquisition cap rates are in similar or better markets even. That math can work today. I think we're looking at all opportunities that make sense for our unit holders for both the immediate and long- term.
Got it. Presumably, those would be FFO per unit accretive transactions if they were to materialize?
Correct.
Okay. In your opinion, is there anything specific within the public markets that you feel is not recognizing the quality of the portfolio, like the low cap rate assets within the portfolios? Is there something specific, in your view, that is preventing the realization of that?
Yeah. There are a lot of things, I think, in the public markets that are not recognizing. I mean, number one, fund flows are negative. That is always tricky because then investors are just horse trading, I think. Number two, unfortunately, I heard some stats where real estate used to be 4% of the index. Now it is less than 2% of the index. And what is real estate is actually Colliers and someone else. It is not even kind of the fundamental REIT guys as we think about them. I think some generalist investors and other investors simply are not as interested in the REIT sector today. I think they feel like they have a lot of runway to get back in because there is not necessarily, I think, an obvious catalyst for folks to pile back into the real estate market today. When you have all that as a background, I think public real estate isn't valued at NAV. That's exactly, I think, what's happening today. That's what we're dealing with.
Got it. Okay. Two more quick ones just on the operational side. You mentioned kind of releasing rents or leases that were done 12 months ago. It would be notably lower today relative to 12 months ago. What would that spread be like in Toronto and Vancouver today as an example?
In Vancouver, I was there last week. To give you an example, a one-bedroom was rented out for $2,800 approximately. Today, with incentives, that net number is closer to $2,350. That is Vancouver. That is new builds. I am not saying it is the whole market. I am just saying kind of that is what we are seeing with some of the new builds. In Toronto, it is probably similar, maybe a little less, but similar. New build, I am talking about. That is a pretty big gap, right? Folks are moving for that. We are in constant dialogue with these folks. We are approaching people five, six months ahead of expiring leases to just have that dialogue, open up that dialogue, see if we can keep them in. I thought this is not pervasive throughout the whole portfolio. I am giving you very specific. When we go look at properties, we look at kind of the units that are vacant. This is the dynamic that we're dealing with in certain units. That's a bit of color as to what we're seeing.
Okay. My last question. In terms of when you look at your individual markets in terms of relative strength and relative strength maybe being kind of conviction level to start pushing up asking rents heading into the spring leasing season, how would you rank the individual markets in your portfolio, maybe kind of the market you're most encouraged about versus the one that you think is most challenged?
I think it's pretty consistent with what everyone's seeing, right? I think it's going to be more challenging to push rents in Toronto and Vancouver right now. I think Calgary, it's more challenging today, but I think that's a market that can easily flip back to positive. We're seeing relatively more consistency in Ottawa and Montreal. That's kind of how I would rank them from lowest to highest. We're actively managing everything. I think we're going to try to drive occupancy as much as we can over the next two quarters, and we're going to see where we get to.
Okay. That's it for me. Thank you.
Thank you.
Next question today will come from Jimmy Shan at RBC.
Thanks. Just a couple of questions on the incentives. Incentives as a percentage of revenue, what would that look like roughly today? Are you also having to offer incentives on renewals, at least on a portfolio-wide basis?
I'll start with the second question. Not on a portfolio-wide basis. On the renewal front, that's very specific units that would have a large gap between what the person rented at and today. I wouldn't say that there's a ton there. When I was in Vancouver, it was like, "Hey, we'll offer you a free storage locker." Nothing more than that. Eddie, do you have the numbers in front of you on the other?
Yeah. Hey, Jimmy, it's Eddie. In terms of promotion, you said maybe I'll quote it kind of in dollar values. In Q3, we would have offered incentives in the CAD 800,000 range. That's just the value. As you know, that would amortize against the reduction of revenue throughout the quarter. That's just to give you perspective of what it would have been for this quarter.
Okay. I think you mentioned that. Let's say, roughly CAD 800,000. That's been fairly consistent over the last little while. Hasn't really been trending up.
I mean, yeah. It's trended up, I guess, from June or July to now. As we look forward, we anticipate keeping it around the same from where it is today.
Yeah. So, given your comments about population growth, turnover, and then the supply that's coming next year, how should we think about revenue and expense growth next year?
Yeah. I think for us, we're thinking about revenue growth in that 3%-5% range. I think expense growth will probably be in that same range, but maybe towards the higher end. If you think about NOI margin, flat to slightly compressing. NOI growth in that kind of same thing, 3%-4% growth range. Commercial is going to be a little bit of a tailwind for us coming year. Furnished suites will hopefully be kind of less of a headwind as you move forward. On the interest expense line, I think we're anticipating doing, we do not have a lot in 2026, but there are some upward refinancings that are available to us if we choose. Interest expense will probably be a little higher in 2026 than it is in this year.
As you know, the CDL income that we're going to receive is going to be reduced a little bit. I would just point out that your assumption on the Beechwood CDL being repaid and when that will be repaid will really impact your numbers in 2026. As an example, if it's repaid in December 2026 versus June 2026, that's a huge difference. Every quarter difference in terms of what you think is about 2/3 of a penny for the Beechwood CDL repayment. Yeah, that's, in a nutshell, I think that's kind of how we're seeing 2026.
Okay. On that, we should be modeling December, no b ecause that's when it matures?
No. Jimmy, it's prepayable at any time.
Oh, I see. Okay.
It's prepayable at any time, and it'll probably be linked to either stabilization or, with, a transaction.
Okay. The revenue of 3-5%, how do you get there?
We get there because our renewals are still growing at 2.5%-3.5%. If we're, and then the turns will grow 0-5% in that range. Commercials, a bit of a tailwind. There's going to be a little bit of dilution from some of the new, well, I guess that hits the local line. Occupancy kind of flattish to, we're aiming to be flat on occupancy. That's how we get there.
Okay. That's helpful. Thank you.
Good.
We'll move now to the line of Matt Kornack at National Bank Financial.
Hey, guys. I think you kind of answered it in that last comment for Jimmy, but we focus a lot on new leasing spreads. Are you roughly getting, in aggregate, on a blended basis, the allowable rent increase on renewals in the rent-controlled markets?
I think, yeah, pretty much everywhere, yes, except I think Vancouver is probably closer to flat.
Okay. On long sale, obviously, you had a lot of turnover, vacancy increased in this quarter. Do you have a sense as to how that trends into the colder months? Are you going to be able to pick up that occupancy in the next few quarters, or is it a waiting game until the spring again?
I think based on what we're seeing today, it's probably going to be a spring thing. It's highly competitive.
Maybe just lastly on the development side. Has the decrease in construction costs, a little bit more favorable interest rates, can you make today's market rents work from a yield-on-cost standpoint, or is it still a bit skinny in terms of returns? Do you need to get some market rent growth or at least get back to kind of where proformas were a year or two ago to justify building today?
I think the math is pretty close, Matt. I think it all depends on kind of what your rent growth assumptions are going forward and all that type of thing. I think for us, it's almost more of a capital allocation decision. I think it would be a lot of capital to tie up for yields and margins that are not guaranteed. I think it will be unlikely to see us start any, at least us, start any new developments in the near future. I think if you're not us, or you're just a developer looking at the math, I think it's pretty close.
Do you think that keeps a lid to some extent on market rent growth a few years out, or it's not going to be big enough to kind of meet the eventual return of demand as population growth returns?
I think it has more to do with the existing supply that's there in terms of where the rents are going. There's still, at least in Toronto, some pretty decent supply to chug through e ighteen months or so.
Okay. Fair enough. Thanks.
Our next question today will come from the line of Mike Markidis at BMO Capital Markets.
Hey, good morning, everybody. Jon, I mean, maybe I'm reading into this too much, but on Beechwood, it sounds like your base case assumption for your budget would be that you get that capital back. Is that safe to say?
I mean, that's kind of our base case on everything right now, especially as it relates to the CDLs.
Okay. When you quote that dilution, what are you assuming you do with the capital?
Sorry, the dilution of what, Beechwood would not be diluted. The unbalanced developments would be diluted.
Oh, sorry. I thought you said the return of the Beechwood capital would be diluted. Did I misstate that?
It would be diluted in the sense that it's earning 3.25% above our revolver. We get that paid back, and then you assume we use the proceeds to pay back our revolver. That spread of 3.25% is what we would be missing, or time, right, between the end of 2026 and whenever it's paid back.
Right. Right. Okay. No, that's fair. What would you assume that would be your base case is paying down the revolver with that?
Yeah.
Okay. Just with respect, the last question for me because I realize we're running long on the tooth here. With respect to the strong demand that you've talked about, can you maybe just talk about, is it on an asset-by-asset basis? Is it still mostly private investors? Is there any institutional capital to come back would be question one. Number two, has anyone looked at it? Is it always just like, "Hey, I like this asset, I want this asset." Or does anybody come to you and say, "Hey, there's five assets here, and we'd like to do CAD 300 million," I'm just trying to get a sense of what that demand looks like.
Sure. I think the demand is still somewhat specific to assets. We have demand for specific assets. I wouldn't say there's kind of like, "I have CAD 500 million. I want to spend it on whatever is available." I think it's very much asset-specific. The buyer pool, I think, is a mix of local privates. Institutional capital is looking. They're being quite, I guess, picky or selective. There are some pockets of institutional capital. I think right now there's quite a bit of, I think there's still a little bit of a gap between seller expectations and buyer expectations. For certain assets, people just want to own them and t here are transactions that are happening.
Okay. That's helpful. I'll turn it back. Thank you.
Thanks, Mike.
We will move to Dean Wilkinson at CIBC.
Thanks. Morning, guys. Probably a bit of a continuation of Mike's question. I realize this might be a tough one to answer, Jon. Given the sort of CAD 9 differential between book value and where the units are trading, has there been any conversation or thought given to a sale that might not be, let's say, at the asset level and something more meaningful?
I mean, I guess what I would say there, Dean, is, yes, you're right. I can't say anything. If you're the—look, the private company, th ey're keeping Eddie and I out of any discussions about anything like that, if those are even going on. You'd have to think that. [ Yeah. Enough said.]
Yeah. I got you.
Anything's on the table for people to figure things out.
Yeah, yeah. Yep, yep. I figured as much. That's all I had. Thanks, guys.
Thanks.
That was our final question from our audience this morning. Gentlemen, I'll turn it back to you for any additional or closing remarks that you have.
Thanks very much, everyone, for your time. We will look forward to speaking to you guys in the new year. Take care.
This does conclude today's Minto Apartment REIT conference call. We thank you all for your participation, and you may now disconnect your lines.