Good morning. My name is Michelle, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Minto Apartment Real Estate Investment Trust 2022 fourth 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 the 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 March 8, 2023 for more information. During the call, management will also reference certain non-GAAP 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 GAAP. Please see the REIT's MD&A for additional information regarding non-GAAP financial measures, including reconciliations to the nearest GAAP measures. Thank you. Mr. Waters, you may begin your conference.
Thank you, Michelle. Good morning, everyone. I'm Michael Waters, Chief Executive Officer of Minto Apartment REIT. I'm joined on the call today by Jonathan Li, our President and Chief Operating Officer, and Edward Fu, our Chief Financial Officer. I'll begin the call by providing an overview of our fourth quarter and full-year financial results and other corporate developments. Eddie will review our financial results in detail. Jon will discuss our operating performance and growth initiatives. I'll conclude with our business outlook. We'll be pleased to take your questions. For the full-year, our operating performance improved significantly as Canadian urban rental markets strengthened. We generated strong same-property NOI growth of 7.5%, reflecting solid growth in rental rates and increased occupancy. Average monthly rent increased by 4.6% for the same-property portfolio and revenue grew 8.3%.
Our AFFO increased by 12.3% compared to the prior year, and AFFO per unit increased by 3.4%. Moving on to other highlights from the year. As you are likely aware, we increased our annual cash distribution by 3.2% to CAD 0.49 per unit. We're proud that as a result of increasing our distributions in each of the five years since the REIT was created, we were added to the S&P/TSX Canadian Dividend Aristocrats Index in January 2023. We acquired two premium downtown properties, Niagara West in Toronto and the International in Calgary, consistent with the REIT's strategy to own high-quality assets in urban locations. ESG continues to be an important strategic priority, and we're very proud of the outstanding results outlined in our 2021 ESG report, which was published in October 2022.
Finally, we made significant advances on our senior leadership succession plan. In January, Jon Li was appointed to be our next CEO and will assume the role effective April third. In addition, Eddie Fu was selected as the REIT's next CFO and took over the role from Julie Morin in January. These are critical steps in the REIT's internalization plan, as Jon and Eddie are both full-time employees of the REIT. The REIT now has a similar management structure to many of the grocery chain-sponsored and retail-sponsored REITs at the time of their IPOs. Jon and Eddie have proven to be outstanding leaders, and I'm confident that we have the right people in place to shepherd the REIT into its next stage of growth. I'll now review our fourth quarter operating performance on slide four. It was another strong quarter in what was typically a slower time of year.
Average monthly rent for the Same Property Portfolio increased 4.6% year-over-year, and average occupancy increased by 210 basis points to 97.1%. Year-end occupancy was even higher, topping 97.6%. We achieved a gain-to-lease in the quarter of 16.6%, which was our highest quarterly gain-to-lease since the onset of the pandemic and the second highest in the REIT's history. We had strong double-digit rent growth in all of our markets, and our annualized gain-to-lease potential increased to 13.6%. NOI for the Same Property Portfolio improved by 7.2% compared to Q4 last year, while same property NOI margin dropped by 30 basis points, reflecting cost pressures.
Total portfolio annualized turnover was 21.5% for the quarter, reflecting typical seasonal decline and strong market fundamentals. We believe turnover will continue to moderate due to a shortage of affordable housing alternatives. Moving to slide five, where I want to cover a few other highlights. Firstly, we collaborated with four other publicly traded apartment REITs to launch the website ForAffordable.ca in November. We thought it was important to dispel myths about how we operate and spread facts and policy ideas about how we can help address the housing supply and affordability crisis in Canada. While NOI growth was strong in the fourth quarter, AFFO and AFFO per unit declined primarily as a result of increased floating interest rates. Finally, just two days ago, on March 7, we completed the sale of High Level Place, one of our three properties in Edmonton.
The sale was completed as part of our capital recycling strategy, and the sale price was approximately CAD 10 million in line with our Q4 2022 fair value for the asset. I'd now like to invite Eddie Fu to discuss our fourth quarter financial and operating performance in greater detail.
I am pleased to have the opportunity to speak with all of you on earnings call for the first time. Turning to slide six. Same property portfolio revenue increased by 7.6% year-over-year, reflecting higher occupancy, higher average rents, and reduced amortization of promotions. Same property portfolio NOI grew by 7.2% from Q4 last year, a margin of 61.2%. FFO per unit in Q4 2022 was CAD 0.196, a reduction of 8.7%, and AFFO per unit declined 10.1% to CAD 0.17 per unit, reflecting higher finance costs, spurred by the impact of rising interest rates on variable rate mortgages and increased draws and interest rates on the REIT's credit facility, partially offset by higher NOI.
Average monthly rent in Q4 2022 was CAD 1,738 for the same property portfolio, representing an increase of 4.6%. Average occupancy was 97.1% for the total portfolio, up 210 basis points from 95% in Q4 last year. I will now turn it over to Jonathan Li to review our operating performance and growth initiatives. Jon.
Thank you, Eddie. Moving to slide seven. The upper chart shows that gain-to-lease and average monthly rent has trended very positively over the last several quarters as the Canadian urban rental market has steadily recovered from the negative impacts of the pandemic. In the lower chart, we break out rents by geography. In addition, our rental product continues to be an affordable alternative to home ownership. Moving to slide eight, as Michael noted, we generated double-digit gain-to-lease in all of our markets. The average rent on new leases increased 16.6% to CAD 1,981 per suite. That was the second-largest quarterly gain in the REIT's history. Furthermore, as a result of increasing rents, the embedded gain-to-lease potential of our portfolio increased to 13.6%.
On slide nine, strong rental demand is driving higher occupancy for the REIT. Contrary to seasonal trends, move-ins have exceeded move-outs in six of the last seven quarters. On slide 10, average monthly rent for the furnished suite has improved materially, with only a slight decline in occupancy relative to last year, as travel has returned to normal levels, particularly in the film industry and business executive stays. On slide 11, property operating costs in the fourth quarter increased due in part to higher labor costs, filling staffing vacancies, and higher repair and maintenance costs. Higher natural gas costs were a key contributor to increased operating expenses as rates increased 47% year-over-year with consumption in line with the prior year. So far in 2023, gas prices have dropped significantly.
We are working hard to minimize operating costs. We are pleased to see that inflationary pressures showed signs of slowing by the end of the year. On slide 12, we renovated and leased a total of 41 suites in the fourth quarter, which generated an ROI of 11.3% on our proportionate share. We repositioned 259 suites in 2022 and expect to reposition between 80 and 120 suites in 2023, reflecting lower anticipated turnover. On slide 13, in 2022, we made initial advances on the University Heights convertible development loan to Minto Properties Inc, supporting an exciting development of a large mixed-use residential property in the Greater Victoria area. Overall, we have eight projects in our pipeline, five of which are under construction and one of which is stabilized.
Five of our investments consist of convertible development loans with exclusive purchase options upon stabilization, and three are direct investments in properties we own. These projects have the potential to increase the REIT's gross suite count by 2,302 suites by 2029. On slide 14, we will provide a status update on two of our developments. Beginning with Fifth + Bank in Ottawa, it is highly unlikely the REIT exercises its purchase option in the near future, and therefore, MPI and the REIT are currently in discussions to extend it. Lonsdale Square has the potential to be the REIT's first foray into the strong greater Vancouver market. It was topped off in December, and stabilization is expected to occur in the first quarter of 2024. I will turn it back over to Eddie to review our debt financing and liquidity.
Thanks, Jon. Turning to slide 16. A core element to our strategy is to maintain a conservative leverage ratio and a balanced debt maturity schedule. As the chart shows, our debt maturities are nicely staggered through 2027, and the debt coming due this year provides opportunities to maintain a balanced maturity schedule. As we discussed earlier in the call, our FFO and AFFO in the fourth quarter were impacted by higher interest rates on our variable rate debt. At the end of 2022, we were carrying CAD 265.5 million of variable rate debt with a weighted average interest rate of 6.87%. We expect to refinance CAD 108.4 million of variable rate mortgages with fixed-rate CMHC insured mortgages for Niagara West and the International in early Q2.
By closing these loans, our proportion of fixed-rate debt would increase to 86%, with the CMHC portion rising to 73%. In addition, we plan to further mitigate our exposure to variable rate debt through proceeds from upward debt refinancing and other de-leveraging strategies. Finally, I want to note that total liquidity was approximately CAD 115 million at the end of December 2022, and Debt-to-gross book value was 40.6%. I'll now turn it over to Michael.
Thanks, Eddie. I'll conclude with our business outlook on slide 17 before we take your questions. Our performance in 2022 reflected a strong recovery in Canadian urban rental market conditions following the negative impact of COVID-19. Looking ahead, we believe that we're positioned to further strong performance as the fundamentals underpinning this sector remain very robust. These include a further deterioration in housing affordability due to rising interest rates, continued growth in immigration and inelastic housing supply. It's not surprising that an increasing proportion of Canadians are opting to rent a home instead of owning one in this environment. To achieve long-term success, we remain focused on five key strategies.
Growing NOI, the strategic allocation of capital, which may include reducing variable rate debt and/or buying back units, generating capital through internal sources to fund our growth pipeline, the execution of our intensification development pipeline, and improving balance sheet and liquidity management. We believe that executing on our strategy will position us for solid growth in FFO and AFFO per unit. This is the last time I'll be speaking with you all on an earnings call. It's been a pleasure and a privilege to serve as the CEO of Minto Apartment REIT since its formation and IPO. I'm very confident that through our succession planning, we have the right team in place to lead the REIT to further success and drive strong returns for unitholders. That concludes our presentation this morning. Jon, Eddie, and I would now be pleased to answer your questions.
Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question will come from Sairam Srinivas of Cormark Securities. Please go ahead.
Thank you, operator. Michael, it's been a pleasure working with you and all the very best for the next steps ahead for you. Jon, Eddie, looking forward to working with you guys as well. First up, gents, I think thank you for the additional disclosure in the quarter. This was really helpful. My first question is primarily on organic growth. How do you see the lookout for 2023, and how should we be thinking about the broader SPP growth in this year?
Yeah. It's Jon. Hey, Sai. Thanks for the time. You're asking sort of overall growth for 2023. Is that what I heard?
Yes, that's right.
Just at a High Level, you know, I think our revenue growth, we expect to be consistent with what it has been recently. We are hopeful we can get high single-digit growth in revenue. We suspect revenue growth will outpace our expense growth, not by a ton, but a little bit. We're optimistic that we'll get a little bit of NOI margin improvement over the course of the year.
Jonathan, would you say that's maybe, you know, in line with say high single digits, so high single-digit NOI as well?
Correct.
All right. Okay. That makes sense. Probably my next question is kind of tied to a couple of aspects, and that's essentially around recycling. Eddie, to your point about reducing the variable rate exposure for the REIT. How do you guys plan on actually, you know, executing that? Could you comment on the recycling aspect of the program as well?
Yeah. We are, you know, considering, we're evaluating lots of other transactions that we can generate equity capital internally. I think the high probability of that will likely be further asset sales. We'll recycle the proceeds of those asset sales into either higher growth assets or paying down our variable rate debt or buying back units. Today, with the high cost of our variable rate debt, I think it makes a lot of sense for us to pay back. That debt is quite financially attractive. We're not gonna just provide guidance on which assets we're gonna look to sell, nor their locations, because we think that will best position us to maximize proceeds and maximize auction tension and keep it confidential. We don't wanna put an expectation out there in the market.
'Cause, you know, just right now, look, the execution risk of selling these assets in this market is, you know, high.
It's not an easy slam dunk to sell some of the assets we're looking to sell, and we're cognizant of that. You know, we're gonna look for attractive deals on a bunch of different assets. We'll see what we come back with. We'll update the market once we have something to update the market on.
That's fair, Jon. Thanks for that. Eddie, on the refinancing bit, you know, once the CMHC refinancing is done, where do you see those rates coming in at?
You're asking what do we see in terms of the rates?
Yeah. You know, yeah, sorry, go on.
With our CMHC, it's priced off of our CMB, and we're looking at, let's say, as a 10-year term. Currently the pricing would be around, you know, 4.25 %-4.5 %.
All right. Actually, that's actually a good gain. All right. I think my last question, gents, in terms of turnover, I know it's been a bit of a slowdown in the last couple of years now. How do you see portfolio turnover trending in 2023?
Yeah. You know, we ended the quarter in the low 20s%, I think 21.5%. Let's not forget that Q4 is a typically lower turnover quarter. What we're seeing in January and February and March to date, I'd say again is Q1 is also a slower turnover quarter, is moderating even lower than that 21.5%. That's what we're seeing. It's really not surprising. It's very different in different markets. Obviously, Calgary is slightly higher, and some of our affordable properties in Toronto are much, much lower. The good news is, we have, you know, between 15% and 20% of our portfolio is not subject to rent control, so that helps. You know, but let's face it, I mean, we think turnover is moderating.
Yep. I mean, that's a great color, Jon, I'll turn it back. Thank you.
Your next question comes from Jonathan Kelcher at TD Cowen. Please go ahead.
Thanks. Good morning. Just to clarify first on the potential asset sales. You'd be looking at partial sales, like selling an interest in properties?
Look, I think it probably wouldn't surprise you that a lot of the assets we're trying to sell are likely our older assets, a combination of high-rise and low-rise. You know, finding institutional partners for those, you know, we could, but I think plan A would be for us to sell those outright. I think if we were looking to partner on potentially some newer assets that were higher growth, you know, I think partnering with some JV partners would be easier to execute on those. I think that's also plan B. For us, plan A would be likely to sell our older assets that are under rent control in certain markets and maybe even some of our low-rise, and that would be plan A.
Okay. Fair enough. Just on the slowdown in expected suite repositionings, is that fully a function of lower turnover or is some part of that just that the market's strong enough that you can still get a very good rent uplift without going through the repositioning expense?
Yeah. It's a good question, Jonathan. I think the way we're thinking about it is a lot of it is driven by both the reduced turnover that we're expecting as well as the overall lower vacancy in our portfolio. There's just less white space for us to do these renovations. That's number one and two. Number three, the opportunity costs of taking a unit offline for three to four months has increased substantially with rental rates increasing and the market demand that we're seeing.
Our asset management team reviews every single unit that's coming back to us a couple of months before once we get the notice, and we're running the math on, all right, well, what does it look like if we simply put a new tenant in that market in a with a standard turn that takes three days for new paint and et cetera, versus taking it offline for 3 - 4 months, putting CAD 50,000 into it and losing that opportunity cost of three months of market rent. We're doing that analysis on a suite by suite basis and are making a determination based on return on based on that math. It's kind of a combination of all 3 of those things that you just said which is driving us down to 80%-120%.
To put it into context, it's not a lot of dollars, right? Like, our repositioning program like as a whole is less than CAD 10 billion for 2023.
Okay. That's helpful. Lastly, just on the financing, the CAD 108 million on International and Niagara Street. Since you bought those, I'm guessing the NOIs improved nicely. Do you think you can get more on the fixed rate debt when you go and do that and some up financing there?
Yeah. On Niagara, the reality is part of what explains the delay is that we had to have 12 months of stabilized performance for CMHC to look at, and that clock didn't start until November 2021. We didn't submit until November 2022, and by that time, yes, a lot of the rental rate was part of our submission. On the international, we actually purposefully resubmitted in December of last year because of that exact reason. The, the loan amount that we got or that we submitted in December was CAD 15 million higher than what we originally underwrote back when we purchased these assets.
Okay. Just to be clear, how much fixed rate debt are you expecting to get at the end of March, beginning of April?
CAD 108 million.
Okay, thanks. I'll turn it back.
Your next question comes from Brad Sturges at Raymond James. Please go ahead.
Hi, good morning.
Hi.
Just on the capital recycling, obviously, you know, you're not giving guidance on assets specifically. Just curious if you have a quantum or a dollar amount you think could be achievable in terms of asset sales this year as you think about what's under review right now?
Yeah, I don't think we're gonna be giving you a target, Brad, unfortunately, because, you know, we have a number of assets that we've identified. There are assets that we think are higher probability execution than others, it's just too big of a range. I think you can kind of look at what our capital needs are over the course of the next two years. You can think about what's in the pipeline. You can look at how much variable rate debt we have left to pay down, you can triangulate in terms of what our target will be from there.
Okay. You would expect, I guess, at the very least, the Edmonton assets remaining would go back on the market for sale at some point in the spring or summer, perhaps?
Yeah, I think that's right. I guess we haven't addressed it specifically on this call. We did sell High Level Place for CAD 10 million. We were happy with that sale price. There are two remaining assets. We are going to take them off the market, but we are going to relaunch them at some point. There is interest in the properties. They're attractive buildings. What we're observing is our negotiating leverage just is not optimal today as buyer pools remain relatively thin. To be quite honest, we're just not happy with the pricing that we have today. The Edmonton market continues to improve week by week. Vacancy is getting better, more smaller.
You know, promotion use is now zero, and it still remains a relatively affordable market compared to other markets. For us, there's no reason to sell at suboptimal pricing or what we think is suboptimal pricing today, and we're in no rush to sell. We'll relaunch it when we think there's more auction tension in the market and buyers will be more aggressive than what we're seeing today.
Just on Fifth + Bank, obviously you discussed there's the potential for an extension there on the purchase option. What would that look like? Would that be another 6-month extension to the end of the year, or would there be a different framework in mind?
Maybe I'll tackle that one. I think what we're looking at is probably a further extension, perhaps as late as the end of the year. I think that, you know, MPI, you know, speaking parochially, wants to support the REIT, wants to be constructive for the REIT. Given the unit price and capital, you know, availability, I think that, you know, we'd like to give it another six months. That's a proposal that, you know, Jon and I are working on right now to take it to MPI and get approval to extend it further. That's a, you know, a process that's been very collaborative.
you know, as I say, MPI wants to be constructive and support the REIT, and so we'll undertake that process and hopefully have some more information on that for the market in the very near future.
I would also add that from the REIT's perspective, you know, we're gonna remain disciplined. We're not gonna buy it anytime soon because the cost of debt would be higher than the cap rate. I think for us, that doesn't really work. You know, MPI can't hold it forever. You know, to be quite honest, and Michael doesn't want to say this, but they could sell it immediately for a higher price than they could sell it to the REIT too, you know, tomorrow. You know, we very much appreciate that they're working with us and we hope to, but, you know, we're gonna remain disciplined, and that's we're kicking the can down the road.
Yeah.
For the option to make more sense for the REIT, effectively, it sounds like you'd have to have good line of sight on capital recycling to the point where you can pay down debt, but also it makes more sense to exercise that option.
I mean, I wouldn't disagree with anything you said. It's not the only thing we're looking at, but that's consistent with the framework that we're thinking.
Okay, great. I'll turn it back.
Thanks, Brad.
Your next question comes from Jimmy Shan at RBC Capital Markets. Please go ahead.
Thanks. Just to follow up on the Niagara and international refinancing. You know that you submitted to CMHC in November, December of 2022. Is it normal for it to take four to five months for CMHC to get through the underwriting process, or are they becoming a little more stringent? I'm just kind of curious as to whether, like, if there's anything to read from the delay in getting approval.
Yeah. No, it's. Thanks, Jimmy. It's Jon here. A plain vanilla CMHC financing will take anywhere from, you know, three to four months. Both of these assets are not, unfortunately, plain vanilla, and they're actually in the bucket of CMHC that is the new construction bucket. The International is a full repositioning or conversion from a hotel, so it's not plain vanilla in their mind. The Niagara West loan is an extremely large loan, and it's big enough that it actually hits their threshold that it needs to go all the way up to their credit committee. There's just lots of high balls on it, and it's a complicated time for anyone to underwrite an asset whose rent growth has gone up very, very quickly in a very short period of time.
There's just been lots of back and forth with respect to that asset in particular. You know, we expect to term both of these out at the very early part of Q2.
Yeah. You feel fairly confident that given the two factors you mentioned, that you'd be able to get the amount and the CAD 108 million refinanced?
We're as confident-
Yeah.
as we could be with respect to dealing with CMHC, so.
Okay. Okay.
Hopeful.
just to follow up on the system bank. Was that asset put on the market at all? You know, you seem very confident that you could sell it at a good price today, higher than what you would sell it to the REIT. I'm just curious as to whether you've had soft discussions on potential sale, and that's I guess from the MPI perspective.
No, NPI has not had any discussions on that. I mean, we obviously get a lot of interest in a lot of the assets that we hold and, certainly there is, you know, strong appetite, I'll say, from large institutional investors in multi-res in Canada. There's all sort of a regular dialogue going, I'll say, with the usual suspects. We've not had any discussions about selling Fifth + Bank or an interest in Fifth + Bank. The intent is, if we can engineer it, to sell that asset into the REIT.
You know, again, that's part of the ongoing dialogue that, you know, Jonny and I are having about that asset and see if we can find a way to do it in a way that works for REIT unitholders. Very mindful of the REIT's capital position, its cost of capital, and finding a way to make that work. You know, the asset continues to, you know, perform very well. It's, you know, 100% leased, and it's not a rent-controlled asset. It's in a very tight sub-market, and it's an attractive property for prospective tenants. You know, we continue to, you know, see that asset, you know, perform very well.
I think that's one of the reasons we're excited if we can find a way to get it into the REIT ultimately. That's sort of how we've been looking at it.
Okay. Thank you.
Your next question comes from Matt Kornack at National Bank. Please go ahead.
Hey, guys. Just wondering if your thought process around development, both through the loan extension process but also on book, has changed in how you think about long-dated projects and the concept of where interest rates are. I mean, you've got some time to think about High Park Village, but that's a pretty sizable development opportunity at some point in the future. Also you're in process on a few other projects. Just interested in how you see those projects progressing.
Yeah. Thanks, thanks, Matt. What we're seeing, and at least in our properties, is that, you know, the increase in development costs and charges and timeline extensions and all that stuff, which is well known to the market, generally are being offset completely, if not a little bit more than the increase, or for the increase of rental rates. Our kind of overall project yields have been very consistent despite what folks are seeing in terms of elevated costs and protracted schedules. You know, that's what we're seeing for those projects. To your point on High Park Village, it's, it is large. It is long-dated. You know, we're constantly looking at our best uses of capital. Should things change materially between now and then, you know, we always reassess.
We have a partner there that owns more than us for that property, so we'll have to take that into consideration in terms of any of our decisions, obviously. Again, you know, we think development over the long term is very attractive. If we were financing it with 7% interest. We're gonna look for other ways to fund a lot of our developments as we're talking about here.
Okay. No, that makes sense. And I understand that it's a shrinking portion of the overall portfolio, but can you give us a sense as to, I mean, it's been volatile through the pandemic, but how the furnished suite portfolio is trending in Q1? I think occupancy was a little bit weaker than what we were expecting in Q4, but rents were strong, so I know that's there's an optimization aspect to it. Just, yeah, I mean, where is occupancy trending in Q1?
I think for us, like I might not talk to Q1, but if you think about where we think a reasonable run rate is for this very small portion of our portfolio, is, you know, call it 80% occupancy. We're using it as a bit of a yield management tool. It is volatile. There's like short durations of these leases. To be quite frank, I would love to de-emphasize this in terms of how much we talk about it as it's relative to the proportion of NOI that it represents. I guess we put it out there, so it's tough to get off that treadmill.
Fair enough.
Certainly in the early days of the crisis, it was an outsized contributor to the year-over-year variance in FPNOI. Then of course, as the market improved, it went the other way. As we continue to shrink that portfolio down, I think we're down to 188 or something suites, Matt, so we're kind of where we signaled to the market we would be last year, or even 2021, our long-term plan to get into that range. I think to Jon's point, and you probably... This is something that we don't wanna overemphasize, but you know, I think that 80% target is kind of where we sort of look at it and really emphasize the yield management benefits of it because they are short duration leases.
It's a strong contributor in a, you know, a steady or rising market where we're in right now.
No, that makes sense. Honestly, it's just, I only ask Q1 because the last two years it's shocking. We were in some level of lockdown, so it had impacted occupancy. I guess on the, on the flip side, as you look at capital recycling, I know you don't wanna speak to specific assets. Would properties with this component in them, like is it something that you'd look to potentially get off of? Presumably, this type of shorter duration product probably does well in the environment we're in.
I mean, I would not put out there that we're gonna be selling 61 Yorkville.
Okay.
I just think that piece of real estate is irreplaceable, and we'll never get that back. A similar comment about 185 in Ottawa. It's right downtown. We have another building that's right across the street. We have nice scale there and we own the office building that it's attached to. We, MPI owns the office building that it's attached to, probably not getting rid of that one either.
Okay. No, fair enough. Thanks, guys.
Ladies and gentlemen, once again, if you would like to ask a question, please press star one at this time. Your next question will come from Gaurav Mathur at iA Capital Markets. Please go ahead.
Thank you, good morning, everyone. Just given the execution risk which you mentioned earlier and slight increase in cap rates, do you think there's more price discovery that's yet to happen, or are we in the later innings as far as a valuation rerating is concerned?
No, I don't think that we're saying that there's risk in terms of the pricing. We think we're gonna be able to get pricing that we want. It's just our. You know, with the buyer pools, with the reset of the market and other folks currently out of the market because cost of funding is just too high, you know, we'd rather have four or five people clamoring to buy something versus dealing on a one-on-one negotiation with one party. I think it's as simple as that.
Okay, great. Just a last question on my end. You know, on the refinancing front, can you discuss how you're thinking about staggering the debt ladder going forward?
Sure. It's Eddie here. Jon, where you discussed the Niagara West and the international, when it comes to our 2023 maturities, we have, you know, six mortgages coming due this year, which gives us a good opportunity to look at the balance of our maturities. These are stabilized properties. They're CMHC insured. We've already started that process to examine. Earlier in the call, I talked about pricing based on CMHC rates that are you know, based on CMB plus spread, that we would be looking at somewhere between, you know, 4.25% - 4.5% if we were to lock in today, as an example.
Gaurav, just to add to that, I think as we look at our upcoming refinancings, I don't think you're gonna see us try to like play funny business with short-term debt to try to play reductions in the interest rate environment. I think what we're gonna prioritize is term and just cash flow certainty because we're already taking a bet with the amount of variable rate debt that we have on our balance sheet now. Potential upside should interest rates come down from where they are today. I think if we can kind of lock in what we have soon, you know, coming up in the short term with long-term debt that's fixed rate, that's great. To the extent that interest rates come down, you know, from here, that's hopefully a little bit of upside to our cash flow per unit.
To add to that, we're looking at whether we can upward refinance some of these. Obviously, we're still reviewing them, but, you know, if the potential is to upsize, we would redeploy that additional proceeds, and it would just make sense to use that to pay down our floating rate debt. We're obviously carrying it, you know, 7% right now today.
Great. Thank you for the color, gentlemen. I'll turn it back to the operator.
Thank you.
Your next question comes from Michael Markidis at BMO Capital Markets. Please go ahead.
Hello, everyone. Just a couple of quick ones from me. Pardon me. Just following up on the potential for upward financing. Edward Fu, I don't know if you said it or not, but do you have, like, a rough range of the potential quantum of capital you could pull out of that program for sure?
The approximate quantum?
Yeah.
We're terming out, but we're refinancing. It's approximately CAD 160 million on the six properties. It's still preliminary, you know, based on loan-to-values and debt service coverage. This is just an estimate. Maybe we're gauging somewhere around CAD 50 million-CAD 60 million as a potential.
No, that's helpful and certainly not gonna hold you to a certain pin there. I understand things are moving around all the time. But that's helpful. And just in terms of the cadence of the maturities, is it relatively spread out over the year, or is it front-end or back-end loaded?
The first ones will start maturing around April timeframe, and then it's fairly balanced throughout the rest of the year.
Okay. That's helpful. Thank you. Just with respect to, you know, potentially kicking the can down the road on the option with Fifth + Bank, I understand that there's, you know, a proposal being made to MPI. Would that discussion potentially contemplate the REIT giving up something in terms of maybe, a lesser coupon or a lower discount on purchase in order to effect that?
No. That's not currently in the cards. There'd be no concessions from the REIT.
Okay. Awesome.
A free extension is what we're talking about.
Got it. Okay. No, that's good to know. Thank you for that. Then just last one for me. You know, understand all the thin buyer pools that are out there and the decision to sort of relaunch Edmonton down the road. Maybe if you guys could just comment, how the market with the buyer pool depth in Edmonton would compare to Calgary, Edmonton. I'm sorry, Calgary, Toronto, Montreal, that would be helpful. Ottawa for that matter.
Yeah. I mean, I think, I think the buyer pool in Edmonton is probably shallower than all those other markets that you just mentioned. I think that, the buyers that are looking to increase their exposure in Alberta are tending to look at Calgary first and then Edmonton. I think that kind of shrinks the pool a little bit. You know, again, just the cost of financing is a challenge for everyone everywhere. That's what we're seeing. I don't think, you know, I think the buyer pools that we're seeing in other markets are slightly deeper. Again, you know, with all the REITs kind of on the sidelines, that takes out a good chunk of the buyer pool with the high-quality, sophisticated buyer pool, right?
I don't know if that answers your question.
No, that's good color. Appreciate that. I lied. I have one more. just with Montreal lagging on the on the occupancy front, but realize you guys have got some good momentum there, and it likely catches up. Is the vacancy there, is it specific to any one of the four properties that you own in the market, or is it fairly broad-based?
That's a good question. It's actually shifted a little bit. I think overall, you know, it's a market that, you know, there's still net migration out of the province that we're experiencing. I think new immigrants seem to be going to other cities, and they have other alternatives, especially Calgary. I think you're seeing a lot of that. It's a very tight labor market, so it's hard to find skilled workers on a timely basis. You know, our portfolio continues to improve. Occupancy is now above 94%. We don't mind carrying a little bit of vacancy coming into the leasing season. You know, embedded rents in the market are double digits over 11%. I would say, though, to try to answer your question, we're seeing there's slightly more vacancy in Le 4300 right now.
That's typical for this time of the year as it's a very affluent market, and a lot of the folks that would be potential renters are actually down south. We hope that that comes back very soon. We're seeing some nice uptick in Le Hill-Park. In fact, we've signed a number of leases in the last couple of weeks, and that's a repositioning asset, as you know. I think that one will help with our cash flow going forward. Rockhill has been kind of a nice, steady increase for us. you know, we see a little bit of upside in the whole portfolio, hopefully catching up from an occupancy perspective to the rest of our cities.
Would the comments on the Le 4300 be similar for Haddon Hall, or is it a different kind of base?
No, it's a little different. Haddon Hall is a very diverse set of tenants. We're experiencing quite, like, a lot stronger occupancy in Haddon Hall right now.
Terrific. Thanks very much.
Thanks.
There are no further questions from the phone line, so I will turn the call back to Michael Waters for any closing remarks.
No, thank you very much, everyone, for your attendance on the call today. We appreciate your interest in Minto Apartment REIT and look forward to chatting with you all again after we release our Q1 results. I will be listening intently, not participating. It has been a joy to work with all of you, and I really appreciate the time we've spent together over the last five years. With that, we'll call the end of this teleconference. Thank you very much.
Ladies and gentlemen, this does conclude the conference call for this morning. We would like to thank you all for participating and ask you to please disconnect your lines.