Earnings Call: Q4 2020

Mar 3, 2021

Good afternoon, ladies and gentlemen. My name is Annis, and I'll be your conference operator today. At this time, I would like to welcome everyone to Artis REIT's 4th Quarter and 2020 Annual Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the meeting over to Ms. Heather Nickel. Ms. Nickel, please go ahead. To begin. Thank you, and good afternoon, everyone. Welcome to Artis' 4th quarter year end 2020 results conference call. To With me today is Artis' Interim CEO, Sameer Manji and CFO, Jim Green. Other members of senior management are also with us and may participate in our Q and A session. Our Q4 year end 2020 results were disseminated yesterday and are available on SEDAR and on our website. To The audio cast of today's call is also available on our website. A replay of the call will be available later this afternoon until Wednesday, April 7, 2021. To the replay numbers and passcodes were provided in yesterday's press release and an archived recording of this call will be available on our website. To Before we get started, please be reminded that today's call may include forward looking statements. Such statements involve known and unknown risks to take a look at the financial results and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors in our public filings with the to review our securities regulators and suggest that you refer to those filings. As we discuss our performance, please keep in mind that all figures are in Canadian dollars unless otherwise noted. With that, I will turn the call over to Samir. Thank you, Heather. Good morning to those in the West and good afternoon to those in the East. Welcome and thank you for joining our 2020 annual results conference call. Before we get to our Q4 results, I would like to say a few words to Regarding the global pandemic. As we all know, COVID-nineteen continues to impact our country and the world we live in. To I would like to thank and acknowledge our courageous frontline workers across the country who have worked tirelessly throughout the pandemic to do everything they can to serve and protect Canadians. Our thoughts and prayers go to all those who have lost loved ones through and because of the pandemic. To We are encouraged by the increasing number of vaccines and their availability. It appears we are heading in the right direction and And can look forward to brighter days in the coming months as new case count numbers decline and the number of Canadians who have been vaccinated increases. This will, amongst other things, help reopen our economy, businesses and allow Canadians to see life return to some level of normalcy. To I'll now provide an update on Artis' business and operations. I'd like to start by acknowledging the team at Artis for their hard work and support to take a look at our progress over the past 3 months. ARTIS has undergone significant changes and I recognize that this has not been easy on many people in our organization. To I have been impressed by the professionalism and commitment of our team, including those based in our Winnipeg head office to and others situated in our remote offices across Canada and the United States. We have a strong and dedicated team at Artis. To Since November 30, 2020, we have completed or substantially advanced all of the initiatives set out publicly by Sandpiper, to include overhauling the REIT's governance, the addition of new and diverse perspectives, a 25% reduction in Board costs to and identifying opportunities for reduction in G and A expenses. We are all working hard to improve many critical areas of our business, include corporate operations, asset management and deal negotiations. We are identifying efficiencies, to Professionalizing processes, implementing best practices and institutionalizing our platform in real time to with the ultimate goal of maximizing long term value for our unitholders. In light of the fact that plan to announce the results of the 100 day review in the coming days. I'll keep the remainder of my comments focused on the 2020 annual results. To I look forward to presenting our go forward vision and strategy for artists very soon. To 2020 was a challenging year for the real estate industry. Despite these challenges, we are pleased to report improvements to our debt metrics to and our ability to maintain significant liquidity throughout the year, which Jim will provide more details on shortly. To Our portfolio continues to demonstrate its strength and resiliency. Occupancy decreased slightly from December of 2019, to but was still strong at 91.9% at the end of 2020. Rent collections remained steady throughout the year to And we're especially strong in the Q4 at over 98%. Our property managers continue to work diligently to support tenants during this time And our leasing team has adapted, now providing virtual tours of vacant space wherever possible and facilitating virtual lease negotiations. To Despite these challenging conditions, 1,300,000 square feet of new leases and 1,800,000 square feet of renewals commenced During 2020, the renewals achieved a 2.4% increase in rental rates. To During the year, we also completed 1 industrial development in the U. S, ARC 890 Phase 4 to in 2 retail development projects in Canada, 330 Main and Linden Ridge Shopping Center 2. To During the Q3, we completed Park 890 Phase 4, a 100,000 square foot built to suit industrial building in the Houston area to that is 100% leased to a multinational tenant. Artis, along with our joint venture partner, has now begun construction turn the call over to Eric. Thank you. Thank you. Thank you. Our next question comes from the line of Chris Anes, to totaling 677,000 square feet of gross leasable area. The 2 retail developments completed during the year were to take a look at the location projects on land already owned by the REIT. The first, 330 Main, is a 28,000 square foot retail development to be located at the iconic intersection of Portage Avenue and Main Street in Winnipeg. The property is situated between a 30 story office tower at 360 Main Street to and the new apartment development that is under construction at 300 Main Street and is located above the shops of Winnipeg Square, to provide indoor access to the city's Skywalk system that links numerous towers and downtown amenities. To This property is 94% leased. At Linden Ridge Shopping Center, Artis completed a 17,000 square foot densification project to that is 100% leased to 2 national tenants. The land was acquired in 2013 and is situated in a popular retail node in Winnipeg, to adjacent to a 193,000 square foot retail property that is owned by the REIT. This new 17,000 square foot multi tenant building share the site with Lowe's, whose building was constructed in 2017 pursuant to a build to suit agreement. To In terms of ongoing development projects, in addition to the final phase of Park 890 already mentioned, to Construction of 300 Main continues. In addition to these ongoing projects, subsequent to the end of the year, to We closed on the purchase of Park Lucero East, a 37 acre parcel of land located along the South Loop 202 Freeway to introduce our new business in the Phoenix area. Artis has a partnership agreement in place to develop 3 Class A state of the art industrial buildings, to totaling approximately 561,000 square feet of leasable area. Artis will develop this project as a 10% general partner. To take your questions. Lastly, I will provide some color on Artis' disposition activity during the year. We sold 13 properties during the year to totaling 2,100,000 square feet of leasable area and 2 parcels of development land. Of the 13 property sales, to 9 were office properties, 3 were retail and 1 was industrial, with 11 of the 13 located in Canada and 2 located in the United States. To The sale price for these assets exceeded the IFRS values by a combined total of $10,400,000 to We will endeavor to further maximize value on all future dispositions we pursue, understanding that IFRS values don't always align to reiterate the results for real time fair market value. Subsequent to December 31, 2020, we sold Tower Business Center, to an industrial property located in the Denver area for $66,450,000 which translates to $53,160,000 to for Artis' 80% interest. The sale represents a 3.99% cap rate and a significant gain over the construction cost to hand the REIT's IFRS fair value for the property. We also have an unconditional agreement in place to sell 2 retail properties in Regina to $45,000,000 representing a 9.4% cap rate and a portion of a retail property in Fort McMurray to call for $4,600,000 representing a cap rate of 7.7%. I will now turn to Jim Green, our Chief Financial Officer, to provide a summary of our consolidated financial results for the Q4. To Thanks, Sameer, and good afternoon and or good morning to everyone on the call. The 4th quarter Was certainly an active one at Artis. As Sameer mentioned, the COVID-nineteen virus is still hitting all countries, including Canada and the U. S, to our specific markets with more restrictions and government mandated shutdowns. During the quarter, Artis reached agreement settle a potential proxy battle with 1 of our significant investors, which resulted, as Sameer mentioned, in a reconstituted board and changes at the senior management level. To The new Board placed all prior strategic initiatives either on hold or terminated to give itself time to review and create to a new plan and direction for Artis, which Sameer referenced in his remarks and which will be revealed to the market in the coming weeks. To The settlement and wind up of the prior strategic plans did involve some significant one time costs. To To the best of our knowledge, these have all been accounted for in Q4 and there will be nothing that will carry forward into Q1 to I think this I'm going to duplicate one of Sameer's comments, to turn the call over to our operator. Our rent collections have been strong at 98.5 percent of our rent collected in the Q4, and thus far, our tenants are weathering the storm quite well. To Artists chose during 2020 to not participate in the CCRA program proposed by the federal government. To However, we have been working with our tenants as needed to provide rent deferrals and in some cases, we've provided rent abatements in exchange for an early renewal or longer term on the lease. To The federal government has announced the new rent relief program for tenants referred to as CERS, CERS, to With the aid coming directly to the tenant and not involving a rent reduction by the landlord, we feel this is a major improvement as far as the government program goes And are working with our tenants as necessary to help them access this program. To the end of December, our rents receivable were down to approximately 5 point $7,000,000 from $8,200,000 at the end of September and there is a further $4,900,000 to be under deferral agreements with our tenants. This deferred rent balance is also down from Q3 as we begin to collect amounts that were deferred to During Q2, while we feel the majority of both the current rents receivable and the deferrals will ultimately be collected, to We did book a reserve of approximately $2,000,000 against these balances, which we feel is adequate to cover any potential rent defaults. To Leasing activity has been strong as in the quarter, roughly 250,000 square feet renewed And an average annual total of 1,800,000 square feet. And again, I believe Sameer mentioned this, but weighted average rent increase was 2.4%, to Which we feel was very good given the impact of COVID on both the overall market and specifically on our tenants. To Based on our Q4 NOI net operating income, the REIT had a 49.3% weighting in Canada to And 50.7% in the U. S, so almost an equal balance, slightly tilting towards the U. S. On an asset class basis, we are 44.2% weighted in office, 19.3% weighted in retail, to 36.5 percent weighted in industrial. For those of you who were on our Q3 call, you may to We added some additional disclosure in our MD and A breaking out a lot of our metrics segregated now by asset class to And hopefully this disclosure is helpful to the marketplace as investors review our results and valuations as I know sometimes a diversified REIT can be to Our balance sheet continues to improve. Our debt to GBV ratio has been gradually coming down to announce it set up on a proportionate share basis at 50.2% this quarter compared to 51.9% last quarter to and 52.3 percent last year end. Artis has a relatively significant portion of our debt to Maturing in the next 12 months with $438,000,000 of mortgage debt in addition to an unsecured debenture for to $250,000,000 Some of this in the last few years has been kept short term as it relates to assets we plan to sell. To We anticipate no difficulty in what we see in the current market in refinancing the rest and funds are available on our line of credit if needed for any refinancing. To Our NOI this quarter was $67,300,000 compared to $71,000,000 last quarter. To The primary driver of the NOI drop was asset dispositions. However, there was also a swing in Last quarter, we had a recovery of bad debts based on an over allowance, I guess, maybe call it in Q2 that was recorded as a reversal in Q3 that did not occur this quarter. So there is and then there is also slightly lower FX results. Decline in NOI also translated to a decline in FFO to 45 point to $8,000,000 compared to $50,800,000 last quarter, roughly comparable to the NOI change. To FFO came in at $0.34 per unit this quarter compared to $0.37 last quarter and $0.37 in the comparative quarter last year. Asset sales completed during the year are generally dilutive to NOI metrics to And that was anticipated and planned for. So a lower per unit numbers have been aided somewhat by units repurchased under our NCIB to program. There is some dilution occurring from the asset sales, but the strengthening of the balance sheet in our opinion is worth it. We've added disclosure breaking out our FFO from each asset class using the percentage of NOI as the method of allocation. And if you do it on that basis, to The re earned $0.15 of FFO from office, dollars 0.12 from industrial and $0.07 from retail. AFFO for the quarter to was $0.23 per unit compared to $0.27 in Q4 of 'nineteen, again roughly tracking the changes in FFO. To Our payout ratios remain very conservative at 38.3 percent of FFO and 52.9 percent of AFFO. To Getting a little more granular on a same property basis. Results, I'm going to say unfortunately were negative 5.2% this quarter. It is of course timing differences, but one of the largest factors in the drop continues to be parking revenue in the office sector to As many tenants have canceled parking while they work from home during COVID, the general office lease of course is on a longer term lease, to But parking revenue is generally month to month and if the tenants aren't there, they aren't paying for it. The industrial segment continues to show the Strongest performance in both countries. Canada did have a slight decline of 1.6%, to But the U. S. Had 4.8% growth. The decline in Canada is, in our opinion, just some temporary occupancy to On the issue of fair values, our investment properties are valued conclude our balance sheet at fair value. It continues to be somewhat challenging to determine fair value due to the impact of COVID. However, there is no hard evidence that cap rates, discount rates or market rents have moved substantially. To You may recall if you've been following Artis quarter by quarter that there was a fairly large decline of $141,800,000 in Q1, to Mainly related to retail and some office assets as the pandemic started. However, we did not feel any significant adjustments were warranted in subsequent quarters And there have been generally some smaller increases and decreases over the subsequent three quarters such that we ended the year with a 122 to $600,000 loss. As Artis reports our investment properties at fair value Under IFRS, we can calculate a net asset value per trust unit figure and that calculation is simply using the equity on our balance sheet to Less the equity held by preferred unitholders and divided by the number of common units outstanding at the end of the quarter. And on that basis, the net asset value per trust unit was $15.03 this quarter compared to $15.35 last quarter. To So a 32% decline this quarter largely due to FX, in fact more than necessary due to FX, to Which on a standalone basis would have decreased the net asset value by $0.46 and offsetting that was a gain of $0.14 to related to our NCIB and redemption of deferred and restricted units. To Artis ended the quarter with roughly $35,000,000 of cash on hand and $575,000,000 undrawn on our line of credit, to About $250,000,000 was drawn on that line subsequent to year end to repay the Series C debentures as they matured. To That was planned. The Series D debentures were issued in September of 2020 with the plan to temporarily put the money down on the line of credit and repay the Series C debentures. Based on what we know today, we feel we have added to liquidity to get us through the remainder of the COVID crisis and we look forward to more normal times. And last but certainly not least, to I would highlight the fact this was made public in November that we have implemented a distribution increase of 3% commencing with the distribution to That was paid in January of 2021. And that completes the financial review for now. Happy to answer questions if there are some later, but I will pass it back to Sameer for further remarks. Keep safe everyone. Thank you, Jim. In to. In summary, we would like to reiterate our confidence in our people and our portfolio of assets. We remain committed to doing everything we can to maximize value to which in the near term includes focusing on optimizing operations and maximizing rents and occupancy in every asset we own. To We will also continue to explore divestitures. We have a lot of interest in various assets and asset classes And this combined with our healthy liquidity position that Jim summarized puts us in a strong negotiating position to take a look at the results of our 100 day review in a few days, to which will include our go forward vision and strategy. This will also include hosting a virtual investor meeting to present our plan and to engage with our unitholders and other stakeholders. We hope you and your families all continue to stay healthy and well. To I'll now turn it back to the operator for Q and A. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Questions will be taken in the order to your first question comes from Jonathan Kelsher with TD. Jonathan, please go ahead. Thanks. Good afternoon. First question is to Just on, I guess, near term capital allocation. I guess, we'll get a longer term view when you put out the to the plan within the 100 days in the next couple of weeks or so. But near term, I was a little surprised to see you guys repurchase to share in the Q4. Can you maybe give us your thought process behind doing so? To Sure, Jonathan. I'll simply say that to the comments that Jim made earlier, to We have ample liquidity. We have a high conviction in our disclosed NAV and combining the 2 to Where the unit price was trading, for us, the NTIB spilling even into January, to which was noted as a subsequent event, the NCIB represents a very compelling allocation of capital and investment to buy back our units for unitholders. Okay. To And then I guess just keeping along the same lines, I was also a little surprised and this was a subsequent event that you guys put to leverage on 3 unencumbered retail assets. I would have thought that You were looking to sell retail assets. So again, there, we've got, as you know, over 200 assets to across our 3 asset classes and we are looking at upcoming maturing debt. We were looking at where interest rates were in the market. And so the ability to swap assets, including those maturities that are upcoming that we would then potentially add to our pool of unencumbered assets to Was in our view a sound decision, again in light of what the prevailing interest rate environment was. To Okay. So should we can we read anything into that with your future outlook? And I guess, and the last thing there With selling the industrial asset post the quarter? To I won't comment on what one should read into. We will be, as has been noted, present a separate from this call and from yesterday's press release, a formal to take a look at the presentation and press release regarding the go forward vision and strategy. And within that, there will be ample color to and visibility around items including capital allocation going forward and what the strategic plan is to Across the board. But I would say that with respect to the divestiture of Tower, it was a to Frankly, very compelling transaction. We had ample interest in this asset to follow-up through a formal process and the result I think speaks for itself in terms of what was achieved both in terms of cap rate, But also what was achieved relative to cost and the gain that was realized. To Okay. So was that was it like an unsolicited bid and then you guys started to process or to Did you decide to sell it and start a process? We've got our Executive Vice President for the U. S. Region, Philip Martins on the call. Philip, why don't you take that to Thank you. The process was formal. It was not unsolicited. We used to We went through various different brokerage houses to obtain a book of value and selecting CBRE, to We went through a formal process and it went through almost 4 rounds of bidding, all receiving really great interest to And exceeded our expectations for the exit cap, which turned out to be 4.03% exit yield, which broke all records in Denver for industrial sales. Okay. That is helpful. Thanks. I'll turn it back. To Thanks, Jonathan. Thank you. We have a following question from Mike Markidis with Desjardins. Mike, please go ahead. To Hi, thanks and good afternoon everybody. I was hoping we could to office portfolio specifically. 1 quarter doesn't make a trend, but the same property NOI there was down significantly, but also your occupancy in the office segment has to Over the last several quarters, it's taken a bit of a hit. So I don't know if it's isolated to a specific region, if it's more of a broader trend that you're seeing or transitory in nature, but any color on that dynamic would be helpful. Thank you. Sure. Thanks, Mike. We've got our to Executive Vice President Frank Sherlock on the line. I'm going to ask Frank to comment on Canadian office and then I'll ask Philip to comment on U. S. Office. To Sure. In Canada, the major change to For year on year with the Alberta office market, our occupancy at the start of 2020 was about 78.6% And it ended the year at 66%. So that's where we saw the most of the decrease. Our other office The market or other major office market in Canada is Manitoba and occupancy remained flat there for the full year. So we didn't really see any change there. We had a again, in Ontario, not as many office buildings, one of which was sold, Concord Corporate last year. So Really, we have 4 office buildings in Ontario and again, flat there as well, nothing in Saskatchewan. To And in regards to the United States sorry, go ahead. Sorry, I was just going to add one further comment is that the office also So includes the parking revenue that I referred to as being substantially down from a year ago. So there is a hit on parking revenue, of Of course, yes. Okay. Thank you. In regards to United States, where we have office to In Madison, Minneapolis, Denver and Phoenix, we generally have had held stable, open. Although it's been a quiet year in 2020 and we are seeing all types of responses to the future, some that have been very positive, to Particularly in Minneapolis in the Q3 where we had a good opportunity to extend for long term to by providing early TI while their employees were at home. So we do see some bright spots, particularly also in Phoenix, we're seeing a greater amount of To be more than ever and that does spill more into the 2021 with the good news of how vaccines are being distributed in the United States. Madison has remained to be stable. We still hope to achieve a few good leases in the upcoming future. So overall, also in Denver, it has been to be quite quiet downtown. We did sign a significant lease in Southeast Denver, and so So we're looking forward to a much better year in 2021. Again, I think this has a lot to do with the success of the vaccine distribution in United States. To Okay. That's helpful. Thank you. Just with respect to the developments So that were completed, Jim, during the quarter, would the full NOI from those have been captured in the quarter? Or is there still an uptick? And if so, do you happen to know what the incremental contribution would be in Q1? There was I would say it's not 100% incorporated into Q1 or sorry, Q4 for sure. Did you have a comment on that? Sorry, I do think that the Park 890 NOI would be the full amount for the quarter as well as 330 Main Street. I don't think that Good Life commenced in October 1. I think it was delayed a little bit. Okay. Sorry. Yes. To Yes. Okay. Excellent. And then just lastly, just to confirm on the Park 890 that you start the construction on. Is that being done on a speculative basis? And if so, do you have a read on any leasing activity on that Thank you. Again, we'll pass that over to Philip. Thank you. Yes, we are building debt speculatively. We to We're introducing a variety of product on that site that will be a cross dock, which will be our 2nd foot of site, but it will be larger and then a Small rear load and front load. We've had success with front load, but overall we have no pre leasing completed. We just to broke ground. And so we have had interest from various parties already. Marketing has been sent out. So to I look forward to giving you more news in the quarter. Okay. And last one for me before I turn it back. Just on the to 2 sales that were done subsequently, obviously a record breaking transaction on the Denver asset. And To confirm that was so two questions here. To confirm that OCUPACHT asset was 100% occupied? And then the second would be to Just on the Victoria Square transaction, the 9% forecast looks elevated even compared to what we would consider to be a cap rate for retail. And I was just wondering if you could give a little bit more color as to what was the driver there. Thank you. And I'll turn it back after that. Thank you. To Great. Thanks. So yes, the answer to the first part of the question tower was fully occupied with 2 significant tenants. To And then your comment around the upcoming dispositions. I think one has to look to into this a bit with a bit of a different lens. This represents our last enclosed retail shopping center. To And from our vantage point, just based on what we want to focus on strategically, we felt that after to take a fully marketed process exercise that the highest and best offer that was presented to was one that we were comfortable negotiating and ultimately landing on transaction in. And As we've conveyed, they're unconditional and we anticipate that's closing. To thank you. Your next question comes from Matt Logan with RBC Capital Markets. Matt, please go ahead. To Thank you and good afternoon. Wondering, Sameer, if you could give us a few of your high level thoughts on your first to couple of months on the job. Just what you've learned and how your views have changed about Artis as a business, if at all? To Sure, Matt. I'm going to keep my comments relatively brief because I think a lot of what we to look forward to presenting in the days ahead following the 100 day review. We'll respond to that question. But let me start to by saying or reinforcing what I conveyed in my earlier remarks, I've had the privilege and opportunity to get to know many of the incredible individuals who work at Artis over the last few months. To And we've got a committed, dedicated, hardworking team of individuals. And I think that to The second comment I would share is, and I touched on this earlier, we have strong conviction turn the call back over to Eric. Thank you. Thank you. Thank you. To And even currently is undervalued and perhaps underappreciated by the market. To 3rd, I would say that while there are some challenges that to We anticipated and we have now confirmed that we're confident that we'll be able to work through those challenges. To And then finally, insofar as the opportunities ahead of us, to Including some of the operational efficiencies that we believe we're going to be able to together to as a unified team materialize and put in place, to We think that that's going to pave the way for a positive road ahead. So to I'll just keep my comments to those for now. And like I said, look forward to sharing more in the days ahead. To Appreciate the color. And maybe just clarifying your earlier comments saying that the IFRS values don't always align with fair market values. To Would that mean that you expect to sell assets on average in line with your IFRS NAV? Or would that be maybe the office And retail assets might be sold a bit lower and the industrial assets might be sold a bit higher. How should we think about that? And any comments would be appreciated. To Sure. Again, the general comment I'll make is not specific to asset class. To We have engaged in negotiations and discussions on specific individual assets to across each of the asset classes. And in many instances, to When particularly when someone comes forward on an unsolicited basis to express interest in an asset, Ultimately, the market speaks and generally, there's never a perfect correlation between the cap rates that we use for IFRS purposes and to What in a practical sense happens in a specific market and with a specific asset. All that to say, to Do I think that $15.03 is an accurate net asset value for Artis? To I would say that and I speak on behalf of the entire management team and the Board, we are very comfortable with $15.03 to And one can interpret that as they choose. And maybe just following up on some comments from the prior management to last quarter who noted that they were still in discussions with potential purchasers for ARTIS for the entire business. Would that still be the case following the reconstitution of the Board? No. As Jim already mentioned, we've to if I understand the question correctly, we've suspended all activities that were in place last year as it relates to to The strategic review as it relates to the retail spin, we have undertaken a very exhaustive exercise to Under the leadership of our Board of Trustees in this 100 day review that we will be coming back to the market on in the days ahead. To And the outcome of that, we look forward to presenting will include what the go forward to Vision and strategy is for Artis. And at this point, that go forward vision and strategy does not contemplate putting the company up for sale. So no plans for sale at the moment, but we'll hear more on the future of ARTIS in a few weeks. Would it be fair to say that those potential purchasers would still be interested? You're simply taking a bit of a step back to reassess at the moment? To Yes, I can't comment on that. We have not in a proactive way engaged with any parties to related to potential sale of the company. Have you received any inbounds since You've taken or reconstituted the Board? I can't comment on that. Okay. Well, I'll leave it there and turn the call back. Thank you very much. To thank you. Your next question comes from Jenny Ma with BMO. Jenny, please go ahead. To Thank you and hello everybody. Sameer, I wanted to get your thoughts on the distribution. To We've seen some high profile distribution cuts in the very recent past. And I know earlier in the fall, there was a view of raising the distribution by a little bit on the back of some lower G and A costs. So just net net, how are you feeling about the distribution? To excuse me if I'm getting ahead of the 100 day review results. But when you look at what other REITs have done and when you look at where the other diversified to our trading at in terms of yields. Has your philosophy or approach to this distribution changed in light of the past few months? To Thanks, Jenny. I'll provide a couple of comments and then I'll also invite Jim to share his thoughts. But let me simply say that to We have we believe a safe distribution, a conservative distribution to that we are both including on a ratio to FFO and AFFO that includes to The bump that the predecessor board announced and management announced in November and on a go forward basis, to We are certainly very comfortable with this distribution. We do not intend to reduce the distribution. And insofar as to know what may happen with the distribution going in the other direction upwards. I think we'll have to just wait and see what the Board determines to On the other end of the 100 day review and then also obviously how we perform operationally and financially to in the quarters ahead. Jim, do you want to add anything? Just very quickly, I think the As Sameer just mentioned, we remain very comfortable with that 3% distribution increase at the time that was implemented. I think it was appropriate and sustainable and likely could be increased further down the road. But to Again, we'll have to invite you all to wait for the results of the 100 day review. Okay. I guess we'll wait. To I want to ask about office leasing and the outlook. On your perch, you can see what's happening in to Canada and the U. S. And there's been a lot of talk about the rise or the revival of suburban office space. And I'm just wondering if you could talk to us about to If you're seeing any differences in the approach to any sort of moved suburban office between Canada and the U. S. And if to There's differences across the borders or just basically any color you could share with us. Sure. Again, let me invite Frank and Philip to comment respectively on the Canadian and U. S. Side. Okay. To Speaking about Canada, where our 2 major office markets in Canada are Manitoba and Alberta. To We haven't really seen any movement away from our downtown office in Manitoba. Again, it remains flat at about 86% occupied right now. It is slow to As far as new leasing goes, but we've been very, very solid on renewals. So and Part of the reason why we're doing well on renewals is the same reason why it's low on new leasing. It's the cost of new construction and relocating. To Tenants are tending to stay put and haven't been making any real decisions on Relocating or increasing or downsizing for that matter in recent quarters. We don't to Again, in those two markets, see any real change in our occupancy based on work from home. Alberta has its own problems right now and that's a demand problem for office space in general. But again, to There may very well be new requirements for more space for employees going forward, especially in the higher density offices, to more circulation space, larger workstations and we have some reason to believe that that could offset to Any of the work from home trends that we might see, especially in some of our government offices, we're finding now to They are already looking at possibly taking more space because of that to spread their people out a little bit more. To So hopefully that answers your question. Hey, Jenny. In regards to the U. S, to Because we do have a large suburban office and we're in very unique cities, so to speak, I can go by 1 by 1 quickly. To Madison, we are all we are completely suburban office and it's generally just a slight quieter market And we do see some level of the severity of COVID lockdowns in the downtown area of Madison has Given us a lot more looks and RFPs from downtown. So not we haven't closed any deal yet on that, but there's been a distinct interest where that's never been before. Minneapolis remains the epicenter of the political upheavals to from last year and that will continue on with the trial of the police officers starting next week to And overall Minneapolis market has been quiet. In Denver, we are starting to see interesting signs, particularly at Point of Inverness for our leasing. To And also particularly in Phoenix, where our assets ranging from Union Hills Office Plaza to Stapley and even MAX, to Again, primarily, I wouldn't call it quite suburban because Phoenix is a bit different that way, but definitely distinct nodes outside of the CBD. To We are seeing quite a bit of activity and has been going on for the last couple of quarters. So Phoenix from a suburban standpoint to For all our markets, is the strongest. So I guess in Phoenix's case, is that to from downtown or is that just an increase in demand that would have been targeted towards suburban anyway? Right. Because Geofinas doesn't have a significant CBD office product, it's a combination to Of people wanting to particularly for stable, let's say, it's a smaller square footage overall for the size of suites, to They have not been as COVID impacted. They still have been going to work. And overall in the market right now, I would say of all the states we're in, to Arizona by far is the most loose in policy and that also has created a lot of we're seeing actually a lot of to In migration from California, Oregon and Washington State. So that's also been something to Quite significant the amount of people that are moving in, particularly as how COVID fast forward essentially has potential. So we're seeing a lot of new companies coming into Phoenix. To Okay. That's interesting. Thank you for that color. And then my final question relates to the to A question for Jim. You've always maintained that proportion sort of in that high teens to Low 20% range. See a little bit of a downtick in Q4, but just in light of the back of the yields that we've seen over the very short term, to have that changed your view on where rates are? It looks like there's definitely momentum on the move up. Do you intend to maintain to That proportion of floating rate debt or have you been more active in locking in some of the historically low rates we've seen? I would say we have been a little more active in locking in some of the floating rate debt into longer term. We are keeping things still shorter term depending on the asset. If It's an asset that may or may not be subject to disposition in the relatively near future, then we keep the debt shorter term to avoid big mortgage penalties. But If it's an asset that is kind of considered core to the REIT, we would be looking to lock in that debt at longer term fixed rates. To So is it fair to say, we may expect a continuation of the downtick in the 1st couple of quarters of the year on the floating rate debt? Yes, I would say that's Likely. Okay. Sounds good. Thank you, everyone. To Thanks. Thank you. We have a following question from Mike Kornack with National Bank. Matt, please go ahead. To Hi, Al. Just wanted to quickly get a sense on the development side, if you could provide any to Color on the outlays with regards to remaining costs to complete and then how we should think of NOI coming in Particularly on the residential assets in Winnipeg. To Jim, do you want to take a lead on that? And then if you want to invite either Kim or Phil to add, please do so. Sure. So the largest piece of the development is of course the apartment building that's being built at 300 Main Street in Winnipeg. There is roughly, I'm going to say $90,000,000 to $100,000,000 left to spend on that to project that will be over the 2 year timeframe. We are expecting roughly 50% completion of that building by the end of this year From an occupancy standpoint and the balance at the end of 2022, that the tower is progressing well. To As I drove into the office this morning, they were standing the steel for the 37th floor on a 40 to Story building, so we're getting close to topping it out. On the to U. S. Developments, there will be the Parq 890 Phase 5 that we are just commencing. To Kim, do you have a price on what that was or do Phil? Yes, Phil. Maybe I'll turn that to Phil in a second. And then there's the joint venture with to Our partner Nuveen in Phoenix and I'll let Phil comment on that as well. Thanks, Jim. In regards to Parq90 Phase 5, to That will be a $55,000,000 project where we have 95% ownership in a joint venture with Trammell Crow. To And we have just, as I said before, broken ground. So that's just beginning now. We hope to complete construction to In the Q1 of next year, maybe even a little bit sooner, but we have had some rain delays as you probably heard in Texas in the last couple of weeks. To Park Ignatie 90 Phase sorry, Park Lucero East as we're calling it. It's really Park Lucero East is going to be a $60,000,000 project to And we also are beginning hopefully this month construction. So that also construction completion is anticipated to be In the Q1 of 2022. Okay. Thanks. And Jim, I don't know if you've disclosed this in the past, but what is the total Cost of $300,000,000 and the yield anticipated on that cost? It will be over $200,000,000 yield on cost will be somewhere in the low fours range. To Okay, perfect. Sorry? Sorry? Okay. Sorry, I've been corrected. It's Closer to a 5% yield on costs. Yes. And when you say it's 50%, but like is it being done in stages or is that just the lease So the first twenty floors we're expecting to get a partial occupancy permit by the end of the year And the top 20 floors will be a year later. Okay. That's great color. Appreciate that. Last one for me. I think in 20 to 21, you have Worley Parsons maturing. Is there any status update on the negotiations for renewal of that lease? Tim or Frank, do you want to comment? Yes. They're going to be moving out. To Okay. And any prospects at this point for releasing the space? There's been tours, but nothing on paper yet. Okay. Thanks, guys. Appreciate it. To ladies and gentlemen, as a final reminder, should you have a question, please press the star followed by the one. To there are no further questions at this time. Ms. Nichol, you may proceed. To Thank you, operator. That concludes our call for today. The webcast and the dial in numbers for an archived recording of this call can be found on our website. To please don't hesitate to reach out to us if you have any further questions. Thank you everyone for joining us today and have a good day. To ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you disconnect your lines.