Earnings Call: Q3 2020

Nov 6, 2020

Afternoon, ladies and gentlemen. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Autosuit's 3rd Quarter 2020 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. Today's discussion may include forward looking statements, which includes statements that are not statements of historical fact and statements regarding Artis REIT's future financial performance and its execution of initiatives to deliver unitholder value. Such statements are based on management's assumptions and beliefs. These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see Artis REIT's public filings for a discussion of these risk factors, which are included in the annual and quarterly filings, which can be found on Artis REIT's website and on SEDAR. Thank you. And I would like to turn the meeting over to Mr. Armin Martins. Please go ahead, sir. Okay. Thank you, moderator, and good day, everyone. Welcome to our Q3 2020 conference call. So again, my name is Armin Martens. I'm the CEO of Artis REIT. With me on this call is Jim Green, our CFO Kim Reilly, our EVP of Investments Phil Martin, EVP of U. S. Operations and Jackie Curry, SVP of Accounting. So again, thanks for joining us. Now as in the past, I'll ask Jim Green to review our financial highlights, and then I'll wrap up with some market commentary, and then we'll open the lines for questions. So go ahead, please, Jim. Thanks, Armin, and good afternoon, everyone. So these strange times continue. The 2nd wave of COVID is hitting all countries with more restrictions and government mandated shutdowns despite that. However, Artis continues to see good results from our operations. And in our opinion, we have completed an excellent quarter despite the presence of COVID. Our rent collections have been strong and thus far our tenants are weathering the storm quite well. Artists did not participate in the SECRA program proposed by the federal government, where we have been working with our tenants as needed to provide rent deferrals. And in some cases, we have provided rent abatements in exchange for an early renewal or longer term on the lease. Federal government has recently announced new rent relief program for tenants with the aid coming directly to the tenant and not involving a rent reduction by the landlord. We feel this is a major improvement in the program and we will work with our tenants as necessary to help them access this program. At the end of September, our rents receivable were down to approximately $8,000,000 from $12,000,000 at the end of June. We have a further $5,500,000 that we've agreed to defer under deferral agreements with our tenants. And while we feel the majority will ultimately be collected, we did book a reserve of approximately $2,100,000 against these balances, which we feel is adequate to cover any potential rent defaults. Our accounts receivable collection rates during Q3 were over 97% and have been over 98% for the month of October. Our leasing activity continues to be strong with over 600,000 square feet of new leases commencing in the quarter at a weighted average increase of over 6%. Interesting fact, the number is almost the same, roughly 600,000 square feet of leases physically negotiated during the quarter. And the average increase of that was 5.4%, which we feel is very good given the impact of COVID on the commercial rent market. You'll recall going back to 2018 that the REIT announced a planned series of new initiatives to surface value for the REIT. In our opinion, we've now virtually completed that series of planned initiatives and we've set ourselves a new series of initiatives including a further $550,000,000 of asset sales with the proceeds targeted mainly for debt reduction. This program is already well underway. In addition, we've announced a plan to spin off our Canadian retail properties into a separate entity. We believe this plan, which is aimed at reducing the diversified nature of Artis' portfolio, is still a potentially effective strategy. However, as announced in our press release, given the recent proxy fight initiated by one of our unitholders, the Board has determined to delay the unitholder meeting related to the spin off until a later date. Based on our Q3 NOIs, the REIT is 50.5% weighted in Canada and 49.5% in the U. S, so almost half half. As we continue to move forward, however, we expect the majority of future asset sales will likely be in Canada, and we expect this ratio to swing such that greater than 50% of our income will come from assets in the United States. On an asset class basis, we're 45.6% weighted in office, 19.2% weighted in retail and 35.2% in industrial. Specifically on retail, you may recall retail was only 17.2% of Q2. However, part of that swing was due to a fairly large bad debt provision recorded in Q2 on the retail tenant rents receivable. You will have noted or may have noted that we've added some new disclosure in our MD and A, breaking out a lot of our metrics by asset class. Hopefully, this disclosure is helpful to both the marketplace and to our analysts as investors continue to review our results and valuations. During Q3, we've completed 2 projects we had under development, both of which are 100% leased. And as of September 30, we really only had one project left actively under development, which is our 40 story residential project in Winnipeg. As detailed in our MD and A, we also have several development in the planning stages where construction has not actively started. However, they're proceeding well, and we would expect at least 1 or 2 of those to start during Q4 or Q1 of 2021. Our balance sheet reflects a slight improvement in our debt to GBV with the ratio now at 51.9% this quarter compared to 52.5% last quarter and 52.3 percent at year end. We did collect a fairly substantial mortgage receivable right at the end of the quarter. So that did not get applied to the debt, but did on October 1. So we expect further improvement in Q4 when you factor in that mortgage receivable collection plus some asset sales that are currently under unconditional contract. Artis does have a fairly significant portion of our debt maturing within the next 12 months, including roughly $503,000,000 of mortgage debt in addition to an unsecured debenture of $250,000,000 Some of that debt we've been deliberately keeping short term as it relates to assets that we plan to sell and we'll probably continue to do that with some of it. We don't anticipate any difficulty in refinancing the rest of it on longer term assets. Roughly $32,000,000 of that gets repaid anyway just from typical principal repayments during the next year. And funds are available on our line of credit, if needed, for any refinancing. Our NOI line this quarter was $71,000,000 compared to $70,200,000 last quarter, so an increase again. With the increase in NOI combined with lower interest rates and lower debt costs, our FFO for the quarter is up to $50,800,000 from $49,400,000 last quarter. On a per unit basis, FFO came in at $0.37 this quarter compared to last quarter and $0.34 in the comparative quarter last year. Again, as we did in Q2, we've added disclosure allocation. So on that math, it's $0.17 from our office portfolio, dollars 0.13 from our industrial portfolio and $0.07 from the retail portfolio. AFFO for the quarter was 0 point 2 $7 and $0.25 in Q3 of 2019. Our payout ratios are very conservative 37.8 percent of FFO and 51.9 percent of AFFO. On a same property basis, the results unfortunately were negative this quarter, 1.2%. And one of the largest factors in the drop is actually the parking revenue in the Western Canadian office sector as many tenants have canceled parking while they work from home during COVID. Industrial segment continues to show the strongest performance in both countries with 2.3% growth in Canada and 0.7% growth in the U. S. On a fair value basis, we as required under IFRS value, all our properties at fair value. And valuation is a little challenging in the current market due to COVID. However, we did have additional external appraisals done during the quarter and there's certainly no hard evidence to indicate that cap rates or discount rates or market rents have moved substantially. You may recall we recorded a fairly substantial reduction in value at the end of Q1. And for both Q2 and now Q3, we did not feel any significant adjustments were warranted and the net fair value adjustment was very nominal this quarter. So given that fair value of properties, we can now calculate the net asset value per trust unit. And our calculation is just using the equity on our balance sheet less the equity held by our 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 or NAV per unit was $15.35 this quarter compared to $15.40 last quarter. Asset declines, I'm going to say, is mainly due to FX, which on a stand alone basis would have decreased NAV by $0.23 And offsetting this is a gain of approximately $0.18 from our income for the quarter being in excess of our distributions. There we go. Hardist ended the quarter with approximately $48,000,000 of cash on hand $423,000,000 undrawn on our line of credit. Based on what we know today, we feel we have more than adequate 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, I'm pleased to highlight that we've announced a distribution increase of 3% commencing with the distribution that will be paid in January 2021. That completes the financial review for now. I'm happy to answer any questions later, but I'll pass it back to Armin for some more discussion first. Keep safe, everyone. Thanks, Jim. And so folks, as we all know, this has been a volatile and unprecedented year. But as it applies to ARTIS, the world really is behind us. ARTIS is clearly performing very well this year. We continue to make good progress on all key strategic fronts and are delivering strong performance metrics for our unitholders. So our rental increases, our FFO and AFFO per unit are all solid numbers. Our rent collections are good and continue to improve. Watch for more monthly updates from us on that front as well. So we're in great shape. And of course, we just printed an excellent quarter. We have every reason to believe we'll deliver a great Q4 as well and end the year strong and look forward to next year with optimism. Looking ahead, given our very conservative payout ratio and the progress we've made on our strategic initiatives, debt reduction will continue to be a top priority for us. As mentioned, we're confident of our ability to reduce our debt to GBV to the 45% range by the end of the second half of next year. And we're satisfied, of course, that as we improve our debt metrics, our price multiple will improve as well. And finally, remember, it was only in the Q1 of this year, the same year, we were trading over $13 and we think that kind of price is achievable in short order as well as we continue to improve our metrics and demonstrate progress on all of our strategic fronts. Now as Jim mentioned, falling floating interest rates are a natural boost to our earnings, which we think is structural and will remain with us long term. Lower for longer is clearly the new mantra or normal for interest rates. It is our view that liquidity and availability of credit will continue to improve as we get to the other side of this pandemic. And all of this, of course, will be good for real estate and REIT valuations. Our property disposition program progressed very well during Q3, Q3. Looking ahead for this year, selling by selling, I mean closed or unconditional, about $300,000,000 by year end with another $250,000,000 to $300,000,000 by summer next year. So $550,000,000 to $600,000,000 by the summer of next year. But most of it done this year and again, our price is consistent with our IFRS NAV of $15.35 and again used for debt reduction and improvement of our liquidity. It's important to note, of course, that as our financial metrics improve, so is our portfolio of properties. We're continuing to improve our office and retail waiting I'm sorry, we're continuing to reduce our office and retail waiting and increasing our ownership of industrial properties. We're streamlining and high grading our portfolio as well as reducing the number of secondary markets we're in. And in a sense, this is a private equity model that we're implementing to maximize unitholder value. The office and retail markets have been challenging this year, but on balance, our overall portfolio is performing well. Interesting to note, of all the office markets Artis is in, Toronto, Winnipeg, Calgary, Vancouver, Madison, Minneapolis, Denver, Phoenix, it's Madison and Minneapolis that have printed positive absorption numbers in terms of the markets themselves. But a new paradigm is upon us in terms of office and retail and even industrial. And I mentioned this at our AGM. Excuse me again. Well, what a difference a 100 year pandemic makes in terms of office. We will see more work from home, but maybe not so much, but we'll see more because creativity matters, productivity matters and teamwork matters. We believe there will always be needs for office space, of course. However, we do expect that office tenants the office tenant market will settle down to about 1 to 2 work from home days per week. We expect office tenants to need more space per employee, and therefore, we expect the demand for suburban office space to increase versus CBD. And in our case, as you are aware, about 75% of artists' property office properties are suburban 25% CBD. In terms of retail, the paradigm shift has hit retail in an accelerated manner this year. Online shopping has potentially peaked during this lockdown. But as we move to the other side of the pandemic, equilibrium between online and in person shopping should be achieved. And in a way, it's good to get that over with, so to speak. We do point out that not all retail is bad retail. Open air service sector strip malls needs based retail. Retail will always be in demand. Shopping in principle has to be done in person. And in a way, this kind of retail is akin to Showcase Industrial, and that's the kind of retail that Artis primarily has. And Showcase Industrial, as you know, is a very good asset class. So not all retail is bad retail. There's still good opportunities in retail. In terms of industrial, while industrial come up again as a winner during this pandemic, generally speaking, we will see demand for industrial space increase. And in our case, Artis has about we own about $2,000,000,000 of industrial properties, about $1,000,000,000 on each side of the border. And it's all performing well. It has a very good track record and continues to deliver solid organic growth. And our industrial development pipeline is also on track to deliver excellent results. Now as I mentioned before, stay tuned for more good news on this front as we move to expand our industrial development pipeline with institutional joint venture partners. We do not have an announcement to make on that front yet, but we have signed a comprehensive letter of intent with a global institutional partner that focuses only on real estate to develop an $80,000,000 that's Canadian dollars industrial development in Phoenix. We're just trading paper on the JVA. And as we get I mean, that is completed, which is the target before the end of this year, we'll give you more color on that. But it's a good validation. And this is a fund that manages over $1,000,000,000 of real estate worldwide. It's a good validation of our management team on our industrial development platform and our expertise. So we're looking forward to that JV and many more in the year ahead. So again, some key takeaways for this quarter and beyond. ARTIS will deliver very good results this year. We have poised to be one of just a few weeks that will actually increase its FFO per unit in 2020, and next year will be better than this year. We feel that our distribution hike of 3% is both modest and prudent and it sets the stage for multiple annual distribution hikes in the years ahead. Also in terms of return of capital, I'll watch for artist keep its NCIB active and a prudent manner during the months and years ahead as well. And it's not just about a select accretive use of capital. It's very accretive, of course, at these prices. What about tax planning for our unitholders as well? We do always have to keep all aspects of the capital markets and of finance in perspective. But income tax planning, there's recapture of depreciation and there's capital gains. All these things have to be taken into account when we execute on our sales program. We can't just push a button and say sell. We've got to do it in a methodical and well planned manner, and that's what we are doing. When we look at our 5 year model, we feel our model is very conservative. And the distribution hikes that we're talking about and the NCIB that we're discussing are very reasonable and very prudent and very much affordable. As a matter of fact, possibly, we can do even more. So again, Artis is not your typical diversified read anymore. This is important, and this is because of a lot of hard work in the part of the board and management. It didn't happen overnight. But during the past 2 years, we've made very good progress in streamlining and improving our portfolio by asset class and geography, and we'll continue to do so as we saw noncore retail and office properties between our next summer and in the quarters ahead. As Jim mentioned, we did about we did a lot of leasing this last quarter. I mean, that's a typical quarter for us. We're working very hard. We did over 700,000 square feet of leasing, 105 leases, 35 were new leases, which are always challenging, and then 70 of them were reduced to renewables. And so we've got a diversified portfolio. We make the point that being diversified is not easy to do. Not everybody has that experience to manage a diversified portfolio, 3 different asset classes, real estate. And at the portfolio level and then even at the capital markets level, at the board level, it's not that easy to do. If you look at the charts, we feel we've got a great track record of doing that and we're the right team, management team to do it. You can't just push a button and say, we'll change the management team or you can't just push a button and say, we'll change the board because there isn't that much expertise out there that can manage a diversified portfolio the way we manage it. So we feel we're in good shape. That does complete my part of this report. We trust that you'll find, as Jim mentioned, our new MD and A format even more informative and useful to analyze and value in Artis Week. Looking ahead, as we mentioned, always saying, we'll continue to work hard and keep our buildings full whilst bringing the rents up to market and consistently streamlining and improving our portfolio. And to be clear, the integrity of our balance sheet, our earnings growth and implementing our strategic initiatives and staying on the path of continuous improvement, and that's an important path. As I said, it doesn't happen overnight. And the results what we see results we've delivered this year is an example of that objective to stay on that path of continuous improvement. All that is of utmost importance to us. So I'll turn the mic over to the moderator now to answer questions ask for questions. But before I do, I just want to make the point that I think we all know that ARTIS is in the early stages of an activist campaign, if that's what I can call it. But we want to focus we'd like the questions in this call to focus on ARTIS, on the good week that we are in a great quarter and the results in the operational and anything to do with ARTIS, not on the activist campaign. There's a lot of days ahead of us to do that. So if you hear me say the word activism or activist or sandpiper, doesn't mean that I want to talk about it. So with that, I'll now let the moderator take open field questions. Thank And your first question will be from Liam Chen at IA Securities. Please go ahead. Thank you and good afternoon. I was just wondering if you could give us a little bit more color specifically regarding your general outlook in terms of the Canadian office segment. Naturally, it depends on how long the implications of COVID are going to last, especially now that we're in the middle of a second wave and perhaps even getting some subsequent waves. So given this extended period of uncertainty, I know you briefly mentioned your overall thoughts, but I was just wondering if you've gotten some updates as to how employers are going to reimagine their office space going forward? Yes. That's a good question. All of us are hopeful that and we believe we're seeing it a little bit that more space is required per employee and tenants got to deliver at least more space. This is one of the reasons that there could be a push for more demand for suburban office versus downtown and then because the rental rates at the end of the day do matter. And depending on which city you're in, 90 day commute each way plus 30 minute commute minimum to get to your office space is an overrated experience. So these are still uncertain times with the office market. There will be a paradigm shift for sure upon us. There will be more work from home. We don't know yet. I think long term, everybody wants to be downtown and be in an office space with and we can work collaboratively with their teammates and with their co employees. But for now, I think and we're seeing negative absorption, as you know, in Toronto, Winnipeg, Calgary and Vancouver even. And that we should and there's a lot of subleasing taking place, especially in Toronto. We should expect that to continue. And we I thought by this time, we'd be out of this pandemic thing, but we're not. And I think we should expect next year to be a slow year as well, and we should not expect positive absorption anywhere and potentially even more subleasing before things get back to normal. But by no means, by one, I would say the urban living is dead or the downtown is dead. There will always be demand for office space. There just always will be. But more space per employee will be needed. I believe suburban office will become more popular. It could become the next big thing. Availability of space at a cheaper rate, availability of parking, ability to be closer to the soccer fields and the schools where the kids are and even to your support of the in laws and your support system, all that will matter. So it's not very centric on everything that I've said, but that's our set for right now. It's early days still. I'm 100% believer that office space will always be with us, demand will always be with us, but there will be a shift in the nature of the demand. Thank you. And similarly, can you give us some more details about the market conditions in Minnesota? If you could talk about your views there going forward? Yes. So there's been slight absorption in the first half this year in Minnesota and Minneapolis, St. Paul market as well as Madison. Now in fairness, I believe most of that was suburban. There was a little bit of decline downtown in those markets. But they've outperformed most markets in North America in that sense because it's been a disruptive year we tend to put their pens down and said, we're not leasing this space. We're hanging in there. We'll do short term renewals. And when we get to the other side of this pandemic, we'll start making decisions again. So that's a tough year of the year we're in. In our case, our office properties are performing okay. We're still not good enough. It's been our greatest in terms of drop in the same drop NOI was retail first, then office and then industrial was positive. But we see ourselves coming out of this and being and obviously our portfolio being in pretty good shape, all things considered vis a vis the market conditions. Great. Perfect. And just lastly, very quickly. So just regarding the retail spin off, other than the party that was mentioned in the press release, I was just wondering what kind of feedback you've received from other stakeholders so far on this initiative since the announcement in September, and what's the current action plan and timeline here? So I think the press release is clear on the action plan there. When we first reviewed this retail spin off, it's about 120 day process. We had 2 financial advisers working with us and recommending it, unanimous board support. And we are seeing the month of September, we got nothing but positive feedback. Some of the guys just said, you're doing fine, don't bother with the spin off. Nobody criticized it. But then, and activists have come up to disagree. And I'm not sure if it was opportunistic or not. But we're doing this we're not jamming this down anybody's throat and we won't. We said our AGM was well disclosed that we're contemplating and proposing a spin off. We always said it would be up to the unitholders. We take it to unitholders for both. We're doing it in a tax efficient manner. And that because of that, because we're not jamming it down to anybody's club because it's tax efficient and totally democratic, it requires twothree vote of approval from the preferred and the common, not 50.1%. Jim's looking at me here. And because of that, that's one of the factors that we could consider and say, well, maybe we'll just put this aside right now. And then we last say 2 thirds of the core. We'll just put this aside right now. We firmly believe in it, and we'll deal with another game. And we'll just focus on the board acquisition as it won't for now. The thing about the retail spin off is the empirical data speaks for it. It's a very good idea. And one thing I'm disappointed in is activists coming out and not having a better idea, just saying no, status quo, sell down. Okay, there's 2 questions when we say when somebody says you sell retail, there's 2 questions to ask. 1 is to whom and the other is to what price. And then what about then the third thing is what about the income tax consequences? You've got to think of all aspects. Most of our investors are retail investors. They're taxable investors. If you have nontaxable GP of an activist fund, maybe you don't care. You only get paid only on the top line. But this but we look at all aspects, and we're very careful to do this the right way. We look at the way we're trading, look at our FFO breakout by asset class, we're clearly not getting any value at all for retail. And we know when you spin off a small cap retail REIT, it's not necessarily going to trade well. It will trade below NAV. And some people say it will trade like an orphan. Well, there's a lot of orphans out there. It's a big orphan. If you play in terms of retail REITs trading below NAV right now, an office REITs trading below NAV. We think it's a brilliant idea still. A very good idea is to still the retail spin off. It's tax efficient and you get something. Then you get a retail unit in your hand. And if you're a taxable investor, you can sell the unit in ghetto. If you're nontaxable, you can stay in it and watch the retail REIT sell down its properties at a NAV, which is higher than the trading price and give you back a good return of capital. There's so much optionality there. And again, as I said, diversified leads is hard to run. A diversified leads is an excellent value proposition. Every all diversified leads in Canada have excellent value propositions. But if you want maximum value, if you want to get NAV, well, now you're in a value trap. Now how do you get on with that? How do you get on this value trap to get the full NAV of $15.35 Well, now you've got to think outside the box. You can't just say, well, sell and pay taxes or this or that. You've got to think outside the box and you've got to look at what is working. What is working is pure play leads. That is working. They're getting better price multiples than we are. And so that's why we went that direction. And I still think think retail spin offs is a great idea. It moves us forward to just being an office industrial REIT, which we can then spin off again or we privatize. Either way, it gets us to a better price multiple for the Austin Industrial. Without the retail, and the retail, we get whatever price we get, it's more than we're getting now. So thanks for mentioning that question. I answered it much of a longer answer than I thought it would. That's great. Thank you for your comments. I'll leave it there. I'll turn it back. Thanks. Thank you. And Your next question will be from Jonathan Kelcher at TD Securities. Please go ahead. Thanks. Good afternoon. First question, just on the asset dispositions. Maybe especially the 2 large ones, the Concord portfolio and Shoppers Delta, could you maybe give a little bit of color on them in terms of who looked at them, who the potential buyers were and who ultimately bought them? Yes, I'll let Kim weigh in here. Yes, for sure. And I can't say the names of the purchases, but I can say in terms of who's looking at all of our dispositions right now, it's kind of a mix of larger fund managers, private individuals and some family office. So kind of a little bit of a mix. So Concord specifically was looked at by multiple buyers. We didn't have it listed, but we think that we achieved a great value. That one does have some future density. So there's an apartment complex that could be developed there. We're in the kind of final stages of approval on that and anticipate that will be approved early next year. Same thing with Delta, Delta Shoppers, it has some density as well. I do think that the purchaser plans to just continue to operate it as a retail center, maybe kind of a land play and then future development potential as well. Okay. And Concord, was that that's a stabilized 5% cap rate to full building? That is more of a actual in place kind of going forward next 12 months. Okay. In terms of now that you're deferring the retail spin off and you're still looking to sell a fairly larger number of assets next year, will you sort of tailor that more towards retail asset sales now? Is there any change in plan there? No, you're right. It will be a combination of retail and more office. A year ago, before this pandemic came upon us, we shifted the paradigm and while we're doing it. We thought we can sell down all our retail in a 3 year period. We don't think that anymore because we don't want to give it away, right? But we can continue to sell some retail and improve our balance sheet and improve our portfolio streamline our portfolio. And then we'll sell some more office as well and we'll grow industrial. Okay. And then just on the development, were Park 890 and Linden Ridge, were they fully in NOI? Were they in NOI for the full quarter? Mark, 890 was, Linden Ridge is not. And when how much of the quarter was it then? One tenant at Linden Ridge has taken occupancy. And off the top of my head, Jonathan, I'm sorry, I'm not sure when the rent actually commenced, but I'm guessing it wasn't maybe September at the earliest? Correct. Okay. Okay. And then the bad debt recovery you got, that was included in Q3 NOI, correct? Correct. Okay. That is it for me. I will turn it back. Thanks. Thank you. Next question will be from Matt Logan at RBC Capital Markets. Please go ahead. Thank you and good morning. When we think about some of your asset sales, you had mentioned there'd be tax consequences or potential tax consequences. If The REIT sold all of its assets today in a hypothetical, what would they be? Like how much could we see in terms of value erosion through tax leakage? I can give you my answer because I'm not a CPA. And he looked at me. He said, he's never giving me a warning, look, don't say that you're stuck in the public domain. But in theory, Matt, if we sold all of our assets that are now to $15.35 that would be the equivalent to selling the REIT at $9 a unit for example. It's just a killer. That is why when we conducted a strategic review, the idea was to do a unit based transaction. That was the whole goal. If artists and we're and if the pandemic had not come, we wouldn't be having this conference call today possibly that we're that close to a strategic transaction for the whole REIT and then it would have been a unit based transaction, tax efficient for the unitholders. So, yes, it's not that simple. Just saying push a button and sell. But as I said, there is a risk of an activist not being aligned with the universe, especially when the activist is in middle is partway through halfway through a 5 year fund. The more the time goes by in a 5 year fund, the less the GP and the activist fund is aligned with artist unit holders or even their own LP unit holders. And then and as I said, the promote structure, the promote fee is based on top line, not based on bottom line. That's another misalignment with artist unitholders. And most of our investors, we know they're retail investors, they're taxable. If you have artist units in an RSP account, that's different. That's different. And then you can plan accordingly. And if you're a solvent fund or pension fund, that's different. But for most of our investors, and in our case, I'm taxable. I'm watching that. I'm always looking at the after tax result of all of our transactions. And to your point, Matt, it's really not value erosion from the tax. It would just impact if you sold all your assets, you would have, let's say, dollars 15.35 in cash to distribute to your unitholders. It would just affect the portion of that $15.35 that's taxable when you get it back from the company, yes. As you saw the units, Matt, it's just capital gains with young men, not recapture. That's the difference, right? And recapture is a big thing the longer we own our properties. Fair enough. Maybe just changing gears. During the quarter, you put out a press release which outlined the outcome of the strategic review. With over 100 investors that were reached out to. Have any of them come back to the table given what would have been very solid operating results here over the last two quarters? So I mean, the answer is yes, Some ongoing dialogue does is taking place and interest continues. But there's nothing much more we can say on that front. And changing gears in terms of your planned retail spin out, would it be fair to say that has been put on pause indefinitely? And if so, what really are your top 3 strategic initiatives over the next 12 months? Is it simply debt repayment? Or how do we think about the balance between deleveraging and the NCIB and anything else you might have in regards? Yes, we'll stay the course. I mean, it's interesting, but even the activists when it wasn't that long ago, they were saying that, Armin, you're doing a good job. Artists are doing all the right things. And then they forgot to say that in their press release. But we'll stay in the course. It's quite clear what we're doing. We're signing another $550,000,000 of properties. A good chunk of that will be done by Christmas, paying down our debt to 45%. We know what our earnings profile looks like. We've got some good office leasing kicking in, in Q4 and Q1 as well. And so we're in good shape. And the 3% distribution is a model. It's very much very prudent and very affordable at this point in time, and it's the right thing to do to reward our investors because of what they've gone through or evolved and experienced in the past year. The NCIB is a great thing because of our unit price right now. It's very accretive. But also it's a way of us sheltering capital gains when we disclose the properties. As we run out of Calgary office properties to sell, we'll be hit with capital gains, not just to recapture on depreciation. And at least the NCIB is the way to shelter capital gains the recapture to deal with on the depreciation. So we're in a good place right now. We've got a good plan. We're moving forward. And we're not spinning off the retail right now, but we are shrinking retail, and we're shrinking Cement office as well. And it's all all of it makes us increases our rating in industrial. It will improve our earnings and improve our balance sheet. It's got to, sooner or later, improve our price multiple as well. So we feel good about where we are, without a doubt. And with the leasing that you've got on the horizon, together with improving rent collections, do you think we could see a return to positive same property NOI growth in 2021? It will happen. I mean, if for no other reason, we pitch at the bottom this year with our retail, right? It will happen, for sure. The end is near as the sign was says, right? So things are looking up for us and we'll get back to that positive. We were so proud. We had it 7 was it 9 consecutive quarters? We had a positive same property NOI growth. We're positive of that, And now we just hit 2 consecutive negative. But it's a 100 year pandemic. We'll get through this and our numbers will improve, including the same property numbers for sure. But suffice it to say with all the work that you're doing, at least the outlook is for generally stable results in the near term? Yes, stable. Stable with I believe you'll see FFO per unit improvement, but stable and improving. Again, it's a pandemic. We're not expecting a spike in earnings and a spike in the same property, but we're in very good shape. And as I said, we see ourselves being able to maintain good earnings, FFO per unit, whilst paying down debt. Thank you. And at this time, I would like to turn the call back over to Mr. Martin. Well, thank you very much, moderate and everybody on the call. We appreciate your interest. We hope everybody has a good Friday. Again, we feel very good about our results and about our outlook. We look forward to remaining engaged with all of our investors in the weeks months ahead. Thank you very much. Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending.