Good 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 Artis REIT's third quarter 2020 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 followed by one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. 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 unit holder 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. I would like to turn the meeting over to Mr. Armin Martens. Please go ahead, sir.
Okay. Thank you, moderator, and good day, everyone. Welcome to our Q3 2020 conference call. Again, my name is Armin Martens. I'm the CEO of Artis REIT, and with me on this call is Jim Green, our CFO, Kim Riley, our EVP of Investments, Philip Martens, EVP of U.S. Operations, and Jackie Curry, SVP of Accounting. 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. Go ahead please, Jim.
Thanks, Armin, good afternoon, everyone. These strange times continue. The second 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. 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. Artis did not participate in the CECRA program proposed by the federal government. However, 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 CAD 8 million from CAD 12 million at the end of June. We have a further CAD 5.5 million that we've agreed to defer under deferral agreements with our tenants. While we feel the majority will ultimately be collected, we did book a reserve of approximately CAD 2.1 million 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 sq ft of new leases commencing in the quarter at a weighted average increase of over 6%.
An interesting fact, the number's almost the same, roughly 600,000 sq ft of leases physically negotiated during the quarter. 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 CAD 550 million of asset sales with the proceeds targeted mainly for debt reduction. This program's already well underway. In addition, we've announced the 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.
As announced in our press release, given the recent proxy fight initiated by one of our unit holders, the board has determined to delay the unitholder meeting related to the spinoff until a later date. Based on our Q3 NOIs, the REIT is 50.5% weighted in Canada and 49.5% in the U.S., almost half and 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 on our MD&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 two projects we had under development, both of which are 100% leased. As of September 30th, we really only had one project left actively under development, which is our 40-story residential project in Winnipeg. As detailed in our MD&A, we also have several development projects in the planning stages where construction has not actively started.
However, they're proceeding well and we would expect at least one or two 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% at year-end. We did collect a fairly substantial mortgage receivable right at the end of the quarter. That did not get applied to the debt, but did on October 1st. We expect further improvement in Q4 when you factor in that mortgage receivable collection, plus some asset sales that are currently under an additional contract. Artis does have a fairly significant portion of our debt maturing within the next 12 months, including roughly CAD 503 million of mortgage debt, in addition to an unsecured debenture of CAD 250 million.
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 CAD 32 million of that gets repaid anyway, just from typical principal repayments during the next year. Funds are available on our line of credit if needed for any refinancing. Our NOI line this quarter was CAD 71.0 million compared to CAD 70.2 million last quarter, so a nice increase again. With the increase in NOI combined with lower interest rates and lower debt costs, our FFO for the quarter is up to CAD 50.8 million from CAD 49.4 million last quarter.
On a per unit basis, FFO came in at CAD 0.37 this quarter compared to CAD 0.36 last quarter, and CAD 0.34 in the comparative quarter last year. Again, as we did in Q2, we've added disclosure breaking out our FFO from each asset class using that percentage of NOI as the method of allocation. On that math, it's CAD 0.17 from our office portfolio, CAD 0.13 from our industrial portfolio, and CAD 0.07 from the retail portfolio. AFFO for the quarter was CAD 0.27, and CAD 0.25 in Q3 of 2019. Our payout ratios are a very conservative 37.8% of FFO and 51.9% of AFFO.
On a same property basis, the results, unfortunately, were a 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. The 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. Valuation's 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.
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. Given that fair value of properties, we can now calculate the net asset value per trust unit. Our calculation is just using the equity on our balance sheet, less the equity held by our preferred unit holders and divided by the number of common units outstanding at the end of the quarter. On that basis, the net asset value or NAV per unit was CAD 15.35 this quarter, compared to CAD 15.40 last quarter. The asset declines, I'm going to say, is mainly due to FX, which on a standalone basis would have decreased NAV by CAD 0.23. Offsetting this is a gain of approximately CAD 0.18 from our income for the quarter being in excess of our distributions.
On the wrong page here. There we go. Artis ended the quarter with approximately CAD 48 million of cash on hand and CAD 423 million 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. 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.
Hey, thanks, Jim. Folks, as we all know, this has been a volatile, unprecedented year. As it applies to Artis, the worst 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 unit holders. 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. 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. We're satisfied, of course, that as we improve our debt metrics, our price multiple will improve as well. Fondly remembering it was only in the first quarter of this year, the same year, we were trading over CAD 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. All this, of course, will be good for real estate and REIT valuations. Our property disposition program progressed very well during Q3, in the third quarter. Looking ahead for this year, we anticipate selling, by selling I mean closed or unconditional, about CAD 300 million by year-end, with another CAD 250 million-CAD 300 million by summer next year. CAD 550 million-CAD 600 million by the summer of next year. With most of it done this year, and again, at prices consistent with our IFRS NAV of CAD 15.35.
Again, used for debt reduction and improvement of our liquidity. Excuse me. It's important to note, of course, that as our financial metrics improve, so does our portfolio of properties. We're continuing to improve our office and retail weighting. I'm sorry, we're continuing to reduce our office and retail weighting 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. In a sense, this is a private equity model that we're implementing to maximize unit holder 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.
A new paradigm is upon us in terms of office and retail and even industrial. I mentioned this at our AGM. Excuse me again. 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. Creativity matters, productivity matters, and teamwork matters. We believe there will always be needs for office space, of course. However, we do expect that the office tenant mark will settle down to about one to two 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. In our case, as you are aware, about 75% of Artis' office properties are suburban, 25% CBD.
In terms of retail, the paradigm shift is at retail in an accelerated manner this year. Online shopping has potentially peaked during this lockdown. As we move to the other side of the pandemic, equilibrium between online and in-person shopping should be achieved. 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 will always be in demand. Shopping in principle has to be done in person. In a way, this kind of retail is akin to showcase industrial, and that's the kind of retail that Artis primarily has. Showcase industrial, as you know, is a very good asset class. Not all retail is bad retail. There's still good opportunities in retail.
In terms of industrial, well, industrial come out again as a winner during this pandemic. Generally speaking, we will see a demand for industrial space increase. In our case, we own about CAD 2 billion of industrial properties, about CAD 1 billion on each side of the border. It's all performing well. It has a very good track record and continues to deliver solid organic growth. 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 a CAD 80 million, that's Canadian dollars, industrial development in Phoenix. We're just trading paper on the JVA, and as we get that is completed, which is the target before the end of this year, we'll give you more color on that. It's a good validation. This is a fund that manages over CAD 1 billion of real estate worldwide, and it's a good validation of our management team and of our industrial development platform and our expertise. We're looking forward to that JV and many more in the year ahead. Artis will deliver very good results this year.
We are poised to be one of just a few REITs 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, watch for Artis to keep its NCIB active in a prudent manner during the months and years ahead as well. It's not just about a select accretive use of capital. It's very accretive, of course, at these prices, but about tax planning for our unit holders as well. We do always have to keep all aspects of the capital markets and of finance in perspective. 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 a sales program. We can't just push a button that says 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 five-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. A matter of fact, possibly we can do even more. Again, Artis is not your typical diversified REIT anymore. This is important, and this is because of a lot of hard work on the part of the board and management.
It didn't happen overnight, but during the past two years, we've made very good progress in streamlining and improving our portfolio by asset class and geography, we'll continue to do so as we sell non-core retail and office properties between now and next summer and in the quarters ahead. As Jim mentioned, we did a lot of leasing this last quarter. That's a typical quarter for us. We're working very hard. We did over 700,000 sq ft of leasing, 105 leases, 35 were new leases, which are always challenging, then 70 that were released renewals. 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, three different asset class real estate at the portfolio level 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, managing 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." There isn't that much expertise out there that can manage a diversified portfolio the way we manage it. We feel we're in good shape. That does complete my part of this report, and we trust that you'll find, as Jim mentioned, our new MD&A format even more informative and useful in analyzing and valuing Artis REIT. Looking ahead, as we always say, 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.
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 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. I'll turn the mic over to the moderator now to ask the questions. Before I do, I just want to make the point. I think we all know that Artis is in the early stages of an activist campaign, if that's what I can call it. We want to focus.
We'd like the questions in this call to focus on Artis, on the good REIT that we are, the great quarter, and the results and the operational and anything to do with Artis, not on the activist campaign. There's a lot of days ahead of us. Nine days ahead of us to do that. If you hear me say the word activism or activist or Sandpiper, it doesn't mean that I want to talk about it. With that, I'll now let the moderator take over and field questions.
Thank you, sir. Ladies and gentlemen, if you do have a question at this time, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Should you decide to withdraw your question, you will need to press star followed by two. If you're using a speakerphone, you will need to lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Liam Chan at iA Securities. Please go ahead.
Thank you. Good afternoon. I was just wondering if you'd give us a little bit more color, specifically regarding your just 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. Given this extended period of uncertainty, I know you briefly mentioned your overall thoughts, but I was just wondering if you've got 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 have got to deliberately lease more space. This is one of the reasons that there could be a push for more demand for suburban office versus downtown because the rental rates, at the end of the day, do matter. 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. These are still uncertain times with the office market. There will be a paradigm shift for sure of products. 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 and work collaboratively with their teammates and with their co-employees. But for now, I think we're seeing negative absorption, as you know, in Toronto, Winnipeg, Calgary, and Vancouver even. There's a lot of subleasing taking place, especially in Toronto. We should expect that to continue. I thought by this time we'd be out of this pandemic thing. We're not. I think we should expect next year to be a slow year as well. We should not expect positive absorption anywhere, potentially even more subleasing before things get back to normal. By no means am I one that would say that urban living is dead or the downtown is dead. There'll always be a demand for office space. There just always will be. 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, your in-laws and your support system, all that will matter. It's not very scientific, everything that I've said, but that's our assessment right now. It's early days still. I'm a 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. Similarly, can you give us some more details about the marketing conditions in Minnesota? You could talk about your views there going forward.
Yeah. There's been slight absorption in the first half this year in Minnesota, in the Minneapolis-St. Paul market, as well as Madison. In fairness, I believe most of that was suburban. There was a little bit of decline downtown in those markets. They've outperformed most markets in North America in that sense, because it's been a disruptive year where tenants have put their pens down and said, "We're not leasing new space. We're hanging in there. We'll do short-term renewals. When we get to the other side of this pandemic, we'll start making decisions again." That's a tough year of a year when, in our case, our office properties are performing okay. They're still not good enough. In terms of drop, the sharp drop on the line was retail first, then office, and then industrial was positive.
We see ourselves coming out of this and we see our portfolio being in pretty good shape, all things considered, vis-a-vis the market conditions.
Great. Perfect. Just lastly, very quickly. Just regarding the retail spinoff. 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?
I think the press release is clear on the action plan there. When we first reviewed this retail spinoff, it's about a 120-day process. We had two financial advisors working with us and recommending it. Unanimous board support. During the month of September, we got nothing but positive feedback. Some investors said, "You're doing fine. Don't bother with the spinoff." Nobody criticized it. An activist has come out to disagree. I'm not sure if it was opportunistic or not. We're not jamming this down anybody's throat, and we won't. At our AGM was one of the slides that we were contemplating and proposing this spinoff, but we always said it would be up to the unit holders. We'd take it to unit holders for a vote. We're doing it in a tax-efficient manner.
Because of that, because we're not jamming it down anybody's throat, because it's tax efficient and totally democratic, it requires two-thirds vote of approval from the preferred and the common, not 50.1%. Jim's looking at me here. Because of that's one of the factors that made the committee consider and say, "Well, maybe we'll just put this aside right now." When we say two-thirds, it's two-thirds of the quorum. We'll just put this aside right now. We firmly believe in it, and we'll deal with it another day, and we'll just focus on the board requisition vote for now. The thing about the retail spinoff is the empirical data speaks for it. It's a very good idea. The one thing I'm disappointed in is activists coming out and not having a better idea, just saying, "No. Status quo.
Sell down." There's 2 questions when somebody says to sell retail. There's 2 questions to ask. One is to whom, and the other is to what price? Then the 3rd 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're a non-taxable GP of an activist fund, maybe you don't care. You only get paid only on the top line. We look at all aspects, and we're very careful to do this the right way. We look at the way we're trading. We look at our FFO breakup by asset class. We're clearly not getting any value at all for retail. We know if you spin off a small-cap retail REIT, it's not necessarily going to trade well. It'll trade below the NAV.
Some people say it'll trade like an orphan. There's a lot of orphans out there. It's a big orphanage in terms of retail REITs trading below NAV right now and office REITs trading below NAV. We think it's a brilliant idea still, a very good idea still, the retail spinoff. It's tax efficient, you get something then. You get a retail unit in your hand, and if you're a taxable investor, you can sell the unit and get out. If you're non-taxable, 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. Again, as I said, the diversified REIT is hard to run. A diversified REIT is an excellent value proposition.
All diversified REITs in Canada are excellent value propositions. If you want maximum value, if you want to get NAV, well, now you're in a value trap. How do you get out of that? How do you get out of this value trap to get the full NAV of CAD 15.35? Well, 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 REIT. That is working. They're getting better price multiples than we are. That's why we went that direction. I still think the retail spin-offs, it's 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 office industrial without the retail. The retail REIT, whatever price we get, it's more than we're getting now. Thanks for mentioning that. Asking me that question. It took me a longer answer than I thought it would.
That's great. Thank you for your comments. I'll leave it there. Turn it back. Thanks.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. 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 two 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?
I'll let Kim weigh in here.
Yeah, for sure. I can't say the names of the purchasers, 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. Kind of a little bit of a mix. 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. 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 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. Concord, that's a stabilized 5% cap rate? The full building?
That is more of an actual in place kind of going forward next 12 months.
Okay. In terms of now that you're deferring the retail spin-off, 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'll be a combination of retail and more office. A year ago, before this pandemic came upon us, we shifted the paradigm. While we're doing it, we thought we can sell all down all our retail in a three-year period. We don't think that anymore because we don't want to give it away. 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. Then just on the development, were Park 8Ninety and Linden Ridge, were they in NOI for the full quarter?
Park 8Ninety was. Linden Ridge is not.
How much of the quarter was it in?
One tenant at Linden Ridge has taken occupancy, and off the top of my head, Jonathan, I'm sorry, I'm not sure when their rent actually commenced, but I'm guessing it was maybe September at the earliest.
Correct.
Okay.
Okay. The bad debt recovery you got, that was included in Q3 NOI, correct?
Correct.
Correct.
Okay. That is it for me. I will turn it back. Thanks.
Thank you. Next question will be from Matthew Logan at RBC Capital Markets. Please go ahead.
Thank you, and good morning.
Hey, Matt. Go ahead.
When we think about some of your asset sales, you had mentioned there would be tax consequences or potential tax consequences. If the REIT sold all of its assets today in a hypothetical, what would they be? 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. Jim's looking at me. He says, "Jonathan, give me a warning look. Don't say this stuff in the public domain." In theory, Matt, if we sold all of our assets that are now the CAD 15.35, that would be the equivalent to selling the REIT at CAD 9 a unit, for example. It's just a killer. That is why when we conducted the strategic review, the idea was to do a unit-based transaction. That was the whole goal. If the pandemic had not come, we wouldn't be having this conference call today, possibly. We were that close to a strategic transaction for the whole REIT, and then it would've been a unit-based transaction, tax efficient for the unitholders. Yeah, it's not that simple, just saying push a button and sell.
As I said, there is a risk of an activist not being aligned with the unitholders, especially when the activist is partway through, halfway through a five-year fund. The more the time goes by in a five-year fund, the less the GP and the activist fund is aligned with Artis unitholders or even their own LP unitholders. As I said, the promote structure, the promote fee, is based on top line, not based on bottom line. That's another misalignment with Artis unitholders. Most of our investors, we know they're retail investors, they're taxable. If you have your Artis units in an RSP account, that's different. Then you can plan accordingly. If you're a sovereign fund, a pension fund, that's different. 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.
To your point, Matt, it's really not value erosion from the tax. It would just, in fact, if you sold all your assets, you would have, let's say, CAD 15.35 in cash to distribute to your unitholders. It would just affect the portion of that CAD 15.35 that's taxable when you get it back from the company. Yeah.
Now, if you sell the units, Matt, it's just capital gains again, not recapture. That's the difference, right? 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 have been very solid operating results here over the last two quarters?
The answer is yes, some ongoing dialogue is taking place. Interest continues. There's nothing much more we can say on that front.
Changing gears in terms of your planned retail spin-out. Would it be fair to say that has been put on pause indefinitely? If so, what really are your top three strategic initiatives over the next 12 months? Is it simply debt repayment, or how do we think about the balance between de-leveraging and the NCIB and anything else you might have in your cards?
Yeah. We'll stay the course. It's interesting, even the activists, when it was not long ago, they were saying that, "Armin, you're doing a good job. Artis is doing all the right things." Then they forgot to say that in their press release. We'll stay the course. It's quite clear what we're doing. We're selling another CAD 550 million 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. We're in good shape. The 3% distribution is a model. It's very prudent and very affordable at this point in time. It's the right thing to do to reward our investors because of what they've gone through, what we've all experienced in the past year.
The NCIB is a great thing because of our unit price right now. It's very accretive. Also, it's a way of us sheltering capital gains when we dispose of properties. As we run out of Calgary office properties to sell, we'll be hit with capital gains, not just recapture on depreciation. At least the NCIB is a way to shelter capital gains because we won't have the recapture to deal with on the depreciation. 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 select office as well. All of it makes us, increases our weighting in industrial. It'll improve our earnings and improve our balance sheet. It's got to, sooner or later, improve our price multiple as well.
We feel good about where we are, without a doubt.
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'll happen if for no other reason, we've hit such a bottom this year with our retail, right? It'll happen for sure. The end is near, as the sign says, right? Things are looking up for us, and we'll get back to that positive. We were so proud. Was it seven, was it nine consecutive quarters we had a positive same property NOI growth? We were proud of that. Now we just hit two consecutive negative. It's a one-in-100-year pandemic. We'll get through this, and our numbers will improve, including the same property numbers, for sure.
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. I believe you'll see FFO per unit improving, stable and improving. Again, it's a pandemic. We're not expecting a spike in earnings and a spike in our same property. We're in very good shape. As I said, we see ourselves being able to maintain good earnings, FFO per unit, whilst paying down debt.
Well, we appreciate the color. That's all for me. I'll turn the call back. Thank you.
Thank you. At this time, I would like to turn the call back over to Mr. Martens.
All right. Well, thank you very much, moderator, and everybody on the call. 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 and 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. At this time, we do ask that you please disconnect your lines.