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 conference call to discuss the proposed spin-off of its retail portfolio and strategic debt reduction initiative. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, you will need to press star followed by two.
Today's discussion may include forward-looking statements, which include 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, including the proposed transaction and initiatives disclosed in its news release issued today. 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 their 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.
Thank you, moderator. Thank you everyone for joining us. Again, my name is Armin Martens, the CEO of Artis REIT, and with me on this call is Jim Green, our CFO, Jaclyn Koenig, SVP, Accounting, and Kim Riley, EVP of Investments. This call is a supplemental call, if you will, to the press release that we issued this morning pertaining to the spin-off of our retail portfolio. We do draw your attention to an investor presentation pertaining specifically to this retail spin-off that we've uploaded last night or first thing this morning as well. It's in our website. You can follow the link and download this presentation, 14 or 15 pages. If you don't already have it's still worth downloading. In any event, download it later and take a good walk through it.
I'll begin, and bear with me as I present. I'll be following this presentation. It won't take too long, and then we'll be opening the floor to questions. Again, in summary, what we're doing is, the press release told you a lot, but the background isn't very complicated. Artis is a diversified commercial REIT. We own three asset classes: office, industrial, and retail. Really, we're primarily an office and industrial REIT, 83% office industrial and 17% retail. Now, our retail is open air, primarily open air, needs-based retail. Very good. We're performing well in terms of numbers, but we are caught in this chronic and structural vortex of diversified REITs trading below analyst NAV, never mind their own NAV, and we are not trading at one of the price multiples of the three asset classes we own.
This is just briefly demonstrated on page three in the charts there. You see this time and time again. After a while, it gets old. You realize after a while, well, this is actually structural. Investors everywhere from Toronto to Red Deer, New York to London and Singapore, all institutional investors, in particular wealth managers, have made a decision to strongly prefer pure-play REITs. We're announcing that we're taking a big step in that direction. It's a twofold strategic initiative, if you will. One we've already commenced with, and that's selling non-core properties to pay down debt, improve our balance sheet. We already have a very conservative payout ratio. We're working to give us and create a pristine balance sheet by selling more properties, paying down more debt. We're grateful that we're getting good traction this year already.
We thought this might be a lost year, but it's not a lost year at all in terms of selling properties and paying down debt. Again, at prices that correspond to our values. Then, of course, spinning off the retail to further unlock value, improve price multiples. We don't know what value we're getting for our retail in our portfolio. Some people say little or no value. Well, it probably might be negative value. It's better for our retail portfolio to be in a separate retail REIT. It's better for our investors, better for the portfolio, better for everybody involved. One way or another, it will unlock value. It'll be easier for analyst investors to assess, to analyze, to appreciate, and put a value on.
As we move forward quarter- by- quarter, we think we'll be able to do a very good job with that retail REIT and have opportunities to grow. We'll have M&A opportunities as well on both sides of the ledger. Of course, it's good for Artis REIT, which will become, I'll say in quotations, a pure-play office and industrial REIT, as pure-play as we've ever been. That's better for Artis as well. Better for the course, we think very good for our unitholders in terms of unlocking value. Moving on to page five. If you're following the booklet, we give you a glimpse of the new structure. More info on this will be in our information circular that comes out in mid-October.
We don't need to discuss everything here. You'll see there the diagram showing a pure-play retail REIT that holds the limited partnership that owns all the Canadian properties on the left side. We basically are making a slight tweak here where we're creating new LPs, pure play, so to speak, for the industrial, for the office. The U.S. will have pure-play sub-REITs that'll hold the industrial properties separately and the office properties separately. Again, making things more efficient and easier if there ever is an opportunity for M&A. Next page, on six, we show you all the pie charts you could hope to see. On the left is where we are today as of Q2 in terms of, this is always based on NOI. You can see that again, we're 48% office, 35% industrial, so that's 83% office industrial today at Q2.
Retail only 17%. At the bottom, we show you which provinces and states we're in. Going to the right is where we would be pro forma, but it's a snapshot as of Q2. You see that Artis REIT will or is 58% office, 42% industrial post spin. At the bottom, you see what states and provinces we are. Now, this means we'd be about 63% today invested in the U.S. and 37% in Canada. This gets skewed more to the U.S. On the right side, you see the retail REIT, 100% retail, all Western Canada, the three Prairie provinces, 92% open air, unenclosed malls, needs-based retail. We have one mall representing 8% of the retail NOI, and it is held for sale.
We expect that one property in Regina to be sold. That proceeds will be used to pay down debt and improve the balance sheet even more. In the bottom, you see where our breakdown by province in the three Prairie provinces. Moving to the next slide on page seven. We'll give you the next couple of slides are all about Artis REIT. Artis REIT 2.0, if you will, the office industrial REIT. You can see in the top tables what we own in Canada in terms of office property. We break it down by asset class, office in Canada, office in the United States by GLA, occupancy, WALT, book value, property NOI, and the totals. Same thing with industrial, Canada and the U.S., and then the totals at the bottom.
You can see what the NOI was at Q2, and the breakdown again was close to 40% Canada and 60% U.S. in that range. The bottom is all about our tenant profile. Bottom two pie charts on the right, you see the office profile on national tenant, breakdown by national tenant, government, local and regional, and then industrial. Same thing with industrial. As we move forward, we'll be able to become even more granular with the type of tenants we have in our asset classes in our MD&A. On the next page eight, we highlight pro forma credit metrics for Artis REIT. This won't. We think we'll get there by the end of next year. It's all about improvement. Improving the REIT. Our debt to GBV will improve down to 46%. We have an interest coverage ratio will improve also up to 4.3%.
Debt to EBITDA will move down to 8.4. Liquidity will improve our payout ratio. We think this will gravitate to 60%. Today, it's about 52%. Very good improvement on that front. It's great for our investors, great for our common unit holders, great for our preferred unit holders as well. On the last page, in terms of the office industrial port REIT, the highlights. This is our industrial portfolio. It does represent a healthy industrial portfolio with a strong growth profile. I mean, we've been averaging 5% same property NOI growth over the past 10 years. We're in great markets on both sides of the border. We have a great history of A good track record in terms of our industrial and greenfield development, and we have continued to have a very strong industrial development pipeline right now.
We really have a blue-chip, institutional-grade industrial portfolio in our portfolio right now, full stop. Our office portfolio has been improving nicely over the years as we've gotten past the Calgary office market and sold down our Calgary office portfolio, and it's stabilized nicely. Over the past 10 years, it's actually given us an average of 1% same property growth. That number would've been a lot higher if we hadn't been hijacked, if you will, by the Calgary office market. Today that's the Calgary office market is behind us, and our growth profile has improved very nicely. We like those two portfolios a lot. In terms of Artis REIT, spinning off the retail, it reduces that distraction, it eliminates that distraction, and it reduces Artis' exposure to Alberta in general. Again, as I said, our credit profile can improve.
A bit about the Retail REIT. I think we think it's a win-win for both REITs. The Retail REIT will be a smaller REIT. It's, of course, 40 properties about 2.8 million sq ft in the three Prairie Provinces. Excuse me. I mean, largely unenclosed, open-air strip malls, needs-based tenants, defensive, if you will. As I said, we've got one enclosed mall that is held for sale. Value, IFRS value today is about CAD 780 million. We think we're in good markets, good neighborhoods with good underlying fundamentals to support these properties. The cash flow is positive, and it's designed to be successful. The balance sheet will be just fine and improving. Our payout ratio will be low, and it will be a cash flow positive REIT. It will not be a REIT that's under stress looking for capital.
On page 11, you see the map of where we own our properties also by city, not just by province. On the bottom right, you see the type of properties we own in terms of neighborhood centers, convenience centers, and community centers. On page 12, and I'm moving. I think we're making good time here. It gives you another A different snapshot of an overview. CAD 780 million in total IFRS value. The NAV per unit is CAD 2.55 on our books. We're going to end up with a REIT with a good balance sheet, a conservative payout ratio. Again, cash flow positive. The balance sheet will be improving. As we sell some properties, and we will, the balance sheet will improve. This REIT will be externally managed by Artis REIT.
That's the right thing to do, we think right now in year one. Over time, in a perfect world, we want this retail REIT to grow and then the management can internalize. We're keeping it simple, and nobody has to guess what the G&A is or will be. It's 35 bps for an asset management fee, and it's 3% property management fee, this is basically revenue neutral. The property management fee, it's break even. That brings me to the end of that. I have two more slides. You heard me talk at the beginning about valuations, sort of the rationale for spinning off into at least one pure play REIT at a time. You can see it on page 13, we give you pure multiple valuations. We've just taken some pure REITs in different asset classes, industrial, retail, and office.
These are the bottom of the pack, if you will, with the lowest price multiples. It doesn't mean they're not the best REITs, but they're the bottom of the pack in terms of having the lowest price multiples. We're not comparing ourselves to the average of every REIT or the top half, but really the bottom. You look at the two industrial REITs, the average price multiple there is 15.3x. You look at the two retail REITs at the bottom of the pack there, the average price multiple is 9.1x. The bottom three, we talk of office REITs, average price multiple is 9.2x. You correspondingly multiply that against Artis' retail FFO of CAD 0.23, office FFO CAD 0.66, industrial CAD 0.48. You see in these COVID times, we're getting a price of CAD 15.52, a valuation. Pre-COVID, the number would even be higher.
If you wanted to take worst case scenarios, just take the lowest of all of these. Take the lowest trading retail REIT, the lowest trading office REIT, the lowest trading industrial REIT. Today, in these COVID times, you would get a price of CAD 12.50 for Artis. You can see our frustration. When you compare that CAD 12.50 and CAD 15.52 to our current price of CAD 9-CAD 9.50, in that range, you can see that it doesn't take long after a while to come to the conclusion that it is time to take a step forward and pause in a different direction and look at streamlining and un-diversifying, if you will. Basically, it's all about unlocking value for our unit holders.
There's an old saying, the customer's always right, and if the investors want pure play REITs, then that's the direction we have to go in order to deliver results and increase unit holder value. The last, page 14, just a reminder of the transaction milestones. We've announced everything. Today's the day. Interim court order is expected to be middle of October. The info circulars will get mailed out middle of October as well. Unit holder vote, again, middle of November. Closing will be in Q1 next year, as early as possible in the new year. That's our plan. With that, done, we're very pleased about this, very optimistic. At this time, I'll ask the moderator to open the floor for 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. If you should decide to withdraw your question, as stated, simply press star followed by two. If you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question, sir, will be from Jonathan Kelcher at TD Securities.
Thanks. Good afternoon.
Hi.
First question, just on the assets held for sale, the CAD 550 million, can you maybe give us a breakdown of what type of assets you're selling, maybe geography and how many office, industrial, and retail?
I'll let Kim weigh in here. Primarily office and some retail. Maybe it's about half and half when you look at the listings. It's mostly in Canada, but some in the United States. Kim can give you more details.
Yeah, no, that's a pretty good summary. It's mostly office. There's a couple retail. They are in a variety of markets kind of across Canada and the U.S.
Okay. I guess the 42 assets that you had at the end of the Q2, and you have 40 assets in your presentation here. Would that include, I guess it might be smaller if you're selling a bunch of retail assets?
Yeah. Good catch. What is that? Go ahead, Kim.
Yeah. There's one asset that is kind of being held for sale, and then there's one asset that we're kind of reclassifying from Q2 to now. It's part of our Winnipeg office development. We're calling it mixed use. It'll move and stay with the main REIT rather than the retail REIT.
The Delta Shoppers Mall?
Yeah. Delta Shoppers is the one that's held for sale, and 330 Main is the other one that we just completed development on.
Okay. When this spins out, given what you've got listed with brokers and assuming everything sells, how many properties do you think will be in there?
In the retail? It'll come down, could easily come down by another five properties. It could come down by anywhere from another CAD 60 million-CAD 100 million. Again, all those proceeds will be used to pay down debt. You get our debt closer to 48%, 47% on retail assets.
Okay. That would reduce debt at the pro forma Artis, and the retail REIT's going to have slightly higher debt? Is that the way to think about it?
No, that would reduce debt on the retail side. Well, I guess it'll depend when we get it done.
Yeah. Right now the plan is to put those 40 assets as if they were going into the Retail REIT. If some of them sell pre-closing, then Retail would spin out with less debt attached to it.
Okay. That's it for me for now. I'll turn it back. Thanks.
Thank you. Next question will be from Matt Logan at RBC Capital Markets. Please go ahead.
Good afternoon.
Hi there, Matt.
Just following up on Jonathan's question with regards to leverage. If we look at the target leverage as it stands without any asset sales, that's about 54% for Artis Retail REIT. We compare that to the Q2 balance sheet, it would seem that you plan to place roughly CAD 200 million on the retail portfolio before spinning it out. Could you just.
That's correct.
Yeah. If that's correct.
Go ahead, Jim.
How hard is it going to be for you guys to place mortgage debt on these assets? Have you had any discussions with banks or other financing options to date?
We have some of them in the market right now. We've actually got, I would say, three really good proposals in on three different assets. So far it's going really well. Then we will likely have a line of credit available for the retail entity that will form part of the debt.
That's great color there. What sort of a rate would you guys be looking at for new debt on the retail assets today?
The only one I have a sort of firm proposal on today for new debt is a five-year term interest rate in the mid 2.5% range.
Changing gears in terms of the planned spin-out, could you give us some color on why you chose to do a planned spin-out just for retail? I mean, why not do all three? Could we see three independent entities over the course of time?
Yeah. This is something we can do now. We feel we've got good control of it. Execution, we think is close to 100% in terms of spinning off the retail. If we wanted to spin off all three, we would have to sell more properties first and improve our balance sheet more. We're not quite there, and we didn't want to wait another year and wait for all the stars to align perfectly. We wanted to do this spin-off now, and it's just as well. In a perfect world, it's more efficient to do three at the same time instead of two. This is something we can do now, and it'll be the right thing to do. It'll take us at least a step in the right direction.
Looking forward, Matt, if our price multiple for Artis REIT, which will own only industrial and office, if it doesn't improve, bring us to NAV, then as we sell down properties and improve that balance sheet, we'll definitely look at splitting that REIT into two more REITs.
You guys seem to have really good traction on your asset sale program. Can you talk about maybe just some of the feedback that you've had to date and if there's any indications to the contrary that you might not achieve your IFRS marks for any reason?
We're grateful for the traction we're getting on all fronts, and we've launched some listings, and we've got an office building in Denver that's listed. It's been getting a lot of traction. We expect to have our office building in Hartford sold soon, too, on the U.S. side. Here in Winnipeg, we launched two office buildings for sale. They're getting a lot of traction, a lot of interest. We launched a listing for some of our Saskatchewan retail portfolio, and the bulk of it is our one enclosed mall. Again, very good interest. There were two of those properties already under LOI. We've got another CAD 200 million almost under LOI right now, under contract. Still conditional, in addition to the properties that I just mentioned.
We're grateful for that because there was a time when we thought this was going to be a lost year, but it won't be a lost year. Especially on the U.S. side, we've seen money come back. The debt markets have opened up very nicely. The debt is there, and along with debt, equity is there. Deals are being chased quite aggressively in the United States, and Canada's just getting there. I mean, Jim gave you one example of a mortgage debt there, and it's somewhat agnostic as to the asset class, actually. If the metrics will all work. We never ask for too much debt on any of our properties. On the equity side, it's a little shy still, but coming back. Buyers are looking to place their money.
I think by now everybody knows that trillions of dollars has been printed and pumped into the global economy, into North America, and that means that eventually interest rates come down, cap rates come down, and assets will become rare. We're glad to see that we're getting this much traction, and I don't think we're the only ones. We're sensing that other people in the business looking to sell are finding buyers. Anything else, Kim?
That's a pretty good summary. I mean, we're happy to see everything come back. Definitely the U.S. came back before Canada, but now it seems like there's lots of appetite out there for deals, and we're getting them done.
Suffice it to say that in aggregate, you still see your IFRS marks as fair on a post-pandemic basis?
Oh, yeah. Of course. As we forget. Yes. We're definitely hitting those numbers, some below and some above. On average, based on what we've got under LOI and contract now, we're ahead.
Excellent. Well, I appreciate the commentary. That's all for me. Thank you very much.
Thank you. Next question will be from Mike Markidis at Desjardins. Please go ahead.
Hi, everybody. Thanks. No particular order here. Just building on Matt's question on the debt profile of the retail REIT. Jim, do you expect that Artis REIT, Artis 1.0, will have to provide any intercompany debt or loan guarantees to that entity?
That's still to be determined, but I suspect a number of those properties that are moving over with existing debt on them do have the Artis guarantee on it. I can't tell you for sure whether we'll get that released prior to spin or whether it will transfer with the debt, and then we'll just have to fall off at maturity of those mortgages. Yes, there is a possibility that there will be some of that existing debt that will retain the Artis covenant on it.
Okay. Armin, I think you made some comments about the new structure being more efficient, and I guess some of the comments alluded to potentially spinning out or separating the office from industrial down the road. I was just curious if this new structure, all else equal, would've helped in the strategic review that was completed earlier this year in terms of selling the entity.
Yeah, good question. For sure, the retail spin-off would've helped for sure. That was definitely a stumbling block for interested. I can't say too much about all that, but it was definitely a stumbling block in the process that we had retail as part of the package.
Okay. You've, on a couple of points, made reference to future M&A opportunities. I was just wondering if you could potentially elaborate that and what you're meaning on that point. Is that from a being acquired perspective or going on the offensive and consolidating perspective?
I think both. It's easier to value the retail REIT then. Here we are, value us. We'll demonstrate one good quarter at a time. Retail is not a loved asset class. There could be good opportunities for us to grow, assuming we get a good cost of capital. This could become a bit of an aggregator of other retail properties of similar asset class. There could be other REITs and other portfolios out there that institutions own that they'll want to merge with a REIT like Artis as well. There could be other REIT institutions that will say, Artis Retail REIT is a great REIT, great portfolio, and we'd be interested in buying the REIT. It's all about getting value, getting the value we should be getting for our unit holders.
We're not shy to be on either side of the M&A ledger.
Got it. Okay, last one from me before I turn it back. Just on the valuation and comparing to some of the Canadian peers. I was just curious if, given your office concentration in the U.S., if you guys have done some similar P versus consensus FFO or even P/NAV on suburban U.S. office REITs as part of your analysis.
No, we should. We're not listed. We should be looking at, I guess, City Office REIT, for example. Now that you mention it, we'll take a good look at that as well.
Yeah, we should be on our side, too, and we haven't yet. I was hoping you might have looked at that. We'll take a look, and we'll see who gets there first.
Yeah. Tell us what you know.
Sounds good. Okay, thanks very much.
Yeah.
Thank you. Ladies and gentlemen, once again, as a reminder, if you do have a question, please press star followed by one on your touch-tone phone. Your next question will be from Jenny Ma at BMO. Please go ahead.
Hi, good afternoon.
Hi, Jenny.
Armin, just wanted to get a little bit of background color on the transaction. Wondering if, in your discussions, if you considered spinning off the industrial portfolio, given the valuation of the market versus the retail? The second question is, now that you've arrived at spinning off the retail portfolio, did you shop that portfolio first before arriving at the spin-off?
No. Sorry. No, nothing was shopped. A year ago at this time, we would've probably spun off industrial first along with an IPO even, and raised money because there's a strong demand. Now, this is not IPO season. Industrial is a bigger portfolio, and I think I mentioned dealing with industrial and office means selling more properties to pay down debt or raising equity. We don't want to raise equity in this market, and we don't want to wait a year to sell the rest of our properties. Retail just works for us. In these post-COVID times, it's become more evident than ever that retail is a concern for investors. We're saying, fine.
We'll take it, separate it from Artis so that it's not a concern with respect to Artis, and then take a good look at it, and you'll realize it's also not a concern when we separate it and put it in an independent REIT because it's very good retail that performs well. We don't need the highest price multiple to benefit from it. Retail is what we can do now, are doing now. Yes, we did contemplate industrial during the past year as well.
Oh, I'm just curious why you didn't shop the retail portfolio. Is it just because of the size or the geography, or you just didn't think the pricing was there, and you wanted to give it more time for price discovery in a public entity? Any color on that would be helpful.
Yeah. Our sense is that there's no portfolio premium in this market, right? Portfolio discount, we're not interested in that. If we sell retail and we're selling some, it's one at a time or a small mini portfolio. That's how to get maximum value. We just didn't see the point, especially in this pandemic season, for us to go over the whole big portfolio of retail properties. We didn't even try it. Having said that, now that we've made this announcement and we're giving more and more disclosure, and as we head towards the spin-off, the door is open, and the phone line is open. If anybody's interested, they can always call us. We don't say no. I'm not expecting a lot of interest at this time. If interest shows up, that's fine.
Otherwise, it'll be easier to generate interest from investors, all investors, types of investors once we've completed the spin-off.
Okay. On the retail portfolio, it looks like the IFRS cap rate on it as of June 30th was about 6.6%. Just some back of the envelope math here. Based on the CAD 2.55 NAV that you guys disclosed for AXX, using the CAD 12.1 of quarterly NOI, which is probably a little bit high given that you'll have a couple of properties fall out. The suggested cap rate's a little bit closer to probably 6.25% . I'm just wondering if you can reconcile that calc and sort of the outlook on the cap rate of the retail portfolio.
I'll let Jim have a shot at that. This is backward-looking accounting.
Yeah. A little bit. Actually, I think if you take the NOI from Q2 exclusive of the bad debt allowance, so you would see that in our same property table from the Q2 MD&A disclosure. I should have that right in front of me. The retail NOI disclosed in there exclusive of bad debt allowance was actually around CAD 14 million for the quarter.
Okay.
Thank you.
If you annualize that, you'd get to more like a 6.9% cap coming in at. The 6.6% that we use for valuation purposes is the equivalent of forward-looking one-year NOI on those retail properties.
Yeah.
Because of the COVID situation, we have upped our vacancy allowance a little bit going forward. That's why it's looking like a 6.6% cap rate.
Okay. Gotcha. It looks like when you're going from the 42 to the 40 properties in AXX. The two B.C. properties fall off. One you mentioned is listed for sale. What is the view on Poco Place? Is that something that you're looking to sell, or is that sort of a reclassification given the office GLA on it as well?
We've always classified Poco Place specifically as one of our office assets.
Okay.
It's never been in the retail portfolio at the quarter end disclosures. Even though it does have some retail, it's always been lumped in with the office. Yes, that is one of the sites that has future multi-family density. I guess as we've said all along, is that our plan is to dispose of our assets that have future multi-family density on them. When the time's right, that one will be up to the market.
Okay. Gotcha. Just with regards to the retail portfolio, could you let us know what some of the top tenants would be in the retail portfolio? I see TD Bank and Shoppers sort of in your aggregate list, but what are some of the other major tenants within that? Do you have any other essentials, grocery tenants, or more of a small business mix?`
We've got some grocery tenants, and drugstores and liquor stores, of course. Otherwise, a lot of personal service tenants that ranges from the bakery to the chiropractor, to the hair salon, to the dentist and the doctors, and then the bars and the restaurants. Yeah, I wish we probably could have done a better job of giving more detail on that, and we will going forward in terms of the retail tenant mix. You see, when we're pure-play retail REIT, all this will be in the MD&A.
Okay. I presume that'll come out with the circular later on.
Yeah.
Sorry, go ahead.
Yeah, go ahead. I was just going to say the usual retail suspects will be in there, but I think as far as the top group of tenants, I believe Shoppers will be the biggest in the portfolio.
Yeah.
Okay. Then when you look at the pro forma mix, I'm just wondering from a definition point of view, how does Artis differentiate between the convenience centers versus community centers versus neighborhood centers with regards to the retail portfolio?
Yeah. It's a fine line. A neighborhood center would be either food anchored or well shadow anchored. We have a lot of properties that are adjacent to a food store, and you can tell that we don't own the food store. The park lot's contiguous. We have a lot of that. Community centers, there you get more into the strip malls, but they're older generation. They're in mature neighborhoods where the leases of properties have gone through several iterations of lease renewals, and the tenants meet the needs of the neighborhood, plain and simple. The tenants are there because they're doing well. They meet the needs of the neighborhood. They're not all blue-chip, credit-rated tenants, of course, but they're tenants that are doing well in the neighborhood shops here. Convenience is what it is. The convenience stores, I believe it maybe includes gas as well.
Of course, we said one enclosed mall.
By convenience, do you mean sort of standalone pads or just much smaller strip centers?
Yeah, standalone pads, and I believe we've got some 7-Eleven in our portfolio as well.
Okay, gotcha. My last question is with regards to the view on the distribution for the two entities. I presume you're going to maintain a similar payout, but is there going to be any differentials between the yields on the two entities, or is that a little bit too early?
It's a little early, but right now the plan is for sure that the distribution at a minimum from the two entities will add up to the same distribution that Artis has today. That'll be a minimum distribution. It'll be the same as the Artis distribution today.
Great. That's all for me. Thank you.
Yeah.
Thank you. Ladies and gentlemen, this is all the time allotted for questions today. I would like to turn the call back over to Mr. Martens.
Okay. Thank you again, everyone, for your interest for calling in. You know where to find us. You can reach out to us any time with emails or phone calls, and we'll be happy to continue the dialogue and the information exchange. Again, as we mentioned, the info circular will be coming out in mid-October at the latest, and we're looking forward to moving this project along into a very successful conclusion. Thanks again. I'm looking forward to meeting and talking again. Have a good day, everyone.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.