Earnings Call: Q3 2019

Nov 4, 2019

Good afternoon, ladies and gentlemen. My name is Leone, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Artis REIT's 3rd Quarter 2019 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. Thank you. 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. 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 now like to turn the meeting over to Mr. Armin Martins. Mr. Martins, please go ahead. Thank you, moderator. Good day, everyone, and welcome to our Q3 2019 conference call. So again, my name is Armin Martins. I'm the President and CEO of Artis REIT. And with me on this call is Jim Green, our CFO Kim Reilly, EVP of Investments Jackie Koenig, SVP of Accounting and Heather Nichol, VP of Investor Relations. So again, thanks for joining us. And as in the past, I'll now 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, Jim. Thanks, Armin, and good afternoon, everyone. So just a little reminder, Artis is a diversified commercial REIT. We invest in office, retail and industrial properties. We have assets in 5 Canadian properties and 6 U. S. States. Based on the Q3 net operating income for the REIT, we had a 54.8% weighting in Canada and 45.2 percent weighted in the United States. As the majority of future asset sales will likely be in Canada, we expect this ratio to move such that greater than 50% of our assets will be in the U. S. On an asset class basis, at the present time, we're 49.0% weighted in office, 20.2% weighted in retail and 30.8% weighted in industrial. As I expect everyone on the call is aware, our Q3 earnings press release from November 1, 2018 announced a series of new initiatives for the REIT, which we anticipated being implemented over a 3 year time horizon. We're now 1 year into that plan and we've been busy executing on the strategy. The impact of executing the strategy continues to impact our metrics and will for a few quarters still to come. However, we're looking forward to the continuation of the strategy in future quarters as the next steps consist mainly of further asset sales with the proceeds used for debt reduction and that should demonstrate continued improvement in our balance sheet metrics. Curtis continues to be active in both new developments and redevelopment of our existing properties, and we currently have approximately $130,000,000 invested to date in properties currently under development. During the quarter, we invested roughly $47,000,000 into the development projects and transferred $62,000,000 of properties from considered under development to completed properties. As detailed in the MD and A, there are several new development projects that remain underway, including a new residential tower, a 300 Main in Winnipeg, a new industrial space in Houston, Phoenix and Denver. Also as detailed in our MD and A, we have several development projects in the planning stages where construction has not yet actively started, and they are all progressing nicely through the various development stages. I think to touch on this one, but we do still have a continued presence in the Calgary office market, although it is becoming a very small component of our operations. For Q3, Calgary office contributed 6.4% of our NOI. However, we have relatively small exposure to the Calgary office tenant maturities in the near future with only 57,000 square feet of space left to mature in 2019 and only 35,000 feet renewing in all of 2020. We've been able to maintain our balance sheet metrics in general terms with GBV is up slightly to 52.6% from 51.9% last quarter and it was 50.6% at December of last year. The main driver of the increases in GBV has been timing of the unit purchases planned under our new initiatives to buyback our units and versus the timing of asset sales, which will happen in future quarters. In the current quarter, we also redeemed the balance outstanding on the Series G preferred equity in addition to the amount of activity under our NCIB. Well, that unit purchase combined being slightly in excess of the net proceeds from asset sales is what contributed to the slight reduction increase in debt to GBV. We anticipate bringing debt to GBV back under 50% in the near future as further asset sales are completed, and we're targeting a range of 45% to 48% over time. Our EBITDA coverage ratios remain healthy despite carrying a little bit higher debt level at the current time. And despite the dilutive effect of asset sales, the unit buyback program combined with good same property growth and completion of some of our developments has had a positive effect on our metrics. And FFO came in this quarter at $0.34 up from $0.33 in the comparative quarter last year and AFFO came in at $0.25 also up $0.01 from Q3 of 'eighteen. Our payout ratios are very conservative at 41.2 percent of FFO and 56.0 percent of AFFO. Coming back to the initiatives, just a quick update on the status. As I mentioned on November 1, 2018, we announced the new initiatives with the goal of increasing cash flow, increasing unit values by increasing NAV and improving focus and quality of the portfolio. The distribution was reset at that time to $0.54 annually, resulting in a much more conservative payout ratio and freeing up cash to fund our development pipeline. The plan also included non core asset sales of between $800,000,000 to $1,000,000,000 of assets and this process is well underway. We've completed $482,000,000 of sales to September 30 and have closed a further $13,000,000 subsequent to the quarter end. We have a further unconditional acquisition of 39,000,000 dollars sorry, disposition set to close in November. The basket of properties held classified as held for sale at September 30 was $327,000,000 including the 2 properties just mentioned, and those are in various stages of sale with most under conditional contract. We anticipate most of these will sell over the next 2 to 3 quarters. Initiatives also included using a portion of the sales proceeds to buy back our units using our NCIB, and we started this immediately after the announcement last November in advance of the asset sales. From last November to September 30, we have repurchased almost 16,000,000 units at a cost of just over $173,000,000 and we used our line of credit to fund these purchases with the plan to repay the line as the assets are sold. In addition to the NCIB purchases, as I mentioned, we also redeemed a maturing series of our preferred equity at a cost of $78,400,000 So including the redemption of the preferred equity, we've basically met our target for equity redemption. We've reached the maximum trust unit purchases permitted under the current NCIB and we will be renewing it in December or when future unit purchases under that plan will be dependent on the trading value of our units at that time and the amount of debt reduction we have achieved. In our opinion, it's more important to get our balance sheet metrics under control first. Touch on just a couple more operational highlights and then pass it back to Armin. Touch briefly on fair value of investment properties. So they are valued on our balance sheet at fair value. This quarter, the net adjustment, including joint ventures, is relatively nominal at roughly $800,000 positive. There was a very nice gain this quarter on the sale of 415 Young in Toronto. However, it was offset by reductions in some other properties. Debt to GPB, we remain comfortable with the ratio. As I mentioned, we are up very slightly and we anticipate that coming down in the near future. This still has a unencumbered asset pool valued at roughly $1,900,000,000 and that permits us the unsecured debt that's currently on our balance sheet. We have roughly a $700,000,000 unsecured revolving credit facility with a syndicate of lenders and 2 non revolving unsecured credit facilities for a further $300,000,000 Both of the non revolving facilities have been drawn in full and we placed swaps to fix the interest rates on those facilities as we expect they will be outstanding for their full term. Touching briefly on the operations, so same property and property results were a positive 2% this quarter, which really is 1.3% in functional currency and the 2% is in Canadian dollars once the foreign exchange is factored in. And we also presented a stabilized same property calculation, eliminating properties planned for disposition or repurposing as well as the Calgary office sector. And on this basis, same property growth is 3.2% in functional currency and 3.8% once foreign exchange is factored in. Industrial segment continues to show the strongest performance in both countries 7.3% growth in Canada and 10.9% growth in the United States. This quarter, we had a we disclosed our net asset value. So it's simply taking the equity on our balance sheet less the equity held by the preferred unitholders divided by the number of common units outstanding at the end of the quarter. And the net asset value per trust unit was $15.72 at the end of this quarter compared to $15.37 last quarter, a $0.35 lift this quarter, driven again this quarter driven by foreign exchange of a $0.10 gain, a gain of roughly $0.07 related to the unit buybacks and the rest is the fact that our income exceeded our distributions. So that's the advantage to the low payout ratio, I guess. At subsequent events, we ended the quarter with $59,000,000 cash on hand and $96,000,000 undrawn on our line of credit, in our opinion adequate liquidity for the REIT. With several events detailed in the subsequent events note, which we believe continue to reflect our strategy of intelligent recycling of capital. We plan to continue to focus on a strong balance sheet and the overall quality of our portfolio. As I mentioned, we will be renewing our NCIB plan in December. However, our near term goal is debt reduction. That completes the financial review. The feely initiatives announced last November will make Ardas a better and stronger REIT. And we look forward to demonstrating our results in future quarters. I'll now pass it back over to Armin for a bit more discussion. Okay. Thanks, Jim and folks. So on balance, we feel we're on track to have a much better year this year than last year. We're making good progress on all fronts and delivering strong performance metrics for our unitholders. So our weighted average rental increase, same property NOI growth, our FFO and AFFO per unit growth are all solid numbers. And looking ahead, we're given our very conservative payout ratio and the progress we've made on our strategic initiatives, debt reduction, as Jim said, debt reduction will be a top priority for us. And the progress in our debt reduction should be very noticeable in Q4 of this year and Q1 of next year. So again, looking back at what we promised in terms of our promise, we made promises kept, our distribution has been reset. It's very conservative. It's among it's the lowest of all the commercial REITs, and we feel it's quite bulletproof and safe. Our unit buyback program is basically 70% complete. And if you when one considers the $85,000,000 of preferred equity, equity we also bought back. We've invested $260,000,000 in equity buyback in the past 12 months. And of course, as mentioned, our disposition program is going very well and about $600,000,000 sold or unconditional with another $200,000,000 under conditional contract and more visibility. And the key to all this, of course, is that we're selling at price that correspond to our NAV of 15.72 dollars And we've been selling some challenging properties. So we feel we're doing very well there and demonstrating excellent value for our unitholders and our investors. It's important to note, of course, that as our financial metrics improve and as we continue with our disposition program, Our portfolio of properties is also improving, all right? We're reducing our office and retail waiting in general. We're increasing our ownership of industrial properties. We're reducing the number of secondary markets we're in as well. Our Calgary office exposure is in the 6% range now. But given the properties we have under contract for sale, we feel that by the end of Q1, we'll be down to the 3% level with just 3% of NOI. And our remaining retail investments, as we close out our U. S. Retail dispositions and our last enclosed mall. Remaining retail investments will only be open air service sector properties, if you will, and in Western Canada only, which we feel is a good focus for us. And all of this for the retail end office, all of this will improve the growth profile of our portfolio. And needless to say, our industrials are already outperforming, doing very well. So meanwhile, our overall portfolio is performing well and the office markets as discussed is somewhat inconsistent our retail and industrial properties have a very good track record and continue to deliver solid organic growth. And of course, our industrial development pipeline is also on track to deliver excellent results as well. We invite you again to look at our MD and A and investor presentations for more color here. So looking ahead, we will continue to work hard to keep our buildings full, whilst bringing the rents up to market and consistently streamlining and improving our real estate portfolio and our growth profile. To be clear, the integrity of our balance sheet, our credit rating and implementing our new strategic initiatives continue to be of up utmost importance to us. Given the progress we've made year to date, we really feel at this juncture with the properties we just mentioned, the As mentioned, the portfolio is improving. We're shrinking our retail from 20% to 15% of our total portfolio. Open air service sector, Western Canada only properties will be shrinking our office from 50% to 45% possibly lower, and we're growing our industrial from 30% to 40%. All of this will again improve the overall growth profile earnings growth profile of the REIT and make us a better REIT. So that's all from us for now, folks. I'll turn the floor over to the moderator now, and we'll be happy to host any questions you have. Thank you. Your first question is from Mark Rothschild from Canaccord. Mark, please go ahead. Thanks and good afternoon guys. Starting with the same store portfolio, the growth in industrial was quite good. One thing that wasn't clear to me from the wording in the MD and A, does that include income from development? And if yes or if not, maybe just talk about what drove that strong growth? Generally not, because the developments would not have been in the prior year. So we don't have a prior year comparison. So we would not include a development property until we have a prior year to compare it against. So what drove the strong growth was a combination of improved occupancy and higher rents. Yes? On the south side of the border, we're basically 99% occupied on both sides of the border and especially in the U. S. Side, that's a very good number. And it doesn't matter which industrial properties. You look at the big box distribution or the multi 10 flex showcase industrial light manufacturing, Infill older generation, it's all performing well on both sides of the border and a little bit more in the U. S. Right now. So if you're at such a high occupancy rate, would it be reasonable to assume that, that pace of growth will slow down going forward just because there isn't much to lease up? Possibly, needless to say, we're pushing rents now as well as we can and we're making a point to ourselves, well, maybe we've got a lot of the elasticity here and maybe we've got to charge more rent and live with a little less occupancy. But yes, I wouldn't say there's any low hanging fruit out there at this point, point, but there's a lot of runway ahead of us, we feel, in the industrial sector and raising rents in the years ahead on both sides of the border. Understood. And in regards to asset sales, you've done quite a bit this year and it seems like there'll be quite a bit more closing over the next little while. Do you expect to continue can this program will this program be extended to sell more assets that you might view as either lower growth or markets you don't want to be in? Or is the plan still to stop at a certain number? We'll say stop and dial it back on a nutshell level, so to speak, we'll dial it back. And we'll continue and you might recall, we used to recycle between $200,000,000 to $300,000,000 of properties, but we definitely see more properties that we would like to sell out of and reposition our portfolio and more aggressively grow the industrial portfolio, for example. Okay, great. And lastly, just in regard to reducing leverage, it sounds like that's going to be a focus over the next little while. How far down would you want to take it? And how do you look at it? Are you looking at a debt to EBITDA basis or on debt to book value? What is the preferred measuring or what is the target that you're setting? We're looking at both. The target that I referenced was a debt to book value or to gross book value basis, but we're also very cognizant of maintaining debt to EBITDA metric. So we're really looking at both, Mark. I think they kind of are going to move in tandem as we get debt to GBV lower, the debt to EBITDA should go up as well. Okay, great. Thank you. Thank you. Your next question is from Dean Wilkinson from CIBC. Dean, please go ahead. Thank you, Leoni. Good afternoon, everyone. Hello. Armin, just on the Calgary office it and Alberta as well. It seems to be up a little from Q2 like 6.4% versus 6.1%. Not a big move at about 100 basis points. Is that more a function of selling things like 415 Young so that the portfolio is lifting? Or are you seeing a little strength out of the market that perhaps we're missing? More a function of selling. Okay. So when you look at the remaining sort of $326,000,000 and perhaps more, would that suggest maybe that that weighting to both Calgary office and Alberta then maybe ticks up a little as we look forward the next couple of quarters? Well, we'll be selling down a lot of Calgary probably have, but 4 more Calgary office under contract for sale, We're very optimistic that they'll close by Q4 as a matter of fact, excuse me, and for sure be unconditional if not before we report the Q4 results. So we see the weighting going down by default, so to speak, just as we sell down these properties. And we expect them in the 3% range when we announce our Q4 results. Okay. Fair then to say that, that remaining sort of $3.26 it's classified as for sale is probably going to be at a substantially higher cap rate than the sort of 500 or so 490 that you've already sold? Slightly, Kim can answer that. Yes. So it will be slightly higher, but not substantially. We expect it to be kind of in the low 7 cap range. The low 7% s. Okay. And then just when we look at the gain on 415 Young, I kind of noticed that the cap rate was based upon $4,600,000 of NOI, which included some leasing. Was that forward look on the leasing included in the IFRS value? Or was the IFRS mark based upon what was historically in place like what would say be in the rest of that table? The leasing would be included in the IFRS value because we're generally modeling a 10 year time horizon on the valuation of the properties. So we would be looking forward including the new leasing. Okay. That's good. And then just a clarification on how you got the assets classified in the presentation. Non core assets to be sold, that was $800,000,000 to 1,000,000,000 dollars Is that on top of what has already been done? Or how are you getting because I'm looking at 4.2 plus $1,000,000,000 plus $200,000,000 of development assets that kind of gets me to your gross book value there. So is it $1,000,000,000 of non core assets to be sold or is it $1,000,000,000 less what you've already done? $1,000,000,000 less. $1,000,000,000 less. Okay. We're almost there. We're almost done. You're almost done. The last part is the hardest. That's it for me. Thanks guys. I'll hand it back to the queue. Thank you. Your next question is from Jonathan Kelsher from TD Securities. Jonathan, please go ahead. Thanks. Good afternoon. Hi, there. Just turning to the developments, just on the Tower Business Center, what's your yield expectation on that? And when should we expect that to come online? It will be in the low 7, yes. Yes. It will be roughly between we're not finished yet, but between 6.8 to 7.2 in that range. It won't be lower than 6.8. Okay. And that will come on, Wes? Construction completion is almost finished and the leasing of the first building is complete and that lease commences. I'm going to say it's in Q2 of next year, might even be Q1. Yes. So the larger of the 2 buildings, 2 thirds of the project, if you will, will the revenues will kick in, in Q2 next year. Okay. And then the rest sort of by the end of next year? Yes, yes, for sure. Okay. And the property you're buying in Minnesota, the new development there, is that where does that stand in terms of occupancy? At the prime therapy? So that was 100% occupied, 15 year lease with 2% annual bumps in it. Nice property. It was called a forward purchase. So it's been in our MD and A for almost 2 years now. Okay. Fair enough. And then just lastly on the special committee, you put through $400,000 or so of charges this quarter. Was that in your G and A and then you just you're adding back to FFO? Yes, that's correct. Okay. And is how long is the mandate for the special committee? And is that sort of $400,000,000 kind of how we could think about it on a quarterly basis until they're done? Or was there any one time things in there? Well, that's a good question. I don't know if they've got a firm on the mandate. They have an expiry date of their mandate. I guess they're still working through it. Probably, I'm going to say it's a little bit cheaper going forward because some of that the bulk of that was legal costs as they were getting going. And so probably the next quarter or so will be a little less than that. Yes. I went on the committee and we official spoke people, but I would expect between now and next June AGM, we'll get a lot of visibility from them and even a report from them and things will either ramp up or wind down. Okay. Thanks. I'll turn it back. Thank you. Your next question is from Matt Logan from RBC Capital Markets. Matt, please go ahead. Thank you and good afternoon. Yes. Just wondering if you could talk a little bit about your same property NOI growth outlook. Last quarter, you mentioned it was about 2% to 3%. Would that include some of the drag from the Calgary office portfolio that we've seen here this quarter? Yes. I mean, the 2 this quarter was including the drag from the Calgary office portfolio. So yes, the estimate from us of 2 to hopefully 3 is inclusive of any drag from Calgary office. And going forward, I mean, it seems like the organic growth in the business pretty much everywhere except for Calgary is doing quite well. And when we look at the industrial growth, that's obviously quite great, but how should we think about the tenant inducements and some of the CapEx for the portfolio? I mean, will that trend down as you sell more of your Calgary office business? It should for sure. And even in our organic growth, it's not just Calgary office that we sell that down our Minneapolis retail and our enclosed malls. This is where there might have been a drag in Same Property NY growth. And as you heard me mention, as we streamline our portfolio and to finish up with our disposition plan, we will have a better portfolio with a better earnings profile. We're very optimistic about that. And back to CapEx, yes, the economy office always requires a lot of CapEx. So the less of that we have, the less and the better off our AFFO will be. So when we look at kind of the business at the end of the strategic review, the maintenance CapEx that we see in the AFFO deduction should really converge to the actual CapEx as we look out to 2020 2021? Yes. Okay. And just in terms of the future asset sales, can you give us a sense for what else you plan to sell in Canada outside of the Calgary office segment? We will. We even have them listed here. So we have one left in Ottawa, so we plan to sell that one and then an enclosed retail center in Saskatchewan. So those are on the list. And then the rest is really a lot of Calgary office. Yes, it's category office. And I think that we mentioned the mini office retail, of course. Yes, it's already unconditional. Yes. That one was just unconditional. So that's why we're kind of it was in there, but it just barely made the list on Friday. And we've got 4 Calgary office properties. But we're looking at some other office properties that again to your point about CapEx and outlook, if we think we've maximized the value, we'll let them go to. You might recall, we own a building in Hartford, New York or is it yes, and the tenant is Hartford Insurance. We just renewed their lease, but they had the right to give us back one floor. So they take 2 of the 3 floors. Now we've been able to release that top floor. And now with this new leasing status, we're going to sell that property as well. So there's certain non core buildings we're looking at and there's smaller office building in suburban Minneapolis called the DSI building that's on our list as well. We've got a good focus on what we want to sell and how we're going to streamline the portfolio. And as you downsize the business, how do what sort of impact does this have for the staff or the leasing folks who are doing the day to day leasing in planning, does this simplify their life in terms of the operations? And maybe just some color on how it impacts the rest of the business from an operational perspective? Good question. It's funny how often we might ask one of our property managers and leasing people about a building that we're thinking about selling and they'll say, yes, please sell that one. They don't mind at all. But on the other hand, you do a new Canada point like in Calgary, for example, it's been tough. Morale is not good at anywhere in Alberta and almost any sector right now. And we find ourselves spending more time doing our best to cheer our people up than even talk about leasing and getting keeping the morale up there. Everybody is working really hard and it's a thankless job in many respects being a leasing agent in Calgary. But so at a certain point, when we sell property in Calgary, we do our best if it's property managers, we don't but for them to transfer what's the property to the new owner and leasing, once make no mistake about it, some layoffs are involved sometimes and that's not a good thing, but that's the situation we're in right now. And maybe just last question from me in terms of a quick housekeeping item. Can you tell us the IFRS values for Center 15 and the Minnesota retail portfolio? I don't have the total off the top of my head, but I can tell you 10 or 15? Yes. And then I don't know the retail. So it'll be that's Canadian. So it's 65? In total? Yes, in total. Yes. Does that help you? 65, so that would be okay. Yes. And the split between the 2, was that 15 for Center 15? It's $13,000,000 for Center 15. $13,000,000 for Center 15,000,000 in the balance from the Minnesota portfolio. Yes. So it's a slight gain on Center 15. Your next question is from Jenny Ma from BMO Capital Markets. Jenny, please go ahead. Thanks. Good afternoon. So you talked about reducing the overall debt, but I'm just wondering what your thoughts are on the debt strategy over the near to medium term given that you still have a pretty big proportion of floating rate debt, the weighted average term on your mortgage is quite low and presumably you're paying off the credit facilities first, but how do you expect that to shake out in the next 1 to 3 years, call it? We're still seeing today that we can refinance much of the maturing debt at interest rate savings. So expect that there will be some savings to come. You're correct, a bunch of it is still floating rate debt. However, LIBOR and BAs in Canada really have not moved as much as you would expect given where the underlying bond rates have gone. So the floating rate debt really isn't as cheap compared to fixed debt as it used to be. That's the reason we've been placing a few more swaps on some of the floating rate debt just to lock them in. So you said they were the floating rate debt is not as cheap as it used to be? No. No, because the LIBOR is still running at 190 basis points. So if your spread is 160 or 170 over LIBOR, you're still running 3.5% on floating rate debt, which is where you can get 5 year fixed debt at today. So in that case, would you be more inclined to over time convert that into fixed rate secured debt? Some of that was swaps, right? Yes. So some of that we've been doing with swaps and but yes, I'm going to say over time, we would be more inclined to be fixing more debt today. And how are you thinking about the secured versus unsecured balance? So our secured debt today is less than 30% of GBV, which is probably where we would roughly want it to be. So expect that the secured debt will stay about where it is today and then the unsecured will layer on top of that. Okay, that's fair. Just wondering the Madison office portfolio, it looks like the occupancy has crept up a bit and it's been fairly stable. When you look at that, do you view it as a core component of your long term portfolio? Good question. I mean, as a REIT, long term owners and managers and holders of real estate, right now, we do consider it as core. It's a good, stable, predictable, reliable source of income. Our NERs are relatively high there compared to the face rates. We're really pleased with that. It's a market that doesn't get disrupted by large players coming in and overbuilding and then poaching tenants. So we like all of that. It adds some good balance to our portfolio. That doesn't mean that someday we wouldn't dispose of it. I mean, not everybody agrees with us that we should be investing. But it is a state capital and it's a university capital. And in terms of mid market, that's those are two key features to real estate and valuations and drivers of rent. So right now, we like it. That's not on our list on the top half of our list of properties to sell, that's for sure. Would you be able to comment on the cap rate on this portfolio versus when you bought it? Has it changed much? Well, the NOI has gone up a fair amount, right, Kim? And we feel the cap rates dropped at least 50 bps from our cap rate. We were over 8% when we bought it and it was 86% occupied. We brought it up to 90% and we raised the rents across the board. We've added we've been able to add make some additions on surplus land with long term leases in place for existing tenants. So we've been able to add value to that portfolio as well. Okay. Usually, it feels worth more than we paid. That's interesting. Okay. And then on the held for sale portfolio, could you comment on sort of the NOI associated with that in aggregate? I'm looking to somebody else in the room, Kim or Jackie or Jim? Well, I'm asking because when you look at some of the more recent transactions, the cap rates on them are quite high and I'm just wondering if that's indicative of what's left in the held for sale bucket? It all depends. There were some anomalies there. There are obviously many office retail is an anomaly. And I think it's Calgary which was another one where a couple of anomalies are the retail property. Yes, I mean, I don't have the exact calculation off the top of my head, but I would say in the held for sale bucket, again, it would be closer to that low 7 cap range is kind of where we're expecting it to be. Okay, That's helpful. Thanks. I'll turn it back. Thank you. Your next question is from Mike Markidis from Desjardins. Please go ahead. Hi. Two quick ones for me. Thanks. On Concord Corporate Center and Poco Place, just curious if you could give us some color as to where you guys might be with respect to getting rezoning or up zoning on those two assets? So still progressing. It's a work in progress going from meeting to meeting, so to speak, booking more meetings with the planners and with members of the community. I'd say Concord is definitely further ahead, and we really are optimistic by the end of by Q1, Q2 at the latest next year, we'll get at least a positive report, a support report, if you will, from the planning department. And then Afnan should be downhill to get the final density approved, the final entity approved, the final entitlements at the level of counsel. Poco Place, we've had several meetings as well. Including the mayor there in Port Coquitlam. And we're progressing, but I'd say at a slower rate. However, by the end of next year, we also we have a very good chance of getting our entitlements at least confirmed in principle. Now that's not to say that we wouldn't achieve a lot of value if we dispose of the properties now. But however, we feel they're not the top of our list. We've got other properties we want to sell first, and we'll keep working hard at getting this densely approved before we go to market with them. Okay. When you say preliminary plans, have you made an initial application? Or is it just sort of you're having discussions before you make your initial application? No, we've got a lot of plans done. We've paid a lot of consultants a lot of fees. I hope they've done something for us. No, I've seen the plans do. No, I mean, at Corner Court, for example, we're looking at density for about 5 50 suites in 1 large building there. That's moving forward. And we've had gone back and forth with the planners on making changes to the plans so that they could support them. And then at Port Coquitlam, it's a bigger densification, about 1,500,000 square feet we're looking at either 3 or 4 towers of multifamily. And that requires a lot more thought and indigestion, if you will, to go through the process with the planners there. But so far, they're in principle, they're very supportive of giving us more density there because we're within less than a kilometer of a SkyTrain station there, which makes it a TOD, so to speak. Okay. And last one here for me. Just with respect to how you guys carry those assets, is there any carve out for the land that you're building on the excess density? Or is it just capped as a normal property without any regard to it? Just treat it as a normal operating property. No potential lift recorded for the future density. Okay. That's helpful. Thank you. Thank you. Your next question is from Johan Rodriguez from Raymond James. Please go ahead. All my questions have been answered. I'm good. Thank you. Best caller. There are no more questions at this time. Please proceed. Okay. Well, then thank you again, moderator and everyone for joining us on this call on short notice. For Q4, we'll give everyone more time. It will be year end, and we'll have the call the next day after release of the results. In the meantime, we're looking forward to working hard for our investors. We hope to see a lot of you at the next Real Estate Forum in Toronto and hopefully when we do some marketing as well. And we're looking forward to delivering more good results in Q4 as well. Thanks again. Have a good evening. Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.