Good afternoon. My name is Konstantin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Artis Real Estate Investment Trust's Q3 2024 Results 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 the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. Heather Nikkel, you may now begin your conference.
Thank you, Operator. Good afternoon, everyone. Welcome, and thank you for joining us for Artis REIT's Q3 2024 results conference call. Our results were disseminated yesterday and are available on SEDAR+ and on our website. With me on today's call is Artis's President and CEO, Samir Manji, CFO, Jaclyn Koenig, and COO, Kim Riley. As we discuss our performance today, please note that the discussion may include forward-looking statements that involve known and unknown risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from those expressed or implied today. We have identified these factors in our public filings with the securities regulators, and we suggest that you review those filings.
In addition, we may refer to Non-GAAP and supplementary financial measures that are not defined under IFRS and are not intended to represent financial performance, financial position, or cash flows for the period, nor should these measures be viewed as an alternative to net income, cash flow from operations, or other measures of financial performance calculated in accordance with IFRS. Throughout this discussion, all figures will be presented in Canadian dollars unless otherwise specified. Before we proceed, I'd like to note that a replay of this conference call will be available until December 8th. You can access it by using the telephone numbers and passcode that were provided in yesterday's press release. Additionally, a recording will be made available on our website. I will now turn the call over to Samir to discuss Artis's Q3 results.
Thank you, Heather. Good afternoon, everyone, and thank you for joining us for Artis REIT's Q3 earnings call. Let me start right off the top by saying that Artis's Q3 was a defining quarter for our unit holders, with our overall leverage reduced to 39.8% and our AFFO payout ratio improved to 71%. These two points alone magnify the impact of the work that's been underway for the past several quarters, during which time we focused on our key objectives of strengthening our balance sheet and enhancing liquidity, while at the same time continuing to work at executing our value investing strategy. This strategy, by design, will produce lumpy income that we believe will ultimately allow us to maintain our distribution while aiming to grow our net asset value in the long term.
These objectives are critical to managing our risk profile while producing a positive long-term trajectory for Artis's owners. We are seeing positive signs in the overall real estate sector with the Bank of Canada's recent policy rate cuts and the anticipation that further rate cuts could be coming in the months ahead. In order to achieve our internal leverage and liquidity targets, we continue to use the tools available to us, including asset sales, refinancing existing mortgages, and obtaining new mortgage financing. In the Q3 of 2024, we sold two office properties and a parking lot located in Canada, and 14 industrial properties and one office property located in the United States for an aggregate sale price of CAD 616 million.
This includes two significant portfolio sales: Park 890, a portfolio of industrial properties in the Greater Houston area that closed in July, and the Arizona and Minnesota industrial portfolio comprising nine properties that closed in August. The proceeds from these sales were used to reduce debt primarily. At September 30th, 2024, the REIT had one industrial property and two retail properties located in Canada and one industrial property located in the U.S. under unconditional sale agreements for an aggregate sale price of approximately CAD 113 million. As part of our commitment to improving our balance sheet and reducing debt, our mortgage maturities continue to be a key area of focus for us. We've been working diligently and closely with our lenders on this important area of our business.
At September 30th, we had CAD 74.7 million of mortgage debt maturing during the remainder of 2024, and we have extension options in place for the entire balance. Subsequent to the end of the quarter, we extended the CAD 150 million non-revolving credit facility to November 2024 and are in active discussions with lenders with respect to both this maturity and the maturity of the first tranche of our revolving credit facilities. We have a substantial pool of unencumbered assets in our portfolio and believe we can secure a new financing structure that is better aligned to Artis's strategy and long-term goals. During the Q3, our units, despite appreciating 25%, continued to trade at a material discount to our net asset value.
From July 1st to September 30th, we used our normal course issuer bid to purchase 1,630,500 common units at a weighted average price of CAD 7.30 and 149,868 preferred units at a weighted average price of CAD 19.81. Under the current NCIB terms, we have purchased 4,975,324 common units, representing over 70% of the maximum number of unit buybacks permitted under the term. The weighted average price for these units was CAD 6.64 per unit, representing a discount of over 50% compared to our net asset value of CAD 13.77 per unit at September 30th. Through our efforts over the last several quarters, including asset sales and other capital management strategies, we are pleased to report that our debt to gross book value decreased to 39.8% at September 30th, 2024, compared to 49.8% at June 30th, 2024, and 50.9% at December 31st, 2023.
At September 30th, 2024, Artis had investments in equity securities of CAD 100.2 million compared to CAD 152 million at December 31st, 2023. This includes equity securities of Dream Office REIT and First Capital REIT. Including the impact of realized gains and losses on equity securities, FFO and AFFO per unit increased to CAD 0.31 and CAD 0.21 respectively for the Q3 of 2024, compared to CAD 0.25 and CAD 0.13 respectively for the Q3 of 2023, and we are very pleased to see our payout ratio drop to 71.4% of AFFO this quarter. As we have conveyed since establishing Artis's new strategy in 2021, we expect our income and correspondingly our FFO and AFFO metrics to be lumpy from one quarter to the next, and we anticipate that this will continue to be the case going forward.
On August 2nd, 2023, Artis's board established a special committee to oversee a strategic review process to consider and evaluate alternatives available to the REIT to unlock and maximize value for unit holders. The work undertaken over the past 15 months has enabled us to properly assess the current environment, and the board remains committed to evaluating and pursuing strategic alternatives that may be available to the REIT. Looking ahead, with improved leverage, our near-term debt maturities dealt with, and the benefit of lower interest rates, we are well positioned to explore growth opportunities that we believe will increase our net asset value per unit and narrow the gap between intrinsic value and the market price of our units. We look forward to providing further updates on some of the key initiatives we've highlighted in due course.
I will now turn it back over to the Operator to moderate the question and answer session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Jonathan Kelcher from TD Cowen. Please go ahead.
Thanks. Good afternoon.
Hey, Jonathan.
First question, Samir. Just, and I guess this goes to the lumpy income, but you guys had CAD 4.7 million of the additional interest income that, as the MD&A says, may or may not be recurring. What does that refer to, and how can we think about it, whether it will be recurring or not? Or when does it come in?
No, thank you. I'll let Jaclyn respond to that.
Hi, Jonathan. We spoke about this one in the past, as we've seen it previously in our quarters. Going forward, we aren't certain that it will recur, but this is additional interest accrued related to our Iris investment.
What causes it to come in?
This would just be certain metrics surrounding the agreement related to that investment.
Okay. So I guess on that investment, it looks like you guys can put the pref back to the JV early next year. Is that something you're considering?
Yeah, I think that the plans related to Comin are fluid, and we're starting to see, as I mentioned in my comments, some positive momentum in the broader real estate market, and we think with rates continuing to decline, the overall picture for Canadian real estate generally, and we would say even specific to the core assets that we continue to own within the Cominar Consortium, that outlook looks reasonably positive, and so we're working through the 2025 plans with the board of the consortium's board, and at this point, it's premature to comment on what our intentions are related to our pref. I think it's going to be contingent on a few different factors, including the other pieces of the capital stack.
Okay. Switching gears and congrats on getting your leverage down.
Thank you.
Actually passed, I think, past the target you were aiming for, so that's good, but how are you looking at dispositions going forward? Do you have a target size for your asset base? I know at the end of your comments you talked about growth opportunities. Maybe give us some color on what type of growth opportunities you guys might look at.
Yeah, thanks. I don't think we have a definitive target number for our income-producing properties. I think your question related to disposition activity, now that we have our balance sheet where we would like to see it in terms of both leverage but also liquidity, there are a number of opportunities of differing forms that are in front of us that we are exploring. And as is consistent with our strategy, we have a lot of flexibility, whether we want to acquire directly a property or group of properties, whether we want to acquire an interest in a property or group of properties in the form of a joint venture that Artis would then be the managing partner in. Those are a couple of options as it relates to hard assets.
We continue to look at the broader public securities environment and, again, from a value perspective, identifying opportunities that we think could provide, on a risk-adjusted basis, better returns on our capital for our unit holders, and then we continue to have existing investments that we're continuing to manage and assess as we keep going, and the outlook, again, there's a lot of optionality, whether there could also be M&A in the future, could be an interesting area as Artis's unit price continues to strengthen and looking at sort of the universe of other players in the market that may not have that same benefit and to see if there are scenarios out there where 1 plus 1 equals 3 and that, again, on a risk-adjusted basis, we'd be comfortable with.
I think it's a full gamut, Jonathan, in terms of the spectrum of opportunities and areas where we're going to consider growth, and we're going to do it in a very thoughtful, strategic, and diligent manner.
Okay. That's helpful, and the last one for me, just on the 300 Main, where do you sit in terms of occupancy on that? How's the lease going?
I'll let Kim address that, but things are going very well at 300 Main. Kim.
Thanks, Samir. Hi, Jonathan. So yes, agreed with Samir. Things are going very well. We have released phase I, as we've talked about previously. We are over 90% occupied for that phase, so we're very happy with that outcome, and the phase II of the tower got released to the market a few months ago, so we continue to lease up there. We're seeing great progress, lots of tours weekly, and things continue to progress really well.
Perfect. That's great. I'll turn it back. Thanks.