Good morning and welcome everyone. Many of you have traveled quite a distance to be here, and we appreciate that, and you are all welcome. Thank you. My name is Edward Warkentin, and I am the Board Chair. This is the annual meeting of the unitholders of Artis REIT, which I will refer to today also as Artis or the REIT or the Trust. After some initial comments and introductions, today's meeting will consist, as it normally does, of two parts. The first part will be the formal business part, and we will deal with the matters set out in the agenda in the management information circular. In the second part, Armin Martens, our CEO, will address the meeting and respond to any questions.
If required, meeting materials, which include the agenda, the information circular, and the annual report, together with the 2017 consolidated financial statements, can be found on the table near the entrance to the room. At the outset, I would like to introduce those of the senior management team who are in attendance today, and I would ask that you please identify yourself as I call your name. Our President and Chief Executive Officer, Armin Martens; Chief Financial Officer, Jim Green; Executive Vice President, Asset Management, Central Region, David Johnson; Executive Vice President, U.S. Region, Philip Martens; Executive Vice President, Property Management, Frank Sherlock; Executive Vice President, Asset Management, Dennis Wong. Where is Dennis? Unable to be here today, but shown on the screen, is Patrick Devine, who is Senior Vice President, Leasing, U.S. Region. Senior Vice President, Asset Management, U.S. Region is Marie Dunn. Senior Vice President, Leasing, Central Region, Brad Goertzen.
Senior Vice President, Asset Management, Minnesota, Amy Melchior. Senior Vice President, Asset Management, Western Region, Greg Moore. Senior Vice President, Investments and Developments, Kim Riley. Senior Vice President, Construction and Development, U.S. Region, Ron Wheeler. Senior Vice President, Asset Management in Wisconsin is Leon Wilcox. Thank you very much. This meeting of the unitholders of Artis is hereby called to order. As Chair of the REIT, I will act as Chair and Secretary of the meeting and ask Kara Watson to act as Recording Secretary of the meeting. I appoint Gloria Gratham, AST Trust Company, to act as scrutineer. All unitholders of record who are present should now be registered with the scrutineer, and all proxies should now have been deposited. If you have not done so, please do so now.
The notice calling this meeting of unitholders was sent to all of the unitholders of record as required 30 days prior to the date of this meeting. An affidavit of mailing indicating a mailing date of May 15, 2018, has been submitted to the Chair and will be attached to the minutes of this meeting. The scrutineer has submitted its report on attendance. It reads as follows. We are pleased to report that there are 69 unitholders holding 75,729,040 units represented in person or by proxy at this meeting. This represents 49.24% of the 153,795,779 issued and outstanding units. I declare the scrutineer's report adopted. Notice of this meeting having been given as required and a quorum of at least 5% of the units being represented in person or by proxy, I declare that this meeting is duly constituted for the transaction of business.
The first item of business is to have a drink of water. I'll do a Trump thing. The first item of business is to receive the annual consolidated financial statements of the REIT for the year ended December 31, 2017. The 2017 annual financial statements, together with management's discussion and analysis, were sent to all Artis unitholders that requested them. Deloitte LLP, the auditors of the REIT, have certified that, in their opinion, the consolidated financial statements present fairly in all material respects the financial position of Artis Real Estate Investment Trust as at December 31, 2017, and December 31, 2016, and its financial performance and its cash flows for the years ended December 31, 2017, and December 31, 2016. We will take the financial statements and the auditor's report thereon as received and considered. Thank you, auditor representatives, for being here this morning.
In addition, we have copies of the financial statements of the REIT for the interim period ended March 31, 2018, and a related MD&A available on the table near the entrance to the room. These documents are also publicly available on SEDAR and on the REIT's website. The next item of business is to fix the number of trustees of the REIT for the ensuing year to elect the persons who will hold office from the close of this meeting until the next annual meeting of unitholders. I requested that Victor Thielmann move, and Cornelius Martens second the following motion: be it resolved that the number of trustees be fixed at 10. Vic?
I so move.
Thank you. Are there any questions on that motion? All in favor, so indicate. Are there any opposed? Indicate. Thank you. That motion is carried unanimously.
The next item of business is to elect the persons who will hold office as trustees from the close of this meeting until the next annual meeting of unitholders. Before doing so, I would like to introduce the current trustees of Artis, all of whom are in attendance today and are being nominated. Please identify yourself as I call your name. Number one, Bruce Jack. Number two, Steven Joyce. Number three, Armin Martens. Number four, Cornelius Martens. Number five, Ronald Rimer. Number six, Victor Thielmann . Number seven, Wayne Townsend. Number eight is myself. Patrick Ryan, who served on our board since 2013, decided not to stand for re-election for the forthcoming year. Pat is not here today, but we take this opportunity to thank him for his time and contributions to Artis.
Also being nominated today for the first time to our board and for the upcoming year are Ida Elbo and Lauren Zucker. We will conduct individual voting for the trustees, and the following resolution will apply to each, namely, be it resolved that the following nominee, who is named in the information circular, be elected as trustee for the ensuing year to hold office from the close of this meeting until the close of the next annual meeting of unitholders. Number one, for nominee Ida Elbo, I ask Bruce Jack to move and Wayne Townsend to second this motion. Bruce? So moved. Wayne?
Second.
Thank you. All in favor. Any opposed? None opposed. Thank you. That motion is carried. Number two, for nominee Bruce Jack, I ask Vic Thielmann to move and Cornelius Martens to second this motion. Vic?
So moved.
Cornelius?
Second.
Thank you. All in favor. Any opposed? None opposed. That motion is carried. Number 3, for nominee Steven Joyce, I ask Ron Rimer to move and Victor Thielmann to second this motion. Ron?
Moved.
Thank you. Vic?
I second the motion.
Thank you. All in favor. Any opposed? None opposed. Thank you. That motion is carried. Number 4, for nominee Armin Martens, I ask Bruce Jack to move and Wayne Townsend to second that motion. Bruce? Moved. Thank you. Wayne?
Second.
Thank you. All in favor, please indicate. Any opposed? None opposed. Thank you. That motion is carried. Number 5, for nominee Cornelius Martens, I ask Ron Rimer to move and Steven Joyce to second this motion. Ron?
Moved.
Steven?
Second.
Thank you. All in favor, please indicate. Any opposed? None opposed. Thank you. That motion is carried. For nominee Ronald Rimer, I ask Steven Joyce to move and Cornelius Martens to second this motion. Steven?
I move.
Thank you.
Second.
Thank you. All in favor. Any opposed, so indicate. None opposed. Thank you. That motion is carried. Number seven, for nominee Victor Thielmann , I ask Bruce Jack to move and Wayne Townsend to second this motion. Bruce? I move. Thank you. Wayne?
Second.
Thank you. All in favor. Any opposed? None opposed. Thank you. That motion is carried. Number eight, for nominee Wayne Townsend, I ask Cornelius Martens to move and Victor Thielmann to second this motion. Cornelius?
I move.
Thank you. Vic?
Second.
Thank you. All in favor. Any opposed? Thank you. None opposed. That motion is carried. For nominee Edward Warkentin, I ask Armin Martens to move and Ron Rimer to second this motion. Armin? So moved. Thank you. Ron?
Second.
Thank you. All in favor. Any opposed? None. Thank you. That motion is carried. Number 10, for Lauren Zucker, I ask Bruce Jack to move and Steven Joyce to second this motion. Bruce? I move. Thank you. Steven?
I second.
Thank you. All in favor. Thank you. Any opposed? None. I declare that motion carried. The next item of business is to consider a resolution reappointing the external auditors of the REIT for the ensuing year and to authorize the trustees to fix the remuneration of the auditors. I requested that Bruce Jack move and Ron Rimer second the following motion: be it resolved that Deloitte LLP be and is hereby appointed the external auditor of Artis for the ensuing year, and that the trustees be and are hereby authorized to fix the remuneration of the external auditor. Bruce? I move the motion. Thank you. Ron?
I second.
Thank you. Are there any questions on that motion? No questions. All those in favor, please indicate. Thank you. Any opposed? None opposed. I declare that motion carried. This then concludes the formal business part of the meeting, and I'll call on Armin to present and to address any questions. Thank you.
Thank you, Ed. There we go. Thanks again, everyone, for joining us today. I'll go along with a glass of water. Yes. Welcome again to our 2018 AGM, everyone, here in the Del Crewson Conference Centre . We appreciate your support and your interest. Let's talk a little bit about Artis REIT. You've heard us say that our core mission, folks, we feel, is to create economic value for our investors through the active investment and management of commercial real estate in our target market. In terms of objectives, Is the sound okay? In terms of objectives, let's start by just staying on the path of continuous improvement. That's a broad statement, but we want to be able to say to our investors every year in Europe that Artis is a better REIT today than a year ago. It's about our real estate.
The RE in REIT stands for real estate. We want to improve the caliber of our real estate slowly but surely during the course of each year. Our earnings profile, our balance sheet, and the reliability and sustainability of our income. Our strategy and our business model has been clear. We can probably clear if we go straight to the map. It starts with diversification. We're a diversified REIT by geography. We're in two countries, 10 major markets. We're a diversified REIT by asset class. We're in three asset classes right now: office, retail, and industrial. Internal growth has been the mantra for us for a couple of years now. We haven't raised new equity to grow externally for several years.
It's about internal growth, about accretively recycling capital, about harvesting our development pipeline, about bringing rents up to market, and thus pushing up our same property, same store NOI. Here on the map you see again, what we own and where we own it. Again, we're in two countries, 10 markets, major markets. The office properties are in green, industrial in blue, and retail in yellow. To be more specific, in Canada, we're just west of Quebec. We're not in Quebec and we're not east of Quebec. We're just west of Quebec. That means we're in Ottawa and Toronto, we're in Winnipeg, we're in Regina, Saskatoon, we're in Calgary, Edmonton, we're in the greater Vancouver area as well. Excuse me. In the U.S., by design, we stayed down the central corridor. We stayed away from the coastal markets, which are more competitive and lower yielding.
We stayed down the central corridor, and we focused on cities that are state capitals and university capitals. Madison, Wisconsin, great state capital, great university capital, Minneapolis, Minnesota, Denver, Colorado, and Phoenix, Arizona. We're also in Texas right now in Houston, not the state capital, but it's got an MSA over 7 million people. Texas, by Canadian standards, is a country of its own, 28 million people. Your personal tax, your corporate tax, end of presentation, so to speak. In Houston, second-biggest port in the country. Texas, as a result of all that, it's got great geographic location. It's got unfettered access to the global markets. Anything you're making that you want to sell, they can get to the markets.
No state or province can say, "No, you can't have access to the ocean." A lot of good reasons to be in that state, and things are performing very well for us there. These pie charts tell you how we make our money and where, in terms of how we see that last year, 21% of our income came from retail properties in yellow. 26% industrial, 53% office. Looking ahead, you'll see us shrink retail to about 15%. We don't have a big problem with retail, but the winds of change are over retail. E-commerce is upon us. We're careful about the type of retail we want to own, and you'll see us shrink to about 15% in a year or two years ahead. Industrial, you'll see us moving that up to north of 30%. Industrial market and the winds of change are positive for industrial.
On both sides of the border, industrial real estate is performing very well. In Canada, possibly primarily because our dollar is under CAD 0.80. Things are performing very well in Canada. Our occupancy levels in the last four years have moved from basically 92%-98%, and rents have gone up 50% in our industrial portfolio in Canada. Similar story in the U.S., but the economic fundamentals are structurally positive there. You've got the largest economy in the world now, and it's energy self-sufficient. This is a major catalyst for the industrial sector, manufacturing, industrial job creation, and it's pushing. All of our industrial developments are performing well also. On the right side, by geography, you see. There's one thing missing. Oh, there, in the middle. 60% in Canada, 40% in the U.S.
It wasn't that long ago, we were 80/20, and 90/10 in favor of Canada. Looking ahead, we're probably 50/50 Canada and the U.S. There's a great value proposition so far in favor of the U.S. in terms of higher unlevered yields and a good economic profile. If that ever changes, we'll switch. For example, the last several years, what we've done is we've been able to sell non-core assets in Canada at lower unlevered yields than we've been able to acquire in our target markets in the U.S. If that ever changes, then you'll see us change our strategy as well. We'll be selling lower yielding non-core assets in the U.S. to invest in Canada. We don't see that changing in the years ahead.
It's not just the economic profile in the U.S., but you add layer on top of that, the tax reforms they've implemented in the U.S., that's attracting a lot of capital. It's made Canada less competitive than the U.S. and attracting money like ours into real estate there. The bottom, the two different shades of brown you see is Calgary office and Alberta others. We have 22% of our income come from Alberta right now. Just three, four years ago, it was 38%, so we brought that down over the years to 22% to improve our diversification. We still expect to bring that down to about 15%. Calgary office at one time was 18%, now it's down to 9%. We expect to bring that down to about 5%, but we don't expect to vacate the province at all. Sunny days will be there again. The market will turn around.
It's all about pipeline and infrastructure for Alberta. Then the geographic market and other things will turn around too. We won't move it all together, but we want to bring it down some more just to improve and add better balance, if you will, to our diversification. I mentioned internal growth. Capital recycling is the essence of our internal growth. In the past three years, we've cycled over CAD 1 billion of real estate very accretively. In essence, it's about buying low and selling high, or for us, it's about selling our lower-yielding non-core assets and purchasing higher-yielding assets in our target markets. What this does is it improves diversification, again, by geography and by asset class and the caliber of our real estate. Last year, for example, we sold CAD 220 million of properties.
Cap rates, you can see in the 5.5 range. We were able to acquire. Most of that was redeployed into new generation real estate in our target markets at a spread of almost 100%, 100 points rather. In addition to that, some of that was deployed into our greenfield developments, which are achieving unlevered yields in the 7% range. The new developments are excellent projects. We'll show you some examples in a minute. It gives us new generation institutional caliber real estate, again, at higher unlevered yields than we could get if we were to buy them. Here's some examples of cap rates recycling at work. These are just examples of acquisitions. All of these are industrial properties. When I was younger, I never thought I'd see the day when I'd be excited about industrial properties.
As I said, they're performing very well, both sides of the border. You see on the left, up and down on the left, industrial properties in Phoenix. We were able to acquire some good properties there to add to our industrial position in Phoenix. At bottom right, a new generation distribution center in Minneapolis, 15-year lease, annual rental increases, great acquisition, adds to our position there. We're the third-largest industrial landlord in Minneapolis. We have a good position there. Upper right is an industrial development center, the project in Denver. It's our first acquisition in Denver for industrial. We've got office properties there. You'll see us adding to that this year, beginning construction on a 400,000 sq ft industrial development near that site in the Denver Airport area as well. A very good market to be in, one of many good markets.
We're very bullish on those assets we bought, and it's definitely improved the REIT. Now, here's examples of new developments under construction. This is all new generation. At the bottom right, it's Phoenix. Only thing missing is a palm tree. I keep asking my people to put one in there. We're now under construction with phase 4 at Park Lucero in Phoenix. That'll make it 600,000 sq ft of Class AA institutional-grade and industrial property. Just a great asset. We're breaking 7% on the unlevered yield there. Again, it took us three years, it's performed very well, great traction, great results for us. Far left, you see Park 890. This is again, a Class AA industrial business park in Houston. It will be 1.8 million sq ft when it's finished.
We're on phase 2 now, getting good leasing momentum, leasing traction, already dealing with prospects for phase 3. In the middle is another project that's in Houston Cedar Port. It's got water access to the port as well as dual rail access and freeway access. It's in a major distribution district across from a large Walmart distribution center, across from an IKEA distribution center. This will be a 2-phase, million-sq-ft development. The first phase of half a million sq ft is pre-leased already, 12-year term, annual rental increases, construction will be starting this summer. A lot of good things happening for the REIT. Takes a little bit of patience, it's worth it. The exit cap rates for these are under 6%.
The spread is anywhere from 100 points to 150, roughly, in terms of the profit we can make if we want to sell them later. In the meantime, because of the high unlevered yields, we see ourselves just enjoying the income as we develop out and lease out these projects. Now for something completely different. The next two slides I'll show you multifamily. That's a fourth asset class. We don't know if we'll keep these properties when we finish them because of their opportunity to exit us at the low cap rate. What's happening in urban centers in Canada and core suburban centers is that the highest and best use for surplus property and/or densification rezoning opportunity has become multifamily. On the right, you see Stampede Station. That was supposed to be a 300,000 sq ft office building.
We're getting it rezoned, getting permission or permit to make it a 300-unit apartment building. That'll be the highest and best use. We decided it's an existing office building we own, so it'll make the whole asset worth more just by getting the entitlement, not to mention when we sell out the building. Because we're in Winnipeg, we have to show you. It's too bad the Artis's sign is missing from that building, but it was worth it to get TD Bank in here. You see upper left there, on the left side, there's a taller building. That at one time was supposed to be a 30-story office building, but the highest and best use now is multifamily. It'll be a 40-story apartment building.
If you know the history of that block that we own there, the land is in place, the parking is in place, 3 levels of underground parking. We've got an office tower there. We've got 60,000 sq ft of retail, and the pad and foundation is in place for this 40-story apartment. Now we're going ahead, in addition to that, the stars have aligned very nicely. The city and the province have agreed to provide us with 18 years of property tax abatement to help with the project. No school tax, no municipal tax. We ran out of reasons to say no, we're going ahead with the project. Very excited about it. Value creation in Toronto. When we bought these two properties, on the right-hand side, you see 450 Yonge, on the left, Concord.
We heard more snickering than cheering when we bought them many years ago, but now they are definitely home runs for us, for sure. On the left side, Concord, if you know that area, it's on the Don Valley Parkway. We've got three office buildings there. We've got room for a fourth office building, but instead we'll build 500 apartment suites. The applications for rezoning are in for both of them. I'm personally taking a vested interest in attending these planning meetings with city planners. There, we've applied for 500 suites. The game changer for that site is, again, the transit and the infrastructure. If you look at the map, it looks like it's close to downtown, but really it's a one-hour drive to get to downtown, sometimes 90 minutes. Now we're building an LRT line right to our property.
The Eglinton line going east-west is going to come right to our property, and we'll get an LRT station 100 steps away. It'll take only 15 minutes to get from our property to the Yonge Street line, and then 15 minutes to get from that station to downtown, 30 minutes in total. That's an economic game changer for that site. We're already seeing it with positive leasing momentum for the office component, and we're very optimistic about getting the density approval for that site, which will add a lot of value. Same with Toronto. If you look close at that glass building here, this is going to be 62 stories in total. We're just across the street from the 75-story building. We're not doing anything new in that sense. We're across the street from the College Park subway station, very major subway station.
We're between the two universities, U of T, just a little bit to the north. Ryerson is just adjacent to us to the south. There we've got a 20-story office building. What will happen is maybe two floors will be retail, the next 18 floors will be office, then we will add 42 stories of multifamily, purpose-built rental, something that really meets the needs of the neighborhood. We're optimistic again about getting that approval. Land values in Toronto. Vancouver has about the highest multifamily land values in the country, and Toronto would be second. My example today is that land value, if we had the entitlements, would be worth about CAD 200 per buildable square foot. And that's 400,000 sq ft times CAD 200. It's CAD 80 million of value creation if we get the zoning.
We don't want to get ahead of ourselves, but the application's in and we're working hard to go through the process. With all of it's at least a one-and-a-half to two-year process to get that. Not a problem necessarily because we don't mind being patient, right? None of us are getting older. In Toronto and Vancouver and those kind of markets, if it takes longer to get the zoning, it's not a problem in a sense that the land's only going up in value anyways. And it's going up in value greater and double-digit rates. Ironically, it becomes a good investment for us. We're looking forward to getting these projects launched. Next year, we'll add one more page. We'll show you a property in Coquitlam in the Greater Vancouver area. We'll be applying for 600 suites of additional density there.
It's a shopping center, office building complex, and we'll show you our TransAlta complex in Alberta. It's about transit-oriented infrastructure. In Vancouver, the Evergreen line has come there. There's a SkyTrain station just near our site. A game changer. In Calgary, the TransAlta site. The city's bringing in a new LRT line. It'll become a subway station just adjacent and connected to our property, that they're calling the Green Line. Again, is a game changer for the site and for value creation. Looking forward to discussing that next year. Back to reality. Some select financial information. We've gone back four years. 2014 is just before the oil crisis in Canada and the collapse of the Calgary office market. We held our own pretty good. If you look at the far right for earnings per unit increasing. We did come down.
I mean, we can't fight the fact or change the fact that the Calgary office market is having a negative effect on our earnings. Our earnings are still higher today than they were in 2014 before the office market collapsed in Calgary, and our unit price is trading at CAD 13 range versus CAD 15. We think there's room for a multiple upgrade. We do feel we offer great value proposition. If you look at the bottom, you'll see the analyst consensus information. The analysts have a target price of over CAD 14 for us, and we feel comfortable that our NAV is even higher than that. This is our favorite chart. Once in a while, investors are concerned with Artis of value proposition.
Well, if you've been paying attention, we were, and Not only are we one, we were for five years, three years, and one year. Look at those charts. This is a peer comparison, but we're also comparing ourselves to the TSX REIT index, our total unit holder return. On a one-year, Artis is in the red, the TSX index is in the black, and the rest of our peers, these are diversified REITs with a billion market cap or higher, most of them are in blue. You can see we did well in the five-year, three-year, and one year. We've always been a good investment. Now, every year is a different year, but generally, it's the three- and the five-year charts that matter, not just one year that goes up or down.
We're very pleased with that, pleased that we rewarded our investors, and that at least any and all of our patient investors have been well rewarded by staying close to us. Back down to our last two slides, folks. Looking ahead, here we could talk for a long time. This section could be a 10-page section, but looking ahead, headwinds and opportunities for REITs and for Artis. In our case, it's really one headwind still. It's Calgary office market. It continues to put negative pressure on our income. It won't bottom out until the end of next year. Then we'll see 25%-30% vacancy rates depending on the sub-market there. The challenge in Alberta is, of course, making money. They deliver, they produce four million barrels a day of oil, and they're at full capacity. The pipelines are full. Oil by rail is full.
They could produce more. They can't sell it. The subject of pipelines comes up. Well, the Enbridge line is under construction, Line 3. It'll be finished in 2019. Trans Mountain, we believe, will now happen by 2020. Collectively, they add a million barrels a day, bringing it up to five million. It adds about CAD 30 billion a year in economic activity to the province, which will be a great job creator and a great source of demand for Calgary office and other things. These are the catalysts that are around the corner and why we aren't interested in shutting down Alberta completely, but we're looking for a balance in our portfolio. Sometimes investors are patient. They don't want to wait that long. Things will turn around in Alberta one year at a time.
We're looking for, of course, is for investors to be optimistic before the pipeline gets completed, right? There's what I call a new REIT paradigm. We've all heard this expression, we're in the eighth or ninth inning, or seventh, eighth, ninth inning of the ballgame, or we're in the 10th year of the six-year economic cycle. Really, I say we're in a new paradigm. We're actually in a new ballgame. The old ballgame is over. It was friendly. We're starting a new ballgame that's a little more serious. Now the score counts. Last 10 to 12 years, we've seen interest rates fall, and we could make money just by renewing a mortgage at a lower rate. And cap rates came down, so our NAV went up every year. That friendly game is over.
Interest rates are level or rising, cap rates are level or rising, and REITs are more like real estate operating companies that just make a distribution every 30 days. And REIT management teams have got to be good at all things real estate, not just the regular stuff, asset management and property management. They've got to be good at the greenfield developments. They've got to be good at repurposing buildings, fixing broken buildings, seeing value, extracting that value, such as rezoning opportunities, and then not just selling out when you're finished, but maybe you'll develop and maximize and squeeze every last penny out of that opportunity. So we have to be good at all things real estate. I like to think we are at Artis REIT. We've got a team of [220] people in seven offices, two countries.
We've got a great management team of employees, and we do it all. We do all the asset management, leasing, property management, building operations, investments, developments. We drive the bus and we drive the deals, investor services, financial services, accounting. We've got a great, well-rounded team that knows real estate and that is ready to play in this new ballgame we're in and work hard for our investors in the year ahead. What about AX on the TSX? We do feel that any investor that shows confidence in us and invests in us will be well rewarded. Our intrinsic value continues to improve, folks. As we work our way through the Calgary office cycle, and as we harvest our development pipeline, investors won't be sorry. What you'll see us do, not to oversimplify, is to stay focused and disciplined.
Sometimes institutional investors and hedge funds are the ones that are not that patient, but being focused and disciplined sometimes requires patience, and patience in itself can be a strategic decision. Jim and I remember when, back in 2015 and 2016, we'd be criticized, institutional investors in particular said, "Well, do something, do something." Our stock was coming down but our earnings were going up and our stock was coming down. We said, "Look, we've got a plan. You've got to be patient." And the eyes just glazed over. That in itself is a strategic decision. Our patience paid off. I'm just going back on that. As you can see, we proved our patience and our strategy paid off. If you look at the five and the three and the one-year results. Here, on our last slide now, folks, why invest in Artis?
My favorite rhetorical question. You've heard me say we're a great value proposition. We are actually the highest yielding investment-grade REIT listed on the TSX. We are a great value proposition, a good opportunity for investors. We have a well-diversified platform by geography and by asset class that's improving. We've got a great track record in terms of creating value with our development pipeline and a good development pipeline ahead of us, and a great track record of accretively recycling our capital to improve our earnings and the REIT as a whole. That does bring me to the end of our presentation, Mr. Chairman. I want to thank everyone again for joining us and take the time to thank all of our stakeholders. There are four or five key stakeholders, starting with all of our investors for the faith and confidence they placed in us.
Our tenants are the top line of our income. We are here to serve our tenants. Appreciate each and every one of them. Our financial institutions. Real estate is a capital-intensive industry, very capital intensive. We appreciate all of our relationships on the debt and the capital market side. Our board of trustees, which is getting bigger and better for their great corporate governance and wise counsel. Again, as I've mentioned, our great team of employees, each and every one of them for the contribution they've made to Artis' success. I thank all of you. Folks, our CFO just came back from holidays. He's dying to answer your questions. The floor is open for questions. Dig as deep as you want. Thank you. Are there any questions? Yes, sir.
Armin, in 2016, 2015, and 2014, I asked what it would take to get Artis' stock price back over CAD 15. Five years ago, April of 2013, Artis was trading just over CAD 17. Artis got a dual mandate to provide reliable, safe dividends, but also some capital appreciation. Now, you've got 47% properties in Western Canada, 20% in Alberta. Is the Alberta holding down the disparity between the book value and the stock price? Book value is CAD 17.30. Stock price, I don't know, CAD 13.25, CAD 13.30. Why is Artis trading so much under its book value? What's it going to take to get the stock price up to CAD 15?
It's changed the definition of book value based on IFRS. We're at CAD 15.20, right, Jim, in terms of our-
CAD 15.03 is the current book value. Last time I checked this morning, it was CAD 17.30.
We wish that were right.
It was a number during the sub-prime for a very long time. I'm not sure where you were. Will it take operational efficiencies and cash flow FFO, or will it take appreciation in the portfolio itself, given that you've got 23% in Alberta?
Look, both of those, and also investor sentiment. As I mentioned, the Calgary office market, what's happening in Alberta, is still a drag on our revenues. Investors can see that. When investors see that turning around, and in fairness, that's the way the market is. It's a show-me market, right? The stock market often shoots first and asks questions later. I think we've been oversold before. I've never felt we've been overbought. It starts with investor sentiment, feeling that things are turning around in Alberta. Then it's our job to keep delivering on the value. I've shown you some value creation projects there. It's our job to deliver on those, and we will. That's how we'll get our NAV up.
We think that sum of our parts, on a bad day, it's closer to CAD 16 if we break out our industrial and all of our office and all of our properties separately. The uncertainty from a buyer's perspective is they can't always put a value on our Calgary office. As we get to that bottom of that cycle, it goes north of that as well. We feel good about where we are. Yeah, to be sure, back in 2014, end of 2014 when the oil market collapsed and the Calgary office market just evaporated on us, our strategy, so to speak, got hijacked by what happened, and our job is to work through it. We're the only REIT in Canada with an Alberta-centric position, so to speak, that did not cut its distribution.
We went a different direction, to be patient, to work hard, and we kept very busy. Our job, 1, is to avoid the distribution cut, job 2, to grow the NAV and the income stream. Unfortunately, it doesn't happen as quickly as we'd like. Thanks, sir.
Martin. I've been an Artis shareholder since before it was Artis, when it was originally Westfield.
Oh, I missed that name then.
Been there for a long time. Question for you is this: What is Artis doing differently between December 31, 2015 and December 31, 2017 and going forward, where according to page 12 of this year's financial report, AFFO payout ratio was changed from 8.6% December 31, 2015 to 103.8% December 31, 2017, and according to a research report from National Bank Financial, will increase to 110% in 2018 and about 109% in 2019. Where is Artis getting the money to continue to pay my-
Jim is dying to answer that. He asked a full question. We've been in that movie before, by the way, where our distribution's been 120% before. It's been over 100% before, and we've grown it back down. We're going to grow it back down again, that's the payout ratio. Part of the reason for that spike was the real change in definition of how AFFO was calculated. That doesn't bother us at all. Our cash flow is good. Our liquidity is very good. You asked what we're doing different. We've diversified out of Alberta. Just in 2014, we're 38% weighted in Alberta. Now we're 22%. We're 18% Calgary office. Now we're 9%, and we're bringing that down. We're improving our diversification and the balance in our portfolio, so to speak.
In parallel with that, as we diversify, we have been improving the vintage and caliber of our portfolio. Because it's real estate, it's slow and steady. There's no easy button to push on that. Do you want to add to that, Jim?
I think one of the major items there was a change to the definition of AFFO based on the 2020
Because all I'm referring to is what you've got in black and white in this financial report that's in front.
Yeah.
Your turn.
There was a time back in the 2008, 2009 recession where just under 80% have invested in Alberta and 40% Calgary office. We dodged that bullet. That didn't hurt Canada much, that recession. After that, we embarked on this diversification mission. Went first to Ontario, and we found out to our chagrin that Canadian real estate was becoming priced to perfection way too quickly. We said, "Okay, we're diversifying to the U.S. Great value proposition." We've done that. We've been on this road path of to diversify geographically, but for years now, not just in the past two years. Jim and I will fondly remember being in N.Y. at a meeting.
For some reason, we were wearing the same coats, these Tip Top Tailors black raincoats, and we were asked that same question by Colonial First State in N.Y., says, "What are you guys going to do about your distribution?" Because right after 2009, we were back up to CAD 1.20, and I said, "Look, we're like The Blues Brothers. We're on a mission from God to grow into our distribution." Now, forget the tune on one more hour, and we got a good laugh out of many. They are still investors of ours today. They stuck with it. It's manageable. If we over distribute, for example, by CAD 0.10 a year, over five years, that's CAD 0.50 of NAV. Just one rezoning will get us more than that back. We're not concerned about that. We still see our NAV growing north in the years ahead.
Then I'll turn this over to our chairman. Thanks again, everyone.
So I also would like to conclude with some acknowledgments. First of all, I'd like to express my appreciation to the trustees. They're very responsive and knowledgeable. They're diligent, and they're good people, and we really appreciate them. Thank you, trustees, for your commitment and contributions. Finally, most importantly, I acknowledge the Artis team and staff for their dedication during these times, the good times and the challenging times. We look forward to the opportunities that lie ahead, and thank you, Armin, for articulating them so well to us this morning. On behalf of the trustees and the unit holders of the REIT and others represented here today, thank you to the Artis team. This concludes our meeting, and I'd ask Wayne Townsend to move and Steven Joyce to second a motion to terminate the meeting. Move, Steven second.
No vote required. I declare the meeting terminated. Once again, thank you, everyone, for attending, and I wish you all a safe and wonderful summer.