Good day, ladies and gentlemen. Welcome to Timbercreek Financial second quarter earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session for analysts only. Analysts, you're asked to raise your hand to register for a question. As a reminder, today's call is being recorded. I would now like to turn the meeting over to Blair Tamblyn. Please go ahead.
Thank you, operator. Good afternoon, everyone. Thanks for joining us to discuss the second quarter financial results. As usual, I'm joined by Scott Rowland, CIO, Tracy Johnston, CFO, and Jeff McDade, Head of Canadian Originations and Global Syndications. It was another solid quarter financially with strong year-over-year-
This meeting is being recorded.
All right. It was another solid quarter financially with strong year-over-year increases in earnings and distributable cash. The highlights included net investment income of CAD 31.5 million, which is up 22% from last year. Adjusted net income of CAD 17 million, which is up from CAD 15.2 million in the same period last year. A significant increase in distributable income, which reached CAD 17.8 million or CAD 0.21 per share at a very comfortable payout ratio of 81.1%. As we commented on with our Q1 results, borrower demand has increased, supported by a more active commercial real estate market. We should see this translate to healthy transaction levels in the coming quarters. The majority of the portfolio continues to perform well, which speaks to the emphasis on high-quality income-producing assets in the main urban centers across Canada.
The strategy served us well over the past 15+ years through periods of economic and financial market turbulence. That said, in certain situations, borrowers are experiencing challenges in this environment, and this is reflected in the near-term increase in the level of Stage two and Stage three loans. Scott will provide additional color in his remarks. We've also expanded this discussion in our MD&A this quarter. The key takeaway is we remain confident in the quality and value of the underlying assets and our ability to recover all of our principal. This remains a hands-on process for the team and very much in our DNA as longtime investment managers in this asset class. Strong cash generation and a low payout ratio, we're fundamentally well-positioned to manage through a uniquely challenging period for certain borrowers and deliver on our core financial objectives.
With that, I'll turn it over to Scott to discuss the portfolio trends and market conditions. Scott?
Thanks, Blair. Good afternoon. Our quarterly results once again showed a strong year-over-year growth across key financial metrics, as our portfolio continues to generate strong top-line income at a low payout ratio. I'll quickly cover the portfolio metrics before commenting on the loans in Stage two and Stage three at quarter end. Looking at the portfolio's KPIs, at quarter end, 87.7% of our investments were in cash-flowing properties, compared with 89% at the end of Q1. Multi-residential real estate assets, apartment buildings, continue to comprise the largest portion of the portfolio at 50.4% at quarter end, with minimal change from Q1. Including loans on retirement assets, approximately 57% of the portfolio was in multifamily residential assets at quarter end. We continue to ensure the portfolio is conservatively positioned.
First mortgages represent 91.4% of the portfolio, consistent with 92% in Q1. Our weighted average LTV for Q2 was 68.3%, consistent with the prior quarter, which was 68.5%. The portfolio's weighted average interest rate, or WAIR, was 9.8%, up slightly from 9.7% in Q1. For context, the WAIR in Q2 2022 was 7.2%. The year-over-year increase is due, of course, to the impact of Bank of Canada rate hikes on our floating-rate loans, which represented 88% of the portfolio at quarter end. Our Q2 exit WAIR was 9.9%, up from 9.7% exiting Q1, reflecting the policy rate increase in June. After a less active first quarter, we saw an uptick in portfolio activity in Q2.
We invested CAD 108 million in new mortgage investments and additional advances on existing mortgages. This was offset by net mortgage repayments and syndications of about CAD 133 million, resulting in a decrease in the net value of the mortgage portfolio from Q1. The portfolio turnover ratio was higher at 11.6% and closer to the long-term historical average, compared with 8.4% in Q1. We are also seeing a pickup in our originations pipeline, which gives us confidence in the outlook for new transactions for the second half of the year. In terms of asset allocation, there were no material changes from Q1 with respect to geographic concentration. The vast majority of the portfolio is tied to assets in urban markets in Ontario, Quebec, BC, and Alberta.
We are well-established in all these regions and as a result, continue to see good quality deal flow. In addition to our focus on income-producing multifamily properties, we are also seeing diversification opportunities within industrial warehouse and land that is zoned for industrial or multifamily use. Bank lenders have receded from land, creating an opportunity to invest in low LTV deals with stronger sponsors than typical. Conversely, we remain cautious on the office sector that is experiencing headwinds from the shift to work from home. Our office exposure represents only 8% of the portfolio, and we continue to be comfortable with these current loans. Finally, given our shorter-term loans turn over relatively quickly, we have the flexibility to respond to changing market conditions and invest opportunistically in a given region or asset type.
Let me now spend some time on the Stage two and Stage three loans in the portfolio, and where possible, provide additional transparency on the status and path to resolution for these loans. Our Stage three loans include the following: CAD 17.9 million in condo inventory. During Q2, we discharged CAD 1.3 million of this inventory, with more units expected to close in Q3 and Q4. We are satisfied with the proceeds to date and expect to be materially out of this position by the end of 2024. We also continued to work on our exit plan for a medical office building in Ottawa. We recently engaged a new property manager with deep expertise in the market to complete a lease-up strategy. In recent earnings calls, we've highlighted two assets owned by a sponsor group that filed for CCAA in Q4, 2022.
Both assets are attractively located in Montreal. One is a high-quality, income-producing senior living facility, and the other is a multifamily building that is currently under construction. In this instance, we expect a resolution to the court process this quarter and an eventual full recovery of our exposure. Lastly, a series of loans with one sponsor group were moved to Stage three from Stage two during the quarter. Together, this represents CAD 143 million in exposure on 7 high-quality income-producing multifamily assets. Along with a broader lender group, we successfully put a receiver in place to resolve these loans via a sales process. The process is advancing well, and we believe will be largely, if not entirely, resolved by the year-end. Now, in terms of Stage two assets, the balance here relates to an income-producing multifamily loan in Edmonton.
This loan matured in Q2, and an extension is being negotiated to provide the borrowers time to complete a sales process. The loan is current, and we expect full repayment. To summarize on the Stage two and Stage three loans, we remain confident in the underlying assets and our ability to get repaid. For certain borrowers, the increase in interest payments or other costs within their portfolios has added strain and is leading to necessary recapitalization or disposition decisions. This is normal activity at this point in the interest rate cycle, and we are working closely with our borrowers as they go through this stage. For loans that do come under stress, there is a wide range of remedies available to lenders, and rest assured, the Timbercreek team is experienced and focused on ensuring the best outcomes for our shareholders.
At the same time, while the high-rate environment creates some challenges, this is, of course, offset by record levels of portfolio income. They provide a significant cushion for TF. I will now pass the call over to Tracy to review the financial results. Tracy?
Thanks, Scott. Good afternoon, everyone. You can find our full filings online. I'll focus on the main highlights of the quarter. As Blair mentioned, we reported strong income growth for Q2. Net investment income on financial assets measured amortized cost was CAD 31.5 million, up 22% from CAD 25.8 million in the prior year, reflecting significantly higher interest rates positively impacting the variable rate loans. Fair value gain and other income on financial assets measured at fair value through profit and loss decreased from a gain of CAD 352,000 in Q2 2022 to a gain of CAD 306,000 in Q2 2023. We reported a modest net rental loss from real estate properties of CAD 293,000, which relates to expenses at a marina on the Lagoon City portfolio.
You will recall that we acquired this from an equity interest conversion completed last year. We intend on selling the land and have accordingly recorded as land inventory. Provisions for mortgage investment losses were CAD 9 million for Q2 2023, to CAD 2.3 million in last Q2. The provisions are largely representative of future interest to be earned up until the anticipated time of disposition. As Scott said, we expect to recover the principal amounts on all these loans. Lender fee income was CAD 1.7 million, down from CAD 2.1 million in Q2 2022, reflecting lower originations in the period relative to last year. Q2 net income increased by 15% to CAD 16.9 million, compared to CAD 4.7 million in Q2 last year.
Q2 basic and diluted earnings per share were CAD 0.20, up from CAD 0.17 in the prior year. After adjusting for net unrealized fair value gains and losses, Q2 adjusted net income was CAD 17 million, compared to CAD 15.2 million in Q2 last year. Q2 basic and diluted earnings per share were CAD 0.20, up from CAD 0.18 in the prior year. We also reported strong growth in quarterly distributable income and adjusted distributable income of CAD 17.8 million in Q2 2023, up 12% from the same period last year. On a per-share basis, we reported DI of CAD 0.21, up from CAD 0.19 in the same quarter last year. The Q2 payout ratio on DI was very healthy at 81.1%, up slightly from Q1, but considerably lower than last year's Q2 of 91.3%.
Turning now to the balance sheet highlights. The net value of the mortgage portfolio, excluding syndications, was CAD 1.12 billion at the end of the quarter, a decrease of about CAD 25 million from the first quarter as repayments exceeded new investments in the period. The enhanced return portfolio decreased by CAD 58.7 million from CAD 68.2 million at Q2 2022. The balance on the credit facility for mortgage investments was CAD 361 million at the end of Q2 2023, compared with CAD 387 million at the end of Q1 2023. Shareholders' equity increased modestly to CAD 701 million at quarter end, up from CAD 700 million last year and CAD 699 million at year-end 2022.
Under the normal course issuer bid program, we repurchased for cancellation 300,000 shares, common shares this past quarter at an average price of CAD 7.40 per share. We will continue to evaluate opportunities to use this program to acquire shares accretively. I will now turn the call back to Scott for closing comments.
Thanks, Tracy. We remain broadly positive on the market environment for the rest of 2023. Commercial real estate activity is picking up as both buyers and sellers adjust to the current interest rate environment. This should translate into increased activity within the Timbercreek portfolio. With a high percentage in floating-rate loans, we will continue to see strong top-line income supporting healthy distributable income, earnings, and payout ratios. As we continue to make meaningful progress on the Stage two and Stage three loans in the coming quarters, we will be in a position to evaluate opportunities for growth after exiting the previous ultra-low-rate environment. That completes our prepared remarks, and we will now open the call to questions.
We will now take any analyst questions. If you have a question, please click the Raise Hand button on the bottom right screen below. Graham, your line is now open. Please go ahead.
Hi, can you hear me?
Hey, Graham. Yeah, we hear you.
Okay, great. appreciate the disclosure you provided there on the incremental sort of Stage three, Stage two loans. That's very helpful. Could you maybe talk about the loan-to-values associated with those four loans in particular in Stage three, and then just any sort of, I don't know, incremental color on sort of your confidence on these things being resolved without without any associated credit losses?
Yeah. Let's go through that sort of one at a time, Graham, if you want. I think let, let's take a look at the, the, the Rosemont, the, the, the retirement asset, and like we talked about for a long time, the CCAA situation.
Yep.
We'll start there. For this, we're, we're working through the court process now, and we're going to be. You know, we're essentially, credit bidding our asset. From an LTV perspective, you know, we probably believe we're in the- I mean, it's hard, it's hard to sort of estimate what that would be, right? Because of the way the process is, is working out, but we would probably be in the 80s, I'm going to say, Graham. For us, we're, we're going to be taking control of that asset, and then we'll be looking to look to market for a third-party sale in the sort of the coming quarter or two.
The ultimate outcome for that loan, you know, I think we, we certainly feel we're going to have our, our full position back, and then we'll likely be in a offering sort of a VTB type of position, I would think, with a, with a third-party purchaser. When it comes to the loans, this sort of the larger group of assets that moved from Stage two to Stage three, this is a larger sort of sales process, and it involves a number of assets. You know, some of them are, are ours and some are third party, like nothing to do with us. These would also be loans we would say are probably in the... You know, again, loan-to-value in this environment is, is sometimes difficult to gauge, but probably in the, again, I would say in the 70%-80%.
We'll just have to see how the sales process happens. You know, we're working collectively as a group on this, with a single receiver in place. A broker is actually being hired imminently and will be in the market this fall. We anticipate that that should get wrapped up, and certainly, we're anticipating getting our full P&I recovered there, ideally by the end of the year. You know, the condo inventory, again, we're working that down sort of loan by loan, and we are recovering our position as we go. Yeah, unit by unit.
Unit by unit.
Unit by unit.
Loan by loan.
Yeah, sorry, unit by unit.
Yeah, I just-
In one... Sorry, my fault. In one, it's one loan, one building. And then the medical office building we've talked about, we, we put in a new property manager. We believe there's actually considerable value to be unlocked here, and we may be doing a bit of an investment program. Again, this is a small loan, so it's not overly material. Maybe a, maybe CAD 1 million or so in, in going further into the, into the deal, where our loan balance is CAD 8.7, and I think we can actually achieve a decent outcome on that one as well.
Okay, that's helpful. The, the loan-to-values that you're quoting me there, is that sort of your estimate of, you know, perhaps a mark to market in the current environment and the current situation behind those, those mortgages, and it doesn't necessarily reflect what would be in, I guess, your... I think you quoted 68% for your portfolio overall. Is that, is that fair when you're sort of giving me a 70%-80% on those situations?
Well, that would be kind of what we're reflecting in our, in our 68, Graham. On these assets, these are higher-levered assets at this point, as we sort of work through the process. With them, what does that result in what the final sort of purchase price will be? It's hard to tell because in these sort of, you know, lender selling processes, sometimes those proceeds, the final bids are lower than what you would accept in a sort of a one-off market trade. It's in that range. You know, if we were held it long term, if we were in control with our asset, there's probably more value attributed to it than what, you know, a borrower might see in this type of a situation on the actual net selling proceeds.
From a value perspective, that's, that mid-70s%, low 80s%, those are what would be reflected and what works out to that, to the weighted average 68%.
Okay
values that are in there.
Okay, understood. What's, what's reasonable in these situations when you're going through receivership and whatnot, at like a 5%-10% discount on the price? Is that, is that reasonable, or could it be more than that?
I would say, I would because it's high-quality assets, like example, the, this larger portfolio are newly built, like within the last sort of five, six years. You know, like mainly fully occupied multifamily assets, that discount is a lot smaller than what you would. You know, it's, it's not like we're trying to sell, you know, like a fashion mall or, or an old office building, right? This is a high, high-in-demand product. That discount could be anywhere from par, Graham, to yeah, maybe 5%-10%. That would be my, sort of my expectation.
Yeah, it's Jeff here. I, I just add to that, I think, I think that what Scott's just noted is absolutely correct. Obviously, our values will also include the brokers, as it relates to the high-quality nature of the assets, the limited availability of this type of inventory at scale, frankly, in any market across the country, is expected to deliver strong, more typical market demand without necessarily an expectation for a material discount tied to the receivership process itself. Yeah, to your point, is it 5%-10% discount potentially? It's, it's going to be market dependent. We do think the portfolio itself, and again, the issue underlying the receivership process is not asset specific, right?
It is more broadly sponsor driven and broader external, you know, corporate capitalization issues that has pushed our assets, otherwise high quality-performing assets, into this receivership process. Again, good quality assets for which we expect to receive strong demand and market interest on the exit.
Graham, it's Blair. I'll just add, I mean, obviously, LTV, as Scott's alluding to, is a bit tricky here, right? I mean, we're on a stabilized basis, assets, you know, you can calculate an LTV, using a normalized valuation methodology. I mean, in this case, we're not really focused on the LTV, right? We're focused on recovering our exposure, and that's kinda it, right? It, it, it's a bit different when you're- than when you're talking about the, you know, the published 68% on the broader per-- you know, performing portfolio.
No, that's fair. I just wanted to make sure that these assets were at 90%-95% loan-to-value, and all of a sudden-
Yeah
... going through a receivership.
No, I get why you're asking.
Yep.
Yeah, it's just, you know.
Okay.
For us, really, really the... Graham, just a final comment, Scott, again. Just for us, it's just the time of it, right? Like, we sit there and I look at the portfolio, we had, as Jeff alluded to, there's a sponsor that had, you know, outsized debt within their portfolio, like beyond us, like within their own equity stack. That's what created the distress for them, not the assets themselves. Us, as the first, you know, mortgage lender, we just find, we sort of find ourselves in these positions at this time in the cycle, and we have to work through the court process, and we have to go through sort of a selling process. For us, it's, we're confident in getting our recoveries here. It's just the time of working through the process.
The nice thing is, on this new one, it's been very coordinated. Our receiver went in almost immediately, we're already talking about building the sort of sales process out. Hopefully, we can move through this quickly.
On that, actually, there's quite a bit of competition to get the listing. You know, I think you could extrapolate to that, that, you know, they believe that there's going to be strong demand for the assets, right?
Okay, that's helpful. Good color. Can I just jump to the provisioning side? It sounds to me like these are high-quality assets, and you're comfortable with the marketability of them or the potential to resolve. Still, if you take a step back, you've got, I think, roughly 20% of your portfolio sitting in Stage three. You know, perhaps you talk about why you, you didn't provision more on the PCL front this quarter, just given there's, there's arguably some credit loss exposure here with your Stage threes?
Hi, Graham. It's, it's Tracy, and I, I can take that question. As you'd recall, like, for the two assets that are through CCAA, we would've taken, a, a larger provision obviously in Q4, which still remains on the books. With respect to the portfolio that moved from Stage two to Stage three, there is an additional, approximate CAD 500,000 that was taken on that portfolio. Again, just, just given kind of where the LTVs are and, how we, how we do our provisioning in accordance with IFRS, you know, we do continue to feel confident that, you know, following that, that methodology consistently, and particularly with defaulted loans on a case-by-case basis, that we still do have adequate provisions and reserves on the books.
Just being mindful that the larger one was actually taken in Q4 and still remains there, against the CCAA portfolio in particular. Then the Stage two loans that moved to Stage three, we already had another, you know, CAD 1 million against those loans, as of Q1, so we've added another CAD 500,000 to those this quarter. Again, we do think that that adequately covers our exposure there, just given we expect to recover the principal.
Tracy, did you wanna just clarify for Graham on what we're provisioning? Tracy?
Yeah. I mean...
For our audience.
... not to go crazy. Yeah, not to go crazy into the math here, but, but the model such as it, you know, it takes the, the value, you know, the, the principal exposed, and then what it does is it adds forward-looking interest to the time of disposition. At minimum, a year is applied, and then that is, is really compared to, to the value of, of the asset. As Scott said, you know, we've looked at, at those carefully. Really the provisioning math is, is kind of driven off of, of that forward-looking interest in these cases, 'cause they're generally under 100% LTVs, so you, you wouldn't really have a provision there outside of, of the interest.
Again, it's, you know, we, we feel like we have enough coverage there, and largely the math on that provisioning is, is really forward-looking interest.
Okay. Okay, understood. Then, if you've got a sizable portion of your book in Stage three, I assume they're not paying interest right now. How should we think about, you know, the impact on your distributable cash flow, in this sort of situation over the near term?
Yeah. With respect to the larger assets that is in CCAA, we've actually haven't recorded the full interest receivable on that. What we've recorded since January 1st has actually just been the expected NOI on that property and, and the cash that we expect to receive. Similarly, with the condo portfolio, we actually haven't recorded any interest in our, in our top line income. When you look at the GI there, that really truly is kind of reflective of the, of the cash, the running cash yield that, that we're getting on these assets currently.
Additionally, with, with the Stage two to Stage three assets, now that we've put the, so the other portfolio of assets that are now into Stage three, we, now having put the receiver in place, are in control of, of the assets and the cash associated with them. We are receiving the NOIs on them now. They, they don't fully cover, but, but, you know, we're estimating that they cover about, about 50% of, of the interest to date.
Okay. All right. That's very helpful.
That, Graham, sorry, sorry, that payout ratio that we're talking about obviously is using as a denom- or a numerator, the, the cash, the net cash received, right? You know, 80% of...
The net cash being received.
Yeah, go ahead.
Sorry. The net cash being received right now is factoring in what you're not getting from these roughly 20% of your portfolio, at Stage three?
Well, right. It's not, yeah, it's not 20 that is generating no income, as Tracy was saying. It's sort of case by case. It is reflective of, of what we're receiving, not what we would notionally be receiving. That's why, you know, yes, we're happy to talk about, and, you know, the Stage three assets and working through those, but in spite of that, obviously, the cash flow that's being generated to cover the dividend is, is, you know, substantial.
Okay, great. That's it for me. Thank you.
Thanks, Graham.
Thanks, Graham.
Just a reminder to please raise your hand if you have a question. Jamie, your line is open. Please go ahead.
Yeah, thanks. Good afternoon. Just a couple more questions on the on these Stage three loans. The CAD 140 million portfolio, the seven loans, are these all, like, similar properties, like seven loans, CAD 20 million? The way I understand it is, you're the only lender on these loans. It's not like there's other lenders that have security against the loans. Those are subordinated lenders in the capital stack? Did I understand that all correctly?
It- they're definitely similar assets and actually in a similar, in similar markets. Like it's, it's, it's a sort of Quebec City portfolio. Picture, you know, clusters of 4 or 5 buildings that are together, that are individual, separate buildings and, and separate loans. In our world, we control seven of these loans, and we are more nor- in all cases, but 1, we're the- we are the first mortgage, Jamie. There's- we have 1 position where we have a small second mortgage, and that is a secured, that is a secured debt stack. Then there are other buildings with other loans with- from other lenders, like nothing to do with us. It's in a similar situation, and but it's the same board with the same sponsorship group.
There's a coordinated effort amongst various lenders on, you know, how we go through this realization process. Each lender has their, our own security and our own cash flows coming out of it. We're just sort of being efficient by using a similar receiver and going through a... we believe it's more efficient and an opportunity to get a higher price by offering, liked buildings, into the market.
Yeah. Hey, it's Jeff. Just, just to clarify a little bit further. Call it five projects. Each project has multiple phases. We've lended on, you know, a phase or two within a project. Let's say, there are other lenders on other phases within those projects. As Scott said, only one loan position is CAD 2.5 million second mortgage in one phase of one project, with everything else in a first mortgage position. The assets are all recently built over the last handful of years. They are similar, albeit some cater to a slightly higher end, end-use tenant. Some are, you know. They, they do span across slightly different price points, so there is some diversity as it relates to that, as well as diversity in relation to location.
They are all exceptionally high quality, highly amenitized, well laid out, and very marketable assets from our perspective. We do believe the opportunity to buy a project or the opportunity to buy multiple projects does create a broad base for potential interest from either domestic buyers and/or non-Quebec and/or non-Canadian investors through this sales process. Which is in the process of being engaged and will be implemented, you know, fairly imminently.
Okay, a couple more on this then. Are these... Just remind me, are these, like, purpose-built rentals or...?
Right.
yeah, they are? Okay. and then-
fully leased.
Fully leased. Okay, perfect. And then your exposure is CAD 140 million. What would be the, the total, you know, project exposure? Like, how much does the sponsor need to sell, let's say, if, if they were to sell the entire portfolio in one, in one shot?
beyond us, right? Like,
Beyond, beyond yours. Yeah, yeah.
Got it.
Yours is 140. If you're 1 of 2 phases, is the entire ownership?
Got it.
... or property asset, like CAD 500 million?
You know, Jeff and I are just looking at each other, and CAD 500 million sounds about right.
Okay. Okay,
Bit of a, it's a bit of a guess from us. We don't have, we don't have all the details, but, like, that is. No, it's spot on, I think.
Okay.
Definitely somewhere around.
forgive me for my, my ignorance here. Like, you know, as, like, how many CAD 500 million multifamily purpose-built rental deals have there been in Quebec, that you can kind of point to for, you know, valuations or, or expected-
Yeah
outcomes on this?
No. Hey, listen, I think it's Quebec and beyond. I mean, there are lots of large multifamily deals that trade and portfolios that trade. I can think of publicly listed companies as well as privates. Again, as, as we look at this, this where it's a bit of a unique situation, right? Like, I think this is an extremely attractive product for some larger pension funds, especially ones who are looking to rebalance sort of away from office and, and go deeper into multifamily. This is a high-quality portfolio where you can get scale day one. I think there is, there is a, a large institutional interest that will come for this portfolio. Separately, I also think going into more of the Montreal, Quebec City markets, there's absolutely Quebec local players that might be interested in picking up, you know, one cluster.
Like, the buildings work independently. Like, it's not like you can buy one building, and that, and that's a standalone working property. It's more efficient, I think, to have more and, and you'll be able to scale your infrastructure. I think we get portfolio bids. I mean, this is, this is early days. I mean, we're still in the process of hiring the broker, and I'm not the broker who will be selling the portfolio. I, I, I think there's a lot of liquidity for this particular product, especially at this time in the, in the cycle.
Jamie, it's Blair. I, like it wouldn't take you long to find statements from Scott's point, pension plans, in particular, one or two Quebec pension plans that have said they're looking for some additional exposure in, in core multi-res.
Yeah
... you know, nor, nor U.S.
... larger U.S. players that are looking for additional exposure to the marketplace. Doesn't mean it's going to be a portfolio trade, but I mean, it's a pretty, you know, as I said before, when we, you know, when Graham was asking these questions, like, there's some competition for this listing. So.
It's actually a nice size, right?
Yeah.
It's not, it's not CAD 5 billion, and it's not CAD 50 million or CAD 100 million, right? Like, it's, it's like at CAD 500 million, it's going to attract a lot of attention.
Right. There's smaller individual projects within that broader. There's large individual projects. There's obviously the entire portfolio as a whole in that $500+ million range. It's also unique in terms of the quality, right? Newly built, newly built at scale. I mean, the opportunity to buy scale historically has meant, you know, 60s, 70s vintage older product, right? This is again, a unique opportunity, obviously, for a variety of reasons, but the expectation is there will be broad-based demand, and it can be carved up and looked at in a number of different ways.
Okay. The last part of the question here is just, there's non-reimbursable legal fees. Would you expect any other non-reimbursable fees to flow through on the sales process, like, in addition to just these sort of run rate legal fees that we see here, whether it's commissions or something along those lines?
Yeah.
is this sort of like extra CAD 600K per quarter of-
Yeah, yeah.
legal fees about the right run rate?
Yeah. I'll let Tracy answer, too. Really, some of those fees are sort of more like legal fees consulting for us as we work through how are we legally going to go about, you know, making sure we're in, we're in court correctly. You know, we're-- And this is for all the assets and how we handle our processes, you know, to make sure we're, we're well represented at the table. That really is it. The things that you're mentioning, things like commission structure, that is-- that's a real bill that will get paid to a broker, but that's-- it's not a non-recoverable to the lenders, right? It just comes out of net sales proceeds. That is all calculated and formulated when we come and say, "Hey, we think we're very comfortable that the net selling proceeds will cover our position.
Yeah, the only other thing I would add, going back to Blair's point about the demand to list this project, it does result in. In light of the fact that the priority is on recovering the secured lenders' positions across a number of lenders and projects, the fee structure within the brokers, again, has been aggressively bid and tied back to, hey, look, there is a very, very nominal, minimal, well below market baseline fee tied to achieving a sales price that recovers the secured debt. Then thereafter, it's much more highly incentivized, such that the borrower can, or sorry, the broker, can earn a better fee for outperforming the recovery of the secured debt.
It's more of a unique structure in that sense, but it does limit the cost burden of the brokered sales process in this respect.
Understood.
The only other thing I'd add there, Jamie, sorry, to Blair again, I mean, when you think about the process, I mean, this is a very different situation than if you had CAD 500 million of land, you know, it was entitled that, you know, was worth a whole bunch more in somebody's mind a year and a half or 2 years ago, and now you don't really know what it's worth. I mean, this is cash flowing real estate, right? So it's, it's, it's really. That's why we're comfortable, generally speaking. I'm not going to guarantee, obviously, we're, you know, this is going to be done in four or five months, but I mean, it's, it's a good line of sight to, to this stuff getting sorted out fairly easily.
Thank you.
Yeah. Thanks.
One last reminder to please raise your hand if you have a question. Since there are no further questions at this time, I'll turn the call over to Blair for final remarks.
Great. Thanks, everyone, for taking the time to join us today. Obviously, lots to discuss, and we appreciate the opportunity to go through it with you, and we'll look forward to regrouping again in three months. Enjoy the rest of your summer.