European Residential Real Estate Investment Trust

Q3 2021 Earnings Conference Call


spk_0: hello everyone welcome to the european residential real estate investment trust third quarter turn stretch one results conference to my name is charlene i'll be coordinating the cool today you will have the opportunity to ask a question that ended presentation in the lot to answer question please post office by one when your telephone keep us on one hand i would your host for that meant see of european residential real estate investment trust to begin it please go ahead thank you op later and good morning everyone before we begin that me remind everyone that during our it's called this morning we may include forward looking statements about our future financial and operating results i get your attention to slide to and are other regulatory filing joining today is our see about didn't go after i provide an update on up operational progress during the quarter even will provide an overview of a financial results and position the thing with thirty two thousand and twenty one concludes another quarter of extremely strong operation on financial results but continue to trend consistently in a positive in a creative direction compared to keep three twenty twenty or sweet count has increased by almost eight percent to six thousand one hundred eighty three sweet including an additional nine residential property acquisitions of over one hundred and seven million excluding transaction costs and fees which closest comparable pyre year period market value of our investment portfolio increased by an even greater seventeen percent which demonstrates the high quality of our diverse portfolio they're operating the outperforming operating metrics increasingly favorable conditions in the dutch market and cool including ongoing cat impression of couple of missionaries and the successful execution of iraqis value adding capital expenditure program as a result the lead recognized the large fair value again on investment poppy than the amount of almost seventy seven million during a three months ended september thirty or twenty twenty one an increase of five percent compared to queue to twenty twenty one or market capitalization and public float increased by three percent in four percent respectively compared to the prior year period a yet still exhibited persistent disconnect between the rich unit price and it's true underlying value though that an absolute basis and relative to our peers five five contagion an overview of business development during the third quarter of twenty twenty one starting with the fair value of our investment bob huggins increasing significantly go on played six four billion euros as and under thirty and twenty twenty one as i just mentioned previously which is comprised of one point five probably not a residential properties for represents ninety four percent of our portfolio value of the reigning six percent constituted by that one hundred million euros and commercial properties which we have located in germany belgium and the netherlands in terms of financing activity liquidity when the period he has obtained mortgage financing for it's acquisitions which closed last quarter and the rate of dune in addition to refinance of certain existing property and total principal amount of ninety two million euros new mortgage there's and six year term to maturity with a weighted average interest rate of one point one three percent of terminal mortgage which lower reach weighted average effect a good straight like a basis points for one point five three percent incorporating this new mortgage financing as it period and the we'd had available two hundred fifty five million euros an immediate liquidity cash on hand under on credit facilities and the and and sixty five million euro pipeline agree and a catholic our strong operating results this quarter translated true to our key financial metrics with effort though per unit increasing significantly by fifteen percent two point zero three nine years compared to the pie your period if appropriate similarly increase significantly by thirteen percent decline zero three four years compared to last year old measures powerfully evidencing the of overall predict financial performance lightships provide some statistics on our client residential portfolio average occupied monthly rents were eight hundred a four year old that the camera thirtieth representing an increase of three point eight percent to three twenty twenty and the dental eye see remain strong at ninety eight point two percent this quarter and ninety eight point four in the prior year period important note this includes the read recently acquired new pop blue belt copy that within the process of being leave that september thirtieth or which has now been completed at mental levels of cheating the weeks business plan further significant portion the residential vacancy in the for a period is due to renovation was sixty six week from the renovation as of september thirtieth representing over sixty percent of the vacancy upon completion of the renovations a significant portion be which will convert from regulated the liberalized demonstrating execution of or value add capital investment program donald was three point five percent for the third quarter of twenty twenty one the parallel to three point two percent in the prior year period rental up of gonna turn over continue to improve meaningfully at fifteen point seven percent compared to only eight point three percent uplift to keep saying prior year period that's contributing significantly to the real achievement of it's top like that book objectives events portfolios well diversified that number of bedrooms ensuring we meet the man for small units as long as the family you can also see the approximately half of the current portfolio was constructed since nineteen eighty providing an average aged under forty years resulting in lower ongoing repairs and maintenance and driving higher asset values to elaborate further on the bounce mixture of property the top speaker paul portfolio and flight seven he conceded over forty percent of a clown puppies are located at the high got urban connotation of the lounge that with approximately twenty five percent directly located in the city to amsterdam rotterdam the hague and egypt rest of the portfolio situated in smaller urban areas throughout the country there are approximately thirty five percent of our portfolio is comprised it's in the family on also like that rowhouses a segment which represents an additional diversifying and neat contributed to a football your neck importantly are sweet continued to be nearly evenly divided between regulated and liberalized with a lot of waiting toward liberalized providing down skelton and ranch on turnover and indexation as well as the opportunity to liberalize more sweet and that know you might remember from the last quarter the red shirt tenant notices to ninety four percent of it's the gli sweets for indication which game effective until like thirst thousand and twenty one class which laid average rent than preceded indexation was two point three percent this was in line with the recently next government legislated now action on annual indexation for level i see that cpr costs one beckett where the initial period of two years from make burst twenty twenty one up to and including april thirtieth funny twenty four and buying the debts governments allowed inflation at one point four percent the rent of tenets of regulates weeks would not indexed and compliance with that governments maximum indexation for all regulated sweet said it zero percent affected for the one year period of july first twenty twenty one up to including june thirty eight point twenty two includes within these regulated sweets which were not indexed are weighted average average rental increase due indication was one point five percent a pun and it's notices served on a total portfolio knowing that the regulatory legislator development continue to be a hot topic in light of the recent changes i will take this opportunity to reiterate that events have been productively operating in this regime the gate and will continue to do so indexation constant on and one component of our read the strategy of strategy is also fueled by rental up with some turnover and are conversion of reykjavik it's week the liberalized pursuant to our capital expenditure initiative it is therefore important to reapply size with these caps do not apply to rent increases that turnover nor do they applied to increase was driven by experimental points and kept that as such we still expect to continue to cheap rental brother our target range of three to four percent going forward and this is already evident with are three point eight percent occupied am margo compared to cute three twenty twenty which incorporates the latest index that the start of the third quarter like burst on friday i can divide it for the update on the called the night game pandemic and the dutch government action as of october first the majority support measures previously introduced by the government or not we knew as a direct response to the improvement in economic condition and continually low unemployment rate with a view to fostering organic economic recovery and growth there are a small amount of support measures which will remain in place to help will take this recovery but deem necessary but overall the netherlands has fared well and they were standing the pandemic especially compared to many of the euro zone counterpart although the dutch government almost totally relaxed all between imposed grown up around a irish restrictions as of this past september in the final stages of their reopening plan the recent surge in cases has resulted in a number of restrictions being put back and place at an alpha november second that include proof of vaccination and men and play face mask the public places all of which are commonplace in many countries already dutch government approach to managing the crisis the date have been protected both it's people on it's economy to a great extent expect expected this track record will continue
spk_1: and with that i will not than the pall over to stephen
spk_0: they develop as you can feel like ten operating metrics remain consistent with strong and on top of that country to improve quarter over quarter operating revenue increased by ten percent from some coupon six million for nineteen point three million that about quarter do partially to acquisition from the prior year period and are also largely driven by higher monkey wrench
spk_2: beat higher operating revenues contributed to the increasing not operating income or jos up by an even greater thirteen percent from thirteen point three million to fifty million when que three of twenty twenty one hours additionally positively driven by decreasing up properly offering caught of the percentage of
spk_0: other avenues this was in part due to the recognition of the nonrecurring line another rebate which reduced to reach kind of like the expense of this year to date an get this resulted in a significant increase in our total the polio and why margin up from seventy five point six percent eighty three a twenty twenty five seventy seven point nine percent in que three of twenty twenty one extreme back of the landlord another rebate however property offering cause of the percentage of up written revenues still decrease predominantly under result of lower commercial aren't on costs and therefore total proposal and one margin excluding the rebate still increase substantially the seventy seven point one percent for the three months ended september thirty at twenty twenty one representing an increase of one point five percent from cute three of twenty one i'm from operations and adjusted bummed funds from operations also fold increase significantly out fifteen percent from the comparable or period prior year period mary due to the positive impact of the creative acquisitions which similarly job the for two percent and thirty percent increases and upper bowl or you're not and vehicle per unit was at the great comfort to you through your trying twice the retail sector payout ratio remain in our long term target range for decrease to the lower end that at the point four percent for the three months ended september thirtieth two thousand twenty one compared to eighty seven point six percent in the prior year period and reflecting the five percent increase in monkey distribution chance which were attacked them from march twenty twenty one onward slide lemon countries a showcase a resident of four months which translates into the consistently high and strong operational metrics shown here i still have briefly mentioned earlier a residential sweet count has increased by almost eight percent since que three of twenty twenty and now includes nine additional residential properties in kosovo of or hundred thirty two sweets which have now been acquired since the prior appeared and the read has also just recently side in your purchase and sell agreement to acquire another multi residential property comprised of sixty three sweets located in rotterdam that will further grow our property portfolio and we expect that he will be able to act on securing more acquisition opportunities before the near new year that will propel our growth oriented trajectory pocket empty thrill up of oil remains consistently high and fable as well rather jog at them feel was ninety eight point two percent or that the current you've done relatively in line with the residential occupancy of ninety eight point four percent accurate three of twenty twenty however as mentioned a significant portion of the current peerage residential or that vacancy a due to renovation which will provide further rental up lips wants to time they start again they also includes the reads recently acquired newly built property that was in the pocket of being least as that september thirtieth twenty twenty one and which has now been completed that rental old exceeding the reach that is what if you exclude that property and all other properties acquired sense to from the thirty twenty twenty presidential occupancy on it's a light bases increased to ninety eight point five percent as a que three of twenty twenty one occupied a are on have stabilize faces increased by three point six percent demonstrating a top line rental growth that we continue to achieve this is supported by an even higher five point seven percent growth in the upper income on our stabilize a boy similar to the total before they'll hire operating revenues were magnified by lower property offering cause of the percentage of operating revenues for donley due to the recognition of the landlord mega read it together this job stabilize and ally margin to increase to seventy eight percent compared to seventy five or six percent or the same period last year excluding that's positive impact of the landlord not a rebate however and why margin on the stabilized of polio still increased by one point six percent to seventy seven point two percent good a three months ended and thirtieth twenty twenty one or liquidity a leverage continue to remain strong and flexible a quarter and as you can fiance like twelve he was have been able to maintain it's get to grossed about you with them it's target range of forty five to thirty percent continue to lower the reach weighted average mortgage effective interstate but you can see went down by top a disappointed and to breed of twenty twenty and that includes effects of about that que to to assert coupon or twenty twenty mortgage financing that was secured at have stated with interest rate of just under one percent as well as a latest mortgage financing which closed on september twenty nine twenty twenty one at a weighted average of interest rate of one point one two percent this evidence it our ability to conceded secure financing and the persistently low interest rate environment prevalent throughout the european union which itself is a fundamental component of our ability to secure acquisitions at high yield spreads he also continue to maintain a conservative term to charity on our told a mortgage a boil the currently has a weighted average of four year term as of september thirtieth and twenty twenty one accounting for the post quarter repayment of our credit facility it's with access casual my mortgage financing the an immediate available liquidity of over two hundred fifty million comprised of approximately eighty five million and undrawn credit facilities hundred sixty five million the the pipeline agreement and the remaining five million in cash and cash equivalents that's liquidity provide us with acquisition capacity in excess of five hundred million euros i dedicated appealing or growth initiatives reinforcing about bug on october twenty nine twenty twenty one the reinvented a renewed it is interesting credit facilities that resulted in combine the reach revolving credit facility and bridge revolver predatory thing to a single new facility providing access to up to one hundred million for a three year period ending on october twenty nine twenty twenty four and with firefighting this therefore ensure that your as continues to have the means to act on upcoming acquisition opportunities why thirteen provide more detail on or staggered mortgage portfolio with the nearest gotten charity not occurring until december twenty twenty two or latest mortgage financing is highlighted here as well but you can see they were we can complement or renewal papa and addition the majority of on mortgages are not advertising so as we continue to grow we would ensure we maintain the smoothie charity profile in order to reduce were no that thank you for their time this morning and i would now turn think that the go up to wrap up thank you stealing built at thing that brings us to on best pilots and flight fifteen and he's never been more true than they are today as you may have gathered from our presentation this morning he has been consistently outperforming on it's benchmarks and target and achieving a creative got both organically and externally despite many economic regulatory and social challenges that it is facing inception even is not just remain stable us to brasilia and has also created meaningful value quarter over quarter to excellent excellent operational management i calling diversified acid that have appreciated significantly market value a multi residential market and is extremely conducive to iraqi strategic objectives with factors that can can you develop to the benefit of our business and all back by a liquid balance sheet and line partnership with capri cat in aggregate effectively ensures that the week and continued to have creatively achieved milestone after milestone on it's growth oriented mission
spk_3: and this your dog we believe that you as office and valley
spk_0: investment opportunity replied unique opportunity invest in the fast growing attractive european not a residential real estate market a partnership with kept replaying significant benefits to again holders you're going a football yet very track of yields bed with strong and highly creative organic and external both opportunities we've established a strong foothold in the netherlands that market and we're building site and scale to drive value going forward conservative balance sheet and financial position provide the building resources to drive further growth and we have in place from experience management team and fees and board of trustees thank you for your time this morning and will now be please take any question that you may have funky a lot to ask a question please press star full of i want on your telephone keep as if you'd like to join a question please post awful if i take a when preparing to watch a question please ensure you on youtube locally
spk_4: our first question comes from kyle's dally of a showdown securities kyle yolanda family from
spk_0: thanks and morning my bad news hundred and four and could you provide your thoughts on that dutch regulatory environment and maybe any expected changes or more specifically yeah you know your your expectations with what happened to and regulated rent indexation and twenty two to learn i mean the short answer is there isn't great clarity simply because the government has yet to be formed on everybody will call those elections and que en i'm they are now set a record in terms of the longest period of time since elections and and the the point in time when the governments formed there is more clarity now in terms of which parties will one the coalition and it'll be the same party that form the coalition for the last government so we have confidence that will be continuity ah they're still debating on know what displayed and who populate me to the ministries but we hope to get resolution there soon
spk_5: and of course that will influence the past year towards regular regulation or changed and regulations as it pertains to everything including of the housing market
spk_0: but given that it's the same for parties we would expect it should be reasonable inconsistent with their approach and l in the previous government ah again it was generally as an alley had been a more evolutionary process than revolutionary they did in that the changes with respect to the liberalized space beginning of the year again those and put in place for a two year period so it's not our expectation that those would change they didn't announce any changes with respect to the regular lady regime they just put the annual guidance and zero uncertain again how that might play out so much short answer is it's a beat up in the are now and they did in that changes recently might they enact more they could found about it's really too early to tell on there are certain things that we expect to happen it as we've mentioned before like clapping the contribution of your municipal packs value a point etc like that will have a very and significant impact on our our results in our performance but most importantly on i think we need to just double emphasize that we're still achieving at the very top end of our growth targets at the top line notwithstanding these changes that have already taken place that we because of our diversified go what color yell and that we have multiple leavers to pull on if we're not getting it in yet indexation than we can get it would incremental catholic school measures or we can get it with incremental am up with some turnover such as so i'm i i can't say it's been nine regulatory environment at the moment that i can say with confidence that know we and capri have a long history of operating regulatory environment said our history you read and demonstrates that we can continue to meet our top line vote targets even in a changing environments should more changes come to pass and i think we also need to be aware that most of the regime has said i'm upon it inflation plus
spk_6: aces and given the inflation art at them inflation or environment that or in today i certainly would expect were twenty twenty two than inflation would be higher or so that might give us one bit of a tailwind as well but we just kept the latency but in in any event
spk_0: remain confident that given a constructive our portfolio and how we have multiple the support will be able to continue to perform well within the range in my top on about target
spk_7: okay okay thanks
spk_0: i'm just taking a look at your regulated vs liberal i'd mixing i know you you actually prepared remarks that it feels like there's there's been a slight shift in lot that got twelve months toward more liberalized the it is an intentional shift or a that did the function of ie the acquisition opportunities are seen more the ladder yet if you go back to years it was closer to fifty fifty on a now it has moved more towards body sixty weighted toward liberalized again we liked both components pardon the others generally less growth but more arms to delete or in the regulated near the more bond like a low turnover no indication that jackrabbit really stable ah we also like gullible global a segment because it gives us the opportunity to take more advantage and writing market rents which we're seeing a possible oregon our market as well as on i'm just for the diversification generally you know you see that that those and liberalize tweets and to be more and around that the regulated tend to be more outside of so we very much arm and and to keep a good salad mix between the two but for out there isn't really a fine line whether it's forty percent regulator that you present regulated it often is more influenced by the part that available to buy pot as we speak to achieve external world okay great and just the the last and for me it's a comedy or the indian and and also in the prepared remarks early to suggested the possibility for more acquisition before your and before negative comment and know what you're seeing in the market he likely been any significant changes the pricing and the have given me the car you could leverage range between forty five to fifty percent of gonna be hard the middle there would you be comfortable taking a bit higher for for the right acquisition there is a couple things to unpack there in a book we'd already acquired at the end of june about fifty million neatly announced just the other day another acquisition this year ended up being very back and waited more so than we have an anticipated and people poly recall that twenty twenty was very back and loaded as well largely because of called it in from tax changes and the first half was quieter than lady than anticipated and the in two three and two for has accelerate in terms of people bringing product to market i'm in that context in a we expect the more portfolio betrayed by year end and we'd have a high degree of confidence or that we will be announcing in the coming weeks incremental acquisition tapper it's just because of the performance of the market as well as the the housing crisis that's getting worse rather than better and athletes are coming in i can to continually as they have been turning over the past eighteen months but again where the that debt markets are in europe and all that structured there's more and more er det providers willing and and keen to finance that's not a residential so we expect the continued or to secure very attractive financing on a photo
spk_4: earlier than as even mention and his comments are still be other the key that very robust yields bugs and including if you take the most recent acquisition that we announced in rotterdam and we see in the portfolios with that the are bidding on and that we hope to secure very very significant embedded rental up
spk_0: with and of portfolios even of the cap rates like the tighter on what financing them very attractive league and be feeding a very significant i will prevent the growth arnold football years
spk_8: okay great thanks very much alternate the back
spk_0: thank you kyle on a crushing tantrum much logan of rbc capital markets matt yolanda family from thank you and mind marina like it can you keep your voice color on the lease the environment like your portfolio is near full and what vacancy you add books to be held back renovations at least a good chunk of that sherry commentary on the rising rents and where you see your mac demarco potential across the portfolio to appreciate it she onion that i think the only negative kp i'd it within the his presentation will now corn on a corner new occupancy decrease by it was by a basis points light and then if you you exclude that the building has now been fully leave it was you know a little bit higher in and if you take the just sixty percent the trough why intentionally and that's when i get you the occupancy levels above ninety percent or above ninety nine percent excuse me and and add is structural vacancy know that you're not allowed to show glass in the netherlands until the pennant vacate so you'll always have a overcast and churn and settled in a we believe here we are running i frankly yell at full occupancy and and that's just a reflection of the market it is absolutely certain that the housing crisis and the netherlands is getting worse i'm house price inflation is double digit it's going outside double the rate of rental inflation so it's just a very very strong market amp market rents are going up generally speaking i'm so happy all also have embedded went to work and our portfolio all there were taking that moving targets are people can't buy so they have to rent out it's just across the board real take fundamentals are very much in our favor and that's why would feel me even more pricing power on on turn over here we doubled or turnover up look for to the fire your quarter and week we expect to continue to one of a level one hundred percent result of our our efforts to you absolutely maximize the price elasticity of our product and take advantage of that job market
spk_9: that said it's grey color in terms of your the embedded mental up let's say talk about on your with a lion acquisition keep watch it fly that for us
spk_10: like it would that be the movie the t shirt
spk_0: double miles yeah fired the and to get i'm until isn't it sad acquisition is or is one where we will add some people seen our our biggest after them you track where we have a very systematic ethics grandmother again incredibly meaningful up plus i read on the that will not have an asset is an asset where we expect two armed
spk_11: to play a significant amount of cap that initiatives there on in sweden abstinence but we believe that that they return on capital of that will be above target
spk_0: we generally try and targeting had ten percent on my bird returns are we expect to do better than that and we also expected that the rental uplift available for us the t this is even an inaccessible fifteen percent that you suggested for that asset
spk_12: an should that and i didn't hear this you know stevens common spoke what was the capri on that acquisition
spk_0: as about of three two three job and that's great and as we get off me guys appreciate the commentary iraq can call back and kick
spk_13: thank you master get on it and stuff like that that that factory down the governor just glad i like treat you as on in place
spk_14: though it doesn't reflect the board potential
spk_13: perfect on that question comes from him on she gets out of scotiabank himanshu yolanda shall i can
spk_2: thank you and the morning
spk_0: so my images
spk_3: and it's you're you're done that algernon college those if you sixty five million new of acquisitions just only how much did you on the right of you know how big was huge watch watching food of the audi acquisitions on the boss
spk_0: another just trying to lead you had been they selected in acquisition all not much yesterday in a marketing are we reviewed about a billion euros with you a little bit more the somebody knows would have been new build opportunities but palm roughly half of those would be existing assets that we are very selective even know that rates are compressing we remain very very strict and are underwriting criteria we certainly want to grow externally but we won't do it at any cost so they were several trades in august and september that we did on that we lost
spk_2: we've obviously secured the will monitor them one and there's a couple of other did i mention and alluded to that we expect few on
spk_13: the successful on toward the end of year but gum and discipline regarding underwriting doesn't change so we don't win everything i'm not there has been a fair amount of supply but it's been very back and loaded and and we we win some and we lose some that again where will we see the marketing and we don't have to win them all we just kept got the when the ones that
spk_0: that we like a host and the our fair share it you up okay and the several kids that she lost her leg which which groups to do lose to a didn't mean benching find a good private equity is it house you situations ah me don't really lose to housing associations you know they're probably developing more than they are anything else you might recall that we purchased the the horizon answer from a housing association because it is moving into the like zone so they're they're not our biggest competitors on the by
spk_3: side or the competitors yeah the existing competitors are there on as i'm sure it's happening globally ah the residential asset class along with you know industrial logistics there are certain cities your and there's more people raising capital coming into the market are a lot of people particularly given away
spk_13: their house price inflation is are operating a privatization strategy so we we don't do that we might someday button or were bidding on a bill i feel the what we think the stabilize deal potential is so if somebody else believes appears more value they can be extracted on a by hotel sell retail and extract the discount the vapor the production value in a we might lose to them it's mixed bag know so there's been a and competitors know that we've had historically awesome new entrance into the market but again in a we bit sort of not mustain a vacuum but we look at it from our perspective only and and that allows us to be successful in some cases and and domestic
spk_0: vessel and others okay though it and you know it seems like a have been kept in compression and seems like a gentle and selections are still have been a market so my question is are the lodge feet on the games is cotton
spk_12: a hadn't had any of it with food externally appraised at all like this you
spk_13: and so the and we we actually get our our portfolio extremely plays at a quarter not a full valuations at that operation but we work with our value aiders on a quarterly basis where we share information you time and they they give us the david alpert and week and ensure that it actually makes sense given by the market that like that
spk_0: awesome okay no definitely adding the values ago in one direction oh and then a discussion on the other yemeni organic gotten violent she be i ain't one percent is what you can do on the liberalized of what could be the see be a for next year for twenty twenty two on in any indication sofa you're seeing a big of inflation but then that be rejected him again on the it i mean we get leant solely kid got go had been oh yeah i mean you have to go to tell us when we can't really predict whether don't but it a ton of a backward looking i'm how out calculate reply
spk_13: we are expecting it to be more than the one point five percent i would say culture that to present for next year and much how we kind of see it right now gates atlanta generally are literally that you think clerics argument your that regular we don't calculate the cp i weekend look backwards and try and see what it was but ultimately the government or that arousing regulator announces what cpr big applicable phoebe i will be for the next in that
spk_0: patients that we would expect that to be announced and que en as it has been traditionally exactly yeah that's what i'm and you let us be said in april i believe so you will get to know that she diego so overdone bad good looking you might have already know that you know where the she the are you shaking up to be ah but i think that that's helpful and then on the question is on the one billion book station on deregulated there is zero percent law if it is on extended beyond on july twenty twenty two what could be didn't until good feed on the that limited good for you yeah so another difficult question the answer but if you look at what had been happening for many years on the regulated side the regulator would announced an income threshold and then the regulator would provide a sleepy eyed plus extra fewer above the let the income threshold or cp i plus why a pure below the income threshold and those numbers for very long period of time had been cp i was born cpr i plus two point five respectively the regular deviated quite dramatically from that last year where they initially announced it would be cp i pass one for regulated across the board and then they rescinded that and said zero
spk_2: so again it's difficult to know where they will be bad if inflation is going up significantly i doubt that they would put the plus and plus why levels that as high as they were before ah but i think we just have to wait and see i mean it's not a great answer it's not clarity but we
spk_0: we've demonstrated this year that even if it a war hero for regulated indexation we can still building or pipeline like a good cost of portfolio very close to the high end of our target of for itself tom i'm optimistic it will be better than zero about we demonstrated the ability to deliver our
spk_13: our targets even in the event different lawyers europe
spk_0: got it and and you still believe in a g to have to focus in redcoats for the mixture of for twenty two digits the i mean we've always had three to four percent by the volleys new exceeded dad and and and this year you know what the top and so i did three nap before three to four the answer would be yes but yeah this year it certainly loves three and a half thank you thank you i didn't either back perfect thank you as a reminder it's staff will buy one on your telephone key part of you wish to submit a question our next question comes from jonathan culture of td security johnson your line it's not like and thanks just just sticking with he got the inflation stuff on on a liberalized cp i was like there's no cap though it or was declared month no no cap and then that and that inflation is it is backward looking but it'll be whatever twenty twenty one average keep guide clayton as for the netherlands so it didn't look meeting look that up getting late january or early february when or that comes out collected for the calendar year preceding so yes twenty twenty one okay and then on on the flipside the on the cost side for inflation our our you guys impacted what what sort of letters we're ready he cost pressures and and where might you the benefit so i mean any we have always guided that margin and around twenty five and seventy seven percent so week we continue to believe that that holds true are you there are costs pressures and we see that and the realty taxes than as a function of the municipal taxpayers are increasing over the past couple of years in terms of utilities were less impacted by from of the natural gas to get a lot of the the those are cost that incurred directly by the tenants and then we do see some inflationary pressure lung or lamb and other type of expensive but again we still believe we can we can retain that seventy five the sunset seventy of percent ah marjan and we are looking at other opportunities that you are aware of the lander letter rebate there are other opportunities out there so we're currently evaluating a couple them and that may provide some benefit for and twenty twenty two but i i think and is being a feel it's potency a falling out what more optimism or i think it sometimes last on people that we have been controlling our cost and created incredibly well and when we regularly announced the seventy five to seventy seven arrange an an ally margins where closer to seventy five if you exclude the benefit to the landlord and on levy on financial transactions that we done war now operating are an ally margins it seventy seven plus self and on top of our top line lentil grow the team is also doing a great job of controlling the costs and taking advantage of of all of the experience that we in capri have and so not i think that's off and mosque that in that we've increased and my an ally margin by two hundred basis points on top of jogging are toppling mental vocalist close to four percent perfect our next question comes from much logan as a follow up match your is now i can thank you just circling back on some comanches questions on transaction volumes on it sounds like the deal quality the netherlands it's quite back and voted this year and wondering if you think all the transactions that deal occurred they'll put you in november would have been reflected in that kept great movement on in the concorde of i think half rates are continuing to trend down and i think which is always the case ah portfolio valuation including external valuers and to be lagging
spk_15: in terms of reflecting were current rates are they're always looking backward ah her their president transactions and not necessarily looking with happen currently so on
spk_0: a bit you say that we're we're buying cap rates certain that three to wish range and you locate wow portfolios valued in the three five range it demonstrates their is still a gap letter not our entire portfolio would moved three and a quarter i'm not certain on but i think that stephen explaining in a we of i am and utilize june uses a data point for establishing our values what input we're getting from outside valuers and and they tend to be behind as my experience with would ah would would not push a pickup they should be colorful up that lot of me a keep honest question comes from much corner of national bank financial match yolanda how i can just wondering with regards to the sixty percent at it's that are being held for renovation is that above a normal range or would you anticipate that as though they're renovated you will be adding new property to be renovated in that making he would be somewhat stable yeah i think the vacancy stable i think being running it ninety eight plus percent is a great number and as i mentioned before know if you know or you know the the offline you invest in and in train investments he would be above ninety nine and and i think that is an attorney normalized and we're always gonna have a collection of assets that are the candidates for investment i mention that when a moderate and portfolio that we just acquired that will as an investment going into it as those assets turn i think historically sometimes the component of vacancy to a capital investment is is and seventy seventy five percent this quarter at sixty or were always gonna having meaningful than number of units off line for turn over callbacks whether that be already liberalized sweet that were investing in or whether deregulated sweet that is gonna be converted and world's always coming to our portfolio to make certain that we're taking advantage of every regulated so week that can be converted i were finding more and more again i don't think that's gonna move near dramatically from the you one an have two percent the we do a year ah but on the margin yeah so we're always going to have that nam did you sixty seventy percent compelling of are vacancy that is a result of our capital investment palmer no an accent and then just with regards to that easily the demand is quite strong on the multifamily side but has there been any change in supply at this point out know there were some restrictions around yeah greening in assets for him though that one to the typically supplied the market not made it less economic to do so and that is supply catching up at all or it still and canada's persistent supply demand announced persistent supply demand and balance there's been no movement whatsoever to try and address it and again this and that's only anecdotally right now there is a supply demand than balance in many countries know globally including canada of course ah n one of the biggest things to to observers is what does the new government do ultimately and any existing ah the minister whether she stays in place or not when not quite certain he's very aware where that the biggest problem is on the supply side and if you just take it anecdotally if you look in ireland the government recently put in new initiatives to address that supply as opposed to tweaking their top line vote doesn't mean another that is gonna do the same thing but one would hope if you're trying to remedy a structural supply demand about they would focus on supply on as opposed to new vegas nations an existing but whether they do that or not i'm not certain but it is definitively not been addressed in it's continuing to get worse and particularly there was a a small paws and getting worse i was getting worse and i'm let's quickly or more slowly during the pandemic because know you add lot of the immigration
spk_16: yeah
spk_0: subside ah and that dollars level of housing unit demands what was depressed but now that immigration and is back he ex pats are back as so once again on the i would argue it it's more accelerating and decelerating against very much in our favorite without being insensitive be cause it gives us more pricing power there and and i guess we didn't see it in your portfolio big live is remarkably stable throughout the dynamic i am but work they're sort of temporary similar things like man shooting coordinating and with their parents and students not going to university like who were those demand drivers actually pulled back during the pandemic in the netherlands or that pretty sort of status quo on that front i mean all educational after getting opportunity that and yet had to adjust something concern are not be in my bonnet of you will for for me read different than yeah a lot of our peers whatever the canadian peers for european peers we were a train running down the tracks exactly as we had advertised for pandemic and we never wavered they never came off the track where many of our dear the train came off the track and various new know levels of severity and everybody's getting rewarded for getting your train back on the track well we never went off it's just been steady or she goes our collection rachel the same occupancy rates with the same or lentil up lives are are getting better are turnover rate thing stable of a you're effect is getting better so an archery not only didn't go off the track it's probably accelerating and people just seem not to be recognizing that were a lot of appears both in north america and europe are are getting rewarded for and getting back are making progress back to where they were any other stock price reflects that and we'd rated a discount everybody and we never wavered and that is necessarily addressing you know your your common it's sort of free commentary and that from the student affect he didn't really see that because we we don't have purpose built student housing our our target market are just basic young professionals and or young families will we don't either student component with the and are portfolios couldn't be a big movements new negatively that it subsequently recovered or corporal i stayed on the track and has been accelerating and and pre and and like all the way through the pandemic and now while we're not pose pandemic but in the process that both pen damn it thanks for that and then we are you lifter we've agreed and and noted it throughout because day you have really been up for me through the last year and continued his also congrats our next question comes from brad sturges of raymond james bradley yolanda satellite i and better the
spk_17: such on the acquisition commentary that she gave
spk_0: and even letting a good leverage take up a bit to do some of the search for talk and acquisitions a get that you could he joked to there's it's thursday that the good think of even higher but i get what moody the catalyst to the bothered are selling that the to legacy august as a he could find somebody that they are pretty interesting on the acquisition so down in and we've we've been very very open about our view on leverage on again targeted range hasn't changed between forty five and the ah but we would certainly be comfortable taking that lever job modestly to still a reasonable level before we would entertain issuing equity at current levels ah so yet taking our leverage up know modestly is not something that we're concerned about i would suspect the selling the commercial assets they're always if you will for sale at an appropriate price and so three pandemic i would have thought they would be sold by now because the market was conducive in a post endemic or since the onset of the pandemic those are core assets although they're not klein core as i like to say i'm and that pricing has not yet returns in terms of the trading market in and people buying those assets would wanna discount that we would be prepared to give so in a we will sell those assets in the course of time when we get what we believe is appropriate pricing but again we don't and liquidity restrictions either
spk_18: so that isn't and it and the incremental paddle as to cause us or want us to sell them before we should because we don't need that liquidity and we have on capacity on line and we also have the undrawn or pack on agreement with capri that would capri though yes we would fellow that appropriate price but
spk_0: we don't have a liquidity can strengthen terms of achieving our external growth that might cause us to sell them on earlier than we should read at a price less than what we think is fair accents and and wouldn't in the acquisition pipe on your team right now and yell at least and you said before i get you know the the better of you had waited more on the little i glided that the what you're seeing right now within the current pipeline that he could you still with him or way towards
spk_2: the lord billion yielding but i agree to legalize them as it
spk_0: yeah i think that's accurate again i don't think it's just an addict or a trend it's almost that's what's coming to market but with the rotterdam outset that we just announced it's twenty percent regulated eighty percent liberalized but again very significant double digit growth potential ah with a couple of the other ones that were

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