H&R Real Estate Investment Trust

Good morning and welcome to H&R Real Estate Investment Trust 2021 Second Quarter Earnings Conference Call. Before beginning the call, H&R would like to remind listeners that certain statements, which may include predictions, conclusions, forecasts, or projections, and the remarks that follow may contain forward-looking information which reflect the current expectations of management regarding future events and performance and speak only as of today's date. Forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties, and actual results could differ materially from the statements in the forward-looking information. In discussing H&R's financial and operating performance and in responding to your questions, we may reference certain financial measures which do not have a meaning recognized or standardized under IFRS or Canadian Generally Accepted Accounting Principles and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H&R's performance, liquidity, cash flows, and profitability. H&R's management uses these measures to aid in assessing the REIT's underlying performance and provides these additional measures that investors can do the same. Additional information about the material factors, assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and the material factors or assumptions that may have been applied in making such statements, together with details on H&R's use of non-GAAP financial measures, are described in more detail in H&R's public filings, which can be found on our website and www.cdar.com. I would now like to introduce Mr. Tom Hofstetter. Chief Executive Officer of H&R Retail. Please go ahead, Mr. Hofstadter.

Good morning. I'd like to thank everyone for joining us today. With me on the call are Larry Frum, our CFO, Patrick Sullivan, COO of Primaris, Philippe Lapointe, COO of Landtower, Alex Avery, Executive Vice President, Asset Management and Strategic Initiatives, and Robin Kestenberg, Executive Vice President, Corporate Development. I'm very pleased to report H&R's stable and consistent second quarter financial and operating results reflecting the quality, strength, and resilience of our portfolio and balance sheet. We are in exciting times with H&R with the impact of the pandemic fading, accelerating lease up of our residential development properties, and of course, the execution of our strategic initiatives. As we detailed in our announcement last week with the $1.5 billion office portfolio sales of the Bell and the Bell office campus, we have laid the foundation for the next steps. Post-transaction, H&L will improve its tenant concentration profile, reduce Calgary office exposure, enhance our strategic flexibility. I'll now turn it over to our team to provide details of the second quarter 2021 financial and operating results. Philippe will review our multi-residential operations, followed by Pat, who will provide an update on our retail portfolio. Larry will then provide a brief update on office and industrial before providing some context for our financial results. And finally, I'll make some closing remarks.

over to you philippe good morning everyone i'm delighted to be on this call today to provide you with the latest significant progress made within the land tower residential platform we continue to make strides with our strategic initiatives referenced in the past while also adding new and innovative strategies to further our mission of becoming amongst the best fully integrated residential operating and development platforms in north america on the topic of portfolio performance When excluding Jackson Park, same asset property operating income from our portfolio in the U.S. dollar has increased by 5.7% and 4.9% respectively for the three- and six-month periods ending on June 30, 2021, compared to the respective 2020 periods. As you've probably heard from our publicly traded peers in Canada and the U.S., the U.S. multifamily industry is experiencing explosive leasing momentum today. supported by pent-up demand and favorable supply and demand fundamentals predominantly in the U.S. Sunbelt markets. Landtower's lease tradeouts, with a delta between a unit's previous lease rate to its new lease rate, has drastically increased over the past few months. For example, our lease tradeout for our entire portfolio, excluding Jackson Park, was over 18% in the month of July, led by the Tampa market at over 30% and the Austin market at over 25%. Additionally, our same-store occupancy as of this week is over 96% compared to 92% 12 months prior. While we certainly do not expect this rental rate growth trend to continue at this level for an extended period of time, we are certainly encouraged by the strong demand fundamentals in the residential sector. Furthermore, we are proud to announce that our Q2 operating income growth represents over 13 consecutive quarters of same-asset quarter-over-quarter positive NOI growth, once again, when excluding Jackson Park. Despite COVID's impact on our industry in 2020, in addition to the reinstated yet legally questionable CDC eviction moratorium, Lantau's ability to produce consecutive quarters of positive growth during this turmoil is particularly remarkable. And I'd like to personally thank our property management division, led by Emily Watson, and her team who are entitled to most of the credit. Furthermore, we are especially proud that Lantau Residential is only one of few publicly traded multifamily platforms that reported positive quarter-over-quarter net operating income growth throughout 2020 and 2021, when excluding Jackson Park. On the technology front, I'd like to provide an exciting update on our Smart Apartment Strategic Initiative Program. By the end of this upcoming September, our entire portfolio will have been fully converted to smart apartments. As a reminder, these smart apartment packages include smart locks, smart thermostats, and leak sensors that will provide the resident full apartment control, all from a single app. The results to date have been nothing short but exceptional as we are experiencing operational efficiencies and NOI growth, namely thanks to the keyless and remote access unit control, as well as the ability to climate control the few remaining vacant units more efficiently by leveraging the management software. While we are pleased with the smart apartment packages installed to date, we are continuing to further expand our technology-based initiatives to drive NOI growth and further differentiate LandTower's offerings. We are in the early stages of implementation of our virtual leasing platform to be rolled out across our entire portfolio, allowing future residents to tour and lease an apartment 24-7 without requiring a visit to our leasing office. We are extremely excited about this next strategic initiative as we expect it to yield numerous additional financial and operational benefits. As mentioned last quarter, our primary strategic growth initiative is our wholly owned development platform within LandTower. We currently have three active development projects in our U.S. Sunbelt markets. Firstly, I would like to provide an update on Landtower West Love, our infill site in Dallas, Texas, with proximity to the Dallas Love Field Airport and Medical District. The five-story, 413-unit WRAP development is expected to break ground around the end of this year. Also in the works in Dallas, Texas, is Landtower Midtown, a 4.2-acre infill site with direct frontage and visibility to the north central expressway and it's over 275,000 vehicles per day. We are currently drafting construction drawings on this five-story wrap development that will include approximately 351 units, and we expect to break ground on Lantower Midtown in the first quarter of 2022. Lastly, we are commencing construction drawings for a garden-style property called Lantower Bayside in Tampa, Florida. This development with approximately 271 units is adjacent to Highway 19, one of the most dominant thoroughfares in all of Pinellas County. This development is also expected to break ground in the first quarter of 2022. As a follow-up to our ESG initiatives mentioned in previous quarters, it is worth noting that we are carrying that same focus into our land tower development efforts. Every land tower development will be pursuing a National Green Building Standard, or NGBS certification, which is one of the most prominent and recognized certifications in the residential sector. In addition to these pipeline developments, we have additional owned sites and sites under contract that will soon join the land tower development pipeline. For context, if we continue our projected development pipeline on the developments under our control, we will add over 2,000 units or over half a billion U.S. dollars worth of multifamily over the next few years, eclipsing the 10,000-unit portfolio mark. From a return perspective, we are targeting development yields between 5.5% and 6%. for all projects in Landtower's development pipeline. The expected development yields relative to historically low Class A cap rates provide strong value creation and risk-adjusted returns. And with over 175 bps of yield coverage, coupled with the benefit of retaining the upside economics, and almost just as importantly, designing to Landtower's best-in-class design and quality standards, our intent is to continue the expansion of this highly accretive growth strategy for the foreseeable future. On the Lantau River landing front, our leasing pace continues to beat our expectations in budget. As of today, we are 78% occupied and have leased 466 apartments, or over 88% leased. Since September, when we opened our doors, we have averaged over 45 leases per month and have increased rents multiple times while simultaneously decreasing leasing concessions without any noticeable reduction in traffic. On the Jackson Park front, we would like to share a very promising update. As we have disclosed in recent weeks, Jackson Park's recovery has been nothing short but exceptional. Signed leases over the last few months have returned a property to stabilization. For example, Jackson Park signed a record 456 leases in June, which represented the most leases ever signed in a single month at Jackson Park by a large margin. For context, the most leases signed in one month during the original 2018 lease-up was under 200 leases. When including pending applications and leases out for signature, the property is 99% leased as of July 31st. We expect the occupancy to catch up to our lease percentage at the end of the third quarter or early fourth quarter, as this is when the majority of our pre-lease units will take occupancy. On the JV development front, we and our partners have taken advantage of the favorable disposition environment and have successfully marketed for sale a few of our JV developments. Over the next 60 days, we intend to close on the disposition of Hercules Phase 1 in Hercules, California, and Astera Park in the Seattle, Washington market. With a weighted IOR of nearly 30% and an equity multiple of 2x, we are proud to dispose of these two successful developments and redeploy into creative opportunities. We would also like to highlight the hard work of our JV partners, and just as importantly, congratulate them on two very successful developments. As for the JV developments that are not currently on the market, the Pearl in Austin, Texas is scheduled to fully deliver in the third quarter of 2021. Leasing has begun and been met with incredible demand, as evidenced by a lease percentage of 42%. Construction of phase two of our Hercules development named The Grand has remained on schedule and is set to be delivered in the third quarter of 2021. Lastly, Shoreline Gateway, or a 35-story tower in Long Beach, California, is also on schedule and expected to obtain final CO in in early September 2021. In summary, there's lots of good news coming from Lantau Residential, and I'm excited to deliver more news next quarter. And with that, I will pass along the conversation to Pat.

Thank you, Philippe. The 39.9% increase in retail same-asset property operating income for the quarter was primarily due to a material improvement from the enclosed mall portfolio. Same Asset NOI rose due to a significant decline in bad debt expense within the enclosed mall portfolio to approximately $0.6 million, down from $22.8 million in Q2 2020. Q2 Same Asset NOI was also impacted by lease surrender revenue of $2 million related to a Starbucks termination of two locations and a payment related to the Sears CCAA filing. On a sequential basis, the retail portfolio delivered continued momentum with Q2 same asset NOI rising 3.9% for the retail division and 6.9% for enclosed malls compared to Q1 2021. Throughout the pandemic, our primary focus has been to maintain occupancy. Occupancy at the end of the second quarter was 91.4% for the retail division as compared to 91.5% at the end of Q1 and higher than the 90.5% at the end of Q2 2020. For enclosed malls, occupancy at the end of Q2 2021 remained relatively stable at 87.1% compared to 87.2% at the end of Q1 2021, but have improved from the 85.8% at the end of Q2 2020. There have been no significant CCAA filings to date in 2021, and we do not anticipate additional filings to occur the remainder of the year. Moving on to rent collections. Collections in the retail portfolio continue to trend higher since their low point in May of 2020. In Q2, we collected 89% from closed malls compared to 94% in Q1 2021. Our four Ontario-enclosed malls account for just over 20% of gross rent, and they were closed for the entire second quarter. In June, we received 95% of rent from malls outside of Ontario despite continued occupancy restrictions in many provinces and just under 71% from rent for malls in Ontario. With all malls now open and occupancy restrictions lifted in the majority of our markets, we anticipate a return to normal collections moving forward. With Ontario malls closed during the majority of 2021 and occupancy restrictions in place in other provinces, Leasing momentum that was realized in Q1 slowed in Q2. Over the past 30 days, our leasing team has experienced a recovery in leasing activity with a number of national tenants based in Eastern Canada and the United States, including fashion tenants. With restrictions lifted and sales rebounding, we believe that we will continue to improve our occupancy level throughout the remainder of the year. In terms of impact, we anticipate approximately 1.1 million incremental contributions from new lease commencements with large format tenants during the remainder of 2021. In addition, we have completed significant transactions that will create incremental rental growth of over 3.2 million in 2022, including rent from 65,000 square feet of new tenant leasing that has been with medical and office tenants. Throughout the past year, our suburban malls located primarily in secondary markets have performed well compared to urban centers. With restrictions easing in the second quarter, mall sales in our properties outside of Ontario and Manitoba posted strong sales figures compared to pre-pandemic levels in 2019. By way of example, in June 2021, Plaster, Ram and Chicoutimi reported sales that were 112% of June 2019 amounts. For the most part, our malls in Ontario and outside of malls in Ontario and Manitoba reported sales for June 2021 that were 90% or more compared to June 2019. With Ontario Malls now open and occupancy restrictions easing in Manitoba, we anticipate sales to rebound to levels similar to those generated prior to the pandemic for the remainder of 2021. While challenges remain for retailers selling goods and services related to work apparel, we have seen strong sales numbers from junior and casual apparel retailers as well as footwear retailers. We have been encouraged by strong sales productivity reported during the past several months by many national fashion tenants as well as tenants in the health and beauty, jewelry, and footwear categories. Food court tenants and other fast casual food tenants located inside our malls are realizing improved sales and have generally rebounded to 80% or more of their 2019 sales figures. I'll now move on to an update on several development projects. We've recently sold just over two acres of land at Northland Village for approximately $5.8 million to a residential development company who has commenced construction on a six-story building incorporating approximately 240 residential units. The overall plan for Northland Village is to redevelop the Walmart-anchored enclosed mall into a mixed-use open-air center over the next few years in several phases subject to pre-leasing. In July 2019, we submitted combined applications for rezoning and redevelopment for the north end of the property at Dufferin Mall to create Dufferin Grove Village. The project is anticipated to include approximately 1200 residential units. Discussions with the city are almost complete and we anticipate rezoning and site approval in Q4 2021 and commencement of construction Q4 of 2022. Upon completion, this redevelopment project will transform a successful established inner city regional shopping center into a vibrant mixed use development. Thank you, and I'll now turn it back to Larry.

Thank you, Pat, and good morning, everyone. For the second quarter of 2021, our FFO was 38 cents per unit, no change from the 38 cents for Q2 2020. On last quarter's call, we spoke about a few items which were expected to influence 2021 financial results, and I'd like to now review their impact on Q2's results. Firstly, As our River Landing development has been completed, less interest has been capitalized to the project. The aggregate interest capitalized on all development projects amounted to $524,000 for Q2 2021, compared to $5.2 million for Q2 2020. With accelerated leasing momentum, as Philippe mentioned, the operating income from River Landing will begin to offset this interest factor. Property operating income on a cash basis from River Landing was 2.3 million US dollars for Q2 2021. And we expect that to grow to approximately 6 million US dollars per quarter in 2022. Secondly, Jackson Park in Long Island City, New York is particularly hard hit by COVID, but it has begun to recover, as Philippe mentioned as well. Property operating income from this property in Q2 2021 was approximately 2.3 million U.S. dollars at H&R's ownership interest, compared to 6.9 million U.S. dollars in Q2 of 2020. We are encouraged by the recent pickup in leasing activity and the committed occupancy, which should result in a return to more normalized operating results from Jackson Park in Q4 of this year. Thirdly, in January 2021, H&R converted a 146 million US dollar mezzanine loan on a 12.4 acre development site in Jersey City to an equity ownership position. This is the primary reason for the reduced finance income of 4.3 million earned in Q2 2021 compared to 9.2 million earned in Q2 of 2020. Finally, bad debt expense decreased dramatically from the 23.5 million recorded last year in Q2 to 1.2 million for Q2 of this year. As at June 30th, 2021, we had a provision for expected credit losses of 14 million against the gross accounts receivables of 29 million. Turning to our offer segment. Same asset property operating income on a cash basis decreased by 9.9% as compared to Q2 2020 and was primarily due to HES receiving a seven month free rent period commencing December 2020 as part of a lease extension and amending agreement completed in November 2020. Under this agreement, HESS agreed to extend the term of its lease on approximately two-thirds of the building for an additional term of 10 years beyond its current expiry of June 30th, 2026, excluding the impact of the HESS lease amendment, same as the property operating income, increased by 2.5% for the quarter. HESA's free rent period ended on June 30th, 2021, so we will see an improvement in our office segment beginning in Q3 2021. As Tom had already mentioned last week, we announced the $1.5 billion office portfolio sales, including the Bow and the Bell office campus. Once these sales are closed, we will have significantly reduced Calgary office exposure, improved our tenant concentration risks, and improved our credit metrics. Turning briefly to our industrial segment, same-asset property operating income on a cash basis decreased 3.4% compared to Q2 2020 due to the decrease in occupancy from 99% to 98%. In June 2021, H&R sold its 50% ownership interest in a portfolio of five single-tenanted industrial properties totaling 215,000 square feet located throughout Atlantic Canada for approximately $21 million. In addition, H&R sold its 50% interest in a 37,000 square foot multi-tenanted property located in Kitchener, Ontario for $12 million. Subsequent to Quarter End, H&R sold its 50% ownership interest in a portfolio of nine single-tenanted cold storage properties located across Canada for $117.5 million. These industrial transactions resulted in total proceeds of approximately $150 million compared to the R4S value of 121 million as at March 31st, 2021. The weighted overall capitalization rate for these dispositions was approximately 4%. Moving to the balance sheet. At quarter end, debt to total assets at the REITs proportionate share was 50%, compared to 51.1% at the start of the year. And unencumbered assets of unsecured debt was 1.65 times coverage, consistent with Q1. Debt to avatar was 9.85 times. Both for my second quarter results, taking into account the office property dispositions announced last week and the lease up of River Landing and Jackson Park, we expect our credit metrics to improve dramatically and our modeling debt to avatar of 8.6 times, debt to total assets of 43.7%, and unencumbered assets to unencumbered debt of 2.25 times. At quarter end, H&R had ample liquidity with cash on hand of approximately $60 million and $990 million available under our unused lines of credit. In addition, we have an unencumbered property pool of approximately $4 billion. And with that, I will turn it back to Tom.

Thanks, Larry. After challenging 17 months, we are seeing and experiencing signs of recovery. Inactivity has accelerated dramatically, lifting occupancy sharply at Jackson Park, and we are seeing strong leasing momentum at our largest recent development, River Landing in Miami. Vaccination rates are climbing every day, and where restrictions have been lifted, mixed and more retail sales have surged. Over the last few quarters, we've outlined plans to create at least one new entity in 2021, and as is evident by the Bowenville office campus sale, we remain on track to achieve that goal. We are currently working through the final stages of this initiative and appreciate the patience and support of our unit holders and investment community. We look forward to providing more details in this regard in the coming weeks and months. We'd now be pleased to answer any questions from the call-up participants. Operator, please open the line for questions.

Thank you. At this time, I'll just remind everyone, if you'd like to ask a question, please press star then one on your telephone keypad. Again, star one to ask a question. And we'll pause for just a moment to compile the Q&A roster. And our first question is from Sumaya Syed with CIBC. Your line is open.

Thanks. Good morning. Just in the disclosures for tenant inducements for office, there was a reference to a major tenant sign in Toronto. Can you share anything about size, which property, and just anything on the terms of that lease?

Good morning. Are you referring to, I think, what, showing $1.4 million of tenant leasing expenditures in the quarter? Yeah. I actually don't know offhand. I'll look afterwards and get back to you on that.

It's not material enough, so I don't know offhand either. Okay, we'll get back to you.

Okay, that's fine. And I'm just wondering with the reopening and recovery that's underway and, I guess, improving prospects for asset values. Do you intend to revisit fair values in the near term, or are you comfortable with the gains you've recorded year-to-date?

It's a regular process of every quarter revaluing our fair values. So we're comfortable with the positions that we have at June 30th. and September 30th will be revalued on our regular process. I can't say now what we expect that to be, but we don't expect material changes.

Okay. And then just turning to Land Tower and the strategy there, just maybe a reminder for us in terms of what's the criteria for what stays in the REIT versus what could be marketed for sale?

Are you specifically referencing the JV developments?

Yeah.

So if you'll recall, initially the JV developments were a great idea for a variety of reasons, but really what it boils down to is optionality. And so at the time, we decided to do it with a best-in-class developer in a high-barrier market. And what it really afforded us the opportunity was to see if we wanted to build a position around the development and ultimately take ownership of the development to add to our position in that market. What we've quickly realized, frankly, is while those markets are strong in their own respect, frankly, we thought it'd be a better and probably a more worthwhile investment to consolidate our position in the Sunbelt markets. And so the JV developments, unless a material change in circumstance, will all eventually be marketed for sale.

Okay. That's helpful. Thank you.

And, Samaya, just before you go, I did find that first question you asked about the tenant leasing, it was from our property, 25 Shepherds. It was a renewal of a lease for $1 million of tenant inducement or a leasing incentive that we granted on that property.

Okay. Thanks, Larry.

The next question is from Matt Kornack with National Bank Financial. Your line is open.

Good morning, guys. Apologies if you mentioned this. It's a bit tight on conference calls this morning. But with regards to the Jackson Park lease up, Larry, I think you said it's going to be fully stabilized or back to normal in Q4. But can you give us a sense? as to, I mean, it seems like a pretty massive improvement in occupancy from June until August, but when those leases ultimately would commence, and is the character of that leasing, is it student leasing or young professionals returning to the office in Manhattan?

Philippe mentioned some of it. Philippe, do you want to answer that question?

Sure. Sure, happy to. Good morning, Matt. So we'll deal with the easiest one. I would say it's a blend of both. There's obviously going to be a healthy representation of international students. And by all accounts, all of the universities and colleges are having in-person class in New York. And so that's an explanation for the, frankly, the outstanding momentum. But there is also young professionals, although I think that while their impact has been felt, I mean, the property is 99% leased, and so I'm not sure how much more we'll see in the upcoming months. But to answer your question succinctly, it's an interesting blend of both. And as far as the leases are concerned, we think that it's probably going to materialize in the fourth quarter. And so by the time some of the concessions or tenant inducements flush out, the net operating impact will be felt in the fourth quarter.

Okay. So sequentially, we should expect kind of flat performance and then it really to ramp up substantially into Q4.

So I'd have to get back into the exact timing because obviously June, July, September will kind of overlap. And so depending on how many are recognized in the end of this month in September. But if you think about conceptually, 456 leases being signed in July and 99% leased, it's going to skyrocket fairly, fairly quickly. And so we're delighted in being able to announce that we're back to regular business and obviously excited to see Jackson Park outperform the Long Island City market. as it had prior to COVID.

And then, I guess, shifting to the enclosed mall portfolio, Pat, again, I apologize. I missed most of your preamble, and I'm sure it was pretty detailed, so I'll go back and listen to it, so don't repeat that. But just interested in your thoughts going into the balance of the year. Obviously, Christmas is going to be important from a sales perspective. We're seeing some normalization happening. in shopping patterns i think there's some stats out that the traffic is up in the u.s back to pre-pandemic levels um but in terms of what you're thinking in terms of new tenants coming in versus maybe losses we'd have from uh businesses that have been challenged like where should we see occupancy kind of trend over the next year or so if you had to guess i i think matt uh it's gonna it's positive i i see a lot of leasing traction starting uh

We had some pretty good momentum in Q1 that stalled in Q2, primarily because Ontario was shut down. We've had a lot of activity in the latter part of June and July, and typically these are slow months. We're seeing activity from fashion tenants. We're seeing activity from a bunch of U.S.-based tenants who are continuing their expansion in Canada and some Canadian-based tenants as well that are I've got to admit I'm really encouraged by the sales reports for June and reviewing them. The fashion tenants are actually performing very well across the board. Junior unisex especially is doing very well. Footwear is doing well. These are categories that were rather flat or down for the first quarter and even the fourth quarter of last year. They've actually shown some pretty good strength and I think that's going to, as Ontario opens and the retailers kind of get back to business in Ontario, I think it's going to put a lot of guys back in motion in terms of their expansion plans.

Okay, that makes sense. And then lastly for me, on the industrial portfolio, obviously you've generated some interest, got some good cap rates, clearly it's an exceptionally hot sector. The same property NOI growth, is it a transitory vacancy? I don't know if it was discussed on the last call there and what the expectation is just in terms of how that portfolio will perform.

Hey, Matt. Yes, the occupancy dipped a little bit, but we believe that's a good thing as the rents we will be able to get from releasing will be higher than the tenant leaving. So we just expect it to be a short-term impact.

Which geography is that in?

It is actually a mix. One property in Calgary and one property in Ontario.

Okay. Perfect.

Thanks, guys. The next question is from Sam Damiani with TD Securities. Your line is open.

Thank you. Good morning. Just on the bow and bell transaction, and I know we had the call last week, but could you just review, I guess, the impact of on FFO when that goes through with the amortization, and also do you anticipate any fair value impact once that closes?

Good morning, Sam. So first on the accounting treatment, as you mentioned, because of the option to repurchase, R4S 15 reviews regards that as if we have not given up complete control of the assets, And therefore, for accounting purposes, we'll still keep that asset, the bow. We're talking just about the bow, not bell. Bell will be regarded as a true sale. But because the repurchase option is on the bow, the bow will stay on our books. We will continue to fair value that every quarter, probably being straight line down over the 17 years as we come closer to the end of that 17-year period. The proceeds we receive from the sale transactions will be set up as deferred revenue. That will kind of be amortized down with an interest accretion factor. So that's all happening on our financial statements. Obviously, and sorry, and we will continue to record the full impact, the full event of lease, so the full rent at 100% on our financial statements. Of course, 85% of that is non-cash flow because we will only be receiving 15% of the rents as opposed to 85%. So on our disclosures, we will be giving you the non-cash items that are coming in and we will be adjusting, I don't know, we're not quite sure how we're going to do it, but probably adjust it through ASFO, the non-impact of the BO transaction in terms of our rent and the interest accretion component for the deferred revenue going down. But overall, if you treat it as a true sale, if you treat it as a true sale, our FFO would drop by 20. Both sales, Bo and Bell, would be dropping by about $0.20 per annum. So if you're looking through the accounting, that's what you should expect to see from the sales. decrease of 20 cents per annum on our FFO. Again, that's largely offset by what we expect to get in the lease-ups from Rubber Landing and Jackson Park.

And just on Jackson Park, is that a core asset or would you want to sell that? And is there any hindrance in selling that with your 50% ownership?

No, it's a core asset. We don't have any plans to dispose of it. It's actually one of our best assets.

Okay. Thank you. I'll turn it back.

It appears that we have no further questions at this time. I'll turn the call back to Mr. Hofstadter for any closing remarks.

Thanks, everybody.

Have a great weekend and enjoy the rest of the summer.