H&R Real Estate Investment Trust

Good morning and welcome to H&R Real Estate Investment Trust 2025 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 reflects 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 and 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 route's underlying performance and provides these additional measures so 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 H&R's website and www.cedarplus.com. I would now like to introduce Mr. Tom Hofstetter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstetter.

Thank you, and good morning, everybody. Thank you for joining us today. With me are Larry Frum, CFO for H&R REIT, and Emily Watson with Lantau Residential. Larry, I guess we can start.

Thank you, Tom, and good morning, everyone. In my comments to follow, references to growth and increases in operating results unless stated otherwise are in reference to the three months ended June 30th, 2025 compared to the three months ended June 30th, 2024. We have sold 64.7 million of real estate assets in the first six months of 2025 and at June 30th, 2025 we had a further 56.9 million of investment properties under contract to be sold. As at June 30th, 2025 the value of our real estate assets broken down between our segments are as follows. Residential is our largest segment at 48%, industrial 19%, office 18%, and retail 15%. By geography, 70% of our real estate assets by value are now located in the United States. Overall, given the headwinds we face with multifamily supply concerns, a weak office market, inflation, as well as the tariff wall creating general market uncertainty, we are very pleased with our results and in particular the 3.4% growth in same property net operating income on a cash basis for the six months ended June 30th compared to the same period last year. For the three months ended June 30th, 2025, FFO was 31.4 cents per unit, a 2.6% increase from the same period last year. Breaking down the three months in the June 30th, 2025 between our segments, the residential segment same property net operating income on a cash basis increased by 0.3% in US dollars. Emily will provide more details on Land Tower's results shortly. Our office segment same property net operating income on a cash basis increased 2% primarily due to the strengthening of the US dollar. There's been a slate of back-to-office policies from different companies, and it seems clear that more and more employees are heading back to the office, which is positive for the sector as a whole. 87.6% of our office revenue comes from investment-grade tenants, a testament to the quality and location of our office properties. Our office occupancy at June 30, 2025, was 96.8%, with an average remaining lease term of 5.5 years. Subsequent to the quarter, we sold 69 Yonge Street in Toronto for $20.2 million. At June 30th, 2025, 69 Yonge Street was 81.4% occupied, with a weighted average term for maturity of 3.4 years. Our office portfolio now consists of 15 properties, which includes three properties with residential rezoning opportunities. The retail segment's same property net operating income on a cash basis increased by 8.2% due to occupancy gains at River Landing and foreign exchange differences. The tenants in our retail portfolio are predominantly grocers. Our largest retail grocer, Giant Eagle, sold their get-go leases to Max Convenience Stores LLC, a wholly owned subsidiary of Alimentation Couchetard. Giant Eagle is still our largest retail grocer, comprising 3.6% of our gross revenue and MEX convenience stores now comprise 1.8% of our gross revenue. Industrial segments, same property, net operating income decreased 2.4%. Industrial occupancy decreased from 98.9% at December 31st, 2024 to 89.9% at June 30th, 2025 due to three properties totaling approximately 626,000 square feet at H&R's ownership share becoming available for rent. The weighted average contractual rent on lease expiry at these three properties was $6.30 per square foot. This represents a significant opportunity to grow rents. In addition, the redevelopment of our former office property at 6900 Moritz Drive, Mississauga into a 122,000 square foot industrial building was completed. and transferred from property under development to investment properties. This property is also currently available for lease. Industrial properties located in the GTA made up 69% of H&R's industrial portfolio as of June 30th, 2025. I would like to reiterate our headline FFO per unit for the six months end of June 30th, 2025. which was 61 cents per unit compared to 60 cents for the same period last year. We are pleased with these results as we have sold $470 million of revenue-producing properties in the 18 months since January 1, 2024. Our FFO payout ratio was a healthy 49.2% for the six months ended June 30, 2025, and our ASFO payout ratio was also healthy at 59.4%. sheet remains strong. Debt to total assets of the REITs proportionate share June 30th, 2025 was 45.5% and debt to EBITDA was 9.2 times. Our unencumbered property pool totaled approximately $4.3 billion. Our unencumbered assets to unsecured debt coverage ratio was 2.2 times at June 30th, 2025. Regarding the special committee process. The Special Committee of Independent Trustees, together with its financial and legal advisors, continues to evaluate value-maximizing alternatives and determine the best path forward for the REIT and its unit holders. The Special Committee was formed in February 2025 following receipt of an unsolicited expression of interest. Since that time, it has received additional interest and is currently engaged in discussions with multiple parties. The REIT continues to believe in the long-term strategy, including the strategic repositioning plan, and the Board will only pursue a potential transaction that is in the best interest of the REIT and its unit holders. At this time, there's no certainty that a transaction will result, nor is there a defined timeline for the process to conclude. During the three and six months ended June 30th, 2025, H&R incurred $8.7 million in transaction costs related to the potential transaction, which primarily consists of legal and advisor fees for the REIT and the special committee. With that, I will turn the call over to Emily for an update from the LandTower residential segments.

Thank you, Larry, and good morning, everyone. I'll begin with an overview of our second quarter performance and then highlight key operational trends across our multifamily platform. Despite a continued backdrop of elevated supply in several Sunbelt markets, our portfolio has demonstrated resilience driven by strong resident retention, disciplined expense management, and steady occupancy across our core markets. Operating conditions across our portfolio are progressing as we expected. Our markets continue to experience strong demand for household formation driven by population, employment growth, apartment affordability, and positive demographic trends. Rent-to-income ratios remain stable around 20%, with renting averaging 60% less expensive than homeownership. Our high-earning, securely employed renter base continues to drive strong housing performance. Same property net operating income on a cash basis from residential properties in U.S. dollars increased 30 basis points for the three months ending June 30, 2025, compared to the respective 2024 period. Same asset occupancy ended the quarter at 93.7, a 60 basis points decrease over the first quarter and a 90 basis points decrease change from Q2 of 2024. Same asset occupancy in the Sunbelt decreased 89 basis points in Q2 to 92.8 first quarter. Jackson Park ended the quarter at 98.6 occupied with 73% retention. Our Sunbelt resident retention was 57% in Q2 and a blended lease tradeout for the Sunbelt markets were negative 1.4% in the second quarter, an improvement of 70 basis points over the first quarter. These results demonstrate continued increasing momentum as supply decreases. Moving to our fair market value, based on recent sales comparisons, our fair market value capitalization rate for the Sunbelt residential portfolio stayed at 4.96%, which was further supported by a third-party appraisal received in Q2. Institutional quality multifamily assets located in the Sunbelt are expected to continue trading at comparatively compressed cap rates. This is largely due to sustained investor demand and a strong preference among capital allocators for long-term exposure to the Sun Belt, where population growth, job migration, and favorable business climates support durable investment thesis. Turning to development, both Dallas Properties, Landtower West Lab, and Landtower Midtown continue to outperform the competitor market absorption. Landtower West Lab is currently 72% occupied and 77% leased, and Landtower Midtown is currently 72% occupied and 76% leased. Both properties have averaged a monthly velocity of approximately 23 leases per month compared to industry reports of 14 per month over the same time period. On the Reddit front, construction is progressing well and both projects remain on budget with completion expected in mid-2026. LandTower currently has an additional nine development projects in the Sunbelt Pipeline totaling over 2,900 suites at H&R's ownership interest with multiple sites ready and prepared for construction. In summary, we are encouraged by strong demand as demonstrated by our high retention levels and renewal increases as well as record high absorption through the first half of the year and pronounced declining supply levels going into the second half of the year. These improving market conditions are coupled with an engaged and focused team. Leantower Residential was awarded Fortune's Best Workplaces in Texas for the second year in a row. This prestigious award is based entirely on anonymous feedback from our associates, and we are proud of their engagement and laser focus while navigating challenging market conditions. I want to thank the Land Tower team for their continued commitment to excellence. With that, I'll turn the conversation back to Tom.

Thanks, Emily. Officer, you can open up the call for questions, please.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Fred Blondo at Green Street. Please go ahead.

Thank you and good morning. Just going back to the July 4th press release, you mentioned that you've been made aware of speculations, but at the same time, you formed a special committee in February. So before it was leaked out, what was the board's views on the action plan, especially in terms of communication once the committee was created?

Good morning, Fred.

Yeah, Fred, we really can't give any more detail, more than what we said and laid out in our notes. The special committee was formed in February at that time. It was formed when we received the intention of interest. We followed all the securities and laws that we should be doing. So there's nothing more than we can really say on the special committee process at this time.

Oh, okay. And then maybe you won't be able to answer that one, but I was wondering if you could speak on the original unsolicited bids or bids and why you decided not to disclose them to unit holders. Were those bids deemed uncompetitive at the time?

Again, Fred, we can't disclose anything more than we've already disclosed. It's a normal course to entertain dealing with the party once you receive a vote, and The path that we followed is a normal call to action that any REITs and any other company would take.

Thank you. I'll turn it back.

Thank you. The next question comes from Mario Saric at Scotiabank. Please go ahead.

Great. Thank you for taking the questions. Maybe the first one for Tom. Broadly speaking, how would you characterize the transaction, the broader private transaction market today relative to three months ago?

The transaction market being not leasing with sales, it's improved. There's a little bit more liquidity. The United States has more activity. Office is basically still zero. Residential is picking up in the United States. As Emily talked to the 5% caps, we have seen evidence of that. Industrial has slowed. Overall, the short time frame we're talking about, I would say on balance, it's pretty much the same. There's, you know, the United States, I would say, has much more activity than Canada. There's a lot of that's driven by the 1031s, which we don't have over here. I would say over here it's almost the same. The United States improved.

Got it. Okay. And then just on the back of that, can you maybe talk, I know you mentioned offices, a zero for the most part, but can you talk about the implications of the Hess Chevron transaction and approval on the prospect of selling Hess Tower in Houston and similarly kind of leasing progress that you're making there?

Okay, so this, we have reached out to the, they reached out to us actually, the Hess slash Chevron team in charge of it. It was an informative conversation. They have, as you probably well know, laid off around 500 people from Hess, but that's not directly from our office. They have told us by the end of this year, they'll include what the, if any, keeping in the Hess Tower. My guesstimation is that between now and then, There'll be an opportunity for us to discuss whether they want to lease buyout or whether they want to take space or how they want to handle it because we share conference facilities. We share restaurants and fitness facilities, which are much more important in the Houston market than they are in the Toronto market. So that has to be dealt with. There has been a lot of interest on the acquisition of Pantaleon Hatch. We are reluctant right now to sell the property only because people are going to be waiting for the answer, what is Chevron's final intentions. And if there's a buyout, we'd want to monetize on that. So I would say that I don't have a lot of clarity. We have communication. The asset is an A asset in the market, which there's very little but a continuous A space on the market. We are dealing with the to extend them, and I expect that our third will be substantially leased by expiry in June 2026. But again, long-term, I would like a little more clarity from Chevron before we put it on the market.

Got it. Okay. My last question, can you just maybe walk through the justification behind the fairly sizable 9% IFRS NAV drop, of which I estimate about 6% was office in my NPD?

Sure. Hi, Mario. Can I take that question? So just comparing to last quarter, we had a $280 million fair value adjustment down, so that's $1 a share. And the balance of the differences also came from foreign exchange, Canadian dollar getting weaker. So when we were translating the US dollar properties back into Canadian dollars, that dropped. So that was the difference, the two large differences in the NAV. As far as the further write downs go, in terms of the $280 million fair value adjustment that we took, the bulk of it was in our office properties and most of it came from our office re-intensification or redevelopment opportunities into residential where from last quarter we were valuing the residential development opportunities at $140 a square foot and we dropped that down to $120 a square foot. The bulk of the office came from there. The other differences in the rest of the sectors were kind of smaller. just maybe taking into account lower market rents in industrial dropping or longer vacancies periods for the three industrial properties that became available for lease during the quarter.

Got it. Okay. And the $140,000 to $120,000, that's simply a function of select trades, which I don't think there have been many, or is it simply reflecting lower kind of residential costs going forward?

It's So residential, there's been no trades that are at the size of square footage that we have. So we just took it down arbitrarily. There have been trades at the 200,000 square foot price ranges. Prices have come down. They're structured deals. So we had to take it down by something. So we picked an amount that's not supported by trades, but an amount supported by market conditions. Got it.

Okay. Thanks, Eric.

Thank you. The next question comes from Matt Cornack at National Bank Financial. Please go ahead.

Hi, guys. Just quickly on the line of credit or operating lines of credit that you have, it seems like you've been drawing there. Is that just to maintain flexibility? I mean, spreads seem to have come in on a secured basis, and the underlying is relatively attractive. So, Is that just awaiting clarity out of this process and then maybe do longer-term financing thereafter?

Morning, Matt. It's Larry. Yes, the liquidity has been drawn down. Our credit lines have been used. We used $400 million of them to pay off the debentures that came due in June and another mortgage residential in the U.S. And yes, it is awaiting clarity on the process before we proceed with the longer-term financing.

Okay, fair enough. And then can you give a sense as to how much natural hedge you have against kind of U.S. assets in terms of UST denominated debt or is it mostly Canadian at this point?

Well, most of our secured mortgages are in the U.S., which would be in the residential portfolio. Most of the residential properties have mortgages on them. I think there's two or three properties that do not at this time, but the rest of them do have. They started out when we acquired them at a 65% loan to value, but through principal amortization payments have been probably drawn down quite a bit, probably 50% or lower in terms of LTV today. And then again, the rest of our credit facilities and the ventures are all in Canadian dollars on the Canadian side. So it's more corporate debt on the Canadian side. and most of the mortgages would be on the US side.

And then this quarter, it seemed like there was a sizable fee income item from the development fund. Is that one time in nature, or should we expect kind of ongoing higher fees from that platform?

Right. Our trust expenses were lower this quarter due to the third-party fees that we earned. Third party fees earned, we earned property management fees, which are pretty much consistent. But the other kind of fees that we earned from all our joint venture partners, which are like leasing fees, development fees, which may be consistent, and financing fees. So the leasing and financing fees could jump around quarter to quarter. And this quarter, the Reddits did contribute an extra two million for a financing fee. So that was unusual, and there was one other unusual item, and the rest of the third-party management fee is totaling about a million. So I would say in total $3 million is variable with higher than last quarter, put it that way. But they do jump around depending on when leasing is done and when financing is done.

Perfect. That's helpful. And then maybe two quick last ones. One, there was no disclosure on lease termination income, so I'm assuming there wasn't any. And then maybe on the industrial portfolio, it seems like there's a big mark-to-market opportunity there. Obviously, the market's a little bit slower from a leasing standpoint, but can you give us a sense as to how you see the lease-up taking place, maybe a bridge or timing-wise in terms of how we should see occupancy in that segment improve over the next, call it, 12 months?

Sure Matt, there was no significant termination fee income, I don't think there was any, for Q3. As far as the lease up, I think, sorry for Q2, it's been contracted, yeah, thank you guys. No termination fee income for Q2. For the lease up of the industrial, I think it's a tremendous opportunity we have right now. We have a lot of interest in the three new builds that we've just completed. That is on Slate Drive. We have about 500,000 square feet from the two properties there that we have interest in. We're hoping to be able to conclude a lease on that soon. We have a former office property that is now ready for lease in Moritz that also has interest. The rest of the properties, the HBC property may take more time. It's larger and an older property so we are expecting that will take longer to lease up. But overall, you know, the new properties, the new developments should start to, should have a lease and start to be producing cash flow pretty soon. Okay. Thanks for the call, guys.

Thank you. The next question comes from Jimmy Shen at RBC Capital Markets. Please go ahead.

Thank you. Just a quick follow-up on the asset write-down. So given the lack of transaction, I guess I'm wondering, were your views on where the values are also informed by where the bids may have come in at? In other words, like, you know, you're using 120 a foot available for office, 140, why not 100, and why not 110, and just sort of what was the thinking there? And then the write-down, I think there's also – is also relating to the residential land bank and just want to clarify that as well.

Okay, I'll take that in reverse, Jimmy. Thank you. The residential land bank, I did not mention earlier. The residential land bank, we did write down. It wasn't a substantial write down, but there are numerous land parcels that we have. So each one may be taking a three to five million write down added up to the $50 million write down that we see. We value this. on average for the residential land came out to about $38,000 per door. So that's what we're currently carrying out on the books at. As far as your first part of the question in terms of the $120 a square foot, I think Matt is on the line. Matt, do you want to give Jimmy some more color on that? Yeah, absolutely. Morning, Jimmy.

As Tom was saying earlier, the trades that we're seeing are pretty few and far between. And the only one that was around 260,000 square feet that transacted this year through Colliers was a private developer who sold to Cartera at Queenman Dufferin. It was an approved site, fully baked, and that traded for $117 a foot. Total deal size was just around $27 million. And that we think, obviously, that's not as large as our properties, and it's also not as good a location as our properties. But we're seeing very long terms on things. We have had people approach us. And I think that that dollar per square foot, just talking to colleagues, talking to other people, that seems somewhat appropriate, but it would include long terms. So we think we have very well located things. that carry a higher value than the Queen and Dufferin, but the size of them creates a discount. And then the, you know, the likelihood of a transaction with no terms is 0% today. Somebody would want to see a large VTB.

Okay. So hearing all of that, I guess it's fair to say that your views on where the values are, where you've marked it at, we're not informed by where the bids are overall.

Yeah. No, I think they are, Jimmy. I think we're being reasonable with what we're putting our values at. It's just difficult because people with projects as good as ours are not trading them today, like us. We're not willing to take that large a discount.

Okay.

So what I meant was – The differential is it's not condo, Jimmy. Our lands are primarily condo or mixed. What's trading is really residential rental. Residential rental is lower, of course. So for residential condo, you're going to have to wait for the condo market to come back somewhat.

Yeah. What I meant was when I said bids is when in terms of the unsolicited bids and the different proposals that you're getting from different parties as part of the special community review, those values that have come in, whether it's the specific, you know, whether it's in the office in Toronto or other parts where you've ultimately marked those assets today, you haven't taken those proposals and bids into consideration? Correct. Okay. And then the $8.7 million that's been spent on legal and advisor fees, you know, it's not a small number. Is the special committee work, is it relating solely to the review of the proposals that have come in? Or is the work wider in scope, a change in strategy or anything like that?

Jeremy, I'll take that. I can't really answer much more than what they said. The fees that we spent to date, $8.7 million, consists primarily of legal and advisor fees for the REIT and the special committee. The REIT and its special committee will continue to seek value maximizing alternatives and determine the best path forward for the REIT and its unit holders. But just as a comparison for the $8.7 million that we spent to date, I looked up yesterday, I think Interrent had $6.5 million spent to June 30th and they still probably have a way to go and that's on a $4 billion company with assets of $4 billion. If you look further back, the common law, they spent $43 million on professional fees, and that was on a $6 billion company, so $8.7 million I think is kind of in line.

Okay. Last question. The various asset sales we've been speaking about in the past, whether it's Brooklyn, Caledon, Echo, are those initiatives sort of on hold until you, you know, you're waiting on the outcome of the strategic review or, you know, are they still ongoing?

We slowed them down. Let's put it that way. They're not on hold, but we have gone slow.

Okay. And sorry, last one. You mentioned there's no defined timeline on when the process will conclude. If and when it is concluded, I'm assuming there'll be a press release. Does that affect? Of course. Yes, obviously. Yeah. 100%.

You'll definitely be the last to know, Joe. Don't worry about it.

I'll be the last to know. Thank you. Thanks.

Thank you. The next question comes from Sam Damiani at TD Cowan. Please go ahead.

Thanks. Good morning. First one for me, just to sort of expand on a little bit of the discussion with Jimmy there, you know, some of these transactions or files, Echo, Galanis, Kalamin, whatever, they're not on hold, but, Tom, you've slowed them down. How exactly, you know, do you slow these things down? Can you be a little more specific?

Well, we have bankers for Echo that we've talked to. We have proposals from them. We have not contracted with them. And we have on – On Caledon, as a good example, again, we've slowed it down. We're not actively trying to go ahead and negotiate the land values on the highway extension. Hess, we've parked it until, I said, to the end of the year at least, so we have 30 from Chevron. So those are the big plays. And basically, we hope that this process ends sooner rather than later. Otherwise, we will have to go on with business as usual.

That's my next question. Absent any proposed transaction, whatever way you want to describe it, in what ways do you think over the next year or so the strategic plan would move forward most meaningfully?

If we didn't sell, then we would hopefully engage to sell the properties we've been talking about for a while. We would enter into an agreement with them. of an advisor to sell Echo, we would consider selling Hess. We would consider wrapping up to sell to clarify the values on 413 on the Calvin lands. And those are the big numbers. And potentially extradite Gowanus.

And you did mention Gowanus earlier. I mean, is that, are you slowing that one down too? Like, what's the status there, I guess?

Well, we've been working on this. We've been looking at it. The special committee's been working for quite a while right now. So hopefully, we're getting near the end of this. We don't have a timeline, as we said, but hopefully, we're getting close. So I hope to be able to resume businesses one way or another in short order.

Okay. Just the last thing for me, just on the NOI in the quarter, was there anything unusual contributing to NOI. I know there's no lease termination fees, but just curious if there was anything unusual contributing. And then secondly, with those two or three new industrial vacancies that seized paying rent sometime during the quarter, you know, how much rent did you get in the quarter from, you know, 77 Union or the HPC? warehouse, you know, do those rents cease at the end of the quarter or at the beginning of the quarter?

Morning, Sam. For the leasing on Union and Metropole, we received about, booked in the quarter, we booked approximately $600,000 of net operating income in the quarter from those two leases. And your first question, I've already forgotten, I'm sorry, can you please repeat?

Yeah, you've already addressed the absence of lease termination fee income contributing, but was there anything else unusual that contributed to NOI in Q2?

No, there's nothing unusual. That was a one-time option, if that's what you're asking.

Okay, thank you, and I'll turn it back.

Thank you. The next question comes from Tal Woolley at CIBC Capital Markets. Please go ahead.

Hi, good morning, everybody. Just wanted to ask with LandTower, maybe you can just speak to market conditions in Texas and North Carolina and how you see sort of occupancy evolving there over the next few quarters.

Thank you. Good morning. Yeah, it's actually progressing exactly kind of how we anticipated it, which really correlates nicely with the supply coming down in those markets. in all of the Sunbelt markets, actually, specifically. So, you know, if you remember, 2024 was the biggest delivery, about 130,000. In 2025, we have 90, but 55,000 have already delivered, and we only have 35 to go for the rest of the year. So, we see those, we see the effect of that. In fact, we started the year in a gain-to-lease position and it's flipped to a loss-to-lease position in Q3. So I think that we will continue on. I think we'll end the year at a positive lease tradeoff and positive NOI for the year for the portfolio as a whole, you know, just getting some of that absorption behind us. And fortunately, demand is strong in all of our markets. We have positive migration and Even though wage growth is moderating to kind of what it used to be, it's still positive in all of our markets. So I think we'll just continue to get stronger under our feet underneath this. And then 2026, like I've kind of repeatedly said, is going to be a much better year for the multifamily markets and the Sun Belt.

Do you have, like, a market occupancy number where it's, like, you feel confident that it's, like, at that point, like, we hit 92% or 93% and then you feel very confident tradeouts improve?

Yeah, we've been kind of holding steady at 93%. We're 93% today. So I think that that will actually grow in the third quarter and the fourth quarter to maybe 93.5% and then 94%. And then 26, I think, you know, you get back into the 95 range without giving. I mean, we could be in the 95 range now if we wanted to, you know, lower our rates, but we want to keep our rent roll strong. But, yeah, I think we grow from the 93 where we've been to a little bit stronger by the end of this quarter and then get into the 94 and the 95 and 26. Okay.

Okay. And then just on the industrial portfolio here in Canada, I apologize. I was on another call right at the start, if this was addressed. But just any material capital needs, you think, in order to release some of those vacancies, or is it just a matter of finding the right talent?

The capital, I don't think we have a – The capital would be we wanted to take, for example, 100 metropolitan and divide it into multi-tenant, but that's not our first choice at this stage of the game where you don't expect to have to invest any real capital in any of the properties. It's just a typical releasing in commissions. Okay. Perfect. Thanks very much, gentlemen.

Thank you. We have no further questions. I will turn the call back over to Tom Hofstadter for closing comments.

Thank you, everybody, and enjoy the rest of your summer.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect.