InterRent Real Estate Investment Trust

Good morning, ladies and gentlemen, and welcome to the Intervent Read Q4 Earnings Conference Call and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 25, 2025. I would now like to turn the conference over to Ms. Renee Wei. Please go ahead.

Good morning, everyone. Thank you for joining Interim Reads Q4 and full year 2024 earnings call. My name is Renee Wei, Director of Investor Relations and Sustainability. You can find a presentation to accompany today's call on the investor section of our website under investor presentations. We're pleased to have Brad Cutsey, President and CEO, Kurt Miller, CFO, and Dave Nevins, CEO on the line today. As usual, the team will present some prepared remarks and then we'll open it up to questions. Before we begin, we want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risk, uncertainties, and assumptions that could cause actual results to differ materially. For more information, please refer to the Cautionary Statements on Forward-Looking Information in the Reads News release on MD&A dated February 24, 2025. During the call, management will also refer to certain non-IFRS measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT STEM DNA for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Brad, over to you.

Thanks, Renee, and thank you, everyone, for joining us today. 2024 was a year of solid progress for the event on many fronts, despite a backdrop of many new and evolving challenges and opportunities. The quality of our portfolio and our operating platform and its stability and resilience were clearly demonstrated once again throughout the year. We witnessed steady operating rates and consistent rent growth collectively driving strong year-over-year same-property revenue growth of 5.1% for the quarter and 7.2% for the year. Overall, total portfolio revenue grew by 1.2% to the quarter and 4% for the full year. as it was partially offset by lower revenues due to the impact of dispositions created in the first half of the year. Averaging a strong operating platform and with a high-quality portfolio, we effectively translated top-line growth into a solid 7.6% increase in same-property NY for the quarter and 9.4% for the year. Annual NY margins for the same property and total portfolio reached 67.1% to 67% respectively, marking the highest levels in the REIT's history. Throughout the year, we continued to deliver strong operational performance supported by a more favorable financing environment, achieving a meaningful reduction in financing costs, delivering a strong 11.2% increase in FFO in Q4, despite the impact of dispositions earlier in the year and the resulting lower speed count. On a per unit basis, FFO for the quarter was 15.6 cents, an increase of 9.9% in the same period last year, and 61.2 cents for the full year, up 11.1% from 2023. In Q4, we achieved a 13.9% increase in the FFO, reaching 20.6 million, and a 12.1% increase in the FFO per unit to reach 13.9 cents. For the full year, we delivered $80.5 million in AFFO for 54.3 cents per unit, an increase of 14.3% and 12.7% respectively. Rental market conditions remained robust during the fourth quarter and throughout 2024, as shown by our opposite rate holding steady year-over-year at 97% for the total portfolio, and rising by 10 basis points to 97.1% for the same property portfolio. Quarter over quarter total portfolio occupancy improved by 60 basis points, with the same property occupancy improving by 70 basis points over the same period. The increase in the occupancy rates is accompanied by consistent growth in the AMR. Average monthly rent from the total portfolio reached $1,702 in December, showing a year-over-year growth of 6.6%. Dave will share more operational details shortly. But first, a quick note on our strong balance sheet. Slide 7 illustrates total debt-to-growth book values stood at a healthy 40.3% at year-end, with a weighted average interest rate of 3.4%, with 91% of our mortgages under CMHC insurance. We maintain the actual flexibility and resources to execute our strategy. Upholding the strength and integrity of the balance sheet will continue to be a key priority for us. Now, I'll let Dave take it from here. We'll look at some operating highlights.

Thanks, Brad. As Brad highlighted, the rental market conditions remain tight across all of our regions. Same property occupancy rate in December improved by 70 basis points quarter over quarter and 10 basis points year over year to reach 97.1%. The highest since 2020. Compared to December 2023, same property occupancy rate in Ottawa decreased by 120 basis points. but remaining tight at 96.6% and within the normal range. All other regions showed occupancy gains, including 160 basis points year-over-year increase in the Greater Vancouver area to reach 94.9%. Quarter-over-quarter occupancy in Vancouver decreased by 240 basis points driven by the impact of BC's short-term rental regulations that took effect last spring. As we discussed in our Q4 2023 call, the transition of these suites into long-term rental market temporarily shifted leasing cycles away from the typical fall period. We've also seen an increase in conventional supply and some softening in demand due to affordability challenges in the region. While we expect some near-term pressure as leasing activities adjust, our portfolio is well-positioned and the GVA represents less than 5% of our NOI, Blended average rent per suite growth continued at a healthy pace of 6.6% for the total portfolio and 5% for the same property portfolio, with consistent year-over-year gains across all regions, outperforming CMHC data in each regional market. We continue to capture embedded rental upside in our portfolio. During the fourth quarter, we signed 635 new leases and realized positive gain on lease in all our markets, with an average gain on lease of 7.4% to top off an already substantial 12.9% year-over-year increase in our outgoing AMR. With market rent growth moderating, we are starting to see a decline in the tenure of residents who move out in the fourth quarter compared to a year ago. resulting in a smaller gain on lease compared to previous periods. However, trailing 12 months turnover rate held steady at 24%. New lease assigned in the fourth quarter resulted in an annualized incremental revenue gain of approximately $2 million. For the full year, we executed 3,015 new leases with an average gain on lease of 12.7%, which translated into incremental annualized revenue gain of $8.6 million, or 3.5% of 2024 proportionate revenue. Our estimated mark-to-market gap remains at approximately 26%, providing insulation from market rent fluctuations and a foundation for long-term rental income growth. Canada's revised population outlook, macroeconomic uncertainties, and affordability challenges have contributed to a moderation in market rent growth. However, we take comfort in our competitive positioning in a multifamily market that remains largely fragmented and dominated by non-institutional operators. While the volume of rental leads have come in from peak levels of 2021, our lead to approval conversion rate has notably increased, reflecting a strong demand for well-positioned and high-quality communities. Rent-to-income ratios for new leases signed in 2024 remain at a healthy low 30% range. We continue to closely monitor market conditions in each region and remain flexible in our strategy. including adjusting target occupancy levels as needed to optimize portfolio performance. Our efforts to manage operating costs continue to pay off during Q4 and throughout 2024. We delivered a 5.1% increase in same property proportionate operating revenue growth during Q4 and a 7.2% for full year of 2024. outpacing the increase in the same property operating expenses, which were up by 0.4% in the quarter and 2.7% for the year. On a per suite basis, our operating expenses came in at $1,697 per suite for Q4 and $6,790 per suite for the year, up 1.5% and 5.2% respectively. Annual operating expenses at a percentage of revenue declined by 140 basis points compared to last year, contributing to a strong NOI margin expansion. For the full year, same property NOI margin reached 67.1%, while the portfolio NOI margin came in at 67%, both marking the highest levels in our operating record. A key driver of this improvement was utility costs, which for the year declined by 70 basis points as a percentage of revenue year-over-year to 6.9% from 7.6% in 2023. Our energy efficiency upgrade played a role in reducing our natural gas usage by 8%, outpacing the 5% decline in heating degree days. This compounded with a 13% decline in rates drove meaningful savings. Property taxes as a percentage of revenue came in at 10.5% for the year, compared to 10.7% in 2023. On a per suite basis, we saw a 7.1% increase reflecting the impact of annual rate of adjustments and impact from dispositions and acquisitions completed during the year. Of note, property taxes increases were 4.4% on a same property basis. Turning to CapEx, maintenance spending for repositioned suites came in at below $1,000 per suite in 2024, in line with previous years. Our focus remains on value-enhancing investments, which continue to make up the bulk of our spending. I'll now turn it over to Kurt to provide an update on our balance sheet.

Thanks, Dave. As part of our quarterly review, we assessed our internal cap rates and property valuations in collaboration with both our acquisition team and external appraisers. Based on recent transactions, industry reports available at quarter end, and input from our internal team and external appraisers, we've adjusted cap rates in four of our regional markets, summarized here on slide 14. Due to the adjustments in the GTHA, NCR, Montreal and other Ontario markets, average cap rates for total investment properties increased by 15 basis points quarter over quarter, bringing the weighted average cap rate for the entire portfolio to 4.49%. This reflects an expansion of 67 basis points since March of 2022. This adjustment has offset our strong operational performance, resulting in a fair value loss of $143.6 million for the quarter on a proportionate basis. We continue to keep a close eye on the transaction market, taking comfort in our valuation from our recent dispositions. We closed out the year in a healthy financial position. Throughout most of 2024, we benefited from a reduced weighted average interest rate cost. In Q4, financing costs were reduced by $1.2 million or 7.7% compared to the same period last year. And for the full year, they were reduced by $1.6 million or 2.3%. Both our interest coverage and debt service coverage improved consistently throughout the year, ending the year at 2.5 times and 1.7 times, compared to 2.3 and 1.5 for last year. This reflects the work we've done to optimize our financing structure and improve our cash flow resilience, helping our strong operational performance translate into significant bottom-line gains. Moving on to slide 17. As we continue to navigate an evolving market, we're being deliberate and strategic with our sustainability initiatives. As Dave mentioned earlier, our investment in energy efficiency upgrades has delivered tangible results in reducing utility costs with year-over-year savings both across the portfolio and on a per suite basis. Looking ahead, our focus will be on initiatives that enhance our resilience, reduce emissions, lower operating costs, and create lasting value for our stakeholders. To ensure we're prioritizing the right initiatives and to meet upcoming sustainability reporting requirements, we're in the process of completing our first formal double materiality assessment, which will guide our next steps. You'll be able to learn more about these key priorities and our progress in our 2024 sustainability report, set for release in the coming months. On that note, I'll turn it over to Brad to discuss our asset allocation strategy and provide closing remarks.

Thanks, Kurt. In 2024, we strategically advance our capital recycling program, disposing of three communities at or above their IFRS values, reporting the valuation of our portfolio while generating $93.3 million in net proceeds, after accounting for closing costs and mortgage discharges. After year-end, we sold another community in Ottawa and have agreements in place to sell to one more, closing schedule for the next month. Our disposition strategy is a very deliberate process focusing on properties where we have successfully achieved our value-add objectives. These assets had strong performance but did not have the same growth profiles compared to the rest of the internet portfolio. The next phase of the program will target a portfolio of non-core assets in the range of $200 to $250 million, which are anticipated to generate net equity proceeds of $125 to $140 million, including the dispositions that have closed a gone firm since year end. Approximately $135 million in the next phase of our program is in negotiation or under contract. This would generate net proceeds of approximately $90 million. Both Canadian and U.S. government policies and interest rate volatility toward the end of this year put pressures on the real estate sector, and our units are no exception. We began more active with our NCIB program to capitalize on the significant disconnect between the intrinsic value of our trust units and their trading price. Over the course of 2024, we acquired and canceled over 1.3 million units for a total investment of $14.1 million, reflecting a weighted average cost per unit of $10.88, compared to our IFRS NAV per unit at year-end of $16.23. In 2025, we will continue to purchase and cancel units under our Automatic Unit Purchase Plan. At the end of January, we have bought back close to 2 million units for $19.7 million at an average price of $10.01 per unit. Units repurchased in 2024 and as of January 31, 2025, represent 2.3% of issue and outstanding trust units. While our second office conversion project continues to progress with construction on site underway, we have decided to pause on breaking ground on any further developments for now. We continue to hold well-located land and will continue to monitor market conditions to preserve the optionality for when the market makes sense. Near-term asset allocation priorities will continue to include paying down debt and being active on the NCIB grower, all the while balancing this with medium- to long-term growth opportunities. Over to slide 22. As we prepare to navigate through a period of increased uncertainty and competition, we couldn't be better positioned with a high-quality portfolio that provides us with a solid runway for organic growth. Our conviction of our portfolio is built on two key factors. First, we have a well-maintained, high-quality asset. At the start of 2025, 90% of our portfolio has been repositioned with modernized amenities, building systems, and in-suite renovations. These communities offer high-quality living experience, attract stronger residents, generally require lower maintenance and generate higher income. Our remaining non-repositioned portfolio is relatively young, with a weighted average age of just 23 years. Second, our portfolio is located in exceptional central urban areas. 87% of our portfolio is classified as urban, according to Statistics Canada definition. Our properties have an average walk score of 81, which is considered very walkable. But 39% of our community boasts a walk score of 90 or more, the highest level achievable, defined as having amenities within a five-minute walk. In closing, we look ahead to 2025 with cautious optimism. While we face many evolving uncertainties, we remain confident that the long-standing, systemic nature of Canada's housing shortage should always support medium to long-term demand for our well-located, high-quality communities for our residents. I would like to thank everyone who supported us throughout the year. And with that, let's open it up to Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Frank Liu from BMO Capital Markets. Please go ahead.

Thanks, operator, and good morning, guys. Morning, Craig. Just on the leasing front, I guess the turnover spread continued to moderate, but the MTM holds fairly well, and I guess more leases turned recently, had a less tenure. Given this dynamic, what's kind of your expectation on the turnover spread for the next 12 years?

Yeah, I mean, we don't provide forward guidance to that level, Frank. The Q4 and Q1 months, as most people know, there's seasonality to leasing. so is there the the lowest from that perspective so typically your lift on turn in those months will be large it's not reflective of maybe the full 12 months and i just saw our full 12 months with double digits i'm not suggesting it's going to be double digits uh we have seen lift on terms come in but uh from what we've seen q4 and so far q1 we've seen modest uh improvements on the lift on terms so we remain uh encouraged and cautiously optimistic, but maybe we've seen the floor on the lift-on terms.

Understood. And that's great color. And just switching to the spread on renewals, can you kind of give some color on how the renewal spread has been and what's your kind of like a range you're looking at for 2025, including like AGI adjustments potential you can get?

So, I mean, it varies quite a bit in the different provinces with rent controls in B.C.

and Ontario, as you can appreciate. The guidance from the Édite des Demands in Quebec is actually quite elevated for 2025. So I think overall, when you blend it across everywhere, we expect to be in around that 2% to 2.5% with Quebec leading the way given the guidance there. I see.

Absolutely. Great. Just turning to the capsule recycling front, the 104th sweet property in Montreal on the contract, you guys commented in the MD&A, I believe that's 6950 Fielding, Coast and Luke. And also, like, I noticed that several properties sold last year were also in this area. Just could you kind of provide some color on what makes this market less appealing to interest?

I think when you so I think if you if I just to make sure we understood what you're asking there Frank you're just saying that the dispositions that we've had some of them in last year and then the one we just announced have all been in a similar area in Montreal and if there's something about the area specifically yeah that's correct is that yeah there's no I mean our disposition program we earmarked uh different communities within the portfolio looking out to

to see where the growth profile is relative to our corporate profile. And it's just a coincidence what has actually concluded has been in the coasting loop. We're very much like a core focus area of Montreal coasting loop being of that. So I think it's more of a coincidence than drawing conclusions from.

Yes, specific more to the property than the area.

Got it.

Yep. Thank you, guys. That's all my questions. I'll turn it back.

Thanks, Frank. Thank you. And your next question comes from the line of Mark Rothschild from Canaccord. Please go ahead.

Thanks, Sam. Good morning, everyone. Hey, Brad, in regards to the asset sales, which clearly provides a lot of capital for buying back units, could you just expand a little bit more on your thoughts now as far as how much you ultimately would like to do with this and how connected is this to having the ability to purchase units well below what you would consider NAV?

Yeah, I mean, it's a great question, Mark. I think we're very happy with their overall portfolio, but when your units of trading were there, how attractive the trading was today, and we're quite confident than the overall portfolio. Selling communities that don't exceed the overall portfolio growth profile, I think, makes a lot of sense. It also provides us with a little bit of liquidity and helps us balance near-term capital allocation, maybe MCIB down at these levels, paying down debt, or balancing with the medium to longer-term growth, generational growth opportunities.

Okay, great. And then you made different comments in regards to shortage of housing and the idea of holding back on putting new money to development, considering it does take, you know, quite some time to get projects, whether it's an office to residential or redevelopment to get a project to completion. Is this something that you would actually think about starting? Because ultimately there is a shortage and, you know, if there's less new development, it will just get worse.

Well, there's no question, this is a stupid point. I think while there might be some record supply being delivered in the GTHA Vancouver and some pockets in Ottawa, what you will see that's going to follow up is a shortage of starts and there's quite a long development lead time, which will eventually put pressure back on rents upward. Your comment is well taken, Mark. Our commentary on the pause in development is really about breaking new ground. We're caught to capital today relative to the opportunity of the NCIB presents us. So it's not if we're going to go ahead again with those developments. We love the location. We love the land. A lot of the work has been done. So when we do decide the right timing, to go ahead, we'll be in good stead, but we'd rather right now take any of that development capital and just really look towards NCIB activity.

Okay, great. Got it. Thanks so much. Thanks, Mark.

Thank you. And your next question comes from the line of Dana Wilkinson from CIBC. Please go ahead.

Thanks. Morning, guys. Just want to circle back on that NCIB. I think last quarter you said there's a small window to be able to go buy sort of new assets at a discount to replacement value. I guess one, has that window closed given that those rents are probably closer to market or is it just that the utilization of your capital to buy back your own stock at a mid five or better cap rate with that mark to market is just that much more attractive?

It's more the latter, Dean. I think that window will continue to close. I think those opportunities exist. But it's not a window of three or four years. It's likely a window of less than 24 months. But where we sit today presents a really good opportunity. So the challenge with capital allocation is always balancing the near-term opportunity that's a really great opportunity as our NCIB today versus more medium-long-term growth. But I think you're right. It's more of the latter.

It's more of the latter. So it's fair to say you're probably a net seller of real estate, net buyer of your own units for 2025 unless something materially changes. Yeah. Yeah. Second question, just on the occupancy, I guess in prior periods of, I don't want to say up-evil, you've let the occupancy kind of come down to build some growth in there. With it holding steady, is that more a reflection of you think that there's a normalization of these spreads or how are you just looking at that 97% level?

I think it's more of the macro unknowns and uncertainties in the marketplace. I think we kind of highlighted some of that in the Q3 call. We remain cautiously optimistic in Q3, but to be fair, only time will tell to see how the new immigration policies will play out and unfortunately now how the tariffs will play out. I think we a really solid Q4, and all things point to us continuing to be able to, I think, outperform the industry as a whole. But I think, Dean, it's just remaining cautious that we're taking each three months as it comes and recognize that the landscape is changing.

No, that makes sense. I mean, last count, there's more people today than there was at the end of Q3, and I'm sure that continues to go up. That's all I've got. I'll head it back. Thanks, guys.

Thanks, Steve.

Thanks, Steve.

Thank you. And your next question comes from the line of Nathan Kouchel from TD Cowan. Please go ahead.

Thanks. Good morning. Hey, guys. Morning. First question, just going back to some of Dave's comments in the prepared remarks, I think you said the decline, you sort of saw a decline in the tenure on Q4 move-outs. Is that Is that seasonal or is that more of a near-term trend that you expect to continue?

Yeah, I think that's more of a near-term trend that we're seeing.

It's not surprising, to be honest. I mean, we've always maintained that we've been pleasant with how our turnover stayed pretty sticky in the mid-20s range. But of the people that are moving out, that is, we're seeing a lower tenure.

No, for sure. That's what I would have expected. Just clarifying. And secondly, just on the operating margins, obviously Q1, you're going to have a little bit of a utilities headwind. But how should we think about growth in margins for 2025?

I think to that point, it's going to depend a little bit on that utility line, which always drives a few things, and it's going to depend a little bit on what happens with the carbon tax. So we'll see what happens at this point. Sort of, I think we've hit a record NOI margin this quarter, this year. I don't see it going backwards on us. I see it staying flat to modestly improving from a margin perspective. And on an NOI perspective, considering expecting to see still in that mid-single-digit NOI same-store growth.

Okay, that's helpful. And then lastly, just sounds like you've got another $100 million or so under contract for asset sales. What markets would those be in?

They're across all of our markets, John.

Okay, fair enough. I'll turn it back. I'll clarify. The only one I would say, I said all, the only one I would say that's not would be our market out west.

Okay, that's helpful. I'll turn it back. Thanks. Thanks, Colin.

Thank you. And your next question comes from the line of Mario Saric from Scotiabank. Please go ahead.

Hi, good morning. Good morning. Coming back to the tenant tenure, can you quantify in any way how much that's come down in Q4 relative? Sorry, I'm referring to the 635 new leases and the tenant tenure on the replacement leases.

How much is that shifting quarter to quarter year over year? Yeah, I mean, it's

So there's, like Brad mentioned earlier, and I think Dave mentioned too, is the tenure tends to change a little bit quarter over quarter. You tend to see Q4 and Q1 people with a little shorter, or sorry, a little longer tenure than you do in Q2 and Q3. But overall, compared to quarter, we've seen that tenure come in a little bit. It's not like it jumped from two-year or four years to two years. But it's a decline that is noticeable that has continued over the last year and a half, two years, as you see more people just that are earlier in their lease cycle moving.

Okay. And then just on...

the same store revenue growth was 5.1% in Q4. Given the start to the year, is that a, I think Kurt, you mentioned mid single digit same store and wide growth is achievable or reasonable in 25 is mid single digit kind of same store revenue growth similarly achievable this year?

Yeah. I mean, it's, It's early in the year to tell for sure. And we don't provide guidance, but I think it's given what we're seeing in the market, you know, somewhere between four and 6%. So landing on the middle point of that puts you right there.

Perfect. Okay. And then my last question, just on the 144 million fair value loss this quarter, how much of that, roughly would be attributable to the $200 to $250 million of assets that you've noted that are planned for disposition in the next four months?

Not more than the average overall. Like when I look at the dispos versus the overall portfolio, the cap rate change on those versus the other ones is roughly equivalent. I think it's like one basis point. So it's pretty even across the whole portfolio. You know, last Q and Q3, the CBRE report and some other data came out pretty late, like you were already reporting as a service card to come out, and you just saw that roll through. There wasn't much changes in Q4 report, but it's reflecting sort of that activity late Q3, early Q4.

Okay. That's good. Thanks, Maria.

Thank you. And your next question comes from the line of Matt Cornack from National Bank Financial. Please go ahead.

Good morning, guys. We're approaching the spring leasing season at this point. Can you give us a sense of kind of how things are shaping up? And I think your peers have generally said there's good depth to the rental market. It's a question of a little bit more price sensitivity. But is that what you're seeing? And it sounds like you're also seeing a bit of affirming on your spreads, but any sense, early indication as to how spring is shaping up?

Yeah, I think that's fair. I think, and I'll give Dave a chance to speak, but I do think the traffic is relative to call it a pre-COVID norm, is down for this time of year than where it would be, and I don't think that would be surprising. So we're hopeful that our offering costs, to Kurt's point, that will be kind of state-wide emergence here, or see modest improvement. But the one area I wouldn't say you're going to see an increase in the line items, and that would be on appetizers. And I think we're going to have to spend a little more to generate more traffic And we're going to have to continue to see better conversion. And we have. We have been. So we're thankful on that. But we're going to continue to work extremely hard at bettering our conversion ratio because reality is the traffic is down a little. And there's less elemental demand flow. And as we go forward, there's going to become less. I don't know if that helps answer. So we are a little lower than where normally we would be. But from a conversion basis, it seems stepping up.

Fair enough. And then on Quebec, I mean, I think we were generally surprised with what the Regie Logemont came out with last year and then this year is higher. Do you anticipate being able to push that through to tenants this year or will it be a mix of some where you're pushing above and some where maybe you push at a lesser rate than what's allowed?

No, I think it's fair, Matt, and we're hopeful that we'll continue to be able to see the success that we're having on the renewal rates in Montreal. I'll leave it at that.

Fair enough. Lastly, for me, on the CapEx front, I mean, it's pretty noticeable, Q4 in particular, but for all of 2024. you've really been able to dial back the CapEx and you're still getting pretty good rent growth. Is that something you'd anticipate that we continue to see? I mean, there's some question as to whether you kind of go back and start doing sweet renovations to get at bigger lifts, or should we kind of expect the CapEx profile to remain pretty muted?

Well, it's a tale of two cities, right? It's the good news, bad news. It's great that our portfolio is come subsequent to the year when we're less than 5% non-repositioned. And the reason why I say it's the tail of two cities is, as we know, when we're active in that position front and when a cost of capital is there, we've done a pretty good job over history of repositioning assets and really driving growth. Unfortunately, the cost of capital hasn't been there, so we've taken a a different approach to the capital allocation. With that, with their non-repositioning coming in, obviously comes less dollars needed to be spent. That said, when you look at 2024, we will be up a little on CapEx over 2024 because there are a couple of projects that we have identified that are a little larger in scope than normally would entail.

And would that be in sort of common area or mechanic?

No, it's more infrastructure. It's actually outside infrastructure to be fair. One project is a typical project in Stone Creek that entails parking garage. Another one entails a slope stabilization in one of our total properties. And we have another property in London that's another parking slash garage job. It's just where it is in the landscape.

Fair enough. Sorry, one last one in terms of the purchase that you've made in Montreal. Can you give us a sense as to how the leasing is performing and relative to your expectations?

Yeah, so relative to expectations, it's been pretty good. We've made some good strides relative to what you're looking at in the quarter, and we're happy where it is. And I think we underwrote it pretty considerably and gave ourselves some buffer to make sure that we gave ourselves some time to get the programming, get the change of ownership and reputation out within the local marketplace.

Early days, Matt, but so far we're happy. Perfect. Thanks.

Thank you.

And your next question comes from the line of Jimmy Shen from RBC Capital Market. Please go ahead.

Hi, Jimmy. So you're in the market looking to sell assets. I wondered if you could talk a little bit about the transaction market in terms of buyer appetite, buyer depth, and that sort of thing.

Yeah, I mean, it still tends to be, at this point, I mean, it looks like there's more velocity pre the kind of Trump slash terror trade, and I'm certain that's kind of created. It was, it looked like it was broadening to institutional and private. It appears now that institutional and fact comes up again, so there's been a lot of stops and starts from the institutional community and asset class. But what has not gone away, which is really encouraging, and as you know, Jimmy, makes up the majority of the overall private market in Canada, the private buyer is still there. Now, the private buyer doesn't have the same appetite for deal size and solid 50 million plus. I would say the ticket size is probably a sealer. I think there's a lot more of an audience down around a $25 million ticket. But there's still a lot of activity and desire from that private.

And pricing-wise, you did bump your cap a little bit. Is that consistent what you're seeing too? The cap rates have moved up a little bit since?

I think we've seen cap rates move up through the course of the year and we've sort of brought them up the last couple of quarters to try and reflect what we're seeing both from transactions on the street and from different reports from different, whether it's Altus or Cushman or whoever. And it's just a reflection of what's going on with the overall macro interest rate environment.

Okay. So the sales that you're targeting, you mentioned the assets have lower growth profile. I mean, am I to assume, too, that the mark-to-market rent spread on those assets are also smaller relative to the portfolio?

Yeah, like, Jimmy, I wouldn't make those assumptions. They're all been identified for various reasons sometimes. broke profiles sometimes to do with operating strategies and whatnot. And we've got to be somewhat careful as we're tied up in some of these currently, and we don't want to deal against ourselves.

So we just ask you guys to kind of respect that this is a fluid process and respect the process.

Sure, fair enough. Last clarification on the NCIB process. You purchased $1.97 million in January. In the subsequent event note, you noted $3.2 million. Is that just an additional purchase in February?

As we're in blackout, we have to give guidance to the brokers that are doing the activity for us before going into blackout. We set parameters and then they buy through the whole cycle. Until we come out of blackout, we can't really speak to them. uh we reported the january number in there and then you know up to date in february um there was another uh three sorry january and february combined we're at about 3.2 million units um so that's sort of the activity to date and as we come out of blackout then we'll be able to sort of speak to the broker again okay makes sense thanks guys thanks jimmy

Thank you. Is there no further question at this time? I will now hand the call back to Ms. Renee Wei for any closing remarks.

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