Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the NEXUS Industrial Rate Second Quarter 2024 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing start then zero. I would now like to turn the conference over to Kylie Hanzik, Chief Executive Officer. Please go ahead.

Thank you. I'm super excited to welcome everyone to the 2024 Second Quarter Results Conference Call for Nexus Industrial REIT. Joining me today is Mike Rall, Chief Financial Officer of the REIT. Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the REIT's current expectations and projections about future results. Also during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found on our website and at cedar.com, for cautions regarding forward-looking information and for information about non-GAAP measures. For the last 24 months, we've been investing to improve our business. Our goal has been to high-grade and optimize our portfolio and to align it with our strategy to be the only Canadian-focused industrial REIT. We have been investing through acquisitions, through four development projects. We have diligently executed on this strategy. And I'm thrilled to share that we are starting to see the results. On last quarter's call, I mentioned that we were nearing an inflection point. and that we are on the cusp of beginning to realize the benefits from our investments. Our results improved materially this quarter, and it is now clear that we have passed this inflection point and have a long runway of growth ahead of us. In the second quarter, our FFO improved 9.2% to $0.178 per unit, and our AFFO improved 10.4% to $0.148 per unit. In both cases, the increase was driven by stronger net operating income with $31.6 million, which was up 7% compared to last quarter and was up 14% or $3.9 million compared to a year ago. The NOI increase was largely driven by three factors, acquisitions, organic growth, and development. I will discuss each of these in more detail. So new properties acquired over the past year contributed $3.9 million to NOI in the quarter. Within the quarter, we acquired one new building, 135,000 square foot industrial property in Kelowna, BC for 35 million at a cap rate of around 7.1. The building is fully tenanted and contributed 300K of NOI in the quarter. Our industrial same property net income, operating income was 23.7 million in the quarter and 800,000 increased from a year ago. The increase was driven primarily by the lease up of our Richmond, BC property, Overall, I'm pleased with our same property NOI growth, given the fact that we faced key vacancies in Q2 that carried over from Q1. The good news is that we've now resolved the vacancies. At our Exeter Road facility in London, Ontario, a new tenant, one of our existing tenants, has taken possession in July, taking all 68,000 square feet of vacant space. It's always good to see existing tenants grow. And at our 102 Avenue facility, southeast Calgary location, a new tenant took the full 29,000 square foot building effective August 1st. The new tenant in southeast Calgary did not lease the adjoining vacant land. It's about six acres. Instead of leasing it, we will construct 115,000 square foot small bay industrial building on the land, which will be completed mid-2025 for about $15 million at an expected yield of 12%. Small Bay Industrial is in high demand in this node of Calgary. I'm also happy to share that we received the building permits, including the lease up of our Richmond, B.C. facility this quarter. It has been a long and sometimes challenging journey, so I'm thrilled to have the property cash flowing. During the quarter, the Richmond property contributed NOI of 900K. Our Titan Park development in Regina, Saskatchewan, was the first of our recent development projects to be completed. We finished it on schedule and within budget. And the primary tenant took occupancy of 200,000 square feet April 1st. The property contributed a healthy 500,000 of NOI this quarter. We've also found a tenant for the remaining 112,000 square feet. We're just in the final throes of having the lease signed, which is any day. They will take occupancy, scheduled to take occupancy on February 1st, 2025. Once this is fully leased, the property will add annual stabilized NOI of about $3.6 million, representing a 7.5% cap rate on our investment of $48 million. I think they're still continued upside there as we have another five acres of land that could be utilized for parking and may bring additional revenue down the line. Turning to our other development projects, in Q3 we will benefit from the completion of our Hubie Road industrial intensification project in London. We completed this 96,000 square foot building addition in July, and the tenant took occupancy in the third week of July. The project will contribute a going-in yield of over 8% in the first year on development costs of $14 million, and the project has significant rent escalations thereafter. It also builds on our leadership position in the highly desirable London market, which continues to be one of the tightest industrial markets in Canada. We're also making great progress on our Glover Road new build in Hamilton near the airport. At the quarter end, we were tracking ahead of schedule and budget, and we completed construction. It is a 115,000-square-foot building with industry-leading 40-foot clear height LEED certification. We own 80% of the property and expect to earn a 5.9% going-in yield on our $25 million share of the development costs. We're currently looking for a tenant, and I'm optimistic that'll be soon leased. Construction's ongoing at our Dennis Road property in St. Thomas, Ontario, for the expansion of our existing tenant, Element 5, a producer of mass timber. This project is a 325,000-square-foot addition at an estimated cost of $46 million. The tenant pays us 7.8% interest on the development costs that we incur during the construction phase, so there's no financial drag on our cash flow. Once it's completed, which we now expect will be in February 2025, the tenant will pay us a contractual rent equal to 9% yield on all development costs. After the quarter end, we opportunistically acquired a brand new single tenant industrial property, which was a brand new build to suit for one of our existing tenants in the portfolio that is easily divisible into two units, if necessary, down the line. The purchase price was $16.6 million, including 4.6 million of class BLP REIT units issued at $10 per unit, which was a 45% premium to our trading price on that day. Not an easy sell. The 62,000-square-foot building is located in Sherbrooke, Quebec, and will yield 6%, going in 6%. On a full-year basis, I expect that the actions we've taken and the positive benefit of embedded rent escalation will drive mid-single-digit same-property NMI growth in our industrial portfolio. Looking beyond 2024, I continue to expect to earn a healthy rent lift on renewals due to industrial market rents that are, on average, 25% above in-place rents and from rent escalation embedded into our lease contracts. We have high-graded our portfolio through acquisitions and organic development, Our priority focus now is selling some of our legacy retail and office assets and the non-core industrial properties which do not fit our strategy. Selling these assets has two significant benefits. It increases the weighting of our industrial portfolio and it delevers our balance sheet. During the second quarter, we made significant progress on this goal. We closed on the sale of one of our office buildings located in Quebec. That is carrying value of $5.1 million, and we contracted for the disposition of 28 other non-core properties for a total of $107 million, which I'm sure we'll get to into the Q&A. In the short term, we no longer expect to sell our portfolio Western Canada truck terminals. We therefore are now targeting non-core asset sales of approximately $110 million in the second half of 2024. We will use the proceeds from the sales to reduce our debt. In summary, we continue to advance our strategy of Canada's pure play industrial REIT. This quarter demonstrated that we have passed the pivot point and expect our results will continue to improve from here. We have resolved the key vacancies. Our creative developments are coming online. We'll continue to realize significant organic growth through embedded steps and positive mark-to-market on renewal. In the coming months, we will also further focus our portfolio and de-lever our balance sheet through strategic dispositions. I'm going to pass the call over to Mike to go over and give you some more color on the financials.

Thank you, Kelly, and good morning, everyone. Starting with the headline earnings in the quarter, net income was $43.5 million, a $33.7 million decrease compared to a net income of $77.2 million last year. The decrease was due to non-cash fair value adjustment gains on investment properties of $13.6 million in the quarter, compared to gains of $33 million last year. In addition, we experienced a non-cash unrealized mark-to-market loss on our interest rate hedges of $3 million compared to a gain of $6.4 million a year ago. We also had a $21.1 million non-cash fair value adjustment on our Class B units compared to a gain of $25 million in 2023. As Kelly mentioned, our Q2 net operating income increased 14% or $3.9 million year over year to $31.6 million. Of this amount, new acquisitions accounted for $3.9 million and an increase in same property NOI added an additional $800,000. This growth was partially offset by a $400,000 relating to asset dispositions made since the first quarter of 2023. and a reduction in the same property NOI by 400,000 from land pre-classified to property under development in the quarter. Normalized AFFO for the period was 14.8 cents per unit, a decline of 1.7 cents from a year ago, as the benefit from higher net operating income was more than offset by a combination of higher interest expense and more units outstanding. Total general and administrative expenses for the quarter was $1.8 million, which was $200,000 higher than a year ago due to higher legal and professional fees. Net interest expense for the quarter was $13.8 million, a $3.6 million increase from the same period last year. The increase was primarily due to a higher outstanding average debt balance resulting from borrowings to fund acquisitions and development expenditures. At June 30th, our NAV per unit was $13.20, an 11 cent per unit increase from last quarter. Our weighted average cap rate decreased by four basis points to 5.8% in the quarter compared to 5.84% at March 31st, 2024. The fair value of our investment properties increased by $82.5 million in the quarter, primarily due to the acquisition of a new property in Kelowna for $35 million, development spend of $18 million, and positive fair value adjustments of $27 million. I'll now turn the call back to Kelly.

Thanks, Mike. Our strategy to be Canada's pure play industrial REIT is and will continue to be meaningful and rewarding. I'm excited about the progress we've made to date, and I look forward to continuing the momentum that we have built. So with that, operator, please open up the lines to any questions.

Certainly. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You'll hear Tom acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We'll pause for a moment as callers join the queue. The first question comes from Mike Marcides with BMO Capital Markets. Please go ahead.

Thank you, operator. Good morning, Kelly and Mike, and congrats on the solid results. Kelly, you gave some really good detail just in terms of the NOI contributors. Specifically, I think it was the half a million on Titan Park, 300,000 with Kelowna. You mentioned 900,000 at Richmond. Was that the incremental quarter over quarter, or is that the total NOI from Richmond this quarter?

That's the incremental addition to NOI this quarter. Year over year? Yeah. I mean, yes, year over year, too. Yeah.

Okay.

And I guess it's higher. So if you take total Richmond contribution, it's just over a million. So maybe a million, million plus a quarter. So it comes out to be over, over 4 million on an annual basis.

Okay. And how much additional upside is there as the tenant stabilizes?

Um, it's going to take a little while. I think I structured it with two years at this rent and then, um, decent increases in year three and year four. Decent means pretty decent.

Pretty decent? Okay.

Yeah, yeah. Right. Substantial.

Yeah. Okay. So this is the run rate. So Richmond now, the upside's in the NOI, so that'll continue. There's no near-term increase.

Mike, I just double-checked. The annual run rate right now is $4.5 million, so it's about $1.1 million a quarter.

Okay, got it. And the 900,000, I know you talked about it being year over year, but was that the step up versus Q1 as well, or was it less than that?

That was an adjustment from Q1 and Q2. It's a bit messy, because when you talk NOI, it's different from, because we have the BRO, which wasn't included in NOI before. So if you look at the actual impact on NOI, it's 900 grand, but if you look at total contribution... to FFO, it's lower. So total NOI impact is $900,000.

Okay, gotcha. So the VRO came off. You didn't have that adjustment for this quarter, so that goes into NOI plus some information. Got it, okay. All right, thank you for that. Just on the dispositions, sounds like you're making good progress there. I was just wondering on the 110 that you expect to close in the end of the quarter, if you could provide us the following details. One would be the average in-place cap rate based on the NOI that was in Q2. Second would be the amount of debt attached to that and the average rate. And then third, and I promise this is my last question before I turn it back, just if you expect to provide any vendor take-back financing as part of any of those deals.

Yeah, average in-place cap rate is around 7.1%.

So it involves our old Montreal portfolio the retail portfolio and really like the three major ones are and then a small portfolio of Saskatchewan properties that we have. The Old Montreal would be I would say the closest it's firm save and accept our lender agreeing to transfer over and that's for the entire portfolio. So in that we'll close in three different stages. So we're expecting a September and October on that one. Okay. And we are making good progress with our lender. So I don't foresee any issues. It's the only possible thing, but we've already got a commitment letter from them. So I would say that's pretty close to being done. So September, October close. And the other one that we have is the Saskatchewan portfolio. That's closing in on waiver date. So we'll see how that goes. But there's been no issues, and that is expected at January close for that. And then our retail portfolio, we have under contract with someone, but there's a rofer, and the rofer is with our partner. And so we'll see how that plays out over the next month. But that would be expected to be probably an end of the year contract close November-ish. And I think those are the major ones in there.

Yeah, there's another small property and a bit of excess land over Zella as well. And those are probably Q4 closes.

Okay, perfect. And then that's a 7-1 cap. And then do you have a sense of the amount of debt and the average rate on that debt

Mike, I don't have that at hand. We'll have to come back to you with that.

Last one, and I can see everybody, all my peers probably throwing darts at me right now. But just on, do you expect any BTB financing as part of any of these transactions?

There might be in the old Montreal portion a very, very, very small one. But right now it doesn't look like there'll be any.

I've more than overstayed my welcome. Thank you so very much. Congrats again, and I'll turn it back to you.

Thanks.

The next question comes from Kyle Stanley with Desjardins. Please go ahead.

Thanks. Morning, guys. I'm just wondering if we can dig into the Sherbrooke deal just a little bit more. I think you mentioned it there about a six cap. Just if we could talk through, I guess, rationale for expanding into Sherbrooke, new market, and then I guess more broadly, how are you thinking about the acquisition environment? Obviously, there's been a lot of focus on the capital recycling, but what are you seeing in the acquisition environment?

Yeah, this is a little opportunistic. It's a tenant within our portfolio, in the retail portfolio, actually. It's their warehouse. So it's a brand new build. So rationale, unit deal, six cap. But I mean, it's a pretty seriously built building. So consider 10-year deal, six cap with 3% increases a year. We tuck it away, let it cash flow. We don't have to spend any capex on it for the next foreseeable future. good solid tenant that we have our building relationship with that may end up as part of this transaction, take one of our other office buildings that we have. So a little bit more strategic on a bigger picture.

Okay. No, that's fair enough. And then I guess otherwise acquisition, something you're looking at or maybe waiting until the disposition activity occurs.

Yeah, we've parked acquisitions right now, save and accept. I say that loosely. If there was an appropriate unit deal to be had, we would definitely do that. So we're always scouring, looking at different deals. But from a cash perspective, I'd say we don't have anything imminent on the horizon.

Okay, fair enough. And I guess with That in mind, you know, looking at keeping leverage below the 50% threshold, that's something you think based on, you know, I guess the clarity you have on the disposition profile that you should be able to keep leverage maybe below that level?

Yeah, I think we're going to be before, I mean, we do have development happening, right, which stresses it a little bit. So, It's going to be in and around. If we do creep over, it'll be not for long as the dispositions happen. So we'll just have to see as they go along here.

Yeah, if we take over, Kyle, it'll be very minor and with a clear path to being below it as the dispositions are closed. So I don't see an issue there, and I don't expect it will impact our financing costs.

Yeah, and let me just clarify, too. We had West Can under contract, same group, and they couldn't get the loan to value. It was a pretty high loan to value. And so they do own other properties that they're trying to sell. They'll probably come back to us down the line if they... sell them and they're able to reduce that, uh, loan to value requirement. So for me, I've pulled it off. It's a higher cap rate, um, cash flowing assets for us that are under, uh, long-term, you know, longer term leases. So to me, um, I would just soon keep the cashflow for now. I, I'm not in a hurry to sell it, but if, if they came back, uh, at their price. And with the lower term to value, we would resurface it. So I hope that gives some clarity there.

Yep, definitely. And just one last quick one. On the G&A, would you say kind of what we saw this quarter is a good run rate? Yeah. Yep. Okay. Perfect. Thank you very much. I'll turn it back.

The next question comes from Brad Sturges with Raymond James. Please go ahead.

Hey, good morning. Good morning. I just wanted to go back to your guidance on the cap rate. The 7-1 cap rate, that includes the Saskatchewan portfolio as well within that number, right?

It would. Yes.

If we were just to break out the Saskatchewan versus Sandalwood, how would those cap rates compare? Do you have that?

No, I don't have that. I think the Sandalwood would be, I don't want to get off my head right here. I don't know if I have it in front of me. You can take it offline too. Yeah, we can get back to you.

Okay, sounds good. Sorry, maybe I missed it. Just on the RTL West can, I think the credit facility secured to that portfolio, what would be the, that matures in September, what would be the refinancing plan there for now?

Yeah, we're rolling that. So we're going to roll it at a slightly lower rate. So, you know, it's probably closed any day now.

Would you be fixing that rate with a swap as well?

Yes, most likely, and doing a one-year deal. Gotcha.

Okay. Beyond, I guess, maybe revisiting RTL West Canada at another point, is there anything else within the industrial portfolio that you'd be considering from a disposition point of view?

Yeah, well, I think how we're looking at it right now is we've got – The retail, we've got those offices. We have Montgolfier left that we're out to market with one of the brokerage firms. So hopefully that gets done this year as well. We'll see what kind of action we get. I think it closes in about a week. And then we still have Stanley. We have a Cologne one in Gatineau that will probably then move to put on the block for us, which will pretty much... we complete these deals, we're 99% industrial. So from that point on, we do have one problem asset in Fort St. John, I would call it, that we actually had some interest on and we're waiting to see if we get an offer to purchase on it. We are in the process of selling some land there as well, hopefully additional land that we just had attached to it, which would be a bit of a windfall because we don't carry that at a huge value on our books. So it could down the line, but it's going to be little assets like that, I would say. And here and there, unless someone comes to us with a killer offer for something else, but I know we like the portfolio we've developed over the last several years. It's we get rid of some of these Saskatchewan ones, our average age starts to decrease. And, you know, a lot of the stuff that we've purchased recently has all been brand new builds. So I like that from a CapEx standpoint. So, yeah, I hope that gives some clarity. And any maybe smaller little guys that we have struggling along could go, you know, next year.

Yeah. Okay. That's helpful. I'll turn it back. Thank you. Thanks.

The next question comes from Himanshu Gupta with Scotiabank. Please go ahead.

Thank you, and good morning. Good morning. On the asset dispositions, I mean, you mentioned 7.1 cap rate. How does the value compare to the IFRS value you carried?

Um, we will have, um, we just took a write down of about $10 million on our, on our retail portfolio, Sandalwood retail. Uh, so that was this quarter and that was to basically line up our carrying value with, um, yes, the PSA. And so we're basically in line at this point.

Okay. So, uh, I mean, whatever fair value loss you had taken, that's already been taken. Anything regarding the Saskatchewan properties, uh, non-core?

No, no, no. No, that's good. Okay.

Okay. That's fantastic. Uh, and then, uh, I know, you know, Sandalwood has done a couple of more. So what is now left on office and retail? Uh, is it just like suburban Montreal office?

Yeah. So we have, um, uh, our, I would say Montgolfier, uh, which I think is about $12 million, something like that. We have Stanley, where our Montreal office is located. So we own 50% of that with the notaries of Quebec. And then we own 50% of one office building, a smaller one in Gatineau with another group. And then outside the Sandalwood portfolio, we have carved out Les Halles d'Anjou, which is probably the single best asset in that retail portfolio. And we carved that out because we are still ongoing with the sale of the vacant land, and it's getting close. It's been a battle with the city, but they've got approvals. Now it's down to just an easement issue with the neighboring lot, the neighboring property, and that should be resolved soon. So I think we'll be able to pull cash out of that And then after that, we will then put that to the market. But, you know, the reality is that's a great asset. And I would assume Santa would probably want to take that one back. So it might be an easier process. You know, the retail portfolio is hard. Like when you're trying to sell a 50% non-managing interest, it gets a little tricky. So that's why there's been the delay.

Yeah, thank you. And the last, that retail property will be sold once that excess land is sold, right?

Yeah. Okay. Yeah.

Okay. And how was the response in general on the sandalwood retail, like in terms of investor interest or any feedback there?

Interesting. Institutionally, very, very small interest. Locally, Montreal local, A lot of interest. So it's been a very interesting marketing. You'd think it probably has to do to the 50% non-managing, right? Like the institutions all want to step in and everyone thinks they're the best manager in the world. But there was a lot of pretty strong interest from local Montreal.

Got it. Okay. Thank you. Thanks for that. Just on the development side, so Global Road is the only one left now. in terms of to be leased up?

Yeah. Yeah. We do have two other development parcels, one in Hamilton near Glover and one on South Service Road near Stoney Creek. We probably aren't going ahead with them. I think the development returns are a little skinny for us. So We could end up looking just to move those parcels, which we're working on something, and that might end up being fairly lucrative. And then we put a lot of cash back into our coffers to reduce the debt. So we'll have to see how that plays out. We have enough development opportunity, I think, as well in London, and we're also talking to one tenant in, I think, Prince George. We have some excess land on our site there that they may want to expand out into. So there's still fairly significant opportunity within the portfolio.

Got it. And then that Regina, I think 110,000 square feet, that will also get occupied in February, I think you mentioned.

Yeah, we're really close. We had the off release on the last little tidbits of the actual lease negotiation. I was hoping to have it this morning, but it'll probably be this afternoon or tomorrow. And then that has a hard-coded February 1st start date.

Awesome. That's fantastic. Okay. Thank you, guys. I'll turn it back. Okay. Thanks.

The next question comes from Matt Cornack with National Bank Financial. Please go ahead.

Hey, guys. You guys have been successful in kind of bucking the trend with regards to occupancy declines in the industrial portfolio and are getting pretty good rent spreads. But can you give us a sense as you look to 2025 and maybe even the remainder of 2024 as to what type of retention ratios you're seeing on tenants? And then a second question to that. you guys provide market rents relative to in-place rents. Are those pretty good proxies for the maturities that you've got upcoming in the next year and a half?

Yeah. So just to give you a little color on the 2024 renewals that we've done so far, we've renewed about three quarters of our portfolio of our expiries for 2024 at an average growth of 24% over existing. So pretty healthy spread there, which is going to lead to about another million and a half of annualized NOI going forward. We look at 2025, we've done about 50% of our expiries already. And the growth on those is lower at this point, it's around 10%, but we haven't done the big ones yet. We've got a a 250,000 square feet that's coming up there, which is currently 200% below market. And so I expect that to drive about another 2 million of rent lifts. So that's either if we do it to market or if we release with the existing. So I think pretty good juice in the tank there and evidence that we are being able to get the mark to market that we expected.

And do you have any indication at this point, like a rough indication as to whether that tenant will stay or if you'd be sourcing a new one?

Yeah, the big one. So I would be highly surprised if they were actually able to leave. It's a pretty specialized building and the restoration of the building to bring it back to where it would be would be very punitive to them. So I am optimistic. Listen, you always want them to stay. It's a great building. It's a great location right on the London airport. But it's always easier to keep the tenants. So we'll see how we do. They don't expire until December. It is one that we tried to do an early renewal and extend and blend with. But after back and forth, back and forth, there's a difference between the local operations and the United States parent. So We'll see how it goes, but I'm pretty sure they'll end up staying.

Okay. That's great. Thanks, guys, and congrats on reaching this inflection point.

Awesome.

Thank you.

The next question comes with Jimmy Shen with RBC Capital. Please go ahead.

Thanks. Just a general question on the London market, and maybe it applies to that 250,000 tenants well that you're speaking of um the availability is still pretty tight and you know the narrative rightly or wrongly was was that london benefited from toronto being so tight and positive spillover effect but now that we're seeing a little bit more slack in the toronto market do you think that'll impact london at all um no i guess that's one no okay no so there's too many drivers

in that Southwestern Ontario node now. So you've got to take into account that in St. Thomas there, I was down there, I don't know, three weeks ago and the amount of land in the start of the Volkswagen plant, which they're calling between three and 5 million square feet. So that alone will create the need for a significant amount of new industrial in that node. So, um, when I look at the overall fundamentals of London, I think that market's going to continue to outperform.

The CB is showing that the asking rent in London started to trend down a little bit. I wonder if you're seeing the same or whether this is, you know, given the market's still so tight, I was a little surprised to see that trend.

Yeah, I mean, we haven't seen it. So, I always a little bit at odds with some of the reports because I'm like, it could be older, you know, older product that's come vacant that tends to then drive down the overall. But if you have good quality, well-located product there, you're still 12. Okay.

Okay, great. Thank you. All right.

The next question comes from Sam Damiani with TD Securities. Please go ahead.

Thank you. Good morning, and I'll echo the congratulatory words. Great to see the results and the pivot point being reached here. I guess most of my questions have been asked. I just wanted to, I guess, get a sense at this stage, Kelly, just given it's been kind of two and a half years of rate hikes, and now we've turned the corner. You know, you've got the concentration heading toward 90% pretty quickly here with good visibility. What's the sort of next stage in Nexus's growth and strategy to take Nexus to where it wants to be in the next sort of two to four years?

Yeah, listen, I think right now we're about 93% industrial. By the time at the end of this year, hopefully that is pretty close to 100%. In 97, we got some straggler assets to get rid of. And at that point, it's an industrial pure play. And it's what we've been striving for and trying to get to. So hopefully what we've done over the last several years of high grading the portfolio, you've made yourself in demand and people are seeing the results of the development and the moves that we've made. and our payout ratio continues to drive down to where it's a pretty attractive story. And if the stock, if the market, if rates drop and the market cooperates and we're able to go back up, we'll be back on track to complete unit deals with different buyers. Much harder to do, and there's a huge difference between your trading price and the... and what you're asking them to take the stock at. So hopefully we can drive. We've been building relationships for that. And if the markets open up, I'd like to see us grow substantially again and continue to grow and grow in our nose. We can continue to grow in southwestern Ontario. I'd like to grow more in the GTA, Montreal. We probably will grow a little bit out west. We do have opportunities out there. Maybe in the Vancouver-Richmond node, opportunities keep popping up, Kelowna. So at the end of the day, we'll be a little bit market dependent. Our hands are tied right now. We're not about to raise equity anywhere near these levels. So it's really about straightening out the portfolio, driving down the payout ratio, getting our debt down, and then taking it from there.

That's great, and thank you, and I'll turn it back. Thanks.

Once again, if you have a question, please press star then one. The next question comes from Mike Martides with BMO Capital Markets. Please go ahead.

Thanks. Just a follow-up for me. So, Mike, you gave really good color on sort of the 24 and 25 leases that have been addressed. So, I just want to make sure I'm thinking about that properly. So, on the 2025s, 60% has already been addressed. So the 1.2 million of industrial... Sorry, sorry, 50. It's 50, Mike. 50, sorry. My bad. So does that mean there's three, or I guess two and a half million square feet of industrial where rent increases will kick in next year? Or is the, I guess, is the maturity schedule you show, is that a net of commitments or is it a gross expiry?

No, that would be, that would be gross expiry. That is gross. Yeah, that would not include commitments. Those are purely maturities right now coming up. Okay, perfect.

So you've got up to 1.25, you've got 50% done out of 10%, and then the 250K in London, I think it's McCormick, right? Is it there?

It's not more. It's Robin Hills Road is the asset.

Okay, awesome. Thanks for clarifying. I'll turn it back. Awesome, thanks.

This concludes the question and answer session. I would like to turn the conference back over to Kelly Handick for closing remarks.

All right, I want to thank everybody for attending the call. It's a good quarter. It looks like it's going to continue on from here on in, so we look forward to positive results next quarter.

This concludes today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day.