Armin Martens - Chief Executive Officer, Founding President, Trustee, and Member of Disclosure Committee James Green - Chief Financial Officer

Michael Smith - RBC Capital Markets, LLC, Research Division Jenny Ma - Canaccord Genuity, Research Division Chase Bethel - Desjardins Securities Inc., Research Division Matt Kornack - National Bank Financial, Inc., Research Division Mario Saric - Scotiabank Global Banking and Markets, Research Division

Okay. Thank you, moderator.

Good day, everyone, and welcome again to our Q3 2014 conference call. So my name is Armin Martens, the President and CEO of Artis REIT, and with me on this call is Jim Green, our CFO; as well as Heather Nikkel, our Director of Investor Relations.

To begin with, again, I'd like to advise all listeners that during this call we may at times be making forward-looking statements and we therefore seek Safe Harbor. So please refer to our website, as well as our SEDAR filings, such as our financial statements, our MD&A and our annual information form for full disclaimers, as well as information on material risks pertaining to all of our disclosures.

So again, thanks for joining us on this Friday afternoon. To begin with, then, I'll ask Jim Green to review our financial highlights, then I'll wrap up with some market commentary, and then of course, we'll open the floor for questions.

Jim, please.

Thanks, Armin, and good afternoon, everyone. Similar to what I said in prior conference calls, the last few quarters have been much quieter in terms of external growth for the Canadian REITs, and Artis is certainly no exception to that.

During the current quarter, we acquired 1 income-producing property. It's a massive retail strip center in Winnipeg contains just over 24,000 feet.

So very small, but it was a nice little addition for us to our Winnipeg portfolio. Internal growth has always been a focus for Artis, but recently, internal growth combined with development opportunities has become even more important, given the slowdown in external acquisitions.

As I've mentioned in prior quarters, we've been much more active in developments, and we now have over $108 million invested in projects under development, $42 million on the REIT's direct balance sheet and a further $66 million in joint ventures with other developers. As detailed in our MD&A, the scope of projects also in the planning stages is increasing, and during the current quarter, we acquired a second landsite in Houston, Texas, planned for a multiphase industrial development.

We continue to demonstrate good growth in our existing portfolio, and despite a small drop in occupancy, we achieved overall growth of 2.4% in our same property portfolio for the third quarter, giving us year-to-date growth of 2.8%. I'll touch on that again in a minute.

I'll spend a few more minutes reviewing in detail the results from our quarter and I'll pass it back to Armin for a bit more discussion from the markets in general. So working firstly with the balance sheet of the REIT.

Total assets continue to rise at Q3 of '14. We are now at about $5.4 billion of total assets.

Investment properties, making up, by far, the largest part valued at close to $5.2 billion, including our interest in the joint ventures. Properties on our balance sheet are valued at fair value under IFRS, and we adjusted the cap rate slightly on a few assets, nothing material, came to a resulting gain for the quarter of just over $11 million, primarily in the Western Canadian markets and in the U.S.

We're still not anticipating major changes in cap rates for the balance of this year or into at least the early part of next year. So at the present time, we expect this number to remain relatively small in the 2014 results.

On the debt side, the REIT still has 3 series of convertible debentures outstanding. There's a small balance remaining on the Series D debentures that matures at the end of this month and we'll be just paying that off in cash, and then we have a Series F that matures out in 2020 and a Series G, which matures in 2018 but is denominated in U.S.

dollars, and this debenture helps form part of our natural currency hedge for the assets we own in the United States. Total amount of convertible debentures outstanding, $187.6 million.

Artis has, this year, entered the unsecured debt market. And during the current quarter, we completed a reopening of the Series A unsecured debentures to raise the amount outstanding under that series to $200 million.

We are pleased with this issue and expect this source of capital to increase over time, reducing the amount of secured debt on our balance sheet and increasing our pool of unencumbered assets. On some of the ratios, we remain very comfortable with our debt-to-GBV ratio.

As mentioned in prior quarters, we are consciously working to lower the leverage on the REIT. And even with the new unsecured debenture, our total debt-to-GBV is lower than it was at year end.

Secured mortgage debt to GBV has declined from 45.4% at year end to 41.4% at September 30, and we expect to continue this trend into 2015. Artis has some floating rate debt exposure.

We have over the last 12 to 18 months, reduced our floating rate debt, and we currently have about 8.5% of our debt floating down from 10.2% at year end. The majority of our floating rate debt is in the United States.

It gives us some flexibility there, and we still believe an amount of floating rate debt is appropriate in any debt portfolio, and we benefit from the low interest rate on the floating rate debt. There's no plans to reduce the floating rate debt further.

The floating rate mortgage debt is all term debt. It's not demand, and it can't be called by the lenders until maturity.

On the maturity issue, at September 30, Artis had approximately $318 million of mortgage obligations maturing in the next 12 months, roughly 13% of our total mortgage debt portfolio, and the REIT anticipates no difficulty in refinancing outstanding mortgages if needed as they mature. If the unsecured debt market remains strong, we'll likely issue further unsecured debt and use the proceeds to reduce the secured mortgages.

Weighted average term to maturity on the mortgage portfolio is 4.0 years, down slightly from year end, just due to normal turnover of the mortgages. As I mentioned, we've been gradually paying off mortgages with the goal of increasing our unencumbered asset pool and using the September 30 fair values, Artis had 39 properties and 2 pieces of land with a fair value of $538 million that are unencumbered and there's a further $33 million of land value in our joint venture assets, bringing us to a little over $570 million of unencumbered assets.

Interest rates on the debt remained very low in the low interest rate environment. Weighted average nominal rate on the debt is now 4.09% compared to 4.1% at year end.

Turning more to the income statement. Total revenues -- property income from continuing operations, $78.6 million for the quarter, looks almost unchanged from the same quarter last year, however, 2013 included approximately $4 million of lease termination income.

And as I mentioned, lease termination income comes on a very unpredictable basis. We had only $21,000 of lease termination income this quarter, year-to-date total of $103,000 compared to $4 million of lease terminations in Q3 of '13, and a year-to-date amount of $6.3 million in 2013 for the first 9 months.

Turning to the same property results. Still very pleased with our same property operating results for the third quarter showing an increase of $1.6 million or 2.4%.

Year-to-date growth now stands at 2.8%. We're pleased to have positive growth this quarter in all segments of our properties.

By asset class this quarter, the retail segment performed the best with overall same property growth of 3.0% and giving us 3.5% year-to-date on the retail assets. Industrial segment has been a very strong performer this year, however, we did experience a higher vacancy in our U.S.

industrial portfolio this quarter, which dropped the quarterly growth to 0.9%, although year-to-date still stands at 3.9%. The office sector performed very well for us this quarter with 2.9% growth, bringing year-to-date up to 2.0%.

Looking at the entire U.S. portfolio, same-store growth was 1.6% for the quarter, and actually that is mainly due to foreign exchange gains, as the vacancy I mentioned in our U.S.

portfolio hit us this quarter. There was a fairly significant adjustment of operating cost recoveries in one of our office properties in Q3 of '13 that also, because it's not a recurring adjustment, makes this quarter look like less than Q3 of '13.

Overall, Q3 can often be lower unless the summer months from many of the larger repair and maintenance costs are incurred and if we choose to spread the recovery from the tenants over a period of time as opposed to when incurred. We still end up booking the expense when we incurred.

We believe the U.S. economy will outperform Canada over the next few years and we still expect to see strong continued growth from our U.S.

assets. Canada, by comparison, also was solid growth, 2.7% for the quarter with gains in the industrial and retail offset by a little bit softer office market.

So not as strong as the U.S. on the year-to-date basis, but certainly, we're very pleased with the Canadian results as well.

Coverage ratios. The interest coverage ratio in the REIT was 2.84x for the current quarter; debt service coverage, 1.85x, and both ratios are well within any convenance given to any of their lenders.

On comparison a to EBITDA, net debt-to-EBITDA was 7.6x for the September 30 numbers, and in our case, we just take a quarterly calculation by using the actual quarterly results and multiplying them by 4. And EBITDA interest coverage ratio 2.99x, very pleased with those ratios.

As you're aware, the REIT has a fairly significant portion of our assets in the United States, and this requires that we convert assets held in U.S. funds back to Canadian dollars, and this produces largely unpredictable foreign exchange gains and losses on our income statement, affecting both the results from operations, as well as the other comprehensive income.

And generally, what happens is the REIT's assets in the U.S. get translated back at each reporting period and the long-term assets and long-term liabilities flow through other comprehensive income, while shorter-term assets flow through the income statement itself.

So for the 3 months ended September 30, we booked an unrealized gain in the other comprehensive income of $32.5 million, a large number due to the size of our U.S. portfolio.

Based on what we hear from the various currency experts, the Canadian dollar could weaken further in the coming months, and if this happens, it will provide us with even further growth from our U.S. portfolio.

The REIT does have a bit of a natural currency hedge, and that we maintain our U.S. debt in U.S.

dollars. So at the end of September, we had $1.288 billion of assets in the U.S.

And against that, we hold $611 million of U.S. mortgage debt and an $88 million debenture payable in U.S.

dollars, as well as $75 million of our preferred units also redeemable in U.S. dollars.

In our opinion, it gives us kind of a natural currency hedge of about 62% of the U.S. dollar exposure, and we currently have no plans to hedge the remaining exposure.

Flipping over for a minute to the non-GAAP financial metrics. One of the key ones, of course, is FFO and AFFO.

Our FFO for the quarter on a diluted basis, excluding the lease termination income, was $0.35 this quarter, flat to $0.35 in the same quarter last year, and the FFO payout ratio was 77.1%. On an AFFO basis, the AFFO was $0.31 for the current quarter, a slight increase from $0.30 in Q3 of '13, and our AFFO payout ratio for this quarter is 87.1%.

Just touching on a couple of other financial highlights. Participation in the DRIP program continues to run around 15%, gives us a steady source of cash.

Tax status. The REIT believes we meet the REIT exemption today and that we have met it in prior years.

A high proportion of our distributions are return of capital. In earlier years, we are 100% return of capital and this will mitigate any or eliminate any tax should the REIT become subject to tax.

We think we can continue to meet the REIT exception, however, it's an ongoing test that we have to meet on a continual basis. On our credit facility, you may have noticed in the statements that we have allowed our old credit facility to expire, largely because we were not anticipating any need to draw money on the line.

We're currently renegotiating a replacement line and anticipate that will be an unsecured credit facility, and we expect to have that in place before the end of this year. Artis ended the quarter with $123 million of cash on hand, very strong liquidity.

We have the capacity to acquire further properties, however, we're being very selective in the current market. As I mentioned, we anticipate having a line of credit available shortly, probably $125 million to further increase our liquidity position, further update on subsequent events is included in the notes to the statements, but there's nothing overly substantial that I will highlight on this call.

And that really completes the financial review. We feel it was a good solid quarter for us and we look forward to demonstrating results from operations in future quarters.

And I'll now turn it back to Armin for some more commentary.

Okay. Thanks, Jim.

First of all, folks, we're gratified to see the things are continue to gradually improve for Artis REIT and we're confident that we will end the year well and proceed to meet or exceed expectations next year in 2015. We already find ourselves looking into next year.

So looking ahead, it continues to be our view that both the U.S. and Canadian economies will perform well in the years ahead, with an increase in advantage going to the U.S.

economy and among other things, this will be reflected by a stronger U.S. dollar.

The convert to that is the weaker Canadian dollar, and we think will be a benefit for Canadian manufacturing sector, also for the oil and gas sector in the sense that they do get paid in Canadian dollars and we have the gap between Western Canadian select and WTI are being narrower than in the past. So there are some bright lights there.

With respect to interest rates, bond yields remain in a relatively low-trading range, and in my case, I continue to believe that it will be low range bound for several years. We've seen spreads remain for 5- and 10-year mortgages, and this could potentially narrow as liquidity continues to improve.

But today, 5-year rates are in the 3.4% range, while 10-year rates on in the 4% range. And I'd say the U.S.

market is about the same for mortgage rates. Notwithstanding our view that interest rates will stay in a low trading range for a long time, and that any sign of deflation would in fact lead to more QE, new QE, if you will, almost all new mortgages being taken out by owners has been for either 7- or 10-year term.

And in addition, as Jim mentioned, we have been moving to fixed and extend the trend of some of our floating debt. Sorry, but about 8% of our debt is now floating folks, and the floating debt we do have is well termed out.

In terms of acquisition cap rates during Q3, while they still remain level in Q2 and in essence some REITs are still cheaper than real estate right now. The wall of capital chasing real estate deals, however, actually continues to increase.

So even if interest rates were to rise, in our case, we do not expect cap rates to move up in tandem. In some cases, we feel like in Artis REIT, we've seen our real estate portfolio increasing value during the course of the year and we've of course seen our stock unit price come down a little bit.

But -- so in any event, in both the U.S. and Canada, there's basic shortage of new real estate being brought to the market, especially good real estate.

Now a lot of our asset classes offers industrial, retail and the property markets continue to experience healthy occupancy levels in our target markets. Looking ahead, Artis, in our case, we will have to continue to monitor the new office developments in Calgary as this may put negative pressure on occupancy rates and potentially rental rates.

However, the good news for now is that year-to-date up to Q3, the Calgary office market experienced 1.2 million square feet of net positive absorption, surpassing the historical annual absorption of 800,000 square feet. So this is very good news, of course, we trust and hope will continue in the quarters ahead.

Other than that, we feel that real estate fundamentals in all of our asset classes and submarkets are quite strong. And all of us, I think got the news of the U.S.

mid-term elections, I think that's good for Canada if we continue the oil business being a family business and good for Western Canada. Keystone Approval, potential approval of Keystone XL, it seems to be on the front burner now, and a lot of us are optimistic that comes to a compromise solutions there in the next 6 to 12 months.

Now back to Artis. In terms of our portfolio performance, we feel our metrics are quite good.

We have a healthy gap between in-place rents and market rents, and are achieving good weighted average rental increases and the same property NOI growth. Our leasing projects is good.

Our 2014 leasing program is now basically complete as well as about 1/3 of 2015. Our portfolio continues to demonstrate a long-standing track record of an occupancy level in the 95% range, which we feel speaks well to our management team and the reliability of our income.

In terms of our geographic diversification, we continue to be primarily Western Canadian REIT, with a 65% weighting in Western Canada, 12% weighting in the GTA and Ottawa, and 23% in the U.S. And the calibre of our real estate, our balance sheet and payout ratio continues to improve.

This is something we are committed to, slowly but surely improving our real estate portfolio, our payout ratio and our balance sheet. We, obviously think, combined with our geographic focus partly U.S., mainly Western Canada and GTA and Ottawa what makes Artis a unique and compelling REIT to invest in.

Now meanwhile, Artis has pushed the pause back in our new acquisitions, and now pending mortgage building in the capital markets and the percolation of our results going forward. For 2014, our guidance at the beginning of the year maybe the second and third quarter, we mentioned $100 million to $200 million of new acquisitions, but we're fairly confident now that for 2014, our total acquisitions will be in the $150 million range, which is significantly lower than previous years and in essence, that means that we're done for the year.

At the end of the day, value creation is more important to us. So we continue to work hard to keep our buildings full, whilst bringing the rents up to market.

As mentioned, we've been slowly but surely improving our real estate portfolio, our balance sheet, our payout ratio. As you can see, we're increasing our value enhancement and new development pipeline as well.

By the way, we do invite our listeners and investors to go to our website. We've tweaked it a little bit, there's a value creation link, a value creation link on our website now, that highlights value-added initiatives redevelopment projects and greenfield developments.

So I can tell you that our greenfield development pipeline has been quite successful to date, with a completion and lease up of the midtown industrial development in Minneapolis, the Linden Ridge shopping center in Winnipeg and the near completion of Fourell industrial in Edmonton and Centrepoint in Winnipeg. We have just $25 million of new developments under construction.

This blows in about $15 million we got are attribute to them. [indiscernible] the first phase industrial the Park Lucero Centrepoint in Phoenix then the remaining cost just to finish Centrepoint and Fourell.

Now Centrepoint, Winnipeg is 90% leased and Fourell is 100% leased. Everything else, as I mentioned, is fully leased.

Park Lucero, our first phase is just down to 200,000 square feet on spec. We gained good lease activity there, but not leased yet.

But our pipeline going forward, see if you look at our website, we've got new properties in Houston industrial office that we own. We think it's great land and good investment has good potential.

Potentially, in the next year, there could be another $120 million in our development pipeline with more industrial in Houston and an office building in Houston, we'll be cautious about that. We're watching -- you all get the same news.

We're watching and monitoring oil prices, energy stocks and oil production, capital expenditures and job creation. And now on the markets, we're in the U.S., job creation is above their national averages and especially Houston continues to lead in job creation.

So that gives us cause for optimism right now, but it's something we will monitor. As Jim mentioned, we are in good shape.

Our balance sheet is good. Our payout ratio is good.

Our liquidity position is really never been better and our results are sound with we think a good outlook. So we continue to work hard for investors improving the REIT one step at a time.

And that is our report for this quarter folks, so we are pleased with the results and confident in our outlook. I'll ask the moderator now to take over and then to field questions for us.

I just wonder if you could just give us a little bit of color on the industrial land you've got in Houston this quarter? What type of industrial are you planning on building on it?

Now so the gross site area is about 128 acres, and net will be closer to the 110 acres. Well, we like that site a lot in Southwest Houston.

The new name for it, as the website gets developed will be Park 890 everybody likes the word park, so we've been industrial park out. Number 8 stands for Highway and Beltline 8 should be inner Beltline surrounding Houston and number 90 is the intersecting highway there.

Now it could be up to 1.8 million, 2 million square feet of industrial we're looking at a combination of multi-tenant warehousing and then larger tenant distribution, as well as built to suit opportunities and for the right price, we would sell land to a user. So a mixed development.

Don't expect-- not expecting industrial -- I'm sorry, manufacturing, but there could be some heavy industrial if you given the way all country, shall we say smaller buildings in relation to the land site. But we're optimistic.

We have our partner there is Trimac, same partner we had for industrial development in Minneapolis and same partner that we have in Phoenix. We're very confident in this project.

And so, will -- like if you had to guess, how much of it will be, let's say, high clear, high distribution type space?

I'd say about 2/3 of it, I guess right now, a good at least 2/3.

Okay. And any thoughts on when, like how quickly this is going to start coming to fruition?

This development -- I'm expecting Q3 next year, at the earliest Q2, Q3, that's how we say that will be the first phase. And assuming the market remains stable and we have a good visibility, we'll consider 1 spec building, there are smaller ones again in the 200,000 square foot range to get the ball rolling.

But we already marketing -- [indiscernible] is already marketing to users as well, so you will see. I wouldn't surprised to see 1 user or 2 be the first tenants now we're seeing on this development.

Just to kick it off, I guess?

Exactly.

And can you -- what kind of development yields are you targeting? And what kind of construction time are you -- would you anticipate?

So the target development yield is in 8% range. The numbers are always north of than 8.

There's a little bit of a promote structure there, an incentive for the developers so, it will all be between 7.5 to 8.25 is the target development we've netted to Artis. Construction [indiscernible], for example, in Phoenix, they're under construction there and you're looking at 6 months really to build the building, there not much more, but there's time lag in advance, if you will, to get the plans ready, working plans.

So it could be 1 year from beginning to end. If we start construction at the end of Q2 for the first phase, we should be finished by Christmas time next year.

Okay. And just switching gears to Minneapolis for that vacancy.

Can you just give us some color and on what happened and when you anticipate to lease set up?

There was one -- I mean, there was tenants in, tenants out, as always happens. But it kind of reconciles back the 1 larger tenant.

We lost 1 tenant that's about 130,000 feet, which kind of reconciles to the drop in occupancy, and that space is not leased as yet. We've been sending out some proposals and we've got some interest on it, but we don't have a deal yet to lease the space.

And what kind of space, is it distribution space? Or is it modern space or...

Just warehouse distribution type.

Armin, now that we are about 4.5 years out since you've first entered the U.S., I was wondering if you could kind of give an update on what -- where you guys are at in terms of the U.S. strategy?

Presumably, some of the buildings that you acquired earlier on, you've seen the cap rate compression, the fundamental improvement in a lot of them, so assuming you don't want to change the weighting of the U.S. much, are you thinking of maybe looking at some of the properties and crystallizing both gains and redeployment in other geographies or different kind of projects like the development that you were just talking about?

Not for the U.S. portfolio.

I shouldn't say that. We're always looking, right?

We did look at a couple of properties, we've got 2 outliers; 1 in Tampa and 1 in up in State of New York with Hartford Insurance as a tenant and Mosaic in Tampa. We're focusing now on all extending the leases with those tenants, instead of trying to crystallize the value there.

It's easy to manage it to the additional stuff don't bother us at all. You might have seen -- you will see when our Q4 results come up, I'll sell the all the small industrial building in Minneapolis, for example, the price up little higher than we deserve and we'll just take that and then -- and that money gets recycled.

We don't have that program there. You should expect to see though in terms of recycling us consider selling a Canadian property or 2.

In Canada real estate -- I think, I don't want to use the wrong expression, but real estate should extended price to perfection; cap rates are low. They came down in the course of the year and then even though some big deals went up.

So you might see us do that and then we deploy that money into what we think is a good value proposition in some U.S. markets.

So is it fair to say that the conditions in the U.S. have been better and longer than you probably anticipated 4.5 years ago?

Yes. I still feel, [indiscernible] depending -- a lot of people say we're in the second half of the ballgame, so to speak, or the fifth inning, but if we are in the fifth inning of the recovery, I think it will be an extended ballgame with many innings of of overtime.

That's my feeling. But there's a lot of leg there.

The countries become energy self-sufficient now, notwithstanding with oil prices are doing right now. The outlook is great.

Manufacturing sectors experiencing a renaissance. There's a triple -- trillion dollar triplets they used to call them in the current account deficit, trade deficit and budget deficit.

They've all been cut in half there, that's a just a big game changer and attributes trending in the right direction there. So the U.S.

economy has lag, it's for sure the best performing of the G7 countries and it has the best outlook of the G7 countries, the largest economy in the world, best world-class, best largest real estate market as well. You have to be careful and you have to be focused, with what we are doing, but we still -- Actually we are more bullish in the U.S.

economy and U.S. real estate market, than we were 4 years ago when we started.

Okay. Moving on to acquisitions.

I think it's the time a year where we should be asking you what you were looking for 2015. I know you mentioned 2014 was a little bit light.

What are you looking for next year as far as relative to the average of 400 million that you guys talked about?

I think next year, you'll see us blatantly recycling more capital than you've ever seen us before. And I think you'll see us take this crystallizing gains on Canadian properties and then reploying that.

If we can find good opportunities in Canada that make sense, we'll for sure look there first for Canadian REIT, but otherwise we'll expecting to redeploy the money there in the U.S. markets.

In terms of raising capital, while we're trading below our NAV subs, there's no fundraising equity right now in this market there. And so we see ourselves on the sideline in terms of raising new equity.

Okay. So lower than your typical average then?

So next year might the same as this year again maybe $150 million in terms of new acquisitions net -- on a net basis.

Okay. And lastly, just a housekeeping question, probably for Jim.

The leasing that you did at Inkster Boulevard that kicked in on November 1, what was the rental rates on that?

We're looking at it each other here. We'll get it back

I don't have that level of detail with me, Ok

Chase Bethel filling in for Michael Markidis. Just first question I have was regards to the multiphase office development JV in Houston.

Just wanted to know if there are any incremental details you could provide on that, whether you're still looking at the same development yields and time frames as previously outlined. And also, if you're able to disclose who owns the 10% residual stake in that project.

Yes. We're almost there for all full disclosures.

If you look at our website, Chase, you'll get information on the plans. It's not -- we're not quite there yet.

We're going through a name change for that project. It will be called Corridor Park, not Core Park, for example.

We'll be [indiscernible] a little bit. Working plan for the first phase, 300,000 square feet are almost complete, and we'll be -- we want to be very shovel ready, if you will, at that project.

Our partner there is Trading Paper, with 2 different tenants. We'll take a big chunk of space and might even take enough space to require to go to construction on Phase 2, so there's -- it's good to hear and see that type of activity.

But we're not ready to start yet. Just keep watching that site I think in the next month, we'll be -- we'll give you full details on our -- name of our partner there, the project and the exact growth stage of Phase 1.

Okay, much appreciated. And looking at next year, it looks like a good chunk of the 2015 lease maturities are in the industrial segment.

We're wondering if you could, perhaps, give a rough breakdown of how much of the uncommitted would be in the U.S. versus Canada in terms of GLA?

Yes, that is a good question. We're shaking our heads, we can get back to everybody on that, we'll slip you out an e-mail on that.

Okay, that's fine. And then lastly, I think you mentioned that a $500 million unencumbered asset pool was sort of a minimum that you were looking at and that $1 billion would be nice.

Over the next 12 to 24 months, what should we expect to see on that front?

I guess it depends quite a bit on where the unsecured debt market goes. If the unsecured debt market remains as strong as it is today, you see us having roughly $300 million of mortgages rolling in the next 12 months.

So at -- call it 50% leverage on an asset, let's say that $600 million more of assets that could be unencumbered if we did the unsecured debt issues.

Quickly, on Minneapolis, again, can you provide, just in terms of timing during the quarter, when the vacancies of 130,000 square feet would have happened? And what the NOI impact would be going forward, if you have those details?

When it went vacant?

It happened at the end of August. I'm not sure about the NOI impact.

Sorry Matt, I don't have the NOI impact, but...

We can get you and that probably 29,000 square feet, we'll have to check -- $3.75 a square foot.

Probably it's $3.75 to $4 a foot, yes.

Okay, perfect. And in terms of, I guess, on the foot side, Calgary it looked like in the office portfolio, we had a fairly sizable gain to almost 96%.

Just wondering what ultimately drove that? And what you're seeing in the Calgary market in particular at this point?

Well, it's an interesting market. I call that an emotional market.

In summer time, they take July off because of the Stampede and then before you know it they take August off and that decision-making and if the headlines are good, big decisions are made in leasing it. I'm exaggerating obviously, but it's just a month ago, the move is very positive and in a couple weeks, because then all comes down, energy stocks come down, people are more cautious, then there's mid-term election, and then we're hearing good rumors about [indiscernible] in the market again.

But bottom line is that year-to-date, there's been 1.2 million square foot of [indiscernible] absorption. Now I'm really curious what the fluctuation of oil prices and the U.S.

mid-term elections would have done to the net absorptions here in Q4. But bottom line, it's been a very good year.

And if you look at the Q3 reports from CBRE and Colliers, we're trending up there. So if that continues, we're going to dodge the bullet, so to speak, in terms of the new construction that's underway right now.

A lot -- it will help a lot if we can get the confirmation of the Keystone XL. That's not a secret anymore.

And if we can get more clarity on that timeline for the West to East pipeline all the way to Halifax there, that'll we see there's an awful lot [indiscernible] and Western Canada needs to get it out to tidal market not plain and simple. Right down to the Gulf of Mexico right to the Atlantic Ocean, that, of course, the Kinder Morgan pipeline expansion can get approved well done to the Pacific Ocean.

All these things matter because U.S. is buying our oil, but we used not to mention natural gas.

So there's optimism in September/October, then a little bit of pessimism because the oil price is not little optimism, but unbiased the glass is half-full.

All right. And then Armin, you've been fairly smart and forward-thinking capital allocator.

Looking at Canada, because obviously the U.S. is fairly strong, but do you have a changing view with regards to East versus West or in terms of your capital recycling?

Do you plan on staying in the Western economies at this point primarily?

Well, we don't -- to say too much too quickly. In terms of recycling capital, you'll probably see us recycle Western capital more than Eastern capital.

But in terms of deploying, it wouldn't -- it should expect to see us bringing our money to the United States, not to the GTA and Ottawa. If, for no other reasons, things are priced to perfection there.

It's very competitive to buy stuff there, I guess because all the REITs are based in Toronto. The Ottawa market is soft and risky, got to be careful there.

But in terms of recycling, we'll recycle out of the West first, not out of the East. We like the diversification in GTA and Ottawa.

We like what we have there, and we'd like to expand there just that it's so difficult right now. So in terms of value proposition, it's still better in the U.S.

right now.

I may have missed this, but can you give us some additional color with respect to the subsequent acquisitions of both development land as well as the retail property in Calgary, and I guess Alberta, respectively?

In the Crawford in Calgary? Well, I think in Crawford and Calgary, it's an expensive retail, but very good retail but very well located retail.

Cap rates in the 6.6 range. It's adjacent to Crawford Wellington, to another property we own, our synergies in owning both.

We see once in a while in there tend to be more moving up to that complex and then vice versa. We bought Crawford 1 from the vendor that owns Crawford 2, and we always felt we wanted to on both phases that we want in that development.

It's in a great location in Northwest part of Calgary. So it was caused our strategic investment, if we will and we wouldn't have say bought it on an isolated basis that we wanted to own, it's neighbor retail trust and we wanted to own it.

So we're glad about that. The industrial land that you referred to the Houston land now.

No. The development that you bought in Calgary for $8 million on October 8?

October 8? I'm sorry, that's the station land, so talks about again, that was another strategic, but we own Stampede station 1, you might recall, if you go to our website new generation lead southern building.

We've got -- there's an adjacent Phase 2 there planned for 235,000 square feet. It's never got developed by the original developer or vendor.

So Phase 1 that we own is 161,000 square feet and the development plan in place and permit for another 200,000 square feet on Phase 2. There's some joint design consideration there.

The lobby for both buildings we already have, it's been built, we own it. There's a common entry for the parking ramp that we have.

Parking ratio 1 for 500 instead 1 for 1500. So long story short, the vendor just came to us and asked us to buy the land from them, and we did.

So now we're happy what we thinking a better asset. We don't see ourselves starting construction anytime soon of Phase 2, but when we control both phases it makes perfect sense for us to do that.

And we will go ahead now, complete the working plans and we will engage the leasing agent to go out and get some pre-leasing done.

All right. Given some of the synergy that you mentioned, but maybe too early to answer this, but any [indiscernible] types of returns that you did expect on Phase 2?

So Phase 2, we have the first development profile, a little leaner than the one we stated 7 to 7.25 is the develop pro forma right now, but the cap rates, when we sell a property like that, they always start with a 5.

Okay. So still 200 to 225 basis points spread in place?

Yes, yes. So we're -- for sure glad we've brought that land and we bought it at $25 per buildable square foot and, that at and if he make some calls to brokers, the market is $35 to $40 per buildable.

And in fact, we did -- we made a good buy with the land and I was glad we control it and be optimistic about being able to create value there.

Okay. And may be just digging to Calgary, you've been in the market for a long time, you own buildings in the suburbs, downtown.

We often hear about this urbanization theme in Canada. I think it's globally, but we've seen suburbs outperform downtown throughout various periods of time.

How would you characterize the relative expected performance between both, let's say, downtown versus suburb through 2017? So through this next development cycle, in addition to that big Class A versus Class B, over the same time period.

What do you think will outperform and why?

Well, first of all, in terms of gentrification and urbanization of our cities, like, Calgary lags a little bit, not the same as Ottawa, Montreal and Vancouver, but yet you're seeing more condos being built [indiscernible] it's just going to be a -- just started at a slower pace. If you drive in from anywhere once you get closer to your CBD, it's really difficult, and the parking ratio, as you know, is 1 for 3,000.

It's very difficult there. As they've got an LLT system they've got, that's used to the maximum.

They need to somewhat improve on that. In terms of that downtown, CBD expects a Class A, AA to continue to perform the best.

A cyclic quality will be there and suburban markets as a suburban markets, buildings are again site to quality is important, being but LLT station is important. We like our heritage Square property and we like that and we bought in Quarry Park.

Northeast suburban market expects that'll always underperform. Northwest is good, but it's not that much inventory in the Northwest.

And the Beltline will follow the CBD, it's the Beltline a good plan B, if you want to the CBD because double the parking available and it's just a short walk. Does that help you a bit?

Yes, that sounds good. In particular, we've just Beltline and we're hearing there's some new supply coming into the area from an office perspective, but curious as to whether you see any growth opportunity for yourselves in that area over the next 3 years.

In the Beltline -- [indiscernible] station, for example is the Beltline property and is a new office project under construction with central on their right now. So Beltline is slowly growing, no doubt about it in terms of new apartments, new condominiums, people living there, more so than even across the [indiscernible] CBD, but in terms of new office, again, new office are being built there and some select retail.

And we're not seeing any hotels come there. CBD is getting the most office, without a doubt, but I would say the multifamily is going to on pro-rep percentage basis, if you will, is going to be in the Beltline.

So they're both improving. They're both moving in the right direction, that's for sure.

Okay. And then last question, with respect to capital allocation, the units are off a little bit, and you mentioned that you're not expecting to be issuing equity anytime soon.

But how about on the flip side, are you seeing a lot of cash? It doesn't sound like the acquisition pipeline is as robust as it has been in the past.

What point do you strongly consider buying back units, notwithstanding the meaningful improvement you made in with respect to reducing leverage on your balance sheet?

Yes, it's an ongoing discussion here for sure. Mario, if we end up customizing gain on one of our properties here, and then you might see us in the market doing that.

Right now I'm happy with our market cap. We're happy with the results.

What we wanted to do this quarter in particular is demonstrate solid results, solid payout ratio with very good cash balance and liquidity position. This is a good way to go forward to demonstrate good results, whilst having a strong liquidity position.

And demonstrate to the market that we have no need for capital. So it's not eminent, but yet it's -- it is an ongoing discussion in terms of triggering the NCIB.

Thank you, again, moderator. And thank you, everyone for joining us in the call.

Feel free to e-mail us or call us for any follow-up questions, and we hope everybody has a great weekend. Take care.

Bye-bye.