Armin Martens - President and Chief Executive Officer Jim Green - Chief Financial Officer Heather Nikkel - Director, Investor Relations

Mike Markidis - Desjardins Capital Markets Jonathan Kelcher - TD Securities Mario Saric - Scotiabank Heather Kirk - BMO Capital Markets Michael Smith - RBC Capital Markets Jenny Ma - Canaccord Genuity Matt Kornack - National Bank

Thank you, moderator. Good day, everyone, and welcome to our second quarter 2015 conference call.

So again, my name is Armin Martens, I’m 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. So to begin with, again I would 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.

Again, you will soon notice that we have decided to keep our presentations shorter, to see if it works better and then will have more for Q&A, if it’s desired. So now, I’ll ask Jim Green to review our financial highlights and then I’ll wrap up with some market commentary.

Go ahead Jim.

Thanks, Armin, and good afternoon everyone, as the comment we've certainly made before, but internal growth has always been a focus for Artis and internal growth combined with development opportunities is becoming more important for us as we've slowed our external acqusitions. As we've discussed in the prior quarters, we've been quite a bit more active in developments.

We currently have over $82 million invested in projects under development, 35 of that on the REIT’s balance sheet directly and further 47 in jint ventures with other parties. Numbers down from last quarter dues to the successful completion of three properties considered held of development.

As detailed in our MD&A, we still have a number of projects in the planning stages where development activity has not yet started. We had no external acquisitions in the current quarter, pretty quiet.

However, one acquisition is included in the subsequent events; we did successfully sell two properties in the quarter for net proceeds of approximately $53 million. Sorry that was gross proceeds, I believe net was around $33 million.

As a diversified REIT, we benefit from the differenced in the three commercial asset classes as well as our geographic breakdown. Artis started originally as a Western Canadian REIT, but over the last five or six years we've further diversified our geography to include assets in Ontario and the United States.

Not a surprise and I’m sure everyone wants to talk about it, but the drop in oil prices and the potential negative effect on the Canadian economy as a whole in Alberta in particular does affect us. For the year-to-date, Artis earned 37.2% of its net operating income in Alberta and roughly 45% of this or about 17% of the total comes from Calgary office properties.

We do expect the Calgary office market in particular to suffer from lower oil prices and related lower activity in the oil production and exploration sectors. The good news for us is that our occupancy is still holding up fairly well and our specific Calgary office properties at an average of 93.2% and lease expires over the next few years are not huge.

Our expansion into the U.S. has helped us provide an almost perfect hedge against the falling oil prices and that lower oil prices generally producer a weaker Canadian dollar and this benefits the operations from our U.S.

properties and translated to Canadian dollars. We got a great lift again this quarter from foreign exchange based on the fact that roughly 26% of our portfolio is in the U.S.

I’ll spend a couple more minutes on highlights from the quarter and then pass it back to Armin for a little more discussion. And as you heard Armin mentioned, we’ll keep it at a little higher level this time and we’ll be happy to answer questions.

So I’ll hit on a couple of highlights that the fair value of investment properties, our investment properties are valued at fair value and we adjusted the cap rate slightly on some of our Calgary office assets this quarter, but the bigger impact came from reducing some of our expected rents over the next couple of years. The impact of this was a reduction of almost $33 million in our Calgary office portfolio, and this breakdown was offset by gains in other sectors to arrive at a net loss for the quarter of roughly $6.4 million.

The cap rate movement in Alberta is not really supported by any significant volume of transactions, it’s just been very quiet in that market, but we deemed it prudent to reflect that an adjustment on selected properties. We are not anticipating major changes in cap rates in our other markets in 2015, but we are paying careful attention to the Alberta office market.

Net to gross book value is a metric that’s always looked at closely, we remain very comfortable with higher debt to gross book value ratio, it was up slightly from – actually down slightly from year-end due to the fact that we have been a very quiet quarter. So not much is changing, we have drawn a little bit on our line of credit and used the proceeds primarily to payoff secured mortgages, such that our secured mortgages are now down to 39% of gross book value and total debt including both convertible and unsecured debentures are at 48.3%.

One of the goals of payoff the mortgages has been to increase our unencumbered asset pool, and the unencumbered asset pool using the June 30 fair values is now $985 million when you include the numbers that are in our joint ventures. Lease termination income was a bigger number for us this quarter, it’s not unusual, but it is unpredictable.

We received $3.3 million this quarter compared to $82,000 in the same quarter last year. A large piece of that was for a lease termination of a single lease.

Same property operating statics, very pleased to report that our first, the second quarter showed an increase of 2.7 million or 3.5%. We saw positive growth in all segments of our properties, asset class industrial perform the best with overall same property growth of 6% for the quarter and 7.8% year-to-date.

Retail was next at 3.2% and office followed at 2.5%. Calgary office portfolio again that’s a concern, but it was actually very close to neutral this quarter, small positive result of $68,000.

Looking at our entire U.S. portfolio, the same store growth was 14.9% for the quarter, pretty phenomenal, but of course, a lot of that is due to the weakening of the Canadian dollar.

Strongest sector for us in the U.S. was our industrial followed by office, followed by retail; total U.S.

growth in U.S. dollars was 1.9%.

The Canadian portfolio had some ups and downs this quarter and that was a small positive result at 0.1% for the quarter with gains in industrial and retail offset by some issues in the office market. Net debt to EBITDA ratio was 7.92 times based on the June 30 numbers and we are very comfortable with that ratio of EBITDA, interest coverage ratio was 3.0 times.

The REIT does that partial natural currency hedge based on the information in the June 30 statements with roughly $1.5 billion assets in the U.S. we hope $665 million of U.S.

liabilities and $88 million debenture payable in the U.S. dollars and $75 million on preferred units that would redeemable in U.S.

dollars. In my opinion, that gives us a natural currency hedge of approximately 50% of our U.S.

exposure and as of today, we have no plans to hedge the remaining exposure. Turning for a minute to the non-GAAP metrics, FFO for the quarter on a diluted basis once we back up out impact of lease terminations was $0.37 and it was $0.39 including the lease terminations up from $0.35 in the same quarter of last year giving us an FFO payout ratio as adjusted for 73% for the quarter.

Our calculation of AFFO was $0.32 for the quarter compared to $0.30 in Q2 of 2014 and that gives us an AFFO payout ratio of 84.4%. As I mentioned, Artis reports its investment property is at fair value under IFRS and therefore we can calculate the net asset value for trust unit based on the financial statements.

So happy we adjust for equity held by the preferred unit holders, the net asset value for common trust unit was 17.46 and when you dilute that by the effective outstanding in money options it’s about 17.42. Substantially above where the units trade today unfortunately, but that’s beyond our control.

Values have risened from year-end largely due to the positive impact of foreign exchange. Artis ended the quarter with almost $58 million of cash on hand and $82 million undrawn under our line of credit.

Subsequent to the quarter end we did draw and extra draw on the line that was primarily used to purchase, U.S. dollar and we did acquire a further property.

Further subsequent events are detailed in the statements and that basically completes my review of the financial situation. So it was another solid quarter for us, looking forward to next the quarter and look forward to demonstrating our results.

Thanks very much everybody and I will hand it back to Armin.

Okay. Thanks a lot Jim and I will continue for just a few minutes then.

So fokls first of all we are pleased that on balance in the year continues to go well for us and are confident that Artis will continue to meet or exceed expectations in 2015 and beyond. The benefits are being are diversified REIT both geographically cross-border and by asset class has proven to be rewarding one or Artis’ unit holders.

As mentioned, before it continues to be our view of both that U.S. and Canadian economiwa will perform fair to good this year with the advantage clearly going to the U.S.

economy, everyone is along the U.S. economy right now and among other things, this will be reflected by stronger U.S.

dollar. Needless to say the longer commodities remain low, the greater than tendancy would be for the Canadian dollar to trade more.

The Bank of Canada cutting its overnight rate again and the Federal Reserve potentially increasing its rates at least once between now and the end of the year. This will put additional negative pressure on the Canadian dollar.

In terms of acquisition caps rate during Q2, while they remained level for the quarter, but with the recent cut in bank’s counter rates there continues to be negative pressure on cap rates, especially for good real estate. So the wall of capital chasing real estate deals is a very strong and we feel that even if interest rate were to rise some day we do not expect cap rates to move up in tandum.

In both the U.S. and Canada now there continues to be a significant shortage of good real estate being brought to market and the flip side is that good real estate is priced to perfection especially here in Canada.

So for 2015, we expect cap rates to remain level for some asset classes and fall for others. Now in all of Artis’ target portfolio markets in assets classes, the property market continue to hold up and experience healthy occupancy levels including Alberta retail and industrial.

Now the Calgary office market is our only exception as you know and we will continue carefully monitor oil prices as this is having a profound affect in occupancy and rental rates. Year-to-date the Calgary office market experienced $1.6 million square feet of negative absorption and we sense that this trend will continue for at least another two quartera before leveling off and anywhere from $2 million to $2.5 million per square feet is guest mate right now negative absorption before things level off.

Other than that real estate fundamentals and all of that as I mentioned and all submarkets are quite sound. In terms of our portfolio performance as you have seen and heard, we have seen our metrics are good with healthy gap between increased rents and market rents and are achieving good rental increases and organic growth.

Our leasing progress is good and also we feel we have limited and manageable lease renewal exposure in our Calgary office portfolio for this year for 2016 and 2017 in particular ad that is as far as we want to look out for now. Our portfolio continues to demonstrate a longstanding track record in the occupancy level in the 95% range, which speaks well to our portfolio, to our management team and the reliability of our income.

Our strategy to diversify to the U.S. continues to be a sound one if the pressure ball drops well we get compensated by our U.S.

portfolio and if the pressure ball goes up we get compensated by our Calgary office portfolio and as our result indicate on balance we are coming out of head at least even with the diversification. Recycling of capital is a matter that many REITs are holding up now, in our case you will notice we have sold some properties; we haven’t bought that much between now and the end of the year you should expect us to buy and sell about that same amount.

So basically recycling capital and that we think in a very intelligent and strategic and accretive way. Now that wouldn’t surprise me if we ended up selling more properties a little more this year than we bought.

At the end of the day, value creation is most important to us and we continue to work hard to keep our buildings full whilst bringing the rent up to market and consistently improving our real estate portfolio, our balance sheet and our payout ratio. So that’s our report for this quarter folks, we are pleased with the results and greatful for low interest rates and sound real estate markets and we are confident in our outlook.

We continue to believe that 2015 will be better than 2014, which was a record year for us actually and 2016 we feel we would be better than 2015. So I will now ask the moderate to take over and fill any questions we have.

Moderator.

Thank you and good afternoon everyone.

Hi, Mike.

Armin, over the past several years, one of the themes that you’ve kind of been focused upon was continuing to increase the quality of your portfolio and as we read through your MD&A you have some comments there about wanting to take your U.S. exposure to 30% not being based on the fact that you can still buy better properties at more attractive prices in the U.S.

vis-à-vis Canada and just given those sort of two points that we just talked about there, I’m curious how do we reconcile that with the acquisition of the Graham portfolio in canada. A - Armin Martens Well first of all the Graham portfolio is a good portfolio for real estate, 19 year lease, clean, what you see is what you get in terms of the rent, there is no leakage anywhere, Graham staying in the deal or above 75% it is good to see them staying at 25% expect that this will lead to other potential deals and other markets that Graham is in.

So it is good real estate, grant is in Western Canada but 19 year lease, we like their covenant and their credit as a rental lift of 8% every five years, I mean it makes good sense for us, it is not just stable but it is also giving us rental increases and when we started this, to be honest is that deal took a lot longer than we thought, when we started back in March. Our units were trading at higher price and the deal was accretive no matter what, but the real estate is good, the tenant is good, very long-term rental lifts so we like that and we think it will lead to other deals and as I mentioned Graham is staying in the deal.

And parallel with that for new deals, you will see a few things getting announced and you will like what we are buying, you will also like our development projects as they come to fruition and most of them are going to be in the U.S. where we will get new generation of real estate and will benefit from the flat quality and then we will have the option of keeping that real estate or disposing it.

Okay, that is a good segway into my next question just with my respect to the land parcel that you bought in Denver adjacent to your DirecTV buidling, do you own that site, right 100% and how close are you to actually breaking ground there, and you have a partner lined up.

We own that 100% and yes, it’s adjacent through our DirecTV building, still has I think 11 years to go on the lease, immediate connectivity to the dry creek, LRT station, on the i25 great location, normally we wouldn’t have bought that sight, but being adjacent to our building, we want to cover our flank and we tried to buy a year ago when, two years ago when we bought them DirecTV building as well. You might recall that we bought 601 Carlson, Minneapolis, a very prestigious office building and then [indiscernible] side there, west side of Minneapolis, subsequent to buy that building and was the one surplus side adjacent to our office building came to the market we’ve bought that as well.

So it does makes sense for us to own the second phase land if you will. We don’t want somebody competing against us on our neighboring site.

Also in the case of that DirecTV site, it’s fully in serviced if you will, it’s cuddled with aspholt, its striked for parking, the DirecTV employees are using it and they all seem to want to use that beautiful parking out the house. And for DirecTV is paying the property tax and all the maintenance expenses for lot.

Anyway, so it’s calculate nothing to carry in that sense. Looking ahead, we are about a year away from breaking ground; we’ve got the auction of two small buildings under 20,000 square feet each, or one Class AA building of about 320,000 square feet.

So we’ll see, we are in discussions Tramell Crowe to partner with us on that office development. You might recall we’re in a joint venture with Tramell Crowe in Phoenix on an industrial project as well as in Houston on an industrial project and we did one two years ago with Tramell Crowe up in Minneapolis.

Okay. Presumably, the structure would be similar to the deals we’ve done with them on a 10.90 basis or something like that.

Exactly, yes.

Okay. It seems like it’s obvious we are heading for a more difficult down turn in the Calgary office particularly when you compare it to what we experienced in the last down cycle in 2009 and maybe you could say 2010.

Given what you are seeing today what level of occupancy arose and do you think is realistic to assume for your portfolio over the next two to three years.

Fortunately, we don’t have a lot of turnover in relation to our home portfolio. Our occupancy level is going to come down.

I think that’s again Q4 I guided two points over three years, it’s hard to predict and so as in this last quarter, our same property NOI was actually still positive for our Calgary office portfolio slightly positive, but eventually there will be some erosion there. We think the next couple of years, we are overly exposed that’s quite manageable if that this continues right at after 2018, 2019, things will get more challenging.

Historically we’ve been able to beat the market, I think market vacancy is about 13% with some of these spaces now and claiming what about six or seven, we’re ahead of that. And we think we’ll always be better than the market.

Okay. That’s helpful.

Thanks very much.

Thanks. Good afternoon.

Just following along on Mike’s question there, I know there is a not a lot of expiring in Calgary, the next few years but are there any larger leases that you are concerned about it all.

Yes. After a while, you stop thinking about it, because for the next couple of years now, 2018, I believe that’s when [indiscernible] energy comes up, so oil, that’s on our radar screen, right.

I think that’s about 60,000 square feet, if not mistaken, but other than that, we’ve got – our buildings are - we bought logic tenants but their lease got eight or nine in years, we are approaching that with all of our large tenants other than, tenants winning by small tenants. And in that sense, we are doing a pretty job of retaining them, smaller tenants are not a target for the big class – class AA office buildings in those landmarks, we are going after the bigger tenants.

Okay. Do you have much sub-leases or many tenants have sub-lease space out for you.

We do have some I believe about 20,000 square feet with Amech Engineering. We just signed a big lease of Amech Engineering down south land, Amech – Heritage Square just last fall, we were great to offer that and but then when the market went south on us, then Amech had another lease in our Canadian place building there and then CBD that they put up for sub-lease there is a little, there are some sub-lease space in our building I can’t couldn’t give you the exact number.

Okay, but not in the overly concerns you.

No, no we know it’s happening right now we are grateful in the sense that we see the Calgary office portfolio NOI, for going itself on us and hasn’t started yet, but we can see that if it’s happening but we think it’s we are going to manage it as best as we can, we are going to hang out to tenants by ankles and we - renew any and all talents that we have, at least in job one without about and then we have fully expect about to benefit from positive organic growth in the rest of our portfolio to offset the negative in the Calgary office portfolio.

Okay, just switching gears a little bit here the 12% jump in average rental rents you got on renewal this quarter, do you have any currency impact in that number.

No.

So, do you have some I mean just use a percentage type there?

That’s right. That’s blended dollar so if it’s U.S.

lease that’s the percentage increase on the U.S. dollar, if it’s Canadian lease then it’s a percentage increase on a Canadian dollar.

Okay and then finally just the lease termination income was that mostly in this office building and most of that you have sold.

That’s correct.

Okay, thanks. I’ll turn it back.

Hi, good afternoon. Maybe just look into the Calgary Armin you mentioned on too many larger lease expires anticipated in a couple of years.

Your average tenant whether there are 8000, 10000, 12000 square feet, what are they doing in this environment in terms of renewals are they generally contracting couple thousand square feet or they staying from are you seeing an increase in bad debts among those steps - at this point.

Yes, we have seen a little increase in the bad debts not much about a little bit and in some cases there is a shrinkage and in some cases there is renewals we have been had tenant expand but without a doubt we’re playing a very good poker game, they know it’s a tenant market and they are taking full advance of that.

In generally the smaller tenants typically give less lead-time in terms of making leasing decisions, are you seeing those types of tenant I guess you are thinking kind of delay decisions more so in the past.

Yes, have a little bit and that’s always been there nature to make decisions near the end of the term and not early. We do our best and that’s we are not I am surely not alone in among landlords, we do our best to get in front tenants early including all the small ones, surely as we can over there - for sure anybody within 18 months we talk to and we don’t wait and for 6 month term.

But the flipside is that, they feel they’re better [indiscernible] the end before the lease comes up and in the end they are not afraid of them have been kicked out right, so the tenants are in the driver seat right now, but for about the tenants, if he has got a policies, they got business that working, that’s working, they’re still landlord that always having advantage within existing tenant retaining and we continue to work that advantage better as possible.

In terms of renewal rates, can you give a sense in terms of what you’re targeting, in Calgary over the next couple of years versus the total average?

I don’t know if we disclose anything. In the MD&A [indiscernible] there is breakdown of what we are anticipating the weighted average market rental be over the years.

I mean in terms of retaining tenant, what your renewal rates are like?

Okay, just retention the, yes I’m not sure - [indiscernible] I get the reports every two weeks but we were above the average what kind of retention we are not loosing many, we are all over them but got a [indiscernible] when 80% range.

As much as an average specifically on [indiscernible] its page 20 in the MD&A there is the current in place expiring for the 2016 expires, is $25 bucks and we are anticipating it were rolling above 1950.

Okay, Just maybe switching gears to Winnipeg, Artis were down a bit quarter-to-quarter across most of the asset classes, can you give us an update in terms of broader market fundamentals there and whether we shouldn’t anticipate our consumables to start ticking backup again?

[Indiscernible] yeah it would have historically fluctuate within a certain bandwidth if you will and this is nothing new at all, I think it is a very healthy industrial market and I would say retail market is the healthiest, industrial and office after that. And in terms of velocity of tenants and potential deals it is a little higher for industrial and for office, office is – we don’t our occupancy levels are fairly high, it is not bad and we have the RBC building, we renewed that lease with RBC building we knew they were leaving but the flip side to occupancy level being level and consistent the new tenants there in Winnipeg there aren’t that many new tenants.

When we get in front of them. But the total of [indiscernible] real estate we have in Winnipeg that we will see a development go ahead getting not very soon another retail development on that will be fully preleased.

Okay, maybe last question just more of a broader question you touched on earlier on with respect to the diverge between Canada and the U.S. now we haven’t historically seen a lot of divergence in monetary policy between two countries that maybe the case in the next – Fed already tightening I think Canada obviously cutting, what is your view on kind of the correlation between the various bond yields, the U.S.

10 year treasury and the community and 10 year bond yield in this environment, how does that kind of alter your capital allocation strategies?

Yes I think we have come along with in 2008, 2009, 2010 when our Government of Canada said kept saying every 90 days that they are going to raise rates because economy was so good so that now we got the economy is there for sure, and the bond market put one toe on the water so to speak and she will hope that it works, but I don’t think we will get a second rate increase in Canada we should get one more rate cut and if that doesn’t work we might be able to talk of Chile and Canada for the first time. Allocation of capital and we are still more bullish on U.S.

economy notwithstanding that while in our dollar versus their dollars and we know their yields are higher but I am still more bullish on their real estate fundamentals, metals and their economy, we know they have any – there has hardly been a reduction in oil production in United States whereas it has been significant reduction in Canada and that is just one example, so it won’t be long that we – the talk is that after the next – the oil producers will be given approval to export oil and historically in the United States it has been disallowed they can produce some sell domestically, they can domestically but they can export and their cost of production is very low, much lower in United States than up here in Canada, so they have got that going for them as we have said before energy self sufficiency is just a game changer for the world’s largest economy, now when you talk to the Americans they are not necessarily with their economy they are concerned one rating cut, rate increase is not that much but it is going to push their dollar up even higher, they are losing the currency, but that is by design I guess but after long they are going to get tired of having the strongest currency in the world and being the – in the global economy and the exporters here, manufacturing exporters are concerned about that side of it, I will just see rates staying low for long time, I don’t – I think the U.S. with their strong dollar can afford to raise rates much, I think the bond market gets that I don’t think the bond will go up much, again down to a simple [indiscernible] and this is a great time to be in the real estate market, because interest rates are just going to – they are going to stay in the low trading range for long time and low bandwidth.

And is there obviously big Canadian currencies are clearly tied to commodity prices but from a capital allocation standpoint is there a currency that you have in mind within the next several years where that start, Canada starts to look good on a risk reward basis in terms of investment?

90 days ago I would have said $0.80 and now I’m afraid $0.75 not the bottom, I’m afraid we have – on our currency yet because, I think – it will take a lot to get our economy going and if oil and gas and I think oil prices will be structurally low for several years, more years than we want and we need – somebody has to compensate as a manufacturer exactly in Canada and Eastern Canada to compensate for Western Canada, call me not performing that and we don’t see that happening very easily with lots and lots of automotive jobs to Mexico. So I think that dollar bottoms with a six handle not with a seven handle.

Things to watch first the professional traders, right now the foreign buyers of recent foreign buyers of Canadian securities they are still leaving us alone and then selling, they’re not buying. But a lot of portfolio managers have made clear out of riding the Canadian dollar up to parity just in the last cycle.

And if they sense bottom of the Canadian dollar then they, we should expect everybody to buying and we then end to move up. So we’ll all be in the same bandwagon.

But there will come a time, Mario, well for sure what makes sense to invest incremental cash in the U.S. real estate but right now, we are sure like what we have and the portfolio of doing what’s supposed to do.

We like our balance sheet, our payout ratio and we’re keeping all of that sort. In our case, for example now there won’t be a strategic review of our U.S.

portfolio with the view of cashing in on it. But you will at times, selling a U.S.

property and recycling it in the U.S., you may even see and profitably sold an Vancouver 10,45 hall and it was based on in place NOI was 2.75 cap stabilized with a 4.5 cap. We did very well selling that and we will recycle that into a U.S.

property and that will be virtually better real estate, lower price per square foot, higher yield it will make sense when as the quarter and the year unfolds.

Well, thanks for the expansion to the U.S. is proving to be a very good transaction retrospect.

Hi. When you make the adjustments for the IFRF values recovery, can you just talk a little bit about what kind of quantum changes, you made on the rent assumption and on the cap rates.

So not so much. The bulk of that decline in value Heather came from rent adjustments more so than cap rates.

We moved few buildings from about 25 basis points on cap rates but not the entire portfolio. So it wasn’t huge on the cap rates of the bigger drop in value came from ruling the rents down a little bit further yet.

So those decreases like how big would they have been and do they, I’m just trying to get a sense of whether that ties into your disclosure that the negative mark-to-market on the Calgary office portfolio that you just closing your MD&A?

Yes. It will.

And we use the same metrics in market rents in the MD&A and the appraisal process.

Right. And in terms of what you see in the market from I get a sense that we’re sort of at that stalemate point in the cycle where not a lot is getting done but can you just speak to the type of tenants that maybe looking any kind of leasing deals you’ve seen the market, that would be driving the changes to your assumption.

Are you talking about the Calgary or office market or in general?

Yes.

Sure. So we know real time as we renew leases what we are getting that is our first data point.

And Calgary, aren’t a lot of new tours, aren’t there a lot of new tenants out there, everybody still just battling down the hatches. So it’s all about renewing the existing tenants.

And on balance, most of them are getting rent reduction and we still have some leases that are really cheap that go back to 08 or 09 that last recession that we renewed and believe or not we’ve to add increases. And so in our case because of that last cycle, 08 or 09 it might not, we don’t expect it to hurt us much as it would have we haven’t had that down term back then.

And what about sort of the other oil markets. What are you seeing in Texas and maybe you could just give us an update on that office development that you had put on hold.

And whether that shift there?

Well Texas and Houston in particular, very, very diversified, they’ve had job losses in the energy sector but on balance, they still have had positive job creation in the last 12 months, even the last six months I believe. So yes, that office development with our joint venture partner in energy quarter, it’s a great sight.

It is on hold, it’s a five phased development, believe it or not there is some activity and we’ve even been trading paper with the major engineering firm that was involved in merger of two firms, can’t give any more details but there is some activity for 500,000 square foot of lease for example, so we are in business looking for a significant pre-leasing and if we get significant pre-leasing like 80% or 90% then we would start, and otherwise it’s on hold until we get more visibility. We need to, as you know in Houston, it’s not contact - oil price and they’re making money at all right now and they are working, but there was over building in the energy corridor as well.

So that’s on hold until we get more visibility and we, and it makes good sense to start our industrial property there Park 890 and into second of Highway 90 and end of the Sam Houston and Doorway number eight that’s a great site under 28 acres and we do expect a great [indiscernible] our phase this fall there we are very think a lot of activity there. But the industrial is easier to manage not its capital intensive and you can turn of the tap at least and it doesn’t work until leasing doesn’t work but we like that site and that development and we have just see a lot of demand for that end.

And is there any pre-leasing at that place like.

Well we are always responding to RFP and we including build the suits but we haven’t built done in industrial development with any pre-leasing yet, many offices results spec and then it was fully leased when we finished, phoenix was all spec and leasing progressing very well, not that we deliver the product, so we are prepare to built for example the first of three buildings in 80,000 square feet building to get the bond rolling on spec and to demonstrate to that the projects going and the tenants are, but the tenants are likely want to know for sure that you are building so then sometimes have to build, but we are not very concerned about that, that’s sort of the MO for industrial developments very seldom is their pre-leasing in that’s the RFP built-to-suite otherwise developers are building, one building at time on spec leasing them up and building the next one on spec.

And just finally, in terms of where the stock prices and in apply cap rate in order to, can you just comment on whether you are looking to step in on buying back stock.

Well, we’re doing is recycling capital - not raising more equity and that as I said by the end of the year, that the property we sold to put the money the price we got for them and how we deploy the money, but we like our balance sheet, we like our credit rating, the DBRS we put an Artis is, it’s public information, what I has to bigger not as small as, so we are not in [indiscernible] to shrink to shrink our equity base and our balance sheet.

Thank you.

Thank you and good afternoon. I have, I might to the last two years you have been building a lot of flexibility on lease more flexibility in terms of your payout ratio, you have held in for over 6, 7 years, you are lowering your leverage and just you’ve done more flexibility, you made a on this call you made a very strong argument and compelling argument that the Canadian dollars can end with 6 handle not a 7 handle, your units are trading to over 20% discount in net asset value.

And you made a comment that there is wall of capital chasing real estate. So I am just wondering at what point will be in a position to sell some of your let’s say your Calgary, high cap rate Calgary properties, are be that a high cap rate, but given the fact your view is that - Canadian dollar is going go down, oil is going to stay low and your units are trading you’ve already written down some of those assets, I mean when will you be in a position or is that just not something you are kind of thinking about.

Yes, we don’t like to sell low right, I think you can see 1045 [indiscernible] we sold that at a very good price, we got out of this empty this building, we sold it to owners in [indiscernible] you will see between now and the end of the year of selling at least another $100 to $150 million of real estate at very good prices will be Canadian real estate and redeploying that money very wise and it will - any surprise that the price is we get and even I’m selling one U.S. we trading one U.S.

property always for good gains, low cap rate, so it just two more that in our Calgary office. We are hearing anecdotally rumors that, hedge funds are there – as a certain buyers are there looking to do some bond feeding if you will and we are not saying no, but we are not marketing any of our properties either, so but I’m not optimistic there is very little velocity, I don’t know if any trades that are taking place right now in the Calgary office market but yet I wouldn’t be surprised if between now and next summer [indiscernible] we’re willing to take a risk on some Calgary office properties and where we want to buy and they are talking B real estate not just the A real estate, so it is just program how to guarantee but it is on our radar screen if the opportunity present itself to diversify a little out of that Calgary office market.

I mean if you did get out of that Calgary, maybe your units would trade better even if you have to just cut and run kind of thing and it is not, it sounds like it is going to get worse before it gets better and it sounds and you definitely want to expand in the U.S., your target is to get to 30%.

Yes it’s a good point, it is not that you sense to push a button and get a buyer at certain price but to cut [indiscernible] right now you can do the math just often ask yet the market is, our units are trading as if our Alberta NOI, the total forms of Alberta and the NOI down by 30% and as if we have 100% field rates, we have been beaten down a lot and so that doesn’t make sense, I don’t see things getting that bad for us, but we are trading as if on the [indiscernible] and again not here.

Exactly so when you mentioned that you may be selling some U.S. assets and recycling, would that mean like maybe focusing more on the three markets and maybe selling to Florida or New York and just focusing on Denver, Arizona and Minnesota?

All of that and even recycling the property in Minneapolis and to something better in Minneapolis or better in Denver but all of that.

Okay. Thank you.

Thanks hi good afternoon everyone.

Hi Jenny.

I’m looking at your opportunities for acquisitions in the U.S. and Armin, I’m wondering if you can comment on where geographically you’re seeing the best opportunities within your market and are there any other potential new markets where say fundamentals look a little bit more favourable or maybe the pricing looks bit more favourable that you guys are sort of kicking around in?

Yes still Minneapolis and Denver and Texas and all of the four markets we are seeing some good opportunities. We are not seeing many new opportunities in Phoenix but in very select markets but and we don’t think we are going to other markets, we are in four cities including Houston, and if we went further and I still like Texas as the state, 28 million people it is a country of its own, no income tax is the corporations or individuals, sales tax on the lower side, they have got the port there that is expanded, it is one of the biggest in the United States and the Panama Canal expansion and the bigger ships in the world are there is entering Port of Houston now by Galveston, so a lot of reasons, if we can go a long time yet in that state and Denver and in Phoenix and in Minneapolis, it is good the – in those markets, Minneapolis is I will call that a most paid city in America, it is a great place to live with good business community, low unemployment, millionaires like to live there, pretty good job creation not too strong, not too low and taking taxations on an high side so it is pretty much like Canada I guess and Denver is on fire in many ways and Phoenix has had its own awareness and of course we all know the Texas story.

Q - Jenny Ma So with regards to the Phoenix in particular do you see the valuation there is being on the stable side or just starting to get a little bit rich? A - Armin Martens What do you mean by rich by low cap rates?

Q - Jenny Ma Yes. I am just trying to say recently you want to hang on to it, it seems like opportunities or is it maybe a market where there might be opportunities to selectively sell some assets?

A - Armin Martens There is one property we might let go there but on balance we like everything we have there including the new industrial that we are building, we have got really good real estate in Phoenix and Scottsdale.

Okay. And this is a question for Jim, in the same property NOI figure, you did disclose how much lease termination was excluded was there a material amount that was included in the same property figure?

No there have been none included.

Not included. Okay, great, thanks guys.

Thanks Jenny.

Hi, guys. With regards to the Ontario same property NOI growth and the bankruptcy there, can you just provide a little bit of color in terms of leasing, progress post quarter.

Yes. So that caught us off guard, the state is still fully leased and occupied by the subtenants.

The first thing we did is a step-in to be - if you will, and take over, but the sports organization of Ontario was doing and but those tenants, they are all paying but one-third of the rent that we were getting from the master tenant. So we are getting less rent but we’ve got own bodies in there and we are taking of them and we work through that.

We’ll see now, we’ve got some leasing velocity, we believe or not, we are cautiously optimistic about that were complex there about increasing the occupancy level and the NOI in the next six to 12 months because of other leasing interest. But right now, we are getting good support, good landlords if you will and taking good care of them, just as if nothing happened.

Okay. But you are right ultimately what to proceed if you found a tenant to take the entire space at a higher you could.

Good reason. Yes, we could terminate all or some but we would getting a very gentle line.

We hope to shift them around, right but the good reason that can, that space belongs to us.

Okay. Just with the [indiscernible] you mentioned that you are trading at a fairly deep discount now and there is a wall of capital looking for real estate in Canada.

Just wondering, what your view as in terms of - because it’s not just you that are trading at a discount but why we haven’t seen more M&A in the Canadian reach base, is it just because Canadians are too polite to go hostile or is there something else to it.

Yes. I can’t answer that because clearly the table is set for M&A activity to increase right.

Even with the premium, it would make sense and our cost of capital isn’t that good but I think – in our case, we’ve actually never done M&A deal, we tried when years ago and we found to be a better off always just buying real estate directly and it worked for us. But here theoretically the table is set for more M&A activity and it won’t surprise me [indiscernible] something happened.

Okay. Fair enough.

Thanks guys. End of Q&A

Thanks again, moderator, and thanks everybody for joining us. Have a good weekend and a great summer.

Talk to you soon.