Thank you operator. Good afternoon and thank you all for joining us.

Welcome to Artis its First Quarter 2022 Results Conference Call. Listening on the call today from Artis is Samir Manji, President and CEO.

Jaclyn Koenig, CFO, Kim Riley, COO and Phil Martens, Executive Vice President U.S. Region.

Our first quarter 2022 results that were disseminated yesterday are available on SEDAR and on our website. A replay of this call will be available until Friday, May 13th, in order to access the replay.

Please see as the telephone numbers and passcodes that were provided in yesterday's press release. A recording of this call will also be made available on our website.

Before we get started, please be reminded that today's discussions may include forward-looking statements, such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors in our public filings with the securities regulators at an suggest that you refer to those filings.

As we discuss our performance. Please keep in mind that all figures are in Canadian dollars unless otherwise noted.

With that, I will turn the call over to Samir.

Thank you, Heather. Good afternoon, and thank you for joining us for our one results conference call.

As we've done in past quarters and in light with the fact that most attendees on this call have already reviewed our results, I don't plan to reiterate what is already available in our disclosures. Instead, I will keep my remarks high level and focused on the progress we've made to-date in the implementation of our business transformation plan announced in March 2021.

The momentum we gained through 2021 continued through the first quarter of 2022. Our ultimate objective continues to be growing net asset value per unit to value investing in real estate.

As we have shared previously, this will be achieved through three key pillars in our strategy. The first is strengthening the balance sheet.

During the quarter we sold one industrial and two office properties, which combined with property sales in 2021 equates to 44 properties sold since last March. Proceeds from these dispositions have been used to fund our NCIB, to reduce outstanding debt, and to increase liquidity.

On the NCIB front, we bought back 4.2 million units at an average price of $12.46, a significant discount to our current net asset value of $19.09 at March 31st. We ended the first quarter with total debt to gross book value of 43%, a significant decrease from the 49.3% we reported prior to the announcement of our business transformation plan.

Our overall liquidity remains healthy and strong. The next pillar of the strategy is driving organic growth through development of our assets.

This include enhancing performance at our existing properties, as well as growth through new development projects. At March 31, our portfolio occupancy, including commitments, remained stable at 91.6% and we achieved a 7.8% rental increase on renewals that commenced in the quarter.

In terms of development progress, we've completed the fifth and final phase of Park 890 in Houston, adding 675,000 square feet of industrial space to the existing 1.1 million square feet across the first four phases. Also during the first quarter we began pre -leasing the first 20 floors of apartments at 300 Maine in Winnipeg and Earls who occupy space on the main floor of the building opened for business.

The other development projects that we have underway, Blaine35, Minneapolis, and Park Lucero East in Phoenix are coming along nicely and we're very pleased with a strong leasing interest, we've witnessed to-date in both projects. The last pillar of our strategy is value investing, by redeploying capital into new investments, including core cash, flowing hard assets, and undervalued publicly traded real estate securities.

On March first, we, alongside our consortium partners, closed on the previously announced privatization of Cominar Real. this includes a milestone transaction for Artis and it's unit holders.

Since announcing the transaction last October, our conviction in the intrinsic value of Cominar Real Estate portfolio and the corresponding value upside in front of us has only strengthened. Artis’ total investment in this transaction was $212 million.

Of this, $112 million, including our previously owned Cominar units that had a fair value of $13.5 million with allocated to the acquisition of 32.64% of the common equity units in the newly formed entity. The remaining a $100 million was invested in junior preferred units that carry an 18% annual rate of return an attractive return for our unit holders.

The difference between the a $112 million invested in common equity units and the fair value of the net assets acquired as part of the transaction resulted in a bargain purchase gain at Artis is share of $111.7 million. There is also a tax component to the transaction, and we have recorded a deferred tax liability of $27.8 million as a partial offset to the $111.7 million bargain purchase gain.

The bargain purchase gain we recorded this quarter demonstrates the value we are both committed and highly motivated to build for our owners. To significant transaction, we hope is reflective of what is possible for Artis and it's owners as we continue to evaluate and explore other opportunities.

During 2021, we also began accumulating a position in dream office, which culminated in the announcement that we together with our joint actors, had acquired a 10% ownership position in dream office. Subsequent to the end of the quarter, we further announced that our ownership position had increased to 12%.

This is one of several strategic public securities investments we have made. We look forward in time to expanding our narrative around specific entities we've invested in.

But we will do this in a thoughtful, calculated manner that we believe is in the best interest of Artis’ unit holders so as to ultimately keep our cost of investment as low as possible, thereby enhancing the probability of maximizing our returns on the other side. We're off to a good start in 2022.

We look -- We're looking forward to providing further updates on our progress after Q2. We're also looking forward to holding our Annual General Meeting in-person on June 9th in Toronto.

We look forward to the opportunity to meet our fellow owners and other stakeholders at our AGM. With that, I'll turn it back over to the operator to moderate the question and answer session.

Sorry about that, it was on mute. Good afternoon.

So first question on the asset sales. You did $65 million in one you've got $60 million held for sale.

How should we think about that this year?

Jonathan, I would suggest as we have previously disclosed, we have year-marked about $500 million of dispositions for 2022, and we remain committed. And while it's clear that most that will be back ended by virtue of what we have reported in properties held for sale, and what we've completed in Q1, we nevertheless, are confident we will be able to achieve what was previously disclosed.

Okay. Are you seeing any changes in the market with the increase in interest rates over the last six weeks or so?

To-date, we have not, but as we all know, the things continue to move in fairly meaningful manner, including the volatility we're seeing. So at this point, we have not seen any significant change, but obviously a lot remains to be determined as we continue to navigate forward.

With that, if there is a change, would that impact the amount would you pull back on your sale target?

I don't believe we will. And I'd say that with the or on the assumption that if there are changes they will not be material in nature.

Now, obviously again, we're living in volatile times, so nobody can really clearly predict what the next several months holds in store. But right now we remain committed to the path we're on and general indications suggest a healthy demand in the private transaction environment.

Okay. And then just on your operations you had $1.8 million in lease term termination income in the quarter, was there any -- was that a bunch of small ones or was there one large one, maybe a little bit of color on that?

And if you have any lease termination coming up in the next of couple of quarters.

In terms of the in-quarter, no individual significant ones to bring to the particular group. Is there anything adding you can view there Kim on any future expectation?

Nothing that I'm aware of at the moment, that's more of a one-time Item.

Okay. Thanks.

So I'll turn it back.

Thanks, Jonathan.

Hi. Good afternoon and thanks for taking the questions.

I wanted to come back to the bargain purchase option just to get a better understanding of kind of the mechanics of quantifying it. So Samir based on kind of what you highlighted, essentially the 112 million is the difference between what you think the fair value of the assets you acquired in your purchase price, essentially, which I guess in directly would've been 11.75 per share, which is where Cominar has privatized.

So just thinking of it differently, are you essentially saying that the assets which you acquired are almost closer to $23 per unit, for Cominar unit, which is essentially double, uh, what was paid. Like, how should I think about the mechanic behind all this?

Yes. Thanks, Mario.

Remember that we're talking about gross asset values, whereas the equity component of our investment is a much smaller ratio. So one should not take our equity component, which is again, a significantly smaller ratio of the overall consideration paid for the privatization and the fact that we're seeing an almost double of that number, that doesn't suggest to gross asset -- the gross transaction prices double.

So if you adjust accordingly, it really on the equity we invested which at a 100% level is about $350 million. One could and correctly translate that into an additional $350 million of upside through that devalue delta that we estimate and that valuation exercise is consistent with prior practice at Cominar with respect to updated appraisals on a certain ratio of assets that rolls on an annual basis, and then additional valuations based on prevailing market cap data from third-party sources.

So overall, we feel reasonably comfortable in what we're seeing on the valuation front, and that's further validated by a handful of, in these holidays, a handful of dispositions that we've actually made on the net 83 assets that we retained in that privatization, where we've been able to divest of those properties at values equal to or greater than the underwritten values or IFRS values that we have on our books.

That will be my next question. I guess it was noted that your continual appraisal done during the quarter and then pertain to the equity investments as quality florid, so would ensure just they were actually any sports within that equity investments that we're kind of support in the valuation over $350 million [Indiscernible]

Yeah. We feel very comfortable and again, having a few dispositions under our belt is certainly very comforting.

Are there plans going forward in terms of appraising the equity accounted investment on a routine basis or will it be similar to what happened this quarter in terms of just looking at assets as you sell them and then using orders this quarter?

Certainly, it goes along with our accounting so the net equity investment is recorded at fair value. You'll see fluctuations quarter-to-quarter, but everything will be mark to the IFRS fair value.

Okay. And then can you remind us in terms of dream office, how do you treat the valuation for your IFRS purposes?

Is it estimated based on the value of dream that you hold internally, during the IFRS NAV or the trading prices?

The investments in our equity securities are recorded at the market price at the end of the quarter.

And then switching gears then to the distribution program that mentioned the $500 million still intact standing some of the market while tweeted that we're seeing here today. Know you're in the beneficial spot of we could invest in both public securities and private market assets.

The latter or the former has seen quite a bit of pressure in the last couple of weeks, creating some, potentially really attractive opportunities, may have not existed a month ago. Does the volatility in the public market change, the eagerness or willingness to sell assets in the private market in order to fund those potentially incremental opportunities, or do you think you have enough liquidity, enough balance sheet capacity to really take advantage of the recent volatility in the public markets without redefining or rejiggering the definition program.

Generally speaking, Mario, we are on track for our 2022 plan. And if anything, as you noted, the current environment is presenting some very compelling opportunities that I would say may not result in an acceleration of asset disposition, but certainly will result in an acceleration of redeploying some of our liquidity to capitalize on those opportunities.

And that's something that management and our board are aligned on and continue to have very high conviction around in so far as the objective that I touched on in my commentary that remains unchanged in so far as what our long-term priority is regarding NAV growth and value creation for our owners.

How much capacity do you feel comfortable with on the balance sheet? Let's say hypothetically the private market starts to become more complicated.

How much commodity on the balance sheet you have do you think you can make an execute on public market purchases without selling to -- into lawsuits?

Right now, we have ample liquidity as you know. And again, we don't think that will be impacted whatsoever by the timing and outcome of the asset or property dispositions that are either planned or already underway.

Just last question on the operational side. The same-store NOI growth came in at negative 2.5% in Q1.

Do you think it's still possible to get the positive same-store NOI growth in '22, or is that more of a 2023, trend?

Thanks for the question. It's really 4 office buildings that are contributing to that negative same-property NOI.

In the U.S. it's North Scottsdale Corporate Center, which has been fully released.

And that lease will commence in June. And then, it's also Stinson, which is in Minneapolis.

We lost a 128,000 square-foot tenant in that asset. And that space has also been released in June.

So on the U.S. side, things are looking really positive.

In Canada, it is 2 properties as well. It is our Bell MTS building in downtown Winnipeg.

Bell MTS downsized by 100,000 square feet. And that was really driven by a reorganization of Bell over MTS and ongoing reorganization there.

And in EMC, we lost a small tenant and are looking to back fill. So I think, Q2 could be similar, but towards the latter part of the year, there should start to be improvements with those June leases starting to kick in.

Can you remind me, are there any question marks about the AT&T lease in the U.S. In terms of square feet [Indiscernible] a year?

Yes. I believe in a previous quarter we had talked about the tenant is going to be vacating.

They will vacate February 2023, so we have some time. We are actively working on releasing that space, but it'll be at least almost a year before we have to deal with that and we're hopeful that we can get that pre -leased before they vacate.

Okay. Thanks for the reminder.

Hi, guys. Just trying to understand some of the proportional or equity accounted information that you've provided.

And particularly trying to understand how we should model it going forward. If I take IRS and just multiply by 3 to prorate it, is that okay on NOI?

And then, on the other operating income or expenses, I think, it's an expense. What sort of interest rate should I be using to get to the interest expense associated with that investment?

I can take that one. There are some items included in that other expenses, the NOI, I do believe multiplying there is a reasonable assumption.

On the other, due to there being some onetime acquisition cost of I believe it's $11 million, 865, approximately $5 million would be ongoing interest expense.

Perfect. That's very helpful.

And then just in terms of the balance sheet, I think you've report your leverage excluding kind of the leverage associated with these joint ventures. But it seems like leverage is quite high for IRS.

Is that all mortgage debt or what is the nature of the lending on that portfolio?

We made reference to this on our last quarterly call and I'll try and repeat what we shared at that time when we look at the overall cap structure that was established by the consortium for the privatization of Cominar. We used an LBO model to organize the transaction and structure it.

And so one can work backwards in so far as what is publicly available information, including what we've laid out from an equity component of that transactions. And so it wouldn't take long to then underwrite or analyze that while it's got various components.

Essentially, you've got a roughly $2.2 billion transaction with above $350 million of equity. And again, the fair value of that $2.2 billion we believe is higher and we've already touched on what that quantum or delta equates to approximately.

And then beyond that, just like it finished the story line because it's important to understand this and we again conveyed this on the last call. The consortium is very committed to reducing that leverage in 2022 and that'll be achieved through the disposition of certain assets that again, in early days, we are seeing very good signs, both in terms of interest level from buyers and on the valuation front.

So I hope that helps in terms of just providing that clarity.

That's very helpful. And in terms of those sales, what is your anticipated timeline?

Presumably you started even before the acquisition looking at selling some of those trophy assets there. But how should we think of that leverage coming down over a period of time?

And is that ultimately recourse to Artis or is it a cured some way through the joint venture?

Yeah. Both really good questions.

And let me start with the latter. There's no recourse to Artis.

That was again, made clear last call, but I will reiterate that because I think it's important to all our stakeholders to know that. And then, secondly, on the timeline standpoint, time is on our side.

Having said that, again, there's a complete alignment amongst the consortium partners that we want to see a significant reduction in the leverage by the end of 2022. And we're very confident that we'll be able to achieve that, and if it's helpful in terms of trying to quantify, I would say that at a minimum 30% reduction in the leverage.

But my expectation is, it will be well north of 30% if we are successful in executing what is on our radar for 2022.

The last one for me, is the buyer base for those assets. Mostly private entities, pension funds, foreign, domestic.

Can you give any indication as to who is looking at buying the properties?

The 83 assets that we retained are across a wide spectrum of both size, dollar value, location. Although over 80% on a GLA basis is in Montreal, which is certainly very positive in our view.

Nevertheless, we do have Quebec City assets. We have assets in the Ottawa Gatineau area.

And there is similarly a very diverse range of buyers. In some instances, strategic buyers who are private and who may have individuals or cluster of assets in the same or similar location within a certain catchment area.

We've seen incredible unsolicited inbound interest and then in other instances, we have consciously undertaken a process with third-party advisors who are actively marketing assets for sale. So it's a fairly broad spectrum, but the buyer interest remains healthy and remained diverse and that's again before we even start talking about any of the trophy assets that we anticipate will garner equally strong interest when we move forward in taking any one or more of those to the market.

Okay. Great.

Thanks. Appreciate the color.

Thanks. So Samir, on the market sell-offs, I think you mentioned likely begin to see an acceleration of buying securities.

Does that mean you'll buy more of Artis, more of Dream, or are you looking at other securities? And I'm curious whether you're constrained and what asset class you can buy when it comes to equities?

Thanks, Jimmy. Again, I'll start with the latter question.

We are not constrained whatsoever, in terms of asset class. And we're going to approach it as we have been to date, with our board of trustees and the investment committee of the board, on a purely fundamentals basis in what we're looking at, and or exploring, or that we've invested in.

And whether we turn the dial up on some of the existing entities that we now have an ownership position in. Having said that, going back to the first part of your question.

Again, we've got an active NCIB that we've reported on and when the unit price trades lower then obviously, our NCIB will remain active. And when the enterprise moves up, then we'll probably turn the dial down on our NCIB, so as to then allocate that capital to other uses.

Not to put words in your mouth, but it sounds like that's the first priorities to the NCIB to the extent that hits your head -- hits your target.

That's correct. When our unit price is trading at a discount of greater than $6 relative to our $19 now, it would be hard -- we'd be hard pressed to find on a risk-adjusted basis better opportunities for our unit holders.

Having said that, as I touched on earlier, thanks to the hard work of our team under the direction of our board of trustees last year, we made significant progress that put us in a very healthy balance sheet position, not anticipating the world would look like what it is, what it looks like today. But that's why -- that's going to -- we believe proved to be very beneficial for our owners.

Yeah. And then just a follow up on the Cominar purchase gain.

If I would just take the NOI for the one month in the quarter and annualize that, how do we get a very rough implied cap rate of about 5.5? And I'm pretty sure I'm missing something, but there is probably other values in there that cannot be captured in NOI.

And so maybe if you could share some -- like where are the assets that you've sold so far within Cominar so it gives you the confidence in the value that's been marked?

Again, Jimmy, we've got a very diverse range of assets. You have what I would describe as ultra-small assets, i.e.

sub $10 million in value where, between strategic buyers and or other buyers that would have an appetite for that type of deal size, there's no shortage of buyer interest. Then, you've got what I would describe as medium-sized assets between, call it $20 million to $50 million or $60 million.

And then you've got large assets that are $50 million or $60 million to upwards of several $100 million. When I think about certain the two largest assets, [Indiscernible] and class Selexis Neon.

And again, as I touched on earlier, particularly the inbound interest, unsolicited that we've seen across the spectrum of assets, has been significant and some of that inbound, unsolicited interest has already translated into a handful of dispositions that have been completed. Again, those will be smaller in dollar size relative to a pan or a guard central.

And then others are actively either under contract and/or in negotiations. So we have ample data points and experience to-date that enables us to maintain that confidence that I referenced.

Okay, and then last one, just on the industrial portfolio and particularly the Twin Cities area, so the vacancy I think looks to its hovering around 8% for a while, is there anything particular within that portfolio that sort of weighing on the performance, I would've thought the vacancy would be lower and it's kind of looking at the broader market, but maybe if there's anything you could point out in that segment

Sure. I can take that one.

It's really just one asset, so Maple Grove Industrial. We lost a tenant there and we are actively working with the prospect right now and optimistic that will lead to a deal.

It's really just one asset that's driving it and once that gets done occupancy will significantly improve.

Sorry. You said it was Maple Grove?

Maple Grove. Correct.

Okay, great. Thank you.

Thanks, Jimmy.

Hey. Good afternoon.

My first question is on the Cominar investment, specifically, on the debt. Wondering if you can disclose how much of the debt is maturing in 2022, and 2023?

Off head I don't have that number, but I think circle around up to the call and provide you an update.

That'd be great.

What I would say, is there's no near-term concern that we have with respect to any debt maturities that are on the radar, both in terms of the ability to renew and or refinanced that maturing debt.

Okay. Thanks for that.

And then, my last question is a bit of a two - partner on the investment in equity securities. First, I'm wondering for the security purchases that have been announced to-date, if you could disclose what the current market value of those are?

And then secondly would be, whether you've got any hedging programs in place on the securities?

We don't have any hedging program in place and we don't have outlook soft at our fingertips. The current value, obviously, everyone can see what's happening in the markets in terms of the broad sell-off.

And we will, as Jackie mentioned earlier, we will continue to report the ownership dollar amounts at fair value at each quarter-end moving forward.

Okay. That was it for me.

I'll turn it back. Thank you.

Thanks, Al.

Hi there. Thanks for taking my question.

I just wanted to zoom out a little bit. I know that you've made a lot of progress creating NAV since the current management was installed.

Under prior management for many years are was under-performing and undervalued, right? With all of the investment activity, how do you think about protecting against the risk that Artis simply becomes an undervalued holding company with no cash monetization going directly to shareholders?

Thanks Mason. We a year ago -- just over a year ago when we announced the business transformation plan, made it clear at that point that in so far as achieving the outcomes that we believe are possible, that this would be a two to three year exercise in terms of executing the plan.

So being now just over a year into that two to three-year period, combined with obviously macro factors that are impacting the entire, not only real-estate public environment, but just the broader capital markets environment. I think that we know what the opportunity as we know what the potential is, and we remain committed to staying focused and disciplined and what we're doing to try and achieve that two to three-year timeline that we communicated to our unit holders.

Thanks, I'll let it go and we look forward to continued progress throughout the year, so thank you.

Thanks, Mason.

Good afternoon.

Hi, Jenny.

Hi. Going back to the investment in equity securities, give us color on the recent market volatility.

But I'm just wondering as far as investment philosophy, are there any limitations in terms of your holding period and whether or not you would be in booking to be opportunistic and be trading securities during this volatile period, or is it really for strategic long from fourth positioning that with underpin the philosophy of at bucket?

Yes. Thanks.

Jenny, I would say from both philosophical, but I would also urge strategic standpoint. We're not looking to get into the active creating business.

That's not what this is all about for us. It is as I touched on earlier, largely fundamentals-based.

We have very high conviction, both in terms of our Board and its investment committee and the management team on the names that we are invested in and or evaluating. And within those invested entities, we are not time-constrained in any way whatsoever.

Having said that, we do on an entity by entity basis, have a certain desire, timelines and ideas related to how we ultimately can look forward to monetizing these investments over time in a manner that will generate for our unit holders a healthy overall returns.

Thanks, so is it fair to say that there aren't necessarily limitations of philosophically trading securities [Indiscernible] what you're aiming to do. [Indiscernible]

That's correct.

[Indiscernible] profile, it's been coming down a bit to 15%, but still relatively high. And I know Artis has traditionally, for many years, carried a higher proportion of that which has generally been helpful and accretive to earnings.

But with the type having turned on brakes, are you still comfortable in that low teens range on floating-rate debt or is that a number you'd be looking to bring down through fixing or hedging that exposure?

We're looking at our maturing debt as we go along. Right now, we are internally evaluating the balance between variable and fixed rate debt.

I agree with rates coming up, that's going to be something of our focus in the next coming quarters, as our maturities come due.

For the mortgage maturities that are coming up, and it looks like the majority of your floating debt is on the U.S. properties.

But is there any room to be up financing these mortgage maturities to bring down the floating-rate exposure over the next 12-18 months?

Yeah. There's room in the portfolio for that.

And would you be able to disclose or give us an idea, of what the floating-rate debt exposure might be inside the IRS portfolio? Would it be similar to what we saw from Cominar prior to the takeover?

I believe it's similar to what we thought prior, but I can hold that number for you and circulate it after this call.

Okay. I'd appreciate that.

That's all for me. Thank you.

Okay. Thank you, Operator.

And thank you all for joining us today. Have a great weekend.