Great. Good morning.

Thank you, operator. As a reminder, during this call, we will make statements that contain forward-looking information, which is based on a number of assumptions and are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those disclosed or implied.

We would direct you to our earnings release, MD&A, other security filings and additional information about these assumptions, risks and uncertainties. We also invite you to join us at our virtual Annual General and Special Meeting that will be hosted later this morning.

Joining me on the call as usual is Ross Drake, our Chief Financial Officer; and Dayna Gibbs, our Chief Operating Officer. Since inception, the REIT's growth and track record of consistent operating performance has been driven by a focused improvement set of strategies, a disciplined approach to growing our portfolio through new acquisitions, prudent capital management and achieving organic growth through our strategic leasing and management of our existing assets.

So kicking things off on Slide 4, so far this year, despite navigating market volatility, we have accomplished a lot. We started the year off by deploying over $200 million of capital for income producing and development property acquisitions in our core markets, and we'll continue to strengthen our balance sheet and enhance the REIT's overall liquidity, we have raised close to $650 million in new debt and equity capital year-to-date.

In addition, over 1 million square feet of 2022 lease renewals and new leasing deals have completed so far this year, generating over 50% in rental rate increases, which include deals where Summit has achieved over 100% rental growth, both in Ontario and Quebec. Turning to Slide 5.

Our track record of growth and solid performance continued in the first quarter of the year. Revenues were up 12% in the quarter, with same property NOI increasing 1.8%, including 5.2% in the GTA.

The same property NOI growth was muted by the reversal of certain bad debt provisions in the first quarter of last year due to our successful rent collection of all of the COVID pandemic release that we gave. Excluding this historical onetime reversals comparable property NOI would have been 3.5% overall and 7% in the GTA.

FFO rose 15% with FFO per unit rose or was up 9% year-over-year, another healthy quarter for the REIT. Our FFO payout ratio remained a very conservative 77%, and we continue to have a strong participation rate.

Moving to Slide 6. We are very pleased to have announced a 3% increase in our monthly cash distribution yesterday.

This increase results in a new annualized distribution of $0.581 per unit on an annual basis, and that will be effective with our May distribution. With our record performance in 2021, our continued growth in the first quarter, this reflects our confidence in the continued strength of the Canadian industrial markets and our commitment to growing a stable returns to our unitholders - unitholders over the long term.

I will now turn things over to Ross.

Thanks, Paul. Turning to Slide 8.

And as Paul mentioned, we have been very active so far this year raising attractively priced debt and equity capital and continuing to enhance our liquidity profile. We increased the size of our unsecured credit facilities entered into new 10-year fixed rate secured mortgage financing, a significant portion of which is interest only and raised equity through a successful bought deal and ATM equity offerings.

We now have $600 million available through our unsecured credit facilities, including $150 million available for Green financing initiatives under our Green Unsecured Development Credit Facility. With our current record levels of available liquidity, we are well positioned to continue to selectively deploy capital as opportunities present themselves.

Turning to Slide 9. You can see that we have consistently delivered portfolio growth through many different market conditions and environments since the REIT's inception.

We now own 159 properties not including our development program, totaling over 21 million square feet of GLA with a fair value of close to $5 billion. Our portfolio continued to see fair market value gains of approximately $200 million in the first quarter of 2022, primarily as a result of growth in income achieved through lease renewals and new lease deals, as well as ongoing growth in market rental rates.

Slide 10 shows the REIT's total portfolio occupancy at the end of Q1. And as you can see, occupancy remained strong at 98.2%.

Quebec occupancy was 100%, and there was a slight decrease in occupancy in Ontario as a result of a short-term downtime at one of our properties due to tenant turnover, which will be occupied in Q2 2022. In addition to our strategic debt refinancing that we completed in 2021, the REIT currently has record levels of available liquidity and a strong balance sheet.

As shown on Slide 12, the REIT's overall leverage was a very conservative 28.1% at the end of Q1, with a weighted average interest rate of 2.47%, a meaningful decrease over the same period last year. Slide 13 details the continuing strengthening of our financial position.

Our unencumbered properties now represent 65% of our total assets or $3.4 billion. Our proportion of unsecured debt rose to 77% of total debt at quarter end, up from 40% this time last year.

Given the current interest rate environment that we are operating in, you can see that we have very limited debt maturity exposure over the remainder of this year and into 2022, and 2024 as well. To update you on the specifics of our liquidity position.

Slide 14 illustrates the breakdown of the $1.2 billion of potential available liquidity at the end of Q1, including cash on hand, availability under our various credit facilities and potential financing capacity on our unencumbered after pool. I'll now turn things over to Dayna.

Thanks, Ross, and good morning, everyone. As Paul mentioned earlier, strong underlying market fundamentals continue to drive performance in our key markets.

As you can see on Slide 16, despite some of the broader market volatility and noise, the REIT strategy of focusing on high-growth Canadian markets has served us well. In the Eastern Canadian markets of Ontario and Quebec, which make up close to 80% of our portfolio value, we continue to see supply demand imbalances, contributing to our ability to achieve meaningful rental rate increases, increasing annual escalators and providing the REIT with other negotiating leverage with our tenants.

In addition, we believe that some of the potential risk to market cap rates may be derisked or mitigated by the continued depreciation of income to maintain industrial property valuations. Turning to our individual key target markets.

Slide 17 illustrates the positive impact of strong market fundamentals in the GTA. Availability in Canada's leading industrial market saw net rents rise to $13.59 per square foot in the quarter, marking another record of 20 consecutive quarters of rental rate growth.

Over the past 5 years, rental rates have almost doubled. Occupancy at quarter end was reduced from year-end due to downtime at one property resulting from a tenant turnover and will be occupied in Q2 at 42% higher rent.

This tenant will also be occupying 62,000 square feet of plant expansion space at the property. Our in-place net rents in the GTA stood at $7.64 per square foot at quarter end, and we believe there's still considerable upside as we renew our maturing leases.

Turning to Slide 18. We continue to expand our Ontario footprint in the Kitchener Waterloo, Cambridge, Guelph market with the recent acquisition of two new development sites in Guelph.

This region has become a highly attractive industrial market with lease rates hitting historic highs and availability at all-time low of 0.6%. This is the lowest industrial availability rate in all of Canada.

Turning to Slide 19. This region is seeing very attractive relative rental rate growth, with net average rents having increased every quarter since the start of 2021 with an over 50% current increase over last year.

We have a track record of success in this region, having developed just under 1 million square feet to date in Guelph [ph] and will continue to benefit from economies of scale as we add to our development program in this high-growth area. Looking to Slide 20.

Montreal, Canada's second largest industrial market is also demonstrating strong growth with an availability rate of 1% and an 11% increase in asking rents for the first quarter of 2022 marks the 14th consecutive quarter of rental rate growth in this market. At the end of the first quarter, we remained at full occupancy in Quebec, and there's meaningful mark-to-market upside in rental rates in this market, as leases come up for renewal with rents over $14 per square foot seen on several lease deals in recent months.

Slide 21 shows the details of our Alberta portfolio. The industrial market fundamentals in Western Canada and specifically Calgary continued to improve in Q1.

REIT occupancy improved in Calgary in the quarter but decreased in Edmonton due to a tenant turnover, a portion of which has been leased subsequent to quarter end. Calgary's year-over-year same-property NOI chain reflects 65,000 square feet of downtime in the quarter that was a result of tenant turnover as well.

The space is now occupied, as well as the impact from bad debt reversals that occurred last year in Q1, as we've already discussed. Looking ahead, we'll continue to focus on the same successful growth strategies that have generated positive unitholder returns to date.

Turning to Slide 23. Our growth and performance continues to be based on our three-part strategy.

One, expanding the size and scale of our portfolio through selective accretive acquisitions, the proactive development and expansion and capitalizing on strong market fundamentals to achieve organic growth within our existing portfolio. Slide 24 summarizes that despite the highly competitive market landscape, our acquisition program continues to be active, having completed close to $140 million of accretive acquisitions so far this year, including our Van [ph] acquisition that we announced post quarter end.

We also expect to close on the 150,000 square foot net zero carbon expansion project at our Trans-Canada Highway property in Pointe-Claire, Quebec for approximately $40 million upon completion this year. Our underwriting criteria continues to be one of discipline and patience and the REITs being highly selective in pursuing any new investment opportunities at this time.

In addition to our acquisition program and given the current opportunity for attractive relative returns, the REIT continues to grow its development platform. As seen on Slide 25, we currently have over 2.3 million square feet under development in various stages of planning or construction.

In Q1, we added three new development properties to our pipeline in Ontario, one in Burlington, one in Kitchener and on in Guelph, which in total have the potential to add over 1.3 million square feet of GLA to the REIT's portfolio. Importantly, our development projects continue to align with our ESG initiatives and green financing framework, as we strive to achieve maximum efficiencies and minimize our environmental impact through our newly built buildings with the added benefit of an improved cost of capital.

Slide 26 details the organic growth that we've been able to achieve for our proactive leasing programs. So far in 2022, we have completed over 1.1 million square feet of lease renewals and new lease deals.

Most importantly, these leasing transactions generated a significant 52% increase in monthly rents with rents more than doubling in Ontario and up 74% in Quebec, excluding contractual renewals. The leasing activity includes specific deals where Summit has achieved over 100% rental rate growth in Ontario and Quebec.

And with record low availability and high demand, we are confident rental rates will continue to grow in all of our key target markets. The third pillar of our growth strategy is to continue our track record of strong organic growth through our existing portfolio.

As you can see on Slide 27, over the next 5 years, we have over 10 million square feet of lease renewals coming due with meaningful mark-to-market upside potential and over half of our lease maturities in the high-growth Ontario market. In addition, we continue to explore and discuss select expansion opportunities within our existing tenant base to further maximize rental rate opportunities on existing REIT-owned land.

I'll now turn things back over to Paul for some closing comments.

Thanks, Dayna. In summary, we continue to be optimistic about the strength of our underlying fundamentals in our key target markets as they are the backbone of our operations.

We expect to continue to be able to execute on a selective and disciplined approach to acquisitions. We continue to deliver on our development program.

We'll contribute attractive yield on cost returns and create brand-new environmentally efficient real estate to our portfolio. Organic growth, as Dayna mentioned, will continue as we renew leases at market rents, which are considerably higher than our in-place rents today.

And finally, our strong in-place liquidity position that Ross outlined will allow us to navigate the potential market volatility and continue to execute on the growth opportunities as they present themselves. Thank you for your time this morning, and now we'd be pleased to take any questions you may have.

Operator?

Thanks. And good morning, everyone.

I guess just to start off, Paul, I wonder if you could give us a sense of your perspective on what Amazon announced a couple of weeks ago with their overcapacity issues. And so what are you hearing or seeing in the marketplace with respect to that or other fulfillment tenants in the marketplace?

Sure, just like you know we invite – sorry, invited CBRE into our Board meeting today, and they have a global platform that captures a lot of that information, and they also have very good contacts within the Canadian context within Amazon. So clearly, I think it took everyone by surprise.

But when they talked about what it actually means, I think they're talking about subletting some of their space, which would be primarily in the U.S. market for some shorter-term period of like 2 to 3 years.

They don't see that overextension happening in Canada. It might slow down their amount of continuing - to taking more space within Canada, but it really isn't trickling down into anything that we're seeing in any kind of substantive way.

So when we're talking about our leasing, we're still doing a lot of leasing to third-party logistics companies, but also there's lots of other automotive different types of tenants in our portfolio that have that steady demand. And then there's still that onshoring of inventory that we're starting to see, and it's happening where Walmart would say we need an extra 15 days of inventory.

So those kind of tenants, which don't have options are coming to us and starting to talk - can we expand your property in that thing. So we only have the one Amazon tenant, which was in Calgary, it's $7 and something rent.

They're there for 10 years. That building is very leasable.

But Dayna, you want to add something?

Yeah. No, I was just going to add, I think there's a couple of ways to look at this, and we can chat for quite a lot of time about Amazon here.

I don't want to take up too much time. But I think there's a broader market impact on industrial, generally speaking, and then you need to be specific and to be clear what's the impact for Summit in our portfolio.

So Paul already touched on sort of our exposure specifically to Amazon. If you think a little bit more broadly just to close the loop on our portfolio, our exposure to e-commerce in general.

So there's the one aspect where their take-up of real estate space, but also the comments about sort of softening e-commerce demand, I think we shouldn't overlook. So in terms of our portfolio, our exposure to e-commerce, we have direct exposure.

So tenants like Essence that are - in your BeLounge [ph] property, Amazon, obviously, that's probably about, call it, 5%, but then there's sort of follow-on exposure that you would have indirect and servicing as you think of the likes of FedEx and [indiscernible] So there's - if you think about direct export its 5%, EVT [ph] lumped in all of the ancillary exposure, you're below 15% just sort of rough, rough numbers. So really thinking there's very little potential risk, even if this were to become something bigger down the road.

But importantly, I think it's a theme that we've seen in other aspects of real estate where Canada lags the U.S. So from the conversations that we have and the intel that we have they really - Amazon really doesn't have an adequate distribution network set up in Canada as yet.

So this news coming out of the U.S. is much, much further ahead of us, impact on U.S.

region, Amazon, as people have been talking about for years now is number one tenant in a number of the large U.S. industrial REITs, you know, not the case, obviously, in Canada.

So I think that's a key differentiating point, but really keeping an eye on consumer spending and e-commerce, I think, is going to be a focus that we should not lose sight of.

Thanks. That's excellent color.

I appreciate that. And just for my second question, just with the rising interest rates, what are you seeing in the investment market real time in terms of just in the last few weeks in terms of deals being maybe repriced or bidders backing away?

What are you seeing? And do you expect an impact on cap rates in the short term?

Yeah. So again, there's going to be an impact.

We're not seeing a whole lot of it yet. We're just anecdotally, we were bidding on a $200 million portfolio in Montreal, kind of B class buildings.

We bid below the guidance, and we did get into the second round. So there was three groups at the guidance are higher.

It wasn't the kind of real estate that we want to push for. And we'll talk more on this call, but it's - we're going to be very selective on how we do it and strategically grow.

We're still are very comfortable that spending capital on our development program is number one. And if there is some dislocations here, we'll be able to take advantage of that.

Other than that, we really haven't heard too much, but I think everyone is kind of probably doing what Summit is doing right now, which is let's just stop for a second and think about what's going to happen and how long this might go on for. So I think there's going to be a bit of a pause.

The other thing we're hearing is lots of people are going to bring properties to the market this year or last year, if they didn't get a good bid, they would just refinance it. So the impression is that option is not as attractive anymore.

So I think you're going to start to see a little bit higher volume of properties coming to the market. So if there is some softness in the bidding.

But when you look at all of the real estate asset classes and you look at the markets that they're in, industrial in Canada still ticks an awful lot of boxes in terms of availability being the lowest in North America, highest rental rate growth. So it's got growth and it's defensive.

So I think it's still going to be an attractive asset class as people recycle out of office, multifamily and other things, given some of their issues as well.

Thank you. I'll turn it back.

Thank you. And good morning.

So just on 2022 leasing activity. I mean, clearly, a very strong [indiscernible] spreads there.

Montreal in particular, looks strong there. I mean, GTA have spoken for some time.

So do you think the leasing spreads were in line or above your expectations, what you have achieved in 2022 so far?

And I'll break it down to two cities. So it continues to give us a smile on our face when we lease because it just - it keeps increasing gradually in the GTA, big smile on our face for Montreal because in place rents roughly the same as GTA at 750 million.

So we're thinking we get to - when are we going to hit $10 in Montreal, which will be nice rental bumps. But then as things continue to tighten, I think year-over-year, the Montreal rental rates are up according to CBRE, 35%.

But one deal was 106,000 square feet. We actually had two tenants, and we basically just ran an option, and they were - and we ended up at $14 and then 3% or 3.5% steps on that kind of rent.

So then you think, okay, maybe that's a one-off, but we turned around and did it again. We had a $14, $50 rent.

That property had a little bit specific. There's rail going to it.

So maybe there's a bit of a premium for that particular asset. But somehow, that market has kind of jumped over the 10, 11 and 12.

So that's not for every space, but if you're well located, good quality, good ceiling height, that's definitely a pleasant surprise. And then finally, Alberta, and we've talked about it for a number of quarters now, clearly has turned the corner, availability, sub-5 in Calgary and getting closer to 5 in Edmonton, we are actually testing that market.

We've done some at 15%, 20%. But there's a couple that are going to happen later in the year or early 2023, that we'll start to see 30% or 40% bumps in some of our select Calgary process, which is good.

So the last 2 years was primarily maintain occupancy, maintain rent. And clearly, that mindset is changing.

And we don't think we're that far away from some of that happening in Edmonton as well once that market gets below 5% availability. And we're optimistic about - the future is still like - it's still tight.

So even with that Amazon announcement anecdotally, we're starting to hear numbers that are 15, 16, 17, 18. So - and we know there's still room to go.

And I can make another prediction, somewhere in the next couple of years, $20 is going to be achieved as the GTA.

There you go.

Got it. And writing down your production there, 400 is the new 300, 20 is the new 15.

So, thank you. And then the impact of higher debt financing on valuation, I mean that's my follow-up question here.

So based on your experience fall, where will we see the first impact on valuation? I mean, will that be secondary markets versus the primary markets?

Or will it be like leased on specific properties with 3 years we should be fine, but 7 years will be impacted? I mean, to say, any thoughts there?

Yeah. So again, we have all these good dialogues or say with CBRE in the room.

And again, it's still a little early to tell. But Robbins's been doing this for 30 years, underwriting.

He goes, you know, to see properties, right? So those spreads and cap rates.

So what's happened when the market has been as frothy as it's been over the last few years, A, B, C, exactly where they're located, they kind of all blend together. So I think the word we used was bifurcation.

So you're going to start to see a little bit of that. We'll start with the C.

The good news is even B quality properties if they're in the right locations are really seeing no different rental rates than A buildings like across the street. So during the GTA, and we've seen it in some of our buildings 25 years old at $14 to a new building being built on the Street is $15 or something.

So very little or no difference there. So again, because we've cobbled together this portfolio very carefully over the last 7 years, we have A and B buildings, but we don't have any C building.

So we think we're pretty insulated from that. So you'll see some of that.

And then geographically, again, anything in the GTA in Montreal, Vancouver, you're not going to see that. And everything that's been going on has been benefiting Alberta in terms of population growth and immigration and stuff like that.

So we're not seeing any major changes in market specific that we're in.

Got it. And maybe just a follow-up and then keep my final question.

So what happens to the land pricing in middle of all this? I mean, that $3 million per acre or more.

I mean, the looking 4 years away. I mean, how does that get impacted now?

Well, and again, that's going to go to how long do we think things are going to go on. So right now in Canada, it's going to be a record year of what's under construction, roughly 35 million square feet when we probably averaged 25 million square feet in the last 3 years.

I think the number of that 35 million is pre-leased, its up or optimistic in the 60% to 70%. It's not going to fix the problem.

So we're nationally 1.6% availability in our markets, it's 1% or less. You're going to have to have multiple years of negative absorption to have any dent on that availability rate.

So let's just start seeing the availability rate go north of 3% and probably closer to 5%. I think people are still going to be bidding for land that's able to go.

Like it's a challenge we're buying land. And it still takes 2 or 3 years to get the pipeline approvals.

Dayna, do you want to…

I think I mentioned, I'd just add to that as well that if you think about the bifurcation that Paul mentioned, when you're thinking about the B or poorly located B and C properties, when you've got the development side, what you're putting out is larger, newer buildings, so that obviously is a consideration as well, as you think about some of that softening that you really have to have that trickle through in a very meaningful way to your A class buildings and your new building to see a direct impact on that side of things.

I'll give you one note, I'm going to give you one more piece of information right now. Land prices in Montreal are now roughly around $1.7 million an acre, and that's up 100% over the last 18 months.

So what you'd expect in a market that's not building a whole lot of space. So that same phenomena that's been happening in Toronto is starting to accelerate in Montreal.

And you're seeing both in land prices and rental rates.

Thank you, Paul. I have actually…

Okay…

As well. So thank you.

I'll turn it back.

Hi, guys.

Good morning, Matt.

Hey. In terms of the financing you did subsequent to the end of the quarter, I'm interested in your rationale behind sort of secured the term you went with and what the use of proceeds is ultimately for that financing?

Very good question, and we cringe as we watch bonds moving around, as I'm sure everybody does on the line here, we try not to look. But we were spoiled for a very long time with pricing in the unsecured market.

So that obviously would be - have been our number one preference in terms of debt financing. I think we've chatted a fair bit about in the past about our target leverage and really trying to keep that on the lower side with our focus on debt-to-EBITDA multiples, obviously.

So mindful of sort of the looming market ahead of us thinking that we would like to have some debt capital sort of under our belt and really try to replicate as much as possible what we've been achieving in the unsecured market. So as Ross mentioned in our prepared remarks, the majority of that is interest only.

And as we got into the weeds [ph] in the secured mortgage market to see what some of the pricing options were, we found really as opposed to sort of the last time we were in this market, which was several years ago, the landscape has changed quite a bit with lots of different appetites, lots of different underwriting criteria from the lender's perspective. We had some flat pricing, frankly, across the entire curve, whether you're going 5 to 10 years and really just dependent on sort of their acts for debt and what they were looking for.

But we found a bit of a window, and a bit of what we thought was a pricing gap in terms of spreads versus where the unsecured market was, we were able to act quickly and access that market. We did some rate locking in terms of the underlying bonds to improve our pricing there.

But just felt that in terms of tenure being 10 years, there was a very meaningful gap to what we would see in the unsecured market and felt that the pricing was attractive, given where we thought things were headed and frankly where they have had it since we announced that.

Okay…

Your second part of your question, the funds, we have a couple of acquisitions that we're currently looking at and just some debt repayment and that. So we've allocated those funds and once those acquisitions are done, we still have a full $600 million available on our unsecured lines to transact to act on any opportunities that we see going forward then.

So we see a very strong healthy balance sheet and then there is very little maturities in the balance of the year, debt maturities in the balance of the year - or '23 and '24 in that. So we feel like we've put ourselves in a good position for the time being.

Okay. No, that makes sense.

And two quick follow-ups, one on the mortgage side. Was that a single asset that you've encumbered?

Or was it a group of assets? And then maybe on operate - Sorry.

Sorry, finish your question, sorry.

No, no, no. It's completely unrelated, so I'll get...

Okay. So it was two properties in two different markets and so two fairly large properties in one mortgage was for $100 million for 10 years, 5 years interest only in 5 years, 30-year amort on it.

And the other property was $69 million mortgage and that's 10 years interest holding. So it's acting almost like a bond, but a significantly lower spread to government of Canada than the bonds we are offering today.

Yeah. And one was - this is Ross did say, but you'll find it someday.

So one is Calgary and one's Montreal. So Matt, what we're comfortable is the lenders are if you got good quality buildings with good quality tenants and leases, they're prepared to lend no matter where the market is or how the perceived strength of that market is.

So it's not like GTA is getting a better pricing than Montreal or Calgary.

And we had expressions of interest from 6 to 8 lenders on those. So very healthy interest of - had a lot of different options that we could choose from that.

Okay. No, that's perfect.

And then just quickly on the - I guess, it's transitory vacancy and you guys are pretty good at filling things quickly. But is there anything else, whether it's by design on your part because you want to get a higher rent or otherwise in terms of expected kind of vacancy going forward in 2022?

Yeah. And I think it's in our NDA somewhere, but keep an eye on our retention number because we are doing what I'm calling more strategic leasing, which means we're kicking tenants or letting them leave.

So I think it's down into the 60%. So Matt, we are being a little bit more aggressive on whether we don't like the use, we don't like the covenant, their ability to pay the higher rent and that sort of thing.

This is one in Toronto. I think we're thinking of it as a case study.

That was a Kubota sale leaseback. We did 2 years ago.

They were going to - they're building their consolidating and building their own building. They put a $9 market rent on that.

As Dayna mentioned, the rent that we're actually going to achieve now with the new tenant is 43% higher than that. Most importantly, because of the lack of space they're prepared to go in and live through a 60,000 square foot expansion.

So when you - and now with the increased rent and not having the downtime, our yield on this is now going to end up being closer to 5.5. And so if you just look at that, if you look at cap rates, the value creation, NAV once all of that work is done is around $30 million.

So it's over $100 a square foot. So it's kind of another thing that Summit does that I don't think you see every day, it's not building.

It's not buying, it's a value-add proposition, so a combo.

The other thing I'd add to that is our downtime, given the size of these tenants, well in advance or they know well in advance, you're not renewing them. So we're already marketing it.

So the downtime has been really the time to transition from one tenant to the other. So you've got a tenant in place even before the leases expired, and you've done your strategic thing - the only other thing I'd add is when you say you guys - you mean Kim Hill…

Ross…

Okay. Thanks, guys.

Appreciate that color.

Thanks.

Hi, there. just to go back to the discussion on valuation and given the, obviously, the rise in debt costs, and you did talk about maybe a little bit of dislocation short term.

Is that - do you think that's more specific to longer duration assets? Or could that be more of a kind of a general comment in the market at the moment?

I think it's a general comment. I mean, there is so many different buyers for different assets.

So like listed Montreal, these were longer-term in-place leases, but rents were below market. So this wasn't your short-term weighted average lease term, where you can flip those clearly in the GTA that seems to have had the most attention and the most bidders was that, that type of thing.

That's where you saw cap rates down in the 2% to 2.5% and the price per square foot of $350 a square foot. So I think for those kinds of opportunities, we're still going to have a number of bidders.

But then these long-term leases in the past, you'd call coupon tiers [ph] that attracts a different type of capital, usually a non-levered buyer, and it's not going to be an issue. So there might be some - levered buyers might have some negative carry in the early years on a couple of on some of these GTA acquisitions.

But I think it's going to go down to the quality of the assets. So somewhere along the way, there might be some change in pricing of some of those assets.

But like I said, we're not seeing it yet in our portfolio or what we're seeing so...

But I guess the balancing effect is the inflation you're seeing on rents and replacement cost is can help offset the higher cost of capital?

Yeah, I think so. I mean I think the fundamentals are what's going to drive the situation mid and longer term.

What's going to happen in the next along what's going on? How it was on 3 months, 6 months, 12 months.

We've seen that before. But I think the underlying fundamentals are very, very strong, and they're not going to change.

We haven't talked a lot about it yet, but you'll see our in-place contractual rental bumps have moved from like 1.6% up to 2. That means most of our new releases now are getting 3%, 3.5% bumps on top of already a very good rental bump percentage of over 50% on average.

So I think we're combating some of that inflation in not just the initial bump in the rent, but we're getting higher escalations. It's all those contractual rents.

They're very meaningful and let alone our mark-to-market. So for sure, any concern about cap rates is going to be more than offset by that.

And then the second valuation metric is our development pipeline. And we're achieving very, very good spreads, development spreads there.

So that there's going to be some value created through that pipeline as well.

And just a couple of acquisitions you're looking at now, that's the $95 million in the GTA that was previously disclosed.

Yeah, we've got that, and we're always looking at stuff. So like no, it's a very active pipeline.

And as I mentioned earlier, we expect that pipeline to even grow whether we pursue deals or lock them up, that's going to depend on where we think the strategic value is. That yeah, so we've got that and some other stuff that we're looking at.

But we're not - like I said, we given we've already had a quick jump start to the year, we believe we're already kind of on track to hit our normal growth rate. We know we've got 1, 2, 3 – 3 more properties that are going to come out of our development pipeline in income-producing, leases are in place.

We're just finishing in construction. So June, July, third quarter, fourth quarter, we'll bring in 3 or 4 more buildings into the income producing from the development pipeline as well.

Yes. And also not to lose sight of where our unit price is trading right now, which we think frankly is a real disconnect to our underlying valuation.

If you think about what we're talking about this quarter versus last quarter and what's changed in our markets. And we have seen improvement.

So we think certainly there's a dislocation in the capital markets. So we're very happy that we're able to raise the debt and equity capital at the pricing that we had to have the opportunity and the flexibility to continue to have these conversations about selective growth.

Okay, great. I'll turn it back.

Thanks.

Thanks, Brad.

Thanks. Good morning.

Just one on the outlook for rent growth. I think you noted in the press release that visibility is pretty good for 2022.

I don't know if it's too early, but what are your thoughts on how that looks for 2023?

Like we literally, and that's why we've changed our strategy on development leasing. Until we have the site plan approval, we're actually under construction.

We are just delaying development. We've seen that in some of the projects where we leased 6 months before we started construction.

We're kicking ourselves a little bit. So we're not going to do that again.

So we believe you're seeing - and I think when we've talked to other people, what they're doing in underwriting, at least 10% growth in rents for the next 3 years is kind of what most people are using in their underwriting models, which is still substantially less than what we've seen historically in the last couple of years. So yeah, we still see there's lots of runway for rental growth.

And it's just - it's a tenant-by-tenant deal-by-deal and some of our tenants that don't have options to renew. They don't - they're really stuck because they don't have the option to move somewhere else.

They're either going to go out of business or retrench to some other area. But most of the time, the rent cost for a lot of our tenants is a very small part of their G&A.

So transportation, labor, all of the other things. So rents, they seem it.

We're not getting that ceiling we're running into affordability yet.

Okay. That's fair.

And then just for my second question, Dayna, you kind of went over the Kitchener-Waterloo market and the strong fundamentals there. Based on what you see today, perhaps in other markets in the greater GTA, which market would you say is up and coming and poised to become the next Kitchener-Waterloo?

That's a big crystal ball question. I mean, there's been a lot of interest in to talk about the Hamilton area, a lot of investors looking to that.

We're quite comfortable in terms of the markets that we're in, in this Kitchener-Waterloo market. And then there's a lot for us to still do there.

So we're focusing on our core markets. I think we've been rewarded for sort of keeping in our central areas with these opportunities for high rental rate growth and development.

Okay, great. I will turn it back.

Thank you.

Thanks.

Thank you. Good morning.

I promise I only have one. On the land deals that you did this quarter, different geographies, but still western Ontario, there's a pretty wide range in terms of the price per acre.

So I was wondering if you could just give us a bit of color there. Is that solely due to the difference in geography?

Or is there a significant difference in terms of where the entitlements or where they are in the zoning process? Thank you.

Yeah. No, it's primarily locations.

So in the Burlington 1, we've - we're close to putting one site into construction later this year, the - so service road. We just finished North Service Road, which will be completed this year, and so we're kind of looking at what's going to happen in the 2023, 2024.

So that's why we bought the piece of land there. Just kind of the migration when we originally bought the North Silvers [ph] property that was probably what, $1 million an acre.

So Service Road was just under $2 million an acre, and now this new one is 2.3, I think, is my recollection. So that's still inside the green belt is very important to kind of differentiate.

And so then once you go outside the green belt, that's where the prices start to go down, let's go to the furthest one is in the what's the call - sorry, Kitchener, yes. So Kitchener - Kitchener.

So those - originally, when we were looking down there, 500,000 to 700,000 an acre, that's probably migrated up to $1 million an acre, but what Dayna has talked about and shown in the slides, the rental rate growth has been historically that highest year-over-year. So even if those land prices, our yield and costs are going to be extremely better than inside the green belt where it's still trickier.

And then the last one we bought is kind of the outskirts of well right across from Maple Leaf Foods. That is kind of the first stop between Milton go through the green belt and 15 minutes later at our site.

It's only 3 minutes off the 401. We use there was 24 bidders on that, and we end up winning again, because we're able to close in 30 days, but our partner, Cooper.

This is the whole area where they've been doing things for 30 to 40 years. So those connections with the municipality to get the entitlements to get all the little things that you need done, go a lot smoother.

So we're very excited there because we do think we're going to be able to build larger scale on that McLean Road property with 40 acres. We can do one or two buildings, but almost 800,000 square feet.

And again, what we're seeing in even our existing well, rental rates originally were $7 3 years ago. We did 950 last year.

Now the most recent deal is 11, 11.50, the new ones. So it is - just keeps going up and up.

So we're very confident that as McLean Road is even a better site than our existing - or locations a little bit better than the existing group of properties that we've built in. So that's kind of the lay of the land there.

But we're still hearing about the $3.5 million and $4 million. And if you look at the stats for Vancouver, they're up in to $6.5 million now.

So the belief is there's still more room for growth in land prices inside there, and particularly inside the green belt, but it's growing everywhere because you just can't find it.

Thank you.

Okay.

Thanks, good morning. Dayna, you mentioned that you're mindful of the trends in e-commerce, I guess, earlier in the call.

I just wanted to clarify your comments there. Are you seeing demand in this segment actually start to taper off at all among others beyond, of course, Amazon?

And then secondly, as we hear more talk of a possible slowdown on the horizon at some point, I guess we don't know when, from an economic standpoint, but any signs of perhaps slower leasing from some of the users that might have been more active over the last 12 to 24 months?

No. I mean it's a really big question, and I think Ives looking to it, and there's again disparity between the U.S.

market and the Canadian market. So certainly, in the U.S., we've been seeing things drop off in terms of e-commerce penetration.

The question in my mind is that temporary in terms of sort of the reopening post pandemic? And will we go back to a rate of growth in terms of penetration, but maybe at a slower pace.

I mean, that, I think, is my view. In Canada, again, being a laggard, I'd say less of an impact because we've been a little bit behind the curve in terms of e-commerce penetration.

And I think I read a forecast today that there was some - I think the CAGR for the next 4 years was something like growth of 6% to 10% versus what we've been seeing like in and around 15% looking backwards. So I think there'll be some softening or perhaps maybe the better term is slowing down, but not to the point where it's going to be a cliff to have such a big impact.

We put a lot of emphasis on Amazon. If you think about sort of the Canadian landscape, you've also got the Walmart and Home Depots of the world.

I think across the three Amazon, Walmart and Home Depot make up something like 40% to 50% of total online revenue in Canada. So those - you have to go back and then not to be too much of an economist here, but say consumer spending, how much of that is going to be impacted by interest rate hikes and central bank movements to try to obtain inflation.

So I don't know if I have a good answer for your question here. I think we're going to see some slowdown, but not a cliff that we're going to be falling off of.

And then in terms of how does that trickle down into the businesses and the tenants in our space. I think there is still so much backlog as we've talked about across so many different aspects of our business, whether it's rental rates, space requirements, new development.

There's still so much of a backlog that even if these things temper the markets, we have so much catch-up still to do in Canada that I think it will take really some time on a sustained basis for that to really hit bottom line. So we've got - I mean, we're looking at tenants who are just expanding bursting at the seams where they're at the point where they're trying to convert some of their office space and using it for things like returns or sort of pick and pack because they just are trying to get absolutely every square foot that they can.

So I think that even this conversation we're talking about is something much further down the road in terms of seeing any impact.

Yeah. And to add a couple of comments here.

Sorry, good morning. To add a couple is, we can't understate the amount of population growth.

And as the immigration numbers start to come back and likely expand the markets that we're in are experiencing significant population growth, and you've seen that even in Kitchener, Cambridge Waterloo. So simple things like some of our new release and tenants of - they make sauces and food distributors and stuff like that.

That's just a growing market because you have that many more people. So some of the other consumer spending that Dayna talked about might be - it's more discretionary, but there's a lot of distribution that's just purely based on population growth that is only improving in these markets.

Thanks for that. Just maybe one follow-up on the whole discussion around cap rates and pricing.

Have you seen any change in terms of maybe the buyers at the table, the composition of capital that's in the market and from the Canadian industrial standpoint, has that changed at all yet? Or is it really just too early at this point?

It really is too early. So I think it's more just the discussions that somebody like ourselves or CBRE or having with - or other brokers are having with buyers and sellers right now.

So I think everyone's just kind of having these discussions, what do you think your brain would tell you if you're - the leverage buyer is - their cost of capital has gone up, obviously. And so that should impact how they're going to view things a little bit.

But we've been having 24 bidders on the and we're having multiple bidders in Montreal for Class B stuff, like there always seems to be a willing buyer in some places. So the issue will be how much supply comes on.

And if there's more supply then you might start to see people picking and choosing where they're going to go after that capital. But we're seeing more and more foreign capital coming into Canada looking to allocate because they like the dynamics.

I think gain of the stats we saw initially was like Canada as one of the best GDP growth prospects, one of the highest population.

Yeah, across the G7….

Yes. So Canada, the country ticks a lot of boxes.

And then I think when you start looking at industrial, it's ticking more boxes because of that supply-demand imbalance. And again, we just do not see where the supply is coming from.

So for us, it's only whatever happens if it goes on for a long time, and there is a true slowdown that you'll gradually start to see it, but I don't think you're going to see any changes quickly.

Yeah. I'd just add to that, the usual suspects are still there at the table.

Perhaps the leverage buyers are less aggressive on pricing, which they were very aggressive understandably so where interest rates were. And to echo Paul's comments, getting more and more interest from international money because on a relative basis, Canada still has those market fundamentals.

We don't have the same exposure to Amazon. And if you're looking at what are two still very attractive asset classes, multi-res industrial, Canada on a global scale is very, very attractive on a relative basis.

Thanks very much. I'll turn it back.

Thank you.

Great. Well, thanks again for everyone.

A good quarter. Obviously, lots of market turmoil.

I think back to the pandemic, which I think is still ongoing, but with all the opening up, the good news is looking back in hindsight, we've now been through it. We had three bankruptcies.

Anyone that was on our watch list is now off our watch list. We collected 100% of any deferral agreements we've had.

So that was a big unknown for us. This market that we're currently in, we've been through this one before.

So we know what we're doing. We'll pick our spots.

Our balance sheet is in great shape and look forward to talking next quarter. Thanks a lot.