InterRent Real Estate Investment Trust

Welcome, everyone. Thank you for joining InterRent REIT’s Q4 2021 Earnings Call and Happy International Women’s Day.

You can find the presentation to accompany today’s call on the Investor Relations section of our website under Events and Presentations. We are pleased today to have Mike McGahan, CEO; Brad Cutsey, President; Curt Millar, CFO; and Dave Nevins, COO on the line today.

As usual, the team will present some prepared remarks and then we will open it up to questions. Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature.

Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward-looking information in the REIT’s news release and MD&A dated March 8, 2022 for more information.

During the call, management will also refer to certain non-IFRS measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS.

Please see the REIT’s MD&A for additional information regarding non-IFRS measures, including reconciliations to the nearest IFRS measures. Mike, over to you.

Thank you, Sandy. First off, I want to say thank you to everybody for joining us and taking the time here today.

Hope everybody is doing well. And I think I am going to speak for myself and a lot of the people that have – of our team and hopefully all of our team.

And we are starting to see a lot. Things are looking lot better and lot brighter for all of us, lot more bluer skies.

And I hope you are all feeling the same way. And I look forward to seeing many of you very soon.

Also wanted to – before we get in the results is to we have got a new format of our annual report. We had Sandy and Chris and I know a bunch of other people did great work on it.

If you have a chance really to – I wish you take a look at it, you’ll see the – I guess what we’ve been doing not only last year, but the last few years. But on the technology side, we really pushed hard into the technology side, but some of the creativity of our company and some great personal stories from – for everybody.

So if you have a few moments that would be great. And lastly, I just want to say before we hit the results is I like to say like I’m so proud of our team that just done great work and really worked hard and under unbelievably challenging times and very proud of them.

And anyways, you will see. So they have obviously done – produced some, I think some pretty good results.

So, we will go to Slide 7 for everybody right now, if you are going through the deck, anyways on, I just want to kind of talk about things we have kind of held fast on, we really held fast on keeping our rents not worrying about occupancy, we actually utilized that time to upgrade more of the units, we just felt like that in the long run. That was the better move, felt lot of pain for a couple of years over it.

I feel very confident it’s the right move. And I think we are all going to see some really some – some good things coming forward for the company.

So happy we are almost at pre-pandemic vacancy right now. And also, as you can see, we are seeing some good movement on our growth.

We have had growth through our FFO, AFFO and I think we are getting back to more normalized spots. So I am very, very encouraged by that to say the least.

I also want to highlight we – last year, we had a record year in acquisitions. We bought 1,829 units.

We pushed into a new market being Vancouver. I think we are really super happy with that market that was just great timing, very happy, really happy to get our platform down there.

It’s so hard to get any type of scale in that market. But once you have it, I mean it just seems you can just keep bolting on as you go and we are one of the few players that do have a platform there.

And I think it’s going to work out incredibly well. So we are really extremely happy about it, I guess, we did transactions pretty well everywhere in our normalized footprint and everything that’s working out fairly well.

We still have some vacancy in our core markets – and the core in our markets, being in Montreal. Montreal has been the hardest – we have had the hardest time, but I truly believe once immigration and international students come back that will come back to – we have seen it in Ottawa and also in Toronto into core.

I have to tell you, I am surprised Ottawa is there helping as well as it has, especially with really we are not seeing the amount of people that we’d like to see in our downtown core saving except few people that came for 3, 4 weeks on a normalized way, which were really hoping that federal government is going to get back into their offices. And I hope there is a big push on that.

But I think all in all, I think you’re going to see our numbers I am pretty pleased of what I am most pleased about is, I think we just kind of stuck to a meeting. And I am really pleased about what we are going to see going forward.

As I look at the financial health and I will really let Curt spend on the balance of his time on it, you can see our – we do have a number of, you are going to notice that we do have a number of mortgages coming due, we are doing a lot more in CMHC now. We are through a bunch of them now.

You are going to see over the near-term, we are going to be up around 80% CMHC. And just the way we go about it, we obviously we go in and do some work and then after we have done the work, then we can see if slap on the CMHC mortgage.

So, that’s usually the way we always work. So we will never be at 98%.

But you will see that will – that’s going to tilt up a lot. And we’ve kept our – and we have been very conservative again.

We have kept our debt to gross book value down into that 36 and change range. And I am very, very happy of where we are going.

And again, I think that we are really heading in the right spots. And also, maybe I should also point out one of the things that’s not on the slide and I will just say it too is that we have also during this time has really increased our bench strength, really kind of pulled forward a lot of positional hires that maybe we would have held off than traditionally before, but we are really looking in this in the long-term.

And thinking we want to bring people in, we want to get them thinking about the way we do things during that whole education and training and also having some of these senior people. I am talking a lot of rolls all the way through the company, but a lot of senior roles, which we usually held off as – and weighted to grow into those roles.

We have kind of pulled some of that – some of those positions, I guess, forward. And I think it’s just so important as we look forward as the company that I just see like again, great things come in, really good bench strength, just really very happy of where we are going, not obviously never super happy with our numbers, but really excited about what we are doing as a company.

And we are just getting better and better as a company and yes, very pleased so far. So anyways, I’ll pass it over to Dave now.

Thank you.

Thank you. Thanks Mike.

During our last call, we said we are expecting to finish the year close to a 95% to 96% occupancy level and it’s great to see that we are there. Overall, portfolio occupancy is sitting at 95.6% at year end.

And we saw improvements come through all of our regions in the reposition portfolio. Our GTHA reposition portfolio improved 320 basis points during the quarter and is sitting at 98% full in December.

We are also happy to report that our Montreal reposition portfolio closed 250 basis points of vacancy and Q4 is back around the 95% mark, which positions us well for the return of international students in the market. As you know, we like the vacancy on non-reposition portfolio, so that we can work through our CapEx program.

We highlighted Vancouver last quarter with a big occupancy improvement and we chewed through another 390 basis points this quarter to close the year at 3.7% vacancy. As a reminder, that portfolio had nearly 16% vacancy when we acquired it in Q1.

So, to echo Mike’s comments, really happy with how things are progressing in Vancouver and proud of the team on the ground. Looking at Slide 10 in December, we posted 5% annual growth in average monthly rent, which is coming through both our reposition and non-reposition portfolios.

These results are a continuation of what we saw in Q3 and highlights the consistency in our strategy over time even during the challenges of the last 2 years. Now, looking at Slide 11, at the regional level, we continue to see steady year-over-year growth in average monthly rent across all regions in December.

The slight quarter-over-quarter dip in Montreal is from the inclusion of our recent acquisitions at 418 Claremont and 3655 Papineau. Excluding those two properties, we saw sequential average monthly rent growth in Montreal.

We currently see a gap to market in excess of 20% across our portfolio and we expect fundamentals to strengthen further when international students and true immigration returns. I will turn things over to Brad to walk through our capital spends.

Thanks, Dave and good morning, everyone. Turning to Slide 13, on the left side of the slides, you can see that our maintenance CapEx has remained consistent on a per suite level for the past few years around that $950 to $1,000 mark.

In 2021, the big change over 2020 was our value-add CapEx program. We increased the spend on a non-reposition portfolio and for value enhancement initiatives and our reposition portfolio for a combined total of $71 million.

That puts us back in line with the 2019 spend at $70 million after seeing a dip in 2020 to $45 million due to the initial slowdown when the pandemic first hit. I highlight those figures until about a third of our portfolio is at various stages in our repositioning program and we see great value creation potential in the years ahead.

These properties will undergo work in the coming years, but the individual suite upgrades following the cadence of natural resident turnover. As you know, our approach is to apply our reposition expertise to create beautiful, safe and quality communities for residents to call home by simultaneously extending the useful life of existing housing supply and creating value for all stakeholders.

We are excited to be fully back on track with our repositioning program and we truly believe it’s a win-win strategy for all of our stakeholders. Turning to Slide 14, 2021 was a record acquisition year for us, with more than 1,800 suites across Canada, which is a great milestone for us as a company.

We have been saying all year, it’s competitive out there and there is lots of capital chasing their asset class. Want to be clear that we aren’t willing to get caught up in the frenzy at any price.

We have not relaxed our underwriting requirements or internal return hurdles. And we will continue to only pursue deals that make sense and will create value over the long-term.

Turning to Slide 15, we entered Vancouver in Q1, but you can see from the slide that we are able to scale across all core regions during the year. That clustering is key for our growth plan, because we are positioned with scale.

We added to our team in 2021 at all levels of the organization to prepare us for the future. Mike mentioned innovation and moving the business forward in his opening remarks and that momentum is palpable across our business.

We are ready and we are operating as one team. Turning Slide 16.

On the development side, we are progressing nicely on our office residential conversion in Ottawa 473 Albert. Demolition has been completed and construction is underway and on schedule that partial occupancy anticipated to start towards the end of Q3.

If you want to highlight as well that long lead construction items have all been tendered and awarded and the project is approximately 80% contracted from a higher cost standpoint. Turning the Slide 17, we continue to make progress behind the scenes on three Greenfield development projects.

As many of you have heard us say, Canada needs more housing supply to accommodate the influx of new immigration expected in the coming years. These three projects will create nearly 4,000 new residential suites in Ontario.

And we are excited to play an active role in the supply solution with these prime location developments. I will pass it over to Curt.

Over to you, Curt.

Thanks Brad. In Q4, we recorded an $85 million fair market value gain bringing our full year total to $327 million.

The increase in the fair value comes from continued strong operational performance as well as a 7 basis point compression in cap rate. We have been talking about the wall of capital interested in our sector all year and the private market appetite continues to be strong.

We currently sit at a weighted average portfolio cap rate of 3.86%. Moving on to Slide 20, the REIT continues to be in a very healthy financial position.

Our debt to GVV on December 31 has increased slightly to 36.7% from 34.4% at the end of Q3. This is as a result of the significant acquisition activity in the quarter.

At the end of December, the REIT had mortgages of $1.4 billion at an average term to maturity of 3.6 years and a weighted average interest rate of 2.38%. As you can see from the chart, we have approximately $450 million of mortgages renewing in 2022 with much of this loaded in the first half of the year.

We have been actively working on this book for some time and we expect to see our share of CMHC insured mortgages climb back to historical norms somewhere in the 80% range, while increasing our average term to maturity to roughly 6 years by the end of 2022. The current market rates we are seeing for CMHC insured mortgages for a 10-year term are in the 2.95% to 3.05% range.

So, we expect to see our refinancings move our overall weighted average interest rate up somewhere between 15 and 20 basis points. Of course, this will depend on rate movements between now and the time of being able to lock rates.

Although we see pressure on rates from a long-term viewpoint we should continue to benefit from a low overall cost of debt in the historical context. Moving on to Slide 22, you have heard us say before that we believe our responsibility extends beyond the four walls of our properties.

In Q4, we had a small window before Omicron hit, where things had started to open back up and we were able to gather with our stakeholders once again. We seized the opportunity and work with our partners to organize our Annual Mike McCann Charity Golf Tournament in Ottawa in just 4 short weeks.

We had 280 fully vaccinated golfers with onsite health screening and temperature checks at registration and a revamped format to ensure social distancing. With the help of our incredible business partners, we showed up for our community by raising a record amount of over $1 million, which has been donated back to the community.

With eased border restrictions, we also welcomed several groups of investors from Europe and the U.S. to see our communities in the GTHA and Montreal firsthand this fall.

We hope to see more of you in person in 2022. Finally, we have to salute our incredible team.

We organized a volunteer campaign in November and asked our employees to take time out of a hectic year end to help our community partners across the country. They showed up in a huge way as they always do, donating more than 300 volunteer hours, spending their own money to create personal care packages with the Shoebox Project and contributing our modes of food to the donation boxes in our community lobbies.

When we talk about moving our communities forward, our team is the heart and soul behind that momentum. Mike, would you like to say a few closing words?

Thanks, Curt. Overall, again, pretty solid results, looks really good, forming a really good position as we go into 2022-2023.

I am excited of where we are looking. I think that one of the things I touched on before is I am also really happy about the bench strength that we have added.

And to be quite candid, it hurts the results in the short-term. But we are not a short-term results company we are building this for the long run and some extremely talented people that we have added and that’s just fantastic.

So, very, very pleased about it. And as also as we go forward, you can see that we are continually innovating and doing all the right things.

And we have done a lot of this be quite frankly naturally along the way and probably just didn’t really go back and checked the scorecard. That’s what we should have done in the past and there is other items that clearly we needed to get better on.

And so, we are working on getting better on all things as we all tried to do everyday. And so I am really happy about where we are going there.

And again, I am going to give kudos to Sandy and just developing our whole sustainability piece and making sure that we are getting credit for the things that we have done and making sure that we are working on things that we have missed. I guess also as I am looking forward, I see there is – we have got a great future in a lot of different ways.

We have got, I think almost 4,000 units in various stages right now being completed and nobody unless you have been around and did a tour – done a tour with us realize the intensification opportunities that we have. We really truly believe that part of what we are responsible for and to our actually 17,000 shareholders and I think that kind of blows people away when you think about it.

I know we were talking about it. We are actually the ultimate mom and pop real estate play, like how many people are relying on us to make sure that we do all the right things.

And I have to say like and it’s not just us, all of our peers. They have been great and even going through this whole pandemic.

We have shared so much information and they have all been extremely responsible and how they have handled everything and we have shared all best practices. And they are all cranking up their supply too.

We truly know that we need this as we go forward in Canada. We have going to have record immigration numbers coming in here.

They are going to be huge and they have just announced even further increases, I think 5% and 6%, more in 2022 and 2023. We have that whole international student that will be hopefully arriving back here as we get more normalized and we are – and which is fantastic.

So, supply is going to be a big part of the equation. We want to be part of that answer.

And I know with our – with my peers, we have spent a lot of time trying to figure out how we can be helped, be part of that answer. So, I am looking forward to it and I look forward to the opportunities for the whole team here.

So, again, looking forward to the future here for the REITs and I wanted to say thank you to our team. Our team, they have done a great job in the last couple of years.

And now we will open the floor to questions.

Thanks and good morning everyone. In regard to the improvement that you guys have had, fully pretty strong at some marks like Montreal, but Mike you mentioned that it should get a lot better as immigration picks up.

Are you expecting a notable improvement this year or is this something that you think might take a couple of years as immigration accelerates for that Montreal vacancy to come down even further?

I am very hopeful, Mark. And first off nice talking to you.

Hope you are having a good day so far. Very hopeful for the second half of the year, we will be in a much better position.

That’s what we are hoping for. But like these last couple of years have been just crazy.

So, it’s pretty hard to predict. And obviously, the volatility on a geopolitical level, it’s – there is a lot of things out there.

But I am very, very hopeful that we will start seeing that. So, things look relatively good right now.

And even just what the Canadian government is trying to – they are stating for their immigration numbers are going to be record numbers here this year, so…

Okay, great. And then you mentioned you – that’s helpful to understand your thoughts, but I don’t know maybe you mentioned geopolitical in regards to that as well as just general inflation.

Obviously, the revenue growth helps, but do you expect to see any pressure on your margins on the cost side or the energy side this year?

There will be – there is obviously, nobody can predict 100%. We think we are in pretty good shape in a lot of the different areas.

There will be a little bit on that and I’m just kind of speaking out loud here, my usual in script itself, but I think in a lot of utilities, obviously on the gas, that could be a bit of an issue. Still a bit we are hopefully that the taxes have been kind of property taxes have kind of held firm so far.

I think we’ve dealt with a lot of the wage piece, which was a big part of the issue so – but there will be a little bit of obviously some items like we will see some inflation on. I do believe we’ll see some good growth in the rents to offset it though.

Yes. Just add to that, Mark, it’s Brad here.

I think we are going to continue to see margin expansion given that we still have room in the top line for growth, I just don’t think it’s going to be at the same pace that we have seen before on merger expansion given the fact they will need some probably a little bit impression on utilities. But I think we have done a good job of trying to capture that in our own internal budgets going forward to 2022.

Okay, great. Thanks so much.

Hi, good morning guys. Just a quick one for me on the – you did mention that your mark-to-market rental gap is around 20% right now.

Could you maybe comment on what you are seeing, I guess in each of your markets and where you are seeing the largest spread?

Well, right now, the – probably the lowest spread is in Montreal. We are having – I mean, Montreal has been the – I guess the market that we have had the most trouble with the strongest market probably Vancouver to be quite frankly, it’s been – we were so lucky to get into Vancouver when we did, very, very ecstatic about it, very ecstatic at that platform.

We continue to see different opportunities in Vancouver. And it’s pretty easy to pull on those acquisitions.

So, we are really happy about it. But that would be the – I guess the two different spectrums I would say.

I don’t know if anybody have a…

The only thing I would add, I agree with Mike’s comments. Montreal has been probably the lowest and Vancouver, the highest, but Southwestern Ontario has performed quite well as well.

And then really it’s going to come back down to, as the young professionals continue to leave their parents basements, which we have seen a lot of. I think there is still some pent-up demand for the rental.

And then when you put on top of that the newcomers to Canada, especially international students who most of our universities are in the urban core, you should start to see material pressure on rates when we start to see that. And anecdotally, we are starting to see a little bit of return of interest from international students.

Yes. We feel pretty like across the board, we are going to still see some good uptick to be quite frank with it.

And Brad was right to hit on the Southwestern Ontario, it’s done incredibly well. And I have been very resilient all the way through.

Great. No, that’s helpful.

But – and I guess it’s super good to see that the improvement on the occupancy front as well. Would you say the main driver of that is what you just said about people leaving their parents basement and then I guess, the return of the students?

Yes, I think to be honest, Joanne, we have started it last year with such high vacancy numbers and it was unnerving for our senior management team to say the very least, but I think we are pretty happy that we didn’t buy and we kept rents stable. And when we did that, we believe that the decrease in the rental demand was temporary unless and we did throughout the years see a lot of the return of the young professionals.

What we didn’t see to the same degree was the return of international students. And I think we are setup pretty well to see that.

Now that said, we have caveated it with saying we’ll have a better idea second half, because really, it’s going to be September is the true big lease up for the international students. But we are hopeful that maybe some of that will come for the summer.

Got it.

Yes. Joanne, I’ve got a bit of a laboratory at home, I have four kids, three of the four have left, they all came home, and one is telling me he is going to.

So, that is my litmus test of what’s going on.

That makes sense. That’s really helpful.

And I guess maybe just switching gears for me on, I guess, obviously, 2021 really active year on the acquisition side, I guess, kind of what you are seeing right now in the current market and kind of your target for 2022 and the markets where you are seeing the most interesting opportunities right now? Is it still going to be Vancouver?

Well, we love Vancouver. There is no question.

We really love it. Again, we’d like all our markets.

All our markets are very strong. So we are happy about everywhere we are at.

I would say, last year, I wouldn’t want anybody to perform at the same amount of volume as last year. We do see we are seeing a lot of flow of deals.

We are going to be very prudent. Some of it will get really big.

So, we are working really, really hard. We do have some advantages in certain markets.

And we are hoping that we will utilize those to our, I guess, to get the best results as far as purchasing in that. So, I wouldn’t want you to model on the same exact amount and that maybe an outlier.

I guess on that front then you are seeing quite a bit of guessing on the cap rates compression just given the strong demand for rentals. Could you maybe comment on what kind of color that you’re seeing around on the cap rate side of things?

It’s stand down, I think people are looking at multi-revs as a real safe haven and probably a good inflation on – our good hedge on inflation everybody seem that’s coming. We are lucky that we have those shorter term leases, some of them anyways.

So, there is that ability to kind of keep pace with inflation, where some of the other asset classes may not have that ability. So – but it is a really strong market and a lot of players in it and a lot of people that that we hadn’t seen before are arriving on the scene.

And so it’s – you are going be on your feet trying to sign deals is something that.

Yes. It was always leverage your relationship, I guess with the partners or with Crestpoint as well, right?

Yes. We will look at probably more JVs with Crestpoint.

We have got other partners to really be looking at. So, we are going to try to do the best we can do to make sure we make the right transactions that are accretive and good for our shareholders.

And then the key is that the industry is getting institutionalized, which I think is a good thing. And I think they will just – they will be lots of opportunities for ourselves and for our peers and other professionals managed buy their homes, Joanne.

There is an inflection point where it’s getting more orderliness to operate at this level. And I think professionally managed and organized organizations are better positioned to be able to provide the service levels that you need today’s world to compete.

Yes. That’s one thing.

I don’t think enough people have realized on and I am sorry, and kind of go off with factor is I don’t think people understand the value of a platform. That is huge.

And I said, we have a lot more people that come to us and approach us, because of the platform, right. It’s easier to buy, but then you got to operate it.

Right?

It’s an easy asset class, it’s very, very advanced, very people intensive.

For sure. I guess with – I guess still things kind of keeping active on the acquisitions side, and maybe if you can remind us, what would your target leverage would be kind of maintained around the current levels, or just given that I guess the pipeline will continue to be somewhat busy?

It’s really going to – like we don’t mind going into the low-40s in that range, especially if we think we can add value and kind of organically take it back down over time, we feel very good about it. If we see something really compelling, I guess we would have that conversation.

I don’t think you will ever see us have really elevated levels in high-40s or 50s. I don’t think that’s ever in our DNA.

Those – that ship sailed about 8 years ago or 9 years ago, that will never happen. So, we will always be very mindful in that.

And I think we try to build ourselves for the kind of shocks that we have unfortunately have all been through in the last couple of years. And I am very hopeful that we will not to see more of it and yes.

Okay. That’s very helpful.

Thank you very much. I will turn it back.

Thanks. Good morning.

First one, just on the occupancy, were you guys able to roughly hold occupancy in Q1 with Omicron, or do you see a little dip down?

Mike do you want to go with that…

Exactly, it’s in line, Jonathan. I mean typically Q1, it does come up a little bit.

If you look back, even pre, everything we have been through the last couple of years, Q1, the occupancy, sorry, vacancy goes up, occupancy comes down a little bit. At this point in the Q, it looks like it’s sort of following that trend, but it’s very close to where we were for Q4

Yes. I am nodding currently right now.

Obviously, you can’t see me, but yet it’s looks like getting back more in line with historical...

Normal seasonality?

100% didn’t have the impact that one might have thought it could.

Okay.

Jon, I am going to talk about lease.

We can talk about lease. I guess currently just sticking with you that I see post the quarter, you guys did lock in $283 million or so of mortgages, what rates was that at and what sort of term?

So, it was all longer term money. So, we are looking at mostly 10 years right now, there may be a little variation on that to smooth out our mortgage ladder as we go forward, but mostly 10-year term.

And the rates of those averaged to about a 2.9-ish around there. And it was all CMHC insured.

Okay.

This is what’s going on in Ukraine. We are seeing rates actually pulled back markedly, which is nice.

It’s anywhere depending on the date 10 basis points to 20 basis points from where they were sort of going into the latest events. So, we are doing our best to lock more right now.

It’s just, it’s hard to predict right now, because the market on the bond side is up and down daily.

It’s kind of like you are in kind of window, let’s say 280 or 380in that. But it’s very volatile right now.

It’s very volatile. So, I wouldn’t model the 280s.

If we take them it’s a bonus – we get with a bonus, I would be modeling more of that 290, 295 to 305.

Okay, and spread like the Banyoles movement, but has spreads basically stayed the same?

Yes. Spreads haven’t blown out.

We are – we had lower at the beginning of COVID. But they have sort of over the course of the last year, they have come back in line to where they were pre and we are sort of holding in there so far.

Okay. And then, just last one for me, your CapEx got back to sort of 2019 levels last year, what do you expect for 2022 given all the acquisitions you did last year?

I would say it’s maybe a little bit larger just because of the nature of the beast of having like a record year, but it might be a little bit a little bit higher.

Okay.

And so as we work with properties.

Okay, that’s it for me. Thanks.

Thank you, Jonathan.

Hi, thank you. I wanted to just touch on the potential for same-store revenue growth for next year.

So, Q4 was really strong at 7.8%. With occupancy presumably kind of a tailwind for you in terms of year-over-year growth, assuming the occupancy holds, do you think that we can achieve that type of high-single digit same-store revenue growth in ‘22, similar to what you did in Q4?

Yes. There is no question it was high coming off a low base.

But we are happy with that. I think in Mike’s opening remarks, talked that I think we are set up for it could be a very robust industry.

But we have always kind of said in between that four to eight as possible, obviously, we are at the high end of that range. I think it’s quite possible, especially if the foreign students come back.

But I think a rather model will be a little more conservative to kind of look somewhere in that range. But there is definitely a scenario that could play out where we could maintain that and a big part of it.

And maybe that’s for your next question. I am sure Curt is a few AIs, but it’s really the promotional discount this flows into the very top, and that’s where the key is to the revenue growth.

Okay. Alright.

Just in terms of the rent growth, I did notice, like if we just look at Q4 versus Q3 on a same property basis, the uptick was about a percent from Q3 versus Q2 of this year, the uptick was what 2%. It was running at about half of what we saw in Q3, Montreal, and Ottawa, we are kind of lagging a little bit versus other parts of Ontario.

Is there anything in particular from a strategic standpoint that you did in Q4, both have decelerate that pace of growth a little bit?

Well, I think – I am looking at, but I think some of that makes sense that it would be large sequential as you lease up, right. So, we started the year at elevated vacancy.

And then as you go in and leased up each sequential quarter, it’s going to have the impact of that lease up, right. I am assuming that’s a big part of it.

I can’t be to anything fundamentally, that would be different.

So, where we see some problems here, and so that we are seeing the Q4 over the Q3.

Yes. If we just look at your same property rent as of Q4 and same property rentals of Q3 that increase was 1%, same increase in Q3 was 2%.

So, I wasn’t sure related at all to your increased occupancy quarter-over-quarter Q4 versus Q3, whether it’s kind of something…?

Definitely, we have to do with that and something to do with traffic. And typically what you will do if you go back and I think look at previous years, your highest peak demand is in Q3.

So, more demand, more units turning over to market, more rental growth, and I think if you go back over the years, you will actually see that Q3 is the higher, the quarter that has the highest growth, and then it sort of comes in off of that.

Q3 and then Q2 would be number two, Mario.

Got it. So, roughly following the seasonal pattern, that’s the good way to put it?

Yes. It’s very seasonal.

Maybe just two more on my end, the comment on going up to 80% CMHC financing. In the short-term, you still have about a third of your portfolio that’s not repositioned.

So, should we – would that imply that we should expect kind of an acceleration in the repositioning of the non-reposition portfolio, or are you changing how you think about financing of the moderate position portfolio relative to historically?

That’s a good question Mario. And typically, we look at our CMHC insured, it’s our repositions portfolio is like 99%.

And it’s our non-reposition that really accounts for most of the non-CMHC insurance. So, it’s a great question.

I think what we are doing is just trying to balance out the value creation in the portfolio and what we get when we roll it into CMHC versus the risk of interest rates going up. So, we are maybe pulling them forward at a year versus where we might let it go another year before we are starting to pull some of those slowed a little bit.

So, we are just trying to be cognizant if rates do take off, and especially when we are seeing inflation and everything else, we just want to make sure we try and walk that that balancing tightrope, if you will, on that one.

Okay. Last one, just maybe sticking with Curt, can you give a rough breakdown of the fair value this quarter.

You mentioned some of it was because of higher expected NOI and some of it due to the lower cap rates, the rough breakdown of the $86 million for value gain between the two?

Yes. It’s pretty close to 50-50.

It’s just slightly more weighted to the cap rate. But it’s I think it’s about 55-45, it was pretty close to the 50-50 range between cap rate compression and NOI.

Okay. Thank you.

Hi, guys. Within the opening comments there, Mike you talked about adding more talent or bench strength to the organization, I was curious to know if that was targeting a specific area, or is that more broadly across the organization?

It’s pretty broad, to be frank with you. But on the – we have added in all the different facets.

Besides Sandy, there is sort of our bench strength, right. So, we have got part of the sustainability side, we have added on our back office side operationally, like just all the way through I guess the company.

And part of it is we are just trying to make sure that we can get ready for the next leg of the growth of the company. And we think it’s really pretty important that we get everybody in even a little earlier than you usually would.

And just make sure that everybody goes through proper education, training, coaching, all those good things really to make sure that we try to always achieve to be the best in our asset class. So, we want to make sure we are doing that, so.

Okay. And as that translates to overhead or G&A costs, I guess there was a little bit uptick quarter-over-quarter as a result of some of that investment.

How should we think about G&A as a percentage of, let’s say, revenue for 2022, would ‘21 still be a good runway?

I think you are going to see a little bit of an uptick. And I think you saw that as it kind of came through here this quarter.

So, it will be a little bit of an uptick on the – again, the good thing is, is that I think as we thought it was important to do this in the short run, because we are building this company for the long run. And we think you will see as we hopefully scale over the next few years, that you will see a lot of incremental revenue will drop to the bottom line, and we won’t be in a I guess, going through the kind of like a panic mode to be trying to educate, training and coach people.

So, it will be a short-term, a little bit of a short-term debt, but we think it’s the right move.

Right. Switching to your comments on intensification potential within the portfolio, obviously, you have been highlighting that for a while.

If we continue to see the strengthening on the demand side, particularly with foreign immigration, is there the potential to maybe add a couple of intensification projects into the near-term development pipeline if the economics makes sense, or are you pretty comfortable with where you are from a development exposure perspective right now?

Well, we are obviously very mindful of what we are doing. But we are planning as more long-term too.

We do feel that there is a lot of intensification. We have looked at it across the board.

So, we have got a lot in mind here over the next few years. And we really do believe like, again, going back to, we need supply, like the country needs supply.

We are going to have these record amount of immigrants and international students, all arrived here. And there is no course of action for these people for housing.

We want to be good stewards. We want to do the right thing.

So, we want to be part of that answer. And we definitely want them to be bringing in supply, but we are going to be mindful, because we can only afford to do so much and at a time, but we definitely, we have got a really good pipeline that’s built into what we have.

So, hopefully that helps.

Thanks, a lot. Yes.

Thanks a lot. I will turn it back.

Hi, everybody. Good morning.

This question for me is just on, I know there is maybe a few isolated weak spots within the portfolio. But are you guys still using incentives to your leasing program right now?

Sorry, still using what – I apologize so on the incentives, where it’s down a lot. I mean we still have some in isolated spots of Montreal, a little bit here and there.

But really and it’s really burning off all across the board. So, that is looks like that ship will have sailed.

I mean I think we have all went through the tough parts in the last couple of years, where we decided that we thought it was the right thing to do to keep our rents where we were. We used some incentives along the way.

But again, it’s, that’s running off.

Sorry, just to be clear on that, though, the incentives, as we have discussed before, just to make sure for your modeling purposes, we see those peaked in Q4, which I think is what we communicated. We expect Q1 and Q4 to be very similar, like you want a mix of 2022, because of these advertising, we like the lease, and that will sort of start to drop off in Q2 and come down hard in Q3 and Q4.

Yes. I am tracking more on new incentives.

Yes. There is definitely an interplay there and thanks for the clarification, Curt that’s ultimately was trying to get to.

And then I guess, as you are rolling off, now, you are starting to address those leases where you used incentives and are you getting any pushback from tenants as you trying to get rid of those or not so much?

It really depends, like sometimes, I mean you are going to get a little bit here and there. But look at I really – we are really believing very strongly, there is going to be really good velocity in the leasing cycle.

So, it will all work its way through, right. So, we are confident.

Okay. And then I guess, I know you guys holding along on rent, and certainly the strategy and we have gotten through a period where you have rebuilt your occupancy.

The mark to market cap has come down to 24, 25, but directionally now, are there regions in your portfolio or areas where market rents are growing again, or is it still stable?

Yes. There is for sure another – there are definitely some regions that are growing and I am kind of surprised in some cases that they are growing with, again, not being the new immigrants and international students and just a guest deploying their kids out of their bedrooms, and whether they would be in university or professionals, they may not stop them and that’s definitely what’s happened.

Also, you got to remember too what’s happened with houses, the housing prices, there is a whole cohort of people that would usually be moving out to buy houses. It’s out of the range, unfortunately.

I am telling you like supply is key right now. We need supply.

We need to make sure that we are doing all the things to speed up the process to get more supply and it’s the right thing for what I mean, obviously, for we want to see for Canada, we need supply across the board.

Okay, all good points. And then I guess with respect to the mark-to-market gap, would you expect through 2022 that you get back to that in excess of 25%, barring the unforeseen federal state assessment?

I think there is a scenario easy playing out, where you can get to that Michael and even maybe even much higher, but we don’t want to be presumptuous, right. It really does come back to when do immigration went back in earnest meaning that they are not just being given permanent residency, where they are actually coming back into the country and the foreign students.

I think the way the world is headed and especially with the geopolitical risk, I think Canada looks like a pretty attractive place. Prior to the pandemic, and prior to unfortunately, the recent crisis in the Eastern Europe, I think Canada even looks that much more desirable and it goes back – I think we are going to see strong rental demand, but it will go back to what Mike has been advocating and the rest of ourselves and other industry participants, we have got to be able to deliver new supply in a speediest way in order to meet some of this rental demand.

So a long answer, but really at the end of the day, I think our 20% is conservative, you can – you are the smart guys, you guys can kind of figure out where your sensitivity is from there.

Okay, great. And that’s it for me.

Thanks for that. Congrats on strong turnaround last year.

Thank you. So my congrats to the team.

That looks really hard.

Hey, guys. Just one quick one for me.

On Montreal, you have notwithstanding the comment that it’s been a bit weak or you have actually seen some occupancy gains there? Have you been in any cases kind of replacing some of your student population with longer term tenants or is the remaining vacancy kind of exclusively student related at this point?

It’s mostly student and young professionals, again, kind of leaving their family homes to come in, come back. Again, we expect it to be much stronger.

Montreal like we are a big believer in Montreal over the medium to long-term. It just seems like it’s got hit a little bit more in the core then and Toronto have students to be frank, I think you’ve seen it in all the core markets – like all the cores of the urban in the cities, they have all been hit.

But Montreal, we have had just had a little bit more troubles, just because we have got a lot of buildings are very close to the universities.

And just to clarify Mike’s comments with the professional and students, domestic students. So, we saw pretty good uptake in leasing earlier on last year in Montreal and it kind of petered out.

But I think a lot of that was pent-up demand, because Montreal on the first before on the cloud looks like they were coming out and little more back to normal versus Ontario. And we saw that in the leasing traffic really pick up and we saw a lot of the domestic Ontario student kids this time come and lease up.

What we didn’t see, Matt, was on the margin was those international students which you know was quite a big number for the island anecdotally. We are starting to hear of interest picking up again from the international student community.

Now, we won’t have full proof until as we get further on into the leasing season and that will probably be July, August where we will have better visibility of what that looks like.

Okay. So – but at the end of the day, the tenant composition haven’t changed, because I mean, it is nice to have students.

They leave every 3 years.

Yes, I think where you are getting at is I think the young cohorts versus the older cohorts and it’s not the empty metrics.

Sorry about it. We kind of levered it.

We end on that one. We could have made it pretty clear.

Okay, perfect. Thanks, guys.

Well, first off, let’s say thank you everybody for joining us. Really appreciate it.

Hope everybody is doing very well looking forward to seeing many of you over the next few weeks and months and thank you again. Appreciate everybody following us.

Have a fantastic day. And we will see you all at Q1 which is right around the corner.

Thank you everyone.