During the Nexus Industrial REIT (Nexus) Third Quarter 2024 Results Conference Call, CEO Kelly Hanczyk detailed the company's transformation towards a pure play industrial REIT, highlighting the acquisition of targeted assets, the sale of non-core properties, and a strategic focus on development projects. Despite a net loss due to non-cash adjustments, the REIT saw increases in normalized funds from operations (FFO) and adjusted funds from operations (AFFO) and expressed confidence in its growth trajectory and financial strategy for the remainder of 2024 and into 2025.
Key Takeaways
- Nexus Industrial REIT is shifting towards being a pure play industrial REIT.
- The company reported a 5.6% increase in normalized FFO and a 6.8% increase in normalized AFFO.
- There was a net loss of $46 million for the quarter, primarily due to non-cash fair value adjustments.
- Nexus announced the sale of eight legacy office properties and excess land, with most retail assets under firm sale contracts.
- The REIT aims to reduce debt with approximately $110 million in non-core asset sales in the second half of 2024.
- Occupancy rates are at approximately 97%, with a focus on maintaining high levels and managing market variations.
- Significant capital expenditures and development projects are underway, with a positive outlook for same-property NOI growth.
Company Outlook
- CEO Kelly Hanczyk is optimistic about the company's direction and financial health.
- Nexus is focused on organic growth and potential acquisitions, with a cautious approach to market conditions and debt levels.
- Development opportunities in Calgary and London are being explored based on tenant demand.
- The REIT plans to enhance its industrial portfolio and financial performance as it approaches 2025.
Bearish Highlights
- Nexus reported a net loss of $46 million due to non-cash fair value adjustments.
- Occupancy slightly decreased to 97% from 98% due to property classification changes and tenant departures.
- Market conditions show regional variability, with some softness in Quebec and the GTA.
- Adjustments in return expectations have been made, notably with the Glover Road asset.
Bullish Highlights
- New acquisitions and development projects are contributing positively to NOI.
- The REIT is disposing of non-core assets to strengthen its balance sheet.
- Strong leasing performance in regions like Regina, with yields nearing 8%.
- Anticipation of rental rate increases upon lease renewals, particularly in Ontario.
Misses
- A net loss was reported this quarter, primarily due to non-cash fair value adjustments.
- A slight decrease in occupancy rates was noted.
Q&A Highlights
- The leasing landscape is expected to see contractual rent escalations in 2025.
- Discussions are ongoing with significant tenants in London.
- Capitalized interest has increased due to investment in development projects.
- The company is preparing for $210 million in asset disposals in the second half of 2024, with further guidance for 2025 pending.
Nexus Industrial REIT's Third Quarter 2024 earnings call revealed a strategic pivot towards a focused industrial real estate portfolio, with CEO Kelly Hanczyk outlining the company's achievements and future plans. Financially, Nexus experienced an increase in both normalized FFO and AFFO, despite a net loss attributed to non-cash fair value adjustments. The company is actively managing its asset portfolio, with significant sales of non-core assets expected to reduce debt. Occupancy rates remain high, although slight decreases were noted, and the company is proactively addressing lease expiries, particularly in Alberta. Nexus Industrial REIT's commitment to development and capital expenditure, particularly in Ontario and Alberta, supports its optimistic outlook for NOI growth and portfolio enhancement as it moves into 2025.
Full transcript - None (EFRTF) Q3 2024:
Operator: Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT Third Quarter 2024 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions [Operator Instructions]. I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead.
Kelly Hanczyk: Thank you very much. Joining me today is Mike Rawle, Chief Financial Officer of the REIT. Before I begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements which reflect the REIT's current expectations and projections about future results. Also, during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings which can be found on our website and atsedar.com for cautions regarding forward-looking information and for information about non-GAAP measures. Through 2023 and the first half of 2024, we invested to improve our business. Our goal was to high-grade and optimize our portfolio, taking advantage of uncertain economic backdrop and a weaker real-estate market to acquire and develop high-quality assets at attractive prices. We made 10 targeted acquisitions and we advanced four development projects, three of which are already cash flowing. In the third quarter, we enter the next phase of our plan. We are deleveraging our balance sheet and focusing our business further on the industrial sectors through the sale of our legacy office and retail portfolios and some non-core industrial buildings and this quarter, we made great headway. In September and October, we announced the sale of our portfolio of eight old Montreal office properties, as well as an opportunistic sale of excess land in Fort St. John, BC.Now, I'm excited to share that all of our legacy retail portfolio, except for one building, is now under a firm sale contract, which is scheduled to close by the end of the year. In addition, we have a firm sale contract for four non-core industrial buildings in Regina, Saskatchewan, which will close in December. We also made progress on the remaining office buildings. We now have two more under firm sales contracts that are scheduled to close before the end of the year and an additional one under a PSA and in due diligence. This leaves us with one remaining retail building and two office buildings. The retail building, Les Hallesd'Anjou, has surplus land, which we are selling separately from the building. Once the land is sold, we will then move to sell the building in the New Year. Of the remaining office buildings, as mentioned, one office is under a sale contract, which is not yet firm, and the final two are joint ventures, and we are not currently marketing them. All told, we are targeting non-core asset sales of approximately $110 million in the second half of 2024, and I'm confident that we'll achieve the goal. We'll use the proceeds from the sales to reduce our debt balance. After completing these sales, our mission to be Canada's pure play industrial REIT will be complete, and our industrial NOI concentration will be nearly 100%. Turning to operating performance.We had a strong third quarter. Our normalized FFO improved 5.6% to $0.188 per unit, and our normalized AFFO improved 6.8% to $0.158 per unit. In both cases, the increase was driven by stronger net operating income, which was up 3% or $1 million compared to last quarter, and was up 11% or $3.2 million compared to a year ago. This NOI increase was largely driven by three factors; acquisitions, organic growth, and development. I'll discuss each of these more in detail. New properties that we acquired in the past year contributed $2.7 million in NOI for the quarter.Within the quarter, we acquired a brand new single-tenant industrial property in Sherbrooke, Quebec, that was a build-to-suit for an existing tenant. The purchase price was $16.6 million at a fixed cap. As part of the consideration, we issued the vendor $4.6 million of Class B LP REIT Units at $10 per unit, a 45% premium to our trading price on that day. The 62,000 square foot building is fully tenanted, brand new, and contributed 200,000 of NOI in the quarter. Our industrial same property net operating income was $26.3 million in the quarter, a $1.4 million increase from a year ago. The increase was driven primarily by the lease-up of our Richmond, BC property. This quarter, our results benefited from the resolution of two key vacancies that impacted the first and second quarter. On August 1st, a new tenant took the full 29,000 square feet at our 102Avenue, Southeast Calgarybuilding, and at our Exeter Road facility in London, Ontario, a new tenant moved in mid-August, taking all 68,000 square feet of vacant space. Our Titan Park development in Saskatchewan was the first of our recent development projects to be completed. We finished it on schedule and slightly below budget, and the primary tenant took occupancy of 204,000 square feet April 1st. The property contributed a healthy 500,000 of NOI this quarter. We have also inkedthe tenant for the remaining 109,000 square feet, which takes occupancy in February 2025. Once fully leased, this property will add annual stabilized NOI of approximately $3.8 million, representing a 7.9% cap rate on our investment of $48 million. We still have six acres of land at that site that we are possibly looking to finish and lease as truck parking in the future. This quarter, we also benefited from our Hubrey Road Industrial Intensification project in London, Ontario. We completed this 96,000 square foot building in July, and the tenant took occupancy mid-month. The project will yield 8.4% in the first year on development costs of $14 million, and the project has significant rent escalations thereafter. It also builds on our leadership position in the highly desirable London market, which continues to be one of the tightest industrial markets in Canada. We also completed our 115,000 square foot Glover Road new build in Hamilton by the airport. We own 80% of the property and will earn 5.9% going in yield on our 25 million share of the development costs. We're currently looking for a tenant, and I'm optimistic that will be leased in the first half of 2025. Construction is ongoing at our Dennis Road property in St. Thomas, Ontario. This project is a 325,000 square foot expansion for an existing tenant at an estimated cost of $49 million. The tenant pays a 7.8% interest on the development costs that we incurred during the construction phase, so there's no drag on our cash flow.When it is completed in the first quarter of 2025, the tenant will pay us rent equal to 9% yield on all the development costs. We have also just started construction of a 115,000 square foot small bay industrial building on vacant land that we hold at 102 Avenue in Southeast Calgary. The total project cost is about $15 million and we expect it to be completed mid-2025 and to deliver a 12% unlevered return. Leasing signs are up and the response has been excellent for this highly desirable small bay design. On a full year basis, I expect that the actions we have taken in the positive benefit of embedded rent escalation will drive mid-single digit same property NOI growth in our industrial property portfolio. Looking beyond 2024, I continue to expect to earn a healthy rent lift on renewals due to the industrial market rents that are, on average, 26% above in-place rents and from rent escalation embedded into our lease contracts. In summary, I expect our results will continue to improve from here. We have firm sales contracts for our legacy office, retail, and non-core industrial portfolios which will further focus our portfolio and de-lever our balance sheet. We have also resolved key vacancies. Our creative developments are coming online and we will continue to realize significant organic growth through embedded rent steps and positive mark-to-market on renewal. We have built a strong team and by the end of the year, our mission to be the Canadian-focused pure play industrially will be complete and we will set ourselves up nicely for future growth. I'll now turn the call over to Mike to give some more color on our financials.
Mike Rawle: Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net loss was $46.0 million, a $122.9 million decrease compared to a net income of $77.0 million last year. The decrease was due to non-cash fair value adjustments on Class B LP Units on investment properties and on derivative financial instruments, that combined were $121.1 million lower than last year. This was partially offset by higher net operating income in the quarter.Our third quarter net operating income was $32.6 million, an increase of 11% or $3.2 million compared to last year. Of this amount, new acquisitions accounted for $2.7 million and growth in same property NOI added $1.2 million. Normalized AFFO for the period was $0.158 per unit, a decrease of $0.01 per unit from a year ago as the benefit from higher net operating income was offset by a combination of higher interest expense and more units outstanding. Total (EPA:TTEF) general and administrative expenses for the quarter were $1.9 million, which was $0.5 million higher than a year ago, predominantly due to higher employee costs and legal fees. Net interest expense in the quarter was $14.0 million, a $3 million increase from the same period last year. The increase was primarily due to a higher average outstanding debt balance resulting from borrowings to fund acquisitions and construction at our Titan Park, Hubrey, Glover and Dennis Road projects. At September 30th, 2024, our NAV per unit was $13.06, a $0.14 per unit decrease from last quarter. Our weighted average cap rate increased by 1 basis point to 5.81% in the quarter, compared to 5.80% at June 30th, 2024. The carrying value of our investment properties increased by $41.1 million in the quarter, primarily due to the acquisition of an industrial property in Sherbrooke, Quebec for $16.6 million, development spend of $15.4 million and $11.1 million of positive fair value adjustments. I'll now turn the call back to Kelly.
Kelly Hanczyk: All right.Thanks, Mike. I'm excited about the progress that we've made to date, and I look forward to continuing our momentum through the fourth quarter and into 2025. So, with that, operator, please open the lines to any questions.
Operator: We will now begin the question and answer session [Operator Instructions]. We will pause for a moment as callers join the queue.And our first question comes from Brad Sturges of Raymond (NS:RYMD) James. Please go ahead.
Brad Sturges: Hey, good morning.
Kelly Hanczyk: Good morning.
Brad Sturges: Just maybe starting on the development pipeline.Just looking at the table you provided, looks like five or six projects in the planning stage right now. At this point, as we sit here today, what could we expect in terms of new starts heading into 2025?
Kelly Hanczyk: Right now, all we have planned in the immediate planning is the Calgary, which is going.After that, I think over the next several months, we'll start to identify some others that we may have in London and see what the demand is like. But, I know we have a couple in London that are easily expanded upon depending on the tenant demand,so they may pop up next year. But right now, what's in the immediate pipeline is the Calgary asset.
Brad Sturges: And at this point, are you waiting for -- I guess, is it more like a build-to-suit sort of process or would you start anything on spec?
Kelly Hanczyk: Yeah. If we were to start anything on spec somewhereright now, I think it would be in the small bay. Small bay, depending on where you are, has pretty solid demand right now just from the user base.Possibly maybe in Kelowna,maybe, actually probably just there,and if we were to do in London, it would be for an expansion probably in one of our existing tenants.
Brad Sturges: Okay. Last question. Just on capital allocation, clearly it sounds like the initial plan with sales proceeds is to repay debt, but how do you think about resuming a little bit more of an active program on the acquisition front next year?
Kelly Hanczyk: Yeah. I mean, ultimately, we do want to pay down debt.So that's our immediate plan. We do have our eyes on some pretty good acquisition opportunities. If we can do them and keep our debt in check, then we would pursue them. Otherwise, we'll see how the market pans out over the next quarter or two, I'd say before we make any kind of significant moves.
Brad Sturges: I guess any acquisitions in the pipeline today would be more like shared deals in terms of the opportunity set today?
Kelly Hanczyk: Yeah. I mean, it's tough to issue a unit deal right now where we're trading at a significant discount and trying to get closer to where we would like to do a deal at. So, it's really going to depend on unit price going forward.
Brad Sturges: Okay. Thank you.
Operator: The next question comes from Jimmy Chen of RBC (TSX:RY) Capital Markets. Please go ahead.
Jimmy Chen: Thanks. Just a couple of questions as we look out to 2025. First, do you have an estimate of what the contractual rent escalation would look like sort of portfolio-wide for 2025? And then on the expiries, I recall last quarter you talked about a large tenant in London that you're working on, so do you have any update on that front?
Kelly Hanczyk: I'll start off with the London one. It's still a bit early. That's kind of more, I believe, a mid-year one, and they tend to leave it closer towards the renewal time. So, pretty sure they'll stay. They've been at that site for quite a while. I'll pass it to Mike for the other one.
Mike Rawle: Yeah. So, we've laid out in our MD&A, Page 13, you can see basically the average where we're at by -- average in-place rent of expiries by province, and I would use that as your guideline for coming up with a rough total on renewal rate going forward. It's a bit early for us at this point, Jimmy, to start to give a forecast for next year.
Kelly Hanczyk: Yeah. And actually, Jimmy, to answer your question, I think one of the other ones in London is an end-of-year expiry and a fairly significant one.And we actually are speaking with the tenant right now.So we'll see how that goes. But that's where we have a significant amount of lift on renewal.
Jimmy Chen: Okay. And your rent expectation, whether it's on those leases or whether it's on the Glover lease-up, they're about the same as they would have been?
Kelly Hanczyk: Yeah. I mean, Glover right now, I would say, from where I think the development started to where it is today, maybe some expected rent could have been 16, and now you're probably talking 15 somewhere around there. So, it has dropped off there. London, not so much of a drop-off.So, there's still, for a larger space, there isn't a lot available.So, at the end of the day, you're still talking in that $12 note.
Jimmy Chen: Okay. Actually, just one last, just a modeling. In the three development assets, you talked about Hubrey, Glover, Titan. Those were all transferred into income-producing properties, correct?
Mike Rawle: Yes, they were. So, Titan was in Q2, and Hubrey and Glover were both in Q3.
Jimmy Chen: Great. Thank you.
Operator: Next (LON:NXT) question comes from Kyle Stanley of Desjardins.Please go ahead.
Kyle Stanley: Thanks, good mooning guys. You had talked about seeing new acquisition opportunities. I'd just be curious to know what type of assets are you seeing out there. What geographies? I just would love to understand how you're thinking about that external growth program evolving in 2025 after potentially dealing with the leverage.
Kelly Hanczyk: Yeah, I mean, we're seeing some decent ones in London still. One, because we are the biggest landlord there, so I think we're pretty well connected. We've seen some in Edmonton and Calgary, Montreal, Toronto. I would say those are where we're really focused overall. It's going to depend on our cost of capital, what we do. Anything we probably do will have to be nicely accretive from here. We've already high-graded the portfolio significantly, so we'd be looking to add to it. GTA is always a target for us. I think you can find some better deals here, but maybe that's mixed with something out west at the same time on a blended cap rate basis. So, right now, it's been a huge focus on just getting rid of the retail and the office portfolio, which has been challenging, but it’s pretty -- we're happy with the results of it. It took us a while, but we're actually pretty happy with the overall results. So, we're focused on closing those, and then we'll start taking a good, hard look at what we do going forward once we pay down our debt and see where we are.
Kyle Stanley: Okay, that makes sense. Just because you highlighted there, the disposition program, can you remind us how much debt might be on those assets that are being sold? Just trying to think about the net proceeds that could be allocated then to repaying your debt.
Mike Rawle: It's roughly 65% of the total, 65%, 70%.
Kyle Stanley: All right, 70% LTV, okay perfect. And then one of them -- just, you talked about Glover Road, and now maybe you've pushed your leasing assumptions out to the middle of next year. Just curious, what kind of tenants are you targeting for the asset? What might be causing delays and just general market softness? Just curious on your thoughts?
Kelly Hanczyk: Yeah, there's some competition out there. I hate to jump the gun, we're fairly close. I'm hearing on one, I think they've narrowed it down to our property. So whether we get it over the line or not, but I think the overall tenant pool in that market has just taken a pause for a little bit. You know that whole growth, Cambridge, that whole little node going across through into Hamilton, there's been product that's been delivered. So, it's just slower overall for the past, I'd say, six, eight months. And the good news, I'm hearing some positive about it starting to pick up a little bit. So, we'll see how it goes. But, I'm fairly confident that who we're speaking with now, we should be able to get over the line. So, hopefully we can and then have that leased and off our plate in a long-term deal.
Kyle Stanley: Okay, that makes sense. Just the last one. Last quarter, I think committed industrial occupancy was about 98%. This quarter, I know it's about 97%. Can you talk about any changes that might have occurred there?
Mike Rawle: Yeah, two changes. One is, Glover Road is now being included in that number, in the denominator. So, now that that's moved out of property under development and into IPP. So as we spoke through, we expect that'll be leased up in 2025. And then the other one is, we do have at 855 Park Road in Saskatchewan. The tenant left there at the end of September, so that one's vacant at this point.
Kyle Stanley: Okay, that's it for me. I will turn it back. Thanks guys.
Operator: The next question comes from Sumayya Syed of CIBC (TSX:CM). Please go ahead.
Sumayya Syed: Thanks. Good morning. Just on the leasing side, looking at the mark-to-market spread, it went up a little bit from last quarter. It looks like Alberta spreads improved sequentially. On the flip side, market rent in Quebec was down from last quarter. Can you just provide some color on these markets and generally where you are seeing market rents trending these days?
Kelly Hanczyk: Yeah. So, I think Calgary West took a little uptick. So it's been a fairly strong market out there. Like I said, we've broken ground on our small bay. And from my speaking with the brokers, the signs literally just went up and their phones started to ring. So the small bay has been fairly strong out there and it always tends to be in demand. So, that's why we went that route. So that was an uptick. Montreal has, I think, definitely come down a little bit. The demand's weakened a little. We're still doing some pretty solid deals out there, again, in our smaller bay, because that's what we have near the airport, where some of the renewals were pretty good. But I think overall, the market has dropped a little. And I think even if you looked at GTA, same thing, just a little bit of weakness in the market where it's been a little overbuilt in that Cambridge, growth area, which I think is driving down overall market rents a little bit. So, until that gets leased up, I think you are going to see it flat. I am hearing guys giving a little bit more concessions and dropping the face rates a bit. So, that's kind of what's overall driving. London, though, is still pretty strong, not overbuilt, nothing really coming online. So it's holding pretty stable there.
Sumayya Syed: Okay. And then in your own assets, then, have you had to offer concessions, for example, in Montreal or in the GTA markets you referenced?
A - Kelly Hanczyk: No. I mean, I'm looking at our new leasing. Some of the deals were done quite a while ago.So it hasn't really affected us on that level yet. I would say on a new lease in Glover, what we planned versus where we would be, would be slightly off our model. Where we thought maybe we could push into the 6% returns, it's probably more like 5.9% just from what we'd have to put into the deal and where the face rent is. So, a little bit more, that's the real big one. The one we did in Regina honestly, it was a great deal. It put us ahead of our returns. So, it's a little bit of a mixed bag all over the country.
Sumayya Syed: Okay. And then just on occupancy, any known move up? I know Mike just mentioned one at the end of September. Are you expecting an uptick in vacancy in the near term and short term, maybe as you focus on prioritizing rent? I know some of your peers are seeing a bit of that play out in terms of transitory vacancies.
Kelly Hanczyk: Yeah. No, I think we will be pretty stable around these levels. Call it the 97%, 98%.
Sumayya Syed: Okay. Thank you. I'll turn it back.
Operator: The next question comes from Ray Kelliff [ph] of BMO (TSX:BMO) Capital Markets. Please go ahead.
Unidentified Analyst: Thank you. Good morning. Maybe on our capitalized interest, it went up a bit higher this quarter. Can you give some color on that?
Mike Rawle: So, yeah, I mean, it's been relatively flat through the year, and I think the -- this quarter we had greater spend at our St. Thomas facility. So we're building up this new facility in St. Thomas, Ontario, which is $48 million total spend, and we have an increase of $9 million of spend this quarter there, and it's led to higher cap interest there.
Q - Unidentified Analyst: Got it. Thank you. And so, you delivered Hubrey Road and Glover Road this quarter, and they were both to IPP from PUD. And the current PUD balanceon your balance sheet is close to $75 million. But if I look at your development table, the current cost base is -- the cost incurred is roughly $55 million. So, what's causing this difference of $20 million?
Kelly Hanczyk: The other piece is our 1584 South Service Road. So we have [Multiple speakers] Yeah, South Service Road.We have about $20 million spent there. South Service Road in Hamilton, Ontario.
Unidentified Analyst: Got it. Thank you. And then on – so, in S2 2024, you are planning to $210 million of dispossession. So maybe for 2025, so what's your strategy going ahead for 2025? I know it's too early for you to give guidance for 2025, but any color on sort of SB&I growth that you are expecting for 2025? Do you expect any acceleration in the rate? Any color would be appreciated.
Kelly Hanczyk: Yeah, really too early for us to give guidance on that front. I mean, we're going through our budgeting process now, and when we've got that nailed down, we'll be able to give you guys a solid outlook like we did this year, which hopefully will paint the paths for you.
Unidentified Analyst: Okay. And term leases done this year, what's the sort of the retention rate?
Kelly Hanczyk: Yeah, don't have that at hand, I'm afraid.
Mike Rawle: We can go offline and get it to you. It is pretty high. We haven't lost too many.
Unidentified Analyst: Got it. Okay. That's all from my side. Thank you. I'll turn it back.
Operator: The next question comes from Himanshu Gupta of Scotiabank (TSX:BNS). Please go ahead.
Himanshu Gupta: Thank you, and good morning. So, just on the development side, looks like you are starting work on Calgary small bay property. Kelly, did you say 12% unlevered return? That implies almost like $15 per foot rent. So, that looks pretty strong.
Kelly Hanczyk: Yeah, it is pretty strong. So, the small bay in the node we're in in Calgary there, so that's adjacent to the one that we just leased that used to be formerly Canada Cartage. We moved Canada Cartage to Balzac in a new build there, and we've released the building, and then we have six acres vacant. So call it – that's without an implied land value, because we own the land already, and we just used to be leased all in one. So, in those rents, the small bay, I think Calgary right now is pushing like around $12 net and the small bay commands a higher rental rate, especially around that 10,000, 11,000 square foot spaces.
Himanshu Gupta: Yeah. And you know, like looking at small bay, is it because of higher rent still? Because many of your otherwise properties are single tenant properties.
Kelly Hanczyk: Yep. This one is a little different. The footprint is a little shallower, so it lends better to a small bay than from a shipping perspective than a big box. So, when we were speaking with brokers on how to maximize value on the land, we decided to go with the small bay, and it really also affects the downtime. I think we'll have the majority of it leased by the time we're opening up and finishing it off, because right now in that node, there was a new one down the road built at least up really, really fast at pretty competitive rates. So, we're just following suit in what's in the demand for that area.
Himanshu Gupta: Got it. Thank you. And then Regina, I think the second leg also got done. Was it like very similar pricing, you know $10 per foot range or any different?
Kelly Hanczyk: It's higher.
Himanshu Gupta: Okay.
Kelly Hanczyk: It's leased at higher than that.
Himanshu Gupta: Okay. Good to know.
Mike Rawle: The good news with Regina is that we've been able to lease it up exceeding the business case. So, it's coming in at 7.9%, nearly 8% of yield.
Kelly Hanczyk: Yeah. We actually finished it off a little bit cheaper than what we planned, and our lease rates are a little bit higher, so it's pretty good. And we do still have six acres of land that we could pay for truck parking or gravel, and so that could just be additional gravy next year. In talking with our existing tenants, they're pretty full, they're pretty active, they're pretty tight on their shipping. So, it could be something that we just lock into next year.
Himanshu Gupta: Great.Excellent. Okay, and then just shifting on the expiries next year, I think Alberta, some expiries are coming up. Do you expect any space coming back in Alberta next year?
Kelly Hanczyk: No, I don't think so. I think Alberta has been pretty strong with us. We've done a lot of the renewals already. There could be one or two smaller ones, I think. But I think right now it's looking pretty good.
Mike Rawle: We've leased up roughly 50% of next year's expiries already, a pretty healthy lift, so that's looking good.
Himanshu Gupta: Okay. And my view is to confirm, 50% already done. This is out of, I mean, $205,000 what is shown in your lease expiry chart.
A - Mike Rawle: No, no, that's the remaining. So, I mean, we've had what we had coming in, and what's remaining is the ones, the numbers that are in the table in the MD&A.
Himanshu Gupta: Got it. Okay. Thank you. And the last question is on the Ontario lease expiries, I mean, again next year. I mean, in-place rent is less than $7. I mean, is that correct? I mean, it looks pretty low. So, it looks like, is it any one particular asset or property, why this is lower? And we can definitely expect some lift on that.
Kelly Hanczyk: Yeah, it's in London. It's got a very, very low in-place rent, just over $4 on one of them. It's really two big ones, one in Chatham and one in London. And I think combined it’s like 504,000 square feet. So, the one in London is where we expect to see significant amount of lift. The other one, we'll see some smaller lift. It's a little bit more price-sensitive tenant, and it's Chatham, not London, which isn't as, I guess, active as London is, so. But on both of them, we're pretty positive on renewal and at a pretty good premium. Those are the two big ones.
Himanshu Gupta: Awesome! Well, with occupancy consistent, as you mentioned, and with lifts, I think we can expect some stronger same property NOI growth next year, I believe. Okay. So, I think I'll turn it back. Thank you, guys.
Kelly Hanczyk: Thank you.
Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Kelly Hanczyk for any closing remarks.
Kelly Hanczyk: Just thanks everyone for joining. We look forward to a really solid fourth quarter and we'll see you next year on the next conference call.
Operator: That does conclude today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day!
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