Artis Real Estate Investment Trust Spin-Off Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : First question, just on the assets held for sale of $550 million. Can you maybe give us a breakdown of what type of assets you're selling, maybe geography and how many office, industrial and retail?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And then so the -- I guess the stuff -- the 42 assets that you had at the end of Q2 and you have 40 assets in your presentation here, would that be -- would that include -- I guess it might be smaller if you're selling a bunch of retail assets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. So when this spins out, given what you've got listed with brokers and assuming everything sells, how many assets do you think will -- how many properties do you think will be in there?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. So that would reduce debt at the pro forma Artis, and the retail REIT is going to have slightly higher debt. Is that the way to think about it?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : Just following up on Jonathan's question with regards to leverage. If we look at the target leverage, as it stands without any asset sales, that's about 54% for Artis Retail REIT. And when we compare that to the Q2 balance sheet, it would seem that you plan to place roughly $200 million on the retail portfolio before spinning it out?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : How hard is it going to be for you guys to place mortgage debt on these assets? And have you had any discussions with the banks or other financing options to date?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : That's great color there. And what sort of a rate would you guys be looking at for new debt on the retail assets today?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : And changing gears in terms of the planned spinout, could you give us some color on why you chose to do a planned spinout just for retail? I mean why not do all 3? And could we see 3 independent entities over the course of time?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : And you guys seem to have really good traction on your asset sale program. Can you talk about maybe just some of the feedback that you've had to date and if there's any indications to the contrary that you might not achieve your IFRS marks for any reason?

Question: Matt Logan - RBC Capital Markets, Research Division - Analyst : And suffice it to say that in aggregate, you still see your IFRS marks as fair on a post-pandemic basis?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Armin, just wanted to get a little bit of background color on the transaction. Wondering if in your discussions, if you considered spinning off the industrial portfolio given the valuation of the market versus the retail. And then the second question is now that you've arrived at spinning off the retail portfolio, did you shop that portfolio first before arriving at the spin-off?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : I'm just curious why you didn't shop the retail portfolio. Is it just because of the size or the geography? Or you just didn't think the pricing was there, you want to give it more time for price discovery in a public entity? Any color on that would be helpful.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. So on the retail portfolio, it looks like the IFRS cap rate on it as of June 30 was about 6 6. And just some back of the envelope math here, based on the $2.55 NAV that you guys disclosed for AXX and then using the $12.1 million of quarterly NOI, which is probably a little bit high, given that you'll have a couple of properties fall out, the suggested cap rate's a little bit closer to probably 6.25. So I'm just wondering if you can reconcile that calc and sort of the outlook on the cap rate of the retail portfolio.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Okay. Got you. So it looks like when you're going from the 42 to the 40 properties in AXX, the 2 BC properties fall off. One you mentioned is listed for sale. What is the view on Poco Place? Is that something that you're looking to sell? Or is that sort of a reclassification given the office GLA on it as well?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Okay. Got you. And then just with regards to the retail portfolio, could you let us know what some of the top tenants would be in the retail portfolio? I mean I see TD Bank and Shoppers sort of in your aggregate list. But what are some of the other major tenants within that? Do you have any other essentials, grocery tenants or more of a small business mix? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. I presume that I'll come up with the circular later on.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Sorry. Go ahead.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. And then when you look at the pro forma mix, I'm just wondering, from a definition point of view, how does Artis differentiate between the convenience centers versus community centers versus neighborhood centers with regards to the retail portfolio?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : So by convenience, do you mean sort of stand-alone pads or just much smaller strip centers?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Got you. And then my last question is with regards to the view on the distribution for the 2 entities. I presume you're going to maintain a similar payout. But are you -- is there going to be any differentials between the yield on the 2 entities? Or is that a little bit too early?