Artis Real Estate Investment Trust Q2 2022 Earnings 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. They did jump up, I think, quarter-over-quarter. Can you maybe give a little bit of color on those assets, where you stand in terms of timing of selling them, the location, expected cap rate, that sort of stuff?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. So if I was to sort of handicap it, would it be sort of largely in the Q3, beginning of Q4? Is that kind of what you're thinking or closer to the end of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2022 / 5:00PM, AX_u.TO - Q2 2022 Artis Real Estate Investment Trust Earnings Call

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. Now are any of these under contract or are they just being marketed now?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. Switching gears, just on the Cominar investment that I know you guys aren't giving a lot of information on it. But if you exclude the preferred shares that you guys have, roughly, how much did it contribute to FFO this quarter? And how much should we sort of think about it contributing to FFO on a either quarterly or annually basis over the next couple of years?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And there is nothing unusual or anything in there, no one time costs or gains or anything, so that's something we should think about sort of the next couple of quarters as well, anyways?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Just want to follow-up on Jonathan's questioning with regards to the cap rate on the industrial. You carry it on your books, at least the U.S. portfolio in general at 5.3% cap. Is that ballpark what we should be using if we're adjusting for the disposition?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Okay. So we can use something along the lines of that figure. And then on the accounting for the joint venture, I saw the FFO impact that you referred to. But in terms of some of the line items, there's, I think, $17.8 million or something in other costs and then there's a fair value adjustment. In terms of the interest expense associated, should we just take the difference between the $9 million or $10 million of fair value adjustment in the FFO contribution and basically assume that that's the interest expense? I didn't know what the other costs would have been in that disclosure.

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Okay. And then occupancy did pickup in office, in particular. Can you speak to kind of whose taking space? What you're seeing there? Any leasing costs or CapEx that was needed to go into that? And then also any progress on AT&T? I think you had mentioned on the prior call that, that space will be vacating at the end, but it seems like you're making traction on office. So any comment you can make there?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : And is that a property that you would list essentially for a tenant to take up on leasing or potentially purchase, I guess, if an end user wanted to own it?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : So just a clarification on the asset sale. So the 4 office sales, those are the ones in Texas, and then the value that you're looking to sell them that would also be consistent with the IFRS value?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. Sorry, I got confused. So the 4 Texas industrial assets, those are not as part of that portfolio sale? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2022 / 5:00PM, AX_u.TO - Q2 2022 Artis Real Estate Investment Trust Earnings Call

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. And so maybe it's a bit ahead of time, but how do you plan to allocate the funds from the sale? Maybe if you could -- you get, obviously, a few things you could deploy and get paid down, you need buyback, buying other securities. How are you thinking about it at this point?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. And by that you mean public entities, right, I assume?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. I think just last one, a technical one. So I think there was a lease termination income of about $1.7 million in the quarter. It was a little bit more than prior quarters. Maybe if you could comment on that, kind of that related to? And likewise, it sounds like leasing activity has picked up, so leasing cost has picked up as well. How do we think about the leasing costs going forward?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. So a number somewhat similar to 2020 -- sorry, 2019 would be in the ballpark? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2022 / 5:00PM, AX_u.TO - Q2 2022 Artis Real Estate Investment Trust Earnings Call

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Just following up on the last question on leasing costs. Your renewal rate or your lease spread was 3.7% this quarter. Do you have any sense, high level, what that would look like on net effective basis?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : No, on a net effective rent basis, once we factor in the leasing costs, what would the 3.7% look like?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. And then just maybe shifting to capital recycling. I think the assets held for sale, I think the net equity is roughly about $475 million, give or take, based on the disclosure with the comment that most of it's in the U.S. How should we think about the redeployment of that equity in terms of special distributions, the tax efficiency associated with taking the capital out of the U.S. at this stage? Does the fact that's in the U.S. dictate your kind of capital recycling policy in any way?