Artis Real Estate Investment Trust Q4 2021 Earnings Call Transcript

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

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : One with regards to Artis' equity ownership in the Cominar entity, will there be a formal distribution associated with this equity ownership? And also, how do you expect the P&L from that piece to be accounted for within Artis' income statement?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Okay. Great. So when you think about the strategy overall and the business transformation plan, maybe the question is for Samir. Is there any division or component or geography of the portfolio that you would consider to be core to Artis REIT, i.e., not something you would really look to sell ever, if you can help it? Or is everything on the table when you consider how to structure the portfolio over the longer term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2022 / 6:00PM, AX_u.TO - Q4 2021 Artis Real Estate Investment Trust Earnings Call

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Maybe I wasn't clear. I meant Artis' current portfolio putting aside the Cominar.

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Okay. Great. And then maybe one last question on the operations side. Looking at the mark-to-market on the in-place rent versus market and for the industrial portfolio, it seems to be fairly flat. I'm just wondering why that is the case given how strong the industrial market is. I know you've got various geographies and some assets are on the smaller side, but maybe a bit of color on why there isn't much of a differential and what you might be expecting over the near term?

Question: Jenny Ma - BMO Capital Markets Equity Research - Analyst : Can you give us a bit more color on how much better the recent leases have been coming in at?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Just going back to the Cominar investment. The 18% prefs, how long do you expect those to be outstanding?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And that's cash, 18%...

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. So that's more likely scenario?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And then I guess, in your $213 million or $14 million into the Cominar investment. Would I be right in thinking that Sandpiper will get paid just over $1 million annually on the Cominar investment? Or how should we think about that?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And then lastly, you announced the stake in Dream. How many names would be in your public securities portfolio right now?

Question: Jonathan Kelcher - TD Securities Equity Research - Analyst : Okay. And then -- and just lastly, back to the 18%, that will be in FFO, correct -- that's income in FFO?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Just a quick follow-up on the Cominar questions that you had earlier. Is there a potential -- or can you kind of speak to your ability or control to potentially purchase some of the assets and bring them on balance sheet? Or is this purely kind of realize the discount to NAV story in that vehicle?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Okay. Fair enough. And then there are some gems obviously, and what you've got there. Are you in the process of selling any of those kind of core assets at this point? Or is that process -- I mean, I guess you've just closed, but what should we think timing-wise on that process?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Okay. Fair enough. I had a thought for that one as you can imagine. But I'm sure you guys will do well on top of those assets. On the Calgary office portfolio that was sold, can you just give us a sense, I know that there was a large vacancy. So I'm not sure if there would be a big NOI impact subsequent. Could you give us any sense as to what the NOI in Q4 attributable to that portfolio would have been? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2022 / 6:00PM, AX_u.TO - Q4 2021 Artis Real Estate Investment Trust Earnings Call

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : Fair enough. Yes, if it's possible, just so we don't miss on the modeling side and trying to attribute the cap rate because, yes, it seems like it was more per square foot number. And then lastly for me from a modeling standpoint, just on 360 Main in terms of the remaining capital outlay on that as well as kind of timing. I know multifamily, in particular, can be a little bit lumpy in terms of when it comes on and lease-up and the impact there. But can you give us a sense as to how that's progressing, how we should think of lease-up and the NOI contribution there?

Question: Matt Kornack - National Bank Financial, Inc., Research Division - Analyst : And I guess, as we look at 2023, is that a fully stabilized year? Or should we kind of think of it as being stabilized in the second half of 2023?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : I just wanted to get a better understanding of the cap structure of the new entity of Cominar. Presumably, you'll be disclosing that next quarter, but kind of on the numbers, what does the capital stack look like?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. And then the pref equity beyond the $100 million (inaudible) what's the size of the total pref equity bucket?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. And sorry, just on the pref equity again. So to pick coupon 3-year term, but it can be called earlier than a year. So that's why you cannot guarantee the [1.18]. Is that how I think about it? Then basically, from an FFO impact, you've got 1 years' worth of income.

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Yes. Okay. Okay. And presumably, you guys are running kind of who's leading the charge in making sort of asset allocation decisions and leasing decisions at Cominar, I presume it would be to you guys?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. Okay. And then just last for me. On the office portfolio in like the Twin Cities, Madison, maybe can you just talk generally what's happening in those markets as far as leasing and maybe on the investment side, kind of what activity are you seeing in those markets?

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Okay. And maybe just if you're seeing any activity on the sales side of things.

Question: Khing Shan - RBC Capital Markets, Research Division - Analyst : Yes, sorry, on the investment side -- yes. I just kind of wondering like how liquidity in the market today, given what's going on?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Just a couple on the disclosure side, one on Cominar. then you mentioned that it was going to be -- you already going to be equity accounted from an investment standpoint. Is it fair to say that you decided that you won't be providing any proportionate disclosure in the coming quarters? Or is that still a possibility?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Right. I was wondering whether with Cominar it's awful to follow those kind of applicable guidelines or whether given the size of the investment, whether we could expect maybe a bit more disclosure or a bit less?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. And then just maybe another question on disclosure or maybe perhaps better said on the intrinsic value of the company. Samir, you mentioned kind of the 25% trading discount through IFRS now, which is based off of a stabilized NOI as opposed to, let's say, in place NOI, we can probably do the math. But do you have a sense in terms of what the gap is between kind of the Q4 '21 NOI run rate and then the stabilized NOI that you're using in your IFRS math today?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. That would be helpful. And then switching gears to the capital recycling environment, more of a broader question from a specific assets or geographies here, but how would you -- how would you characterize the credit markets or the lending environment today given geopolitical risk that we're seeing in Europe relative to where it was kind of 3 to 4 months ago. So like how conducive are the credit markets to you executing on kind of the minimum $500 million in dispositions that you're targeting for this year?

Question: Mario Saric - Scotiabank Global Banking and Markets, Research Division - Analyst : And then when we look at the various asset costs that you're involved with or looking to becoming involved with, which outclasses stand out to you in terms of having the biggest disconnect or public private market valuation to bide?