H&R Real Estate Investment Trust
Q2 2021 Earnings Call Transcript

Published: 13 Aug 2021

[Operator:]

Good morning and welcome to H&R Real Estate Investment Trust 2021 Second Quarter Earnings Conference Call. Before beginning the call, H&R would like to remind listeners that certain statements which may include predictions, conclusions, forecasts or projections and the remarks that follow may contain forward-looking information, which reflect the current expectations of management regarding future events and performance and speak only as of today's date. Forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties and actual results could differ materially from the statements in the forward-looking information. In discussing H&R's financial and operating performance and in responding to your questions, we may reference certain financial measures, which do not have a meaning recognized or standardized under IFRS or Canadian Generally Accepted Accounting Principles, and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H&R's performance, liquidity, cash flows and profitability. H&R's management uses these measures to aid in assessing the REIT's underlying performance and provides these additional measures that investors can do the same. Additional information about the material factors assumptions, risks and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and the material factors or assumptions that may have been applied in making such statements together with details on H&R's use of non-GAAP financial measures are described in more detail in H&R's public filings which can be found on our website and www.sedar.com. I would now like to introduce Mr. Tom Hofstedter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstedter.

[Tom Hofstedter:]

Good morning. I'd like to thank everyone for joining us today, With me on the call are Larry Froom, our CFO; Patrick Sullivan, COO of Primaris; Philippe Lapointe, COO of Lantower, Alex Avery, Executive Vice President, Asset Management and Strategic Initiatives and Robyn Kestenberg, Executive Vice President, Corporate Development. I'm very pleased to report H&R's stable and consistent Second Quarter Financial and Operating Results reflecting the quality, strength and resilience of our portfolio and balance sheet. We are in exciting times at H&R with the impact of the pandemic fading accelerating lease up of our residential development properties and of course execution of our strategic initiatives. As we detailed in our announcement last week with the $1.5 billion office portfolio sales of Bow and the Bell office campus, we have laid the foundation for the next steps, Post transaction, H&R will approve its tenant concentration profile, reduce Calgary office exposure and enhance our strategic flexibility. I'll now turn it over to our team to provide details of the Second Quarter 2021 Financial and Operating Results. Philippe will review our multi-residential operations followed by Pat who will provide an update on our retail portfolio. Larry will then provide a brief update on office and industrial before providing some context for our financial results. And, finally, I'll make some closing remarks. Over to you, Philippe.

[Philippe Lapointe:]

Good morning everyone. I'm delighted to be on this call today to provide you with the latest significant progress made within the Lantower Residential platform. We continue to make strides with our strategic initiatives referenced in the past, while also adding new and innovative strategies to further our mission of becoming amongst the best fully-integrated residential operating and development platforms in North America. On the topic of portfolio performance when excluding Jackson Park, same asset property operating income from our portfolio in US dollars increased by 5.7% and 4.9% respectively for the three and six-month periods ending on June 30, 2021 compared to the respective 2020 periods. As you've probably heard from our publicly traded peers in Canada and the U.S., the U.S. multifamily industry is experiencing explosive leasing momentum supported by pent-up demand and favorable supply and demand fundamentals predominantly in the U.S. Sunbelt markets. Lantower's leased tradeouts with the Delta between the unit's previous lease rates, so it's new lease rate has drastically increased over the past few months. For example, our lease tradeout for our entire portfolio excluding Jackson Park was over 18% in the month of July, led by the Tampa market at over 30% and the Austin market at over 25%. Additionally, our same-store occupancy as of this week is over 96% compared to 92% 12 months prior. While we certainly do not expect this rental rate growth trend to continue at this level for an extended period of time, we are certainly encouraged by the strong demand fundamentals in the residential sector. Furthermore, we are proud to announce that our Q2 operating income growth represents over 13 consecutive quarters of same asset quarter over quarter positive NOI growth once again, when excluding Jackson Park. Despite COVID's impact on our industry in 2020 in addition to the reinstated yet legally questionable CDC eviction moratorium, Lantower's ability to produce consecutive quarters of positive growth during this turmoil is particularly remarkable. And, I'd like to personally thank our property management division led by Emily Watson and her team who are entitled to most of the credit. Furthermore, we are especially proud that Lantower Residential is only one of few publicly traded multifamily platforms that reported positive quarter over quarter net operating income growth throughout 2020 and 2021when excluding Jackson Park. On the technology front, I'd like to provide an exciting update on our smart apartment strategic initiative program. By the end of this upcoming September, our entire portfolio will have been fully converted to smart apartments, As a reminder, these smart apartment packages include smart locks, smart thermostats and leak sensors that will provide the resident full apartment control all from a single app. The results to date have been nothing short but exceptional as we are experiencing operational efficiencies and NOI growth, namely thanks to the keyless and remote access unit control as well as the ability to climate control the few remaining vacant units more efficiently by leveraging the management software. While we are pleased with the smart-apartment packages installed to date, we are continuing to further expand our technology-based initiatives to drive NOI growth and further differentiate Lantower's offerings. We are in the early stages of implementation of our virtual leasing platform to be rolled out across our entire portfolio allowing future residents to tour and lease an apartment 24x7 without requiring a visit to our leasing office. We are extremely excited about this next strategic initiative as we expected to use numerous additional financial and operational benefits. As mentioned last quarter, our primary strategic growth initiative is our wholly-owned development platform within Lantower. We currently have three active development projects in our US Sunbelt markets. Firstly, I would like to provide an update on Lantower West Love our infill site in Dallas, Texas with proximity to the Dallas Love Field Airport and Medical District. The five-story 413 unit wrap development is expected to break ground around the end of this year. Also in the works in Dallas, Texas is Lantower Midtown a 4.2 acre infill site with direct frontage and visibility to the North Central Expressway and it's over 275,000 vehicles per day. We are currently drafting construction drawings on this five-story wrap development that will include approximately 351 units and we expect to break ground in the Lantower Midtown in the first quarter of 2022. Lastly, we are commencing construction drawings for a garden-style property called Lantower Bayside in Tampa, Florida. This development was approximately 271 units is adjacent to Highway 19 with dominant thoroughfares in all of Pinellas County. This development is also expected to break ground in the first quarter of 2022. As a follow-up to our ESG initiatives mentioned in previous quarters, it is worth noting that we are carrying that same focus into our Lantower development efforts. Every Lantower development will be pursuing a National Green Building standard of NGBS certification which is one of the most prominent and recognized certifications in the residential sector. In addition to these pipeline developments, we have additional owned sites and sites under contract that will soon join the Lantower development pipeline. For context, if we continue our projected development pipeline on the developments under our control, we will add over 2000 units or over $0.5 billion U.S. worth of multifamily over the next few years, eclipsing the 10,000 unit portfolio mark. From a return perspective, we are targeting development yields between 5.5% and 6% broad projects in Lantower's development pipeline. The expected development yields relative to historically low class A cap rates provide strong value creation and risk-adjusted returns. And with over 175 bps of yield coverage, coupled with the benefit of retaining the upside economics and almost just as importantly designing the Lantower's best in class design and quality standards, our intent is to continue the expansion of this highly accretive growth strategy for the foreseeable future. On the Lantower River Landing front, our leasing pace continues to beat our expectations in budget. As of today, we are 78% occupied and have leased 466 apartments or over 88% leased. Since September when we opened our doors, we have averaged over 45 leases per month and have increased rents multiple times, while simultaneously decreasing leasing concessions without any noticeable reduction in traffic. On the Jackson Park front, we would like to share very promising update as we have disclosed in recent weeks Jackson Park's recovery has been nothing short but exceptional signed leases over the last few months of return of property to stabilization. For example, Jackson Park signed a record 456 leases in June. Which represented the most leases ever signed in a single month at Jackson Park by a large margin. For context, the most leases signed in one month during the original 2018 lease up was under 200 leases. When including pending applications and leases out for signature, the property is 99% leased as of July 31. We expect the occupancy to catch up to our leased percentage at the end of the third quarter or early fourth quarter as this is when the majority of our pre-leased units will take occupancy. On the JV development front, we and our partners have taken advantage of the favorable disposition environment and have successfully marketed for sale a few of our JV developments. Over the next 60 days, we intend to close on the disposition of Hercules Phase 1 and Hercules California and Esterra Park in the Seattle, Washington market. With a weighted IOR of nearly 30% and an equity multiple of 2x, we are proud to dispose of these two successful developments and redeploy into accretive opportunities. We would also like to highlight the hard work of our JV partners and just as importantly congratulate them on two very successful developments. As for the JV developments that are not currently in the market, the Pearl in Austin, Texas is scheduled to fully deliver in the third quarter of 2021. Leasing has begun and been met with incredible demand as evidenced by at least percentage of 42%. Construction of Phase 2 of our Hercules development named the Grand has remained on schedule and is set to be delivered in the third quarter 2021. Lastly, Shoreline Gateway our 35-story tower in Long Beach, California is also on schedule and expected to obtain final CO in early of September 2021. In summary, there's lots of good news coming from Lantower Residential and I'm excited to deliver more news next quarter. And with that I will pass along the conversation to Pat.

[Pat Sullivan:]

Thank you Philippe. The 39.9% increase in retail same-asset property operating income for the quarter was primarily due to a material improvement from the enclosed mall portfolio. Same-asset NOI rose due to a significant decline in bad debt expense within the enclosed mall portfolio to approximately $0.6 million, down from CAD22.8 million in Q2 2020. Q2, same-asset NOI was also impacted by lease surrender revenue of CAD2 million related to a Starbucks termination of two locations and a payment related to the CR CCAA filing. On a sequential basis, the retail portfolio delivered continued momentum with Q2 same-asset NOI rising 3.9% for the retail division and 6.9% for enclosed malls compared to Q1 2021. Throughout the pandemic, our primary focus has been to maintain occupancy. Occupancy at the end of the second quarter was 91.4% for the retail division, as compared to 91.5% at the end of Q1 and higher than the 90.5% at the end of Q2 2020. For enclosed malls, occupancy at the end of Q2 2021 remained relatively stable at 87.1% compared to 87.2% at the end of Q1 2021 but have improved from the 85.8% at the end of Q2 2020. There have been no significant CCAA filing to date in 2021 and we do not anticipate additional filings to occur the remainder of the year. Moving on to rent collections. Collections in the retail portfolio continued to trend higher since our low point May of 2020. In Q2, we collected 89% percent from enclosed malls compared to 94% in Q1 2021. Our four Ontario enclosed malls account for just over 20% of gross rent and they were closed for the entire second quarter. In June, we received 95% of rent from malls outside of Ontario despite continued occupancy restrictions in many provinces and just under 71% from rent from malls in Ontario. With all malls now open and occupancy restrictions lifted in the majority of our markets, we anticipate our return to normal collections moving forward. With Ontario malls closed during the majority of 2021 and occupancy restrictions in place in other provinces, leasing momentum that was realized in Q1 slowed in Q2. Over the past 30 days, our leasing team has experienced a recovery in leasing activity with a number of national tenants based in Eastern Canada and the United States, including fashion tenants. With restrictions lifted and sales rebounding, we believe that we will continue to improve our occupancy level throughout the remainder of the year. In terms of impact, we anticipate approximately $1.1 million incremental contribution from new lease commencements with large format tenants during the remainder of 2021. In addition, we have completed significant transactions that will create incremental rental growth of over $3.2 million in 2022 including rent from 65,000 square feet of new tenant leasing that has been with medical and office tenant. Throughout the past year, our suburban malls located primarily in secondary markets have performed well compared to urban centers. With restrictions easing in the second quarter, mall sales in our properties outside of Ontario and Manitoba posted strong sales figures compared to pre-pandemic levels in 2019. By way of example, in June 2021, Place du Royaume and Chicoutimi reported sales that were 112% of June 2019 amounts. For the most part, our outside of malls in Ontario and Manitoba reported sales for June 2021 that we're 90% or more compared to June 2019. With Ontario malls now open and occupancy restrictions easing in Manitoba, we anticipate sales to rebound to level similar to those generated prior to the pandemic for the remainder of 2021. While challenges remain for retailers selling goods and services related to work apparel, we have seen strong sales numbers from junior and casual apparel retailers as well as footwear retailers. We have been encouraged by strong sales productivity reported during the past several months by many national fashion tenants as well as tenants in the health and beauty jewelry and footwear categories. Food court tenants and other fast casual food tenants located inside our malls are realizing improved sales and have generally rebounded to 80% or more of their 2019 sales figures. I'll now move on to an update on several development projects. We have recently sold just over two acres of land at Northland Village for approximately $5.8 million to a residential development company who have commenced construction on a six-story building incorporating approximately 240 residential units. The overall plan for Northland Village is to redevelop the Walmart anchored enclosed mall into a mixed-use open-air center over the next few years in several phases subject to pre-leasing. In July 2019, we submitted combined applications for rezoning and redevelopment for the north end of the property at Dufferin Mall to create Dufferin Grove Village. The project is anticipated to include approximately 1200 residential units. Discussions with the city are almost complete and we anticipate rezoning and site approval in Q4 2021 and commencement of construction Q4 of 2022. Upon completion, this redevelopment project will transform a successful established intercity regional shopping center into a vibrant mixed use development. Thank you, and I'll now turn it back to Larry.

[Larry Froom:]

Thank you Pat and good morning everyone. For the second quarter of 2021, our FFO was $0.38 per unit, no change from the $0.38 for Q2 2020. On last quarter's call we spoke about a few items which were expected to influence 2021 financial results, and I'd like to now review their impact on Q2 results. Firstly, as our River Landing development has been completed, less interest has been capitalized for the project. The aggregate interest capitalized on all development projects amounted to $554,000 for Q2 2021 compared to $5.2 million for Q2 2020 with accelerated leasing momentum as Philippe mentioned, the operating income from River Landing will begin to offset this interest factor. Property operating income on a cash basis from River Landing was U.S. $2.3 million for Q2 2021 and we expect that to grow to approximately U.S. $6 million per quarter in 2022. Secondly, Jackson Park in Long Island City, New York is particularly hard hit by COVID but it has recovered as Philippe mentioned as well. Property operating income from this property in Q2 2021 was approximately U.S. $2.3 million at H&R's ownership interest compared to U.S. $6.9 million in Q2 of 2020. We are encouraged by the recent pickup in leasing activity and the committed occupancy, which should result in a return to more normalized operating results from Jackson Park in Q4 of this year. Thirdly, in January 2021, H&R converted U.S. $146 million mezzanine loan on a 12.4 acre development site in Jersey City to an equity ownership position. This is the primary reason for the reduced finance income of $4.3 million earned in Q2 2021 compared to $9.2 million earned in Q2 of 2020. Finally, bad debts expensed decreased dramatically from the $23.5 million recorded last year in Q2 to $1.2 million for Q2 of this year. As at June 30, 2021, we had a provision for expected credit losses of $14 million against the gross accounts receivables of $29 million. Turning to our office segment. Same-asset property operating income on a cash basis decreased by 9.9% as compared to Q2 2020 and was primarily due to Hess receiving a seven-month free rent period commencing December 2020 as part of a lease extension and amending agreement completed in November 2020. Under this agreement, HESS agreed to extend the term of its lease on approximately two thirds of a building for an additional term of 10 years beyond its current expiry of June 30, 2026. Excluding the impact of the Hess Lease Amendment, same-asset property operating income increased by 2.5% for the quarter. HESS's free rent period ended on June 30, 2021, so we will see an improvement in our office segment beginning in Q3 2021. As Tom had already mentioned, last week we announced the $1.5 billion office portfolio sale including the Bow and the Bell office campus. Once these sales are closed, we will have significantly reduced Calgary office exposure, improved our tenant concentration risks and improved our credit metrics. Turning briefly to our industrial segment, same-asset property operating income on a cash basis decreased 3.4% compared to Q2 2020 due to the decrease in occupancy from 99% to 98%. In June 2021, H&R sold its 50% ownership interest in a portfolio of five single-tenanted industrial properties totaling 215,000 square feet located throughout Atlantic Canada for approximately CAD21 million. In addition, H&R sold its 50% interest in a 37,000 square foot multi-tenanted property located in Kitchener, Ontario for CAD12 million. Subsequent to quarter end, H&R sold its 50% ownership interest in a portfolio of nine single-tenanted cold storage properties located across Canada for CAD117.5 million. These industrial transactions resulted in total proceeds of approximately CAD150 million compared to the IFRS value of CAD121 million as at March 31, 2021. The weighted overall capitalization rate for these dispositions was approximately 4%. Moving to the balance sheet, at quarter end, debt to total assets of the REITs proportionate share was 50% compared to 51.1% at the start of the year. An unencumbered assets of unsecured debt was 1.65x coverage consistent with Q1. Debt to EBITDA was 9.85x. Pro-forma second quarter results taking into account the office property dispositions announced last week and the lease up of River Landing Jackson Park, we expect our credit metrics to improve dramatically and our modeling debt to EBITDA of 8.6x debt to total assets of 43.7%, and unencumbered assets to unencumbered debt of 2.25x. At quarter end, H&R had ample liquidity with cash on hand of approximately CAD60 million and CAD990 million available under our unused lines of credit. In addition, we have an unencumbered property pool of approximately CAD4 billion and with that I will turn it back to Tom.

[Tom Hofstedter:]

Thanks, Larry. That's the challenging 17 months we are seeing and experiencing signs of recovery. Leasing activity has accelerated dramatically lifting occupancy sharply at Jackson Park and we are seeing strong leasing momentum at our largest recent development River Landing in Miami. Vaccination rates are climbing every day and where restrictions have been lifted more retail sales have surged. Over the last few quarters, we've outlined plans to create at least one new entity in 2021 and it is evident by the Bow and Bell office campus sale, we remain on track to achieve that goal. We are currently working through the final stages of this initiative and appreciate the patience and support of our unitholders and investment community. We look forward to providing more details in this regard in the coming weeks and months. We'd now be pleased to answer any questions from the call of participants. Operator, please open the line for questions.

[Operator:]

And our first question is from Sumayya Syed with CIBC. Your line is open.

[Sumayya Syed:]

Just in the disclosures for tenant inducements for office there was a reference to a major tenant Simon Trial, can you share anything about size which property just anything on the terms of that lease?

[Tom Hofstedter:]

Are you referring to I think what we're showing $1.4 million of tenants leasing expenditures in the quarter?

[Sumayya Syed:]

Yes.

[Tom Hofstedter:]

I actually don't know off hand, I can look afterwards and get back to you on this. It is not material enough so I don't know if I have an idea. Okay, we'll get back to you.

[Sumayya Syed:]

Okay, that's fine. And, then just wondering with the reopening and recovery that's underway and I guess improving prospects for asset values, do you intend to revisit fair values in the near term or are you comfortable with the gains you've recorded year-to-date?

[Tom Hofstedter:]

It's a regular process of every quarter revaluing our fair values, so we're comfortable with the position that we have at June 30 and September 30 will be revalued on our regular process. I can't say now what we expect that to be but we don't expect material changes.

[Sumayya Syed:]

Okay and then just turning to Lantower and the strategy there just maybe a reminder for us in terms of what's the criteria for what stays in the REIT versus what could be marketed for sale?

[Larry Froom:]

Are, you specifically referencing the JV developments?

[Sumayya Syed:]

Yes.

[Larry Froom:]

So, if you'll recall, initially the JV developments were great for a variety of reasons, but really what it boils down to is optionality and so at the point we decided to do it with a best-in-class developer in a high-barrier market and what it really afforded us the opportunity was to see if we wanted to build a position around the development and ultimately take ownership of the development to add to our position in that market. What we quickly realized frankly is while those markets are strong in their own respect, frankly, we thought it'd be a better and probably a more worthwhile investment to consolidate our position in the Sunbelt markets, and so the JV developments unless a material change in circumstance will all eventually be marketed for sale.

[Sumayya Syed:]

Yes. That's helpful. Thank you.

[Tom Hofstedter:]

And Sumayya just before you go away, I did find that first question you asked about the tenant leasing, it was from our property 25 Shepherd so that was a renewal of a lease for CAD1 million of tenant inducement or leasing incentive that we granted on that property.

[Operator:]

The next question is from Matt Kornack with National Bank Financial. Your line is open.

[Matt Kornack:]

Apologies, if you mentioned this, bit tight on conference calls this morning. But with regards to the Jackson Park lease up, Larry, I think you said it's going to be fully stabilized or back to normal in Q4, but can you give us a sense as to, it seems like a pretty massive improvement in occupancy from June until August but when those leases ultimately would commence and is the character of that leasing, is it student leasing or young professionals returning to the office in?

[Tom Hofstedter:]

Philippe mentioned some of - Philippe do you want to answer that question?

[Philippe Lapointe:]

Sure. Sure happy to. Morning Matt. So, we'll deal with the easiest one. I would say it's a blend of both. There's obviously going to be a healthy representation of international students and by all accounts all of the universities and colleges are having in person class in New York and so that's an explanation for frankly the outstanding momentum, but there is also young professionals, although I think that while their impact has been - the property is 99% leased and so I'm not sure how much more we'll see in the upcoming months. But to answer your questions essentially, it's an interesting blend of both, and as far as the leases are concerned we think that it's probably going to materialize in the fourth quarter. And so by the time, some of the concessions or tenant inducements flush out, the net operating impact will be felt in the fourth quarter.

[Matt Kornack:]

Okay. So, sequentially we should expect kind of flat performance and then really to ramp up substantially into Q4.

[Philippe Lapointe:]

So, I'd have to get back into the exact timing because obviously June, July, September what kind of overlapping, so depending on how many are recognized in the end of this month and September. But, if you think about conceptually 456 leases being signed in July and 99% leased it's going to skyrocket fairly, fairly quickly. And, so, we're delighted in being able to announce that we're back to regular business and obviously excited to see Jackson Park outperform city markets as it had prior to COVID.

[Matt Kornack:]

And, then I guess shifting to the enclosed mall portfolio, Pat again I apologize I missed most of your preamble and I'm sure it was pretty detailed to go back and listen to it so don't repeat that but just interested in your thoughts going into the balance of the year obviously Christmas is going to be important from a sales perspective, we're seeing some normalization in shopping patterns I think there is some stats out that traffic is up in the U.S. back to pre-pandemic levels. But, in terms of what you're thinking, in terms of new tenants coming in versus maybe losses we'd have from businesses that have been challenged, where should we see occupancy kind of trend over the next year or so, if you had to guess?

[Pat Sullivan:]

I think Matt, it's positive, I see a lot of leasing traction starting though we had some pretty good momentum in Q1 that installed in Q2, primarily because Ontario was shut down. We've had a lot of activity in the latter part of June into July and typically these are slow months. We're seeing activity from fashion tenants, we're seeing activity from a bunch of U.S. based tenants who are continuing their expansion in Canada and some Canadian based tenants as well but I got to admit, I'm really encouraged by the sales reports for June and reviewing the fashion tenants are actually performing very well across the board, junior units are especially doing very well, footwear is doing well. These are categories that we're rather flat or down to the first quarter and even the fourth quarter of last year. So, they've actually shown some pretty good strength and I think as Ontario opens and the retailers kind of get back to business in Ontario I think it's going to put a lot of guys back in motion in terms of their expansion plans.

[Matt Kornack:]

And, then lastly for me, on the industrial portfolio, obviously you've generated some interest, got some good cap rates, clearly it's an exceptionally hot sector, the same property NOI growth, is it a transitory vacancy I don't know if it was discussed on the last call there and what the expectation is just in terms of how that portfolio will perform?

[Tom Hofstedter:]

Hi Matt. Yes, the occupancy ducked a little bit, but we believe that's a good thing as the rents we will be able to get from releasing will be higher than the tenant leaving, so we just expect it to be a short-term impact.

[Matt Kornack:]

Which geography is that in?

[Tom Hofstedter:]

It is actually a mix, one property in Calgary and one property in Ontario.

[Operator:]

The next question is from Sam Damiani with TD Securities. Your line is open.

[Sam Damiani:]

Just on the Bow and Bell transaction, I don't know we had the call last week, but could you just review I guess the impact on FFO, when I go through with the amortization and also do you anticipate any fair value impact once that closes?

[Tom Hofstedter:]

Good morning Sam. So, first on the accounting treatment, as I mentioned because of the option to repurchase IFRS 15 regard that as if we have not given up complete control of the assets and therefore for accounting purposes, we will still keep that asset the Bow, we're talking just about the Bow and not Bell. Bell will be regarded as a true sale, but because the repurchase option is on the Bow, the Bow will stay on our books. We will continue to fair value that every quarter. I'm probably being straight line down over the 17 years as they come closer to the end of that 17-year period. The proceeds we receive from the sale transactions will be set up as deferred revenue and that will kind of be amortized down with interest accretion factor. So, that's all happening on our financial statements. Obviously, and sorry, and we will continue to record the full impact the full Ovintiv lease, so the full rent at 100% on our financial statements. Of course, 85% of that is non cash flow because we will only be receiving 15% of the rents as opposed to 85%. So, on our disclosures, we will be giving you the non-cash items that are coming in and we will be adjusting. I don't know we're not quite sure how we're going to do, but probably adjusted through AFFO the non-impact of the of the Bow transaction in terms of our rent and the interest accretion component for the deferred revenue is going down so. But, overall if you treated it is a true sale our FFO would drop by 20 both sales, Bow and Bell would be dropping by about CAD0.20 per annum. So, if you're looking through the accounting that's what you should expect to see from the sales decrease of CAD0.20 per annum on our FFO, again that's largely offset by what we expect to get on the lease ups from River Landing and Jackson Park.

[Sam Damiani:]

And, just on Jackson Park is that a core asset or would you just want to sell that and is there any hindrance in selling that with your 50% ownership?

[Tom Hofstedter:]

No, it's a core asset. We don't have any plans to dispose of them. It's actually one of our best assets.

[Operator:]

It appears that we have no further questions at this time, I will turn the call back to Mr. Hofstedter for any closing remarks.

[Tom Hofstedter:]

Thanks everybody, have a great weekend and enjoy the rest of the summer.