Dream Office Real Estate Investment Trust (DUN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Dream Office REIT Q2 2022 Conference Call for Friday, August 5, 2022. During this call, management of Dream Office REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Office REIT's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca. Later in the presentation, we will have a question-and-answer session. [Operator Instructions] Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Sir, please go ahead.

Thank you very much, operator, and good morning to everybody. Welcome to Dream Office's second quarter conference call. Today I'm here with Gord Wadley, the Chief Operating Officer; and Jay Jiang, the Chief Financial Officer. And they'll speak to the results. I just want to start with a couple of opening comments on what's happening at Dream Office. Firstly, we're very pleased with the assets that we own. We did a lot of work to reduce the portfolio to these assets. We spent a lot of time improving the assets, decarbonizing the assets. And I think we've got sensational assets that are irreplaceable. The office sector is a complicated sector in a complicated time. So what we're finding now is -- like, as an example, we'd like to redo our space and make it a little bit more modern. However, we're really not sure how we should change our office space because we're not convinced how it's going to be used. Now I met with a few other CEOs, who are in exactly the same position. All of whom want to have the same amount of space as they have now. But we're still uncertain. So we've been seeing a lot more people coming Downtown. We're really pleased that the demand for restaurants Downtown is huge. There's a lot more traffic. And we think this fall, we're going to see a lot more people. So I think things are coming around and we expect that as we head into the fall, we'll see a lot more people in the office and we expect to see some more leasing. We're pleased that in the first 6 months of the year, we've had consistent occupancy. And Gord will get into a little bit about some of the delays. But we've got some wonderful restaurants that have made commitments to our buildings. And we think that not only will they be great tenants, they'll also attract other great tenants. So as we look forward, we're still a little bit uncertain what normal occupancy is. We believe it's significantly higher than where we are now. We're just not certain as to how long it may take to hit the new normal. But we think there's a lot of embedded value in our business. And I think that our valuations of the assets have been pretty conservative over the last 2.5 years. And notwithstanding that, between cash that we're retaining and the industrial REIT's performance, we've seen that asset value grow consistently. Gord, you want to get into the operations?

I will. Thanks, Michael. It's very nice to be with you all today, and I hope everyone's doing really well. Much in line with what Michael just stated, as our industry continues to navigate what fulsome return to work looks like, specifically to our clients, prospective tenants in various industries, our team is staying in the course to offer best-in-class operations, an elevated level of hospitality, building quality and to drive leasing as we wrap up construction to future proof our portfolio for the long term. The city of Toronto has seen market vacancy grow and stabilize from pre-pandemic levels of just around 2% to the current levels of about 14% across all classes. Our portfolio has moved in lockstep with this trend, where our core portfolio, relating to current and committed occupancy, on average is trending at approximately 89%, which is up just over 20 basis points from last quarter. Although we saw some positive momentum, there is some tempered optimism from leasing, operations and construction as our clients, albeit slower than expected, begin to open their doors and come back to work, or like Michael said, are diligently planning on coming back potentially in the fall after Labor Day. We are seeing some positive variables that indicate improvements of occupancy long term. As our tours are consistently growing week to week, suddenly spaces stabilize, now representing only about 2% of our portfolio. We're tracking already this year to do more square footage absorbed than last year and complete a higher number of both new leases and renewals. Net rents are trending quite strong with the average well over $30 a square foot across all of Toronto. In parallel to this, we're seeing strong NERs despite cost pressures associated with construction, procurement of deliveries and materials and the time it takes to build. In our other markets portfolio, current and committed occupancy remained largely unchanged quarter-over-quarter at 79%. We're seeing better tour and deal velocity in Saskatchewan, where we did about 38,000 square feet beginning of the year. Again, rates and NERs of 16% and 60% respectively compared to our budget. Overall across all markets, we're quite pleased with how our team has managed communications with existing tenants and clients. Collections are back up at pre-pandemic levels of over 99%, and this is also signified by over 75% retention ratio at midyear for 2022. Year-to-date leasing volume has picked up versus last year as we've done about 343,000 square feet, totaling just about 55 deals, both new and renewable. These are all at pre-pandemic rates and NERs. And I just wanted to note that this is probably -- already approximately 100,000 square feet more than this point last year. We have some cautious optimism with the additional 150,000 square feet of LOIs and conditional deals in very negotiation, which we will report on in subsequent quarters. One key driver of your future success that I just want to touch on is our curated retail strategy. Over the past few quarters, we've been highlighting the negotiations and prospect of completing 4 very marquee deals on our Bay Street Collection. We're very proud to say today that we've completed 3 of these deals with arguably Canada's top restaurant tours that total approximately 30,000 square feet, and we have 2 additional marquee deals that are conditional. Our completed retail deals are not reflected in this quarter's stats and just firmed up in the past few days. When complete, this will total approximately 50,000 square feet of total absorption at aaverage net rents close to $70 a square foot, an annualized NOI impact of just over $3 million. These are all in our most desirable node and it will finish off and support our thesis of bringing in elevated and all new experience boutique luxury to the financial tour. The global challenges associated with construction have been very well publicized. Our teams worked very hard through supply challenges, mandating construction shutdowns, and have managed well and are over 95% complete in our Bay Street Collection project with all the bathrooms, all the lobbies and our feature alleyway all complete. We're effectively just finishing up the full glazing re-facade program at 330 Bay. This is scheduled to be completed at the end of September. We are all well underway at 36 Bay and tracking quite well to budget for this 40,000 square foot asset. The feedback has been tremendous to-date and we're receiving a steady influx of tours. We really look forward to showing you the completed product, and hopefully we'll get a chance to walk you through in person very soon. For 356 Bay, some context. We're looking at spending about $16 million on a $22 million building. We anticipate a positive value increase upon construction completion at the end of Q1 2023. In unison with this project, we're also doing 67 Richmond, which we previously had on the books for about $30 million. We injected about another $12 million in capital and upon completion, we're targeting about a 5.5% yield on an adjusted cost base. We took both buildings offline as these are full deep retrofits, where we were replacing all the building systems, ensuring we meet our GHG reduction targets, introducing all new control technologies, new lobbies, new bathrooms and curtain walls to bring in more light penetration and also have a direct bird's eye view of our alleyway project and the great animation associated with it. We often get asked by people on this call regarding 357 Bay. Our client is well into their fit-up and doing a great job on what's going to be a showcase location for them. As context, we spent about $29 million on time and on budget, took a building that was valued at about $24 million to now over $62 million. And we also dramatically decarbonized and fully removed over 30 tonnes of asbestos, added an all new HVAC and mechanical to make this a stainable, clean example of what a premier heritage asset should look like in the [ group ]. Being a good community steward is absolutely core to our business. By upgrading our assets, we put a real focus on improving consumption metrics and that of GHG and carbon utilization associated with our overall net zero strategy. We're actively working with CIB on our $113 million debt facility to dramatically reduce our carbon emissions by 40% over the next 3 years and adhere to our very lofty goal to be net zero by 2031. These initiatives are at the forefront of what we hope will separate us from all our peers. As a landlord and a leader, we have a tremendous opportunity to influence and improve our carbon footprint, and in turn, align with the growing sustainability demands of our clients. Last year, we had the country's best first GRESB score of 91, and our team has been working very hard on building on that momentum for year-end equal or a better score. Also, we had the country's top Sustainalytics score and are among the top 10% in this rating globally. Sustainalytics is a Morningstar company that rates sustainability of listed companies based on their environmental, social, corporate governance performance and it effectively applies a risk rating. In addition, we're a signatory to UNPRI and we also committed to Net Zero Asset Managers, which stem from COP 26 and represents the largest organization of asset managers globally. Leasing and operating metrics aside, the general public, corporations and our government at all levels over the past few years have become much more sophisticated in understanding the importance of these ESG verticals, and as such, have been tremendous partners, supporters and advocates to integrate programs into our hard assets, making them much more resilient and appealing to various churning tenants. Operating leases are a key component of this commitment that tenants are making to their physical space and work environments. This past quarter, I'm very proud of the team as we are awarded certified platinum and recognized by Green Lease Leaders Association as having the most sustainable lease and operating standards in all of Canada. Creating healthy and positive buildings has always been a cornerstone of our Dream Office approach and a real source of pride for our team. As a company, we're very fortunate to have focused on great buildings and in irreplaceable locations and used our capital and time to improve our buildings to a whole new standard of boutique luxury that focuses on sustainability, hospitality and community stewardship. As always, I always welcome an opportunity to show or share in person our progress. And please stay tuned for some very exciting announcements from our new committed retail partners. With that, I'll turn it over to Jay.

Thanks a lot, Gord. Good morning, everybody. Originally, our goal for 2022 has been to minimize the word COVID so we can manage our business in a more normalized operating state, both economically and psychologically. While that has been true to some extent with COVID coming up less in our conversations, we now find ourselves in a rather uncertain economic environment, facing significant supply chain disruptions, high inflationary environment and rising interest rates. The return to work for larger users of office space in Toronto has lagged a bit as a result of the summer and a competitive labor market. However, we are seeing good progress and improvements in utilization of both our office buildings and parking garages. We believe post Labor Day will be a meaningful milestone to see increasing activity from both existing and prospective tenants. We think despite all these challenges noted above, our company has continuously delivered stable results over the past few years. We own a very well located portfolio of assets in Downtown Toronto, and if we take good care of them through our modernization and decarbonisation programs, we can capitalize on flight to quality and have a very valuable and safe portfolio of assets that we will be happy to own for a very long time. On the quarter, we recorded $0.38 of diluted FFO per unit or flat year-over-year. We had income contribution from completed development and also a share with higher income from our Dream Industrial REIT investments, offset by lower in-place occupancy, higher interest expenses and drop off of onetime income in the comparative periods such as the wage subsidy programs. Our committed occupancy was unchanged quarter-over-quarter at 85%, which consisted of 20 basis points increase in Downtown Toronto and 30 basis points decrease in other markets. We have less than 150,000 square feet of expiry consisting of 33 leases for the remainder of the year, which we feel is quite manageable, especially considering that paired against 150,000 square feet of deals that we are currently in negotiations for. Now as an update to our internal model. We are currently projecting diluted FFO per unit of approximately $1.50 for 2022. We have factored in higher interest rates as refinancing and variable rates are up 200 basis points since January and also reflected the timing of lease commencements that have been signed to date. Now for clarity, we are tracking well against budget on committed occupancy targets of around 90% in Downtown Toronto and 80% in other markets. However, these prospective tenants, most notably the restaurants, have lagged a bit in taking possession of the space due to longer than anticipated fixturing period caused by supply chain disruptions and elevated construction costs. We'd like to highlight that the leases signed this quarter we're at very healthy spreads at 48% higher than expiry in Toronto, and we are getting record rents on our retail and restaurant spaces, which have not yet been reflected in the results. This means, for the purpose of modeling, some of the budgeted NOI that was originally anticipated in the second half of the year will be recognized in the first half of 2023, which will contribute favorably to stabilize cash flow and value. Our Q2 NAV was $32.83, which is relatively flat quarter-over-quarter. Given the backdrop of interest rate and cap rate sensitivities, we reviewed our valuation assumptions in detail this quarter. Under the direct cap method, our Downtown Toronto assets or 80% of our portfolio by fair value is using a stabilized cap rate of approximately 4.8% and market rents of just over $31. Our cap rates remain comfortably within the midpoint ranges of latest published broker and appraiser cap rate surveys, and our signed leases year-to-date have been higher than published market rents. When we reconcile this methodology to discount cash flow models and latest available private market trade data, we think our assets' values are quite reasonable. Our balance sheet remains very safe. We have $145 million of cash availability on our credit facility and $130 million available on the Canadian Infrastructure Bank facility that can be used for building retrofit and GHG emission reduction programs. We think we have ample liquidity and resources for all operational capital needs for the foreseeable future. For the remainder of the year, unsurprisingly, our focus is to lease space, because that is a driver and outlet for cash flow as to liquidity, value and investor sentiment. We are encouraged that the building capital we invested across Bay Street is starting to show fruition and the restaurant reit will significantly increase rents, value and tenant appeal across our portfolio. We intend to adopt a similar type of buildings across all of our capital initiatives, including 2 smaller development projects at 356 Bay and 67 Richmond. We are conscious to improve the value and return on capital on every dollar invested on behalf of our unit holders. Beyond leasing and value add capital, our NCIB program is renewing in August and we intend to continue to repurchase our units on an opportunistic basis given the disconnect between implied valuations versus the price acquired or to grow the new property today. Overall, we'll remain cognizant over the challenges of managing a commercial office business. But we just want to say that we remain very committed to the company because we see significant value and quality in our assets. Operator, we're happy to take any questions now.

[Operator Instructions] And we have our first question from Sairam Srinivas with Cormark Securities.

And my first question is for Gord. Gord, in terms of the back to office momentum, what are you hearing from your tenants in terms of their plans heading into the fall? As well as generally in terms of office utilization rates, how was it been looking for Q2 and right now, post quarter?

Yes, that's a good question. You broke up a little bit on there, but I think you asked what we've been seeing and what kind of trends we've been seeing from our tenants on their return to work. That's the first part of the question?

Yes.

Effectively, what we've seen in a lot of our private sector tenants, we've seen a bit more of an appetite on them working with us to understand what our back to work policies are, the improvements that we've done so they can communicate them with their tenant. Get them on boarded, feeling comfortable about coming back. And we've seen a big difference -- to be quite candid with you, we've seen a big difference at the occupancy levels of our private sector tenants versus our public sector tenants. In our private sector tenants, we're probably seeing just over about a 50% or 60% occupancy ratio based on people coming through doors, checking through. Our public sector tenants is a bit of a different story. It's a bit of a lower occupancy ratio. But what we've been doing is communicating with them, working with them. What we're hearing at the federal and provincial level is we'll start to see a lot more traction after Labor Day in getting people back into the office. So really, for us, it's just been communicating what our operating protocols are, putting them on paper and sharing them with our tenants so they can in turn share them with their clients and their staff so people feel more comfortable getting back. And then doing a lot of tours and walking them through and showing them the improvements that we've done around UV technologies and the HVAC, the elevators and just raising the overall comfort level. So right now, I'd say private sector tenants 50% to 60% back in the office, public sector much lower. But we're pretty optimistic that the public sector tenants will start to come back in earnest from September. And then my apologies. The second part of your question, I didn't quite get because the phone line broke up.

Gordon, I think you answered my question because it was basically on utilization rates. So I think there was good color. Just probably being back on the public side, would you say that the number is closer about 30% to 40%, I guess, in terms of occupancy?

Yes. You know what? It's really department driven. I'd say that's a really good number to say. If it's a lot of back office, it's more to about 30% right now. But we have some client-facing public sector tenants. That is at a much higher occupancy level. So it's really department specific. If you're working in finance or revenue for the federal or provincial government, you may not need to be in as much. But if you're working for passports, immigration, infrastructure, they generally seem to be a little more.

That makes sense. And my last question, I guess, is for Jay. Jay, I know last quarter you kind of guided in terms of occupancy being -- or maybe I think it's in Q4, when you guided for the occupancy being fairly stable for the rest of 20 -- in '22? Is that something you probably maintain right now? Or do you see any tenants leaving?

Yes, that's a good question. So most of our maturities happen in the first half of the year. For the rest of the year -- in my prepared remarks, I said we only have 150,000 spread across 33 leases. So the point there was it's quite manageable, 1 and 2. There's a lot of leases block and tackle. So we feel like we can address most of them. And we have stabilized our committed occupancy around the 90%, which was our original goal. And that is really what we see as a driver of value and cash flow looking out into 2023. So we're quite optimistic today about that. Just on the in-place occupancy, where we're a bit lighter. Our comments were that the tenants are taking a bit longer than previously or pre-COVID in terms of taking the space and getting their fixtures done. So what we're seeing now is a lag for a bigger spread between in-place and committed occupancy, let's call it, around 200 basis points. So we're quite comfortable in hitting our committed. It's pretty accurate, and what really we're focused on. But the in-place will lag a little bit just on our composition. The nature of the leases that we're signing, they're a bit more complicated, restaurant, larger and more unique tenants. And the supply chain disruptions, that's giving them a bit more time to do their construction work.

Our next question comes from Mark Rothschild with Canaccord Genuity.

Maybe just to start -- and it is for Michael. If you could expand a little bit on the capital program as far as how you look at whether you want to sell more assets or buy back units? And you have some projects going on with Investment Properties? How you look at that over the next year?

I think we started a lot of programs with the idea of creating excellent buildings, and we're continuing with that. On the development front, we pretty much delayed things a little bit because we don't really want to put the capital into it now. We're still bullish on buying back stock. And I think that we've got the liquidity to do that and we've got other sources of liquidity if we need it. So I would say we're not looking to do any acquisitions. We're probably spending less money on our existing buildings that we planned. But the key things were continuous -- new developments we'll take a look. 2200 Eglinton is coming along, and we could bring in a partner there if we choose. And that could help with liquidity and also development. But for the most part, we want to see -- just continuing with what we've been doing.

Okay. Great. And it does sound like there's some good leasing going on. The TIs were up in the quarter. To what extent -- is that a trend? Or is that maybe just some specific leases this quarter? Obviously, any different quarter could jump around.

Yes, that's a good question you point out, Mark. The cost in the TIs have been higher due in large part to construction costs. Jay has summed it in his remarks a little bit that construction costs kind of quarter-over-quarter has escalated quite a bit from materials. And not just procurement on materials, it's securing trade and executing on time. And that's been one of the biggest factors that we've seen. We had to put a little bit more money in the deal just to try to accelerate and get the space built in time. But it's just a combination of materials and getting this forward to do the work as well, too, is proving a bit of a challenge that I think all landlords are dealing with right now.

So this is more to do with -- from my view then, more to do with just the cost of getting these done and not so much a change in or increased demand from tenants?

Yes, I think more costs in getting things done. And to be honest with you, too, Mark, tenants have a little bit more leverage with the growth in vacancy over the last quarter or 2 than they traditionally have been in the past. So we're starting to see a little bit more requests on potentially free rent -- in terms of free rent as well, too, which sometimes we'll bake into the deals and we'll have a clarity on it.

We have our next question from Matt Kornack with National Bank Financial.

With regards to the property you have for sale or in the process of selling in Saskatoon, can you give us a sense as to who the buyer is? And also what the NOI impact would be from the sale of that, if it is -- if it goes through?

Sure. It will be a domestic buyer, but the source of the capital may be from outside of real estate if it's private buyer and it's strategic for them. And in terms of the impact on the financials, the cap rate will be between 7% to 8%. But you know on free cash flow because there's a lot of capital commitments to it. You're looking at more like a 2.

Yes. So sorry, 7% to 8% on in-place. There is not a stabilized number because it looks like most of the occupancies that you disclosed are a little lower in that market.

7% to 8% would be the in-place 4 quarter, annualized.

Okay. Fair enough. And then on 67 Richmond, did that contribute to NOI at all in Q2? Or was it already vacated throughout most of the quarter?

Yes. Very, very nominal. That was basically -- we have the planning for this building to become our next hot project for over a year now. And it was just fortunate that the tenancy has been coming up. And we already had pulled out a couple of test cases with 357 Bay. And the capital we're putting Bay Street. And that we retained strong traction on the retail and restaurant side, it was natural for this to become the next building. And we're quite excited to bring this to the market when it's ready.

And then I think Gord said $12 million of CapEx associated with the repositioning of that. Is that correct?

That's correct, Matt.

Okay. And last one, Gord. Just in terms of -- I missed your commentary in terms of the timing as to when you'd expect the restaurants to be in their space and the space to be fit out? And then maybe as an ancillary question on 357 Bay. Do you have a sense as to when WeWork would maybe be fitting out their space in terms of getting that Bay Street corridor looking to its best shape?

Yes. So both good questions. So we weren't actively working on that space right now. They anticipated in early Q1 completion date. I was just in there the other day doing a tour, and it was incredible. They're starting to do a great job. The exterior was great as well too. And the work we've done is really strong for the building. On the restaurant side, Matt, there's going to be a couple of different dates. Our partners are pretty particular on when they launch. But we're actively doing the construction on one of our very large restaurant spaces right now. We're well underway. And we anticipate that potentially kind of summer, fall of next year we'll be in a position to be opening the cash flows in that space.

Okay. Perfect. And then sorry, Jay, one last follow-up on the timing of the Saskatoon disposition. Should we expect that to close in the near term? Or is it that far out in the process?

You never know as trends are going today, but we're hopeful that we can wrap up the rest of the paperwork, and let's see, probably 30, 50 days close.

We have our next question from Scott Fromson with CIBC.

I was just wondering what impact are you seeing from the tech slowdown in terms of current tenants? Are they looking to downsize or put space up for sublease?

Yes. So in our portfolio, Scott, it hasn't changed too much really since the beginning of the pandemic. Most of our larger tech tenants, we've already had discussions earlier in the past 2 years. So I don't foresee us getting any surprises internally from the slowdown. But just as some general market color. I am hearing and seeing that there will be some more sublet space coming on in the financial corridor and the King West region from some tech users. But for the most part, in the financial corridor, the buildings that we own, I think, we're going to weather the tech slow down quite well just because we don't have as much exposure and we've just been consistently and constantly communicating with them. And one of our larger tech tenants, we're actually well underway on communicating and extending as well. So we foresee that we're not going to see much [ this year anything ].

And Gord, have you seen a change in tone and volume of discussions with prospective tenants, I guess, either in tech or other industries?

Yes. I want to be cautiously optimistic about how I say this. So tours have picked up a little bit. But to be candid with you, Scott, deals are typically getting longer. And there's not the same sense of urgency that there was to get deals over the goal line, the big deals, as there were -- that we were seeing before 2020. Like I think there's activity there. People are still coming through the doors, are very keen on seeing what we've done and how we can lend ourselves to their business. But the deals in general are just taking longer. And I think tenants are starting to get reserved. In fact that building their space and mobilizing and moving over is taking longer as well, too. So we're starting to see a lot of tenants, quite frankly, pass the 2-year mark -- they may have 2 years, 2.5 years of term still on their existing space, already come a little bit earlier to get a sense of what we're doing so they can start to plan ahead on what their occupancy decisions are because it's just taking a little bit longer overall.

And maybe sort of a follow-on on that. Putting aside the retail leasing component of new leases, can you comment on expected timing of closing the gap between in-place and committed occupancy?

Jay and I were talking about this yesterday and what we're seeing from in-place and committed. We're hoping kind of by next summer, we'll be in a position where we'll see that gap closing a little bit. For us in our forecasts and how we've been looking at deals -- we've been pushing the deals out probably 2 to 3 months. It's usually taking 60 to 90 days more to get these deals commencing. You get the deal done, but it's 60 or 90 days more to do the fixturing and other things. So it's taking a little bit longer. So the gap right now is probably 2 to 3 months more than we've traditionally seen. And we're hoping things stabilize in terms of the labor and trade market a little bit more towards next summer. And we're in a position where we can see timely completion and cash flow close the gap a little bit.

So some key metrics. So I think by year-end, you'll see some meaningful progress on getting the in-place occupancies up. And it's always going to trail a little bit on any lease recertified over the next year or so. But a lot of the leases have been committed. And so the stat by Q4 will be pretty good. And then you'll gradually see the income pick up in Q1, Q2 by next summer. Or hopefully, our admitted occupancy will be a lot higher. And then you should probably see a nice handle on the in-place as well.

And actually, maybe just one more for Jay. Are there any other major properties -- I mean -- I think sort of like 40,000 to -- 40,000 square feet plus that you're considering taking off-line for redevelopment?

At this rate, no. I think we're pretty much close to getting through the rest of the Bay Street assets. We will be doing a capital program on a selective basis and try to leverage our CIB program as well to decarbonize the building. But for entire building remodernization and redevelopment, I think that would probably be the last one for a while.

[Operator Instructions] We have our next question from Mario Saric with Scotiabank.

Maybe an operational question for Gord maybe to get more detail. But I'm curious. Did we keep stat on the percentage of tenants on the lease renewals that are kind of expanding versus contracting versus maintaining lease renewals? I guess the occupancy stats will highlight the trend. But just a bit curious to see if there's more kind of color on that front, and if you can separate it out between public versus private tenants and things?

Yes. Mario, it's a good question. We don't per se keep stats necessarily on that. What I can say is a few of our bigger tenants, people on Bay Street and other groups, had downsized a little bit. What we're seeing from the government is that it's basically kind of a wait and see, stay in place. We're seeing some shorter-term renewals as in -- until they're in any position to make occupancy decision. So public sector for the most part, we haven't seen very much downsizing. Some of our larger tenants earlier on in the pandemic. And then as we saw over the course of the last year, we saw some marginal downsizing in 1 or 2 tenants. We saw -- in private sector, we saw a little bit bigger downsizing. But we're starting to see some tenants grow as well, too. We've got a lot of smaller tenants in our portfolio. So we're starting to see a lot of private sector tenants indicate that extra thousand square feet to put another boardroom, maybe do some exterior, perimeter offices. So it's a mix at this point. Mario, I've issued - I gave you a specific number. But if I could give you any real color, it would be that our public sector tenants are, for the most part, just kind of staying out there.

Would it be fair to say then like the larger tenants may be giving out a little bit space, but your average 5,000 square feet tenants are just kind [indiscernible] portfolio. So you're seeing contraction definitely from 5,000 square feet to 3,000 square feet? Or going from 5,000 to 0? Or going the other way?