Minto Apartment Real Estate Investment Trust (MIUN) Earnings Call Transcript & Summary

Good morning. My name is Miranda and I will be your conference operator today. At this time, I would like to welcome everyone to Minto Apartment REIT's first quarter 2022 results conference call. [Operator Instructions] Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to cautionary statements on forward-looking information on the REITs, news release and MD&A dated May 3, 2022 for more information. During the call, management will also reference certain non-IFRS financial measures. Although the we believe these measures provide useful supplemental information about the financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's, MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Thank you. Mr. Waters, you may now be in your conference.

Thank you Miranda and good morning everyone. I'm Michael Waters, Chief Executive Officer of Minto Apartment REIT and I'm joined on the call this morning by Julie Morin, Chief Financial Officer. I'd also like to welcome Jonathan Li, our President and Chief Operating Officer to his first quarterly conference call. Welcome, Jonathan. I'll begin the call by discussing highlights from the first quarter as well as other corporate developments, Julie will then review our financial and operating results in detail and I'll conclude with our business outlook. After that, we'll be pleased to take your questions. Canadian urban rental market conditions continued to improve during the first quarter and we generated solid financial and operating performance. We entered into 401 new leases on which we realized an average gain of 10.8% over expiring rents. This was our single largest quarterly realized gain to lease in 2 years since the outbreak of the pandemic. We continued to reduce the use of promotions and discounts in the quarter, reflecting those strengthening market conditions and we achieved the leasing results despite the challenges in the quarter from the trucker occupation of Downtown Ottawa, which severely impacted our 600 suites in the core and the rise of the Omicron variant generally. Average monthly rent for the same property portfolio increased 2.9% year over year to $1,677 in the quarter and average occupancy improved to 94.2% compared to 91.1% in Q1 last year. These figures underscore the fact that market dynamics are steadily improving. We also continue to pursue important internal and external growth initiatives during the quarter. We completed the repositioning of 60 suites during Q1 generating an average annualized return on investment of 8.4%. These renovations improve asset quality, they reduce future repair costs and they drive strong growth in rental revenue. In March, we agreed to advance a convertible development loan to Minto Properties Inc to fund its share of the redevelopment of the University Heights Shopping Mall in the Greater Victoria area. The redevelopment will create 593 new residential suites and more than 113,000 square feet of grocery-anchored retail space. The REIT will earn a 7% interest rate on the loan during the development period and will have an option to purchase Minto Properties' 45% stake upon stabilization. Julie will provide more details on this transaction later in the call. This is the fifth convertible development loan that we've done with the Minto Group, which provides the REIT access to attractive development opportunities at favorable pricing in new and existing markets. Finally, subsequent to quarter end in April, we announced the acquisition of a 28.35% managing interest in Niagara West in Downtown Toronto and 100% interest in The International property in Downtown Calgary for total purchase price of $201 million. These are premium downtown rental properties that will increase the REIT growth suite count by a combined 753 suites. Overall, we're pleased with improving fundamentals, the combination of normalizing rental markets, and positive outlook for population growth support our top line expansion. Although we're facing rising cost pressures on labor and other operating costs, we're focused on managing our controllable operating expenses. I'll now invite Julie to discuss our first quarter financial and operating performance in greater detail. Julie?

Thank you, Michael. Turning to Slide 4, I'll begin with an overview of the Q1 operating results. Higher average rents and occupancy drove rental revenue growth in Q1. Average monthly rent for the same property portfolio increased by 2.9% and occupancy was 94.3% compared to 91.1% a year ago. Same property revenue increased 5.6% compared to last year and total portfolio revenue, including acquisitions, was up 8.4%. Despite higher operating costs, which I'll discuss in more detail on the next slide, the same property NOI increased by 2.6% compared to last year. NOI for the total portfolio was up by 5%. FFO and AFFO were up 10% and 11% respectively and AFFO per unit was up 4.3% compared to last year. The AFFO payout ratio was 72.1% compared to 72% in Q1, 2021. Turning to Slide 5. I mentioned that higher operating expenses impacted NOI. This table lays out the cost increases. Higher labor costs, the staffing of certain job vacancies, higher insurance costs, and higher repairs and maintenance costs all contributed to the increase in operating expenses in the quarter. You'll notice the large year-over-year increase in natural gas costs. This was due to both higher natural gas prices with unit rates increasing 34% year over year and cold winter weather, which resulted in a 13% increase in total heating degree base compared to Q1 last year. Cost containment is one of our key priorities and we'll continue to focus carefully on costs to maximize net operating margins. On Slide 6, we have an overview of occupancy, Michael and I both mentioned that average occupancy in Q1, 2022 increased significantly compared to Q1 last year, reflecting the stronger market conditions. Occupancy did decline slightly compared to the fourth quarter of 2021 as move-outs narrowly exceeded move-ins during Q1. This is consistent with normal seasonality and leasing and occupancy patterns and reflects the Ottawa trucker occupation's negative impact on 2 downtown Ottawa properties representing 600 suites. Slide 7 has our revenue analysis as of the end of March 2022. The upper chart breaks down our realized gain to lease performance in the first quarter, while the lower chart shows are updated estimate of the gain to lease potential embedded in the portfolio. Beginning with the upper chart as Michael noted, we signed 401 new leases in the quarter following suite turnovers. We realized solid gain to lease in all markets with double-digit growth in every market except Alberta. The average rent on new leases increased by 10.8% from $1,620 to $1,794. This resulted in an annualized incremental revenue gain of approximately $726,000. We continued to reduce the use of discounts and promotions during the quarter, which positively impacted gain to lease. Turning to the gain to lease potential on the lower chart. We believe we can generate approximately $12.5 million of annualized incremental revenue growth by bringing rents in 6,950 suites to market levels, realizing gain to lease of 10.7%. This exceeds our estimated gain-to-lease potential of 6.8% at the end of December of 2021. Turning to Slide 8, the upper chart tracks our gain to lease and average monthly rent on a quarterly basis. Gain to lease in Q1, 2022 was the highest we have generated since the start of the pandemic in the first quarter of 2020, and we have generated steady growth in average monthly rent despite the negative impacts of COVID-19 on urban rental markets. On Slide 9, you'll find a summary of our repositioning activities. We renovated and leased a total of 60 suites in the first quarter or 45 at the REITs proportionate ownership share. The average annual rental increase following repositioning was $4,468 per suite, which generated a simple return on investment of 8.4% in line with our target. We have 2,255 remaining suites to reposition under the current program. We expect to reposition approximately 180 to 250 suites over the rest of the year subject to turnover. On Slide 10, you can see our repositioning results for the trailing 4 quarters. Repositioning investment is our best use of capital. It generates our highest risk-adjusted returns. This chart clearly demonstrates that. The average unlevered return to the 4 quarters was 8.8% and remained in a narrow band of 8.4% to 9.4% per quarter. We renovated a total of 381 suites over the 12-month period. Now I'll review our intensification in development initiatives beginning on Slide 11. With the addition of the University Heights, our development pipeline now consists of 8 projects, 7 of which are in active development. These projects comprise 2,271 suites. During the first quarter, we provide the first advance on the University Heights convertible development loan and construction continued on Fifth and Bank, Lonsdale Square, Richgrove, Leslie York Mills, Beechwood, and 810 Kingsway. I'd like to highlight some of that work now. Let's start with our most recent development loan on Slide 12, which is for University Heights in the greater Victoria market. The plan to redevelop a shopping center in order to construct five 6-story wood-frame buildings with 593 new residential rental suites and 113,485 square feet of grocery-anchored retail space. We expect construction to commence from late 2022 or early 2023 with completion and stabilization in 2026. We have agreed to provide a $51.7 million convertible development loan to Minto Properties to finance its 45% interest in the project. The financing bears interest of 7%, which will accrue and be payable in full upon maturity of the loan. As with our other convertible development loans, we have an option to purchase Minto's interest upon stabilization at 85% discount to then appraised value. Slide 13 pinpoints the location of University Heights. It is in the Shelbourne Valley neighborhood of Saanich near the University of Victoria and Camosun College with good access to public transit and hospitals and attractive amenities, including parks, beaches and a library. The walk score is 77 and the bike score is 88. There is significant demand for student housing in this area. Two of the 5 buildings in the planned redevelopment will specifically target students with smaller furnished suites and student focused amenities. Moving to Fifth and Bank on Slide 14. Construction of this building in Ottawa's Glebe neighborhood is nearly complete. As you can see from the photo on the upper right, more than 75% of the 163 suites have been leased and nearly 100 are already occupied. We will have the ability to exercise our purchase option later this year. Turning to Lonsdale Square in North Vancouver and Slide 15. Excavation on this project is complete. And formal work is well underway, with concrete poured at the P1 basement level. We continue to expect construction completion in the second quarter of 2023 with stabilization in Q4 of that year. Progress was also made on 2 other convertible development loan projects in Q1, 2022. Demolition at 810 Kingsway in Vancouver continued and the Beechwood project in Ottawa officially broke ground. On Slide 16, you'll find a recent photo of the Richgrove site in Toronto, where construction is underway on a new rental tower with 225 suites, including 100 affordable suites. Stabilization is expected in the first quarter of 2026. As I have previously noted, this site is attractive in part because it is beside the future Martin Grove LRT station, which should be operational in 2030 or 2031. Construction is also moving ahead at Leslie York Mills in Toronto, which you can find on Slide 17. We are transforming this site with 192 new rental terrace suites and a new 9,000 square foot amenity pavilion serving the entire community. Construction got underway late last year and stabilization is expected in late 2025. Now, I'd like to review the newest edition to our portfolio, Niagara West in Toronto, and The International in Calgary. I should note that the closing of the purchase of The International is expected later this week. Let's review Niagara West first on Slide 18. On April 22nd, we completed the acquisition of a 28.35% managing interest in this premium and newly built downtown property. The total purchase price was $114.5 million. We capitalized on a very rare opt-in to acquire newly constructed residential rental building in downtown Toronto. Returns on the property are also enhanced by asset and property management fees earned from managing our institutional partner's interest in the property. The property was completed in 2020 and consists of 501 rental suites and 52,600 square feet of retail at-grade anchored by the Farm Boy grocery store. The east-facing suites also provide a lovely view of the downtown core as you can see. Turning to Slide 19, I want to note that this building prioritizes sustainability. It is equipped with electric vehicle charging stations, secure bicycle parking, and a green roof that absorbs and captures stormwater for onsite irrigation. The design of the water and electrical system is also highly efficient, which results in 45% energy savings compared to the national [ cold ] standard for this building category. The building is currently undergoing certification under the Canada Green Building Council's LEED program and is expected to earn LEED-silver certification. This highlight is a highly sustainable and efficient design. More photos of Niagara West are on Slide 20. It features condo-quality suites and amenities, including a rooftop pool, an urban garden with barbecue facilities, a full-service fitness center and a rooftop off-leash area for dogs. This walk score for this property is 94. It also has a bike score of 73 and a transit score of 100. Turning now to The International on Slide 21. This downtown Calgary building consists of 252 suites with 2,700 square feet of commercial space. The purchase price is $86.5 million. The international is located in Calgary central business district and offers direct access to the Plus 15 Skywalk, an 18-kilometer weather-protected above-ground walkway. This is very unique for residential building and connects residents directly to offices, restaurants, retail, and entertainment without having to go out outside. The property was originally constructed in 1970 and was operated as a hotel before being acquired in 2015. The property underwent a $30 million conversion into a condo-quality residential rental property. It has retained high-quality hotel-inspired common area and amenities. Moving to Slide 22. These photos provide a snapshot of the rooms and amenities. A multi-year renovation program of all suites, common areas and amenities was recently completed and significant upgrades have also been made to the heating and building automation system. The International has a walk score of 97, a bike score of 79 and a transit score of 85, which highlights its attractive downtown location. Turning to Slide 23, I'll conclude with the review of our debt, financing and liquidity. Since the REITs inception, we have maintained a conservative leverage ratio and balance in our debt maturity schedule. The chart on this Slide shows that maturities are highly manageable through 2027. As of March 31st, 2022, the weighted average term to maturity on our fixed rate debt was 4.77 years with a weighted average interest rate of 2.81%. Approximately 93.6% of our debt is fixed rate and 70% is CMHC insured lower cost debt. Total liquidity was approximately $144 million at the end of March, 2022 and debt to gross book value was 36.8%. Subsequent to the end of the first quarter, we obtained a commitment from our lenders to increase the limit on the REIT's revolving credit facility from $200 million to $300 million. This provides us with additional financial flexibility as we pursue growth opportunities. Closing of the amended credit facility is expected this month. I'll now turn it back over to Michael.

Thanks, Julie. I'll wrap up with our business outlook on Slide 24 before we take your questions. We believe the outlook for Minto Apartment REIT is highly positive. The Canadian urban multi-residential rental market is steadily improving. The strong fundamentals that have driven long-term growth in this market remain in place. That includes Canada's expansive immigration policy, inelastic housing supply and the increasing gap between the cost of renting and owning a home. These factors were driving the market prior to the pandemic and we believe that they'll continue to do so for the foreseeable future. We're confident that we have the right assets and strategy to succeed if the market conditions continue to strengthen. Our strategy is made up of 5 key pillars. Firstly, capitalizing on organic growth from gain to lease, creating value from suite repositioning, focusing on cost containment, exploring attractive acquisitions and development opportunities, and lastly, capitalizing on our relationship with the Minto Group, which continues to provide us with proprietary and highly attractive investment opportunities. Our strategy has served us well since the inception of the REIT and we can expect that it will continue to do so in the post-pandemic world. By sticking with it, we believe we're well positioned to generate strong returns for unit holders in both the short and long-term. That concludes our presentation this morning. Julie and I would now be pleased to answer any questions you may have. Miranda, please open the line for questions.

[Operator Instructions] There appears to be no questions.

Okay, Miranda. Well, I guess that concludes our call this morning then. Thank you very much for joining us. And...

There's a submission...

Oh, hang on. Sorry, we've just got a note because, Miranda, there seems to be a problem with the call in. I'm not sure quite what that is. Maybe what we'll do is just take 60 seconds here to see if we can resolve the issue. Miranda, do you mind taking a quick look at that, please?

Yes, of course. Okay, it does seem like there are a couple of people here now in queue. The first one would be Brad Sturges from Raymond James.

I wanted to get your thoughts on-- I mean, we've seen a pretty sizable move in the underlying bond yields and debt financing costs. How do you think that translates into acquisition pricing or valuation? Given that move, do you see much of an impact on valuation metrics or do you expect given the inflationary environment for valuation holding right now?

Well, it's -- I think the question, we would probably need to consider funding sources for some of the bidders. In addition to long-term debt, a component of the bidding of a market would be publicly-traded REITs. And, at current conditions, ourselves and our peers are all trading at substantial discounts to NAV, and so that might, at least, in the near term, take some of those bidders out of the market. But when you turn to the other players, the other segments, I guess, of demand for investment in multi-res, looking at private equity and private buyers they, of course, will be looking to fund acquisitions with term debt in many cases. And I think the sort of initial conclusion might be to say, rising rates might translate into valuation. Of course, as you pointed out, there would be I'd say offsetting impact from NOI growth. And it's hard to say that there would be a one-to-one sort of linkage, I think we're going to need a little bit of time here to see exactly how the market plays out. But, the expectation, I think, we have seen rising bond rates for in sort of, several months, we've been seeing the bond rates move. It hasn't had, to this point, an immediate and obvious impact in what we're seeing in the private market for multi-res assets and we've been sort of monitoring several options, and seeing fairly deep bidding pools and fairly aggressive bids. Now, I think if we watched the Central Bank continue to ratchet rates, and we progress into Q2 I think that might change a little bit. So, I think, from our perspective, and I think most bidders are probably underwriting, not on a cap rate basis, but probably on a 5 or 10-year DCF basis. And, so, they are looking at NOI growth. Of course, they are layering in value-add capital for suite repositioning, possibly intensification. And, so, I think that it's not necessarily follow that there'd be a one-to-one relationship between rising rates and cap rates. I think, there's more factors at play. And, I think we need to see sort of how the market dynamic plays out on that.

Great. And from a Minto's perspective, the REIT's perspective, I guess, beyond the eventual vending of Fifth and Bank, I guess, in terms of incremental capital being deployed, I guess, best use of proceeds for now would be still on the renovation program. And would there be more opportunities for further development loan being deployed?

So obviously, our-- And we've said this at length in the past, the highest and best use of capital for us on a risk-adjusted basis is the repositioning program. Partly because we have tremendous visibility into what renovated suites are fetching in the buildings that we're renovating because we're releasing them more or less on a continuous basis. We have really good visibility on the renovation costs because we're on a more or less continuous renovation program in the buildings that we've highlighted for repositioning. But, also that we're metering out capital on very discrete amounts. And, so, we can tailor the program to what market demand is showing us. And so the only negative is that we're really dated in the amount of capital we can deploy in value-add repositioning by the turnover of unrenovated suites. So, it's a very attractive use of capital for us, but it's relatively limited in how much we can deploy in any given year. So turning to other uses of capital, certainly, we are looking for accretive investments, CDL loans, they're all the accretive, the coupons are accretive from an AFFO perspective and they do give the REIT preferential access at a discount to fair value to buy new assets when those buildings are stabilized. Fifth and Bank is an example. As Julie highlighted, we have 5 CDL programs out there. Right now, we are looking at others. The question comes to where is the capital coming from? Certainly, our liquidity position right now is very healthy. It's possible that on a go-forward basis, we might look to -- certainly not looking to raise capital at a significant discount to NAFTA or any discount to NAFTA. As of right now, the stock is trading at a very substantial discount to our IFRS value NAV. So, it's possible that we could look for capital in other ways, recycling some capital, which would allow us to upgrade the portfolio is one such option, but we'll be managing it very carefully.

Your next question would be coming from Jonathan Kelcher with TD.

Just following up on that last one, when you're talking about recycling capital, Michael, would that be sales of partial interest in properties, or would you look to sell 100% interest in some?

I think it might vary, but there are assets where potentially, we have generated significant value and perhaps the future potential that might be possible from selected assets might be attenuating. And, so, in certain cases, it could be potentially the sale of 100% in certain assets. That's a process that we're evaluating on a more or less regular basis. You know, we're looking for assets when we think about acquiring stuff, and essentially, by deciding to hold something, we're making a decision effectively to buy it. And our acquisition criteria include repositioning potential, intensification potential or significant gain to lease. And so when there's assets in our portfolio where the gain to lease is, or potential is limited, either because we're at or near market rent, or turnover is limited, or where there's limited potential for intensification just because of the site characteristics or renovation is limited, those might be assets that we would highlight for sale, and then redeploying the capital into opportunities that are not only accreted, but raise the overall quality level of the portfolio.

Okay. That's helpful. On debt refinancing, you've got the current 5-year CMHC rate in your presentation deck. Would not be a fair assumption to use that you're going to be doing mostly 5-year renewals in new mortgages?

We always look to ladder our maturity, so, I think it'll really depend on what's coming to maturity and where we have gaps. But, to your point, with rising interest rates right now, the bias would be to shorter term.

Okay. And, then, your stack looks like you've got a nice room in 2026, 2027. And then lastly, just for me, what's the expected development spend for the remainder of this year?

When -- and you're looking at the development...

Yes, the Richgrove and Leslie York Mills.

So, we've begun drawing on the construction loan for Richgrove. So, as far as equity outlay, it would be minimal or nothing. I think we made the first draw in Q1. And, we -- and Julie, I don't know if you have that handy. Jonathan, unfortunately, I just don't have that information at my fingertips. But those two on-balance-sheet deals are, I think, roughly $10 million I'd say for Leslie York Mills and as I say, if Richgrove were already drawing on the construction loan.

Your next question coming from Kyle Stanley with Desjardins.

I was just looking for a bit of an update on the Carlisle and your plans there, you mentioned, potentially renovating the commercial space. I'm just wondering what would the impact be to NOI if you were to de-lease the remaining 35,000 square feet? And then just generally what are your thoughts on development potential investment and return to be generated? I understand it's probably early days, but just an update there.

Yes. So we, immediately prior to COVID, had engaged consultants to evaluate the feasibility of converting either non-revenue or commercial [Audio Gap] in that building to revenue space. And immediately pre-COVID, we actually did convert some non-revenue space to residential suites. Part of that work, we developed a number of concepts for the podium itself, and are now taking that to the next level of design development drawing. The properties don't -- to allow for that use. We think, based on our concept in sort of yielding out our preliminary yield analysis could generate something like 40 to 50 suites. The space there is about 43,000 square feet. And so as we go through that design development stage, and we cost it out, we'll be developing a pro forma. So I think it's preliminary right now, which is why we've left that asset in the same property. I would expect that at some point in Q2 we'll have advanced our feasibility analysis on that. I would expect, Kyle, that it would take 12 months or more to get us through site plan and permitting and then perhaps 12 to 18 months to complete the renovation work and bring those online. But we did make the preliminary steps as well as it relates to that tenants that we have in there to convert them to month to month. They are cash-flowing despite the difficulty of COVID for commercial users, the office users from the downtown core. So we've taken all the preliminary steps to take this podium to reposition it. And I think will make a substantial impact on the performance of the asset. But I think it's premature right now to say precisely what that might look like. We do know that obviously, we're in the quarter with having converted those to month to month, it did have an impact on SPNOI performance of about, I think 60 to 80 bps. And I think from an -- obviously, we've been using it to cash flow the space as we continue to buy more. So, I don't know if that helps.

Yes, no, definitely that's very helpful and good to understand what you're thinking there. Just maybe the last one and then just turning to the furnished suite business, I know it's a small component now but rental rates within that part of the business improved pretty nicely on a sequential and year over year basis, especially given the truck occupation in Ottawa. Just wondering with the economy reopening, business travel ramping a bit, what's -- what are your thoughts on where we see the rental rate of the furnished side going? Do we hit pre-pandemic levels in the near term?

Well, we've steadily drawn down the inventory, which makes yield management on those hopefully churn, and as you pointed out, the average monthly rate has climbed well in excess of 4,200. We had lower occupancy in Q1. It's kind of a seasonal lower occupancy quarter for furnished suites. And of course, it was impacted. You pointed out by the trucker occupation and some of the Omicron shutdown. I think when we're looking at April, we've already seen the occupancy improve well in excess of 70%. I expect that will continue to improve. And with that, I think rate. I'm not sure we'll see that rate move to pre-COVID levels in Q2, but obviously, it will continue to strengthen, I think, as we get to the latter part of the year.

Your next question will be coming from Jenny Ma with BMO Capital Markets.

Turning to the off-cost trends that you're seeing, especially as it relates to energy prices and natural gas, do you see much of a differential amongst the different markets or are rates going up at the same click across Western markets?

I mean, we sort of look at it kind of-- I mean it's a global commodity we've seen. I mean, there's probably small differentials for delivery costs, but the actual unit cost of the energy is relatively uniform market to market.

Great. For [ REIT ] cost, can you remind me if you guys do any hedging or do you have any or that in place right now?

We don't. And we've evaluated it at length in the past, Jenny. Our sense has been that over the long-term, a hedging program, obviously, will dampen volatility or eliminate volatility, but it does come at a cost, being the cost of a hedging contract. So we opted for better or for worse, to forego a hedging program and with the expectation that over the long term performance, we would be better because we would avoid the cost of the insurance, if you will, that you pay when you implement the hedging program.

Okay, great. That's helpful. Turning to the development loans, when you look at the nice yield that you get, how is the pipeline looking for future loans? And more specifically how is that yield calculated? I guess what I'm getting at is as rates go up, is there any provision for that yield to go up for future development loans?

Obviously, future loans would be negotiated based on market conditions at the time. We do have a pipeline of opportunities that we're looking at. We haven't committed to anything, obviously. And so I think if we look forward at projects over the latter part of the year, we'll be evaluating credit market conditions at that time in setting rate, obviously, and looking for, obviously, a reasonable spread over the underlying. From the REIT's perspective, though, it's important to note that the bulk of the return from the CDL program actually comes from the exercise of the options because these options are established at a 5% discount to appraised value. And appraisals often lack true fair value. But even if you just look at it on the appraised value basis, about 60% to 70%, of the return to the REIT from the CDL program is coming from the exercise of the option. And as we've talked about with NOI growth and particularly rental growth, we might see that gap widen even further in terms of the discount to fair value.

Great, that's helpful. And then lastly, for me, with the Ontario Provincial election less than a month away, I just wonder if you could share any feedback or tidbits from your discussion with government and of course you can't predict the outcome, but if we end up with a government that is going to be more friendly to building off supply, how do you see the REIT participating in that? Would you sort of continue with what you're doing now or is any sense you could ramp up construction and helping with the supply issue?

Well, I mean, I think at the provincial level, that the 2 big levers the provincial government has is rent control on one side and then planning policy, which is really goes to the growth side. So I think the expectation is that a conservative government would be relatively more constructive, shall we say, than the alternatives on a rent control perspective. We also view that the conservative government, if it was returned to a majority, might also be more constructive on planning policy. Moves such as increasing density around transit nodes, for example, and streamlining planning processes, those would all help. Of course, the reality is, is that municipalities play a very significant role in planning approval. They can both help and hurt, first, in the form of delays in processing planning applications and restrictions in terms of bringing more density online, but they can also help. We've seen great policy, for example, implemented by the city of Toronto for affordable housing. In fact, we're leveraging that program at our Richgrove project, the new tower that we're building there is being built in partnership with the city of Toronto through their Open Door Program where they're granting waivers or deferral on things like property taxes and development charges. So I think that there's rightly a lot of emphasis on what's happening at the provincial level and on June 2, but we also need to keep in mind as well that the planning environment is complicated and by municipal, the impact of municipal government. So I guess that's our sort of look at it.

Your next question, come from Matt Kornack with National Bank.

Quickly just wanted to get your sense as to its early days, but how things are trending in the spring market, I think you highlighted that there was going to be a bit of an opportunity in Q2 and Q3 of this year, but is that materializing in what you're seeing on the demand side, from both an occupancy and rent trajectory standpoint?

Yes. I think number one, just in Q1, we saw that realized gain to lease of 10.8%, versus what we had forecast at the end of Q4, was sold materially higher. Part of that is a function of the suite that actually did turn versus what our forecasts had been. So, we're stronger than what we had expected. We ended the quarter Q3 with an expectation of 10.7% gain to lease, and the early indications is what we've actually achieved in April, are entirely consistent with that estimate. So, we're realizing in April, that level is consistent with the forecast from the end of March. April's tracking very well, not just on gain to lease but demand. Our focus is on downtown Ottawa, filling some of that white space that we suffered from the shutdown. The city streets, in many cases, remain shut. We did have another protest roll through last weekend. So, hoping that we can get through some of these disturbances and sort of return to some sense of normalcy in downtown Ottawa, in terms of street closures and disruptions. Other areas of focus for us, Rockhill in Montreal and Edmonton. But generally speaking, yes, I mean, that's what's really buoying our optimism, is what we're seeing in the leasing offices from a demand perspective and in the early indications as well for move-in versus move-out, was also strongly positive in April. So, April is a strong leasing month, perhaps our second-best leasing month, traditionally, in the year after September. And certainly, the early indications are for Q2 from a leasing perspective.

And from an occupancy standpoint, was the sequential pullback mostly related to the issues in Ottawa, or was there anything else there? Obviously, seasonally, it's slow, but was that responsible for the pullback in occupancy?