Minto Apartment Real Estate Investment Trust
TSX:MI.UN
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Minto Apartment Real Estate Investment Trust
Earnings Call Analysis
Summary
Q2-2024
Minto Apartment REIT showcased a robust Q2 2024 with a 6.3% increase in average monthly rents and a 20 basis point uptick in occupancy. Revenue from unfurnished suites surged by 6.8%, contributing to an overall same-property revenue growth of 4.8%, despite lower occupancy in furnished suites and some retail vacancies. Normalized SPNOI grew 7.5%, while FFO and AFFO per unit rose by 15.4% and 18.7%, respectively. The REIT's debt management improved significantly, with a debt to GBV ratio of 41.8% and a reduction in debt to adjusted EBITDA to 10.9x, bolstered by favorable refinancing conditions.
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Good morning. My name is shoe, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Minto Apartment REIT 2024 Second Quarter Financial 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 the cautionary statements on forward-looking information in the REIT's news release and MD&A dated August 13, 2024, for more information.
During the call, management will also reference certain non-IFRS financial measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they're 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. Li, you may begin your conference.
Thank you, operator, and good morning. This is Jonathan Li, CEO of Minto Apartment REIT. Also on the call is Eddie Fu, our CFO; and Paul Barron, our SVP of Operations. In Q2, 2024, we maintained the strong operating performance that characterized the start of the year. As illustrated in the table on Slide 3, we generated 6.3% growth in average monthly rents for the same property portfolio compared to Q2 last year and increased occupancy by 20 basis points. Same-property revenue growth in the unfurnished suite portfolio was strong at 6.8%. The total same-property revenue growth of 4.8% was impacted by lower occupancy in our furnished suites and temporary vacancy in our retail space at Minto Yorkville.
Normalized SPNOI and normalized SPNOI margin, increased by 7.5% and 160 basis points, respectively, reflecting continued strong revenue growth and flat operating expenses, resulting from disciplined cost containment and lower utility rates relative to the prior year. Normalized FFO per unit increased 15.4%, and our normalized AFFO per unit increased by 18.7%. Our strategy to translate NOI growth into cash flow per unit growth has been successful, and our strong cash flow growth performance is a result of disciplined capital allocation decisions and successful asset sales that contributed to reducing our interest expense compared to prior periods.
Our debt to GBV was 41.8%, while debt to adjusted EBITDA continued to sequentially improve, decreasing to 10.9x as a result of our strong performance. We also continue to work towards the upward refinancing of 4 properties located in Ottawa that have total estimated net proceeds of between $70 million and $80 million that will be used to reduce the outstanding balance on our revolver. Current interest rates have trended favorably. I'll now invite Eddie Fu to discuss our second quarter financial and operating performance in greater detail. Eddie?
Thank you, Jon. Turning to Slide 4. Same-property portfolio revenue was $38.9 million, an increase of 4.8% from Q2 last year, primarily reflecting a 6.3% increase in average monthly rent to $1,939 at quarter end, partially offset by the decline in furnished suite and commercial revenue. Normalized same-property portfolio NOI increased 7.5% year-over-year to $24.9 million, as revenue growth was offset by a small increase in same-property normalized operating expenses.
Same-property normalized NOI margin, increased by 160 basis points to 64%. Average occupancy remained steady at 96.9%. Our strong normalized FFO and AFFO growth has resulted in a normalized AFFO payout ratio of 57.2%, a reduction of 870 basis points from Q2 2023. Turning to Slide 5. This chart highlights the REIT steady quarter-over-quarter growth in average monthly rent and strong realized quarterly gain on lease performance.
Moving to Slide 6. We signed 420 new leases in the second quarter, generating gain on lease of 11%. We generated double-digit increases in both Ottawa and Calgary, while Montreal was up 9.1%. Bruno was up 9.2% despite a larger proportion of new leases signed for suites with a shorter average length of stay, which resulted in a smaller gap to market rents. Moreover, approximately 50% of the new leases in Toronto were signed at Niagara West, a non-rent-controlled property where expiring rents are closer to market. Excluding Niagara West, realized gain on lease in Toronto was 14.4% and was 12% across the portfolio. As indicated in the lower table, the embedded gain-to-lease potential at the end of Q2 remained strong at 15.7%.
Moving to Slide 7. The same property portfolio annualized turnover was 20% in the second quarter, in line with seasonal norms. Movements outpaced move-outs, resulting in improved closing occupancy. Annualized turnover was 34% in Calgary, a non-rent control market where the greater availability of affordable homes gives tenants more flexibility to consider other housing options, but strong demand still drove high closing occupancy of 98.6%. Annualized turnover for Ottawa was 19%, while closing occupancy increased under strong demand conditions.
In Montreal, annualized turnover was 18% and closing occupancy increased to 96.8%, the highest occupancy level in recent years supported by strong demand in that market. In Toronto, annualized turnover was 16%, driven by move-outs in non-rent-controlled suites. Toronto has experienced high vacancy for one-bedroom suites resulting in lower closing occupancy of 95.1%. We are working to increase occupancy in these suites through a combination of targeted promotions, marketing campaigns and a tailored renewal program.
On Slide 8, we provide an update on our commercial and furnished suites portfolios. For our commercial portfolio, we experienced a year-over-year revenue decrease of 27.4%, reflecting the retail vacancy at Minto Yorkville. There's continued interest in the ground floor space with a variety of tenants, and we anticipate executing a lease this year with lease payments expected to commence in early 2026 following a period of fixturing. While our furnace portfolio saw aggregate occupancy improved sequentially over Q1 2024, revenue declined by 12.8% compared to Q2 last year.
This was the result of lower occupancy at Minto Yorkville due to fewer transient stays, partially offset by higher occupancy at Minto 185 and a 5.1% increase in average monthly rent. Since Q2 2023, we have converted 6 furnished suites to unfurnished, including 5 in Minto Yorkville. We expect to complete additional suite conversions at Minto Yorkville in the second half of 2024, to optimize revenue and occupancy.
Turning to Slide 9. Normalized operating expenses for the same property portfolio were up slightly from last year as increases in salaries and wages were largely offset by lower repair and maintenance. Same-property normalized property taxes increased 3.8% due to increases in set values in Calgary and Montreal and rates in Toronto and Ottawa. Utility costs in same-property portfolio declined 7.5%, primarily due to decreases in natural gas and electricity rates.
Moving to suite repositioning on Slide 10. We repositioned 13 suites in the second quarter, generating an ROI of 9.7%. Over the last 4 quarters, we've repositioned 71 suites and generated an average ROI of 9.9%. We expect to reposition 35 to 70 suites this year. Turning to Slide 11. We have provided our key debt statistics. Our maturity schedule remains balanced. As of June 30, 2024, the weighted average turn to maturity on our term debt was 5.5% 7 years with a weighted average effective interest rate of 3.43%. We have steadily reduced our exposure to expensive variable rate debt to 8% of total debt at the end of Q2. Upon completion of the anticipated refinancing mentioned earlier, our variable rate debt will be reduced to low single digits as a percentage of total debt. Total liquidity was approximately $164 million at June 30, 2024. I'll now turn it back over to Jon.
Thanks, Edward. Moving to Slide 12. We continue to advance our attractive pipeline of growth projects. The on-balance sheet intensification at Richgrove and Leslie York Mills continue to progress well and stabilization of both projects is expected in 2026. In addition, construction continues to progress well at the CDL properties. Long sale Square in North Vancouver is the most advanced and consists of 113 suites. It opened its doors to tenants on April 1, 2024, and residential leasing is already over 73% complete, which is a testament to the attractiveness of the asset and its desirable location.
In addition, the ground floor commercial space is 100% leased, highlighted by an upscale group hub and a pharmacy. The purchase option expires on November 30, of this year. We will continue to evaluate the upcoming CDL purchase opportunities in the context of our cost of capital, impact on future cash flow per unit, pro forma leverage, market sentiment and other factors. You can find updated photos and details on the projects on Slides 13 and 14.
I'll conclude with our business outlook on Slide 15. The fundamentals underlying the rental housing demand in Canada are strong. Canada has robust population growth relative to all other G7 countries, there is insufficient supply of new housing and building new supply remains challenging. We continue to focus on the strategy that is delivering our current solid performance, optimizing revenue and expenses, growing FFO and AFFO per unit, exploring attractive refinancing opportunities, making disciplined capital allocation decisions and critically assessing growth opportunities in our attractive pipeline. With our high-quality portfolio and strengthened balance sheet, we are well positioned for sustained success. That concludes our prepared remarks. Operator, please open the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from Mark Rothschild with Canaccord.
Focusing on the Toronto market, it appears after several years that rent growth is maybe stopped or it's peaked. Can you talk a little bit about what you're seeing and what your expectations are for this market in particular as far as the rent growth you're able to achieve? And is this impacting at all the turnover that has been declining for some time?
Mark, it's Paul Baron speaking. So consistent to what we've been communicating for the last few quarters, market rents in Toronto, Aperio plateaued. Most notably, we're seeing that in the 1-bedroom suite. There's been that large condo deliveries through 2024. Those newly completed condo projects are having an outsized impact on the rental market. Buildings registered since 2020, actually represented more than half of all rental transactions in Q2. That's a 65% year-over-year increase in that leasing activity. The continued downward pressure on rents as condo owners look to fill suites quickly to recover those increased mortgage payments that they're all on the hook for. I would say, that said, we still see a significant gain to lease potential in that market at 16.9%. So we do anticipate some decent growth going forward.
And maybe just one more for me. The unit price doesn't seem to be showing any traction as far as getting back closer to NAV at least in the near term. And clearly, you're not looking to issue equity to fund acquisitions. To what extent has your strategy shift or your thoughts as far as external growth, whether it's regards to acquiring properties or from the development loans, would you allow leverage to maybe rise somewhat, not necessarily with variable rate debt, but to take advantage of the opportunity to acquire a quality asset if it was accretive? Or is maintaining or improving the balance sheet further paramount and you just won't grow externally.
Mark, it's John here. I think you've touched on a couple of things and maybe I'll address each of them or at least provide some thoughts on each of them. Our share price, like many REITs, has been frustrating. I don't think there's a management team out there that thinks that their share price is where it should be. But a couple of interesting facts that I think are encouraging. I think transaction activity behind the scenes in the private investment market seems to be picking up. I think that's going to be positive for us in a few ways.
One, it will show that institutional money is coming back into the sector in a meaningful way, I think, which is positive. Two, we're just getting more inbounds for some of our assets at more attractive pricing. Three, based on what we know, the purchase prices of those transactions will highlight the discount that we trade at is not warranted, right? Like if we see a large sample size of individual transactions where institutional parties or buying assets for cap rates well below our implied trading cap rate and closer to our book cap rate. It will highlight that it doesn't make sense for our share price to be trading at a 25% discount to NAV.
You kind of add some of the capital markets factors at play which we're hearing that many generalist investors are becoming like orders in the space. We're hearing retail investors are much more interested as GIC alternatives are becoming less and less attractive as interest rates come down and, you kind of add all that together and we're hopeful that, it will really put some wind in the back of our sales because we have such a high-quality portfolio. And if we see a plethora of transactions that support valuations that are significantly higher than where we're trading, I think that's good for us. I think as it relates to your second question around I'll just break it down to sort of capital allocation decisions and leverage.
Look, I think we've been pretty successful in reducing our variable rate debt exposure. I think it's been accretive. We have a number of refis that once complete net proceeds will be used to continue to reduce our variable rate debt. So that will be, I think, positive and it will be quite low. So as long as there's variable rate debt, I think that's probably the highest on our priority list to pay down as it's the most accretive and should we be in a position where we have excess capital, that's when it becomes more interesting, and we'll consider share buybacks, and we'll consider potential acquisitions.
I think we're pretty comfortable with leverage kind of below that 45% debt to gross book value range. I think we're pretty significantly below that. And we're cognizant of our cash flow going forward. So a long way of saying kind of I think things are fluid. I think many options are on the table in terms of growth, I think external growth is probably less likely, sorry, external third-party growth is less likely than potentially buying one of the CDL opportunities. But I think we've demonstrated that we've been quite disciplined, and I think we're going to maintain that discipline. And we have some time to figure it out, and all options remain on the table. And I think we've been pretty successful at raising equity internally by asset sales and if it makes sense to do more, we'd consider it.
Your next question comes from Michael Markidis with BMO Capital Markets.
I don't think there's anything left after that explanation, John numbers, but maybe I'll try. I mean, I guess with private market activity perking up here, how likely should we think about potential dispositions of assets that you own within the next 6 to 12 months?
I mean I think as I said earlier, further asset sales will likely be tied to other transactions if we consider them, right? I think in and of themselves, we got ahead of, I think, the asset sales game, and we were quite successful in executing them and they're kind of in the rearview mirror. So there's no real catalyst for us to just sell assets for the sake of selling more assets. I think our variable rate debt is in a good spot or it will be after some refinancing.
And I think we would consider other asset sales if we got pricing that made sense. And if it made sense for us to apply some of those proceeds to a potential acquisition to keep our leverage in a good spot, I think we would consider it. So all options on the table, nothing decided yet, but we are trying to extend option value. We're trying to expand option value in terms of the number of structures that we can apply to potential growth. But again, we're maintaining discipline that we're going to stay disciplined and we'll do what's in the best interest of shareholders in the long term in our judgment.
That's fair. Last one for me, and it's a modeling question and it's a far field. So if you don't have the answer, I totally understand we can follow up. But I guess, I can't believe we're looking at 2026 already, but that's where we're taking our numbers too. And you've got 2 developments that will look to stabilize. So do you guys have a sense of all else equal what the potential drag might be in 2026, as those assets you capitalize stop capitalizing and have an initial down period from an NOI perspective as you lease up?
I mean I don't think we're going to get into that yet, Michael. We're happy to take it off-line. We're really focused on just the development of these from now until completion in 2026. And I'm not sure they will be done until the end of 2026. So this might even be a 2027 question. So maybe we'll get back to you on that one.
Your next question comes from Jonathan Kelcher with TD. Cowen.
I guess, turning back to operations here turning to operations here. On the Toronto vacancy, is that spread out fairly evenly across the portfolio? Or is it mostly at 1 or 2 properties?
Mostly at 1 or 2 properties. I should say, breaking that down a little bit further, Jonathan. It's also focused on those 1 bedroom suites that are feeling that additional pressure from the condo competition, as we've mentioned before.
And that condo competition would mostly be right downtown, correct?
Former City of Toronto borders, so primarily downtown.
And can you maybe give some examples of you talked about tactical promotions and tailored renewals, some of the stuff that you're doing?
Yes, for sure. So promotion activity really getting created by property. I think one great example would be High Park where we have an excess amount of parking, so including parking for 6 months as part of the promotional package, very little cost there as we have so much parking on site. As it relates to renewal activity, we have done some targeted renewal promotions at 39 Niagara, really focusing on those residents that are at market or slightly above market. Once again, it's really just the leasing team reaching out describing the market dynamics, the value proposition of our building and if required, a few hundred dollars to get them to reside. It's actually been quite effective at that property. So feeling good about some of the unique programs we have going on for the remainder of the year.
Are you still getting renewal uplifts at 39 Niagara?
It depends on the suite type, it's about flat.
And then just secondly, on the suite repositioning, you pulled back your target for this year. Is that 100% due to just lower turnover, not being able to get out in the suites? Or are you making some decisions at the best or the best cash flow or use would be just to release the suite quickly?
Yes. So it's actually a combination of both. So we have a declining balance at those repositioning projects that have been ongoing for a number of years. Where we're making really the active decisions is around the Montreal portfolio, specifically Rock Hill. Actually, you saw this come through on the gain on lease numbers this quarter. And really, we have the opportunity to take the suite back to market where there's a tremendous amount of demand for that property with simply a paint and clean. So managing cash flow there quite effectively.
So would you expect that to sort of trend down as we go forward into '25 to '26?
It's a tricky one to say at this point. It's really what set to get back. And we know that lets length of stay, pardon me on turnover is going down, but it really is a bit of a crapshoot depending on what you get back.
Next question comes from Kyle Stanley with Desjardins.
Just a quick kind of modeling one for me. For your 2025 debt maturities, is there any lumpiness there or fairly spread out across the year? And then, I mean, I think we have a good idea of where refinancing rates are today, but just confirming you're kind of seeing 5 and 10-year money in the mid- to high 3% range?
Kyle, it's Eddie here. Regarding the first question on maturities, the 2025 would be staggered throughout the year. When it comes to rates right now, starvation rates are trending favorably. So that works positively for us, 5-year pricing today for CMHC mortgages would be around 3.7% and a 10-year review just over 4% come down considerably over the last 6 months.
And then, Paul, just going back to something you said to Jonathan's question, just on the targeted incentives or promotions you're offering, you said a few hundred dollars. That's in total and not monthly, correct?
Correct.
Your next question comes from Mario Saric with Scotiabank.
Just coming back to the promotion activity or the tactical incentives, can you comment on the percent of the portfolio that was offering those tactical incentives this quarter and how that compares to Q1? Are you seeing it accelerate, decelerate kind of remain stable?
So I would say, overall, it's probably decelerated slightly. The market that we're currently focused on is Toronto. Montreal, it was really select suites, but that's largely burned off Mario. So it's really Toronto that we're focused on. And as we've mentioned, those 1 bedroom suites that have just been a little sticky to lease out. So overall, a slight deceleration. And as we look forward to the remainder of the summer, July and August have come back to a typical leasing season from a demand standpoint. So looking positive.
So Paul, just on the back of that, are you able to share where the Toronto closing occupancy that was 95.1%, are you kind of roughly where it is today?
Let me just tack a file. I'm pretty sure it's like right in line. It's pretty close to where it ended in June.
And then I don't know if you provide this disclosure elsewhere. But in terms of the portfolio breakdown between 1-bedroom and 2-bedroom and other, can you give us a sense of what that looks like?
Sure. So I would say, right now, maybe just focusing on our vacancy by suite type. We would have our vacancy in Toronto, for example, 65% of that would be in our one-bedroom suite.
But in terms of the broader portfolio, do you have a sense on what the composition of the portfolio is between 3 times?
I don't have that handy, Mario. But we can get that. Yes, maybe we can follow up on that.
And then lastly, I noted in the call presentation on the outlook slide in the call presentation kind of a reference to continued balance sheet improvements in '24 was removed. We've talked about your target out the GBV on the call. Is that removal simply a function of expected up financing on the auto assets this year? Or is there something else to that?
No. I mean, there is nothing much to it. I mean we're going to have these up financings in front of us, which we'll focus on, but it wasn't meant to indicate anything else really. I forgot we removed it to one. I didn't even realize we got. So there was nothing purposeful about that.
Maybe given Eddie's comment on where 5-year debt and 10-year debt is today are transactions in Vancouver for new construct? Are they generally accretive like our cap rates above or below where financing costs are today?
Yes. I mean, I think you and I have spoken much about kind of that spread. So depending on if you use 5 or 10 years, I think there does seem to be positive leverage. Don't take that as a teaser that we're going to do the deal necessarily. We still have time, I think time is our friend. But I think we've said cap rates, new construction cap rates according to CBRE in Vancouver are in the 4% to 4.5% range, and there have been numerous costs recently in Vancouver Metro for sub 4% or around 4%. And as Eddie said, the financing rates on the 5-year are below that and the financing rates for the 10-year are kind of right in that range. So the math has gone better, I guess, if that's your question on both the long end and the short end of the curve. But we're going to stay disciplined and evaluate all the inputs, and we have time as the purchase option doesn't expire until the end of November.
Your next question comes from Matt Kornack with National Bank.
Just with regards to the delivery of condos and the cadence of that, we've heard, I guess, on some of the purpose-built rental stuff around 39 Niagara. I think RioCan is now at 75% leased on that project. Can you give us a sense as to kind of the length? And obviously, there's a vacuum in condo deliveries behind this delivery, nobody's starting construction. So how should we think of kind of the market normalizing over a period of time and getting back to stable occupancy levels?
So I completely agree with what you described, Matt. So latest fourth quarter total for completions is about 28,000 suites as of Q2. We know that in the back half of 2024, that number is coming down slightly. So it's coming down to about 10,000, a 38% decline from the first half of this year, which was 60,000 completely agree with your comments around the lack of presales. I mean, it's everywhere now. And just an article weekly, I think, talking about projects getting shelves so that will certainly create a way of deliveries in the 3- to 5-year period from what we're seeing, specifically around Niagara, we've got the same facts as you, on the well-being at about 25% availability. They anticipate stabilizing that property by the end of the year.
I think the other just on the purpose-built rental, new construction side, the former city of Toronto is seeing less proposed projects. So it's moving outside of the core, which I think will certainly help the 39 Niagara property longer term. So overall, I think as that condo market kind of stabilizes to some degree with those new deliveries starting to slow. We know that absorption is still in the core and 2 purpose-built rentals become stabilized. We're certainly optimistic on the future of the core and demand in that market. We know that we are still in a housing crisis broadly and Toronto is a very appealing market that's attractive for residents and newcomers to Canada. But the new supply will be with us for a little while longer.
And then I guess turning to renewal spreads because obviously, you guys provide the new leasing spreads on turnover. Can you give us a sense how those have trended because presumably outside of Ontario, but you have got some non-rent-controlled properties in Ontario, but elsewhere, it seems like you're getting better kind of new leasing sorry, renewal leasing spreads, but any color you can provide there would be helpful.
Sure, Matt. So it's fairly consistent with the story that John has described around the mid-3s on renewals. We have in Ontario, a very active AEI program for investors in our properties, and we obviously increased rents were possible through the AGI program. So overall, rent control non-round control, that puts us in, in the midst on average.
And I know it's shrunk in, but we never get the modeling right on your furnished suite portfolio. And so 2 things: a, can you give us a sense as to whether the summer has seen kind of normal seasonal take-up on those furnished suites, particularly in Yorkville? And then what does it look like as you convert one of the Yorkville furnished suites to an unfurnished suite from a kind of apples-to-apples taking into account the vacancy versus the rent differential going forward.
Yes. So I guess a couple of points on the French suite business. So demand at Yorkville has not snapped back in the second half as we had anticipated. We're also seeing a bit of a slowdown in the transient business year-over-year. I think both of those demand drivers do have some relationship with interest rates. In years past, we've seen folks renovating homes and staying with us at Minto Yorkville for 3 to 6 months. We're not seeing that as much anymore.
Film business, I think it's slowed down in Toronto, and we know that other cities across Canada are getting very competitive chasing that business. So to your point, Matt, I think being more conservative on the fridge suite business going forward. We are, as Eddie described in the opening remarks, looking at converting some furnished suites to unfurnished. It's a pretty straightforward process. Just the furnished not sub-metered. So we have to go in and put a sub-meter in, but it's white block work now for the team. So we're working through those conversions now to really optimize demand for the remaining furnished suites at Yorkville for the remainder of this year and into early next.
So if I just simply, I appreciate that color. That's very helpful. Like I guess we should assume that occupancy kind of stays around where it is, rate hasn't been the issue rates been moving up relatively nicely. But is that a fair assumption on the occupancy side?
Yes.
Your next question comes from Khing Shan with RBC Capital Markets.
So just a follow-up on the one condo deliveries. Do you think we've hit the peak delivery in Q2? And do you have visibility on what the deliveries are in 2025?
Khing, so we have visibility on future years. So there's a lot of shovels in the cloud right now. We track turbination pretty closely on deliveries. They're anticipating in 2025, about 15,000 units coming online in Toronto proper. That number starts to wane in 2026, going down to 11,000 units. And then 2027, 2028, I think, is more of a jump ball depending on presales and whether projects continue to some extent. But we will see the supply continue for a few quarters yet.
So it comes down quite dramatically in '25 then because this year is going to end around 6 pop-off.
Sorry, Khing, I was just focused on Toronto. The 26,000 number actually references the Greater Toronto and Hamilton area.
What will be the comparable number for Toronto then?
16,000.
When the condo owners who are trying to minimize their negative cash flows, are you seeing them drop their rent significantly? Or is this just a case right now that we're seeing just a lot more rental listings?
Yes, not significantly. I mean just speaking to some of the condo competition around our 39 Niagara property. They look to the purpose-built rentals as a comp and really a contributor for where they set their pricing. So not significantly, but probably that discount of about 5% from what we've seen in some of the condo competition that we face directly.
Just last one for me, just on the transaction activity. Can you provide some color on some of the transactions that are in the works that you may have alluded to? Are we looking at large portfolio deals or one-offs? And any color there would be helpful.
I mean, I would say, I can't provide specific color. I mean, we have it. But there are a number of both single property as well as smaller portfolios on the market across the country. Obviously, we're focused more on the urban areas and kind of what's happening there. But you're seeing it in some of our peers buying new construction assets. There are a number of both new construction and kind of your traditional 50-year-old building potentially with density as well for sale. But as we're seeing the financing market from up, we're seeing that buyer pool expand a little bit.
You're seeing more activity from folks who Canadian pension funds that have been underweight multi- year end but on the sidelines, you're seeing them come back. We're seeing a little bit more international interest in investing money and parking it in a safe jurisdiction like Canada. As I said, we're seeing the REITs become a bit more active. And so I'd say green shoots, it's all looking more positive. And I think the encouraging thing, as I said earlier, is the cap rates and the values that are being batted around are quite supportive of private market valuation.
[Operator Instructions]. Your next question comes from Bradley Sturges with Raymond James.
Just following on to Jimmy's question there on the transaction market. In your opening comments, you also did allude to that you're starting to see some more inbound unsolicited interest in some of your assets. I just wanted to know or wondered if you could expand on sort of where the demand is either by an asset type or market at this point in terms of the inbound interest?
Yes. Look, as you know, we don't have a ton of assets, less than 30, and they're all very attractive. And so I think if a buyer could get any one of these, I think they would. And so there is interest across the portfolio. But like I said, there's always interesting for high-quality assets and it doesn't mean we're going to execute on all of them, but definitely assessing options to make sure that if we do decide to grow, we're properly capitalized. And I think all options are on the table for us.
My other question is just looking at your CDLs outstanding today, you've got one in Victoria as well, which has got a lot more lead time than the Vancouver options at this point. But I'm just curious, in terms of your strategic thinking, where would Victoria rank in terms of expansion of the market potentially on the radar for the REIT at this point?
Yes. I mean, look, we think Victoria is a very attractive market. We wouldn't have lent money to the private company if we didn't think that were the case. So I think our incremental dollar in terms of a potential acquisition will likely go to or just expansion even on balance sheet. It's kind of GTA and West Coast. And I think West Coast is encompassing both Vancouver and Victoria. We're not going to say never to other jurisdictions, but I think those would be the 2 that are higher on the radar or closer to the bull's eye on the radar.
There are no further questions at this time. I will now turn the call over to Jonathan for closing remarks.
Thank you, and thanks, everyone, for your time. We hope you enjoy the rest of the summer, and we'll speak to you all soon. Take care.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.