RioCan Real Estate Investment Trust (OTCPK:RIOCF) Q3 2022 Results Conference Call November 4, 2022 10:00 AM ET
Company Participants
Jennifer Suess – SVP, General Counsel and Corporate Secretary
Jonathan Gitlin – President and CEO
Dennis Blasutti – CFO
John Ballantyne – Chief Operating Officer
Andrew Duncan – CIO
Conference Call Participants
Mark Rothschild – Canaccord Genuity
Mario Saric – Scotiabank
Sam Damiani – TD Securities
Jenny Ma – BMO Capital Markers
Tal Woolley – National Bank Financial
Pammi Bir – RBC Capital Markets
Dean Wilkinson – CIBC
Operator
Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Third Quarter 2022 Conference Call and Webcast. As a reminder, this conference call is being recorded.
I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel and Corporate Secretary. Mr. Suess, you may begin.
Jennifer Suess
Thank you and good morning everyone. I am Jennifer Suess, Senior Vice President, General Counsel and Corporate Secretary of RioCan.
Before we begin, I would like to draw your attention to the presentation materials that we will refer to in today’s call, which were posted together with the MD&A and financials on RioCan’s website yesterday evening.
Before turning the call over, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.
In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flows, and profitability. RioCan’s management uses these measures to aid in assessing the Trust’s underlying core performance and provides these additional measures so that investors may do the same.
Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements for the period ended September 30, 2022, and management’s discussion and analysis related thereto as applicable, together with RioCan’s most recent annual information form that are all available on our website and at www.sedar.com.
I’ll now turn the call over to our CEO, Jonathan Gitlin.
Jonathan Gitlin
Thanks so much Jen, and thank you to everyone for taking the time to join us today. And as usual, I’m here today with my great colleagues on the senior management team, together with the entire 600 person RioCan team, we delivered strong results through the third quarter. The strength of our quarter reflects our acute focus on the pillars that support our five year plan, reimagine retail, customer centrism, intelligent diversification and responsible growth.
Our results validate that our portfolio and team continue to thrive. The power of this combination and the strength of our balance sheet, our competitive advantages that will provide the resiliency to perform through all economic cycles. The RioCan’s team is mindful that we’re operating in an environment of volatility and we continue to seek to mitigate risks. I’m going to address this in a moment, but first let me get to our results.
Operationally, this was another successful quarter for RioCan. Our major market necessity based portfolio demonstrated its quality and its growth potential. Occupancy itself is 97.3%, bolstered by our retail occupancy, which ended the quarter at 97.8%. FFO per unit is $0.44 leasing results, which I would say are the purest indicator of the overall health of a commercial portfolio, well they’re strong. We completed 1.4 million square feet of new and renewal leases, providing an opportunity to mark our rents to market. This opportunity has resulted in new and blended leasing spreads of 15.9% and 7.9%, respectively.
Rent per square foot is $20.80, representing seven consecutive quarters of increases. Same Property NOI grew by 5.1% and we’ve also continue to fortify our balance sheet. Our liquidity stands at $1.6 billion and our $9 billion unencumbered pool of assets provides additional financial capacity and flexibility, both of which are critical in uncertain times like these.
We’re proud to deliver results in line with and in certain respects, superior to pre-pandemic metrics. This is because, simply stated, our portfolio is better now than it’s ever been before. The quality of our income continues to be enhanced through the prudent disposition of lower growth assets. We are either firm or closed approximately $400 million in dispositions so far this year. In doing this, we’ve improved the profile of our portfolio and at the same time, raise capital that’s going to be used for accretive NCIB investments or to pay down debt. The quality of our revenue was further enhanced through our development program, which has established a cadence of consistent income generation.
Since 2020, we delivered a combined total of 1.4 million square feet of predominantly residential developments in Canada’s most coveted markets. With projects nearing completion, this number is on track to increase to 2.5 million square feet by the end of next year. This represents over 2,500 homes and communities that critically need to supply.
In 2022, the Trust expects the Value of Development Deliveries including properties under development and residential inventory to be between $700 million and $750 million, a largest annual volume since inception of our development program. Year-to-date, the value of Development Deliveries is $415 million. It’s important to note that fixed costs for our 2023 development projects, are already contracted, which provides a level of insulation from inflationary pressures and I’m going to speak more about this in a moment.
But first, I want to acknowledge the advancements we’ve made with our ESG program. Our ESG initiatives are a significant component of our commitment to responsible growth and enhancement of long-term value. Our standing as an ESG leader in the commercial real estate sector continues to improve. RioCan is proud to lead the way in integrating ESG best practices in everything we do. We continue to progress and it’s an honor to be recognized for our ESG achievements.
We’ve been awarded Sector Leader status in the 2022 GRESB Real Estate Assessment. And we also received an A rating and top ranking amongst our Canadian peers for public disclosure. Our operational, developments and ESG efforts over the years yield results now and will continue to bolster RioCan’s success.
Let’s take a minute now to explore the current backdrop. As I’ve mentioned, the environment has numerous headwinds. Year-to-date, the Canadian economy has shown modest growth. However, there is now little doubt of a pending slowdown, due to interest rate hikes and elevated inflation. While the recessionary environment elevates the risk of tenant failure, RioCan’s defensive portfolio provides insulation with more than 86% of our net rent generated from strong and stable tenants. These businesses have stable rent paying ability, strong covenants and reliable foot traffic. They provide the day-to-day essentials consumers require in any economic climate. Of course, there’s going to be tenants who have experienced distress in this environment. However, the scarcity of quality retail space in areas that have strong demographic profiles further protects our operational health.
Let’s dive into the supply dynamic now, as this dynamics supports both operational growth and NAV stability. RioCan’s assets are located in Canada’s major markets, in densely populated areas with high average household incomes. Tenants performed well in these areas due to a high volume of daily foot traffic and also the facilitation of last kilometer delivery. The population in these neighborhoods is steadily increasing, which further drives demand, so there is little doubt that demand is increasing. However, from a retail perspective, these areas are also supply constrained and here’s why. Replacement costs for well-located retail are well in excess of market values. The implied value of our income producing properties at our current unit price is about $335 per square foot. The cost of constructing new retail in the GTA, for example, is in the range of the mid $600 per square foot.
These numbers illuminate two realities. One, there is a clear gap between valuations and replacement costs. And two, it is virtually impossible to buy land and construct new retail without a substantial increase in market rents. Very little high quality retail has been built in the past decade and it’s only feasible to build new retail on land that is already owned or as part of a high density mixed use development. Simply put, with replacement costs where they are, we’re quite certain that very little, if any, supply of new open air retail centers will be added to the already limited inventory. This means the quality retail space, the kind that RioCan offers is and will continue to be in short supply. There is no better indicator of the supply demand constraints that — than RioCan’s leasing results, which I’ve just highlighted. This point is further accentuated by our 91% retention rate, which indicates tenant’s positive view of the space and level of service that we at RioCan provide.
Retailers are keenly aware that our consumers are creatures of habit. Our tenants are reluctant to change locations and disrupt established shopping patterns. Moreover, the cost to move to a new space, if it is in fact available, has increased dramatically. These conditions results in what we like to call, sticky tenants that don’t wish to leave RioCan shopping centers, which, of course, is a favorable conditions for the Trust.
Now I can’t promise that every tenant will breeze through these headwinds. However, most of ours are constructed to withstand stormy weather. Now, I’m going to address concerns about rising interest rates. We’re acutely aware that a prolonged high interest rate environment will negatively impact our FFO. We’re adapting to the circumstances, pivoting to utilize our large unencumbered asset pool and refinancing with secured mortgages for the lowest cost of debt currently available. As we previously shared, we’ll benefit from our $500 million hedge of the underlying GLC bonds, which significantly drive down the cost of financing and Dennis is going to address this further.
Now we’re not going to have the benefit of those hedges on new financings in 2023, which, of course, will impact our FFO results. This FFO impact will be weighted more towards the end of the year in the second half. Even if rates continue to increase, the overall impact will be partially offset by numerous positive FFO drivers, including gains from the scheduled sale of condo units, increasing NOI from development deliveries and organic growth from our existing income producing portfolio.
Rising interest rates do pose a potential risk to our valuation. We’re operating in a distorted market that is shorter transactions. However, our valuations are supported by third-party appraisals and substantiated with available, albeit fluid market data points. It’s important to note that the impact of interest rates on capitalization rates is not the only factor that dictates property values. There are numerous factors supporting RioCan’s net asset value, including solid fundamentals and the favorable supply-demand dynamics that I mentioned earlier.
Canada’s relative stability, the strength of its growing major markets and the protective attributes of hard assets in general will further enhance the value and demand for assets like ours. These factors are further complemented by the delivery of our highly valued mixed use developments. Now understandably, we are asked with increasing frequency about the impact of record inflation on our development growth engine.
Now as I mentioned, our five year development targets have a level of downside protection with fixed pricing in place for projects that are already underway. RioCan also has a competitive advantage in our ability to be highly agile when it comes to new project starts. Our future development sites are typically active retail sites that generate high quality income. RioCan will adjust the timing of new projects according to the market environment. If the economics are unfavorable, we can afford to postpone breaking ground on new projects and still benefit from the in-place income. We’ve responsibly slowed the commencement of new development starts and we’ll continue that exercise a high degree of discretion as we always do, a high degree of scrutiny and judgment in assessing whether costs and revenue conditions are suitable before proceeding with new development.
Now I’m not downplaying the obvious volatility in the macro level environment, but we face these conditions confident, but we have strategically and responsibly managed every aspect of our business over which we have control. Our efforts over the years has set RioCan up for success and our focus remains on the long term. We remain confident in our growth trajectory and the ongoing demand for our scarce and high-quality real estate. The objectives in our five year plan were established with purpose and the conviction that in concert with RioCan’s many differentiating attributes they are achievable in almost any environment.
Underpinned by our strategic pillars, we will continue to leverage opportunities and manage risk to mitigate the impacts of macro conditions. And at the same time, we’re going to grow responsibly and sustainably. We will continue to support this growth by investing in talent and structuring our team to maximize the alignment with our objectives.
With that, I’m delighted to turn the call to Dennis, who is going to take you through our balance sheet and provide insights into how it continues to support the quality — support our quality and growth. Dennis, over to you.
Dennis Blasutti
Thank you, Jonathan. Good morning to everyone on the call. From an operating and financial results perspective, our business continues to perform well against the backdrop of macroeconomic volatility. We believe that the current macro volatility will pass as it always does, while the supply and demand trends that Jonathan mentioned will endure and provide long-term tailwinds for our business. Because we take a long-term view on our business, we have not changed our strategy that we announced at our Investor Day earlier this year. While we may make some tactical adjustments in this environment, we continue to execute on our strategy with a view to creating long-term value for unit holders.
When rolling out our strategy, we focused on the key themes of quality and growth. The quality of RioCan’s portfolio today based on any objective measure is better than it has ever been. The portfolio has evolved over the last number of years through a combination of asset sales and development deliveries. To date, 93% of the portfolio is in Canada’s major markets with the vast majority of assets being open air necessity based centers or urban transit oriented mixed use properties. This portfolio is set up to thrive in any environment.
RioCan’s current period growth and future growth prospects are also better than they have ever been. This is attributed to the portfolio quality providing higher same property NOI growth as well as our near-term development deliveries. Our projects under construction continue to advance with development deliveries between $700 million and $750 million this year and a similar amount next year. We expect the associated FFO to ramp up through ’23 and ’24.
While we always take a disciplined approach to green lighting construction starts, we are being more measured in the current environment. At the same time, our team continues to proactively advance our 16.7 million square feet of zone density to shovel ready status, so that we will be positioned to drive growth and value creation for many years to come.
I must highlight that our development program is fully funded. Our conservative FFO payout ratio of 57% for the quarter is well within our target range of 55% to 65% and allows us to retain capital to fund growth. In addition, we expect to receive over $800 million in proceeds from currently under construction condo projects over the next four years. With these cash flows, combined with project level construction financing, we have no requirements to sell assets or issue equity to fund our development program.
As Jonathan mentioned, our results for the quarter are very strong. We are reaffirming our FFO per unit guidance of $1.68 to $1.71 per unit and expect to finish the year towards the higher end of that range. Our guidance is supported by strong same property NOI growth of 5% year-to-date or 3% adjusted for the impact of the provision and other items, as well as 1.2% growth from development deliveries. The contribution from development deliveries is noteworthy and it highlights the near term nature of our pipeline and as part of our five year targets are expected to provide 2% to 4% of our NOI growth in future years. With respect to our development spending guidance of $425 million to $435 million, we expect to be at the low end of that range due to timing of expenditures that will be shifted slightly into early 2023.
Regarding our five year plan, which includes the years from 2022 to 2026, we continue to standby the metrics that we laid out at our Investor Day, given the strength of our business fundamentals. At the same time, we acknowledge that there is greater risk to those metrics over the next year or two, given the higher interest rate environment and warnings of an impending recession. We will provide formal 2023 guidance next quarter with our Q4 results.
Our net income for the quarter was $3.2 million compared to $137.6 million in the prior year quarter. This decrease was mainly due to a fair value loss on investment properties of $118.8 million, driven by higher weighted average cap rate, partially offset by higher NOI, which brings us to valuations. While transactional evidence is sparse, we continue to take a conservative approach to our balance sheet values. Year-to-date we have reversed fair value gains that we took in 2021 with cap rate increases focused on the lower end of the quality spectrum of our portfolio.
At this point, our cumulative write-downs of over $500 million are in line with where we were at the depths of the pandemic. Our weighted average cap rate at the end of the quarter was 5.37%, expanding 4 basis points and 8 basis points versus the last quarter and year-end 2021, respectively. The impact of higher cap rate assumptions in our models was partially offset by the sale of higher cap rate assets as part of our strategy to continuously improve the portfolio quality.
One way to highlight the impact of this improved portfolio is to look back at our portfolio in Q3 of 2018. At that time, our weighted average cap rate was 5.51%, while our percentage of major market assets was only 84% of our annualized rent. Today, our major market assets stand at 93% and we have completed nine residential rental buildings throughout our development program. When we compare this to our weighted average cap rate today of 5.37%, it would appear on the surface that we have simply tightened cap rate assumptions. However, our cap rate reduction over these years was the result of portfolio enhancement through a combination of asset dispositions and development deliveries. Holding our 2018 portfolio constant, our cap rate today would be 5.75%, 38 basis points higher than our reported cap rate.
We continue to see real-time transactional evidence within our portfolio, given that we have [indiscernible] are under contract to sell $394.4 million of assets this year. These sales are at values that aligned to our IFRS values on average. A good example of trades we are seeing in our Abbotsford Power Centre, APC, an asset that went from this quarter. This Lowe’s anchored center with our near term development potential that will be sold at a cap rate of 5.02% to a private buyer. This is just one transaction, but it highlights the value that is being ascribed to quality assets by buyers who are taking a long-term view.
[indiscernible] also underscores a significant area of focus these days, which is the gap between private and public market values. Let me provide you our views on the private market side of the equation. In private transactions that we underwrite or see through our negotiations, cap rates are an output of the valuation model, not an input. As buyers typically utilize an IRR model that incorporates long term views on cash flows, often 10 years or more. In these capital models, interest expense is one line item, which is certainly under pressure today. But revenue is the largest line item. Consequently, growth in revenues driven by fundamentals can have a very significant impact on value.
With a value determined through an IRR model, buyers can then calculate a cap rate as the check against comparable assets or portfolios of assets, which is a segue to discuss RioCan value at a unit price level. Given the current macro uncertainty, investors have turned their attention to implied cap rates compared to historic spread versus the benchmark, such as the 10 year Canadian [indiscernible]. While these spreads provide a useful tool for comparison, they do not provide a full picture of RioCan today. This comes back to quality and growth.
As noted, RioCan has evolved over time, the quality of our portfolio, the growth we have delivered and our future growth trajectory are the best they have ever been. All else being equal, improvements in quality and growth should result in tighter spreads going forward.
I’ll conclude my remarks with some comments on our balance sheet strength and flexibility. As mentioned, we have $1.6 billion of available liquidity at the end of the quarter. We continue to prioritize this strong liquidity position, even more so during these uncertain times. Our debt to EBITDA for the quarter was 9.3 times, a further decrease compared to the last quarter. As we report debt to EBITDA on a trailing four quarter basis, we expect this not just to increase slightly in the fourth quarter as the large number of condo gains from Q4 2021 are rolling out of the calculation. We expect this metric to improve in 2023 as EBITDA for development continues to ramp up over the course of that year.
In October, we repaid our $300 million Series Y debentures upon maturity. These were refinanced using $296 million of seven year secured mortgages with an all-in rate of 3.67%, including the benefit of $250 million of GLC hedges. For the balance of 2022, we have minimal financing activities remaining. Looking ahead, we are working to finalize CMHC financing for two of our recently stabilized residential rental properties and are currently planning for 2023 financing activities.
Finally, as at quarter end our mortgage and loan receivables totaled $243 million. While, our mortgage and loan portfolio balances remained relatively stable in 2022, the weighted average interest rate on our loan book has increased to 8.09% from 5.74% as at year end 2021. The increase in related interest income has served as a partial hedge, offsetting higher interest costs on our debt.
With that I will conclude my remarks and pass to the operator for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Mark Rothschild from Canaccord. Mark, please go ahead.
Mark Rothschild
Thanks and good morning, everyone. Maybe starting with the same property guidance. I assume that it includes the pandemic related items and maybe, you could just talk about how that relates to the Q4 number, which — it appears to me to be material slowed down from what you’ve done early in the year. So is that just being conservative or is there something maybe I’m missing?
Dennis Blasutti
No, I think it’s just more of the way we presented it. So in our scorecard in the front of our MD&A, we talked about 3% to 4% same property NOI. And we gave ourselves the green circle for that. That green circle means, it’s on track and in fact should be slightly higher than that including the — it will be higher than the range including the provision change.
Mark Rothschild
Okay, great. And then just on that looking into 2023, the leasing spreads seem to be pretty consistent within the range. So would it be fair to assume that comparable internal growth is likely in the next year as well?
Dennis Blasutti
Yes, I think that’s what we’re seeing from a same property NOI perspective, at least today. We do see things performing quite well and expect to remain in that longer-term target range that we’ve looked out. So we’re not seeing any changes on the ground today and leases remain strong, demand remains strong.
Mark as you know, we did give some cautionary language given this environment, it’s a difficult time to do a budget right now given the range of potential outcomes with the session, et cetera. But at this point, everything remains strong on the ground and our portfolio is set up to perform.
Mark Rothschild
Okay, great. And then just on development, and this relates to your comment on IRRs and how the rents have moved as well, not just interest expense and cost, but how have returns on development projects moved with inflationary pressures and rising interest expense, factoring in that you can probably get better rent than maybe a year ago as well?
Jonathan Gitlin
Yes. Mark, it’s Jonathan. The returns have generally stayed fairly stable in that as much as costs have gone up over the years and this isn’t just a sort of post COVID inflationary phenomenon, the costs have been going up fairly significantly in construction, particularly in the GTA now for a number of years. Thankfully, revenues have been going up in reasonable loss step. So I’d say that the output and the going in yield has stayed fairly consistent throughout the course of the last few years.
What obviously we look at as we stated is not necessarily just a going in yield, but rather an IRR output. And with the — I think, the improving outlook for multi res as well as commercial properties that we’re building, even though interest rates have gone up, there are other factors that will still allow us to surpass some of the hurdles that we’ve said internally. But of course, it becomes a little more difficult with interest rates being where they are.
Dennis Blasutti
The only thing I would add there Mark is that, just based on where we are in our development cycle, as Jonathan mentioned earlier, we’re — our current projects, costs are locked in and we’re moving forward there. Our next wave of major projects really kicks in and starts off in earnest in the second half of 2023 or at least that’s how we laid it out in our Investor Day. But as we mentioned, we have the ability to hold off on those projects and assess whether the market rents have continued to move in a direction required to offset the rising other costs, whether it be interest expense or capital. So we continue to advance the ball, get those to shovel ready. At some point in the middle of 2023, we’ll have a decision to make on some of our, call it, next wave of large projects.
Jonathan Gitlin
None of which really impact our five year plan.
Dennis Blasutti
None of which impacted our five year plan. And we have holding income. This is not — as we said many times, this is not land that we’ve bought that we have a drag of costs. We have productive retail centers on those sites. So if we have to take the disciplined approach to wait, we have the ability to do so.
Mark Rothschild
Okay, great. Thanks so much guys.
Jonathan Gitlin
Thanks Mark.
Operator
Thank you. Our next question comes from Mario Saric from Scotiabank. Mario, please go ahead.
Mario Saric
Hi, good morning. I wanted to start on the operational side. The 50 basis point quarter over quarter increase in occupancy was pretty impressive. Can you provide any color on specific tenants or really kind of tenant categories that’s driving that expansion?
Jonathan Gitlin
I can start and then hand it over to John Ballantyne to provide any further commentary. But I think it really is just a continuation of the growth of those strong and stable tenants. We’re seeing it from various different elements within our tenant base that already exists within our tenant base. We’re certainly seeing growth in grocery, pharma and discounts, including the TJX banners, Dollarama, etcetera. And then we’re also seeing in this kind of environment a, I would say, a significant return to service providers, whether they are nail salons, hair salons or medical uses, they are definitely net growers of space and certainly looking to occupy more and more of our existing space.
John, any further color to add?
John Ballantyne
Yes, the only thing I’d add, when you spoke to in your comments earlier Jonathan is, there is an apparent lack of supply right now in the market. We had the Toronto [ICSC] (ph) almost a month ago and really the theme from the retailers was they are — many are looking to expand store counts. There’s not a ton of space, I would say, both on the box side, the 20,000 square foot to 35,000 square foot size, but also on the smaller space, the 1,500 square foot to 2,000 square foot units. There is a real hunger for these and there’s not a lot of new supply out there. So as far as actual categories, I think Jonathan spoke to the model, essential personal services, I think is where we saw a real bump over the quarter and once can we continue to do deals.
Mario Saric
Got it. Okay. And then just in terms of disclosure methodology, can you just remind us of the 16% new lease spread? So with the tenants that comprise the 50 basis point uptick in in-place occupancy, with the rent that they’re paying in relation to where it was before, would that be included in 16%? Can you just maybe kind of clarify that for us.
Dennis Blasutti
Yes. No, it’s part of it.
Mario Saric
Okay. And then maybe shifting gears to the well. In your opinion, how important do you think it is for the physical occupancy within the office component? The physical office occupancy reaching leased office occupancy, how important do you think that is in terms of completing the retail lease up?
Jonathan Gitlin
I think the well represents a beacon of downtown West. It’s going to be drawing from so many different components of City of Toronto, as well as from tourists visitors to Toronto. Of course, the built in occupants and either the office or residential components are going to add to the list of visitors there, but certainly there’s not a significant amount of reliance on those occupants. And so, we really do believe that given its scale, given its dynamic setup and given the lack of other offerings in the downtown West corridor. And just given how great this asset is coming together that we will be drawing from far and wide, not just the constituents within the eight acres that constitute the well.
Mario Saric
Okay. And then just sticking to the well in terms of IFRS values. I’m not going to ask for specific numbers, but what would you say is the percentage of the total expected NAV accretion from the development that you’ve already booked into your IFRS evaluation today?
Jonathan Gitlin
It’s a tougher question right now and it probably was six months ago. We can’t get a pretty cautious approach there. We have not increase the value other than capital spend since year end. I would say, at last year end — by the year end, I mean, year-end 2021. We did have some buffer in the discount rate and some risk buffer in there that I would have been expected to unwind this year. At this point, we felt the value as is. It’s too — it’s very difficult to prognosticate how that kind of plays out over the next coming months, Mario, to be honest in this environment.
Mario Saric
Okay. And then my last one for Dennis. Assuming the assets under contract closed, how would you rank reallocation priorities taken into consideration the current unit price, the balance sheet and your kind of six month development needs?
Dennis Blasutti
So the way we thought about it is we have — we do have development obligations that we have to meet. And we do have targets with respect to the balance sheet. So we prioritize those. We think those are highly important for our long term objectives. Where we have utilized our NCIB program to buy back stock has been when we’ve had outperformance from an asset sale perspective. You saw us do that in Q4 last year and Q2 this year. So the incremental dollar that’s coming in from asset sales today, the highs [indiscernible] appears to be to buyback our stock at that lease price.
Jonathan Gitlin
But just to reiterate, that’s only if we outperform on the asset sales, otherwise, again, it is a combination of fulfilling our obligations and our development pipeline, which as we’ve stated before, are largely taken care of through retained earnings and project level financing, but then, of course, paying down debt is another priority that we’re very much focused on. But if there is incremental like sort of bonus over and above our business plan from sales, then yes, it’s hard to ignore the accretive nature of the NCIB program.
Mario Saric
Got it. And the definition of our performance on asset sales that is dollar volume in terms of total asset sales or the valuations achieved on those assets?
Jonathan Gitlin
Dollar value. Yes, it’s really its dollar value. I mean, we had in our business plan the sale of — I mean, I’m not going to give you precise numbers, but it seems that if we end up — what I can say is that, if we end up closing on all of the assets that are transactions where there are contracts in place firmer or still conditional, we will outperform on that dollar value.
Mario Saric
Perfect. Thanks guys.
Jonathan Gitlin
Thanks Mario. Have a good day.
Operator
Thank you. Our next question comes from Sam Damiani from TD Securities. Sam, please go ahead.
Sam Damiani
Thank you. Good morning, everyone. Just to clarify one of the questions from about maybe five, 10 minutes ago. You have some projects teed up to potentially commence next year, late next year, but if they were pushed back or postponed or delayed or whatever, you said it wouldn’t impact your five year plan. Is that because those were long term projects that were never going to get completed before 2026? Or was there some other reason why those delays wouldn’t impact the five year plan?
Jonathan Gitlin
Sam, even with the enhancements of the sort of zoning regime that were just introduced in the last couple of weeks, Sam, building anything of substance in the communities where we build is taking somewhere between four — three to five years. So largely outside of the scope of that five year plan that had set out in our Investor Day. So that’s exactly the right answer.
Sam Damiani
Okay. And just a point of clarification, Dan, I just want to make sure I didn’t misinterpret what you might have said. 2023, I know guidance is coming out for in February, but did you say that FFO would increase because of what you know so far? Or was your commentary just more that things underway would help increase FFO in 2023?
Dennis Blasutti
Well, what I would say, I won’t go so far to provide any guidance, but we do have development deliveries that will ramp up over the course of this year and next. So that will contribute to increased FFO. And we do have ongoing — even if we just take today’s leasing spreads are tomorrow’s NOI. So looking at what we have in place today and a pretty conservative view on that roll forward would also increase FFO, but we have to acknowledge that there are headwinds, headwinds being interest expense and headwinds being a recession, which Jonathan alluded to. There are always — there could be some tenants that have issues in that period of time. So we have to be a bit cautious, but we have — certainly in terms of our building blocks of growth, same property NOI growth and development deliveries, those remain intact.
Sam Damiani
Okay. That’s great. And just on the $800 million — in excess of $800 million figure that you mentioned would come back in four years’ time from condo projects. Is that net of the remaining cost to complete on those projects? Is that a net benefit to the balance sheet based on today’s invested capital?
Dennis Blasutti
It’s a gross number. Yes. So if we think about — we talked about spending $400 million to $500 million a year on development inside over the coming years, assuming that all projects proceed as we laid out in Investor Day, which again is a bit [indiscernible] determining right now. We would spend that money, but we would also have $800 million coming back over that period of time as well. And so when we think about how we lay out our financing plan for the development program, we have $150 million in growing per year and retained cash flow given our distribution policy. Gross that up for product level financing puts us at about $400 million and then we require, say, about $100 million of incremental capital from asset sales or condo proceeds over the course of that period of time as well.
So what we’re messaging is, given the size of the condo proceeds coming back to us, we don’t need to sell assets unless we feel that valuations are attractive and there’s other use for that capital. But just to fund our development program, we’re fully funded on this basis.
Sam Damiani
Okay, understood. Thank you and I’ll turn it back. Thank you.
Jonathan Gitlin
Thanks, Sam.
Operator
Thank you. Our next question comes from Jenny Ma from BMO Capital Markets. Jenny, please go ahead.
Jenny Ma
Thanks and good morning. I wanted to ask about the de-capitalization of interest coming off your near term development projects. And how to think about the capitalized interest cadence for the next couple of years as the well comes online netted against any incremental developments you have? Like for the well in particular, is that more of a phase sort of building by building approach? So directionally and maybe perhaps percentage wise, maybe give us some guidance on how the de-capitalization interest flows through the next couple of years?
Jonathan Gitlin
Yes. Jenny, so I’ll start with just a bit of the methodology for the well, because you’re right, it is a phased approach. What some of our smaller development projects may bring project online and kind of one time from PUD to IPP. In this case, we are phasing it and in the office side, we’re actually phasing it tenant by tenant as they have rent commencement. We’ll transfer the particular block of floors on the residential side and we will be basically one-three given the size of that building and then the retail will come on at phases as well, although the phasing there is pretty tight [indiscernible]. So that’s how — that’s from a methodology perspective. So it is phase. So the de-capitalization is spread over the course of 2023.
So when we look at 2023 on an overall basis given our spending profile and that phased sort of transfer, capitalized interest should be relatively flat to 2022. 2024, I’m going to defer the answer to that question a little bit and I apologize that we’re in the midst of our business planning right now. And the impact or the — the impact of that will come back to how much do we actually spend on development in 2024 with those projects that we’d be looking to launch in kind of mid to late 2023 depending on the timing of those launches that would impact the 2024 capital expenditure. So that would also impact this time.
With that said, if we’re not spending in those capital developments, we’ll have more capital to pay down debt and we’ll be kicking on less construction [indiscernible] bit of a natural offset there as well.
Jenny Ma
So for 2024, I mean even if you do spend the full amount on development that you expect to, I think with the well continuing to stabilize. Net-net probably capitalized interest is still a net decline in 2024 versus 2023. Is that fair to say?
Jonathan Gitlin
Yes, I think that’s fair.
Dennis Blasutti
Yes. And with the offset being obviously the NOI, so those projects will be delivering in full board at that point as well.
Jenny Ma
Of course. Okay. When you’re looking at your let’s say medium term development pipeline, I’m just wondering — you talked about a lot of your current costs being fixed. But when you’re talking about contracting or potentially starting new projects, are contractors willing to give you a fixed price contract these days or are they hedging themselves more? Are they even willing to put a number down on paper? What are you seeing when you’re thinking about some of your near term projects that haven’t started yet?
Jonathan Gitlin
So I’m going to hand that one over to Andrew Duncan, Jenny, who’s closer to that than all of us.
Andrew Duncan
Hi, Jenny, thanks for your question. Yes. Short answer is yes. As you’re undertaking a project prior to you starting it, whether it’s predicated on asset or condo sales or leases in place on the retail side, prior to putting a shovel on the ground, typically the goal is to get at least 70% of your cost on the hard cost side contracted and that will include all your trades you’re dealing with. These trades are used to that requirement, there are some supply only trades that might provide escalators in for materials costs, but that’s a small portion of the contract. And as you move through the project, you’ll contract that last 30% over the next year or two of the project. But again, those items are less subject to inflation and a more commodity based item.
So typically, we want to see at least 60% to 70% cost certainty on a hard cost total prior to proceeding with the projects and those heavy negotiations start before you put a shovel on the ground, because obviously that’s where we have the most leverage.
Jenny Ma
Okay. So you’re saying that the contractors are still willing to put numbers down in favor for you? Are they coming in within range of what you’re expecting?
Andrew Duncan
Listen, that’s an ongoing debate back and forth in terms of where escalation lies and what the market is. It’s a very fluid market right now in terms of construction costs. There’s a combination of a couple of factors. The layer trades like the drywall guys and the mechanical electrical guys, the folks that are all the way through the project, those individuals might still be very busy, whereas we’re seeing the front end trades like the demo contractors and the excavation contractors and some of the farm workers are starting to get their book not as busy over the next couple of years. So we’re seeing a little more flexibility in that pricing.
But again, our fingers on the pulse in terms of what’s going on in the market and we’re very cognizant of what those trades are doing, but Jenny, to your point, absolutely prior to starting jobs, some trade contractors have to provide fixed prices and are doing so.
Jenny Ma
Okay, great. So moving on to valuation, the cap rate nudged up a little bit. I apologize, if I missed this, but did you disclose the range of what the cap rate adjustments for the assets that were adjusted was? Could you provide that information?
Dennis Blasutti
We did not, Jenny. We did focused our write-downs in the secondary market and in closed mall kind of end of the spectrum, as we have been over the last while and so that’s what we’ve been pretty focused.
Jenny Ma
Okay. And then, maybe it’s a bit early for this, but when you think about potential tenants running into trouble sort of in that January post-holiday period. I know 2021 and ’22 have been a bit quieter on that front being that they were flushed out in 2020. But are you seeing on the ground now that might inform what we could expect for 2022 or what’s the house view on that?
Jonathan Gitlin
I mean, right now this is a problem everyone expects me to say. Absolutely, we’re seeing some cracks. But right now, to be honest with you across the portfolio, we are not seeing any — I mean, there’s obviously going to be — we’ve got 6,000 or somewhere around 6,000 tenancies and not all of them are going to be exceptionally successful at this point. But we’re certainly on balance, seeing strength in the vast majority of sectors that we have in our shopping environments. Oliver, do you see any change or any reason to dispute that conclusion. No. Okay. They are from the expert himself.
Dennis Blasutti
So, yes, Jenny and look, it’s a weird time in which we’re going into. And so it’s hard to predict. But right now on the ground, and as John Ballantyne that alluded to earlier, certainly is the indication from ICSC, which is, I would say, the largest leasing conference that we attend. All signs point to growth and or stability, but of course there’s always going to be some small shops that will feel the pain of drawn in spending.
But also keeping in mind, like demographic profiles of RioCan shopping centers in this environment is high. I mean, it’s higher than it’s ever been, both in population in a five kilometer radius, as well as household income. And so, even if some service providers and some small restaurants are going to feel the pain of the constraints of a recessionary environment. I think the ones in RioCan shopping centers by and large are going to have a bit of a protection against them, because the demographics are generally quite high in the constituents to chop there.
Jenny Ma
Okay. I’m just wondering specifically, are cannabis retailers something that you worry about. Maybe remind us, roughly how many stores you have in your network.
Jonathan Gitlin
There are cannabis retailers. They were concern for us for sure. I mean, we knew that the market was — let’s call it oversold, when it was introduced in Ontario and other parts of Canada earlier this decade. And we sort of protected ourselves in two regards. One, we got significant security deposits and we also didn’t put in any capital into the stores, we’ve made the tenants pay for their store fit-up. And two, by and large we dealt with sort of the National Cannabis providers or the larger Cannabis providers. There has been some fallout already from the store count that we had and I expect going into 2023 there will be probably some more.
We’ve all seen in neighborhoods that there’s a saturation of this use and I suspect that’s not sustainable. But in terms of RioCan’s overall balance sheet and tenant profile, it’s a rounding error. I would say, John anything to add to that.
John Ballantyne
No, I agree. It’s probably less than 75,000 square feet across our entire portfolio, very small shop space, which there’s demand for. So we’re not concerned about it, Jenny.
Jenny Ma
Okay, great. Thank you very much. I’ll turn it back.
Jonathan Gitlin
Thanks, Jenny.
Operator
Thank you. Our next question comes from Tal Woolley from National Bank Financial. Tal, please go ahead.
Tal Woolley
Hi, good morning, everybody.
Jonathan Gitlin
Hey, Tal.
Tal Woolley
Just wondering, if we could start with just your thoughts and comments on the Ontario housing plan rolled out last week?
Jonathan Gitlin
Well, I think it was a huge step in the right direction and I think I’m quite proud to say that it was a collaborative effort amongst industry and government. We participated quite substantially. I don’t know, Andrew and his — and the development team had a lot to add to their — within their conversations through various industry lobby organizations as well as direct conversations with the government. And I think the outcome is really favorable, because like it doesn’t take an absolute genius to determine if there is a supply crisis, particularly in markets like Toronto.
So I think, what they’re doing is giving developers the ability to build more and fairly quickly. And look, it’s been a frustrating process for RioCan as a willing and able provider of housing both affordable and market in the last five years to go through all the hoops and hurdles that we’ve gone through to get limited product in the ground. I can only imagine how difficult it is for groups that are less sophisticated and less well capitalized in RioCan.
And I think what the government has done is, a very good step in the right direction to enhance the ability to build. Andrew, I just said a mouthful. I don’t know if you have anything to add to that?
Andrew Duncan
No Jon, I think [indiscernible] said I wholeheartedly agree. I think I am very — I’ll be very complementary to the current venture government in terms of willingness to work with industry and accept feedback. A lot of the policies and there’s a lot of them in the new build ’23, come from direct discussions and consultations with the industry, which I’m very complementary of.
I think I’ll add that, what we’re doing as a result of this, is digging into the interpretation of the legislation that we’ve got all our municipal layers look at. And then having our development group relook at all our performance that we’re running continually to understand the impact of these changes. And also looking at some of the projects that are earlier in the development cycle, in terms of our entitlements on square footage and zoning to understand if it’s worth revisiting those and trying to maximize the amount of density we can achieve. So overall, agree with John’s comments, it’s a great step in the right direction and I’m hopeful there’s more to come.
Tal Woolley
Okay. And then just on the RioCan living platform, you’ve got 2,000 units constructed. I think three building has got stabilized this past quarter, it looks like the last two that are — and active [indiscernible] probably take maybe one or two more quarters to get there as well. What do you sort of see that — from this first 10 buildings like, what’s the run rate and resi-NOI that we should be expecting to see once you’re fully leased up?
Jonathan Gitlin
I mean, it’s a rolling pipeline, right. We got new additions kind of delivered over the next year. I mean, over the next five years, so the run rate is going to continue to change, because we’re going to continue to add products to it. So I don’t think, I have anything scientific — I mean, Dennis or John, do you have any better answers for Tal, I feel like I’m not giving him what he need.
Dennis Blasutti
Yes, I think existing development will ramp up into that mid to high ’30s. I’m actually looking at, Andrew is looking as well, a little bit as well and then we —
Jonathan Gitlin
$30 million.
Dennis Blasutti
$30 million. Yes, rental stabilized basis would be broadly comes in by end ’24. That would be kind of on our existing asset base and near-term developments ramping up. And then we did lay out the target of $55 million to $60 million by the end of our five year plan. Right. [Multiple Speakers]
Andrew Duncan
What I would add to that is, we also said on target acquiring $20 million of residential NOI. We’ve done one of those acquisitions and secured a both purchase attached to that acquisition and market level. We continue to underwrite opportunities in the market to continue to achieve that goal over the next three or four years.
Tal Woolley
Okay. And then just on debt strategy. What’s your thinking in terms of like, do you try and length in term in this market or do you maybe keep it shorter? Banking on the fact that maybe rates start to pull back. If we do sort of enter into some kind of downturn here, what’s the thinking around just longer term of the debt strategy?
Jonathan Gitlin
Well, it’s a balanced and always with one eye on our debt ladder. So, even if we — whether we like to go short or long, we always want to slot in the appropriate amount, so we have a balanced renewal schedule each year. But right now, we’re kind of hedging in the middle. We’re not doing a lot of 10 year debt in this market. And we’re not doing — I mean, we are looking at some short-term bank debt. But by and large, we’re kind of looking in the middle ground here of about five years. But as I said, always keeping one eye on our debt ladder.
Dennis Blasutti
Yeah, I think it depends on the type of debt as well up to Jonathan’s point. If we look at some what we did in the summer, in terms of seven year mortgages, which was lengthening our [indiscernible]. Typically people are just, last six months, I would say, going into seven to 10 range, but we do have room in our ladder to fit in kind of in years three, four, five, six, some incremental debt as well without kind of over having too much, as John said. So I think at this point, we’re looking at our funding plan for next year.
I just said in my comments, we’re done for 2022. And we’re trying to understand the — all the different options. What I would say is that, the spread of different pricing by different type of debt is significantly wider than it was obviously this time last year, or you’d say all the different forms of debt we will look out, we’re probably closer to 25 basis point spread difference. Today that’s probably is why this 200 basis points depending, if you go all the way from CMHC financing out to unsecured debenture financing. So we are trying to keep our options open. But tactically, we would consider shorter term at this time. Our long-term strategy of extending our maturity ladder remains.
Tal Woolley
Okay. And then just lastly, thinking about tenant risk. If I’ve done my math correctly here, I think you guys — there tends to be maybe about $1 million, a little bit more than that every year in terms of revenue that you have to deal with in terms of tenant failures. Can you give me an idea of like what — is there been like a bad year and what would like a bad year look like in terms of a hit on revenue if there were tenant failures?
Jonathan Gitlin
Target, remember that one. Yes. That was bad year. But that we’ve got an anomaly, but that was 4% of our revenue at that given time. I mean, look the bad was also 2020, which was also anomalous. So I think the normal run rate that we see in, let’s say, a stabilized here or reasonably normal environment. I think $1 million to $1.5 million –
Dennis Blasutti
$800 million a year, when we looked at the five years before the pandemic, it was about $1 million to $800 million a year of write-offs, which against the $1 billion of revenue, is a pretty low number.
Jonathan Gitlin
Yes. And again, keeping in mind that our portfolio has improved and the resiliency of our tenants list has also improved. So I think that’s a good run rate to use. And that also includes Alberta, Tal, which again, if you look at recessionary environments, I think they’ve had their share of it. And I think that run rate is kind of like pro rata. It’s been pretty stable for even our Alberta portfolio, which I think is largely indicative of the rest of our portfolio.
Tal Woolley
Okay, that’s great. Thanks, gentlemen.
Jonathan Gitlin
No problem. Take care, Tal.
Operator
Thank you. Our next question comes from Pammi Bir from RBC Capital. Pammi, please go ahead.
Pammi Bir
Thanks and good morning. Just coming back to capital allocation. I’m just curious how perhaps distribution increases were put into the equation. You talked about debt reduction developments and possibly the NCIB. So I’m just curious, how you’re thinking about that perhaps for next year?
Jonathan Gitlin
Hello, Pammi. Good to see you — speak to you. I think what we said at our Investor Day and what we continue to standby is, of course, this is a Board decision. But management does view this as a direct correlation to where our payout ratio is. And as long as we can maintain our target range of 55% to 65%, we would like to get back to our unit holders a sustainable increase in dividends year-over-year. And it’s not in the scheme of things a substantial amount of cash in order to do that. So as long as we can do it without being parallels to the other objectives we have, which is, of course, bringing down our net debt to EBITDA numbers, as well as, of course, FFO growth. Then that is something we would like to continue to do on a sustainable basis going forward.
Pammi Bir
Got it. And then, just in terms of what’s actually in the properties that are I guess held for sale, or in the pipeline as of yesterday. What can you share just in terms of the mix there? And the appetite seems fairly healthy, but I’m just curious, what you can say about maybe how the investor appetite might be shifting maybe in the recent weeks or last month or so?
Jonathan Gitlin
Sure. I can break it down into two categories, land and income producing retail assets. With respect to land, I would have to say that the land market has slowed substantially. There’s not a lot of demand as there was last year or even earlier this year for density and land price right now, which is fine. We didn’t really have any reliance on selling any of our density over the next couple of years.
With respect to income producing properties. Well, that’s the interesting one, I do think there is a disconnect right now between public and private valuations. And from what we’re seeing for the types of assets RioCan owns, there is still a significant interest from high net worth local core and sometimes regional buyers. And we’ve been approached in many occasions on an off-market basis to acquire some of our assets, some of which will engage, some of which will won’t. But we’ve been quite surprised that even in this, let’s say, tricky environment, there is still a fairly sizable interest in acquiring assets of the types of RioCan owns.
Pammi Bir
Got it. And Jonathan, just your comment on land. When you said that the appetite has really slowed. Is that — is the land that you do have in that bucket? Is it already zoned for residential density or is it not zoned yet?
John Ballantyne
Predominantly, what we’re talking about is, would these zoned land that could be condo developments for example and this would be — when we look at some of the sales we’ve done over the last couple of years, we got paid substantially for this excess density. The reality is, the condo market has slowed with the interest rate environment and we are interested to see how quickly that rebounds. But in terms of selling zoned residential land right now, it’s not a great time.
Pammi Bir
Okay. And then just given your comments on the whole development program. Thinking about next year, how do you see the impact on perhaps that $500 million annual target for development spending and just which projects would you consider perhaps shelving?
Jonathan Gitlin
So, First of all – I mean, what we do is, simply pause on certain projects. I think [indiscernible] permanent. But next year, most of that committed capital is on projects that are already underway. I would say, some of it is discretionary, but not a significant amount of it. And the ones that we are pausing on, again really we have 14 million square feet of zones density in our pipeline and it grows day-by-day. Which means, we can sort of pick off of a large shelf of potential assets to commence on. And we go through this process constantly as to which ones we would want to commence.
And in this environment, Pammi, as we said, we’re just going to be — I mean, not that we are never, we’re always judicious, but we’re going to be — I would say, there is a higher degree of scrutiny around green lighting of project. And really that scrutiny is around whether or not, we hurdle from an IRR basis, which given the enhanced cost of debt is more difficult now than it was before. So I think, in terms of that $400 million give or take spend, not a lot of that is respecting new projects, its mostly committed projects.
Dennis Blasutti
Well, I would say, Jon is absolutely right. 2023 expect us to spend in the range. In 2024 is one where the spending will come down. And what I would just add is that, those decisions to slow down projects, that haven’t been made. We have a number of projects that are in — that are zoned, that are in that. Of course, as you know, there’s zoning is just one step in the process, we have tenants to deal with, we have the site plan approval and we have all the other construction draws, et cetera.
Our team continues to advance the ball on that. So really what we’re looking at is, a decision points in sort of the middle of ’23 to kick off projects that in our five year plan that we had an Investor Day would have had some spending starting in sort of late ’23 and into ’24. So we can continue to monitor the market as Andrew mentioned on the construction cost side. What we see there, while we see continuously study the revenue market for both residential rental and condo and make those decisions at that point in time. So we have a lot of flexibility and a lot of optionality as we head into the middle of 2023. And in the meantime, we create value by advancing those projects to shovel ready status.
Pammi Bir
Thanks for the color. Just last one, coming back to the tenant discussion. Any update at all with respect to any possible closures from bed, bath and beyond. And I didn’t see any on — any Canadian types on the list initially, but just curious if there’s any update there?
Jonathan Gitlin
No update at this point.
John Ballantyne
None in our portfolio.
Pammi Bir
Great, thanks very much, I’ll turn it back.
Jonathan Gitlin
Thank, Pammi.
Operator
Thank you. Our final question comes from Dean Wilkinson from CIBC. Please go ahead.
Dean Wilkinson
Thank you. Good morning, everyone. I’d respect for everyone’s time, I’ll just keep this to one question. On the issue of replacement cost, your build that 650 per square foot ex-land. So you put land and there you might be pushing towards $800. That would suggest a new build might be a three cap. Jonathan have you ever seen the economics that tight? And do you think that this is a permanent impairment to the new supply of retail real estate in Canada as far as we can see?
Jonathan Gitlin
Well, permanent long time, I have not seen them this type in my brief 20 some odd year career in the real estate space —
Dean Wilkinson
It’s closer to 30.
Jonathan Gitlin
Thanks for that. And I think that in terms of permanent, well I don’t know — like I don’t know what the catalyst is to dramatically reduce those costs. And remember, those are in the GTA not everywhere. But as Andrew alluded to, we’re starting to see some softness in the trace. And I think, a good healthy recession not that any recession is good, but a healthy recession might alleviate the pressures on the cost side and that might bring things a little more of an equilibrium into the equation.
But right now, I’m not sure that, that catalyst is immediate. So for at least the medium term, I don’t think there’s much of a change in those dynamics in which simply means that our existing portfolio continues to gain value and continues to be a very coveted asset class and space for tenants to be at.
Dean Wilkinson
Scarcity premium. All right. That’s it. Thanks guys.
Jonathan Gitlin
Thanks a lot, Dean. Have a great day.
Operator
I’m showing no further questions at this time. I would now like to turn the conference back to our President and CEO, Jonathan Gitlin.
Jonathan Gitlin
Thanks very much, Lauren. Thank you everyone for coming to our call today and we look forward to more great quarters ahead. Thanks.
Operator
This concludes today’s call. Thank you for joining. You may now disconnect your lines.
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