U.S. Markets closed

Edited Transcript of MR.UN.TO earnings conference call or presentation 10-Mar-17 4:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Melcor Real Estate Investment Trust Earnings Call

Edmonton Mar 10, 2017 (Thomson StreetEvents) -- Edited Transcript of Melcor Real Estate Investment Trust earnings conference call or presentation Friday, March 10, 2017 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Naomi Stefura

Melcor Real Estate Investment Trust - CFO

* Darin Rayburn

Melcor Real Estate Investment Trust - CEO

================================================================================

Conference Call Participants

================================================================================

* Kyle Stanley

National Bank - Analyst

* Dean Wilkinson

CIBC World Markets - Analyst

* Michael Smith

RBC Capital Markets - Analyst

* Jenny Ma

Canaccord Genuity - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen. Welcome to the Melcor REIT fourth-quarter and year-end 2016 conference call. I would now like to turn the meeting over to Ms. Naomi Stefura, Chief Financial Officer of Melcor REIT. Please go ahead Ms. Stefura.

--------------------------------------------------------------------------------

Naomi Stefura, Melcor Real Estate Investment Trust - CFO [2]

--------------------------------------------------------------------------------

Thank you, Veronica. Good morning, everyone. Thank you for joining our conference call and webcast for the fourth quarter and full year of 2016.

On the call with me this morning is Darin Rayburn, Chief Executive Officer of the Melcor REIT.

If you have not reviewed the materials related to this call, including the management's discussion and analysis and the financial statements, they are available on the Investor Relations section of our website at MelcorREIT.ca and on SEDAR.com.

Our goal is to keep our remarks to a brief high-level review of the year and then open up the call for your questions.

Before turning it over to Darin to discuss our results, I have a few mandatory statements to make. First, certain statements made during this call may be forward-looking. For a complete discussion of items that may cause actual results to differ, please refer to the business environment and risk section of our annual management discussions and analysis.

Second, we report our financial results in Canadian dollars and in accordance with IFRS. We supplement our financial reporting with nonstandard measures, including funds from operations, adjusted funds from operations and net operating income. We believe these measures are important in evaluating our performance, but caution listeners that they may not be comparable to similar measures presented by other companies. These nonstandard measures are defined and reconciled in our management discussion and analysis.

I will now walk everyone through some of the financial highlights of our results for the year ended December 31, 2016. Our portfolio performed consistently with growth of 1% for rental revenue and 2% for net operating income compared to 2015. This growth was driven by modest portfolio growth in late 2015 and the densification of a retail site in 2016. Our operating margin also remained consistent at 51%.

FFO and AFFO increased by 1% and 3% respectively compared to 2015. Per-unit amounts also grew by 1% for FFO and 3% for AFFO. We continue to capitalize on opportunities to finance our properties and to create liquidity on our balance sheet. We reduced our weighted average interest rate by 17 basis points over 2015 as a result of mortgage refinancing and a Class C LP unit extension. With our credit facility, we remain well-positioned to take advantage of opportunities as they arise.

I will now turn the call over to Darin who will speak to our portfolio's operations and performance.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [3]

--------------------------------------------------------------------------------

Thank you, Naomi. Congratulations to our Melcor REIT team for a solid quarter and a strong performance in 2016 despite the economic headwinds in some of the markets where we operate.

2016 delivered its challenges, which our team met head on through understanding and responding to market demands and their ongoing commitment to building strong relationships and delivering exceptional customer care.

The market has been challenging over the past two years, yet our incremental results have remained stable and consistent. Since our initial public offering in 2013, we've grown our REIT significantly, by 67% in asset value, by 68% in revenue and by 77% in gross leasable area.

Our focus throughout 2016 was on the present -- existing tenants, existing assets and existing stakeholders. By ensuring that these fundamentals were well taken care of, we delivered stable results in all key operating metrics.

Now let me repeat some of the financial highlights Naomi touched on. Rental revenue grew 1% over 2015. Net operating income grew 2% and our AFFO grew 3%. Our steady results in 2016 demonstrate the sustainability of our model and the strength and resiliency of our portfolio.

One thing is certain in these turbulent times of market volatility and uncertainty. Nothing speaks louder than performance. Last year, we committed to continue to execute on our business plan and we have. The strength of our portfolio is in our people and the relationships they build with our clients, our commitment to providing unrivaled customer care and our history with our assets and within our markets. We know and understand our assets, our clients and the nuances of the markets where we operate.

The concerns a softening economy was projected to have on operations of Western Canadian-based real estate companies has not happened at the REIT. This is largely due to the way we have carefully designed our portfolio over the years to be well-diversified in tenant mix, geography and in asset class.

Our tenants include a diversified mix of national, regional and local businesses operating in a variety of industries. This diversified tenant base helps mitigate our exposure to negative trends occurring in any one particular sector. Our portfolio is purposely shaped to mitigate and to benefit from the cyclical nature of [upper end] Western Canadian economies.

The strategic imperatives throughout 2016 have been maintaining occupancy and at year-end, portfolio occupancy reported 92.4%. We successfully completed over 256,000 square feet of new and renewals on expiring tenant space by December 31, 2016. Our portfolio-wide weighted average base rents increased to CAD15.73 per square foot.

Tenant satisfaction with our assets, our service levels and our people is paramount to our ongoing success. Throughout 2016, we continued to improve our best-in-class customer care program and built strong relationships with our clients. We surveyed several office buildings providing important feedback on areas that we need to improve on, as well as a benchmark of our performance.

We are proud of what the surveys told us. 94% of our respondents rated our property management team as good, very good or excellent and 95% of our respondents rated our building operations team as good, very good or excellent. We view these metrics as an important indicator of our commitment to ongoing client care, which contributes to tenant satisfaction and ultimately tenant retention. Congratulations to our team for their efforts and for their dedication to our clients.

Our continued stable results are the outcome of our strategy of building a diversified portfolio of quality assets and focusing on the fundamentals of our business, including looking after our tenants, executing our leasing strategy, improving operating efficiency and (inaudible).

Our pedigree in the 94 years of Melcor Development history, culture and experience with changing economic and political landscapes makes up an important part of who the Melcor REIT is and why we are unique.

Today, there are many positive factors that will continue to shape our growth and our future. We believe the continued focus on real estate fundamentals will result in maximum return for our unitholders over time.

In October, November, December of 2016, we made distributions of CAD0.056 per trust unit per month for a year-end payout ratio of 78%. This compares to our 2014 payout ratio of 89% and 2015 payout ratio of 80%. At 78%, the REIT's payout ratio is a strong indicator of overall health and the REIT's ability to sustain distributions at current rates. Our working capital position remains healthy and we continue to collect receivables in a timely manner.

Funds available under our revolving credit facility at December 31, 2016 provided the REIT with the capacity to respond to market demands and investment opportunities while maintaining and sustaining operational and capital requirements.

The REIT is focused on real estate fundamentals of asset enhancement and property management while considerably managing our debt. With our strong history and diversified portfolio, our focus on property management, customer care and relationships, our strong balance sheet, solid governance by our mainly independent Board of Trustees and the right of first offer to purchase from a solid pipeline of assets we developed by Melcor Development, the Melcor REIT remains well-positioned for the future.

We see the mood improving across business [communities] and the outlook, especially in Edmonton, seems more buoyant than it did at the outset of 2016. However, we are not content to rest on what we did in the past. 2017 will not be without its challenges, but we will keep moving forward with a business-as-usual mindset while being mindful of current economic challenges.

We continue to seek opportunities to improve all elements of our business from maintenance programs to tenant interactions. We are continuing to monitor macroeconomic factors and plan for any potential impact to our business. We continue to look for opportunities to build and strengthen our portfolio via acquisition and densification. We continue to focus on the details to ensure that we have the right mix of properties and clients. We will continue to focus on providing our customers the best service so that when it comes time to renew, we remain their landlord of choice.

The close of 2016 marked the two-year stretch of one of the most difficult business environments I've ever experienced in my 25 years in the industry and in spite of this, the Melcor REIT continues to perform. We continue to see good leasing activity and have not seen a significant slowdown in interest or in our near-term ability to renew and sign new leases.

With the new downtown office inventory coming online in the next few years in Edmonton and Calgary, we are continuing to proactively renew leases and seek out new tenants for existing vacancies. We are committed to prudent financial stewardship to ensure maximum value to our unitholders.

At the end of the day, as I mentioned earlier, nothing speaks louder than performance. The Melcor REIT will continue to perform for our unitholders. Frankly, the type of market volatility we are experiencing is not new to us. These headwinds are not foreign to us and in fact, as Albertans, this volatility is something we have come to expect. It is part of doing business in Alberta. It is part of our DNA. It's how Melcor Developments has successfully built the Company and prospered for 94 years and this experience will shape how the Melcor REIT will continue to perform for our unitholders.

We are now happy to take your questions. Veronica, can you please open up the phone line?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions). Kyle Stanley, National Bank.

--------------------------------------------------------------------------------

Kyle Stanley, National Bank - Analyst [2]

--------------------------------------------------------------------------------

I was just wondering if you could give us a little bit of an update on what the opportunity is for further densification within your existing portfolio.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [3]

--------------------------------------------------------------------------------

Sure, Kyle. Generally speaking, there's one site we've talked about before. We have a project in North Edmonton called White Oaks Square. There is a 2-acre multi-development site at the rear right beside a superstore next to a seniors home. We are pursuing a rezoning on that right now and see an opportunity to densify that site.

Beyond that, we have some retail power centers with some existing densification, so you will read in the MD&A that, in 2016, we added 7,700 square feet. That's a project in Spruce Grove, Alberta where we put a Kal Tire in. So we are looking at other opportunities as well. But beyond that, we do not have any significant densification opportunities.

--------------------------------------------------------------------------------

Kyle Stanley, National Bank - Analyst [4]

--------------------------------------------------------------------------------

Okay. Great. And then I'm wondering could you remind us of the size of the acquisition pipeline available to the REIT through Melcor Developments?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [5]

--------------------------------------------------------------------------------

Kyle, that's a Melcor Developments question, but this is a Melcor REIT call, but having said that, we know that Melcor Developments has about 600 acres of commercially zoned land that is available for development over the next 5 [to 16] years. The potential on that land is anywhere from 7 million and up square feet depending on the densification they can get on that land.

--------------------------------------------------------------------------------

Kyle Stanley, National Bank - Analyst [6]

--------------------------------------------------------------------------------

Okay. Perfect. And then just for the last one, I'm just wondering how the leasing activity for the 2017 expires is going and what you are seeing or expecting in terms of leasing spreads for the year?.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [7]

--------------------------------------------------------------------------------

Sure. So whenever I get asked the question about leasing, I have to break down our portfolio a little bit because, clearly, Edmonton and Calgary are different than Kelowna and Regina and Lethbridge as it stands right now, but I can tell you, generally speaking, we are already over a third of the way through our expiries for new commitment for tenants and considering we are just ending the first quarter, I am pretty proud of that.

In Edmonton, there is still activity. Now clearly the largest glut of vacant space is coming and it's getting harder to do deals. So to answer your question about leasing spreads, I can tell you that we are retaining our spreads in all markets with the exception of downtown Edmonton. Those spreads right now we are seeing requests for higher tenant [inducement] and rents dropping, on CAD15 rents, CAD1 to CAD2 maximum.

--------------------------------------------------------------------------------

Kyle Stanley, National Bank - Analyst [8]

--------------------------------------------------------------------------------

Okay. That makes sense. I think that's it, so I will turn it back. Thanks very much.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [10]

--------------------------------------------------------------------------------

Just a question for Naomi. On the straight-line rent, dropped a fair bit in the quarter. Is Q4 representative of what you think the 2017 run rate quarterly should be?

--------------------------------------------------------------------------------

Naomi Stefura, Melcor Real Estate Investment Trust - CFO [11]

--------------------------------------------------------------------------------

No, I don't think so. I think there were some anomalies in the Q4. We had some straight-line rent adjustments -- some free rent periods that fell off in the quarter and that created an anomaly of a larger-than-usual straight-line rent.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [12]

--------------------------------------------------------------------------------

So it should come back up to more what Q2, Q3 looked like as we turn the corner?

--------------------------------------------------------------------------------

Naomi Stefura, Melcor Real Estate Investment Trust - CFO [13]

--------------------------------------------------------------------------------

I would think so, yes. The bigger problem is we don't often budget for what the free rent periods going forward will be because until the lease negotiations happen, we don't know how those are going to fall out and so I can't say that with certainty, but I would expect it to normalize.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [14]

--------------------------------------------------------------------------------

Okay. That sounds good. And then have you bumped up the necessity of having to put more TIs in so that the amortization of TIs is going to go up, or is that likely going to be in that CAD800,000 a quarter number as well?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [15]

--------------------------------------------------------------------------------

So Dean, last year, we took the normalization from 9% to 10% with the TIs and CapEx. We have reduced on a budgeting some of our CapEx plan spending for 2017. So while we haven't taken anything beyond the 10% right now for CapEx and TIs, we are monitoring it on a quarter-by-quarter basis. Again, it's really only downtown Edmonton where we are seeing some of the (inaudible) TIs.

And just to put it in perspective for you, Dean and for everyone on the call, for the Melcor REIT portfolio in downtown Edmonton in 2017, we only have 57,000 square feet of leases expiring. We've already completed just under 40,000 square feet. So in another month, we will have a pretty good idea of what that [share] requirement is in downtown Edmonton.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [16]

--------------------------------------------------------------------------------

Okay. So it probably won't change all that much then I would suspect?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [17]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [18]

--------------------------------------------------------------------------------

Okay. So that said, where do you think you end 2017 -- obviously, this is a shot in the dark -- in terms of your occupancy levels then?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [19]

--------------------------------------------------------------------------------

Dean, that is a forward-looking statement here. It's interesting because we were down less than 1%. We went from 92.6% in 2015 to 92.4% in 2017. We are already seeing greater success on our goals in 2017 than we did in 2016, so while you can't hold me to this, I would be extremely disappointed if we weren't above the 90% mark.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [20]

--------------------------------------------------------------------------------

The trend would suggest that you are going that way?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [21]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Dean Wilkinson, CIBC World Markets - Analyst [22]

--------------------------------------------------------------------------------

Okay. That's it for me. Thanks, guys. I will hand it back.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

(Operator Instructions). Michael Smith, RBC Capital Markets.

--------------------------------------------------------------------------------

Michael Smith, RBC Capital Markets - Analyst [24]

--------------------------------------------------------------------------------

I just want to make sure I heard correctly. So for the one-third of renewals you've done so far in 2017, with the exception of the Edmonton office, you are keeping the -- the spreads are positive?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [25]

--------------------------------------------------------------------------------

Generally speaking, yes. In Lethbridge, the spreads are up. In Regina and Kelowna spreads are actually up again this year where we took some (inaudible) last year. In Calgary, we haven't had a lot of renewals so far and as you said, as you heard me in Edmonton, we're struggling. So generally speaking, yes. The answer to your question is yes.

--------------------------------------------------------------------------------

Michael Smith, RBC Capital Markets - Analyst [26]

--------------------------------------------------------------------------------

Okay. And just switching gears, what type of returns are you looking for on densification opportunities you have right now?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [27]

--------------------------------------------------------------------------------

It's a hard question, Michael, because, in some cases, our land value, if we put it at market versus cost, is significantly different. Beyond that, from just a develop point of view, it's hard from a REIT perspective to develop without a spread between the cap rate and interest rate.

In Alberta, from a development perspective, we'd like to see at least a 2 to 2.5 point spread between our interest rate and our cap rate returns. It feels now though with construction costs, we expected them to come down a lot quicker and they haven't, so our return expectations are a bit higher, which I think, from a Melcor REIT perspective, is why we are not talking about pipes in the ground yet. We are just talking about sites getting designed for it. Does that answer your question, Michael?

--------------------------------------------------------------------------------

Michael Smith, RBC Capital Markets - Analyst [28]

--------------------------------------------------------------------------------

Yes, it does. Thank you, yes. And then just finally you talked about challenges in -- 2017 won't be without challenges. What do you see as the major challenges for this year?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [29]

--------------------------------------------------------------------------------

Well, growth. Not organic growth. We will work on our organic growth and we'll renew our tenants, but, as you heard in my comments, we are redesigned for growth. So we have grown our asset base value by 67% since 2013. It's part of our DNA.

There are opportunities out there. You heard some of the opportunities. We've turned over a lot of rocks, but there's still a disconnect between buyer and seller and the challenge we have is, at an CAD8.30 unit price and an 8% yield, for me to buy a 5.2% retail grocery-anchored shopping center cap rate, the spreads just don't work for us.

So a challenge will be finding accretive opportunities that will fit in our REIT and beyond that, again, the other challenge, which everyone talks about and it's the elephant in the room, so I need to mention it, is the 1.5 million square feet of vacancy coming in downtown Edmonton over the next 18 months.

--------------------------------------------------------------------------------

Michael Smith, RBC Capital Markets - Analyst [30]

--------------------------------------------------------------------------------

So with the disconnect in terms of how prices are, what are your thoughts on capital recycling?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [31]

--------------------------------------------------------------------------------

Interesting. My Board asked me the same question, Board of Trustees. So it is something we, as a matter of process every quarter, do what we call a scrub of our assets and go through and see if there's opportunities to capital recycle. Because we are diversified and often enough in markets like Lethbridge and Regina and Kelowna, the Melcor REIT does have some opportunities to capital recycle. So that's my vague way of telling you to stay tuned.

--------------------------------------------------------------------------------

Michael Smith, RBC Capital Markets - Analyst [32]

--------------------------------------------------------------------------------

Okay. Fair enough. Okay, that's it for me. Thank you.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [34]

--------------------------------------------------------------------------------

So I wanted to ask about the same-asset NOI. Was there anything in Q4 that was a one-time recurring in nature for the big drop?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [35]

--------------------------------------------------------------------------------

Well, if you look at the revenue, our revenue was virtually the same. I think we were 1% off. So what the NOI drop was again the straight-line rents that Naomi talked about earlier, the investments on that. Base revenue was only down about CAD64,000 in the fourth quarter. So we also had some net recoveries and although we ended up at 92.4% at the year-end, throughout the fourth quarter, we didn't maintain that 92%. We were down a bit beforehand, so there is a bit of slippage there.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [36]

--------------------------------------------------------------------------------

Oh, okay. Would you happen to know what the average occupancy may have been for the quarter then?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [37]

--------------------------------------------------------------------------------

A recovery ratio we used was just under 90%. As a matter of fact, I think the number is 88%, but we would reason just under 90%, and then, of course, finish the year above that at 92.5%.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [38]

--------------------------------------------------------------------------------

Sorry, to be clear, the average occupancy for the quarter was roughly 88%?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [39]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [40]

--------------------------------------------------------------------------------

Oh, okay, okay.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [41]

--------------------------------------------------------------------------------

Are you talking about recovery ratio?

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [42]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [43]

--------------------------------------------------------------------------------

Yes, it was 88% for Q4, just under 90%; I think it was 88.6% or something.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [44]

--------------------------------------------------------------------------------

Oh, okay, okay. That makes more sense. And then just a little further on potential acquisition opportunities out there. I know the unit price is a limiting factor, but given that we are 2.5 years into an Alberta downturn, are you starting to see any signs of distress that may present opportunity to you? Because you know some of the smaller markets well, are there any opportunities there that could make sense mathematically for you guys?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [45]

--------------------------------------------------------------------------------

Starting to see some of it. Again, Jenny, thanks for bringing that up because part of our culture and how we grew our portfolio prior to the REIT was buying in these markets, buying distressed assets.

The difference between now and say 2004 or 2008 is we are finding some of these smaller buildings that are owned by a syndicate or owned by individuals. Back in 2004 or 2008, they were financed at 10%. They lose a tenant, they start to panic. We can go in and buy with cash. Well, today, they are financed at 4%, so there is less of an impetus to try and liquidate.

Having said that, as 2017 goes on, Naomi and her team has done such a great job of keeping powder on our books and room on our line of credit. We are searching for those opportunities. So the short answer to your question is we haven't seen anything yet that has caught our eye, but the phone is starting to ring and people that we've been tracking who have held assets off for sale the last year are starting to ask a little more questions. So we would hope by mid-2017 to see more of those opportunities.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [46]

--------------------------------------------------------------------------------

Okay. It might be early days, but are you seeing any sort of a pattern with regards to asset type and/or geography?

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [47]

--------------------------------------------------------------------------------

It's all over the board. People would expect that industrial in Edmonton should be a fire sale because of the price of oil, but what's interesting is there are a lot of owner users that are trying to do sale-leasebacks, but a lot of those rates are so high, the cap rates are so low based on that, we don't see a lot of opportunity in industrial.

Retail, especially grocery-anchored retail in Western Canada right now is very strong. Our retail sales in Alberta still lead the nation on a per capita basis, so it's really office. And again, the question is would you buy in downtown Edmonton. Dream listed their stuff and Aimco bought a couple of their buildings and there's some opportunities there too. But outside of that, I don't see it being specific asset-based. I think it's on a one-off basis, Jenny.

--------------------------------------------------------------------------------

Jenny Ma, Canaccord Genuity - Analyst [48]

--------------------------------------------------------------------------------

Okay, great. That's fantastic color. Thanks. I will turn it back.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Rayburn.

--------------------------------------------------------------------------------

Darin Rayburn, Melcor Real Estate Investment Trust - CEO [50]

--------------------------------------------------------------------------------

Thank you, everyone, for your time this morning. As I mentioned before, 2017 will not be without its challenges, but be assured we are prepared and built to weather the storm. Everyone, have a great week. Goodbye now.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.