H
CompanyPartners
Tom Hofstedter-CEO
Larry Froom – Chief Financial Officer
Philippe Lapointe – President, Residential Lantower
Conference Call Participants
Sam Damiani – TD Securities
Jenny Ma – BMO Capital Markets
Matt Kornack – National Financial Bank
Sumayya Syed – CIBC Global Markets
Jimmy Shan – RBC Capital Markets
Operator
Hello and welcome to H’s Q2 2022 earnings conference call
Before the call, H
I would now like to introduce Mr. Tom Hofstedter, CEO of H
tom hofstedter
Hello, and I would like to thank everyone for joining us in discussing the monetary and operating results for the quarter at the time of H.
Our unit-consistent net asset price increased to $21. 06 in the first quarter to $20. 14 as of June 30, 2022, thanks to the 10. 5 million games we purchased and canceled our OPR in the quarter. Net organic consistent with the source of income and expansion and strengthening of the US dollar. So far this year, we have repurchased $22. 1 million of games at a weighted average charge of approximately $13 per unit, representing a truly broad 41% reduction in our net asset price per unit of $22. 14. Unit buyback program and the very strong expansion in the net income source consistent with comparable housing are driving the NRA expansion and monetary results. With today’s strong quarterly results, we are on track to create a simplified, expansion-oriented company that will bring a significant price to our stakeholders.
And with that, I pass the floor to Philippe to talk about our residential platform, Lantower.
Philip Lapointe
Hello everyone. I’m pleased to be on this call to talk about current quarterly updates and review our quarterly highlights. But before I did, I wanted to thank our investors for their time, generosity and feedback over the past 90 days. Although the team and I cheer up, because H
Inflation is certainly another topic of verbal exchange regarding the impact of the global economy on multi-family basics. The usual idea is that inflation is accompanied by equivalent increases in special finishing. While we expect prices to increase in the future, we only saw marginal increases in peak spend categories, driven by operating efficiencies from our smart generation, autonomous leasing and traded national accounts initiatives. Our quarter-to-date and six-month spfinishing was actually slightly lower than the same periods for 2021. And more wise news, as we’ve noticed over the past few quarters, we continue to revel in really extensive rental expansion across all of our US Sunbelt markets. For example, during the current quarter, our exchange of new rentals for the entire portfolio, excluding Jackson Park, was approximately 16. 6%. Moving on to Jackson Park, we continue to see positive improvements in the amount of traffic, renewal rates, and the number of rentals executed. At the end of the current quarter, Jackson Park’s occupancy rate was 97. 2% and the percentage of citizens renewing their lease during the current quarter was in the upper 50% range, reflecting another quarter of strength. continues and demand for basic elements for the New York. City Submarket.
In terms of disposals, in June we strategically disposed of our only asset in San Antonio, Texas. Since San Antonio was not compatible with our long-term expansion strategy, we felt it was prudent to have this asset priced above our fair market prices, further reinforcing our confidence in our present. We intend to reinvest profits in our core markets and shift equity in a fiscally efficient way into more profitable long-term investments. On the portfolio valuation front, given what is going down in the capital markets and the ongoing financial policy adjustments, we have been cautious regarding valuation capitalization rates. the capitalization index of our portfolio through an eighth of a point. However, in light of the growth of our rentals and our NOI, the total price of our portfolio actually increased slowly in the current quarter. We are confident that our strong NOI expansion fundamentals will help valuations, despite potential obstacles stemming from long-term cap rate expansion.
On JV’s progression front in Hercules, California, Phase 2 of our progression, Grand at Bayfront, won its last certificate of occupancy in March and is ultimately 59% rented. Shoreline Gateway, our tallest residential tower in Long Beach with 35 floors, has noticed strong tenant demand and is now 69% rented. As far as total ownership progression is concerned, Lantower West Love in Dallas, Texas, is on schedule as we plan to lay the groundwork for the tower crane in the coming weeks. Also in Dallas, Texas, Lantower Midtown recently led the way, with paintings on the well-advanced. And finally, in Tampa, Florida, we’re completing the building permit for a progression called the Lantower Baseline. This progression will come with 271 games and is expected to start in the coming months.
More smart news on the progression front. Again, in the current quarter, we effectively rezoned 5. 8 acres of land from commercial to multi-family. This allotment will consist of 430 apartments and will be adjacent to downtown Dallas. Additionally, in Dallas, we are the latest on Sea Land’s Phase 2 onshore site, which will have space for 250 apartments in an eight-story podium progression adjacent to our recently planned five-story wrap-around progression of 295 apartments to the north. from Dallas. Dallas. In April, we closed an infill site along Highway 19 in Clearwater that will accommodate a 400-unit, five-story wrap-around progression. Finally, in late June, we closed a 381-unit garden-style progression site in South Atlanta, Florida that sits across from Neo City, a mixed-use progression anchored across a studio park. intended. Our residential progression platform is backed by our inland portfolio of over 5,000 prospective assemblies on a unit consistent basis of approximately US$28,000, which is a truly significant price reduction of over $50,000. consistent with the unity we see at Sunbelt Markets for similar A+ sites like ours. In short, we remain excited about the long-term pricing opportunities at H&R.
And with that, I’ll pass the verbal exchange to Larry.
Larry Froom
Thank you Philippe and hello everyone. As Tom mentioned, we are very pleased to report our effects this quarter, which reflect our lean portfolio strategy and our alignment with top expansion homes. This expansion is evident in our year-to-date effects of source of net operating income from same assets in monetary terms, which increased 19% compared to the first part of 2021. Source of net operating income from total assets In monetary terms On a comparable basis, it continued to be strong and increased up to 18. 8% compared to the same quarter last year. Our residential department led the way, growing 43. 7%, or 39% in US dollars for the quarter, primarily due to improved occupancy in the Jackson Park building in New York, which was leased last year. Excluding Jackson Park, expansion was very tight at 20. 8%. As Philippe has mentioned in the past, Lantower Residential continues to see significant construction in new rentals and renewals. RNE’s monetary base of comparable homes of employment homes they build increased 23. 2% in the quarter, basically due to the extinction of the Hess Corporation rent-free era that expired in June 2021. Excluding the rent-free era, the construction is 1. 5%
Our workhouses are situated in colorful urban centres, with a weighted average lease term of 8. 5 years, and are rented to strong and solvent tenants. I would like to point out that only 5% of our overall workspace is subject to lease expirations through the end of 2023. 23,000 sf is due at renewal in 2022 and 349,000 sf is due in 2023. NOI on a currency decreased by 3. 5%. for the quarter, due to higher operating prices for non-recoverable homes at River Landing Commercial, which is leased. Two major tenants are expected to begin occupying their facilities in the short term, a 49,000-square-foot lease in the fourth quarter of this year and another 63,000-square-foot lease in the first quarter of 2023. And finally, the same business assets and NOI on a monetary basis, increasing 4. 9% in the quarter, mainly due to higher occupancy and the accumulation of contract rents. During the quarter, we leased the 314,000 square foot vacant commercial assets at 2121 Cornwall in Oakville, Ontario, commencing in the third quarter of 2022. H&R owns a 50% interest in these assets. We also completed a five-year lease renewal on 371,000-square-foot Montreal assets in our interest, with leasing expected to increase to 125% by January 2023.
Overall, second quarter 2022 FFO 28. 40 cents consistent with unit and AFFO consistent with unit 25. 70 cents. Based on our unit-consistent distributions of 13. 50 cents for the quarter, our AFFO matched ratio is a very strong 52. 5%. The overall debt to asset ratio as of June 3, 2022 44%. We ended the quarter with $71. 7 million in cash and $619. 6 million available in our undrawn lines of credit. Our unit-consistent net asset cost decreased from $21. 06 as of March 31, 2022 to $22. 14 as of June 30, 2022, primarily due to the acquisition and cancellation of 10. 5 million games under our issuer offering and the strengthening of the US dollar. . We have repurchased at least 10. 5 million games with a weighted average value of $13, a 41% reduction in net asset cost of $22. 14 consistent with unity as of June 30, 2022. Therefore, we at abstractArray are very pleased with our quarterly spinoff momentum Our portfolio of high-quality homes is well placed to deliver consistent, long-lasting spinoffs well into the future.
And with that, I’m going to call Tom back to answer questions. Continue.
tom hofstedter
Thank you. Operator?
Q&A session
Operator
[Operator Instructions] Our first comes from Sam Damiani of TD Securities. Continúe. Su line is open.
sam damiani
Hello everyone and congratulations on the good results. First of all, just because of the divestments, Tom, perhaps with the agreements set in the most recent acquisitions in June, the procedure was underway in the spring, market volatility. you can tell us how you did, what kind of client you work with, and which one is right: how does value compare to fair values in the first quarter?
tom hofstedter
Do you mean U. S. retail? What did we sell?
sam damiani
No, I mean, sorry, specifically a hundred Wynford and the other 3 assets that are also under contract.
tom hofstedter
Ah, of course. According to our inference values, the right to acquire exists because it has prospective residential densification, this is in the future. We control the rezoning and that is why we have given ourselves the right to buy back.
sam damiani
And was there a replacement in their price just the quarter to bring them closer to the asking price?
tom hofstedter
Hahaha
sam damiani
It is ok. It is ok. Very well. But, in general, the procedure: how would you characterize the procedure, given the volatility of the market?
tom hofstedter
It’s an off-market transaction, so I can’t answer your query about market volatility. If I had gone to the market, I can’t speculate, but since it’s an off-market deal, it’s very fluid. That’s not a problem.
sam damiani
It is ok. And in terms of leasing in the residential and commercial sector, have you noticed in your portfolio a slowdown in momentum that would imply a slowdown in the economy?
Philip Lapointe
Hi, Sam, I’m Philippe. No, not yet. We still have, of course, a record point of renewals. As I mentioned earlier, we are seeing a rental rate that is consistent with what was observed over the last 3 quarters. So, obviously, by paying close attention to the data, taking care not to accumulate our income to the detriment of the balance of our inhabitants. But no, we don’t perceive any slowdown.
sam damiani
And in the same assets for Lantower alone, Jackson Park, it was more than 20%, I guess. How does the portfolio do this as it stabilizes?I guess I’m just having a little problem with math.
Philip Lapointe
Sorry, Sam. Again, how what?It is transparent on our part, Sam. Me apologize.
tom hofstedter
Forgive me. A second Sam. Let’s just turn up the volume.
Philip Lapointe
Sam, would you repeat the question?
sam damiani
Oh, of course. Yes, no, I was just wondering, how does a portfolio that is contracted in the 90s, how does it generate 20% more the same property?And just, I guess, help us understand how occupancy and rental replacement would be triangulated into a NOI of more than 20% for the same property.
Philip Lapointe
Oui. Je I mean, Sam, math is simple, right?So if you look at one, if you think about the NOI margins of the most sensitive 50%, I think it’s 57 or 58%. And as I said before, no significant buildup in spending since the beginning of the year. Don’t forget what we did last quarter, however, we did 16. 6% this quarter. The calculation is in the end simple, rarely is it?And therefore, it does not seem sensible perfectly, but no, it is not a matter of occupation. It’s purely a matter of revenue expanding at a very immediate pace and expenses being reduced a bit.
sam damiani
And the moderate spending experience you’re enjoying right now, is it something you see as sustainable, just looking at the details of the portfolio?Or will you eventually see the portfolio being affected by the macro inflation we’re seeing?
Philip Lapointe
I think 95% of the spfinish drift that other people are experiencing, we’ve reduced through our leverage, and it’s not just us, right? So some of the largest publicly traded REITs in the United States have done the same thing. But our use of generation has actually mitigated the build-up of debt, which for other people who hadn’t made investments in the last 18 months, I guess they now wish they had. That said, I don’t think the generation can do anything to help our tax and asset insurance. And I’ll be waiting, and we’re notoriously hoarding for that, however, I do expect there to be significant year-over-year increases, namely in asset taxes, as you can believe, given that our values are notoriously skyrocketing because of our very healthy NOI growth. But one aspect of, to answer your question, no, I mean, I’m not surprised that there haven’t been many replacements because of the monumental investment that we’ve made in this aspect from home two years ago and last year. And actually, and credits to the Dallas team for pushing this. I mean, we’re in the middle of, at the end of COVID. It is a very complicated framework. Some teams did. It still hasn’t shown up at all. Despite that, there are plenty of executives in Dallas who saw the solution, and the execution was near perfect. And so a lot of credits go to the team that saw the build packs implemented.
sam damiani
Super. Thank you. I’m going to come back.
Operator
The next one comes from Jenny Ma of BMO Capital Markets. Continúe. Su line is open.
jenny mom
Perhaps only with the emergence of multifamily measures, Philippe, said that there was a 16. 6% expansion in the income of the same assets in the portfolio?
Philip Lapointe
That’s right, for a quarter.
jenny mom
It is ok! Super. Can you tell us how you are building your tenants’ renovation hires?Of course, there is the point of view of generation functionality control software. scenario and try to get as far as you can without wasting it?And how does this hiring expansion differ from one market to another?
Philip Lapointe
Excellent consultation. I think, in general, I will answer the last query first. Generally speaking, we see the same thing in all spaces just because we have, apart from Jackson Park, we are in the Sunbelt markets. So, the story is similar in North Carolina, Florida and Texas. In terms of renewals, in the first quarter, I use numbers, but in the first quarter our renewal rate was around 4. 5% in terms of the raises we requested from our current residents. And the explanation of why we made it a self-imposed governor. And so, in the first quarter, much of the expansion came from new rentals. And so, the delta between new rents probably, and I’m (sophisticating), but I guess it’s between 12% and 15%. These experienced very healthy increases of 18%, 20% in the first quarter. This quarter, I think the delta is less than 2%.
So we got rid of the governor, and I think our renewals are in the 14% to 16% diversity, as are our new leases. It is combined. It is a much more balanced construction that we are seeing. Somehow unexpectedly our renewal rate is also, I don’t know if I’m right. So the last quarter was in the 60s. This quarter is about 60%. Historically, we have seen between 40% and 50%. And so, not only are we expanding to a very healthy clip, but they’re also revamping it to a healthier clip than we’ve noticed in the past. So my biggest fear and the thing that helps keep me up at night is, in the end, the balance and credits of the local residents. As we raise rents, whether at renewal or new leases, it is actually at the expense of your bottom line and, more importantly, your ability to pay. And I’m reassured knowing that the 20% – 20% of rent to income ratio is about the same as it was in 2018 and 2019 and pre-COVID, which leads me to there’s still a long way to go.
jenny mom
Are renters willing to pay those higher rents because housing market rents are barely emerging in all areas, or is there a detail of the housing market that is cooling with worsening affordability and some renters would possibly have bought, say last year, are more susceptible to Stay. Is there any of that in your marketplaceplaces?
Philip Lapointe
Yes. I mean, that’s a wonderful question. I think in closing, there is a massive housing shortage, period, of apartments and houses in the Sunbelt markets. And there is – notoriously. It’s true, pre-COVID, with COVID and migration patterns to the United States that have only exacerbated the challenge, that evidently with emerging interest rates, I don’t know what the last one was, however a few weeks ago it’s possible that have a loan of about 5%. And ultimately what this did was an already otherwise expensive acquisition that was much more inaccessible to others. So what we’re seeing and what the knowledge suggests is that on the right side of popular deviations, our members are staying longer, but they’re also a little bit older in our communities. And I think it’s because of a lack of opportunity for them to move to another house or, frankly, just lack of a source for them to move from one network to another. Array So I think all those points play or come into play. But the fact is that there is a serious shortage of apartments in the Sunbelt. And frankly, the stats that we see on 23, 24, we think housing starts are going to start to slow down. And that’s precisely how it is, as if making the challenge even worse. So, I think it’s more of a source issue. There is a lot of demand. There is seldom enough supply to meet demand. And so what we’re seeing are those very healthy increases across the board.
jenny mom
It is ok! Super. As far as progression is concerned, H’s goal
Philip Lapointe
I think the answer is yes, they are destined to be sold. They are not, they were not meant to be built to the core. They are also in markets where we are not. So, from an operational standpoint, I do. I don’t know if it would make much sense. But we have to be opportunistic. And frankly, we think it’s possibly not the right time to sell those assets, but before long they’ll sell. Now, whether it’s through our partners or a third party, I guess it will probably be a third party. . There will be no shortage of buyers for this type of product.
jenny mom
When you say it’s not the right time, do you mean that just given the uncertainty in the market, or the fact that it’s a partial interest makes it harder to download?For example, can you give more details about that?
Philip Lapointe
No, it’s not a partial interest because we’re all on the same page. We sell it as one. So, it’s actually a lack of liquidity for that interest repayment. No, I think it’s more of the type, given the potential hurdles that we have, and then the fact that assets aren’t stabilized, we think, and we’re probably wrong, but we think that to get a maximum price, it’s probably also higher if we wait for assets to be leased at around 80%. So, for Shoreline, we’re at 69%. Hercules, we arrived a little late. So the fourth quarter, the first quarter, turns out to be the right time to bring what we think is a top-notch asset to the widest audience imaginable.
jenny mom
It is ok. They gave me you. In transfers, for the exchange of the same type 1031, I believe their sales exceeded land purchases in Florida. Does the exchange of the same nature 1031 apply to land acquisitions or is it only for PPIs?I’m just looking to find out if you can maximize the currency you have in 1031.
Philip Lapointe
No, surely you can do it for the earth. We still have budget to implement. And as Tom mentioned, we’re very busy on the disposition side, whether it’s in Canada and in the U. S. In the U. S. , and we are exploring possibilities. So whether that budget is mixed with some other disposition product, or in themselves, they will be reallocated to land to be developed or to income-generating assets within Lantower.
jenny mom
It is ok! Super. Et and then my last query is, in the leasing business, especially with the commercial assets in Oakville and Montreal, I was just wondering if you can give us a little more guidance on how to design that incoming revenue, I guess Q4 and maybe Q1 next year?
tom hofstedter
Hey, Jenny, it’s hard to say because those are single-tenant assets and I don’t need to be cute and we have confidential agreements with our tenants, and we give you the rents and what the raises are, I think it’s a little unfair about them. What I can, is that there are really extensive increases. Coming soon, the baseball stadium: Montreal’s comes from about $5 consistent with the square foot of rent. You can design it this way. I think we said a 125% increase, okay?
Larry Froom
But Jenny, they are all rented and the appointments with the market, there was no reduction or it was: it is a very dynamic market and they gave us the market price.
jenny mom
So Montreal is going to take a big step forward. Oakville, remind me, was the current quarter vacant? So is it going to be a big step?
tom hofstedter
Yes she is.
jenny mom
That’s fine.
tom hofstedter
Oakville has been vacant for a few months
jenny mom
It’s true. It is ok. I agree. I’ll do the math on that. Thank you very much. I’ll come back.
Operator
The next one comes from Matt Kornack of National Bank Financial. Continúe. Su line is open.
mate kornack
Hi, guys. I guess Larry, just a brief follow-up to Jenny’s questions about Oakville. Are there arrangements or things like that that would prevent it from being a monetary contract in the third quarter, or is it a monetary contribution?
Larry Froom
Is there an era of flexible renting?I’m not sure. One month. I told him there was a one-month era with no rent.
mate kornack
Okay, perfect. And then also a follow-up of Jenny, in terms of Shoreline and The Grand, can you give a concept of?I know you are in the joint venture portfolio and you are only a third of the interest, however, the contribution of NOI, what do you think about those types of ramps when you rent?I know you have to exceed the threshold of your charge policy. There may not be much there, but what do we expect on this front?
Philip Lapointe
So we have estimated numbers, however, what I would tell you, Matt, is correct, I guess from our point of view, that looking to subscribe to what’s stabilized underlying, I think they just put you back in your mind, the fact that we’re going to continue divestting those assets. They were not meant to take place, but if they did take place, on – or are a kind of, on a combined basis, that our interest is about US$6 million.
mate kornack
Okay, and you know if it wasn’t negative the quarter, but it was above 0 at this point, or?
tom hofstedter
It was really a bit negative. That was a few hundred thousand negative dollars the quarter.
mate kornack
It is ok. No, it’s useful. And then, of the $110 million that is withheld as allocated money in 1031, you’re pretty sure you’ll eventually find an acquisition that you can allocate that tax benefit to. Is it fair to say that?
Philip Lapointe
Yes, without bowing your hands, and we’re going to have some attractive updates for the next quarter, but we see some pretty and underrated arbitrage opportunities, especially at Sunbelt. So I don’t need to be cute and flexible, but stay tuned in and we’re going to have a Q3 appeal to expand on this question.
mate kornack
It is ok. No, pretty fair. And the last one for me. Quite simply, there have been transactions at impressive costs to Caledon or near the land of Caledon. I know you have a fair price that is not included in some of those H numbers.
Larry Froom
$2. 5 million consistent with acre.
mate kornack
It is ok. Thus, some recent transactions turn out to be, if not more so.
larry froom
Well, there’s one in 2. 5, but there’s more dominance around three. There has been nothing below 2. 5 that I know of.
mate kornack
That’s fine with me. It is ok. Thanks guys.
Operator
Our next one comes from SUMAYYA Syed from CIBC. Continue. Your line is open.
Sumayya Syed
I simply looked to get past 145 Wellington with zoning progress this quarter. I wonder what the next steps are, if it’s under discussion or if it gained interest or what the plan is with that asset.
tom hofstedter
Pardon. Je made the question heard. Can you repeat?
Sumayya Syed
Oui. Je just wanted, I guess, to go through 145 Wellington, given the zoning progress during the quarter, I was just wondering what the next steps were, if there was any discussion or interest in this asset.
tom hofstedter
At the moment, it’s rented and we’ve done the zoning, as you know. So right now, we’re just going to burn the leases. There are no redevelopment or sale plans.
Sumayya Syed
Well, then, turning to Lantower, I wonder, Philippe, if you can just overlook earnings trends in the portfolio and how they compare to what you’ve noticed historically.
Philip Lapointe
I am sorry. Did you say renewal or renewal ratios?
Sumayya Syed
Trends in billing.
Philip Lapointe
Trends in billing. They are so low traditionally, so going back to my starting point, our renewal rate is in the 60s and now, in the first quarter. It’s about 60% in the current quarter. If I take a look at the last nine years, it’s probably a little less than 50%. Therefore, we not only record rental rates, but also renewal percentages. And that’s also true in Jackson Park and New York.
Sumayya Syed
It is ok. And to stick to U. S. multifamily. In the US, I wonder if there are any updates or adjustments to the aspect of the transition market in terms of value that were carried over from the last quarter to the present.
Philip Lapointe
It is not surprising. I have to admit it’s a bit unexpected, however frankly the sheer amount of equity and capital that needs to be invested in multi-family housing, whether it’s because of a preference for that type of asset or frankly because of the ability to come in and have this explosive growth, reasons why the maximum homes are still valued in the middle 3%. And what I think will take position is, as evidenced by our disposition in San Antonio, arguably our worst active asset in the sleepiest market position of all our positions, and even hitting a 3. 6 cap ratio, we don’t I see that there is no softness in our fair market position position values. And I think the trades that are going to take position in the next 60 days, as everyone gets off their summer vacations and picks up activities for Labor Day, we’re going to see more trades going down to a 4-roof reduction rate. Despite the fact that interest rates would possibly mean there would be negative leverage in the first year, the fact that other people would build their NOI at 14%, 15% and go out that leverage temporarily negative leverage is very hilarious – personal and institutional capital. And so, in short, no. Rather, based on the number of calls, incoming calls we receive with our own assets from others seeking to protect them from market position on those numbers, give us more assurance of our fair market position values.
Sumayya Syed
It is ok! Super. Thank you.
The next one comes from Jimmy Shan of RBC Capital Markets. Continúe. Su line is open.
jimmy shan
So, just about the assets that have been rezoned, can you remind me how they are valued on the balance sheet?I guess I’m thinking in particular of 145 Wellington. Now that it’s rezoned, is there any additional value, or are those assets necessarily valued as if they were existing buildings?
tom hofstedter
It has a cost like building an existing workplace, but really what is being conveyed through the REIT industry in general is that the cost of the income-generating asset has gone up building and the cap rate has gone down because would have intensified them. So it doesn’t cost, and place the same with the selection in Rio, Canada, all over the world. They are not worth $250 or $300 per square foot. They are worth it based on a discounted overall cap rate for someone buying an income-producing asset. And you can see, though, that when the old CICA – CSA building on Wellington Street was sold to Westdale, it was actually sold on the same basis, plus a more competitive cap than an actual valuation based on residential and advertising density that will be will be held during the rezoning. So, in essence, you’re getting a boost, but you’re not getting a boost: a full market cost boost. If it’s the cost of the land, you get a build as a more competitive cap because the client rarely buys an assignment that they’re in a position to approve at the time because we have tenants in the build.
jimmy shan
I see. So the competitive ceiling, I guess, incorporates incremental density. So, at 145 Wellington, we can assume that the price, even with rezoning, we shouldn’t see an increase this quarter, in the next quarter.
tom hofstedter
Not this quarter, but I guess the price will add up over time as we get closer to the end of the lease. As now with the fact that it was recently rezoned, it falls into our reevaluations.
Larry Froom
Just a little more color, Jimmy, we did a reevaluation. We had a third-party valuation of that asset in the first quarter, and we had some construction based on planned rezoning. Planned rezoning took shape after the current quarter. So, we didn’t reposition that price since the first quarter. It’s still accumulating a little bit more now that we have it in hand, this rezoning, but we haven’t repositioned it since the first quarter when it was still expected. So, it was reduced a little bit based on the expected rezoning that we have now.
tom hofstedter
At the time, it was recent in rezoning. You can expect it to accumulate gradually, but not at the price of a vacant lot.
jimmy shan
It is ok. they gave it to me And then the same. . .
tom hofstedter
Evaluators will never do that. They will give you full value. This is how the formula works.
jimmy shan
It is ok. And on Wynford Drive, and this would possibly be an overly simplistic way to look for it, the merit built into the rezoning of that asset is the difference between the sale value and the value of the option. that additional cost could be, is essentially this difference of $39 million which is the time cost of the cash that Array. .
Tom Hofstedter
Sorry, I don’t perceive the question, but I don’t hear you well either. What. . .
Larry Froom
So the question is, how is this buyback option based on value?Is it based on the revaluation of potential?
tom hofstedter
No, it doesn’t compensate at all. There is no math in this. It’s just a negotiation.
Larry Froom
The rezoning is much higher.
tom hofstedter
But keep in mind that rezoning is speculative at this point. Surely we have no idea if or when this is going to happen. We control the process, but we are not convinced that it will necessarily happen, or what will happen. we will do in getting it and what we will have to give to the people to get it. It is conceivable that we will retain the rights, but I would not consider that option to be important. I don’t know. It’s completely speculative. It’s very similar to the option in The Bow, where I can’t put a dollar amount either. The genuine question you deserve to ask yourself is: can I sell this option today?And how much would someone pay me for this option today?the answer is that since that user would have to pay money out of pocket, they probably wouldn’t pay much, however, it has as a gift, a lot of prospective value. So, good luck comparing it. It is not evaluated in our books at any time.
jimmy shan
It is ok. Finally, in addition to the valuation, on the price of U. S. multifamily assets. In the U. S. , some of the U. S. REITs are in the U. S. U. S. companies comment that capitalization rates are successful in 5200 fundamental issues in markets such as Dallas, Rally. He’s talking about 4 to 4 and a part from 3 to 3 and a part at the top. I do not know. Capitalization rates are complicated these days. I think so, I don’t know what the other people in NOI are limiting. So I’m just looking to reconcile that with what you’re talking about, a kind of under-4. Are we seeing tension in the costs of certain other types of assets or not?And I’m just looking to see if you can comment on it.
Philip Lapointe
No, I do not dispute the data you have received. It’s just that it’s not indicative in any of the data sets we’re looking at. Both: We stick to all markets, and I think I’ve talked about this before, but we stick to a hundred or so live trades to get a broader concept in case we want to make a quick acquisition, or we’re looking to take profit from a misjudged opportunity. And most of the opportunities that we are meant to take a look at in this regard, at most 90% of them lately have a cap rate of less than 3. 7, 3. 8. Now there hasn’t been a lot of trading yet I think the confusing component is that I think everyone is pontificating about cap rates because naturally one would expect cap rates to increase in accordance with the capital charge, and more on particularly the debt burden. However, there haven’t been many, if any, in fact, any public transactions that have a top rate above 4. Now what’s going to happen in the next 90 days, who knows, again, I’m not looking at anything right now other than the misjudged opportunity here or there through perhaps a distraught developer. But I would say that for most other people in the market lately who are looking for Sunbelt stabilized opportunities in the Class A asset class, there are no 4 stops to be found.
jimmy shan
OK thanks.
Operator
We no longer have any questions online. I would like to turn my back on Philippe Lapointe for the last word.
Philip Lapointe
Thank you all for joining us today, and we look to the future to update you on our progress in the coming quarters. Thank you and have a wonderful weekend.
Operator
This concludes the convening of today’s convention. Thank you for your participation. You can now log out.