Artis Real Estate Investment Trust's (ARESF) CEO Armin Martens on Q1 2015 Results - Earnings Call Transcript

Artis Real Estate Investment Trust (OTC:ARESF) Q1 2015 Results Earnings Conference Call May 8, 2015 1:00 PM ET

Operator

Good day, ladies and gentlemen. Welcome to the Artis REIT First Quarter 2015 Conference Call. I would now like to turn the meeting over to Mr. Armin Martens. Mr. Martens, please go ahead.

Armin Martens - President and Chief Executive OfficerThank you, moderator. Good day, everyone, and welcome to our Q1 2015 conference call. Again, my name is Armin Martens, I am the President and CEO of Artis REIT, and with me on this call is Jim Green, our CFO; as well as Heather Nikkel, our Director of Investor Relations.

So to begin, I'd like to advise all listeners that during this call we may at times be making forward-looking statements and we therefore seek Safe Harbor. So please refer to our website, as well as our SEDAR filings, such as our financial statements, our MD&A and our annual information form for full disclaimers, as well as information on material risks pertaining to all of our disclosures.

So again, thanks for joining us. You will notice during this conference call and maybe during Q2 and Q3 as well, we will keep our format a little shorter, our presentations briefer. And, of course, at Q4 we will be more lengthy. So you will notice that during the call. That will leave us more time for questions and/or more time to get back to work later. I will ask Jim Green now to review our financial highlights and then I’ll wrap up with some market commentary. Jim, please?

Jim Green - Chief Financial OfficerThanks, Armin, and welcome everyone, to our first quarter conference call. To highlight what we said before, internal growth has always been a focus for Artis, but internal growth combined with development opportunity has become even more important for us as we’ve slowed our external acquisitions.

As we’ve discussed in prior quarters, we have been much more active in developments. We currently have over $165 million invested in projects under development, roughly $81 million on the REIT’s balance sheet and a further $85 million in joint ventures with other developers. As detailed in our MD&A, we have a number of projects in the planning stages where development activity has not actively started.

External acquisitions this quarter was a massive acquisition of one property in Denver, Colorado. It's a joint venture with a partner we own other properties with and a very nice building. We are very pleased to get that one.

As a diversified REIT, we benefit from the differences in the three commercial asset classes as well as our geographic breakdown. Artis started as a Western Canadian REIT, but over the last five or so years, we further diversified our geography to include assets in Ontario and the United States. I’m sure everyone on the call is well aware of the drop in oil prices and the potential negative impact on the Canadian economy as a whole as well as on Alberta in particular.

The REIT earns 38.8% of its NOIs in Alberta, which 44% or if I express that as a percentage of the REIT’s total NOI about 17% of our total NOI comes from Calgary office properties. We do expect the Calgary office market in particular to suffer from the lower oil prices and related lower activity in the oil in the oil production and exploration sectors.

The good news is that our occupancy is still holding up fairly well in our specific Calgary properties and lease expirings over the next few years are not huge. Our expansion into the US has provided us with what we consider to be a great hedge against the falling oil prices and lower oil prices usually mean a weaker Canadian dollar and this benefits the results of operations from our US properties when translated back to Canadian dollars. We got a great lift again this quarter from foreign exchange based on the fact around 26% of the REIT's portfolio is in the US.