Minto Apartment Real Estate Investment Trust

TSX:MI.UN

Earnings Call Transcript

[Operator]

Good morning. My name is Michelle, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Minto Apartment REIT 2023 Second Quarter Financial Results Conference Call. [Operator Instructions]

Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward-looking information in the REIT's news release and MD&A dated August 8, 2023, for more information.

During the call, management will also reference certain non-IFRS financial measures. Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures.

Thank you. Mr. Li, you may begin your conference.

[Jonathan Li, executive]

Thank you, operator, and good morning, everyone. I'm Jonathan Li, President and Chief Executive Officer of Minto Apartment REIT. I'm joined on the call by Edward Fu, our CFO; and Paul Baron, our SVP, Operations. I will begin the call with an overview of some highlights from our second quarter, Eddie will review our financial results in detail, and I will end with our development pipeline and business outlook. Then we will be pleased to take your questions.

We delivered strong operating performance in the second quarter supported by our high-quality urban portfolio and strong demand for rental housing in all of our markets. We successfully executed on our strategy to reduce our variable rate debt exposure from 26% to 11% of our debt stack, a reduction of $165.9 million. Importantly, the refinancing initiatives have helped us deliver positive FFO and AFFO per unit growth for the first time in a number of quarters after adjusting for nonrecurring items.

It is also notable that the measures were implemented partway through the quarter and only had a partial impact on FFO and AFFO per unit during Q2. The full impact will be achieved beginning in Q3 onwards. In addition, we continue to evaluate other opportunities that are accretive to FFO and AFFO per unit, including upward refinancing mortgages maturing in January 2024 and further capital recycling. We are committed to maximizing FFO and AFFO per unit permits, and we will remain depend in our capital allocation decisions to achieve this goal.

Turning to Slide 4. We refinanced 7 mortgages during the quarter, including two variable rate mortgages and 5 fixed rate mortgages, with new CMHC insured fixed rate mortgages. In total, as a result of the 7 refinancings, we realized an interest rate reduction of over 350 basis points on the two variable rate refinancings. Our variable rate debt as a percentage of total debt declined from 26% to 11%, and we generated $73.8 million of incremental refinancing proceeds that we used to pay down the credit facility.

Subsequent to the end of the quarter, we upward-refinanced maturing term debt, generating incremental proceeds of $24.2 million, which we used to further repay the credit facility. In addition, we are exploring upward refinancing of 3 properties with mortgages maturing in early 2024 that have potential to generate between $55 million and $65 million of incremental proceeds that we expect to use to pay down the credit facility.

Moving to Slide 5. Given the current capital market conditions and interest rates, we remain disciplined as it relates to capital allocation decisions. During the quarter, we made 3 important decisions that highlight this. One, we agreed to terminate the purchase option on the Fifth and Bank property. Two, we waived on our right of first opportunity for 3 attractive development opportunities that were presented to the REIT by Minto Properties. And three, together with our investment partner, we postponed the construction start of the High Park Village intensification, the rationale for which is detailed on the slide.

I'll now invite Eddie Fu to discuss our second quarter financial and operating performance in greater detail. Eddie?

[Edward Fu, executive]

Thank you, Jon. Turning to Slide 6. Same property portfolio revenue was $36.7 million, an increase of 9.3% from Q2 last year, reflecting higher occupancy and higher average rents. Same property portfolio NOI increased 11.8% year-over-year to $23.1 million, while NOI margin increased by 140 basis points to 62.8%. The increase in NOI reflected a higher revenue, which outpaced higher operating expenses. The FFO and AFFO reflected nonrecurring items. After adjusting for these, normalized FFO and AFFO per unit in the quarter increased by 1.2% and 1.1% to $0.213 and $0.186, respectively. The normalized AFFO payout ratio in the quarter was 65.9%.

Turning to Slide 7. This chart demonstrates the steady quarterly increases we have generated an average monthly rent as well as our very strong gain on lease performance in recent quarters. You can see that gain on lease was temporarily impacted by the pandemic in 2020 and 2021, but it has now been in the mid-double-digit range for 4 consecutive quarters.

Moving to Slide 8. we signed 495 new leases in the quarter. The average monthly rent on new leases increased 16.2% to $2,066, with significant double-digit gain on lease realized in all markets. The embedded gain-to-lease potential at quarter end increased to 16.1% representing $22.1 million of annualized incremental revenue growth.

On Slide 9, we break down quarterly suite turnover and occupancy for the same property portfolio. Turnover of 20.2% on an annualized basis in the second quarter was a sequential increase compared to the first quarter as Q2 is a busier leasing season, but it is below historical norms as more tenants are choosing to stay in place due to tight rental market conditions. Occupancy has been at least 97% for 3 straight quarters.

Moving to Slide 10. Operating expenses for the same property portfolio increased 5.4% compared to Q2 last year. Property operating costs increased due to higher salaries and wages as well as severance costs as we pursue efficiencies. Higher electricity and water expenses reflect rate increases and increased consumption. And finally, natural gas expenses dropped significantly due to lower rates as well as lower consumption due to warm spring weather.

On Slide 11, we repositioned a total of 33 suites in the second quarter, generating an ROI of 9.4%. We expect to reposition 80 to 120 suites this year, a reduction from 259 last year due to reduced turnover and higher occupancy.

Turning to Slide 12. You will find our key debt statistics. The maturity schedule of our term debt reflects our recent refinancings and remains balanced. As of June 30, 2023, the weighted average term to maturity on our debt was 5.87 years with a weighted average interest rate of 3.23%. 89% of debt was fixed rate and 76% was CMHC-insured, an increase from 74% and 61%, respectively, just last quarter. Total liquidity was approximately $163 million at quarter end and debt-to-gross book value was 42.2%.

I will now turn it back over to Jon.

[Jonathan Li, executive]

Thanks, Eddie. Moving to Slide 13, we have an overview of our development pipeline. We currently have 2 intensification projects under construction, 1 predevelopment intensification and 5 convertible development loans, or CDLs, that include purchase options. While we terminated the purchase option on Fifth and Bank, the other 4 remain in place. We will remain disciplined with our capital allocation and evaluate each opportunity carefully in the context of the prevailing market conditions.

Stabilization of all the projects currently under construction is expected between 2024 and 2026. They could add 1,459 suites to our portfolio or 1,020 at our proportionate share. You'll find some updated information and photos of the projects in our pipeline over the next 2 slides.

I'll conclude with our business outlook on Slide 16 before we take your questions. Our operating results have been strong in recent quarters, supported by very solid fundamentals in the Canadian urban rental market. We believe these fundamentals are poised to remain in place for the foreseeable future. Housing affordability has become an increasingly serious issue due in part to rising interest rates, Canada's expansive immigration policy and inelastic supply of new housing that is not projected to keep up with demand. We are not surprised to see an increased public willingness to rent in this environment, and it is reflected in our strong rent growth and high occupancy.

Given these positive fundamentals and our high-quality portfolio, we are highly focused on the following; one, maximizing FFO and AFFO per unit; two, strategic and highly disciplined allocation of capital; three, minimizing our revolver balance given the high current interest rate environment; four, exploring alternatives to fund our growth while minimizing any dilution to cash flow per unit. We are confident that these strategies will deliver strong returns for unitholders despite the external challenges our industry is facing from high interest rates and more constrained access to equity capital.

That concludes our presentation this morning. Eddie and I would now be pleased to answer any questions you may have. Operator, please open the line for questions.

[Operator]

[Operator Instructions] The first question comes from Mike Markidis of BMO Capital Markets.

[Michael Markidis, analyst]

Nice to see some FFO per unit growth finally coming through the system. So congrats on that. Thanks so much for the incremental disclosure on the ROFOs that you've waived on in the past few quarters. Perhaps maybe you could just give us some color as to whether or not these developments have actually progressed and if other capital partners were found, if you're able to answer that.

[Jonathan Li, executive]

Yes. Michael, thanks for the question. Can you hear me okay?

[Michael Markidis, analyst]

Sure I can.

[Jonathan Li, executive]

Okay. Great. So now I'm here with Eddie and Paul, and if anyone has got a legal question, John Moss is sitting next to us as well. So we're excited to be here. So yes, we're happy to give you some more detail on the wave opportunities, MPI is a tremendous partner, are okay with us disclosing some more detail. There are 5 towers that they have -- sorry, 5 properties and 7 towers comprising about 1,000 suites in Vancouver alone. In Toronto, they've got 3 sites, 5 towers and 1,300 suites in Toronto. And they have a mix of partners and properties they're going to go added alone. They're all -- so they're spending money at all of these, and the construction will probably start anywhere from Q3 of 2024 onwards. Actually, one of them maybe Q1 2024. So they have institutional partners on 1, 2, 3, 4 -- between 4 and 5 of these who are signed up and ready to go with them.

We're hopeful these will potentially at least MPI's ownerships come back into early -- that they'll be presented an opportunity, hopefully in the future. They don't have to [ be paid ]. But we're hopeful that they'll be an option for REIT going forward at some point.

[Michael Markidis, analyst]

So the 7 opportunities, it sounds like there might be a couple more, I missed the number of properties in Toronto, that might come through or might be offered.

[Jonathan Li, executive]

Yes. I mean this is kind of -- there's an abundance of opportunities that MPI has. I think they've shown that these are a set of -- they've made up. And so even in addition to these, we know they're out there looking at others as well that are at various stages of the process. And so we're pretty excited about at least what they're doing. We'll see if the REIT to take advantage of it. It will be dependent on lots of things, including market conditions and cost of capital and access to capital.

[Michael Markidis, analyst]

Okay. And can you remind me, so I mean you're not participating in the development or development funding in any way, so you don't have a -- it was the same structure as the existing CDL program. You have a discount purchase option. But in the event that when these are developed, if Minto looks to monetize its equity stake in these properties, does that ROFO still apply?

[Jonathan Li, executive]

If it's wholly owned, then we think yes. If there's a partner, we -- no, we waived everything. So -- but notwithstanding what it says, I suspect that Minto will be pretty motivated to at least get what they can in terms of ownership to the REIT. And obviously, there'd be no discount either. We don't lend them any money. But it's possible that even through the development process that both parties decided that starting another CDL and market terms make sense. And if that's case, then there'll all likely be a discount associated with anything, we would serve...

[Michael Markidis, analyst]

Okay. Nice to see -- at least just given the environment, not [indiscernible] the environment, but nice to see that your partner was willing to work with you and postpone the planned intensification of High Park Village. I think Leslie York Mills. Is that the one that's still in predevelopment? Question -- that would be the first part of the question. And then the second part, is there any thought to potentially postponing that one?

[Jonathan Li, executive]

So I mean, the 3 on balance sheet developments that we have, Leslie York Mills, Richgrove and High Park Village, both Richgrove and Leslie York Mills are already under development. We've basically moved the parking garages on both of them out of the way so that we can dig a hole and start building. So we're actively at that stage now for both Richgrove and Leslie York Mills. There's a big hole in the ground, if you drive by, you can see it. And I think we're going to start showing relatively soon on both of them. So those we can't stopped.

We have a partner on LYM where we own 100% of Richgrove. High Park Village is the one that we can and we do have control over. And if I just can comment on that, Michael, it's we're disappointed. And it's because our country needs more housing, right? And it needs it now. And this is a tremendous candidate to add. I think it's like 700 suites or new housing units in the heart of Toronto right on major transit, adjacent to High Park. So it's too bad to get start. But the reality of the situation is we have competing demands for our capital and our capital is not unlimited. So we have to be disciplined and prioritize our future spend, and we have to make some difficult decisions.

So at this time, if it makes sense for us to defer this and concentrate what's already in process and what's directly in front of us. And that includes not only our on-balance sheet development that I just went through, but also includes our CDL commitments. I will add that the returns and yields for this development for High Park Village, they still make sense to this environment for us. But we don't have unlimited access to capital, and that's got to be factored into our decision making.

[Michael Markidis, analyst]

That makes a lot of sense. And then last one from me before I turn it back. Just on maximizing cash flow per unit growth as being the number one sort of priority given the current environment. I mean simplistically, does that mean that as long as you've got a balance outstanding on your credit facility, any source of equity capital would be used to pay that down?

[Jonathan Li, executive]

I think simplistically, that's probably the case. I think we do have capital requirements. So as I just said, CDLs, development opportunities, on-balance sheet development and CapEx, not to mention CapEx. So we're going to take care of those first. And then any excess capital or cash that we have in excess of that we will likely use to pay down our revolver, because that is the most accretive thing that we can do even more than buying back our units, even more than some development yields, like we're paying back over 7% money with that. So I think that's a pretty reasonable guess.

Now, if there were -- if there was an amazing acquisition opportunity and we could -- we thought we had funds and leverage was in a good spot and it made strategically sense for us to do it, would we have to have a 0 revolver balance to do that, probably not. But obviously, we're thinking about all this holistically and we're concentrated on delivering FFO per unit growth.

[Michael Markidis, analyst]

Sure. And just -- can you just remind me, is there any more equity required for the 2 on-balance sheet developments? Or has that been fully taken cared of?

[Jonathan Li, executive]

Yes, there's a little bit, call it about $6 million for both of them combined for the rest of 2023 and another about $6 million for both of them for 2024.

[Michael Markidis, analyst]

And then you've got construction financing for the balance?

[Jonathan Li, executive]

That's right.

[Operator]

The next question comes from Jonathan Kelcher of TD Cowen.

[Jonathan Kelcher, analyst]

I guess just sort of sticking with the balance sheet and where you guys have made really good progress on the floating rate debt. Given that progress, are asset sales less a priority now than they may have been 3 or 6 months ago? And I guess, related to that, what are you seeing in the market in terms of opportunities for some asset sales?

[Jonathan Li, executive]

So on the asset sales front, I guess, there are a few comments we can make. To answer your question directly, we feel like you kind of nailed it. At the end of the day, the good news for us now is that we don't "need" to sell anything. There's no pressure for us to do it given all the good financing work that Eddie and his team have done in recent months and the refis that we actually have ahead of us for the balance of this year and the rest and for 2024. So that really helps us, vis-a-vis, pricing discussions with potential buyers. There's no real impetus for us. We don't have to sell anything. And I think that will help us going forward.

We haven't taken our foot off the pedal in terms of asset sales because they're still accretive for the most part, like if we can sell something for a 5% cap and pay down a 7% revolver, like that's accretive. So we're continuing on that path. We're making -- the Edmonton process is still ongoing for our remaining 2 assets. I would say the mortgage assumption approval process with CMHC just generally is extremely slow today given capacity constraints that they have, given the huge volume of applications that came in right before the fee increase went into effect in June. So that's slowed down everything. So they're drowning. But they're great organizations, fantastic partners, and we're really thankful that they're working so hard.

But the reality is, is everything, including apartment sale approvals, including normal applications, including everything else that came in, it's just slowing everything down. And so we don't have great visibility on the timing for those remaining assets as we're simply waiting for the final approval. But we're hopeful that all is going to be done there before the end of September, we're hopeful that will happen. And so that's Edmonton. And then we continue to work on a handful of other sales that are at various stages. But buyer activity has been slower for larger assets, call it, $50 million and up, because there are fewer buyers and those buyers know they have leverage, and so they're being more selective.

But there does seem to be some liquidity in smaller assets, sort of $20 million and less, and we're seeing that and we're -- our peers are seeing that and we're just seeing that with other transactions that have been announced. So we continue our discussions. We hope that there's a good outcome, but nothing's guaranteed. And as I said, I think things will take longer due to the capacity constraints at CMHC and that kind of is what it is.

[Jonathan Kelcher, analyst]

Okay. That's lots of color there. And I guess just switching gears a little bit. You guys deferred the High Park development. But if we look out 3, 6 months and your cost of capital improves and it starts to make sense, how quickly could you sort of change gears and move forward with that?

[Jonathan Li, executive]

Yes. So we are -- and I think as we announced, we are continuing the predevelopment work over the next 12 months. It's probably a small budget in like the low -- the very low single digits for 100% of the project for us to keep spending some money to prepare the site for it, to get the rendering done, get everything ready for tender. So when we finish that work, which will take, I don't know, 8 to 12 months, we will be in a position that when we say go, we'd hopefully just have to go through the tendering process and could start shovels about 6 months after we decide to say go.

[Operator]

The next question comes from Matt Kornack of National Bank Financial.

[Matt Kornack, analyst]

Just switching to operations. The gain-to-lease opportunity increased a bit this quarter, but leasing spreads were kind of flat. How should we think of trajectory of those 2? Understanding that your turnover is a bit higher because you have some non-rent controlled assets but -- and Alberta exposure, but just a sense as to where you see that gain-to-lease moving maybe over the next 12 months or so.

[Jonathan Li, executive]

Sure. Matt, thanks. So I think a couple of comments on the gain-to-lease. I think our rents are higher, $1800 rents on average. So I don't think we can grow that at 16% into [ proportunity ]. I think we saw 9% to 13% gain-to-lease is pre-pandemic. And we think that the fundamentals in the market today are stronger than they were pre-pandemic, which leads us to slightly higher than 9% to 13%, maybe it's 10% to 15% or low double digits we think is a reasonable assumption for our gain-to-lease going forward.

And that means long term, if you assume a low double-digit growth on our new leases and you assume 3% to 3.5% on our renewals, that still gets you to 5% to 6% revenue growth. And we think now that we've rightsized or at least fixed some of our balance sheet, we're hopeful that even if we generate 5% or 6% revenue growth, we can translate that, and then some into cash flow per unit growth if you add leverage to that. So we still think that's an okay place to be over the long term.

And I guess the last point is if you think about our 16%, don't forget that is on $1,800, right, or on a much higher rent. So that is, if you just do that math of 16% x $1,800, that's, I don't know, $280 or $290-odd dollars per month on a rent. And that -- if you take that $280 on a much lower starting base, that's a much higher percentage gain-to-lease. So I don't want to lose sight of that for us.

[Matt Kornack, analyst]

Fair enough. That makes sense. And then I guess the only other aspect of the math there would be just cost escalations. It seems like you guys and your peers are starting to see some reprieve on that front. Utilities were down rate may have been usage plus cost. But year-over-year, and I guess we may be in better shape this winter. But on that front, margin expansion, it seems like it's happening, but how should we think about that going forward?

[Jonathan Li, executive]

I think we've been pretty consistent with telling people what we think at least for 2023, and that is we expect our revenue to outpace -- or revenue growth to outpace our expense growth. Where if you just think overall about our expenses, I think the new inflationary increase for us is probably 5% to 6%. So you can expect inflationary increases for many line items, right, water, hydro, insurance. Maybe property taxes a bit lumpy, but so far, it's a little lower than that. But we are experiencing higher growth on salaries. So high single digit, maybe even double-digit growth on that.

And then where we're getting a little better is on natural gas, where we remain unhedged. And I think the comps for the rest of -- at least the next 2 or 3 quarters, are likely going to be favorable from a pricing perspective at least. Like I don't know about usage. But -- so if you take all of that together, we think kind of like 5%, 6% growth on the expense side, maybe a little higher than that I don't know. It's probably going to happen, but we're hopeful that revenue will outpace it.

[Matt Kornack, analyst]

Okay. That makes sense. And then lastly from me, on the occupancy front, just general seasonality, it's a more active times, so you're move-ins and move-outs. So sequentially, it was fairly stable at 97%. Montreal still looks a little light at 94%. And I know you've got Le 4300 that you're dealing with there. But how should we think about kind of the second half of the year from an occupancy standpoint? And for you, what is an ideal occupancy number? Are you kind of yield-maximizing to some extent and keeping a bit of vacancy?

[Jonathan Li, executive]

Yes. I think the other -- like our major markets other than Montreal are all between 97.5% and 98.5% occupancy, and we feel like that's a good place to be for those markets. We're getting pricing power. We're able to drive deals and we feel pretty good about that. And any upside in our occupancy will likely come from Montreal.

So like you just said, it's been pretty slow. We're hopeful that it catches up to the rest, but where we are experiencing our vacancy in our Montreal portfolio, I think has been -- I think you asked this question before, is in our higher rent penthouses in Rockhill, as well as a number of units in Le 4300, which, as you know, is just a much more expensive building and higher rents. And so that's where the vacancy is in our portfolio, and we're working hard on it. But it's -- management has spent a lot of time out there.

[Matt Kornack, analyst]

Yes. So you wouldn't say there's been a step change in demand at this point in that, but still hopeful that you had some progress there? And would you capitulate it on rate at all to fill it? Or are you just -- you don't want to go there right now?

[Jonathan Li, executive]

I mean the only promotion that we have in our portfolio is in Montreal. And so we -- given the time of the year today, we're probably less inclined to give the parlay on promotion. But as we approach the more difficult leasing season in the winter, maybe we'll look at it a little bit differently, so that we're at least full through a slower time in the year. But we're not there yet. And I think there's a lot of -- for Le 4300, that note is quite unique in that folks need to sell their homes in West Mount for $3 million to $4 million to fund a stream of rental payments going forward.

So that's not an easy decision, it's not a quick decision and it's not easy to execute in terms of selling your house. So we are cautiously optimistic. To answer a little bit more of your question, you -- I guess you did mention, we are seeing a lot more students, not just in Montreal but everywhere. But in our Montreal portfolio, we don't -- the students can't afford the units that are vacant, unless you put 5 students in one apartment, which is probably a reason for anybody. So that's kind of what we're dealing with there, Matt.

[Operator]

The next question comes from Brad Sturges of Raymond James.

[Bradley Sturges, analyst]

Just to -- I guess, thanks for the color on the asset sale process or progress. Just curious if you had a pencil in timing, would you still expect an announcement or a deal to be done by the end of the year?

[Jonathan Li, executive]

Well, I think just said, on Edmonton, I think I just put the bogey out there at kind of hopefully end of September. But -- and on the other stuff that we're working on, I would not be anticipating any announcements in 2023 given the backup that is currently at CMHC with approvals.

[Bradley Sturges, analyst]

Got it. That's helpful. Just based on, let's say, Edmonton getting completed plus some of your plant refinancings that is going to generate some incremental proceeds, where do you see floating rate debt exposure penciling out of that? Is that going to be, I think, you hinted that last quarter like mid-single digits in terms of a percentage of that?

[Jonathan Li, executive]

Yes. I think by -- because again, we do have ongoing capital commitments for the rest of the year. So we won't just be standing still. We'll be drawing down. So I think by the end of 2023, we'll be kind of close to where we are today, right? But with some refinancings that we have in the pipe in early 2024, we expect that to come down slightly from there.

[Bradley Sturges, analyst]

Right. As you're getting closer to your target, does that make it easier to shift the capital allocation strategy back towards adding a little bit more focus on growth, such as maybe funding some of those acquisitions through the CDL program?

[Jonathan Li, executive]

I mean it helped, but it's not just the only factor. There's lots of factors that we're considering what are the relative cap rates relative to our cost of capital, could we sell some assets and match fund and maybe high-grade the portfolio. Are we entering a new market that we really want to get into because there's a path to own a lot more in those markets. There's a whole bunch of strategic reasons as to why we may or may not do an acquisition. I think we want to get into a position where we have the option to do as many things as possible with our capital. And I think reducing the revolver amount to the extent we can helps us get to that position, where we have the flexibility and the optionality to do what we can do with our capital at the time where it makes sense.

[Operator]

The next question comes from Jimmy Shan of RBC Capital Markets.

[Khing Shan, analyst]

Yes. Just a couple of questions from me. Are you able to speak to the development economics on the opportunities that you passed on? And secondly, maybe speaking in theoretical, if you were to do the CDL on any of these opportunities, what do you think the rate would look like relative to what you're currently earning on these projects?

[Jonathan Li, executive]

Okay. I'm going to -- I'll try -- I'll answer your first question, but then you'll have to repeat the second question because I didn't quite get it. But on the first question, the ones that we passed on, the economics for the development are extremely good. They're in the -- I mean, some of them are above 5% yields and many are high teens, low 20s IRRs, but we just don't have the capital to do it. So it's too bad. And the proof in the pudding there is that there are parts like, MPI's have partners to invest money alongside of them at those returns. So even with cost escalations and interest rate increases and everything else, rent assumptions, given where market rents are, the development yields for all those developments are at a point where smart institutional money willing to go forward.

[Khing Shan, analyst]

High-teens IRR is levered, I assume, right?

[Jonathan Li, executive]

Yes.

[Khing Shan, analyst]

Yes. My second question was if you were to convertible loan, would the rate be materially different from what you're currently earning?

[Jonathan Li, executive]

Yes. Yes, for sure. I mean we talked about that way, right? Like, okay, well, if we were to reset a new CDL, like what does that look like? The CDLs that we struck that are currently yielding 6% and 7%, I think the base rate was like sub-2% at that time that they struck those deals. So that's quite a nice equity spread. I'm not saying we get 4% to 5% on top of 6 or 7, but it will be -- there would be a positive equity spread I think if we struck our new one. It will be on market terms, Jimmy.

[Khing Shan, analyst]

Yes. And market trends would be probably closer to high single digit?

[Jonathan Li, executive]

Yes. I mean, look, I don't know and I don't want to negotiate anything on here, but it's a spread to our revolver or some other base rate I think makes some sense. And look, this is basically rent debt that is guaranteed by a partner. So if you think rent debt is low double digits, like this is better than that, plus you get the 5% discount, which you need to factor in. So it's in that sort of higher than what it is. I don't want to negotiate with MPI, without MPI at the table here.

[Khing Shan, analyst]

Fair enough. And then one quick follow-up. So the Minto's, their institution partners who are going in these development projects, would they be candidates as partners for you on the existing assets that you're currently selling or looking to sell, or maybe selling a half interest or some or anything like that?

[Jonathan Li, executive]

Yes.

[Khing Shan, analyst]

So that's a potential opportunity on your assets sale initiatives?

[Jonathan Li, executive]

Yes, potentially. But we're not looking to sell brand-new assets, though, right, that's the difference here. Like the capital that's chasing the new developments, they want brand-new urban. Some of the assets we're looking at selling is not that. But if we got to a point where we wanted to buy one of the CDL opportunities, finding a partner, like there's lots of options that we're considering. And also throw one out if we find a partner, reduces the equity check, we get the management fees, it validates the purchase price, that could make sense. But everything is on the table.

[Operator]

There are no other questions at this time. I will turn the call back to Jonathan Li for closing remarks.

[Jonathan Li, executive]

Thanks, Michelle, and thank you, everyone, for your time. We appreciate it, and we will see you next quarter. Take care.

[Operator]

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.