Asset Quality is Improving & Buybacks Selling lower quality assets
Identifying and retaining higher quality assets
Using the sales of these lower quality assets to buy back units at historically discounted prices
Unlocking value through aggressive sale of assets and repurchasing of units
Attracting institutional investors resulting in reduction of public float
Repurchasing higher cost debt (Debentures, and by what it sounds like, possibly Preferred Units).
Buying back preferred units at a 9-10% yield ($18-$20-ish) will be FFO accretive (Currently E's have been maxed out on the NCIB). It is very rare to see these units trade at this discount. This also removes the unitholder liability of these units on the balance sheet. Buying back preferred units will INCREASE FFO as these distributions are treated like interest payments. You will see in the FFO table that pref distributions are deducted from FFO. Additionally, preferred units are deducted from NAV at FACE value, so buying back units at a discount will add to NAV (and generate income).
Due to the small number of preferred units out there, its very hard to purchase them through a NCIB in any quantity. It would make sense to try to cancel as many of them as possible at a 9-10% yield via SIB.
As interest rates fall, the value of these preferreds will rise, making it more expensive to aquire these units in the future. We cannot reduce the yield on preferreds, and they are a risk both if rates rise (when they reset yields will go up further), or rates fall (market value of prefs rise).
In summary, Artis should repurchase preferreds at a 2-3% yield over LOC rates, while we still can. It'll be immediately accretive to FFO/AFFO to common unitholders, and remove the liability of having to buy them back at face value ($25) in the future when interest rates fall. Artis cannot adjust the preferred rates paid, but can adjust the common units. Buying these pref's back now while cheap will be the best use of funds today and help secure the common unit's yield.
NCIB should allow for another 7M common units to be bought back in 2024 (starting December). We need to see the LOC paid down, since it was just used to purchase 250M in debentures. Currently, the credit facility is 567M of 680M available, less 120M in dispositions happening (Assuming no mortgages) = 447M. Still too high. More asset sales need to happen IMO for a larger SIB, or fixed mortgages need to be put in place (this is a fine line as this affects our LOC limits due to unencombered ratios).
Lastly, I may be wrong, but I believe the 2% tax on buybacks start Jan 2024, and include REITs (which it shouldn't IMO). Maybe someone can chime in on this. More reason to get this done before year end.
See you on the call tomorrow. Not investment advice. I'm just a person on a computer who may or may not know what they are talking about. Do your own research and make your own decisions.