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Executives

Barbara Lavery – Corporate Secretary

Todd R. Cook – President and Chief Executive Officer

Robert Palmer – Chief Financial Officer

Analysts

Jonathan Kelcher – TD Securities Inc.

Heather C. Kirk – BMO Capital Markets

Mario Saric – Scotiabank

Alex D. Avery – CIBC World Markets, Inc.

Jimmy Khing Shan – GMP Securities LP

Jenny Ma – Canaccord Genuity Inc.

Northern Property Real Estate Investment Trust (OTC:NPRUF) Q2 2014 Earnings Conference Call August 13, 2014 4:30 PM ET

Operator

Good afternoon. My name is Laurel and I will be your conference operator today. At this time, I would like to welcome everyone to the Northern Property REIT’s 2014 Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I’ll now turn the call over to Todd Cook, Chief Executive Officer. Please go ahead, sir.

Todd R. Cook

Thank you. Welcome ladies and gentlemen, and thank you for joining us for the second quarter conference call. Joining me today is our Chief Financial Officer, Rob Palmer; and Barb Lavery, our Corporate Secretary. We will begin the conference call after Barb reads our brief cautionary statements.

Barbara Lavery

Thank you, Todd. Certain information and statements made during this conference call including any question-and-answer session may contain forward-looking information with respect to Northern Property REIT, or NPR as we’re known, and its operations, strategy, financial performance, and conditions. The actual results and performance of NPR discussed could differ materially from those expressed or implied by such statements. The important factors that could cause actual results to differ materially from expectations include among other thing, general economic and market factors, competition, changes in government regulation, and additional risk factors discussed in other documents, we filed from time-to-time with securities regulatory authorities, which are available on SEDAR at www.sedar.com or upon request without charge from us. All forward-looking statements speak only as of today August 13, 2014.

Todd R. Cook

Thank you, Barb. Yesterday, we reported our second quarter results of $0.61 per unit, $1.10 for the first six months. This represents a 7% increase from the second quarter of 2013 and 4% year-to-date. In addition, while still negative, our same door NOI decline has improved since the first quarter. The primary drivers for the growth over 2013 have really been the acquisitions and developments from 2013 coming online. During last 12 months, we’ve added over a 900 rental units and 30,000 square feet of commercial properties. Offsetting this growth is the annoyingly stubborn vacancy we have talked about over the last few quarters.

I’ll get into the highlights and low lights for some of these regions in a couple of minutes. Overall, vacancy loss was 8.2% for the quarter and 8.5% for the six months. This is 170 basis points and 200 basis points higher than the same period of 2013. The lion’s share of the increase in vacancy has been in both Yellowknife and Fort McMurray; again, same story we talked about last quarter. On a positive note, we have started to see an improvement in overall vacancy.

The vacancy loss of 8.2% in the second quarter is 60 basis points better than the first quarter of this year. The areas leading the charge in this improvement are Saskatoon, Newfoundland, and various parts of BC. We are happy to see some progress on the acquisition front this quarter. At the end of June, we closed on 279 units, being a 247 unit portfolio in Slave Lake, and 32 townhomes in Lloydminster on the Saskatchewan side. Both acquisitions come with effectively zero vacancy yielding about a 7% cap.

They are good acquisitions and fit nicely into our portfolios. As we’ve discussed for many quarters the pricing on existing properties remains too high. In the markets we are following cap rates haven’t moved much. And as vacancy tightens and rent increases, the map on acquisitions gets worse for those of us on the buy side as vendor price expectations continue to increase. They are now, as they have been for sometime getting too close to replacement cost. From my point of view, its hard to pay near replacement costs for 30 to 40 year-old apartments that are in need of some love to bring up to our standards, especially, when we have more attractive development opportunities available to us.

Moving onto developments, we have 39 units in Iqaluit, 24 units in Yellowknife, and the final two buildings in Regina come online in the first half of the year, all are being received well. Iqaluit is 100% leased, 21 of the 24 units in Yellowknife have been leased, and we are down to less than 30 units to be leased in Regina, which is inline with our lease-up expectations and are achieving rents about $100 more than planned. The construction of our 418 units started earlier this year, is progressing on time, on budget.

In Lloydminster, the development of 150 apartments in 8 townhomes is progressing nicely with the first turnover expected early in the fourth quarter. Today, we have pre-leased 20% of these units. Our developments in Grande Prairie in Fort St. John are also moving along as expected. The turnover of the first building scheduled for early 2015. Other lands held for development are in various stages of the development permitting stages, including the Calgary development, and in St. John, Newfoundland.

Our first project in St. John’s, which was slated for 71 units and expected to start later this year, ran into a small hiccup in late June, as the city of St. John’s turned down our request for a change in zoning. While this was unexpected, we are hopeful it is temporary and still believe in St. John’s as a strong opportunity for us to expand our portfolio through development.

Our 43 acres of land inventory gives us over three years of development capacity, Bo and his team continue to work the DP process and we are maintaining an adequate supply of developable land in strong markets. We remain hopeful to get another 200 residential units started in the second half of the year and continue down the road to our goal of 600 to 800 units started and delivered each year.

Focusing on residential operations for a minute, we saw a slight improvement in the quarter. Physical vacancy has decreased in five of the first six months of 2014. The only month we didn’t see an improvement was, for June, and a month where we’ve received a record number of notices. We‘ve had a strong rental month in June and came close to covering these large run notices. July rentals were strong, and we are in a positive net leasing position, which is expected to continue through August.

The source spots in our portfolio continue to be Yellowknife and Fort McMurray. In Yellowknife, we are completing – competing with much more affordable homes than we have seen in the past. There are two new modular home neighborhoods that are priced at points that appeal to our renters. We are focused on improving our customer service, and have stepped up our capital spending here, including the recently completed security program on eight buildings.

Rental activity remains strong and with our new management team in place, we are poised to turn the corner. Our Fort McMurray portfolio has also been the victim of the high amount of notices. We’ve been averaging close to 14 notices each month, or the last three months. The primary reason for this is residents moving out to town and purchasing homes.

We are aggressively pricing our suites and featuring incentives, and have seen the number of rentals increase each month. We also suffered from a loss of 51 suites in Riverside and Fort Mac that have had been unoccupiable since January 1. Some of these suites came back on line August 1 with 11 rented. We’ve completed an overhaul of the property, including major interior and exterior work.

The building looks brand-new and the rents are more than 200 over what we were receiving before. This quarter also saw a number of regions with positive improvements. The rest of our Alberta markets continuously shine. Lloydminster is well below 1% and Grande Prairie, St. Paul and Bonnyville are covering in the 2% to 3% range.

In BC, Fort St. John, Taylor and Prince George have consistently been below 1%. Fort Nelson and Dawson Creek continued to chart along with the weak economy. These economies are primarily focused on natural gas. As mentioned previously, the catalyst for any market improvement is going to hinge on LNG projects going ahead.

I believe this will happen one day, but until then, these will – these communities will continue to firm within our expectations. After some resident clean up and rebinding, vacancies in Abbotsford, Nanaimo and Campbell River are finally trending in the right direction.

Saskatoon also saw improvements in the second quarter. Overall our Newfoundland market remains strong. The vacancy in St. John’s and Gander remains stable. Our vacancy in Labrador City did not change despite the recent mine closure. The price of iron ore remains low, and the future of this mine and the new Alderon mine remains unchanged. Our operations team continues to focus on a number of strategies. We’ve reviewed our major expenses and looked our ways to decrease these, including a new paying contract, supplies contracts and bringing in some products from China. We’re also putting a larger focus on resident retention.

Moving onto the commercial operations, they continue to explore and to perform as expected. The vacancy is approximately 43,000 square feet, or a 3.7% at June 30. Our development partner has recently started the fifth and final building in the Bristol Court development, which we expect to require in early 2015. This last property is 50% pre-leased, and we expect to have signed commitments for the remaining space in the next few weeks. This will bring us less – down to less than 2,000 square feet of vacancy in this 150,000 square foot portfolio, which when completed will have developed out in excess of an eight cap.

The hotels continued to outperform – underperform in 2013. A large part of the decline in our hotel portfolio has come from our St. John’s property, fill their suites. This is, do in part to new supply in a market, a decrease in overflow traffic from the long-term contract in a residential division that expired earlier this year. The expiry of this contract is impacted both the residential performance and Hillview as there’s furnished suites, which have been re-leased as traditional unfurnished departments at lower rates.

We are refocusing our marketing efforts in Hillview to focus on more longer term states, which have been the staple of this property. One thing to keep in mind, on the hotel portfolio is that while they are not performing in line with 2013. They have had a steady improvement over the past many 20 years and are coming off peak performances. As Robert will discuss shortly, half of our same year end, NOI decline does come from the hotels.

Lastly, of note is, we closed the Navigator Hotel in April and has been leased to a company involved in the airport terminal project for the next three years on a triple-net basis.

I’ll turn the call over Rob now to dive in a bit more details on the finance results. Rob?

Robert Palmer

Thank you, Todd. as part of the Q2 financial review, I would like to cover the following items. After forth bringing the results, same door NOI and an update on our financing program.

As Todd mentions, we are pleased to see FFO increase, when compared to the second quarter of 2013 and improving trend from the first quarter of 2014. That performed bringing the second quarter, were $0.61, up 7% from $0.57 bringing the second quarter of 2013.

Key drivers of this growth have been the recent acquisitions and developments, which were partially offset by our vacancies experienced mostly to import back in your life. Operating expenses for the quarter were in line with expectations, as our high utility costs experienced in Q1 were turned to normal levels.

Admin costs were lower in the quarter and have been for the first half of the year. Most of this is due to timing, and we expect to return to normal levels in the second half, which have historically been $1.8 million to $2 million for quarter; partially offsetting the revenue gain was higher mortgage interest expense in the quarter, when compared to the second quarter of 2013. This was a result of an increased leverage, as we continue our finance and leverage unencumbered assets either from acquisitions, or dispositions.

Same door NOI for the second quarter of 2014 decreased by 2%, compared to the second quarter of 2013. Multi-family same door NOI declined 1%, commercial was up 8% and the hotels were down 37%. I’ve mentioned Fort Mac and Yellowknife have vacancy increases during the quarter and were the main drivers for the lower multi-family same door NOI.

On the positive side, same door improvements were realized throughout BC, in fact all reasons in BC, improving with the exceptional Dawson Creek with Prince George, Abbotsford and Nanaimo leaving the way. Commercial same door NOI was positively impacted by the first building in the office, personal office and part and renewal layouts portfolio in St. John’s. The strong thing John’s commercial results are expected to continue, as the remainder, of the office park has completed and the new buildings become stabilized.

As you know, in the first quarter 2014, the execusuites and hotels, same door NOI experienced a significant decrease. Same door NOI declined by a 37%. The segment accounts were approximately half of the total same door NOI decrease only accounted for 4% of the overall NOI. The majority of this decline habituates the St. John’s property; a significant drop in occupancy has resulted in lower revenue and therefore lower NOI.

Now turning to our financial position, our balance sheet remains healthy, debt to gross book value was 47.4%, debt service coverage ratio was 2.09%, interest coverage ratio was 3.76%, weighted average interest rate of 3.78% and weighted average term to maturity of 4.8 years. These ratios have increased during 2014, but still remain very strong and within our comfort zone. The second quarter was a busy one for financing. As you would have seen in the financial statements, we utilize a single advanced temporary credit facility to bridge the acquisitions in late June.

In addition, we continue to utilize construction financing on developments, which becomes self funding after the initial equity component. To supplement the construction financing, we have also utilized land financing on development with a little longer lead time. These credit facilities are usually one to two years in duration and are at prime plus 50 basis points to prime plus 75 basis points. On the mortgage front we completed approximately CAD95 million of financing in the quarter, including CAD50 million in assumed mortgages from the Slave Lake acquisition.

The Slave Lake mortgages are currently being refinanced with the expectations of converting them to same rate insured, adding additional leverage and extending the term to 10 years. Additional net funds from financing in the quarter was CAD26 million. The second quarter mortgages were refinanced with the weighted average interest rate of 3.71% with an average term to maturity of 5.9 years.

The term to maturity is shorter than expected due to commercial mortgages usually being five years financed during the quarter and the assumption of the mortgages since the Slave Lake acquisition.

Subsequent to June 30, we financed approximately CAD50 million in mortgages with the weighted average interest rate of 2.86% and the weighted average term to maturity of just less than seven years. Our related multifamily insured mortgages for 10 years at 3.07% demonstrating that there is still substantial mortgage interest rate savings being realized.

With that, I will now turn it back to Todd, for his closing remarks before we open the call for questions.

Todd R. Cook

Thanks, Rob. To briefly sum up the quarter, we are pleased with the positive direction in both earnings and our growth plans to the developments and acquisitions. As always, is never fast enough, however, we are going in the right direction. Now, I’ll turn it back to the operator to open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Jonathan Kelcher with TD Securities. Your line is open.

Jonathan Kelcher – TD Securities Inc.

Thanks. Good morning.

Todd R. Cook

Good morning, Jon.

Robert Palmer

Hi, Jon.

Jonathan Kelcher – TD Securities Inc.

I guess first, on the developments, you say you want to start another 200 units this year, maybe let us know where? How many projects that would entail?

Todd R. Cook

I think there is a couple of projects, we recently acquired some land in Bonnyville, which is a town about an hour and a half I guess north and west of Lloydminster. So there is 110 units I think we are looking to start there. We are still hopeful to start something in St. John’s and then there is – we’ll see what happens in Calgary. I’m not sure it will get them out of the ground this year, but we’re actively working through the DP process.

Jonathan Kelcher – TD Securities Inc.

Okay. And what was the St. John’s number?

Todd R. Cook

The plan initial 71 we have a couple other sites we’re working through as well. So again, 110 plus about 70 gets you close to 200.

Jonathan Kelcher – TD Securities Inc.

Okay. And then just secondly on your leverage it has been going up in the last few quarters obviously you've been refinancing and spending. What would you look at as your optimal leverage target?

Robert Palmer

Hey, Jonathan. We look at 45% to 50% is where we’re targeting right now. We see it’s fluctuating in that range, but that’s the area, that’s the range that we feel comfortable at.

Todd R. Cook

We are pretty much in the comfort zone right now. It’s not going to go significantly higher.

Jonathan Kelcher – TD Securities Inc.

Okay.

Todd R. Cook

I may bounce a bit in the next quarter so as the development stuff is financed, but we are sort of in that zone right now.

Jonathan Kelcher – TD Securities Inc.

Okay. It sounds good. I’ll turn it back, thanks.

Todd R. Cook

Thank you.

Operator

Your next question comes from the line of Heather Kirk with BMO Capital Markets. Your line is open.

Heather C. Kirk – BMO Capital Markets

Good morning.

Todd R. Cook

Hi, Heather.

Heather C. Kirk – BMO Capital Markets

Great. Just in terms of the executive suites, clearly you’ve got some one-off things happening there. How should we look at what that performance is going to look like in 2015?

Todd R. Cook

I don’t think and I think most of it’s in Hillview, so that the northern hotels, they’re down a bit over the prior year, some of that’s due to the federal government has gotten strange again on their travel where they are not traveling as much as part of their budget balancing exercise. In St. John’s its more of a I don’t think is going to go back to 2013 level, but I suspect it’s a sort of mid way between our 2013, 2014 performance. So it will be better than this year, but not as good as 2013.

Heather C. Kirk – BMO Capital Markets

Okay. In terms of just the G&A it’s been trending down just as a percentage of revenues and I’m just wondering whether this is sort of that level that you expect to stay out and whether you have any guidance for what you’re looking for the full-year for 2014?

Robert Palmer

Yes. Heather, we expect it has been little lower than we see in the past in the first couple of quarters of this year. We mentioned we expected to see it get back to CAD1.8 million to CAD2 million a quarter for the rest of the year. And as of now that’s a pretty good run rate.

Heather C. Kirk – BMO Capital Markets

And in terms of the BC, you talked about the pipeline activity being a trigger. Is there anything else that could potentially see that those markets improve? Or you just expecting them to kind of remain at the high levels of vacancy? I guess I’m thinking more the one that are higher like Dawson Creek.

Todd R. Cook

I guess the two higher ones in Northeastern BC or Dawson Creek and Fort Nelson. There is a bit of agriculture, but they are primarily natural gas plays. It’s going to take I think it’ll trend a little bit better, but it’s not going to go down to 2%. Fort Nelson is the – it’s a shale gas play in the Horn River basin. That project absolutely needs an LNG pipeline before it does anything exciting. So I don’t expect significant improvement in those two markets.

I mean they’ll bounce around a bit, but nothing is going to material improve. The other markets in BC, for the Abbotsford, Nanaimo, Campbell River there they are less tied to the natural resource, the Nanaimo is more of a – just a normal economy, there is a bit of tourism, a bit of retirement, Abbotsford’s a couple hours of Vancouver. So they’ll bounce around a bit, but for the North, East, and South the rebound is really gas.

Heather C. Kirk – BMO Capital Markets

And you did buyback a little bit of stock this quarter. And I’m just wondering given your comments on how overprice the – existing acquisition market is, whether there is any thought to being more active and whether selling some assets to buyback stock would be – make any sense to you.

Todd R. Cook

Maybe. How’s that for an answer?

Heather C. Kirk – BMO Capital Markets

Definitely maybe, that’s helpful.

Todd R. Cook

Yes. No, we’ve had some good strengthening in the unit price recently. So if it – when it’s in the 29 to 30 range, I’m probably less inclined to be an active buyer, With the other part that we were restricted by was to get a significant amount of black hole time that you can’t buy them. So sort of after the first week of July, when you where the results are going, you can’t be active into the NCIBs, so I think we’ll be actively well, while I sell assets to get heavy into it, not sure, I mean there is some non-core assets we might think about, but it’s not an immediate strategy out there.

Heather C. Kirk – BMO Capital Markets

Okay. Thanks very much. I’ll past it on.

Todd R. Cook

Thank you, Heather.

Operator

Your next question comes from the line of Mario Saric with Scotiabank. Please go ahead.

Mario Saric – Scotiabank

Hi, good morning.

Todd R. Cook

Good morning, Mario.

Mario Saric – Scotiabank

Even I know how much guys like to talk about Fort McMurray, Yellowknife, following the customary question on the two markets. but looking back over time, kind of seeing where you are at this point of the cycle. Do you think there have been any new competitive pressures in the market that could potentially change the structural; they can see those two markets over the long-term, in Fort Mac, it’s typically a more volatile market, but I guess the question is do you foresee getting back the total average of agency at this point?

Todd R. Cook

Yes. I mean I guess to start with Yellowknife, there has been a significant amount of sort of condo development and as we mentioned, some of the trailer codes over the past couple of years. So there is more color affordable housing in Yellowknife. So it has – we went through where we were in that 2% to 3%. I think we’re higher than market, and we intend to fix that, but I think the market vacancy in Yellowknife is probably in the 5% to 7% range, versus couple of three years ago, whereas in the 2% to 3% to 4% range.

So I think there is a bit of a change there. Fort mac is more volatile and it’s a bigger city, I mean remember, Yellowknife is only 20,000 people give or take over there; Fort Mac, if you include the sort of a greater Fort Mac area, this is around 100,000 people. So it’s a bit bigger and there is condo development and there is we are seeing more notices for homeownership. But it will bounce around; there has been some capital projects slow down. but again, I still think that the Fort Mac is probably in that 5% to 7%, 8% range, as well as where the vacancy is and we intend to take care of our share back.

Mario Saric – Scotiabank

And when you think about improving our occupancy in those two markets that predominantly market share growth, or do you see vacancy coming down a little bit just – overall market may be coming down with growth?

Todd R. Cook

I think it’s market share growth.

Mario Saric – Scotiabank

Okay. And then had a curiosity in St. John’s, can you give us some color to why the city turned down the application?

Todd R. Cook

I got the cap rate colorful I get on that answer, Mario. It was a piece of land that was zone commercial. It’s in a great location. We went through the application process. They had a record number of residents show up, not sure if I can say in MBS, but I’ll say it anyway. So it was a bit of outside. We’re regrouping, make a decision whether we want to go back and take a better run at it, the property is also zone, so those things were building a same store and commercial building on it, just for fund. So it’s one of those things that it’s what it told me is there is a – there is more risk for having to rezone property in existing communities. So it’s just that sort of what I was, okay.

Mario Saric – Scotiabank

Okay. And then last question, on the 1,000 square feet of commercial space that was renewed in Yellowknife, bring it work, can you sense of what the delta in the net rates?

Todd R. Cook

There wasn’t a huge delta in the net rates. It was more of a term extension. There is – that would talk about before, there’s some new supply coming on, which could create some market instability there. So we just felt it was prudent to tie up our existing leases with GNWT and for a longer period. So there is less delta on it and more term security.

Mario Saric – Scotiabank

And by longer-term, you mean five years plus.

Todd R. Cook

Five years plus, yes.

Mario Saric – Scotiabank

Okay, thank you.

Todd R. Cook

Thank you.

Robert Palmer

Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Alex Avery with CIBC. Your line is open.

Alex D. Avery – CIBC World Markets, Inc.

Thanks. Todd, can you just provide a little bit more I guess color into what happened at the execusuite in St. John’s?

Todd R. Cook

There is no one thing, Alex. so the – if I go through the long list our Melbourne’s given me the St. John’s conventions that are closed down for I guess is close to two years that’s in the close down, which decreased, they did a fair bit of convention traffic, while we were in the start really, our market, we did get the overflow as the hotel, so that’s part of it. We did have some longer-term contracts, one was with the Navy, one was with a private company that, when there wasn’t apartments to be put, they went into the furnished execusuites. so that business stall of again, the Navy got their own accommodations on cap rates. So, a bit of that and then the third major factor with Hillview is the delta few hundred new hotel rooms over the past couple of years.

So just the increased number of supply in the options. I mean you’ve been there; the execusuites in St. John’s are effectively furnished apartments. So that’s okay for certain purposes for other purposes, taking your kids, you need a pool and do source amenities that don’t exist for where we are. So we’ve been unfortunate after sort of benefit from the overflow and the extra contracts. I do believe there is a market to half of the oil companies for all the staff and all the government and get more a back end to this long-term state. So that’s sort of where we are going and I they did just takes time to reach out and get them.

So I think we’ll start to see stuff happened later in the year, but it’s really a 2015 recovery piece for that property.

Alex D. Avery – CIBC World Markets, Inc.

Okay. And so, I guess after several years of pretty strong performance from that property, maybe weren’t spending a lot of time and effort on that, but it think is that fair to say?

Todd R. Cook

Yes, it was. No, I don’t remember. I got here in 2006 and then for a lot for the seven years after that, it just kept getting better and better every year, and we just attributed to our absolute brilliants, when you look at the market conditions changing we need to focus our marketing efforts to that and we’ll get there.

Alex D. Avery – CIBC World Markets, Inc.

Okay. That’s encouraging. And then just on the Slave Lake – that’s a new market for you. I might have missed any comments you might have had at the beginning of the call, but can you tell us what took you to that market?

Todd R. Cook

There is an opportunity, we got less than 247 units, which is I guess it’s a dominant market share. There were newer properties, we bought it from a vendor, we’re familiar with and have transacted with before. The market is strong what, look at again, there is lumber, there is oil and gas. It’s just the good place to be, so we sort of get in there with a full portfolio with some growth potential, and comes with a couple of development sites. So in story, it’s our kind of time.

Alex D. Avery – CIBC World Markets, Inc.

Is that the 17.7 acres?

Todd R. Cook

That’s part of it.

Alex D. Avery – CIBC World Markets, Inc.

Okay. And the other part of that land purchases?

Todd R. Cook

In some other communities, some that were in, and some that are new, that are not quite ready to disclose.

Alex D. Avery – CIBC World Markets, Inc.

Okay, fair enough. Thanks.

Todd R. Cook

Thank you.

Robert Palmer

Thanks, Alex.

Operator

Your next question comes from the line of Jimmy Shan with GMP Securities. Please go ahead.

Jimmy Khing Shan – GMP Securities LP

Hi. thanks, guys. Just in the market set in which you’re building, I was just curious as to what you’re seeing in terms of development activity by other guys? And then second, sort of what are you seeing in terms of inflation on the construction side for this land, labor, that may throw off your pro forma budgets there?

Todd R. Cook

So the first question in the markets, we are developing, there is by market. so in St. John’s which doesn’t quite count as we’re developing yet, but we think so, our friends at Killam have been active for a couple of years. So there is development activity there. Our focus of getting into Calgary, there is some activity, but it’s fairly minimal. And if you go to Regina, there is – there’s a couple of developers that have been active over the past three years Broad Street is a private individual who has got three or four units the he has built over the past two years. There’s a couple other local developers. So it varies community-to-community, but I guess to summarize, the bigger the community you are developing in the more activity there is.

Jimmy Khing Shan – GMP Securities LP

Yes. By markets like Lloydminster for instance for last time, or was it Grande Prairie at last time that was a little bit overbuilding that are you starting to see that or was that still not a concern?

Todd R. Cook

I’m not seeing the tunnel will go, there is another, I think Broad Street again, is building in Lloydminster. but there appears to be enough demand to cover both in Grande Prairie, there’s not much happening. I believe like I say, I’d like to think we are the smartest guys in the room, but other people can do the math and say there is opportunity to develop.

So there will be others that develop. We just hope that we’re building better and developing first. So again, there is activity, we’re not the only ones, and as far as the second part of your question, which is the inflation on costs, I guess the one comment I’d say is, I’m seeing inflation in the price of land. The more demand there is for multi-family land, the more the prices were up I guess so.

In some of communities, we’re looking at a securing additional pieces of land, we are seeing a higher asking price.

Jimmy Khing Shan – GMP Securities LP

Any rough sense of percentage increase let’s say over the last since year-to-date?

Todd R. Cook

It varies I mean in couple of places we’ve seen close to 10% increase in asking price in other places it’s been fairly consistent. So without getting into details that’s what we’re looking at and somewhere between zero and 10.

Jimmy Khing Shan – GMP Securities LP

Okay, great. Thanks.

Todd R. Cook

Thank you.

Robert Palmer

Thanks.

Operator

Your next question comes from the line of Jenny Ma with Canaccord Genuity. Please go ahead.

Jenny Ma – Canaccord Genuity Inc.

Thanks. Hi, everybody.

Todd R. Cook

Hey, Jenny.

Jenny Ma – Canaccord Genuity Inc.

I just have a quick question with your development. So you want to get to 600 to 800 units on an annual basis, which is little higher than where you’ve been tracking. Could you make a comment on your management bandwidth and how you guys kind of administer the portfolio of development from the corporate side?

Todd R. Cook

Sure. So what we’ve done over the past I guess two to three years once we started on this process and you were on the tour last year, so you met Bo. We’ve assembled a very strong team, development team within Calgary. That are – include Bo and number of senior project managers. And then, they provided that head office support on the specific projects. Each site that you’re doing so Lloydminster will have a talented superintendent that’s managing substrate in an army of people there. So it’s really – it started with the strong team in Calgary to support the on the ground activities. So we are comfortable that we’ve build up the capacity to be able to comfortably do the 6800 per year.

Jenny Ma – Canaccord Genuity Inc.

So to the extent that you’ll expand locally is, just be adding local superintendent and then all funnels back to head office?

Todd R. Cook

Yes.

Jenny Ma – Canaccord Genuity Inc.

Okay, great. Thank you.

Todd R. Cook

Thanks, Jenny.

Operator

There are no further questions at this time. I’ll turn the call back to presenters.

Todd R. Cook

Thank you very much for your attention and joining us and look forward to talking to you in future. Thanks. Have a good day.

Operator

This concludes today’s conference call. You may now disconnect.

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