Q3 2019 Earnings Call

November 13, 2019

Operator: Good day, and welcome to the SmartCentres REIT Q3 2019 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Peter Forde. Please go ahead, sir.

Overture, Mr. Peter Ford. Please go ahead Sir.

Good evening.

Peter Forde: Good evening. Welcome to the SmartCentres Q3 2019 conference call. I'm Peter Ford, President and CEO of SmartCentres REIT. Joining me on the call today are Mitch Goldhar, Executive Chairman, Peter Sweeney, Chief Financial Officer, Mauro Pambianchi, Chief Development Officer, Rudy Gobin, EVP Portfolio Management and Investments, and Allen Scully, EVP Development. The agenda for the call will begin with a few overall comments by me, followed by Peter Sweeney, who will talk about our results for the quarter and financing activities, followed by Mitch speaking about some of our exciting project developments. We will take your questions. Our comments will mostly refer to the first 10 pages and page 24 to 25 of our supplemental information package and the outlook section of our MD&A, which are posted on our website.

Welcome to the Smart centres Q3, 2019 conference call.

I'm, Peter Ford President N.C.E.O. Smart centres read.

Joining me on the call today are Mitch Cold hard executive Chairman, Peter Sweeney, Chief Financial Officer, moral Pamby Yankee Chief Development Officer, Rudy Gobin, E.V.P. portfolio management, and investments and Alan Scully E.V.P. development.

The agenda for the call will begin with a few over all comments by me followed by Peter Sweeney, who will talk about our results for the quarter and financing activities followed by Mitch.

Seeking about some of our exciting project developments and then we will take your questions.

Our comments well, mostly referred to the first 10 pages.

On page 20, 425 of our supplemental information package.

And the outlook section over M.D.N.A., which are posted on our website.

Peter Forde: I refer you specifically to the cautionary language at the front of the supplemental material, which also applies to any comments any of the speakers make this evening. First, some overall comments. SmartCentres REIT remains a highly stable portfolio in excess of 34 million sq ft of well-located, value-oriented shopping centers with tremendous mixed-use intensification opportunities. Regular and growing positive results from our new mixed-use initiatives are about to commence next year. Towards this end, we achieved the following. For SmartVaughan Metropolitan Center, SmartVMC, we commenced construction of our purpose-built 35-story, 451-unit residential rental tower adjacent to the 5 sold-out condominium towers, bringing the total residential units under construction on the site to 3,218. In SmartVMC, the KPMG Tower office space is fully occupied and the PwC-YMCA Tower is also now fully leased.

I refer you specifically to the cautionary language at the front of the supplemental material, which also applies to any comments any of the speakers make this evening.

First sum over all comments smart centres rate remains a highly stable portfolio in excess of 34 million square feet, well located value oriented shopping centres with tremendous mixed use intensive vacation opportunities.

Regular and growing positive results from our new mixed use initiatives or a boat to commence next year.

Towards this and we achieved the following.

Smart Varden Metropolitan Center Smart B.M.C.

We commence construction of our purpose built 35 story 450, while you're at residential rental tower adjacent to the five soldo condominium towers.

Bringing the total residential units under construction on the site to 3218.

In smart V.M.C., the K.P.M.G. tower office space is fully occupied and.

And the P.W.C.Y.M.C.A. Tower is now is also now fully least.

Peter Forde: PwC opens for business next week. We announced that we entered into a co-ownership agreement with Greenwin and closed on the purchase of the land to develop a 7.8-acre lakefront property in Barrie. It is planned to be a multi-phase rental apartment community comprising over 2,000 residential units. A phase one building of 421 units is expected to be under construction by mid-2021. As you will hear from Peter Sweeney, we had another strong and stable quarterly performance from our existing retail portfolio, with notable mention going to the strong results from the Toronto Premium Outlet expansion, which opened in November last year. Average tenant sales for the center are at CAD 1,175 per sq ft. High overall portfolio tenant retention with 83% of 2019 maturing tenants already renewing.

P.W.C. opens for business next week.

We announce that we entered into a coal ownership agreement with Greenwood.

And closed on the purchase of the land to develop a 7.8 acre lakefront property and Barry.

It is planned to be a multi phase rental apartment community community comprising over 2000 residential units.

A phase one building a 421 units is expected to be under construction by mid 2021.

As you will hear from Peter So we need we had another strong and stable quarterly performance from our existing retail portfolio.

With notable mentioned going to the strong results from the Toronto premium outlet expansion, which opened in November last year average tenant sales for the center are at $1175 per square foot.

Hi, overall portfolio tenant retention with 83% of 2019.

Maturing tenants already renewing.

Peter Forde: Then going forward for 2020 and 2021, profits from the first of many recurring residential developments and from the variety of new business initiatives and developments, some of which are described this evening and in our quarterly report. Our core open format retail portfolio remains strong, and with its value-oriented, nationally-focused tenant base, is well-suited to the changes taking place in the retail marketplace. On executed leases, our shopping centers continued to lead the industry at 98.2% leased, inclusive of all executed deals. As has always been the case in our business, a few retailers come and go. In that respect, good news on the releasing of premises vacated by bankrupt tenants.

And then going forward for 2020 and 2021.

Profits from the first of many recurring residential developments.

And from a variety of new business initiatives and developments some of which are described this evening and in our quarterly report.

Our core open format retail portfolio remains strong.

And with its value oriented naturally focus teller base is well suited to the changes taking place in the retail marketplace.

Well executed leases are shopping centres continue to lead the industry at 98.2% least inclusive of all executed deals.

And has an s. has always been the case in our business a few retailers come and go.

And in that respect good news on the releasing up premises vacated by bankrupt tennis, we had 12 term leases with Bombay and bearing in our portfolio along with a few temp deals representing less than one third of one per cent of our portfolio.

Peter Forde: We had 12 term leases with Bombay and Bowring in our portfolio, along with a few temp deals, representing less than one-third of 1% of our portfolio. All locations are in shopping centers that are anchored by a Walmart Supercentre. Payless closed all locations in Canada, including all locations with us early in Q2. All but one of our locations are in a center anchored by a Walmart store. We are pleased to report that we are in advanced discussions and/or have executed deals for approximately 70% of the Payless locations and approximately 50% of the Bombay and Bowring locations, with rents equal or higher than the previous rents.

All locations are in shopping centres that are anchored by a Walmart Super Center.

And pay less closed all locations in Canada, including all locations with US early in the second quarter, all but one of our locations.

Are in the center anchored by a Walmart store.

We are pleased to report that we are in advance discussions and or have executed deals for approximately 70% of the pay less locations and approximately 50 per cent of the Bombay bowery locations with whereas equal or higher than the previous Reds.

The trouble premium et cetera expansion of 144000 square feet.

Peter Forde: The Toronto Premium Outlet Center expansion of 144,000sq ft, opened last November, is fully leased and exceeding expectations. The expansion and high caliber tenant mix makes this center one of the top performing premium outlet centers in the world. Several successful retailers in Canada are taking advantage of the opportunities to expand their platform across the country. Retailers such as TJX, with its three banners, Winners, Marshalls, and HomeSense, dollar stores, quick service restaurants, and fitness. Several new retailers are coming to Canada, and we are working with them on several locations. Jollibee, F45, Wahlburgers, and others yet to publicly announce their arrival. Our strong and stable retail portfolio provides a solid base upon which we will grow income and NAV through our mixed-use intensification.

Opened last November is fully least and exceeding expectations.

Expansion and high caliber tell it makes makes this set or one of the top performing premium other centres in the world.

Several successful retailers in Canada are taking advantage of the opportunities to expand their platform across the country.

Tellers, such as T.G.X. with its three banners winters marshals on Homesense.

Dollar stores.

Quick service restaurants and fitness.

And several new retailers are coming to Canada, and we are working with them on several locations.

Jolly B.F. 45 wall burgers, and others, yet to publicly announced their arrival.

Are strong and stable retail portfolio provides a solid base on which we will grow income and they have through our mixed use intensification.

Peter Forde: We are seeing signs of a strengthening market and tone from retailers for our brands of value-oriented tenants and shopping centers. A few general reminders about our development pipeline and capabilities. Most of the development initiatives we are planning are on land we already own, unlocking value and not requiring us to buy very expensive land to develop this density. We use our in-house development team to drive the initiatives, all contributing to enhanced yields and profits over the long term. Remember, this in-house development team developed 86% of our current retail area. We know the markets, the municipalities, and the properties.

We are seeing signs of a strengthening market and told from retailers for our brains for our brands of value oriented tenets and shopping centers.

A feud [noise] general reminders about our development pipeline and capabilities.

Most of the development initiatives, we are planning planning our on land we already old.

Unlocking value and not requiring us to buy very expensive land to develop this density.

And we use our in house development team to drive the initiatives all contributing to enhance deals and profits over the long term.

Remember this inhouse development team developed 86 per cent of our current retail area.

We know the markets the municipalities and the properties.

Peter Forde: With 34.5 million sq ft built on approximately 3,500 acres of land, with less than 24% utilization, and primarily all of that at ground level, we have over 100 million sq ft of land within our shopping center to accommodate mixed-use growth throughout the country. That is only at grade and does not include the nearly 14 million sq ft of undeveloped lands we also own, for much of which we have plans for building out mixed use. Retailers and the new uses we are bringing to the centers, residential, condos, and apartments, seniors residences, office, and self-storage, are aware of the synergistic benefits of bringing this all together in one location.

With 34 million 34.5 million square feet built on approximately 3500 acres of land.

With less than 24% utilization.

And primarily all of that at ground level.

We have over 100 million square feet of land.

Within our shopping center to accommodate mixed use growth throughout the country.

That is only at grade and does not include the nearly 14 million square feet of undeveloped land.

We also or.

For much of which we have plans for building out mixed use.

Retailers and the new uses we are bringing to the centers residential condos in apartments seniors residences office and self storage.

Aware of the synergistic benefits are bringing this all together in one location.

Peter Forde: The new uses benefit from the great locations, the great access and visibility of our centers, while progressive retailers in the centers recognize the benefit of having these additional customers at their front doors. As we have stated before, we carefully select our development partners, looking for like-minded partners for a good cultural fit with complementary skills. I'm pleased to report that all our new relationships are going extremely well. Revera, SmartStop, CentreCourt, Groupe Sélection, Jadco, Greenwin, and of course, our long-standing relationships with Walmart and others. A reminder that virtually none of the additional land value associated with the density we are creating is reflected in our IFRS values.

The new uses benefit from the great locations.

Rate access and visibility of our centers.

Well progressive retailers in the centres recognize the benefit of having these additional customers at their front doors.

As we have stated before we carefully select our development partners looking for like minded partners for a good cultural fit with complementary skills.

I'm pleased to report that all our new relationships are going extremely well.

Their Smartstop Centre Court selection group.

<unk> Greenwood and of course, our longstanding relationships with Walmart and others.

A reminder, that virtually none of the additional land value associated with the density we are creating is reflected in R.I.F. rest values.

We generally reflect this increase and land values when we sell an interest in the land to a J.B. partner once it's old.

Peter Forde: We generally reflect this increase in land values when we sell an interest in the land to a JV partner once it's zoned, at which time we recognize the uplift on our retained portion as well, or for retained properties when zoning is obtained, tenant permissions are in place, and we have a project ready for implementation. Also as a reminder, when we present development project yields or profits from a condo projects, land is included in the cost side of the equation at an estimated market price, and all internal fees and capitalized costs are included in cost. More about the developments from Mitch in a few minutes, but first, I'm gonna turn it over to Peter Sweeney.

Which time, we recognize the uplift on our retains portion as well.

Or four retain properties when zoning is obtained tenant permissions are in place and we have a project ready for implementation.

And also as a reminder, why do we present development project fields for profits from a condo projects.

Land is included in the costs side of the equation at an estimated market price.

And all internal fees and capitalize costs are included in cost.

But more about the developments from mentioned a few minutes, but first I want to turn it over to Peter Sweeney.

Thanks, very much Peter and good evening everyone.

Peter Sweeney: Thanks very much, Peter, and good evening, everyone. Our financial results for Q3 2019 reflect the continued strength, stability, and security of our 34 million sq ft, predominantly Walmart-anchored shopping center portfolio. During the quarter, this portfolio generated the following strong results. Number one, rental revenue from investment properties of CAD 198 million was CAD 3 million higher than the CAD 195 million dollar rental revenue recorded in the comparable quarter last year. Number two, net income, excluding fair value adjustments, increased by CAD 3.4 million or 3.9% to CAD 91.5 million from CAD 88.1 million in the comparable quarter. Three, net operating income as a percentage of net base rent was 100%, which is consistent with our previous quarterly results in 2019.

Our financial results for the third quarter of 2019 reflect the continued strength stability and security of our 34 million square foot predominantly Walmart anchored shopping centre portfolio.

During the quarter this portfolio generated the following strong results.

Number one.

Rental revenue some investment properties of $198 million, what's $3 million higher.

And the hundred and 95 million dollar rental revenue recorded in the comparable quarter last year.

Number two.

Net income excluding fair value adjustments increase by $3.4 million or 3.9 per cent.

To $91.5 million from $88.1 million in the comparable quarter.

And three.

Net operating income as a percentage of net based rent was 100%.

Which is consistent with our previous quarterly results in 2000 in 19.

These continued strong operating metrics are indicative of our portfolios unique ability to demonstrate steady growth even in uncertain times.

Peter Sweeney: These continued strong operating metrics are indicative of our portfolio's unique ability to demonstrate steady growth even in uncertain times. These stable operating results contributed to a CAD 3 million increase in FFO to CAD 97.3 million, representing a 3.2% increase over the comparable quarter last year. On a per unit basis, FFO was CAD 0.57, which is CAD 0.01 lower than the comparable quarter last year, and this decrease can be principally attributed to the dilutive impact of our CAD 230 million equity issuance in January 2019. From a cash generating perspective, ACFO increased to CAD 87.2 million and exceeded both distributions declared, and distributions paid, by CAD 10 million and CAD 28 million, respectively. Again, representing the business's continued ability to produce steady and consistent cash flow.

D stable operating results contributed two or 3 million dollar increase in F.F. all to $97.3 million.

Representing a 3.2% increase over the comparable quarter last year.

On a per unit basis, F.F., all with 57 cents, which is a penny lower than the comparable quarter last year and this decrease can be principally attributed to the dilute of impact of our 230 million dollar equity issuance in January of 2000.

In 19.

From a cash generating perspective, a CFO increase to $87.2 million.

And exceeded both distributions declared and distributions paid by $10 million and $28 million, respectively, again, representing the businesses continued ability to produce steady and consistent cash flow.

Peter Sweeney: Same property NOI growth was flat for the quarter, which was principally caused by the 2019 bankruptcies previously announced. Excluding the impact of these bankruptcies, same property growth would have exceeded 2% for the quarter. We renewed or are near completion of renewing approximately 3 million sq ft of tenancies, which represents approximately 83% of our 2019 lease maturities at average rental increases, excluding anchor tenants, of 4%. This is consistent with the improving growth rates that we've been experiencing over the last 3 quarters, and as Peter mentioned earlier, is indicative of an improving retail leasing market. These improved Q3 results can be attributed to the following primary factors. Number one, the incremental NOI now being generated from the new tenants at both the KPMG and PwC office towers.

Same property and alike growth was flat for the quarter, which was principally caused by the 2019 bankruptcies previously announced.

Excluding the impact of these bankruptcies same property growth would have exceeded 2% for the quarter.

We renewed or near completion of renewing approximately 3 million square feet of tendencies.

Which represents approximately 83%.

Of our 2019 lease maturities average rental increases excluding anchor tenants 4%.

This is consistent with the improving growth rates that we've been experiencing over the last three quarters.

As Peter mentioned earlier is indicative of an improving retail leasing market.

He's improved third quarter results can be attributed to the following primary factors.

Number one.

The incremental in a why now being generated from the new tenants at both to K.P.M.G.N.P.W.C. office towers.

Peter Sweeney: Number two, the incremental NOI now being generated from both the 144,000 sq ft expansion of space at the Toronto Premium Outlets, which opened in November 2018, and most recent earn-outs and other developments. Number three, our portfolio of mortgages continues to provide unsecured fixed-rate refinancing opportunities at lower rates than the outgoing maturing rates. Number four, additional percentage rent, parking revenue, and other miscellaneous revenue. Now let's focus on our balance sheet. From a financing perspective, we began 2019 with a strong reminder to the capital markets of our conservative management of capital. We applied the proceeds of our very successful issuance of CAD 230 million of equity against some of our credit facilities to reduce our overall debt levels and related debt metrics to appropriately accommodate future levels of expected development financing.

Number two.

The incremental and why now being generated from both the hundred and 44000 square foot expansion of space at the Toronto cream outlets, which opened in November of 2018.

Most recent earnouts and other developments.

Three our portfolio mortgages continues to provide unsecured fixed rate refinancing opportunities at lower rates than the outgoing maturing rates.

Number four.

Additional percentage rent parking revenue and other miscellaneous revenue.

And now let's focus on our balance sheet.

From a financing perspective, we began 2019 with a strong reminder to the capital markets of our Conservative management with capital. We applied the proceeds are very successful issuance $230 million of equity against some of our credit facilities to reduce our overall debt levels and related.

Metrics two appropriately accommodate future levels of expected development financing and the impact of these debt reduction continue.

Peter Sweeney: The impact of these debt reductions continue to be reflected in all of our debt and financial metrics. In this regard, at the end of the quarter, we note the following further improvements. Number one, our unencumbered pool of assets increased by 15% to CAD 4.7 billion from CAD 4.1 billion. Number two, our debt to aggregate assets ratio was reduced to 41.8% from 44.3%. Number three, our weighted average interest rate for secured and unsecured financing decreased further to 3.66% from 3.73%. Number four, our adjusted debt to adjusted EBITDA multiple was further reduced to 7.8x from 8.2x. Number five, our interest coverage ratio improved further to 3.9x from 3.8x.

To be reflected in all of our debt and financial metrics.

In this regard at the end of the quarter. We note the following further improvements.

Number one.

Or uncovered pool of assets increased by 15% to $4.7 billion from $4.1 billion.

Number two.

Our debt to aggregate assets ratio was reduced to 41.8% from 44.3%.

Number three.

Are weighted average interest rate per secured and on secured financing decreased further to 3.66% from 3.73%.

Number four.

Are adjusted debt to adjusted <unk> multiple was further reduced to 7.8 times from 8.2 times.

Number five our interests coverage ratio improve further to 3.9 times from 3.8 times and finally number six are secured to unsecure debt ratio has now improved to 55% to 45% from 47% to 53%.

Peter Sweeney: Finally, number six, our secured to unsecured debt ratio has now improved to 55% to 45% from 47% to 53%, furthering our strategic pursuit to increase SmartCentres' overall unsecured debt and unencumbered asset levels. This is a key strategic initiative that we've been working on over the last 2 years as we continue to pursue an enhanced credit rating. Recall that when we embarked upon this strategic initiative, two-thirds of our debt was sourced from secured lenders. For our payout ratio and distributions, our ACFO payout ratio for the 9 months ended 30 September increased to 86.6% from the comparable year's level of 82.6%, and has been primarily influenced by the equity issued earlier in 2019, and continues to reflect the healthy level of cash flow generated by the retail portfolio.

Furthering our strategic pursuit to increase smart centers overall, unsecure debt and unencumbered asset levels.

This is a key strategic initiative.

That we've been working on over the last two years as we continue to pursue it enhanced credit rating.

Recall that when we embark upon the strategic initiative two thirds of our debt with sourced from secured lenders.

For our payout ratio distributions are A.C.F.L. pay a ratio for the nine months ended September 30th increased 86.6% from the comparable comparable years level of 82.6% and has been primarily influenced by the equity issuing equity issued earlier in 2000 in 19.

And continues to reflect the healthy level of cash flow generated by the retail portfolio.

Peter Sweeney: Our year-to-date surplus of ACFO over distributions declared of CAD 36 million reflects the continued strength and core stability of our business model. When factoring in our highly successful DRIP program, the year-to-date surplus of ACFO over distributions actually paid totaled CAD 88 million. Our financial and operating results for the third quarter reflect our strong and stable business model that we believe positions us to continue to provide our unitholders with stable and growing distributions as further evidenced by our board's decision for the sixth consecutive year to approve an increase of CAD 0.05 a unit in annual distributions to CAD 1.85, which took effect in October 2019.

Are year to date surplus of a CFO over distributions declared a $36 million reflects the continued strength.

And course stability of our business model.

When factoring in our highly successful grip program.

Year to date surplus of H.T.F., all over distributions actually paid totaled $88 million.

Our financial operating results for the third quarter reflect our strong and stable business model.

That we believe.

Positions us to continue to provide our unitholders with stable.

And growing distributions.

Further evidenced by our board decision for the sixth consecutive year.

To approve an increase of five cents a unit in annual distributions to $1.85, which took effect in October of 2019.

Peter Sweeney: The very successful bought deal that was completed in January 2019 will dilute our growth expectations in 2019 by approximately 3%, thus resulting in limited FFO growth per unit in 2019. However, the expected closings of the first two phases of Transit City condos in 2020 will signify a profound change in the evolution of the growth profile of SmartCentres, as these initial closings are expected to result in growth in FFO per unit exceeding 10%. I'll now turn things over to Mitchell Goldhar, our executive chairman, who will provide you with an update on some of our upcoming development initiatives. Mitch.

The very successful bought deal that was completed in January of 2019 will dilute our growth expectations in 2000 in 19 by approximately three per cent, thus, resulting in limited F.F. old growth per unit in 2000 in 19.

However.

The expected closings of the first two phases of transit city condos in 2020, well signify a profound change in the evolution of the growth profile of smarts centers. As these initial closings are expected to result in growth in F.F. all per unit exceeding 10 per cent.

I'll know turn things over to Mitchell goal to our our executive Chairman, who will provide you with an update on some of our upcoming development initiatives match.

Thanks.

Mitchell Goldhar: Thanks, Peter. In Q1, together with our partner, Revera, we announced three specific senior residence projects on REIT-owned sites, two in Vaughan and one in Oakville. We are in the very final stages of documentation and announcing three additional GTA locations, another REIT-owned site, another on a site owned by my company. Today, our board approved the development of another project with Revera in the GTA on lands already owned by Revera. In addition, we also have entered into a partnership with Groupe Sélection for a seniors complex of two towers in Ottawa. For our 120,000 sq ft-plus self-storage initiatives, we will be opening our first in Leaside in January, and we are under construction in Brampton, Oshawa, and Vaughan. We have announced three additional projects, Scarborough, a second location in Brampton, and Markham.

In the first quarter.

Partner.

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In addition, we also have entered into a partnership with.

For seniors complex of two towers.

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420000 square foot plus self storage initiatives.

Opening our first.

Side.

We are under construction in Brampton.

We have announced three additional projects Scarborough second location in Brampton.

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Mitchell Goldhar: We are in the planning stages for many additional REIT-owned sites in Ontario and the Greater Montreal area, as well as in cities in Western Canada with SmartStop. In addition, we recently, as part of a continued strong relationship with SmartStop, purchased jointly with them a 735-unit self-storage facility on Dupont Street, near Dufferin in Toronto. Now, a quick update on the VMC project. Things are advancing quickly. With the subway commuters and more than 1,300 employees working out of the KPMG building already, our project is quickly becoming a metropolitan area. This will only increase in intensity as we have now completed the office leasing for the KPMG tower, and it is 100% leased in the office component.

We are in the planning stages for many additional read old sites, Ontario.

The greater Montreal area as well as in cities in Western Canada with Smartstop.

In addition.

Recently as part of the continued strong relationship with Smartstop purchased jointly with them 735 unit self storage facility on Dupont Street near Duford.

In Toronto.

Hmm.

No quick update.

See project.

Things are advancing quickly.

Subway commuters.

And more than 1300 employees working out of a K.P.M.G. building already or project is quickly becoming a metropolitan area.

All the increase in intensity.

Yeah.

Completed the office leasing for the K.P.M.G. tower, and there's 100%.

Yeah.

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Second we've completed the mixed use tower in which Pwc opens for business next week.

Mitchell Goldhar: Second, we've completed the mixed-use tower, in which PwC opens for business next week, and recently leased to Scotiabank an office floor and a ground floor retail, which will open in early 2020. The YMCA will open in H1 2020. An additional 600 employees and an estimated 1,200 daily visits to the YMCA on our VMC. Thirdly, the three previously sold-out 55-story Transit City condo towers scheduled for delivery in 2020 and 2021, 1,741 units in total, are under construction and costs are below budget. These sold at an average price of CAD 710 per sq ft. You can see a current picture of the construction on page 11 of your supplemental information package.

Scotiabank.

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Open in early 2020 and the Y.M.C.A.

2020.

Additional 600 employees and an estimated 1200 daily visits too.

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Thirdly, the three previously sold 55 story.

Scheduled for delivery in 2020, and 20 117 141 units in total are under construction.

Costs are below budget.

These sold at an average price.

Word and $10 per square foot.

You can see a current picture.

Construction on page 11 of your supplemental information package.

Mitchell Goldhar: Construction activity has reached the 55th floor, the 45th floor, and the 20th floors of the towers 1, 2, and 3, respectively. We are now projecting the REIT's 25% share of the profits from these three towers to be approximately CAD 65 million, CAD 30 million higher than the original projections. Fourth, as Peter mentioned, we commenced construction of two additional residential condo towers, 1,015 units, 45- and 50-story condo towers, again sold out in less than a month. The 45-story tower at an average of 835 dollars per sq ft, and the 50-story tower sold next at 865 dollars per sq ft. These two towers are in our partnership with CentreCourt and are connected to our 451-unit residential rental tower that my company and the REIT are developing, constructing, and operating together.

Construction activity has reached the 55th floor, 45th floor and the 20th floors of the towers, one two and three respectively.

We are now projecting the reached 25% share the profits from these three towers to be approximately $65 million.

$30 million higher than the original projections.

Enforce.

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Construction.

Two additional registered and residential condo towers.

1000 in 15 units 45, and 50 story called or towers.

Again sold out in less than a month.

45 storey tower at an average of $835 per square foot and the 50 story tower.

Sold next.

$865 per square foot.

These two towers are partnership was Cedric card.

Connected to our 451 unit residential rental tower.

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Operating together.

Mitchell Goldhar: We are commencing construction of a new Walmart store in Vaughan as the site of our former office. Once the new location is open in July 2020, Walmart will be moving from its current location, and this will free up 15.5 acres of additional development lands on the Smart VMC site. Many of the new roads within the Smart VMC have now been completed and are open. The ramp off the Highway 400 has been redesigned to allow access directly into our road network and allowing easier movements to the office buildings, the condos, and the new Walmart store once it is open. We are already designing the next phase of the VMC to include a 600,000sq ft office tower, an additional residential towers.

We are commission construction of a new Walmart store involved.

Sorry to vote for their office.

Once the new location is open in July 220, 20, Walmart, we'll be moving from its current location.

And this will free up 15.5 acres.

Initial development lands on these smart M.C. site.

Many of the new roads within the smart V.M.C. have now been completed header open.

The rap off the highway 400 has been.

Designed to allow access directly into our road network, and allowing easier <unk> to the office buildings and the contours and a new Walmart store once it is open.

We already deciding the next phase of the B.M.C. to include a 600000 square foot office tower.

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Overall.

Mitchell Goldhar: Overall, we now see 9 to 11 million square feet being developed on the 50 acres of VMC lands that the REIT owns with my company as partner. Another recent testament to the growing sentiments of a downtown community feel of Smart VMC is that it will soon be showcased to millions of Canadians on 12 January next year, this coming 12 January, with Rogers Hometown Hockey festivities and broadcast from our transit square directly adjacent to the Vaughan Metropolitan Center subway station and the KPMG Tower. We are reviewing and planning for residential, rental, condos, and/or townhouses on all our sites, over time. Master planning and active participation with the various municipalities are underway on most of these sites.

We now see nine to 11 million square feet being developed almost 50 acres.

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Company as partner.

Another reason testament to the growing sentiments of a downtown <unk> of the other downtown community feel of Smart Vmc. Because then it will soon be showcased to millions of Canadians.

On January 12th.

Next year. This this coming January 12, with Rogers hometown hockey festivities and broadcast from our transit square directly adjacent to the bond Metropolitan centres subway station.

The K.P.M.G. Terrell.

We are reviewing and planning for residential rental condos and or townhouses or all our sites.

Overtime.

Master planning.

Active participation.

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Underway on most of these sites today are board approved two additional residential rental projects in Ontario.

Mitchell Goldhar: Today, our board approved two additional residential rental projects in Ontario, a master-planned project of 400 to 500 units in 4- to 5-story buildings and a 21-story, 241-unit building. Details to be announced later next quarter. As you can see, our significant mixed-use development plans extend across the country in all types of markets, where we already own real estate and where we are generally already the dominant center in the market. We have been in discussions with potential residential partners for many of these sites and will be redeveloping many of them on our own. The potential intensification and development growth and redevelopment program continues to grow as we further review our portfolio for opportunities.

Master plan project afford a 500 units in four to five storey buildings.

Do you one story 241 unit building.

<unk> to be now it's later next quarter.

As you can see are significant mixed use development plans extend across the country. It all types of markets, where we already own real estate and where we are generally already the dominant sets are in the market.

We have been in discussions with potential residential partners for many of these sites.

Developing many of them on or off.

The potential intensification development grow in <unk> development program continues to grow as we further review our portfolio for opportunities.

Mitchell Goldhar: The number of potential projects and towers to commence construction, in addition to our retail development pipeline within the next 5 years, is currently estimated at 105, up from 82, comprising some 12.4 million sq ft. That's our share, the REIT share, of mixed-use space. This development will have an estimated cost of CAD 12.1 billion on completion, with SmartCentres REIT's estimated share being over CAD 5.5 billion. In addition, another 151 projects and towers, 15.5 million sq ft our share, have been identified on which we will commence rezoning, design, and site plan approvals and marketing during the same 5 years, with construction commencing after that. A total of 256 projects, 27.9 million sq ft our share of mixed-use space, and the review continues.

The number of potential approaches and towers to commence construction in addition to our retail development pipeline.

The next five years is currently estimated at 105 up from 82.

Comprising some 12.4 million square feet and that's our share the recharger.

Mixed you space.

This development.

Estimated cost of $12.1 billion on completion, which sparked center <unk> <unk> estimated shared are being over $5.5 billion.

In addition, another hundred and 51 project some towers 515.5 million square feet Oh sure have been identified on which we will commence resulting design inside plan approvals and marketing during the same five years with construction commencing after that.

So a total of 256 projects 27.9 million square feet, our share of mixed you space and the <unk>.

Review continues.

Mitchell Goldhar: A breakdown of these projects by asset type is provided on page 9 of our MD&A. As the table shows, we have planning entitlements for 65 of the 105 active projects and for more than 50% of the 256 projects. Some specific examples of the current projects in addition to Smart VMC is the 407 project on the west side of 400 at Highway 7. Pointe-Claire in Quebec, which we've spoken about in the past, which is an estimated 2 million sq ft of density. Oakville, our South Oakville Center, will become a reconfigured 180,000 sq ft shopping center anchored by Metro, Shoppers, LCBO, GoodLife, Winners, and other strong retailers, with an adjoining Revera seniors residence building and townhouse development.

A breakdown of these projects by acid type is provided on page nine of R.M.D.N.A.

As the cable shows.

We have planning.

Titles.

Horse 65.

105 act approaches and for more than 50 per cent.

Of the 256 programs.

Specific examples of the current projects. In addition to smart Vmc is the 400 and.

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Side of 400 at highway seven.

Point, Claire in Quebec, which we spoken about in the past, which.

Is.

To me to 2 million square feet of density.

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Are so fulfill center.

Will become a reconfigured hundred 80000 square foot shopping center anchored by Metro shoppers L.C.B.O., good life winters and other strong retailers with an adjoining Rivera seniors residents building and townhouse development rendering.

Mitchell Goldhar: A rendering of the plan of this project is included on page 13 of the supplemental package. Vaughan Northwest, a 178,000-sq-ft shopping center, to be surrounded by 1.7 million sq ft of new development. Townhouses in our joint venture with Fieldgate, self-storage with SmartStop, 2 senior residence towers with Revera, and 2 condos and 2 apartments are underway to be developed on our own. Westside Mall in Toronto on Eglinton is our 12-acre site, which is adjoining the LRT station being built, which is actually being built on our lands, and a pedestrian bridge connecting our site to the new GO train stop. This site is now designated for just over 2 million sq ft of mixed-use development. Laval Center, 43 acres, is anchored by a 160,000-sq-ft Walmart.

Of the plan of this project is included on page 13 of the supplemental package.

Fall Northwest 178000 square foot shopping center.

To be surrounded by 1.7 million square feet of new development townhouses in our joint venture with fuel gate self storage with Smartstop two senior residents towers with Rivera had to call doors into apartments are underway.

To be developed.

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West side mall.

Toronto.

12 acres site, which is.

Which is.

Adjoining the L.R.T. station being built which is actually being built on our lives at a pedestrian bridge connecting our side to the new go <unk> train stop.

This site is now designated for just over 2 million square feet of mixed use development.

Well centre 43 acres is acre by I didn't 60000 foot walmer construction of our new of our story of our first two apartment towers is under way, we expect to develop the remaining lands with primarily residential rental apartments.

Mitchell Goldhar: Construction of our first two apartment towers is underway. We expect to develop the remaining lands with primarily residential rental apartments and condominiums. Other sites for which residential plans are evolving include Oakville North at Trafalgar and Dundas, Pickering, Hamilton Stony Creek, Hamilton Mountain Plaza, Alliston, several Mississauga locations, Markham at Highway 7 and Woodbine, Mirabel, where we have the outlet center, Laval East, Beauharnois, Mascouche in Quebec, and, with a lot of interest in joint ventures, and Langley, just outside Vancouver, Maple Ridge, Chilliwack, New Westminster, a suburb of Vancouver in British Columbia.

And condominiums other sites for which residential plans are evolving include <unk>, nor at your fogged in done does Pickering Hamilton Stony Creek, Hamilton Mountain Plaza Alstom several Mississauga locations.

Markup at seven in Woodbine Mirabelle, where we have the center.

<unk>, well joy that Scrooge, Quebec.

And with a lot of interest in joint ventures and Langley.

Outside Vancouver Maple Ridge Chill Wack.

Westminster.

Suburb of Vancouver, British Columbia.

Mitchell Goldhar: We estimate that in 10 years from now, we will be generating recurring NOI from these new rental businesses, seniors' homes, apartments, office, and self-storage, in excess of 20% of our total rental NOI, plus significant profits in CAD tens of millions every year, starting in 2020, from the sale of condominiums and townhouses.

We estimate.

10 years from now we will be generating recurring into I from these new rental businesses seniors homes apartments office.

In excess.

20%.

Rental.

Plus significant profits and the tens of millions every year.

Starting in 2020 from the sale condominiums in town houses.

[noise] with that I will turn it back to the operator to coordinate us.

Mitchell Goldhar: With that, I will turn it back to the operator to coordinate us and in addressing your questions. Thank you.

In addressing your questions.

Operator: Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Once again, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. One last time, if you'd like to ask a question, please signal by pressing star one. Since there are no questions, we'll go ahead and give the floor back to the moderator.

Thank you.

She would like to ask a question please.

Pressing star one on your telephone keypad.

Please make sure you mute function is turned off.

To retire equipment.

Once again pressed to ask a question.

Oh.

<unk>.

Signal for question.

Once again, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.

Yes.

And one last time, if you'd like to ask a question. Please signaled by pressing star one.

Yes, or no questions well go ahead and keep the floor back to the moderator.

Okay, well again, thank you for all taking the time to participate in the call Tonight for third quarter.

Peter Forde: Okay. Well, again, thank you for all taking the time to participate in the call tonight for our Q3, and thank you for your continuing interest and investment in our REIT. Good evening.

And thank you for your continuing interest and investment in our region.

Good evening.

Operator: This concludes today's call. Thank you all for your participation. You may now go ahead and disconnect.

This concludes today's call. Thank you for your participation you May now go ahead of disconnect.

[noise].

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