Q3 2019 Earnings Call

November 6, 2019

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the RioCan Real Estate Investment Trust Q3 2019 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Jennifer Suess, Senior Vice President and General Counsel. You may begin.

At this time all participants are in a listen only mode.

After the speakers presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded.

If you require any further assistance please press star zero.

I would now like to handle conference over to your speaker today during the first two senior Vice President and General Counsel.

Maybe get.

Jennifer Suess: Thank you and good morning, everyone. I'm Jennifer Suess, Senior Vice President, General Counsel, and Corporate Secretary for RioCan. Before we begin, I would like to draw your attention to the presentation materials that we will refer to in today's call, which were posted together with the MD&A and financials on RioCan's website earlier this morning. Before turning the call over to Jonathan, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts.

Thank you and good morning, everyone I'm, Jennifer Davis, Senior Vice President General Counsel and corporate Secretary for Riocan before we begin I would like to draw your attention to the presentation materials that we will refer to in today's call, which were posted together with the M. DNA and financials on real cans website earlier. This morning before turning the call over to Jonathan I require to read.

Following cautionary statement and talking about our financial and operating performance and in responding to your question. We may make forward looking statements, including statements concerning REO cans objective, it's strategies to T. Those objectives as well its statements with respect to management's beliefs plans estimates and attention and similar statements concerning anticipated future events result.

Circumstances performance or expectations that are not historical fact these statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions and these forward looking statements.

Jennifer Suess: These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principles measures, GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows, and profitability. RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same.

In discussing our financial and operating performance in responding to your question. We will also be referencing certain financial measures that are not generally accepted accounting principle measures gap under IRS. These measures do not have any standardized definition prescribed by a breath and are therefore unlikely to be comparable to similar measures presented by other reporting issuers non-GAAP measure should not be considered as altered.

It tends to net earnings or comparable metric determined in accordance with I ever it as indicators of real cans performance liquidity cash flows and profitability real his management uses these measures to aid in assessing the trusts underlying core performance and provide these additional measures. So that investors may do the same additional information on the material risks that could impact our actual results and the estimates in it.

Jennifer Suess: Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements for the period ended 30 September 2019, and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent Annual Information Form that are all available on our website and at www.sedar.com. I would now like to turn the call over to Jonathan Gitlin, our President and Chief Operating Officer.

Assumptions, we applied in making these forward looking statements together with details on our use of non-GAAP financial measures can be found in the financial statements for the period ended September Thirtyth 2019, and management's discussion and analysis related there too as applicable together with real cans. Most recent annual information form that are all available on our website at www dot seat aren't.

Outcome I would now like to turn the call over to Jonathan Gatlin, Our President and Chief operating Officer got off the call. Thanks, Jennifer. Thank all of you aren't robust coming in through our conference call today I'll begin by focusing on real cans engine, namely its major market commercial portfolio, Oh, the easy and 'cause admittedly be tempting to focus from.

Jonathan Gitlin: Is that off the cuff? Thanks, Jennifer, and thanks to all of you who are listening in to our conference call today. I'll begin by focusing on RioCan's engine, namely its major market commercial portfolio. Now, it would be easy and can admittedly be tempting to focus primarily on our growing development portfolio, including eCentral and Frontier rental residential projects, the success of which I will touch on momentarily. However, in emphasizing our development success, we forgo the opportunity to underscore the impact that our major market strategy has had and will continue to have on our core commercial operational results. I want to highlight the strength of our key operational metrics this quarter as they demonstrate the resilience of RioCan's portfolio and the quality, consistency, and inherent growth in its future income stream. In Q3, RioCan's FFO per unit was CAD 0.47.

There are we are growing development portfolio, including east Central and frontier rental revenue that Doug. It's a sense of words I will touch on momentarily. However in emphasizing our development success. We for go the opportunity to underscore the impact on our major market strategy outside and we'll continue to have on our core commercial operational result.

Oh I want to highlight the strength of our key operational metrics this quarter as they demonstrate the resilience of real cans portfolio and the quality consistency and inherent growth in future income stream.

The third quarter real can't AFFO per unit was 47 cents as of the end of Q3, 88.7% of real cans rental revenue is derived from Canada six major markets and 49.5% is derived from the greater Toronto area. We're confident that by the end of this year real Kent will meet or exceed the objective of 90.

Jonathan Gitlin: As of the end of Q3, 88.7% of RioCan's rental revenue is derived from Canada's six major markets, and 49.5% is derived from the Greater Toronto Area. We are confident that by the end of this year, RioCan will meet or exceed the objective of 90% and 50% of its rental revenue derived from the six major markets and GTA respectively. The major market strategy was conceived in recognition of the growth and consistency that our tenancy from these markets. We now see that growth and consistency translating into strong outcomes for RioCan. Major market same property NOI growth in Q3 was 2.3%. Committed occupancy was 97.7%.

And 50% of its rental revenue derived from the six major markets and GCA, respectively. The major market strategy was conceived in recognition of the growth and consistency that I can see from these markets and we now see dark roast and consistency translating into strong outcomes for Riocan major markets same property NOI growth in the third quarter was.

2.3% committed occupancy was 97.7%.

Jonathan Gitlin: RioCan's leasing team had another strong quarter, renewing more than 130 leases in the major markets with a robust rental rate increase of 7.7%. Seventy-one new lease deals were completed at an average rent of CAD 28.63 per sq ft, resulting in a major market leasing spread of 7%. It is important to discuss how these results were achieved and why we are confident that they are sustainable. Simply put, our commercial portfolio is stronger than it has ever been. The combined strength of our major market assets and the depth and experience of RioCan's team, not just the senior leadership, but through all levels of the organization, leaves RioCan well-positioned to sustain a robust growth profile. We are concentrated in the six major markets, but perhaps even more importantly, within these markets, we have strong, well-located assets.

Okay leasing team had another strong quarter, where new more than 130 leases in the major markets with a robust rental rate increase of 7.7% 71, new lease deals were completed at an average rent of $20.63 per square foot, resulting in a major market leasing spreads 7%. It is important too.

Discuss how these results were achieved and why we're confident that they are sustainable simply put our commercial portfolio is stronger than it has ever been the combined strength of our major market assets in the depth and experience of Riocan seem not just the senior leadership, but through all levels of the organization leaves REO can well position to sustain.

Robust growth profile, we are concentrated in the six major markets, but perhaps even more importantly within these markets. We have strong well located assets. Our properties are generally focal points in transit oriented fast growing densely populated and high income area.

Jonathan Gitlin: Our properties are generally focal points in transit-oriented, fast-growing, densely populated, and high-income areas. The desirability and quality of our locations allows us to attract, retain, and evolve our tenant mix, which in turn drives operating results today and provides significant upside for future growth. We have successfully curated a tenant mix that sees nearly 75% of RioCan's rent derived from the healthy service and necessity-based sectors, which are more insulated from the impact of changes in consumer spending habits and less easily disintermediated by the internet. I should add that none of our tenants are relied upon for more than 5% of our revenue. We have deep and long-standing relationships with the desirable high-profile national tenants who serve as anchors for our centers, including Loblaws, Shoppers Drug Mart, the TJX Companies, and the restaurants under the Recipe Unlimited brand.

The desirability and quality of our location allows us to attract retain and evolve our tenant mix, which in turn drives operating results today and provide significant upside for future growth. We have successfully curated its having makes it sees nearly 75% real cans rent derived from the healthy service and necessity based sectors, which.

Your more insulated from the impact came from tumor spending habits and less easily disintermediated by the Internet I should add that none of our tenants are relied upon more than 5% of our revenue.

We have deepened longstanding relationships with a desirable high profile national tenants, who serve as anchors for our centers, including Loblaws shoppers drug Mart, the TJX companies and the restaurants under the recipe unlimited brand. We pair this with a strong local presence in understanding to identify shifts in consumer behavior and include forward looking.

Jonathan Gitlin: We pair this with a strong local presence and understanding to identify shifts in consumer behavior and include forward-looking tenancies in our centers to bolster our resilience and keep us ahead of the curve. Our portfolio strength and our team's ability to translate vacancy into growth is illustrated through a recent example. Payless ShoeSource exited the Canadian market in Q2 of this year. RioCan has already backfilled two-thirds of the space previously occupied by them. Of the nine replacement tenants that we assigned, seven are food uses, one is a financial institution, and one is a desirable national shoe retailer. The covenants are strong, and the new tenants will be significantly better draw to the centers than those who previously occupied them.

Tendencies and our centers to bolster our resilience and keep US ahead of the curve our portfolio strength and our team's ability to translate bacon seem to growth is illustrated through a recent example, payless shoes exited the Canadian market in the second quarter. This year. We again has already back filled two thirds of the space previously occupied.

By them a benign replacement tenants that we assign sever food users one is a financial institution and one is a desirable national shoe retailer. The covenants are strong and the new tenants will be significantly better draws the centers and those who previously occupied.

Jonathan Gitlin: The story is almost identical for the former Bombay and Bowring spaces, where two-thirds of the space has also been backfilled with tenants who will bring significantly more traffic and vibrancy to those centers. We expect to lease the remaining space in normal course. However, it is notable that we have already replaced 85% of the total lost annual rental revenue through the successful leasing of only 66% of the vacated Bombay, Bowring, and Payless space. As the replacement tenants commence rent and operations in the coming months, the impact of that higher rent and increased traffic will be recognized in our operating results. This single example is demonstrative of a consistent theme. RioCan's retail portfolio provides healthy, stable income and will continuously produce strong results. For the last few years, the word retail has been shorthand for challenged landscape.

The story is almost identical for the former Bombay bearing spaces were two thirds of the space has also been back filled with tenants, who will bring significantly more traffic and vibrancy to those centers, we expect to lease the remaining space in normal course. However, it is notable that we have already were placed 85% of the total loss annual rental revenue to this.

Accessible leasing of always 66% of the vacated Bombay borrowing and pay less space as the replacement tenants commence rent and operations in the coming month, the impact of that higher rent and increased traffic will be recognized in our operating result. This single example is demonstrative of a consistent theme Rio cans return.

Well portfolio provides healthy stable income and we'll continuously produced strong results for the last few years. The word retail has been shorthand for challenge landscape rear camera is demonstrating that in the hands of a dynamic team with a proven track record and a strong well position major market portfolio from the challenge landscape an opportunity can emerge frequency.

Jonathan Gitlin: RioCan is demonstrating that in the hands of a dynamic team with a proven track record and a strong, well-positioned major market portfolio, from the challenged landscape an opportunity can emerge for consistent and steady growth. Based on RioCan's year-to-date results and the trends we are seeing, we are confident RioCan's portfolio will continue to support strong operating results into 2020, including same-property NOI growth in excess of 3% based on achieving our targets of major market and GTA exposures by the end of 2019. In addition to consistently driving growth from our existing portfolio, we are pleased that we can augment, complement, and accelerate our growth through the mixed-use intensification of our transit-oriented sites. This intensification includes the completion of our first two residential projects, namely eCentral at Yonge and Eglinton in Toronto and the first phase of Frontier in Ottawa.

Listed and steady growth.

Some real cans year to date it results in the trends, we're seeing we're confident real cans portfolio will continue to support strong operating results into 2020, including same property NOI growth in excess of 3% based on achieving our targets of major market MGT exposures by the end of 29 team. In addition to consistently driving grow.

Both from our existing portfolio. We're pleased that we can augment complement and accelerate our growth through the mixed use intensification of our transit oriented sites. This intensification includes the completion of our first two residential projects, namely central a young magnitude in Toronto and the first phase of frontier in Ottawa only 11 months since we started.

Jonathan Gitlin: Only 11 months since we started leasing, eCentral and Frontier are 77% and just under 90% leased respectively. The rents on the more than 560 leased units are satisfyingly at or above pro forma. As we are close to stabilization for these projects and now have a clear view on the resulting NOI, we can disclose that the yields are both, on both are netting out in the range of 5% to 6%. Given the strength of the multi-unit residential market, the value creation on each of these assets is significant. Success stories such as these support our confidence that RioCan's unit holder value will continue to be bolstered as we come to market with the 4,100 additional residential units that are either currently under construction or will be by 2021.

Leasing you central and frontier, our 77% and just under 90% leased respectively. The rents on the more than 560 leased units are satisfying lee at or above pro forma.

As you are close to stabilization for these projects and now have a clear view on the resulting in Hawaii. We can disclose that the yields are both on both are netting out in the range of 5% to 6% given the strength of the multi unit residential market the value creation on each of these assets is significant success stories, such as the support our confidence the real cans.

Unit holder value will continue to be bolstered as we come to market with the 4100 additional residential units that are either currently under construction or will be by 2021.

Jonathan Gitlin: As I mentioned earlier, it can be tempting to focus on the success of our current and future development projects, particularly when we consider that we have identified more than 27.4 million sq ft of major market density, of which approximately 13.3 million sq ft is already zoned for mixed-use development. It is important, however, to put these development projects in the context of our existing retail portfolio. Mixed-use development and the residential intensification of our existing properties benefits both retail and residential, and in turn, drives higher rent per square foot. When the demonstrated strength of RioCan's portfolio is viewed in the context of our strategic intensification program, it becomes clear that RioCan is unlocking the significant value inherent in our existing assets, improving the profile of our portfolio, adding substantial net asset value, and diversifying our sources of cash flow.

As I mentioned earlier it could be tempting to focus on the success of our current and future development projects, particularly when we consider that we have identified more than 27.4 million square feet of major market density of which approximately 13.3 million square feet is already zoned for mix use development. It is important however to put these development projects.

The context of our existing retail portfolio mixed use development and the residential intensification of our existing properties benefits, both retail and residential and in turn drives higher rent per square foot when the demonstrated strength of the real cans portfolio is viewed in the context of our strategic intensification program it becomes clear that.

Ken is unlocking significant value inherent in our existing assets improving the profile of our portfolio, adding substantial net asset value and diversifying our sources of cash flow Neocon has a longstanding history of operational success and delivering unit holder value. Our results continue to demonstrate that our major mark.

Jonathan Gitlin: RioCan has a long-standing history of operational success in delivering unit holder value. Our results continue to demonstrate that our major market focus and intensification strategy is sound. We have Canada's strongest, best-positioned major market portfolio and a team with unparalleled experience. The combination of the two facilitates our ability to continue to drive results in the near and long term as we put the right tenants in the right markets and intensify our existing sites to bring them to their highest and best use. I say with confidence that RioCan is financially strong, strategically structured, focused on operational excellence, and well-positioned to deliver growth and unit holder value. With that, I will turn the call over to Qi, who will provide an update on RioCan's financial results.

Focus and intensification strategies sound, we have Canada strongest best position major market portfolio and a team with unparalleled experience. The combination of the two facilitates our ability to continue to drive results in the near and long term as it put the right tenants.

In the right markets and intensify our existing sites to bring them to their highest and best fuse I see with confidence the real Kevin financially strong strategically structured focused on operational excellence and well position to deliver growth and unitholder value with that I will turn the call over to achieve who will provide an update on riocan financial results.

Qi Tang: Thank you, Jonathan, and good morning, everyone. RioCan reported FFO per unit of CAD 0.47 in Q3, stable from the same period last year. This was achieved despite CAD 14.7 million in lower realized marketable security gains, CAD 4.3 million in lower capitalized interest resulting from substantial development completions, lower lease cancellation fees, and higher condominium marketing costs, which added up to a hit to FFO per unit of approximately CAD 0.06 before taking the dilutive effect of our disposition program into account. The Trust's strong operational results, as reflected in same-property NOI growth, higher residential inventory gains, higher NOI from development completions, and strong leasing velocity on its residential rental business, lower G&A costs, as well as its NCIB program, was a key positive driver of this quarter's FFO per unit result.

Thank you Jonathan and good morning, everyone real can reported AFFO per unit of 47 cents in the third quarter stable from the same period last year. This was achieved despite 14.7 million you lowered realized marketable security gains 4.3, Muni lower capitalized interest.

Resulting from substantial demand on completion, lower lease cancellation fees and higher condominium marketing costs, which added up to a hate hits to AFFO per unit of approximately six cents before taking the dilutive effect of our disposition program into account.

The truck strong operational results as reflected in same property NOI growth higher residential inventory gain higher in NOI from debarment completions and strong leasing velocity onethree residential rental business lower DNA costs as well as its Npis April one was the key positive driver.

This quarter's AFFO per unit resolved.

Qi Tang: The Trust's FFO payout ratio held steady in the 77% range quarter to quarter and down from 78% a year ago. As of this quarter end, our IFRS book value per unit grew to CAD 26.01, a 4% increase when compared to Q3 2018. This growth is underpinned by the improving quality of our assets and our mixed-use development program. As of this quarter end, the Trust's average net rent per occupied square foot increased by 6.4% to CAD 19.49 over the comparable period in 2018.

The truck AFFO payout ratio, how study in the 77% range quarter to quarter and down from 78% a year ago.

As of this quarter end, our I first book value per unit grew to 26 dollar and one cents, a 4% increase when compared to Q3 2018.

This growth is underpinned by the improving quality of our assets and our mixed use development program.

As of this quarter in the trust average net rent per occupied square foot increased by 6.4% to $19.49 over the comparable period in 2018.

Qi Tang: Since 2015, the Trust has achieved a compound annual growth rate of 3.5% in its net rent per occupied sq ft, highlighting the significant improvements we've made to our portfolio as we're getting closer to our 90% and 52% major market and GTA exposure goals, respectively, and as we drive hard on organic growth. The average land rent at our active urban intensification mixed-use projects was CAD 33.96 per sq ft, based on 691,000 sq ft of committed or in place leases as of the quarter end. The quality of our major market and transit-oriented mixed-use developments are expected to further drive increases in the Trust's average land rent over time.

Since 2015, the truck has achieved a compound annual growth growth rate of 3.5 per said, it's not rent per occupied square foot highlighting the significant improvements we've made to our portfolio as we're getting closer to our 90% of 52% major market.

And GTH exposure ago, respectively, and as we drive hard organic growth. The average net rent at our active urban intensification mixed use project was 33 Dollarsninety six cents per square foot based on 691000 square feet of committed or in place leases as.

The quarter end.

The quality of our major market and transit oriented mix use development.

To further drive increases in the trust average NAND rent overtime.

Qi Tang: During the quarter, we expanded our existing partnerships with Boardwalk REIT and Killam Apartment REIT through a closed deal and a firm deal to sell discrete portion of the underlying shopping centers in Mississauga and Ottawa, Ontario, for mixed-use residential developments at CAD 80 and CAD 45 per buildable sq ft, respectively. This further highlighted the inherent net value growth potential of our portfolio, given our 27 million sq ft of development pipeline, with nearly half of the pipeline, or 30 million sq ft, already zoned. As of this quarter end, the Trust has recognized approximately CAD 288 million of cumulative fair value gains pertaining to its development pipeline, of which 23.1 million sq ft are incremental density. These recognized fair values are mostly related to a small portion of the Trust's development pipeline that had just recently completed one-year completion.

During the quarter, we extended our existing partnerships is boardwalk read kill them apartment read through a close deal and the from deal to sell discrete portion of the underlying shopping centers in Mississauga, and Ottawa, Ontario for mix use residential developments $80 $45 per billable.

Square footage respectively.

This further highlighted the inherent not value growth potential our portfolio.

Our 27 million square feet off the bottom and pipeline with nearly half of the pipeline or 30 million square feet already zones.

As of this quarter end the truck has recognized approximately 218 million our cumulative fair value gains pertaining to it's divided them pipeline of which 23.1 million square feet high incremental density. These recognize fair values are mostly related to a small portion of the trust development pipeline.

That I just recently completed on your completion.

Qi Tang: We continue to progress well on our residential rental lease-up at eCentral and Frontier, with quarterly NOI growing to CAD 0.9 million during the quarter. Stabilization expected by the end of Q1 2020 for eCentral and by the end of 2019 for Frontier. We have secured CAD 60.6 million of CMHC financing for Frontier together with Killam REIT. Once eCentral reaches stabilization, the recent CAD 150 million property level loan will become CMHC insured with the interest rate lowering to 2.33%, which has been locked in, plus up to CAD 40 million of additional CMHC financing. We will continue to utilize the lower cost of CMHC financing for our existing mixed-use residential properties, including the eligible commercial components, to lower our average cost of debt and drive FFO per unit growth.

We continue to broke was well on our residential rental lease up high essential frontier with quarterly NOI growing 2.9 million during the quarter.

People are they shouldn't expected by the end of first quarter 2000, 2024 essential and by the end of 2019 for frontier. We have secured 60.6 million of CMC financing for frontier together with Killen rate once the essential reaches stabilization. The recent 150.

In in property level alone will become CMC insured the interest free Lori into 2.33%, which has been locked in costs up to 40 million of additional CMC financing. We will continue to utilize the lower cost of CMC financing for our existing makes use residue.

Actual properties, including the eligible commercial components to further our lower our average cost of that and Dr. pfaffle per unit growth.

Qi Tang: We will ensure our overall leverage and debt to adjusted EBITDA will remain in our target ranges. As of this quarter end, our average contractual cost of debt for our entire debt portfolio is 3.36%. In addition to approximately CAD 36 million of inventory gains expected for the year from condominium and townhouse closings, we are progressing well on presales at our Yorkville and Windfield Farms phase one condo projects in Toronto and Oshawa, Ontario, with about 73% and 62% presold, respectively. These projects are estimated to generate profit margin or value creation between 15% to 20% on IFRS cost basis, including capitalized interest. During the quarter, the Trust incurred and expensed marketing costs of about CAD 1.3 million, mostly relating to these projects, which negatively impacted this quarter's FFO.

But we will ensure our overall leverage and debt to adjusted EBITDA will remain in our targeted ranges.

As of this quarter in our average contractual cost of debt for our entire debt portfolio is 3.36%.

In addition to approximately 36 million intriguing expected for the year condominium townhouse clothing.

We are progressing well presales highpower yorkville windfall farms based when condo projects in Toronto, and offshore, Ontario is about 73% and 62% pre sold respectively.

Project I estimate to generate profit margin all value equation between 15% to 20% I first cost basis, including capitalized interests.

During the quarter, the trough incurred and expand marketing costs of about 1.3 million, mostly relating to these project, which negative to be impacted this quarter the ethanol.

Qi Tang: We continue to prudently manage our development program and remain committed to keeping our total development as a percentage of total gross book value of assets at no more than 10%. As of Q3 2019, this number was 8.8%. With respect to our maintenance capital expenditures for our commercial operations, our expectation for the full year remains at CAD 40 million as guided. As of this quarter end, our debt to adjusted EBITDA was at 8.07 times on a proportionally shared basis. This was accomplished despite the completion of nearly CAD 500 million strategic acquisitions during the quarter and the development cost balance of approximately CAD 1.3 billion. Our leverage as of quarter end increased to 43.6%, primarily due to these strategic acquisitions.

We continue to prudently manage already been program and remain committed to keeping our total development as percentage of total gross book value of assets and no more than 10% as of Q3 2019. This number was 8.8%.

With respect to our maintenance capital expenditures for our commercial operation our expectation for the full year remains a 40 million as guided.

As of this quarter end, our debt to adjusted EBITDA was at 8.07 time, all proportionate share basis.

This was accomplished despite the completion of nearly 500, many strategic acquisitions during the quarter and the development costs balance of approximately 1.3 billion.

Our leverage as Acorda and increased to 43.6% primarily due to these strategic acquisitions.

Qi Tang: After our recent very successful CAD 230 million equity issuance, the proceeds of which were used to repay the indebtedness incurred for these strategic acquisitions, our leverage ratio is expected to end the year in the mid-42% range. With our CAD 500 million senior unsecured debenture issued in August, our debt composition ended the quarter at roughly 61% unsecured and 39% secured. The Trust's floating interest rate debt exposure was lowered by 460 basis points to 9.7% from the previous quarter end. Our weighted average term to maturity was increased from 3.3 years at the end of 2018 to a bit over 4 years as of this quarter end.

After our recent very successful or 230 million equity issuance. The proceeds of what which were used to repay the indebtedness incurred for these strategic acquisitions, our leverage ratio is expected to end the for in the mid 42% range.

These our 500 minis senior unsecured debenture issued in August our debt composition ended the quarter I, roughly 61% unsecured and 39% secured the trust floating interest rate that exposure was lowered by 460 basis points to 9.7% from the previous quarters.

Again.

We did I returned to maturity was increased from 3.3 years.

At the end of 2018 to a bit over four years as over this quarter at our pool to unencumbered assets grew from 8 billion as of the year end 2018 to 8.9 billion as of this quarter end and now generating close to 50 and that puts and of the real can analyze and NOI.

Qi Tang: Our pooled unencumbered assets grew from CAD 8 billion as of the year-end 2018 to CAD 8.9 billion as of this quarter end, and now generating close to 59% of RioCan's annualized NOI, thereby providing us with financial flexibility. Overall, we are pleased with our operational and financial results for Q3, and we look forward to a strong Q4. With that, I would like to turn the call over to our CEO, Ed, for his closing remarks.

There, but providing us with financial flexibility.

Overall, we're pleased with our operational and financial results for the third quarter and we look forward to a strong fourth quarter with that I would like to turn the call over to our Theyll add for his closing remarks.

Ed: Thank you, Jennifer Suess. Thank you, Jonathan Gitlin, and thank you, Qi. As you can tell, things are going okay. In fact, better than okay here at RioCan. As we hurtle towards the end of 2019, and in fact, this decade, as the years go by, I can't help but reflect on the journey RioCan has been on, particularly over the last five years. Over that relatively short time frame, short in the context of the real estate world, where everything takes forever, we have sold about CAD 3.5 billion worth of assets, including our entire portfolio in the US and the bulk of our assets in Canada's secondary markets.

Ed Sonshine: Thank you, Jennifer Suess. Thank you, Jonathan Gitlin, and thank you, Qi. As you can tell, things are going okay. In fact, better than okay here at RioCan. As we hurtle towards the end of 2019, and in fact, this decade, as the years go by, I can't help but reflect on the journey RioCan has been on, particularly over the last five years. Over that relatively short time frame, short in the context of the real estate world, where everything takes forever, we have sold about CAD 3.5 billion worth of assets, including our entire portfolio in the US and the bulk of our assets in Canada's secondary markets.

Thank you Jennifer Thank you Jonathan Thank you Ci as you can tell.

These are gone okay, better no. Okay here, we again.

But as we hurdle.

Since the going over the years go by towards the end of 2019 and in fact this decade.

I can't help but reflect on the journey recant has been on particularly over the last five years.

Over that relatively short timeframe short in the context of the real estate World, where everything takes forever.

We have sold about 3.5 billion dollars' worth of assets, including our entire portfolio, United States and the bulk of our assets in Canada secondary markets.

Ed: We then used the proceeds of those sales to significantly expand our presence in Canada's major markets while launching a large-scale development program aimed primarily at the repurposing of many of our shopping centers to mixed-use properties with a heavy emphasis on rental residential. That program is successfully well underway and is starting to hit some of the lofty targets RioCan set for itself almost five years ago. Our first multi-res properties are open and operating, and within a short few years, we shall have a large, growing, and uniquely all-new multi-use portfolio located only in Canada's major urban areas under the RioCan Living banner, something we quite frankly could not have dreamed of five years ago. We have done all this without letting our balance sheet deteriorate.

Ed Sonshine: We then used the proceeds of those sales to significantly expand our presence in Canada's major markets while launching a large-scale development program aimed primarily at the repurposing of many of our shopping centers to mixed-use properties with a heavy emphasis on rental residential. That program is successfully well underway and is starting to hit some of the lofty targets RioCan set for itself almost five years ago. Our first multi-res properties are open and operating, and within a short few years, we shall have a large, growing, and uniquely all-new multi-use portfolio located only in Canada's major urban areas under the RioCan Living banner, something we quite frankly could not have dreamed of five years ago. We have done all this without letting our balance sheet deteriorate.

We then use the proceeds of those sales to significantly expand our presence in Canada as major markets, while log launching a large scale development program aimed primarily at the re purposing of many of our shopping centers to mixed use properties with a heavy emphasis on rental residential.

That program is successfully well underway and starting to hit some of a lofty targets Ria can set for itself almost five years ago.

Our first multi raz properties are open and operating and within a short few years, we shall have a large growing and uniquely all new multi use portfolio located only in Canada as major urban areas under the Ria can living banner something we quite.

Frankly could not have dreamed up five years ago and.

And we've done all this without letting our balance sheet deteriorate to the contrary.

Ed: To the contrary, our recent very well-received equity issue was done solely for the purpose of ensuring that the wonderful acquisitions of the other 50% of Yonge Sheppard Center and our continuing expansion in the Yonge-Eglinton corridor don't cause us to deviate from our own focus on the credit metrics that have allowed us to enjoy the lowest cost of funds in our sector. That equity issue of CAD 230 million was our first in five years, and we will continue to use equity issue sparingly, if at all, over the next few years.

Ed Sonshine: To the contrary, our recent very well-received equity issue was done solely for the purpose of ensuring that the wonderful acquisitions of the other 50% of Yonge Sheppard Center and our continuing expansion in the Yonge-Eglinton corridor don't cause us to deviate from our own focus on the credit metrics that have allowed us to enjoy the lowest cost of funds in our sector. That equity issue of CAD 230 million was our first in five years, and we will continue to use equity issue sparingly, if at all, over the next few years.

A recent very well received equity issue was done solely for the purpose of ensuring that the wonderful acquisitions of the other 50% of young Shepherd Center and are continuing expansion in the middle income corridor don't cause us to deviate from our own focus on the credit metrics that have allowed us to enjoy.

The lowest cost of funds in our sector.

[noise] that equity issue of $230 million was our first in five years.

And we will continue to use equity issue sparingly if at all over the next few years instead, we expect to be able to fund our significant development program internally through retained earnings on an ongoing joint venture transactions, such as those recently announced Kellerman boardwalk.

Ed: Instead, we expect to be able to fund our significant development program internally through retained earnings and ongoing joint venture transactions, such as those recently announced with Killam and Boardwalk REITs, as well as continuing opportunistic sales of secondary market assets to the extent we have them, and some in primary markets where we see neither growth nor redevelopment potential. Where is this journey that I referenced earlier taking RioCan? Our destination is not having 90% of our revenue in the VECTOM markets or 50% in the GTA or the building and lease-up of thousands of apartments. Those are critically important milestones, but they have been set to let everyone, including ourselves, measure our progress.

Ed Sonshine: Instead, we expect to be able to fund our significant development program internally through retained earnings and ongoing joint venture transactions, such as those recently announced with Killam and Boardwalk REITs, as well as continuing opportunistic sales of secondary market assets to the extent we have them, and some in primary markets where we see neither growth nor redevelopment potential. Where is this journey that I referenced earlier taking RioCan? Our destination is not having 90% of our revenue in the VECTOM markets or 50% in the GTA or the building and lease-up of thousands of apartments. Those are critically important milestones, but they have been set to let everyone, including ourselves, measure our progress.

Please as well as continuing opportunistic sales of secondary market assets to the extent, we have them and some in primary markets, where we see neither growth no redevelopment potential.

So where is this journey I referenced earlier, taking recap.

Our destination is not having 90% of our revenue in the exact on markets or 50% and the DTA or the building and lease up of thousands of apartments. Those are critically important milestones, but they have been set to let everyone, including ourselves measure our progress so.

Ed: Simply put, we are striving to become a vehicle that will reward our unit holders with ever-increasing valuations based on strong FFO per unit growth, continuing value reflection, creation reflected in net asset value growth, and when we can do so without adversely impacting our various credit metrics, growing distributions. We will achieve this by moving our asset base to a more diversified mix with the bulk of it being in the GTA. It will be anchored by mixed-use properties such as we already have here at Yonge and Eglinton, are in the process of completing at Yonge and Sheppard, and are constructing with our partner, Allied REIT, at The Well. These trophy assets will be joined by quite a few others over the next few years, and some of which are in fact already in the pipeline.

Ed Sonshine: Simply put, we are striving to become a vehicle that will reward our unit holders with ever-increasing valuations based on strong FFO per unit growth, continuing value reflection, creation reflected in net asset value growth, and when we can do so without adversely impacting our various credit metrics, growing distributions. We will achieve this by moving our asset base to a more diversified mix with the bulk of it being in the GTA. It will be anchored by mixed-use properties such as we already have here at Yonge and Eglinton, are in the process of completing at Yonge and Sheppard, and are constructing with our partner, Allied REIT, at The Well. These trophy assets will be joined by quite a few others over the next few years, and some of which are in fact already in the pipeline.

We put we're striving to become a vehicle that will award our unitholders with ever increasing valuations based on strong AFFO per unit growth continuing value reflection creation reflected in.

Net asset value growth and when we can do so without adversely impacting our various credit metric mark metrics growing distributions.

We will achieve this by moving our asset base to a more diversified mix with the bulk of it being in that GTH. It will be anchored by mixed use properties such as we already have here young in aggregate.

Our in the process of completing a young and Shepherd and are completed and are constructing with our partner Allied read at the well. These trophy assets will be joined by quite a few others over the next few years and some of which are in fact already in the pipeline.

Ed: When taken together with growth in our now concentrated retail portfolio, I am confident that RioCan will achieve what we have set out to do. We of course know that this journey will never really end, nor will it be without the odd bump. The opportunities for future growth within our existing portfolio are in fact almost endless. As Canada continues to grow in population and urbanize, RioCan will equally continue to seize those growth opportunities as they're presented by those trends. Thank you. I'll now open up the call for questions.

Ed Sonshine: When taken together with growth in our now concentrated retail portfolio, I am confident that RioCan will achieve what we have set out to do. We of course know that this journey will never really end, nor will it be without the odd bump. The opportunities for future growth within our existing portfolio are in fact almost endless. As Canada continues to grow in population and urbanize, RioCan will equally continue to seize those growth opportunities as they're presented by those trends. Thank you. I'll now open up the call for questions.

When taken together with growth in our now.

Concentrated retail portfolio I'm confident that Ria candle achieve what we have set out to do.

We of course nodes. This June journey will never really end.

Nor will it be without the odd bump.

Has the opportunity, but the opportunities for future growth within our existing portfolio of fat almost endless.

As Canada continues to grow and population and urbanize re can well equally continue to see those growth opportunities as our presented by those trends. Thank you and I'll now open to open up the call for questions.

As a reminder to ask a question do you want me to press Star one on your telephone to withdraw your question press the pound or hash key.

Operator: As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Rothschild with Canaccord. Your line is open.

Please standby of all the compiled a Q and a roster.

Our first question comes from a line of Mark Rock child with Canaccord. Your line is open.

Mark Rothschild: Thanks, Zang. Good morning, everyone.

Thanks, and good morning, everyone.

Ed: Good morning.

Ed Sonshine: Good morning.

Part of it.

Mark Rothschild: In regards to the guidance for 2020 of 3% same store NOI growth, can you talk about if that's like a recurring number that you think is achievable consistently over time? And maybe in that number, how much growth is coming from, whether it's the Bombay Palace space or from the office assets, and what type of leasing spreads for retail would be assumed in there?

In regards to the guidance for 2000 20-F, 3% same store NOI growth.

Can you talk about it that's like a recurring number that you think is achievable consistently over time and maybe in that number how much growth is coming from whether it's the Bombay payless based or from the office assets and what type of leasing spreads for retail would be assumed in there.

Ed: I'll answer part of that question. The answer is yes. It is very sustainable, and we hope we'll go even higher. If you'll recall, Mark, when we announced our secondary market disposition program, the reason for it, besides the obvious one that I'd mentioned about raising capital without issuing equity, was actually to create a portfolio that will ultimately be able to achieve same property growth in the area of 3% to 5%. We're getting there. We're confident enough to say, you know, more than 3%, next year. And that's a number that we think will continue to grow. As far as its makeup is concerned, I'll turn that over to Jonathan and Gene.

Ed Sonshine: I'll answer part of that question. The answer is yes. It is very sustainable, and we hope we'll go even higher. If you'll recall, Mark, when we announced our secondary market disposition program, the reason for it, besides the obvious one that I'd mentioned about raising capital without issuing equity, was actually to create a portfolio that will ultimately be able to achieve same property growth in the area of 3% to 5%. We're getting there. We're confident enough to say, you know, more than 3%, next year. And that's a number that we think will continue to grow. As far as its makeup is concerned, I'll turn that over to Jonathan and Gene.

I'll answer part of that question. The answer is yes. It is very sustainable.

And.

And we hope will go even higher if you'll recall mark when we announced our secondary market disposition program. The recent for besides the obvious one that I've mentioned about raising capital without issuing equity.

It was actually to create a portfolio that will ultimately be able to achieve same property growth in the area, 3% to 5%, we're getting there and we're confident enough to say, yes more than 3% next year and that that's a number that we think we'll continue to grow as.

Hi, Chris. Its makeup is concerned I will turn that over to Jonathan Angie sure. Thanks, Mark things that there's a number of drivers to to permit the sustainability of bad number.

Jonathan Gitlin: Sure. Thanks, Mark. Thanks, Ed. There's a number of drivers to permit the sustainability of that number. There's obviously the strength in our portfolio, you know, the continuing strength of the major market focus on our portfolio, the urban focus on our portfolio, the fact that we, you know, that we are through the Bombay and Bowring leases, and we're leasing them up at substantially higher rates. I would also say that there's a general view from management that our overall leasing rates for our existing portfolio are below the market. Right now, I think our average rents are somewhere around CAD 19 a sq ft, and the new rents that we're writing are somewhere closer to CAD 26 a sq ft.

There is obviously the strengthen our portfolio.

The continuing strength of the major market focus in our portfolio the urban focus in our portfolio. The fact that we.

That we are through the bomb be bearing leases and we're leasing them up at substantially higher rates.

And I'd also say that as a general view for management that our overall leasing rates for our existing portfolio are below the market right. Now I think our average rents are somewhere around $19 a square foot and the new rents that were writing our somewhere closer to $26 square foot and thus we.

Jonathan Gitlin: Thus, we feel we'll capitalize on that inherent spread over time. Then there's also obviously the benefits of reducing expenses at our property, which over time translates into the ability of our tenants to pay higher net rents, things that we're very much focused on. It is a combination of factors, but those are the highlights.

We feel we'll capitalize on that inherent spread.

Overtime. So there and then there's also obviously the benefits of reducing expenses at our property, which overtime translates into the ability of our tenants to pay are not rent things that were very much focused on so it is a combination of factors, but those are the highlights I was summing up marked by saying next year I worry me hitting home really all cylinders.

Ed: Yeah. I would sum it up, Mark, by saying next year, we're gonna be hitting on really all cylinders. We're gonna be hitting the cylinders that we expect our occupancy rates to go up, and not just on Bowring and Bombay, but other spaces. Office rents, in properties like Yonge Sheppard, like Yonge Eglinton Centre, even Lawrence Square and others, will continue to move up as leases are renewed. Our retail portfolio, now that, you know, I used the word concentrated, in my presentation, we're very confident that we're gonna be able to hit rent increases because the type of retailer that we're leasing to, they can afford it. They don't have a lot of alternatives. I hope that answers your question.

Ed Sonshine: Yeah. I would sum it up, Mark, by saying next year, we're gonna be hitting on really all cylinders. We're gonna be hitting the cylinders that we expect our occupancy rates to go up, and not just on Bowring and Bombay, but other spaces. Office rents, in properties like Yonge Sheppard, like Yonge Eglinton Centre, even Lawrence Square and others, will continue to move up as leases are renewed. Our retail portfolio, now that, you know, I used the word concentrated, in my presentation, we're very confident that we're gonna be able to hit rent increases because the type of retailer that we're leasing to, they can afford it. They don't have a lot of alternatives. I hope that answers your question.

We're going to be hitting Selner said, we expect the occupancy rates to go up.

And not just on bowing Bombay, but other spaces office rents and properties like him Shepherd like young Egelton Center, even Lorne square and others will continue to move up as as leases that renewed and our retail portfolio now that ice.

Stored concentrated.

In my my presentation.

We're we're very confident that we're going to be able to hit rent increases because.

Type of retailer that we're leasing to they can afford.

And they don't have a lot of alternatives I.

I hope that answers your question, yes for sure. Thanks, just one more question I'm sure what type of target would you have for asset sales next year or maybe over the next couple of years and do you think that you will continue to sell assets as you go into portfolio add to what extent is that baked into when you talked about being self funding.

Mark Rothschild: Yeah, for sure. Thanks. Just one more question.

Ed: Sure.

Ed Sonshine: Sure.

Mark Rothschild: What type of target would you have for asset sales next year or maybe over the next couple of years? Do you think that you will continue to sell assets as you prune the portfolio? To what extent is that baked into when you talk about being self-funding for the development?

Them it.

We will continue to sell assets. We you know we have as I mentioned, we have we have several strategies to ensure that we have the capital that we have acquired and while at the same time, keeping our credit metrics I think you will see.

Ed: We will continue to sell assets. You know, we have, as I mentioned, several strategies to ensure that we have the capital that we require, and while at the same time keeping our credit metrics. I think you will see quite a few more joint venture situations. Those are actually quite wondrous for us because, as you know, we've disclosed many times, we don't really recognize the value that we've created through rezoning in any material way. Well, we don't put a per square foot dollar number on density that we have either already created or, you know, we're in the process of doing.

Ed Sonshine: We will continue to sell assets. You know, we have, as I mentioned, several strategies to ensure that we have the capital that we require, and while at the same time keeping our credit metrics. I think you will see quite a few more joint venture situations. Those are actually quite wondrous for us because, as you know, we've disclosed many times, we don't really recognize the value that we've created through rezoning in any material way. Well, we don't put a per square foot dollar number on density that we have either already created or, you know, we're in the process of doing.

Quite a few more joint venture situations.

Those are actually quite wonders for us because as I know.

We've disclosed many times, we don't really recognize the value that was created three resulting in any material way.

Hello, We've got we don't put a per square foot dollar number on density that we are have either already created or.

We are in the process of doing and when we do a joint venture transaction for a building that's getting close to being built it helps us in two ways generates cash.

Ed: When we do a joint venture transaction for a building that's getting close to being built, it helps us in two ways. It generates cash, and it recognizes the value creation and allows us not only to enjoy the cash and the profitability, well, it's not profit, it's not FFO, but we also are then able to write up the value of our remaining 50% interest, assuming it's a 50/50 deal. That is probably gonna be, Mark, our prime focus for capital raising. You know, we're talking some pretty material numbers. But we will also continue to do, you know, use the word opportunistically, sales of properties. Have we got a number for that? No. But between the two, it's gonna be in the many hundreds of millions of CAD in 2020.

Ed Sonshine: When we do a joint venture transaction for a building that's getting close to being built, it helps us in two ways. It generates cash, and it recognizes the value creation and allows us not only to enjoy the cash and the profitability, well, it's not profit, it's not FFO, but we also are then able to write up the value of our remaining 50% interest, assuming it's a 50/50 deal. That is probably gonna be, Mark, our prime focus for capital raising. You know, we're talking some pretty material numbers. But we will also continue to do, you know, use the word opportunistically, sales of properties. Have we got a number for that? No. But between the two, it's gonna be in the many hundreds of millions of CAD in 2020.

And recognizes the value creation allows us.

Not only to enjoy the cash in the profitability wellness not profit is not AFFO, but we also are then able to write up.

The value of our remaining 50% interest assuming it's a 50 50 deal. So that is probably going to be mark our prime focus for capital raising and we're talking some pretty material numbers.

But we will also continue to do you know used the word opportunistically.

Sales of of properties have we've got a number for that.

No, but between the two it's going to be in the many hundreds of millions of dollars in 2020.

Okay, great. Thank you so much thank you.

Mark Rothschild: Okay, great. Thank you so much.

Ed: Thank you.

Ed Sonshine: Thank you.

Our next question comes from that Sam Damiani with TD Securities. Your line is open.

Operator: Our next question comes from Sam Damiani with TD Securities. Your line is open.

Thanks, Good morning, everyone. Just one follow up on thoughts on works I want to Mark's question. So you had previously said it leverage goal of 30% to 42% so even with the equity raise in Q4, you'll be at or slightly above the top end to that range, where where do you expect to be a 2020 and do you still feel a need to stick to.

Sam Damiani: Thanks, and good morning, everyone.

Ed: Good morning.

Ed Sonshine: Good morning.

Sam Damiani: Just to follow up on Mark's, one of Mark's questions. You had previously said a leverage goal of 38% to 42%. Even with the equity raise in Q4, you'll be at or slightly above the top end of that range. You know, where do you expect to be in 2020? And do you still feel the need to stick to that same range?

That's a that's that's safe.

Well, let me answer that first of all I'm disappointed you want for Sam and.

Ed: Well, let me answer that. First of all, I'm disappointed you weren't first, Sam. You know, usually you are. Mark beat you out. You know, I'm not sure that's telling us anything, but perhaps. The you know, that 38% to 42% number is a range we're gonna stick with. I understand we're slightly over that, but I also wanna emphasize that that is not our prime metric. Our prime metric are the other much more, in my sense of my view, objective metrics, i.e., net debt to EBITDA, interest rate coverage, and all the other coverage numbers that we use. You know, as

Ed Sonshine: Well, let me answer that. First of all, I'm disappointed you weren't first, Sam. You know, usually you are. Mark beat you out. You know, I'm not sure that's telling us anything, but perhaps. The you know, that 38% to 42% number is a range we're gonna stick with. I understand we're slightly over that, but I also wanna emphasize that that is not our prime metric. Our prime metric are the other much more, in my sense of my view, objective metrics, i.e., net debt to EBITDA, interest rate coverage, and all the other coverage numbers that we use. You know, as

Usually you are.

Mark that be Joe and on that I'm, not sure that's telling us anything but perhaps.

But the.

You know thats, 38% to 42% number is arrange we're going to stick with.

I understand we're slightly over that but I also want to emphasize that that is not our prime metric our prime metric, our the or the other.

Much more in my sense of my view objective metrics I'd net debt to EBITDA interest rate coverage and all the other coverage numbers that we use.

Ed: I'm not gonna belabor the point 'cause I have in the past, but you know, there's a large element of not the discretion, but not all IFRS calculations are made the same across the sector. You know, those percentage numbers, while we understand it's important and we measure them, you know, 'cause they are a basis of comparison, we actually are much more focused on the other metrics, and we intend to keep doing exactly what we say we're gonna do. In fact, I would hope by the end of 2020, our metric for leverage will be in better position than they will be at the end of 2019.

I'm not going to belabor.

Ed Sonshine: I'm not gonna belabor the point 'cause I have in the past, but you know, there's a large element of not the discretion, but not all IFRS calculations are made the same across the sector. You know, those percentage numbers, while we understand it's important and we measure them, you know, 'cause they are a basis of comparison, we actually are much more focused on the other metrics, and we intend to keep doing exactly what we say we're gonna do. In fact, I would hope by the end of 2020, our metric for leverage will be in better position than they will be at the end of 2019.

The point because I have in the past.

But there's a large element of.

No not the discretion, but.

Not all IRS calculations are made the same across the sector.

And so those percentage numbers, while we understand it's important and we measure them.

No because they are basis a comparison, we actually are much more focused on the other metrics and we intend to keep doing exactly.

What we say we're going to do.

In fact, I would hope by the end of 2020.

Our our number our metric.

For leverage will be in better positioned than they will be at the end of 2019, okay.

Sam Damiani: Okay. That's helpful. Just on that, like, why not just grow the balance sheet? You know, why the aversion to raising equity? You know, why not just grow the balance sheet?

That's helpful and just talk.

Well why not just grow the balance sheet.

Well why the aversion to raising equity.

Why not just grow the balance sheet.

Ed: It's expensive. I mean, simply put, our goal is to achieve the best cost of funds that we can. Obviously one aspect of that is debt, and I think we have actually achieved that goal, and we're focused on staying in that spot. The last list I've seen from some of the banks, our spreads are actually the lowest of anyone in our sector without exception. I'm not sure we've been able to say that ever before. But the other side of the equation is of course equity. We try to target every expenditure of size, whether it's an acquisition or a major development program, in fact, our overall portfolio, that 60% of the cost is gonna be represented by equity of some sort.

Ed Sonshine: It's expensive. I mean, simply put, our goal is to achieve the best cost of funds that we can. Obviously one aspect of that is debt, and I think we have actually achieved that goal, and we're focused on staying in that spot. The last list I've seen from some of the banks, our spreads are actually the lowest of anyone in our sector without exception. I'm not sure we've been able to say that ever before. But the other side of the equation is of course equity. We try to target every expenditure of size, whether it's an acquisition or a major development program, in fact, our overall portfolio, that 60% of the cost is gonna be represented by equity of some sort.

It's expensive I mean simply put our goal is to achieve the best cost of funds that we can.

Obviously, one aspect of that is that and I think we've actually achieved that goal and we're focused on staying in that spot.

The last list I've seen from some of the banks are spreads are actually the lowest of anyone.

In our sector without exception and I'm not sure we that we've been able to say that ever before.

But the other side of the equation is of course equity and we tried to target every expenditure of size, whether it's an acquisition or a major development program. In fact, our overall portfolio that 60% of the cost is going to be represented by equity of some sort.

When you look at our cost of equity at this.

Ed: When you look at our cost of equity at this price of our units, it's probably by our calculations looking on a, let's say, a 2020 FFO number, it's 7%+. Now, if we can, you know, get that at a much lower cost through either sales, joint ventures, particularly joint ventures where they're effectively, you know, like both Killam and Boardwalk, we're not giving up any income that translates into FFO because they're discrete portions of a shopping center. It seems to us that that's a far preferable way. Now, if the stock were trading at CAD 30, you know, I might give you a different answer, but it's not.

Ed Sonshine: When you look at our cost of equity at this price of our units, it's probably by our calculations looking on a, let's say, a 2020 FFO number, it's 7%+. Now, if we can, you know, get that at a much lower cost through either sales, joint ventures, particularly joint ventures where they're effectively, you know, like both Killam and Boardwalk, we're not giving up any income that translates into FFO because they're discrete portions of a shopping center. It seems to us that that's a far preferable way. Now, if the stock were trading at CAD 30, you know, I might give you a different answer, but it's not.

Price of our units, it's probably by our calculations looking on a let's say a 20 20-F or number it's 7% plus.

No.

If we can you don't get that at a much lower costs through either sales joint ventures.

Particularly joint ventures, where they're effectively like both kill them and boardwalk, we're not giving up any income that translates into fall because so discrete portions of the shopping center. It seems to us that that's a fire preferable way.

Alpha stuff, we're trading at $30 I might give you a different answer.

It's not.

Sam Damiani: Okay. Maybe I'll just switch gears to enclosed malls. I know they're a very small portion of the portfolio today, but they do represent not an insignificant portion of your GTA portfolio specifically. How are they performing? I know there's been some backfilling and probably above average performance of late, but how do you see the performance there going forward, and how does that factor into your same property NOI growth guidance, not only for 2020, but longer term?

Maybe I'll just switch gears to close balls I know there were very small portion of the portfolio today, but they do represent not insignificant portion of your G portfolio specifically.

How are the performing I know theres been some back filling it probably a above average performance of late but how do you see the performance there going forward and how does that factor into your.

Same property NOI growth guard settlement for 2020, but longer term.

Ed: Yeah. Well, first I'm gonna quibble with you. It's not such a, you know, it's something I'm looking at our SVP of asset management. We have to do a better job or different kind of job of characterizing, because, you know, I don't consider Yonge Eglinton Centre a mall. I don't consider Lawrence Square a mall, even though they are enclosed properties. And I should probably add Yonge Sheppard to that list and probably some others. But we do have some enclosed malls, and over the last few years, they have been challenging. Happily, our leasing team has been including empty Sears and empty Target in a couple of cases. Our leasing team has been superb in handling those challenges.

Ed Sonshine: Yeah. Well, first I'm gonna quibble with you. It's not such a, you know, it's something I'm looking at our SVP of asset management. We have to do a better job or different kind of job of characterizing, because, you know, I don't consider Yonge Eglinton Centre a mall. I don't consider Lawrence Square a mall, even though they are enclosed properties. And I should probably add Yonge Sheppard to that list and probably some others. But we do have some enclosed malls, and over the last few years, they have been challenging. Happily, our leasing team has been including empty Sears and empty Target in a couple of cases. Our leasing team has been superb in handling those challenges. You know, I think the telling number is that our department store and apparel category is together, I think, in single digits as a percentage.

Well first segment equivalent Hugh.

It's not such a something I'm looking at the our SVP of asset management, we have to do a better job or different kind of jobs characterizing because yes, I don't consider young Nagle from center a mall I don't consider Lawrence Square mall, even though they are and closed.

Properties and that's probably.

Young Shepherd to that list and probably some others, but we do have some enclosed malls and over the last few years they have been challenging.

Happily our leasing team has been including how empty Sears and empty targets in a couple of cases.

Our leasing team has been superb and handling those challenges and.

Ed: You know, I think the telling number is that our department store and apparel category is together, I think, in single digits as a percentage.

I think the telling number is that that our department store in apparel.

Category.

Together I think in single digits as a percentage is 8%. Thank you Jay of our total revenue sources. So.

Qi Tang: 8%.

Qi Tang: 8%, thank you, Qi, of our total revenue sources. In other words, we're losing those kind of tenants, Sears and Target being great examples, even though Target was already a few years ago. We're replacing them with either necessity-based retailers or experiential retailers, including food and entertainment type retailers. We are getting growth through that process. It's a challenged sector. There's no question about that.

Ed Sonshine: 8%, thank you, Qi, of our total revenue sources. In other words, we're losing those kind of tenants, Sears and Target being great examples, even though Target was already a few years ago. We're replacing them with either necessity-based retailers or experiential retailers, including food and entertainment type retailers. We are getting growth through that process. It's a challenged sector. There's no question about that.

In other words were losing those kind of tenants Sears and target being great. Examples even though target was already a few years ago.

And we're replacing them with either necessity based retailers.

Or experiential retailers, including food and entertainment type retailers and we are getting growth.

Through that process.

But it's a challenge sector, there's no no question about that.

Thank you I'll turn it back.

Sam Damiani: Thank you. I'll turn it back.

Ed: Thank you, Sam.

Ed Sonshine: Thank you, Sam.

Thank you Sam.

Our next question comes from Pammi Berg with RBC capital markets. Your line is open.

Operator: Our next question comes from Pammi Bir with RBC Capital Markets. Your line is open.

Thanks, and good morning.

Pammi Bir: Thanks, and good morning.

Ed: Good morning.

Ed Sonshine: Good morning.

Pammi Bir: Just on the portfolio has undergone, you know, pretty major realignment over the last two years. You've guided some pretty good same property NOI growth for 2020. There's still a lot of development activities, some projects coming on and some, of course, some additional spending. When you layer all that together, how are you feeling about FFO growth for the year ahead?

Just one on.

The portfolio has undergone pretty major realignment over the last two years.

You've guided some pretty good same property NOI growth for 2020, there's still a lot of development activities. Some projects coming on in some of course, some additional spending so when you layer all that together, how you're feeling about a AFFO growth for the year ahead.

Well, we don't like to really guide on that I don't think GE and right now we're sticking to same store.

Ed: Well, we don't like to really guide on that, I don't think, Chi, and you know, right now we're sticking to same store. You know, all I'll say is I don't think what we'll have in 2020 will be representative of what I see in the years following. Next year is still a bit of a transition year. We're finishing Sheppard Centre. By the end of next year, that residential will be there. So you've got a ton of money. I think the number Chi used was about CAD 1.2 billion that we're. From an FFO perspective, all we're doing is capitalizing interest at 3.3%. So it will be a challenge to get to the growth rates in FFO that we would like next year.

Ed Sonshine: Well, we don't like to really guide on that, I don't think, Chi, and you know, right now we're sticking to same store. You know, all I'll say is I don't think what we'll have in 2020 will be representative of what I see in the years following. Next year is still a bit of a transition year. We're finishing Sheppard Centre. By the end of next year, that residential will be there. So you've got a ton of money. I think the number Chi used was about CAD 1.2 billion that we're. From an FFO perspective, all we're doing is capitalizing interest at 3.3%. So it will be a challenge to get to the growth rates in FFO that we would like next year.

You know I all say is I don't think what we'll have in 2020 will be representative of what I see in the years. Following next year is still a bit of a transition year, we're finishing.

Shepherd Center.

By the end of next year that read to that.

Residential be there so you've got you've got a ton of money I think the number to use was of a $1.2 billion.

That were from an AFFO perspective, all we're doing is capitalizing interest at 3.3%.

So.

It will be a challenge to get to the growth rates NFV fold.

That we would like next year, I think where that will really take off quite frankly as in 2021.

Ed: I think where that will really take off, quite frankly, is in 2021. You know, as I said, Pammi, you know, a couple of years ago or maybe longer, when we really started this transformational process, that sometimes we feel like jugglers around here because, but basically we haven't dropped any balls, notwithstanding some skeptics. We have continued FFO growth throughout this transformational program, and we expect to continue to do that. We think

Ed Sonshine: I think where that will really take off, quite frankly, is in 2021. You know, as I said, Pammi, you know, a couple of years ago or maybe longer, when we really started this transformational process, that sometimes we feel like jugglers around here because, but basically we haven't dropped any balls, notwithstanding some skeptics. We have continued FFO growth throughout this transformational program, and we expect to continue to do that. We think

As I said Pammi, you know a couple of years ago or maybe longer.

When we really started this transformational process that sometimes we feel like jugglers around here because.

Basically we haven't dropped any balls.

Notwithstanding some skeptics.

We have continued EFO growth.

Throughout.

This transformational program and we expect to continue to do that.

We've seen okay in a couple of years, it's going to get to a significant growth rate.

Pammi Bir: Okay

Ed: In a couple of years, it's gonna get to a significant growth rate.

Ed Sonshine: In a couple of years, it's gonna get to a significant growth rate.

Right and I think if I recall, a few years ago that growth rate that you were targeting was over the long term somewhere around 5%.

Pammi Bir: Right. I think if I recall a few years ago, that growth rate that, you were targeting was over the long-term, somewhere around 5%. That sort of still in that range? Right.

So that's still in that range right absolutely.

Ed: Ab-absolutely.

Ed Sonshine: Ab-absolutely.

Pammi Bir: Right. Okay. Just again, sticking to next year, and thinking about some of the condo projects, townhomes, and air rights sales, I guess, at The Well, which it sounds like might be spread over 2020 and 2021. How should we think about the gains that could be surfacing next year?

Okay.

Just again sticking to next year and thinking about some of the condo projects.

Town homes in Air rights sales, I guess at the well, which it sounds like might be spread over 20 2021.

How should we think about the gains I couldn't be surfacing next year.

Ed: Okay. Let me be clear. We're not involved in any of the condominiums at The Well. We sold those air rights to Tridel for the condominium side. Our exposure at The Well, which is huge, is gonna be on the residential side. We're partners with Woodbourne in a 600-unit multi-res building that'll be almost at the corner of Front and Spadina, and that I think will get started in 2020. You know, there won't be any condominium gains there. In fact, I think the condominium gains in 2020 will be relatively minimal.

Ed Sonshine: Okay. Let me be clear. We're not involved in any of the condominiums at The Well. We sold those air rights to Tridel for the condominium side. Our exposure at The Well, which is huge, is gonna be on the residential side. We're partners with Woodbourne in a 600-unit multi-res building that'll be almost at the corner of Front and Spadina, and that I think will get started in 2020. You know, there won't be any condominium gains there. In fact, I think the condominium gains in 2020 will be relatively minimal.

Okay, Let me, let me be clear.

We're not involve many of the condominiums at the well we sold those air rights.

To try bell for the condominium side, our exposure at the well which is huge.

Is going to be on the residential side were partners with Woodburn in a 600 unit multi raz building that will be almost at the corner friends, but I know that I think we'll get started in 2020.

But.

So there won't be any condominium gains there.

In fact, I think the condominium gains in 2020 will be relatively minimal.

Pammi Bir: Yeah.

Ed: Because U.C. Tower, which is the phase one of the Windfield Farms project in Oshawa, is just gonna get started at the beginning of 2020. That's one that's gonna come in more like the 2022. Yorkville, which we also expect to get started at the beginning of 2020. In fact, I'm pretty sure, and which is amazingly almost 75% pre-sold at some pretty good numbers, will be completed in 2024. That's one of the reasons I talk about next year. There's gonna be nothing big that's unexpected next year, from the point of view of condominium sales.

Ed Sonshine: Because U.C. Tower, which is the phase one of the Windfield Farms project in Oshawa, is just gonna get started at the beginning of 2020. That's one that's gonna come in more like the 2022. Yorkville, which we also expect to get started at the beginning of 2020. In fact, I'm pretty sure, and which is amazingly almost 75% pre-sold at some pretty good numbers, will be completed in 2024. That's one of the reasons I talk about next year. There's gonna be nothing big that's unexpected next year, from the point of view of condominium sales.

Because.

University City, which is the phase one of the Wouldnt feel firearms project in offshore is just going to get started at the beginning of 2020. So that's that's when that's going to come in more like the 2022.

Yorkville, which we also expect to get started at the beginning of 2020 inside.

And I'm pretty sure in which is amazingly almost 75% pre sold at some pretty.

Good numbers.

We will be completed in 2024, and that's one of the reasons I talk about next year, there's going to be nothing big that's on a unexpected next year.

On the point of view of condominium sales.

Okay.

Pammi Bir: Okay. Maybe just wanted to clarify your comments earlier in the call where you mentioned, you know, hundreds of millions of, I guess, sales to JV partners. Can you just clarify, are those gonna be on projects that are completed or projects that are starting? Like bringing in new partners.

Maybe just a.

Just wanted to clarify your comments.

Earlier in the call where you mentioned.

Hundreds of millions of I guess sales to JV partners can you can you just clarify are those going to be on projects that are completed or projects that are starting like bringing into equivalent of course it could be both.

Ed: It could be both. I mean, again, you know, the timing of this is probably a little off for us. Monday, as a matter of fact, we have an offsite where we sit down, and one of the things we do is focus in on exactly our budget for 2020. I mean, we all have a pretty good sense of what it is, obviously. Equally important, we look at a capital plan that extends out five years. When you see us entering into transactions next year, they're moving towards fulfilling the requirements of that capital plan. We're, you know, I know hundreds of millions sounds like a big number.

Ed Sonshine: It could be both. I mean, again, you know, the timing of this is probably a little off for us. Monday, as a matter of fact, we have an offsite where we sit down, and one of the things we do is focus in on exactly our budget for 2020. I mean, we all have a pretty good sense of what it is, obviously. Equally important, we look at a capital plan that extends out five years. When you see us entering into transactions next year, they're moving towards fulfilling the requirements of that capital plan. We're, you know, I know hundreds of millions sounds like a big number.

I mean again.

The timing of this is probably a little little off for us.

Monday as a matter of fact, we have an offsite.

Where we sit down and one of the things we do is focusing on exactly our budget for 2020, I mean, we all have a pretty good sense of what it is obviously, but equally important we look at a a capital plan that extends out five years and so when you see us entering into transactions next year there.

Sure there moving towards fulfilling the requirements so that capital plan.

And where it will you know I know hundreds of millions sounds like a big number, but if I may be bold with what's really big numbers.

Ed: If I may be bold with really big numbers, rough estimate, we're probably looking at a development spend over the next 4 to 5 years of CAD 2 billion. If we keep to that 60/40 formula that we like to keep to, and we will keep to, that implies a requirement over a period of 4 years, of raising about CAD 1.2 billion in equity funds. Now, some of it's gonna come from retained earnings. Some of it may come, I mean, we're talking over a period of years, from equity issuances, although, you know, hopefully at prices much better than we are today.

Ed Sonshine: If I may be bold with really big numbers, rough estimate, we're probably looking at a development spend over the next 4 to 5 years of CAD 2 billion. If we keep to that 60/40 formula that we like to keep to, and we will keep to, that implies a requirement over a period of 4 years, of raising about CAD 1.2 billion in equity funds. Now, some of it's gonna come from retained earnings. Some of it may come, I mean, we're talking over a period of years, from equity issuances, although, you know, hopefully at prices much better than we are today.

Rough estimate we're probably looking at a development spend over the next four to five years of $2 billion.

If we keep to that 60 40.

Formula that we'd like to keep too we will keep too.

That implies that requirement over a period of four years.

Of raising about $1.2 billion in equity funds now some of its going to come from retained earnings.

Some of it may come I think we're talking over 30 years from equity issuance issues since although.

Hopefully at prices much better than we are today and the bulk of it will come from recycling capital either.

Ed: The bulk of it will come from recycling capital, either from, you know, low to no growth properties, some completed projects, and largely though from land positions, that we already own and, hopefully won't be giving up income from. I wish I could give you numbers. I know you'd love them, but I don't have them.

Ed Sonshine: The bulk of it will come from recycling capital, either from, you know, low to no growth properties, some completed projects, and largely though from land positions, that we already own and, hopefully won't be giving up income from. I wish I could give you numbers. I know you'd love them, but I don't have them.

From a low to no growth properties.

Some completed projects and largely though from land positions.

That we already own and.

Hopefully won't be giving up income front. So I wish I can give you numbers I know youd love them, but I don't have them.

Great. Thank you just last one at the well.

Pammi Bir: Great. Thank you. Just last one. At The Well, it looks like costs stabilized this quarter. I think last quarter-

It looks like cost stabilized this quarter I think last Crinone didn't move Iris yeah right.

Ed: Finally.

Ed Sonshine: Finally.

Pammi Bir: They did move up.

Ed: Finally.

Ed Sonshine: Finally.

Pammi Bir: Yeah, right. Just can you remind us again what your, you know, expected unlevered yield is or range, you know, on completion at this stage?

Just can you remind us again, what your expected unlevered yield is or range.

We should at this stage.

I think now excluding the residential component, which were partners as I said with Woodburn and then that's a significant on that because I spoke 600 apartments, but looking at the office and retail components I think we're in that five to six range I don't think best change.

Ed: I think now excluding the residential component, which, you know, we're partners, as I said, with Woodbourne. That's a significant component because that's about 600 apartments. By looking at the office and retail components, I think we're in that 5 to 6 range. I don't think that's changed. Costs have gone up, but so have rents.

Ed Sonshine: I think now excluding the residential component, which, you know, we're partners, as I said, with Woodbourne. That's a significant component because that's about 600 apartments. By looking at the office and retail components, I think we're in that 5 to 6 range. I don't think that's changed. Costs have gone up, but so have rents.

<unk> costs have gone up.

So offerings.

Got it thanks very much thank you.

Pammi Bir: Got it. Thanks very much.

Ed: Thank you.

Ed Sonshine: Thank you.

Our next question comes from Johan Rodriguez with Raymond James Your line is open.

Operator: Our next question comes from Yohann Rodriguez with Raymond James. Your line is open.

Good morning.

Ed: Good morning.

Ed Sonshine: Good morning.

Yohann Rodriguez: Good morning. First off, could you maybe tell us what the expected NOI contribution just from multifamily would be in 2020?

Johann Rodrigues: Good morning. First off, could you maybe tell us what the expected NOI contribution just from multifamily would be in 2020?

Good morning, first off can you maybe tell us what the expected NOI contribution just from multifamily would be in 2020.

Actually no [laughter] and will be a lot more in or was this year. Obviously, because this was our first year games anybody living on our apartments.

Ed: Actually, no. It'll be a lot more than it was this year, obviously, because we, you know, this was our first year of getting anybody living in our apartments. You know, the stabilized NOI from just the two buildings is probably in the CAD 15 or 16 million range. To give you an exact number on that, I just couldn't do because, you know. I could do it better after next Monday, if you want to speak to Qi then. She might have some exact numbers for you. It's still relatively small within the scheme of things, because you know, it's gonna really hit some growth, but only as we get later into the 2020s, like 2021, 2022.

Ed Sonshine: Actually, no. It'll be a lot more than it was this year, obviously, because we, you know, this was our first year of getting anybody living in our apartments. You know, the stabilized NOI from just the two buildings is probably in the CAD 15 or 16 million range. To give you an exact number on that, I just couldn't do because, you know. I could do it better after next Monday, if you want to speak to Qi then. She might have some exact numbers for you. It's still relatively small within the scheme of things, because you know, it's gonna really hit some growth, but only as we get later into the 2020s, like 2021, 2022. For this year, we'll have two buildings, which is fantastic. The two buildings, one of which we own 100%, one of which we own 50%, actually have a total of over 700 units, 750. But that's just a start. In the context of, you know, total revenue that we have this year, I think about CAD 1.2 billion, it's pretty small.

You know the stabilized NOI from just a two buildings is probably in the 15 or 16 million dollar range.

But to give you an exact number on that.

I just couldn't do because.

Yeah, I could do a better after next Monday, if you want to speak to GE then she might she might have some exact numbers for you but.

It's still relatively small within the scheme of things.

Because.

It's going to really hit some growth, but only as we get in later into the 20 Twond things like 20 21.2.

Ed: For this year, we'll have two buildings, which is fantastic. The two buildings, one of which we own 100%, one of which we own 50%, actually have a total of over 700 units, 750. But that's just a start. In the context of, you know, total revenue that we have this year, I think about CAD 1.2 billion, it's pretty small.

For this year, we'll just we'll have two buildings, which is fantastic and the two buildings, one of which we own 100% one of which we own 50% actually have a total of over 700 units some 50.

But that's that's just to start and in the context of.

Total revenue that we have this year I think 1.2 billion.

It's pretty small.

Yohann Rodriguez: Right.

Jonathan Gitlin: Right.

Yohann Rodriguez: Yohan, we did disclose just for those two rental towers I talk about, we disclosed the stabilized income and yields there. You could calculate. Yeah.

Qi Tang: Yohan, we did disclose just for those two rental towers I talk about, we disclosed the stabilized income and yields there. You could calculate. Yeah.

Right you have we do you could discos just for those tools rental towers at talk about we disclose the stabilizing comment there you could calculate yeah.

Yohann Rodriguez: Okay.

Jonathan Gitlin: Okay.

Ed: Okay, Yohan?

Ed Sonshine: Okay, Yohan?

Okay Uh huh.

Yohann Rodriguez: Okay. Maybe just my second question.

Johann Rodrigues: Okay. Maybe just my second question.

Okay, and then maybe just my second question.

Yohann Rodriguez: Sure.

Ed Sonshine: Sure.

Yohann Rodriguez: How would the rents at Pivot, and then I guess Strata, and then the other Toronto, I think it's Litho. How would those compare to eCentral and the CAD 390 that you guys are getting there?

Johann Rodrigues: How would the rents at Pivot, and then I guess Strata, and then the other Toronto, I think it's Litho. How would those compare to eCentral and the CAD 390 that you guys are getting there?

How would the rents at at pivot.

And then I guess.

Sure on and then the other Charnaux I think it's less so how is how would those compared to two essential and the three nine new that you guys are getting there.

Jeff Ross: Yeah, I think they'll be similar product types. I think there's certain locational attributes that are slightly different, but I think generally we're trying to curate a similar product. I think, you know, at a more boutique type of offering like Strata, which is down at College and Bathurst, there might be enhanced opportunities for rent. But I think Sheppard and Litho are gonna be very similar offerings, and we'd like to see them, you know, in and around that same level, hopefully higher. But you know, we'll see what the market is like.

Jonathan Gitlin: Yeah, I think they'll be similar product types. I think there's certain locational attributes that are slightly different, but I think generally we're trying to curate a similar product. I think, you know, at a more boutique type of offering like Strata, which is down at College and Bathurst, there might be enhanced opportunities for rent. But I think Sheppard and Litho are gonna be very similar offerings, and we'd like to see them, you know, in and around that same level, hopefully higher. But you know, we'll see what the market is like.

I think there will be similar product types, I think with certain location, which attributes that are that are slightly different but I think generally returning curated similar products. I think you know it at a more boutique type of offering like strategy, which has done a college and Bathurst there might be enhanced opportunities for rent, but I think shepherd and lift though are going to be very similar offerings and we.

Like to see them in and around that same level, hopefully higher but we'll see what the market. We plan our I agree with what Jonathan So deal and I would also tell you that are.

Ed: Yeah. I agree with what Jonathan said to Yohan, and I would also tell you that target's the wrong word. Our sort of overriding goal when we started leasing up eCentral is to get it leased fast. I mean, we just started leasing at the beginning of this year.

Ed Sonshine: Yeah. I agree with what Jonathan said to Yohan, and I would also tell you that target's the wrong word. Our sort of overriding goal when we started leasing up eCentral is to get it leased fast. I mean, we just started leasing at the beginning of this year.

Target when we are encouraged wrong word are a sort of overriding goal. When we started leasing of the central is to get at least fast I mean, we just started leasing in at the beginning of this year January and we expect to be like I say stabilized.

Jonathan Gitlin: January.

Ed: We expect to be, like I say, stabilized a year later, effectively, 13 months. To do that, we probably left a few pennies on the table. That will just give us better growth, because the nice thing about rental and the nice thing about our entire portfolio in Ontario that we're building is none of it's rent controlled. Now, I'm not saying we're gonna, you know, we're a public company that tries to act very responsibly, so we're not gonna be looking for piggish increases or what some might call piggish increases. You know, we think we're gonna get pretty healthy increases from the rents we've got at eCentral. I suspect that even as we roll into later in 2020, including Frontier.

Ed Sonshine: We expect to be, like I say, stabilized a year later, effectively, 13 months. To do that, we probably left a few pennies on the table. That will just give us better growth, because the nice thing about rental and the nice thing about our entire portfolio in Ontario that we're building is none of it's rent controlled. Now, I'm not saying we're gonna, you know, we're a public company that tries to act very responsibly, so we're not gonna be looking for piggish increases or what some might call piggish increases. You know, we think we're gonna get pretty healthy increases from the rents we've got at eCentral. I suspect that even as we roll into later in 2020, including Frontier. I think we look at Pivot, which we'll start leasing, I guess, at the end of 2020.

A year later effectively.

13 months and to do that we probably left a few pennies on the table.

But that will just give us better growth because the nice thing above.

Rental in the nice thing about our entire portfolio.

In Ontario that we're building is a none of us rent control now I'm not saying, we're going to you know we're a public company that tries to act very responsibly. So we're not going to be looking for piggish increases or what somewhat call piggish increases but.

We think we're going to get pretty healthy increases.

From the rents, we've got the central and I suspect they even as as we roll into later in 2020.

Including frontier. So I think we look at pivoted, which will start leasing I guess at the end of 2020, yes.

Ed: I think we look at Pivot, which we'll start leasing, I guess, at the end of 2020.

Jonathan Gitlin: Yes.

Jonathan Gitlin: That, you know, we'll achieve probably similar to what we achieved, if not higher. I think Litho and Strata, and this is just me, we haven't set leasing budgets yet, will do even better-

That will achieve probably similar to what we achieved if not higher.

Johann Rodrigues: That, you know, we'll achieve probably similar to what we achieved, if not higher. I think Litho and Strata, and this is just me, we haven't set leasing budgets yet, will do even better-

I think lists all and strata and there's just maybe we haven't set leasing budgets, yet, we'll do even better because as a boutique nature of their and the location of that.

Jonathan Gitlin: Yeah

Jonathan Gitlin: because of the boutique nature of theirs and the location of their buildings.

Ed Sonshine: because of the boutique nature of theirs and the location of their buildings.

Okay. Thanks, I'll turn it back thank you.

Yohann Rodriguez: Okay. Thanks. I'll turn it back.

Johann Rodrigues: Okay. Thanks. I'll turn it back.

Ed: Thank you.

Ed Sonshine: Thank you.

Again, if he would like to ask questions. Please press star one on your telephone.

Operator: Again, if you would like to ask a question, please press star one on your telephone. Our next question comes from Tal Woolley with National Bank Financial. Your line is open.

Our next question comes from Cowen Willey with National Bank Financial Your line is open.

Hi, good morning, everybody morning room.

Tal Woolley: Hi. Good morning, everybody.

Ed: Morning, Tal.

Ed Sonshine: Morning, Tal.

Tal Woolley: Just wanted to ask, on the retail side, in terms of talking to your tenants, how do you see Christmas shaping up for this year?

Just wanted to ask on the retail side.

Tal Woolley: Just wanted to ask, on the retail side, in terms of talking to your tenants, how do you see Christmas shaping up for this year?

In terms of talking to your tenants, how do you see Christmas shaping up for this year.

Hey, good problem. It was no [laughter], but I'll turn that over to Jonathan and maybe Jeff Ross.

Ed: I think it's.

Ed Sonshine: I think it's.

Jeff Ross: Probably with snow.

Ed: I'll turn that over to Jonathan and maybe Jeff Ross.

Ed Sonshine: I'll turn that over to Jonathan and maybe Jeff Ross.

Jeff Ross: Yeah.

Jeff Ross: Yeah. Yeah. It's Jeff Ross speaking. I mean, quite frankly, the tenants that we're speaking to seem quite encouraged by it. A lot of the rhetoric on the e-commerce side has calmed down a little bit as the retailers are focusing on driving consumers through their own stores. Right now, all I'm hearing anecdotally is that it's positive. The initial start to the season is looking quite good.

Jeff Ross: Yeah. It's Jeff Ross speaking. I mean, quite frankly, the tenants that we're speaking to seem quite encouraged by it. A lot of the rhetoric on the e-commerce side has calmed down a little bit as the retailers are focusing on driving consumers through their own stores. Right now, all I'm hearing anecdotally is that it's positive. The initial start to the season is looking quite good.

Yeah, It's Jeff Ross speaking I mean, quite frankly, the tens or speaking to seem quite encouraged by it a lot of the rhetoric on the E. Commerce site has calmed down a little bit as retailers are focusing on driving conns consumers through their own stores and right now all I'm hearing anecdotally is that it's a positive the initial start in the season is.

Looking quite good.

Tal Woolley: Okay. Would it be reasonable for us to expect like after Christmas to see another similar kind of grind on tenancies like we've seen with Bombay and some other players over the last several years? Do you expect that sort of trend to continue?

All right.

And would it be reasonable for us to expect Blake after Christmas to serve another similar kind of grind on tenancies like we've seen with.

Bombay and some other players over the last several years, you expect that sort of trend to continue.

Jeff Ross: Listen, I always hate to guess 'cause often I'm not correct. The way it's looking right now, there's not a whole lot on the horizon that we're hearing. You tend to hear the tribal drums way ahead of any falling out occurring. Right now it's all quiet. I'm not saying there won't be a few small guys, but in a large format, I just don't see anything for the beginning of 2020.

Listen I always hate to guess because often to unlock correct, but on the lakes looking right now there's not a whole lot on the horizon that we're hearing and you tend to hear the tribal drummed way ahead of any falling out occurring and right now it's all quite promising there won't be a few small guys, but in a large format.

Just don't see anything for at the beginning of 2020.

Okay. Yeah, you know, what I I never going to say.

Tal Woolley: Okay.

Ed: Yeah. You know what? I'm never gonna say the famous last words. I think everybody that could go broke has gone broke. Because then there's always a new candidate that comes along that I didn't expect. You know, all of the nice thing about retail, the train wrecks are slow motion train wrecks. You know, the way we monitor through our operations group and asset management group, we tend to have a pretty good idea six months to a year ahead that, you know, 'cause we see some of the sales numbers, we see what their GROC ratios are. When they start getting too high, particularly across a chain, you got a problem or the retailer has a problem, which means you're gonna have a problem.

Ed Sonshine: Yeah. You know what? I'm never gonna say the famous last words. I think everybody that could go broke has gone broke. Because then there's always a new candidate that comes along that I didn't expect. You know, all of the nice thing about retail, the train wrecks are slow motion train wrecks. You know, the way we monitor through our operations group and asset management group, we tend to have a pretty good idea six months to a year ahead that, you know, 'cause we see some of the sales numbers, we see what their GROC ratios are. When they start getting too high, particularly across a chain, you got a problem or the retailer has a problem, which means you're gonna have a problem.

The famous last words, I think everybody that could go broke ask on board.

Because then there's always a new candidate that comes along that Didnt expect but you know all of the nice thing about retract retail the train wrecks or slow motion train wrecks and.

The way, we monitor through our operations group and asset management group, we tend to have a pretty good idea six months to a year ahead that because we see some of the sales numbers, we'll see what their groch ratios are and when they start getting too high.

Particularly across a chain.

You got to prop.

Or the retailer has a problem, which is you're going to have a problem and while we always have a watch list.

Ed: You know, while we always have a watch list, to my knowledge, and I'm looking at the guys running operations and asset management right now, there's nobody of any consequence on it. We're quite comfortable that 2020, you know, maybe it'll be one of those years without any bankruptcies of consequence. Who knows?

Ed Sonshine: You know, while we always have a watch list, to my knowledge, and I'm looking at the guys running operations and asset management right now, there's nobody of any consequence on it. We're quite comfortable that 2020, you know, maybe it'll be one of those years without any bankruptcies of consequence. Who knows?

To my knowledge and I'm looking at the guys running operations and asset measure now there is nobody have any consequence on it. So we're quite comfortable that 2020, you know maybe it'll be one of those years without any bankruptcy so of consequence, who knows.

Tal Woolley: Just, you mentioned GROC ratios. How have you seen, like over the last several years, like what you guys see as an acceptable GROC ratio for the retailer change?

You mentioned Brock ratios how have you seen.

Over the last several years, but what you guys see as an acceptable Brock ratio for the retailer change again, I'm going to kind of turn that over to Jonathan but it really varies on that type of retailer, but yeah, I think about that kind of hit the nail on the head, but I'd just said, it's such a varying by.

Ed: Well, again, I'm gonna turn that over to Jonathan, but it really varies on the type of retailer. Go ahead.

Ed Sonshine: Well, again, I'm gonna turn that over to Jonathan, but it really varies on the type of retailer. Go ahead.

Jonathan Gitlin: I think that kind of hits the nail on the head what Ed just said. It's such a varying calculation, and it's so dependent on the use. I mean, there are certain uses like grocery where, I mean, that GROC ratio for a grocer to consider themselves successful has to be extremely low relative to an apparel user or a restaurant user where it can be much higher. So I can't give you one answer on that. Generally, as Jeff alluded to before and as Ed alluded to, the feedback we're getting, given the strength of our locations at this point, is that our tenants are seeing healthy and fairly low GROC ratios across the board relative to their categories.

Calculation and it's so dependent on the U.S I mean, there are certain uses like grocery where I mean, not crock ratio for a grocer to consider themselves successful has to be extremely low relative to an apparel user or a restaurant user where it can be much higher so I can't give you one answer on that but generally as.

Jeff alluded to before and is that alluded to the feedback we're getting given the strength of our locations. At this point is that our tenants are seeing healthy and fairly low brock ratios across the board relative to their categories.

Tal Woolley: Okay, that's good. Just lastly, in terms of financing strategy, you were talking earlier just about financing the new residential projects. I'm just wondering, when we look at, like, the public peers in the multifamily space who are engaging in development and building new product, they are carrying significantly more leverage than you are. Are you potentially handcuffing yourself a bit by trying to stay at 8x or in the range that you're currently sort of setting? You know, would it or should we expect to see that debt-to-EBITDA ratio creep up modestly as the proportion of residential product in your portfolio increases?

Okay. That's good and then just lastly in terms of financing strategy you are talking earlier just about financing.

The new residential projects.

I'm just wondering when we look at like the public peers in the multifamily space, who are engaging in development building new product, they're carrying significantly more leverage.

Then you are.

And.

Are you potentially handcuffing yourself a bit by trying to stay at eight times.

Or in the range that you are currently sort of setting.

What we should we expect to see that debt to EBITDA ratio creep up modestly as the proportion of residential product in your portfolio increases.

Ed: That's actually a good question. I understand the higher leverage where you've got a much less volatile, you know, sector, i.e. multi-res. We're not there yet. Right now we're looking at staying sort of where we are because obviously the largest portion of our portfolio is and will probably be for many, many years, retail/office, i.e. commercial, which by its nature is a little more volatile. You know, there's an old story I always tell that RioCan is like a car. It's built for safety, not for speed, although we're trying to go pretty fast.

Ed Sonshine: That's actually a good question. I understand the higher leverage where you've got a much less volatile, you know, sector, i.e. multi-res. We're not there yet. Right now we're looking at staying sort of where we are because obviously the largest portion of our portfolio is and will probably be for many, many years, retail/office, i.e. commercial, which by its nature is a little more volatile. You know, there's an old story I always tell that RioCan is like a car. It's built for safety, not for speed, although we're trying to go pretty fast.

That's actually a good question.

And I understand the higher.

Leverage where you've got a much less volatile.

You know.

Sector multi reds, we're not there yet right now we're looking at staying sort of where we are because obviously the largest portion of our portfolio is and we will probably be for many many years.

Retail Slash office I.E. commercial.

Which by its nature is a little more volatile and you know there's an old story I always style.

That recant as like a car it's built for safety not for speed.

Although we're trying to go pretty fast.

Ed: You know, when you look at, times and as good as times have been in the last, 10 years almost, when it comes to real estate and interest rates, you know, times change. We live in a very uncertain world, and we learned long ago, you know, right from the foundations of RioCan 25 years ago, that you can't protect yourself from macro events except by protecting the entity in a number of ways. Diversification of revenue sources, as Jonathan said, and we are continuing to work on that. You know, I don't wanna be one of those entities where 25% or more comes from one tenant, 'cause things happen in this world. We're under 5%. Diversification of maturity dates on your debt and diversification of lease maturities.

But when you look at times and as good as times a bit and the last.

Ed Sonshine: You know, when you look at, times and as good as times have been in the last, 10 years almost, when it comes to real estate and interest rates, you know, times change. We live in a very uncertain world, and we learned long ago, you know, right from the foundations of RioCan 25 years ago, that you can't protect yourself from macro events except by protecting the entity in a number of ways. Diversification of revenue sources, as Jonathan said, and we are continuing to work on that. You know, I don't wanna be one of those entities where 25% or more comes from one tenant, 'cause things happen in this world. We're under 5%. Diversification of maturity dates on your debt and diversification of lease maturities.

10 years, almost when it comes to real estate.

And interest rates.

At times change, we live in a very uncertain world and we learned a long ago.

From the foundations of weekend 25 years ago that you can protect yourself from macro events, except by protecting capacity in a number of ways diversification of revenue sources as Jonathan said and we are continuing to work on that.

Yes, I don't want to be one of those entities were 25% or more comes from one tenant because things happen in this world we're under 5%.

Diversification of.

Maturity dates on your debt and diversification of lease maturities.

Ed: Keeping your leverage as low as possible. Now, you know, your question was a good one, because I think, you know, as you get a larger and larger percentage of residential, we may consider that, you know, a change in policy, but we're years away from that. I think right now what we like doing is we're going to, I won't say be aggressive in leverage 'cause we're not aggressive by nature when it comes to debt. But we will do as much leverage as is prudent, with CMHC insurance, both through the existing program and maybe through some of their new programs where it's even cheaper, where you include an affordable component in your building.

You know the and keeping your leverage as low as as is possible now.

Ed Sonshine: Keeping your leverage as low as possible. Now, you know, your question was a good one, because I think, you know, as you get a larger and larger percentage of residential, we may consider that, you know, a change in policy, but we're years away from that. I think right now what we like doing is we're going to, I won't say be aggressive in leverage 'cause we're not aggressive by nature when it comes to debt. But we will do as much leverage as is prudent, with CMHC insurance, both through the existing program and maybe through some of their new programs where it's even cheaper, where you include an affordable component in your building. Simply use the excess of funds, I'll call it, over what would be 40% to pay down our commercial debt, which is obviously at a much higher cost. That's the short term, i.e. 1 to 3-year program.

Question is a good one.

Because I think as you get a larger and larger percentage of residential we may consider that change in policy or years away from that I think right now where were doing is we're going to I won't say be aggressive in leverage because we're not aggressive by nature when it comes to debt.

But we will do as much leverage as is prudent.

CMHC insurance both.

Through the existing program and maybe some through some of their new programs, where the it's even cheaper.

Were you include an affordable component in your and your building.

Ed: Simply use the excess of funds, I'll call it, over what would be 40% to pay down our commercial debt, which is obviously at a much higher cost. That's the short term, i.e. 1 to 3-year program.

And but simply use the I'll call it excess of funds over what would be 40% to pay down our commercial debt, which is obviously at a much higher cost. That's the short term I want to three year program like a Volvo with the turbocharge and and we're trying our best Turbo SCS.

Jonathan Gitlin: Like a Volvo with a turbocharged engine, I guess.

Ed: We're trying our best to turbo it. Yes.

Ed Sonshine: We're trying our best to turbo it. Yes.

Tal Woolley: Okay, perfect. Thank you very much.

Okay perfect. Thank you very much thank you.

Ed: Thank you.

Ed Sonshine: Thank you.

Sure.

Jonathan Gitlin: Should be running out.

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

Operator: There are no further questions at this time. I will turn the call back over to the presenters.

Ed: Okay. Well, again, thank you, everybody. I know everybody's probably got an 11:00AM conference call from somebody. Thank you for taking the time. We hope we added some color to what I think was a pretty good quarter. We expect to continue being able to do that. Thank you very much for your time and attention. Bye-bye.

Ed Sonshine: Okay. Well, again, thank you, everybody. I know everybody's probably got an 11:00AM conference call from somebody. Thank you for taking the time. We hope we added some color to what I think was a pretty good quarter. We expect to continue being able to do that. Thank you very much for your time and attention. Bye-bye.

Okay, well again, thank you everybody I know everybody is probably gotten 11 o'clock conference call from somebody so thank you for taking the time, we hope we.

Added some color to what I think was pretty good quarter.

And.

We expect to continue being able to do that thank you very much for your time and attention.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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