Q4 2020 CT Real Estate Investment Trust Earnings Call
All participants please standby your conference is ready to begin.
Good morning, My name is Atlanta, and I will be your conference operator today.
At this time I would like to welcome everyone to the P. T reads Q4, and full year 'twenty and 'twenty earnings results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press Star then the number one on your telephone keypad to withdraw your question press the pound key.
The speakers on the call today are Ken Silver Chief Executive Officer, a C. T REIT Leslie Gibson, Chief Financial Officer of P. T REIT and Kevin Salzburg, Chief operating officer of C. T REIT today.
Today's discussion May include forward looking statements such statements are based on management's assumptions and beliefs. These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Please see C T REIT public filings for a discussion of these risk factors, which are included in their Twenty-twenty M D and E and G. I F, which can be found on C. T reads website and on SEDAR and I will now turn the call over to Ken Silver Chief Executive Officer, a C T REIT Ken.
Thank you operator, and good morning, everyone.
Thank you all for joining us for a C T REIT fourth quarter 2020 Investor Conference call.
'twenty and 'twenty was clearly not at your any of us expected or planned for.
We have all been challenge to navigate the twists and turns roadblocks and U turns that the pandemic has thrown us both personally and professionally.
The toll on our communities our economy and on countless individual lives and it's been a measurable yeah. We continue to work together to get through this and we have much to be grateful for among.
Among the things I'm grateful for is a C. T REIT team, who have risen to the occasion to support one another our tenants and their communities to get the job done no matter the obstacle.
While daily case and death rates continue to dominate the headlines we do see the light at the end of the tunnel.
Spring will come and vaccines will eventually rollout.
And that spirit I'm pleased to report on the highlights of 'twenty and 'twenty.
Since our IPO in 2013, we have used the tag line growing reliable and durable to describe to see to REIT.
And while we have consistently delivered performance that supports that description twenty-twenty certainly provided a significant stress test.
And C T REIT once again delivered with healthy growth and a F. F O per unit for the year over $200 million and new investments occupancy and rent collections, both slightly north of 99 per cent in queue for.
Stronger debt and credit metrics and to distribution increases for a total of seven and since our IPO.
This combination of growth and resilience is the hallmark of C. T. REIT in Q4, we reached the milestone of 10 million square feet of GLA added to the portfolio are committed and $2 billion invested since our IPO.
This growth and assets has delivered compound annual growth and the F. F O per unit that has been amongst the strongest and the REIT sector.
Our business model focused on net lease assets with investment grade tenants and long lease terms and combined with conservative financial management.
A significant level of resilience to complement our growth.
Our privileged relationship with Canadian tire, our largest tenant and majority unitholder provide strategic insight growth opportunities and a distinct competitive advantage.
Our significant portfolio of low risk assets is the platform upon which we can add special value add opportunities.
A case and point is our joint venture with Oxford properties, and Canada square, and young and Eglinton and Toronto.
And December 'twenty, and 'twenty, Oxford submitted and exciting redevelopment application to the city of Toronto for this landmark nine acre site on two subway lines and this growing node and Midtown and Toronto.
We look forward to the project obtaining the necessary approvals and proceeding to construction and the next couple of years.
'twenty 'twenty one is off to a good start in early January we closed on our successful unsecured debenture offering launched in December 'twenty, and 'twenty and redeemed our series a maturing debentures, leaving no further maturities to refinance this year.
I'm pleased we've hit the ground running with our newly announced investments and the disposition of one of our completed redevelopment projects.
Last but not least on deleted delighted to congratulate Kevin Salzburg on us being named as President and Chief operating Officer of C. T REIT effective March 1st.
His promotion is a reflection of the growth of the REIT and its evolving organizational needs and of course on Kevin's performance its contribution to the REIT evolution and the leadership qualities. His shown since joining the REIT almost five years ago.
With that I'll turn things over to Kevin and Leslie to discuss our results and more detail Kevin.
Thanks, Ken and good morning, everyone.
As outlined in yesterday's press release, we are pleased to announce for new investments this quarter that will require an estimated $65 million to complete.
These new projects include the vendor and of our Canadian tire store and Canadian tire gas plus gas power and Quebec City, Quebec.
Event and have a Canadian tire store and lower Sackville, Nova Scotia, and the expansion of an existing Canadian tire store and Cochrane, Ontario.
Also included is the expansion of the Canadian Tire distribution Center, and CT told you lock, Quebec interest outside of Montreal. Upon completion. This industrial assets, which serves the Canadian tire store network, and Eastern Ontario, Quebec, and Atlantic, Canada will grow by over 320000 square feet to a total GLA of nearly 2 million square feet.
When completed these investments are expected to earn a weighted average cap rate of 6.41%.
And represent approximately 510000 square feet of incremental GLA.
With respect to previously announced investments and the fourth quarter see theory completed the third party acquisition of three Canadian tire stores, and Drayton Valley and on the Duke, Alberta, and Ontario, Richler, Quebec acquired a property from a third party consisting of two freestanding buildings leased to marks and Tim Hortons and Yellowknife northwest territories.
Completed the first phase of its development and Fort St John and B C, consisting of new Canadian tire and bark stores.
Phase one of the redevelopment of the earliest square mall and are really, Ontario, which comprised the development of a new Canadian tire store and the former vacant and target box and completed the intensification of and existing Canadian tire store and Buckingham Quebec.
The REIT invested approximately $139 million and these previously announced projects, which added approximately 440000 square feet of incremental G L a and the quarter.
Subsequent to quarter and C. T REIT sold its on prior more property and earn prior Ontario for approximately $21 million after a redeveloped and cause enclosed mall and bringing occupancy from 53 per cent of the time. It was acquired to 97 per cent currently and delivering on new store to Canadian tire and the process. We received an unsolicited offer.
To purchase the property at a price that was equivalent to our idea for us value.
The REIT continues to hone its focus on net lease assets and it was determined that in line with our core strategy and based on the fact that we had successfully added value to this property, we would move forward with the sale.
Highlighting our full year activity and despite and initial pullback and capital spending to preserve liquidity at the outset of the pandemic CPA REIT and invested approximately $209 million in 'twenty and 'twenty and grew the portfolio by approximately 800000 square feet.
At the end of the fourth quarter CPA REIT at 16 properties that were at various stages of development. These projects represent a total committed investment of approximately $191 million 57 point and 9 million of which has been spent a day and 32 million of which we anticipate will be spent and the next 12 months.
Excluding the Canada square redevelopment, and Toronto, Ontario, and the development of lands that we own and Calgary, Alberta. These projects will add a total incremental gross leasable area of approximately 690000 square feet for the portfolio. Upon completion over 93 per cent of which has been pre leased.
And at year and C. D. REIT occupancy rate was 99, 3% slightly better than the 2019 year end occupancy rate of 99.1 person and an improvement over the occupancy as on Q3, 'twenty and 'twenty due to the lease up of 11 different plays South East and industrial property and Calgary, Alberta.
With respect to the impact of COVID-19, and other property operations. We are pleased to share that tenants representing approximately $99 four per cent of annual base minimum rent fulfill their January 'twenty, 'twenty, one and financial obligations to the REIT, a slight improvement relative to the $99 two per cent for December and November 'twenty, and 'twenty and the 99.
One per cent received in October 2020.
With that I will turn it over to Leslie for her review of our financial results.
Thanks, Kevin and good morning, everyone.
Despite challenges from the ongoing pandemic, we were very pleased with the strong Q4 and full year results delivered by the REIT and.
And the quarter, we reported a diluted <unk> per unit of 26.0 cents, an increase of three two per cent compared to the 25 for my two cents per unit in Q4 of 2019.
This brings the full year reported diluted and household per unit to $1 3.2 cents representing growth of two five per cent versus 2019.
And the quarter diluted <unk> per unit increased 1% to $29.06 versus the $29 three from the prior year.
On a full year basis, two and each one of you to lose.
And you did increase by 0.5 per cent to $1 18.1.
Net net operating income was $96 9 million or three 7% increase over the $93 4 million and Q4 of 2019, we break this headline growth into its components being on 1.2% growth on a same store basis. Once one 8% growth on a same property basis and the balance as a result net acquisition disposition.
And development activities.
Full year reported NOI was $381 6 million a $3 five per cent increase of $368 8.002 million 19.
The one two per cent same store NOI for Q4 is the result of the contractual rent escalations contributing nearly 1.8 million, which includes the $1 five annual rent Escalations on average contained within nicknamed tire store leases, partially offset by the expected credit losses for tenants were significantly impacted by the pandemic.
And claimed the bad debt expense related to the rental abatements.
For Q4, 'twenty and 'twenty G&A expenses as a percentage of property revenue were two 5%, which is in line with the 2.4 per cent for Q4 2019.
And <unk> payout ratio at the year end was 76, 8% and increase of $2 one per cent from the same period and 2019 due to the increase and monthly distribution rate exceeding the increase and the <unk> per unit.
Not affecting anti felt and perhaps noteworthy the REIT changed the valuation methodologies that had been using sports single tenanted properties from the overall capitalization rate approach for the different discounted cash flow approach.
All properties are now valued on the discounted cash flow approach. This.
And this better allows for the updating of assumptions based on changing market conditions to be incorporated into the REIT property valuations.
And Q4, Threep accorded and a relatively small 0.9 per cent and negative fair value adjustment, which reflects the resilience of our core portfolio. Despite continuing challenges from the broader retail sector.
With respect for the balance sheet, the financial position continues to be strong and like what the interest coverage ratio increased to three five times and Q4 compared to $3 four for for the fourth quarter of 2019.
The interest the increase and interest coverage ratio is primarily due to the growth and EBIT SC excluding the growth and interest and other financing charges. Despite the inclusion of the debenture prepayment costs in the queue for financing charges.
The quarter over quarter interest expense decreased primarily due to the rate reset of the class C. L. P and it's that took place and the second quarter of 'twenty and 'twenty.
The continued resilience of our business model was put to the test in 'twenty and 'twenty and the results underscore our count.
Do you believe that this is the REIT model for US we maintained a conservative 76.8 per cent F. F. L payout ratio, while increasing distributions and continued our trend of low debt to gross book value of 42, 9%.
We have just under 300 million available for our committed credit facilities and cash on hand, coupled with no debt maturities for the balance of 'twenty and 'twenty one.
C. G reached $6 2 billion assets are 97 per cent unencumbered.
And with the with the redevelopment progression Ken mentioned on a Qantas square development, we knew phase one of that project and to put at the end of Q4.
In addition, as at December 31, 2023 book value per unit was $14.62, which is slightly higher than our 2019 year and values, 14th and 61, primarily due to net income exceeding distributions and this is despite the negative fair value adjustment, but it is included and this year's net income as a result from the impact from the patent on it.
Before I pass it back to Ken brief remarks on our debt profile and as Ken mentioned on January six this year C. P. REIT successfully completed the issuance of $115 million of unsecured debentures for the 10 year term and a coupon of 237 one per cent.
The proceeds were used.
And then used to complete the early redemption of the $150 million unsecured debentures originally set to mature on June <unk> 2021, with this early refinancing completed we have no further debt maturities until Q2 of 'twenty 'twenty two.
At the time of issuance the interest rate on the new series on the unsecured debentures with the lowest ever interest rate on a 10 year bond issued by Canadian REIT and.
After these transactions and see if he writes the weighted average term to debt maturity has increased from seven five years to 8581 years and with that I'll turn things back to you Ken.
Thank you Leslie.
And I'm proud of C. T reached 2020 results I'm sure you like me are glad to see 'twenty and 'twenty and the rearview mirror.
Well 2021 continues to be challenging we have cause for optimism.
And look forward to a return to normal life.
I know, it's a busy time for many of our listeners. So I will turn the call back to the operator for any questions.
Thank you.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
The first question is from human Chute zone with Scotiabank. Please go ahead.
Thank you and good morning.
And just for the new investment so it includes and Densification of over 300000 on.
Listing distribution center and Quebec.
Just wondering how much are you looking to spend here on a dollar per foot basis, and what other timelines there.
Hey, Matthew it's Kevin speaking, so the investment and that particular intensification and that's just over $30 million.
And it would probably be spent and the early part of 'twenty and 'twenty three.
And so it's about 100 Bucks a foot.
Got it and.
Do you see any more opportunities on the DHL, where you don't play and Utah is looking to add on expand distribution centers.
Oh, we're definitely and dialogue with was claimed her and there are real estate group on the supply chain is in Venezuela, and the supply chain and group with and Canadian tire.
I think that's an evolving story as they continue to obviously benefit from increased sales related to the circumstances for the last year.
So stay tuned on that one.
Fair enough and.
And then just staying on the transaction activity that disposition those on Toyota mall for $21 million.
What was the cap rate on that property I know you mentioned you see other players was in line with the iPhone its value.
Anything on the evolution day, Yeah, we're we're not disclosing the actual cap rate, but I can and indicated was a call. It a mid to high fixed GAAP.
Okay. That's great and then just one more question on the lease Expiries in 'twenty 'twenty, one and I know it is very small.
But there are some Canadian dry leases also coming up for renewal.
Do you know how do you market rents compare to the Canadian debt events, which are coming up for renewal.
So I mean my question and just wondering how the market is a small Canadian Daddy's has performed over the last say five to seven years.
Sure I can take that one too so.
And in 'twenty and 'twenty, one we actually only have one between entire lease.
And coming up that's expiring and that was a property we acquired from a third party. So I think the rent is actually preset for the extension.
Extension term.
More broadly.
And our belief is the Canadian tire and rents are at market.
Got it okay. Thank you that's it for me and congratulations for you Ken.
Thank you very much.
Thank you.
The next question is from Sam Damiani with TD Securities. Please go ahead.
Thank you and good morning, everyone and I'll Echo the congratulations as well Kevin.
And I'll keep the questioning that you as well just looking at the the rent collections, which is great to see them ticking higher and higher any impact from the recent lockdowns at all that Youre seeing maybe any comment you can make on February two day I know, it's still early in the month, Yeah. I mean, the trends, we're seeing and February are pretty similar to January.
Thus far.
And you know obviously, if there's a negative impact on on retailers and more broadly obviously, we have a high percentage of open and essential needs for retailers, so that benefits our portfolio.
We're starting to see the benefits of the <unk> program come through which is helping obviously from from a rent collection perspective, I mean, one one note I would would make.
On service relative to to see crowd.
Is from a landlord's perspective things have gotten a little bit more opaque.
And he CRO, which we were obviously the the counterparty to make the application.
And there was a lot more information sharing and order to to make makes it unnecessary submissions, whereas serves is entirely on the tenants to.
To to deal with those for those forms and and application portals and therefore, the information flow. We're seeing has slowed down a little bit so it's a little bit more qualitative at this point in terms of the ongoing conversations we're having.
If somebody for one reason or another and receiving the benefit of a service payment or needs to come to us for additional rent relief those or when we would have more access to information so although.
Although sikra administratively was not a great program at least from a visibility perspective.
And Lord.
We saw a little bit more.
That's helpful and the other tenants.
I guess benefited and and you know from slip from the secret program or are they also benefiting from servers in the sense that it hasn't had any negative impact on on overall rent collections have perhaps been a positive impact of the switch and program I think so I think so I think I think serves us doing a better job and secret did.
Supporting our tenants and their ability to pay the rent.
Okay.
That's helpful. Thank you.
And maybe over two two to.
And so it can.
Looking at the distributions that were increased a little bit during the I guess the third quarter of last year. There was no for follow on distribution increase in 2020. When you look to 2021 is this a temporary sort of pulled back on the on the sort of annual bumps.
With perhaps a catch up sort of outsized well, maybe potentially later on in 'twenty and 'twenty, one assuming everything starts to get back to normal and a meaningful way or how do you how should we think about distribution and bumps going for it.
Well Sam of course, we review the monthly distributions and the board approves and every month and you know we were on a on a pretty regular cycle until the pandemic struck so clearly were monitoring you know bose the rates financial situation, but also the.
The external marketplace for me today, obviously, we're in a second wave of the pandemic and and Lockdowns havent been lifted so it's a situation will continue to monitor our into 'twenty one.
Okay.
And I guess, just looking out also on 'twenty. One you resumed your investment activity a few months back for you.
<unk> and <unk>.
<unk> been maintaining that pace and are you starting to see more third party acquisition opportunities.
I'll take that and say I'm.
I think the pace has picked back up and and I think our expectation is.
And it would continue.
Obviously, there was from deferred projects and some delays and some other stuff we were working on as the pandemic hit so I think you'll see hopefully some some continued announcements from our part and the same course completions for 'twenty, one and that'll obviously it will be a little quieter than in previous years.
On the third party front I would tell you the euro started off slowly and I think there was some some transaction volume heading into year and.
And that picked up off the strength of.
And the late summer early fall and and the reopening of our various businesses and the health of some of the essential needs of retailers, there's still lots of interest and.
Re anchor it essential needs anchored retail.
We obviously got our on prior mall property sold at the beginning of.
Of the year, which was great for us.
But I think there is still a bit of a bid ask gap between buyers and sellers a little bit of price discovery is still going on.
And do you have a low bond yields obviously supporting them.
Transactions are more broadly and hurt assets so.
I think there's an appetite and there's a lot of cash on the sidelines waiting and so I think finding the right product at the right price, but that's the challenge right now.
Thanks, that's helpful I'll turn it back.
Thank you and.
The next question is from Jenny MA with BMO capital markets. Please go ahead.
Thank you and good morning.
Kevin Congratulations on your promotion and thank you very much.
A quick question back to on prior mall I'm, just wondering if you could share with us on the rough profile of the buyer and whether or not.
And you could comment on what the what you think their investment thesis of reasoning or interest and the property wise.
The buyer was private private individual.
Hum.
Their interest and the property was based on the strength of the.
And underlying leases I mean, there's as we've detailed.
We bought them all and.
It was half empty and we brought the Canadian tire and we expanded the grocery store or on site.
Yeah, we were calling on an enclosed mall, but we pretty much eliminated the majority of your multi enclosed mall components.
Of the property. So I think 85 per cent of the NOI was from investment grade anchor tenants and then there was a stub piece with some smaller tenants in it.
So all in all a fairly stable property with long term leases.
But you know I guess based on where our bond yields are trading investor felt return was decent and and being private is probably levered it up and put a nice and levered IRR associated with the.
Free cash flow profile.
And was this a relatively local investor.
No no not a local investor.
Domestic domestic yes, yeah. Okay. Okay. That's good to know and wanted to turn to the change in the valuation methodology and what really led to that change and the approach and I see that the terminal cap rates have moved up a bit and I'm not sure. If that's due to a change and <unk>.
And if your assumptions or maybe it's just the waiting change given that the majority of assets we're behind on OCR. So I'm not sure. If that's just a formula driven change or if there's a market condition not change my index.
Jenny it's Leslie.
Thank the LCR approach for the majority of those and.
Standalone, our single tenant properties and have been used since the IPO and and appropriately so but as obviously we go down from I said about on average 15 year term at IPO down she said of nine and and it continues to shrink just as time goes forward and I think we really felt that the OCR wasn't necessarily the right approach.
As you know, we continue to shrink and strength things continue to get smaller and you know, it's a bit tougher with without approach to putting and changes. So we can change on the DCF and the changes and the metrics that you noted and tear are predominantly I would say market market assumptions and changes.
And there's still sort of continued on its own.
And continued pressures on some of the retail real estate and so.
When we move things out for we're also updating that and now that there are a few transactions here and there and the marketplace, obviously with that and do you know transactions being announced.
Fairly sparse so there there's definitely a you know we're definitely looking at and what that could be but they got the transactions are really more market driven etcetera, but that's really our affiliates to change those on to.
And to change the and puts and as assumptions is somebody that we think is gonna be that the REIT move for the rest of the years.
Okay, and it looks like the whole period went up a bit from 10 to 12 years, but you you mentioned that the lease terms are kind of coming down and so how do I reconcile those changes.
I'm gonna change and the whole period.
And I think for that's the change and the whole period.
Got it.
And I wouldn't read too much into that you know I think we have pretty good visibility to the U K and higher storage and then high degree of confidence that those stores will continue to be there and I think just from modeling purposes on.
And we will be moving things over as you know we don't typically use a whole period. If you have to have rollover and expiry from those and so to just really be as he moved and shifted the portfolio over to D. C. After that that ticked up a little bit but.
And I think for our Internet and the whole period.
There's nothing for magic different about that other than.
And sort of just what we looked at and probably had to me and a few things around us and we looked at what rolled over and your 10.
Okay. That's fair and then last question with the with regards to the prepayment of the series C. Debentures. There was a prepayment fee that was incurred in Q4, what or what how much was that fee and I assume that it was all expensed in Q4 and not expected to recur in Q1, yes.
Yesterday, the prepaid and penalty on the series C was about $750000 and that was all expensed in Q4.
Perfect. Thanks.
You very much and congrats on a strong year.
Great. Thanks Jenny.
Thank you and the next question is from Paul Bieber with RBC capital markets. Please go ahead.
Thanks, and good morning.
Just with respect to Canada square and look what can you share with us with respect to the first phase what that will look like.
And when it may start and I guess, some other potential costs that you expect for.
And for that piece.
Hi, Paul and me, it's it's Kent [noise] pardon me the the first phase on the Canada square redevelopment and would be the north and on the site and would incorporate.
Our mixed use a commercial residential tower.
And above a replace bus depot.
And that is currently operating on the site so it'll be relocated.
And to the north and to the site.
And there will be some public amenities that will be included and are in that first phase is well above and beyond the bus depot, including and new transit entrances and and some.
Public Green space.
With respect to costs for that phase and we're still working through the costing exercise or our Oxford property says on her behalf. So I don't have anything to share with you on that front at this point.
From a timing perspective.
We continue to aim to start construction when we get on.
The land that we would be building on a in essence back from a cross links which is the contractor and developing the eglinton and cross down on one or two so it's largely driven by firstly the municipal approval process and secondly, when the when the LRT is completed.
Yeah.
Got it and I guess just on the on the mixed use tower would that be a condo or would that be rental residential and retail just or for office REIT.
Some color there.
At this point, we're contemplating that it will be residential retail and rental pardon me.
With with some retail at the base of the building.
Got it.
Just one more I guess looking at the development pipeline and Kevin I think you mentioned that this year.
Oh, sorry met him and Ken sorry, if you mentioned this year will be kind of light.
And it looks like it's more heavily weighted toward 2022 in terms of the completions. So as you think about either on a year ahead for for this year what are your thoughts with respect to putting capital to work, whether it's and acquisitions or overall development spending.
Yeah, Tom it's Kevin.
You know what we'll obviously look for you know a third party acquisition opportunities as we have and the past, which is basically opportunistically. If there's something out there that we feel are.
Suits, our criteria and fits our strategy and.
As financially.
Worthwhile and we'll pursue it.
You know there is some activity that we are.
Funding and and working through some of our our other development programs on a pad development or third party development and and if you can't tie related activities.
That will see completion of the ear, but are you now.
We've made a decision to preserve liquidity at.
And the outset of other COVID-19, pandemic and obviously.
And the development has a longer lead time so.
And we'll work a little harder on the organic growth side.
And then and look out for the for.
Opportunistic third party deals as well.
Thanks, very much going on.
I'll turn it back.
Thank you.
The next question is from Italo <unk> with National Bank Financial. Please go ahead.
Hi, Good morning can you hear me okay.
Yes, we can hear you great talent. Thank you perfect.
So maybe just to start like I guess, it's probably best for Ken.
Sure.
Just from your perspective like from the CPA REIT perspective going through this past year with higher like has there been any sort of shift to your and your sense about how they're looking at their store base.
Going forward.
Well I think it's a continuation and with many of you know pandemic.
Impacts, we might see even and acceleration, but you know I would say that the pressure that we had been seeing from.
Canadian tire in recent years was to make the stores larger so we had already.
Expanded or had approved our expanding you know 50 60 stores over the last number of years.
And our recent announcements include further expansion so.
I think you know the the impact of the pandemic is probably reinforced.
On the importance of the store network and.
And our multichannel retail environment and and obviously the.
Canadian tire and we think the Canadian tire store network is particularly well placed them. Both in terms of the configuration of the stores and the location of the stores across the country.
And to work and are in the multichannel.
And.
Our distribution system.
Okay.
And then just I think it was jenny's earlier questions just about the methodology change and the auditor language around that.
So the primary rationale for making this shift was.
The maturity of the Canadian tire leases was starting to shorten and do I have that correct.
Oh, it's Leslie and yes that was that was a we've been looking at the other sort of change for a little while and that was sort of the the primary driver and.
Yeah also coupled with that and wanting to be able to make potential cash flow changes to two models and and put other assumptions and that the D. C. S and was more suited for that.
Okay and so.
And like from your perspective, because I know like you know, obviously doing a valuation change like that from.
It's there's lots of irritations that come on and frictional costs and sort of come along with it you just sort of.
Explain maybe why you think thats on sort of a better approach going forward.
And is it.
I think all that that's a better approach for our for US and enables us to take a look at particular markets or you know and make assumptions about a store or whether it's you know growing or shrinking or putting other putting other things into their you know applying and we're going to probably I think whereas the direct cap approach and you know obviously was very veneer and.
Linear and what it delivers so and I think obviously and this pandemic one we're taking and much more.
Later for you about every one of the assumptions and the models and what's going on in the marketplace and.
And you know that and it reinforced our decision to to move to the DCF method.
So if I'm paraphrasing this correctly and fat theirs.
The fact that the pandemic like and the volatility that it sort of creates the fact that you're sort of debt.
And with Tcf allows you to kind of like play with those interim years, a little bit more like our figure and not play with but like Youre able to do a better job sort of like forecasting the insurer and stuffs that maybe a better way to think about it.
And it would be for I guess and multi tenant properties. Obviously, the vast majority of what we switched over from other chairs are single tenant Canadian tire.
And so theres not a lot of moving parts and in those leases that really until we get to until we get to sit on the maturities and a.
The debt the rents even after that time fairly and.
You know there is a bit and bans instead of have have floors and ceilings on them. So I mean, yes, we can we can play with and those.
On a little more easily but.
I think it was you know.
Driven by that the lease term is probably the primary driver on and I think just you know other things and the pandemic and made us.
So, let's find really cement that decision.
Yeah.
And it's Ken and I would I just would add that we.
We contemplated doing this and in advance of the Pentagon and makes it wasn't as a result of the pandemic and we just felt from a methodology perspective, it was more appropriate and flexible going forward. It just happened to coincide with the pandemic.
Okay. That's perfect. Thanks, a lot well sorry time line.
And I was just going to add you know it also aligns with the way we would underwrite our own investing strategy, where you know the longer lease terms and more cap.
Cap rate pace, we would we might look at something but our.
Is it the lease term gets shorter and shorter.
And we would obviously have to start making some assumptions about what would happen on rollover and to the market rents and renewal probabilities and all that stuff. So I think just from a general investment valuations perspective, we're now just aligned more broadly across our spectrum of assets and the way we view them.
Okay perfect. Thanks, a lot guys. Thank you.
Thank you once again in order to ask a question. Please press Star then the number one on your telephone keypad.
The next question is a follow up question from Sam Damiani with TD Securities. Please go ahead.
Thank you and just a couple for.
Follow ups for Leslie.
Just on the just on the I for US just to sort of make sure I understand this the net.
Result was $54 million provision in the fourth quarter and going.
Apples to apples as a result of a change in terminal cap rates and discount rates or is it more change of cash flows that you're forecasting.
How should I, how should we think about how should we think about that.
And it was it was a little bit of both on and you know we when we move to the puppies ever T. D. C. DCF method and you know we we did look at it as Kevin mentioned.
And I hope that renewal probabilities lease up assumptions downtime. So there were changes to the cash flows and.
And we also looked at the cap rates and the marketplace. So a combination of both.
Okay, and the previous pool of assets that were valued on a DCF like those metrics changed materially or was the bulk of the 54 million result, as a result of the pooled switching from OCR to DCF.
The there were there was some changes made to to all of the assets, but I would say that the bulk of the change related to the b and assets up for removed.
Okay, Okay, and just finally I noticed that the.
The REIT drew on the Canadian tire credit facility not the bank facility. Just curious I guess there was a reason for that.
On our.
And there's not a financial reason there are terms of borrowing on our equal under the same so it's a more effective for us tomorrow and are the CTC facility.
Got it.
Great I'll turn it back to you.
Thank you.
And there are no further questions at this time I will turn the call over to Ken Silva CEO for any closing remarks.
Thank you operator, and thank you all for joining us today.
We look forward to speaking with you and me have a good day.
Thank you.
This concludes today's call you may now disconnect.
Yeah.
Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.
This conference is no longer being recorded non religious for modest at coffee <unk> tea.
[music] from recession from fifth FIFA.
Please note that this conference call has ended and please disconnect. Your line at this time and thank you.
If you for Pennsylvania, and ask if it had medical channels total Muni seafood and my question was filling and Duffy.
[music] and they sell off on a fever. Please note that this conference call.
And it please disconnect your line at this time thank you.
And your net debt, Pennsylvania, and also tell me.
And for taking my question was pending.
[music] centered.
Fifth FIFA.
Please note that this conference call has ended please disconnect. Your line at this time. Thank you.
She'll be opinion and up to for that telco and channels. They tell me and he seafood peanuts, because she was pending.
[music] massage on fifth.
And fifth FIFA. Please.
Please note that this conference call has ended please disconnect. Your line at this time, thank you see.
And you're not political answer to how many seafood pick a question about scaling.
[music] and they set off on.
Please note that this conference call has ended please.
Disconnect. Your line at this time thank you.
And you're not pencil.
You're telling me.
A question about training.
[music] centered on process.
And fifth FIFA.
Note that this conference call has ended please disconnect. Your line at this time. Thank you.
Silver Bay opinion, not just for telecom for wholesale meaning people, who pay for it because she was pending.
[music] massage on for fifth.
And with <unk>. Please.
Please note that this conference call has ended please disconnect. Your line at this time. Thank you.
If you compare opinion not COVID-19 type helical fan on site, how many seafood kick out clause he was feeling.
[music] somebody such off on fifth FIFA. Please note that this conference call.
Has ended and please disconnect your line at this time thank you.
For Pip Union Natgas. It that's helpful and healthy telling me seafood.
Okay.