Q1 2022 SmartCentres Real Estate Investment Trust Earnings Call

May 12, 2022

Mitchell Goldhar: Our actions over the past three decades speaks to our commitment to the communities we serve. As we have said before, ESG is woven into the fabric of our organization. ESG is embedded in everything we do and how we oversee our business, engage with our communities, and develop and energize our associates. Although ESG is getting much more attention as of late, it is not something we just started talking about. It has been part of our DNA since the beginning. When you assess our portfolio, you can see these principles applied everywhere. We have been working to formally improve our retail centers through BOMA BEST certification, through improved resource management, occupant safety, and shareholder communication, and continue to work towards an 80% certification by the end of 2022.

As we have said before, ESG is woven into the fabric of our organization.

ESG is embedded in everything we do, in how we oversee our business, engage with our communities, and develop and energize our associates. Along with ESG, although ESG is getting much more attention as of late,

It is not something we just started talking about, it has been part of our DNA since the beginning.

[music].

And when you assess our portfolio, you can see these principles applied everywhere. We've been working to formally improve our retail centers through BOMA best certification, through improved resource management.

occupant safety, and shareholder communication, and continue to work towards an 80% certification by the end of 2020.

Mitchell Goldhar: Further, our CAD 15 billion-plus predominantly SmartLiving-focused transformation plans to enhance Canadian communities are focused on Canadians' desire for transit-connected, pedestrian-focused homes with urban amenities, which contributes to the quality of the built environment and promotes sustainability. We are actively working on our ESG report, which will tell you more about our ESG priorities and rollout. Stay tuned. We are grateful for the exceptional work of our talented and dedicated associates who represent the diversity of our community and the customers we serve. Given all of this, and notwithstanding the current economic climate, we see tremendous NAV creation being generated by our skilled development team, executing and focusing on intensification and centering around the best fit for each community. Let's not forget our leasing team, our stable of existing retailers, an industry-leading occupancy that has set the stage for all this exciting growth.

Further, our $15 billion plus.

Predominantly smart living focused transformation plans to enhance Canadian communities are focused on Canadians' desire for transit connected...

pedestrian-focused homes with urban amenities.

which contributes to the quality of the built environment and promotes sustainability.

Yeah.

We are actively working on our ESG report, which will tell you more about our ESG priorities and rollout. Stay tuned.

[music].

We are grateful for the exceptional work of our talented and dedicated associates who represent the diversity of our community and the customers we serve.

Given all of this and notwithstanding the current economic climate, we see tremendous NAV creation being generated by our skilled development team, executing and focusing on intensification and centering around the best fit for each community.

Yeah.

Got it.

[music] why that is.

But let's not forget our leasing team, our stable of existing retailers and industry leading occupancy that has set the stage for all this exciting growth.

And with that, I will turn it over to Rudy Gobin for operational update.

Mitchell Goldhar: With that, I will turn it over to Rudy Gobin for an operational update.

Rudy Gobin: Thank you, Mitch, and good afternoon, everyone. Throughout Q1, we saw the underlying strength of our centers in driving leasing activity and customer traffic. Tenants in virtually every category were back seeking more space and locking up locations in our high-traffic centers. With virtually 100% of the REIT's properties having a full-line grocery and near 70%, including a Walmart Supercentre, a wide variety of tenants were back adding locations to our well-located centers, including dollar stores, the TJX banners, furniture, health and beauty, QSR medical uses, full organic and specialty grocery stores, distribution and logistics, home decor, pet stores, and much more, all driving more traffic and improving our tenant mix in each community. Here are some highlights. We closed Q1 with 97.2% occupancy.

Throughout the first quarter, we saw the underlying strength of our centers in driving leasing activity and customer traffic.

Tenants in virtually every category were back seeking more space and locking up locations in

And with virtually 100% of the recent properties having a full line grocery and near 70% including a Walmart Supercenter, a wide variety of tenants were back adding locations to our well located centers including dollar stores, the TJX banners, furniture, health

full, organic, and specialty grocery stores.

home decor, pet stores, and much more.

all driving more traffic and improving our tenant mix in each community.

We closed the first quarter with 97.2% occupancy. Virtually all of this change from Q4 was the result of one tenant, Home Outfitters, which closed all locations in Canada.

Rudy Gobin: Virtually all of this change from Q4 was the result of one tenant, Home Outfitters, which closed all locations in Canada, four within our portfolio. You may recall that we negotiated a favorable buyout of a significant portion of the remaining 2022 to 2023 rents with this tenant in Q4. We received payment, and now we are close to renting three of the locations at the same or slightly higher rental rates. With this, we see occupancy improving in Q2 and throughout the balance of this year. At the quarter's end, we have already completed or nearly completed 3.7 million sq ft of the 2022 renewals, representing 74% of the maturities in the year. Over 150,000 sq ft of leases were executed in the quarter for build space.

You may recall that we negotiated a favorable buyout of a significant portion of the remaining 2022 to 2023 rents with this tenant in Q4.

We received payment and now we are close to renting three of the locations at the same or slightly higher rental rates.

With this, we see occupancy improving in Q2 and throughout the balance of this year.

At the quarter's end, we have already completed or near completed 3.7 million square feet of the 2022 renewals representing 74 percent of the maturities in the year.

Over 150,000 square feet of leases were executed in the quarter for built space.

Yes.

When.

New entrants to the market in a number of categories have started with strong interest in our open format and resilient portfolio.

Rudy Gobin: New entrants to the market in a number of categories have started with strong interest in our open format and resilient portfolio. We continue to work with our tenants, helping them to adapt any way we can in meeting their real estate needs, which gives them the flexibility they need in a valued partnership. We've been fortunate, with no creditor filings in 2021 through to Q1 of this year, which reflects the quality of our tenants and hopefully reflects that the worst is behind us. From a rent collection perspective, we ended the quarter at 98.5%. This is expected to improve throughout the quarter going forward, quarters going forward, and again, demonstrating the stability and the financial strength of our tenancies. Regarding our premium outlets in Toronto and Montreal, both continue to improve and are at 100% occupancy.

[music].

We continue to work with our tenants, helping them to adapt any way we can in meeting their real estate needs, which gives them the flexibility they need in a valued partnership.

We have been fortunate with no creditor filings in 2021 through to the first quarter of this year which reflects the quality of our tenants and hopefully reflects that the word

From a rent collection perspective, we ended the quarter at 98.5%.

This is expected to improve throughout the quarter going forward and again demonstrating the stability and the financial strength of our tenancies.

Regarding our premium outlets in Toronto and Montreal, both continue to improve and are at 100% occupancy.

Rudy Gobin: With the pent-up demand, accumulated disposable savings, and the returning tenancies, we have a solid start for 2022, with near 100% cash flow. From all perspectives, 2022 is shaping up to be a strong year in retail and especially in the value segment, an area where we dominate. As we have said before, this portfolio was built for heavy weather. Our high-quality tenants are adapting, customer traffic is improving, occupancy and cash flows are back to near pre-pandemic levels, and most importantly, all of this is happening concurrently with the extensive mixed-use development initiatives already identified or underway in over half of our centers, translating into significant NAV growth to come. With that, I will now turn it over to Peter.

with a pent of demand, accumulated disposable savings, and the returning tenancies, we have a solid start for 22 with near 100% cash flow.

From all perspectives, 2022 is shaping up to be a strong year in retail and especially in the value segment, an area where we dominate.

As we have said before, this portfolio was built for heavy weather. Our high quality tenants

Customer traffic is improving, occupancy and cash flows are back to near pre-pandemic levels and, most importantly, all of this is happening concurrently with the extensive mixed use development initiatives already identified or underway in over half of our centers translating into significant NAV growth to come.

Good day, ladies and gentlemen, welcome to the Smart centers REIT Q1, 2022 conference call as a reminder, if you'd like to queue up to ask a question. Please press star one.

I would like to introduce Mitchell Goldberg. Please go ahead.

Okay.

Good afternoon, and thank you for joining us on our Q1 conference call, Brian Mitchell Golder Executive Chairman and CEO .

Peter Sweeney: Thank you, Rudy, and good afternoon, everyone. The financial results for Q1 reflect the continued steady improvement in our core business that Mitch had mentioned earlier. For the three months ending 31 March 2022, FFO increased by 9.4%, or CAD 8 million over the comparable quarter last year. This increase resulted principally from improvements in NOI, lower ECL provisions, lower overall financing costs, and contributions from our total return swap initiative as compared to the prior year's results. On a per-unit basis, FFO with adjustments increased to CAD 0.52 per unit from CAD 0.49 per unit for the same period last year. This level for 2022 includes the impact of CAD 200 million in new units being issued in December 2021 to accommodate the REIT's purchase of a two-thirds interest in SmartVMC West.

I'm joined by Peter Sweeney, Chief Financial Officer, Larry Goldman EVP portfolio management and investments.

Our commentary will refer mostly to the outlook and mixed use development initiatives section of our MD&A, which is posted on our website I'd refer you specifically to.

The cautionary languages on pages.

This increase resulted principally from improvements in NOI, lower ECL provisions, lower overall financing costs.

One through six of the MD&A materials, which also applies to comments.

Any of our speakers make this afternoon.

Yeah.

Overall, we are pleased to report Q1 delivered solid performance in all areas of the portfolio.

Operationally the durability of our tenants once again revealed itself in the quarter with strong performance and demand for space in Erie.

FFO with adjustments increased to 52 cents per unit from 49 cents per unit for the same period last year and this level for 2022 includes the impact of 200 million in new units being issued in December of 2021 to accommodate the REITs purchase of a two-thirds interest in SMART VMC West.

Every tenant category.

Retailers are experiencing a resurgence of customers to their stores sales improvements.

We're locking we're looking into new locations extending lease terms and asking for more options to extend their leases.

The ladder is an important metric.

The results also reflect IFRS fair value adjustments in our investment property portfolio representing $271 million for the quarter, resulting in the REIT's total assets now exceeding $11.7 billion.

Peter Sweeney: The results also reflect IFRS fair value adjustments in our investment property portfolio, representing CAD 271 million for the quarter, resulting in the REIT's total assets now exceeding CAD 11.7 billion. CAD 241 million of this substantive increase is a result of progress in the zoning and entitlements process associated with several strategic properties, together with improved market conditions, and is consistent with the approach to valuation for our development properties that we discussed on our last call. It is important to note that as we continue to advance additional properties through similar zoning and entitlement processes, we will be assessing the appropriateness of similar adjustments in the future. Given the cash flow generated by the business, our rolling twelve-month ACFO payout ratio ended the quarter at a very respectable 91% level.

Engaging.

The future through.

He is a doors on the playing field of retail.

For the first time in nearly two years, we are experiencing COVID-19.

Competition for space with multiple players.

This improvement is being seen in our stronger cash flow, which approach, which approached 98, 5% by the end of the quarter and is expected to cross 99% shortly.

241 million of this substantive increase is a result of progress in the zoning and entitlements process associated with several strategic properties.

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As retail and E Commerce continued to evolve physical retail locations are clearly playing a central role in both platforms.

together with improved market conditions and is consistent with the approach to valuation for our development properties that we discussed on our last call.

At the end of the day hyper locality.

It is important to note that as we continue to advance additional properties through similar zoning and entitlement processes, we will be assessing the appropriateness of similar adjustments in the future. Given the case, we will be assessing the appropriateness of similar adjustments in the future.

Even more advantageous in delivering food general merchandise and other categories to the public.

Our regionally strategic locations, which are virtually all walmart or grocery anchored are perfectly aligned with this trend.

And are increasingly becoming the origination for online fulfillment quick pick up depots.

Our rolling 12-month ACFO payout ratio ended the quarter at a very respectable 91% level.

Expanded offerings and of course physical shopping.

And this level reflects the continuance of our annual distribution level of $1.85 per unit throughout the pandemic, as Mitch had previously mentioned.

Peter Sweeney: This level reflects the continuance of our annual distribution level of CAD 1.85 per unit throughout the pandemic, as Mitch had previously mentioned. These financial metrics have followed a consistent trend over the last several successive quarters, demonstrating steady, continued growth in the operating platform of our core business, and they support our growing development pipeline that is expected to provide unit holders with FFO and NAV growth for many years to come. We have also continued to focus on further fortifying the strength of our balance sheet. In this regard, we note the following strong debt metrics for Q1 2022 as compared to the comparable quarter in 2021. First, our debt-to-aggregate assets ratio has now improved to 42.5% as compared to 44.7% in the comparable period.

We believe Canadians need and more importantly, deserve a fair deal.

We have always positioned ourself with that belief.

These financial metrics have followed a consistent trend over the last several successive quarters demonstrating steady continued growth in the operating platform of our core business and they support our growing development pipeline that is expected to provide unit holders with FFO and NAV growth for many years to come.

That's why we have always prioritized tenants, who are like minded that is food and general merchandise at fair prices.

Yeah.

This has and continues to serve us well.

That's also why our portfolio comprised of nearly 95% strong national and regional tenants provide.

Provides the financial stability.

We have also continued to focus on further fortifying the strength of our balance sheet.

There has returned us to the near 99% rent collection, an industry, leading 97, 2% committed occupancy by the end of the quarter.

In this regard, we note the following strong debt metrics for the first quarter of 2022 as compared to the comparable quarter in 2021.

This has allowed us to maintain full distributions to our unit holders through these unprecedented times.

Firstly, our debt to aggregate assets ratio has now improved to 42.5 percent as compared to 44.7 percent in the comparable period.

Finding feature that we continue to be proud of.

Yes.

Notwithstanding these lean high performance retail assets are merely a starting point.

Peter Sweeney: Secondly, in keeping with our strategy to repay maturing mortgages and to grow our unencumbered pool of assets, unsecured debt in relation to total debt increased to 75% from 69%. Our unencumbered pool of assets has now grown to an excess of CAD 8.4 billion. We continue to employ a strategy to repay most maturing mortgages, and accordingly, we expect these metrics to further improve in the future. This strategy permits us further agility when considering opportunities and alternatives for our portfolio of mixed-use developments.

For our ultimate vision of adding a mix of uses to our properties, including primarily residential density.

in keeping with our strategy to repay maturing mortgages and to grow our unencumbered pool of assets.

Unsecured debt in relation to total debt increased to 75% from 69%.

In that regard smart living our new wholly owned in house residential brand has been extremely active.

and our unencumbered pool of assets has now grown to an excess of $8.4 billion.

Unlocking embedded.

To our unit holders and a number of highly accretive projects across the GTA, the MTA and across the countries.

We continue to employ a strategy to repay most maturing mortgages. And accordingly, we expect these metrics to further improve in the future.

Here are a few of the highlights of the quarter.

Phase one of smart livings artwork launched last quarter.

And as is already exceeding expectations.

Heart walk.

Yeah.

It is a mixed use <unk>.

Peter Sweeney: Thirdly, pursuant to our refinancing activity over the last 12 months, our weighted average interest rate for all debt continued to decrease, and at the end of the quarter was 3.09%, as compared to 3.26% for the prior year comparable period, while concurrently, our weighted average term of debt continues at approximately 5 years. This continued focus on both the weighted average term of our debt and fixing interest rates is deliberate and is yet another example of risk mitigation strategy that we have employed for several years now to insulate the trust from interest rate volatility as we are currently witnessing in this rising rate market. As at 31 March, approximately 85% of the trust's current outstanding debt is fixed rate debt, which provides tremendous stability during periods of interest rate volatility.

Neighborhood.

Representing 9% of our flagship <unk> hundred five acres smart BMC development.

And the TTC oriented and connected.

Vaughan Metropolitan Center.

Located on the former Walmart Purcell when fully complete heart block will consist of 5 million square feet of density, including 5000 residential units and up to 150000 square feet of nonresidential buildings, such as innovation and community engagement space.

Yeah.

The phase one release of over 320 condo units.

Is sold out.

It is worth noting that smart BMC.

It is worth noting that the smartphone is read.

Owns 50% of these condos twice as much because the 25% ownership.

In transit city condos.

As you may recall in January .

Martin centers more than doubled its ownership in smart BMC by acquiring a two third interest in 53 acres within the 105 acre Master planned smart PMC Citycenter.

Peter Sweeney: Lastly, our interest coverage ratio net of capitalized interest improved from the prior year level of 3.2 times to 3.5 times. This, in spite of the impact that COVID-19 has had on our operating results over the last two years, and in addition, it reaffirms the foundational strength and stability of our core business, providing us with a substantive advantage from which to fund our pipeline of development activity and refinance maturing debt. From a liquidity perspective, for Q1, cash flows provided by operating activities exceeded distributions paid by CAD 20.5 million. Notwithstanding the macro challenges that have resulted in tremendous volatility in the capital markets over the last 24 months, our business has continued to demonstrate its unique ability to generate sufficient cash flow to fund both operating needs and distributions to our unit holders.

This acquisition United ownership across the property, making smart centers, the largest owner in bonds dynamic TTC subway connected downtown.

Following on the heels of this acquisition and in addition to our block we commenced the presale activity two weeks ago.

One month or so after art work.

Yet another BMC neighborhood.

Parcplace condos.

Park place is 1100 units across two luxury 56 story and 48 story towers.

Along with service retail in a podium of contemporary design.

This million plus square foot complex will be built unjust too.

Of the 53 acres recently acquired.

And we will overlook.

<unk> nine acre Central Park, which unifies through green space, the entire smart BMC.

Peter Sweeney: As we look to the immediate future and continue to manage through the current uncertain capital markets environment, in addition to the conservative debt metrics noted previously, consider also that when factoring in our cash on hand together with our new CAD 300 million facility that was established subsequent to year-end to support the VMC West acquisition, the CAD 150 million new revolving line of credit that was completed last year, and the CAD 250 million accordion feature associated with our existing CAD 500 million operating line, our liquidity position of an excess of CAD 675 million provides appropriate flexibility for the capital funding requirements associated with our pipeline of development activity.

Initial pre sales.

And these projects has exceeded expectations.

We plan to commence construction later this year.

Also within Smart DMC, we completed the remaining 100 192 condo unit closings in transit City three tower in 2021, bringing the total to 1741 units closed in the first three transit city towers delivering over six.

<unk> million dollars and <unk> to the REIT at 25% share.

As part of Transit City wanted too we also planned for.

The construction of 22, Townhomes all of which were pre sold and are now virtually complete with delivery expected in the second quarter of this year.

Peter Sweeney: In this regard, we anticipate a requirement for additional funding over the next 12 months to be limited to construction and any potential acquisition financing requirements that may arise, as the next series of debentures in our debt ladder does not mature until May 2023. Finally, it is important that we confirm our unwavering commitment to our balance sheet. It has withstood the unprecedented challenges that the past 24 months have proffered. It has permitted the REIT's development plans to continue without delay or impediment, and it is in a position to serve as the backbone to fund and support the vast array of opportunities that lie ahead for SmartCentres. Now, I will turn the call back to Mitch.

Finally within the Smart BMC Transit city, four and five continue to be on schedule with expected closings in 2023.

Transit CD four is built to the penthouse and transit to 85 is currently built to the 44th floor there.

The mill way the first purpose built rental tower in Vaughan.

<unk> is built to 30 build to the 34th floor of its 36 stories and is now accepting applications to rent with the first apartment units taking occupancy later this year.

This is being leased out of our smart living discovery center across from a subway station right here in the heart of Smart BMC.

These development updates.

Or a small subset of our current permissions in place.

Mitchell Goldhar: Thanks, Peter. As you can tell, the portfolio remains strong and continues to improve. Our tenants are our priority, and we will continue to strengthen our centers with new and exciting additions catered to each community. We also continue to focus on every detail of every project, and we are building our mixed-use intensification project through our new SmartLiving residential brand, a name that you will continue to become more and more familiar with. With that, I will now turn it over to the operator in addressing your questions. Thank you.

283 mixed use projects have been identified mainly on lands already owned which are expected to result in over 40 million square feet being added to our portfolio over time.

As these come on stream you will begin to see the NAV growth and fair value increments.

Completion of successful land use entitlements combined with a thoughtful commencement of each development initiative.

We currently have over three 3 million square feet under construction, which includes six rental apartment buildings, two and Mr. Piyush one in Labelle two in Ottawa, one in our flagship smart PMC in total we have 65 projects either underway or for which work is currently being undertaken.

Operator: As a reminder for people on the phone, if you'd like to queue up to ask a question at this time, please dial star one on your phone's keypad. If ever you wish to withdraw from the question queue, press star zero. We already have one individual queued up. Michael Markidis from Desjardins Capital Markets. Please go ahead, Michael.

Start construction in the next two years.

Yeah.

Well smart DMC represents our vision of the future. It is only one of 93 REIT properties currently slated for intensification page.

Michael Markidis: Hi, thanks. Good afternoon, everybody. I just want to start off. I don't know if this was particularly new, but it did stick out to me within your commentary in the MD&A. I was just curious if you could provide us with a little bit more detail and color around the repurposing space for logistics comment that was in there. Are there any examples of that in your portfolio today?

Pages 23 through 26 of the MD&A highlights over 'twenty mixed use projects totaling in excess totaling in excess of 55 million square feet of net incremental density to be built some with partners and mostly undeveloped land within our existing portfolio upon approval.

Hello.

On the financial side, maintaining a conservative balance sheet is always a priority.

With an unencumbered pool of assets in excess of 8.4 billion.

A 42, 5% debt.

Mitchell Goldhar: Uh-

Michael Markidis: Hello?

Mitchell Goldhar: Yeah, sorry. Yeah, no, I think, Michael, thanks. You know, I sort of was referring to that in part when I was talking about how retail is, and retailers are using the retail space. They are adding, you know, some of the e-commerce fulfillment through their physical spaces as well as interestingly enough, we've had entire spaces being leased for actual logistics and fulfillment. Yeah, I mean, that's what I was referring to in my opening remarks. It's kind of cool because we've leased some pretty big spaces to some logistics facilities right, you know, right in our retail centers.

[noise] level and significant liquidity, which Peter will speak to shortly.

As always we continue to only move forward with capital intensive construction initiatives as market conditions warrant.

Sufficient pre sales occur in the case of condos and owning when financing is in place.

Lastly, in today's environment business has faced numerous challenges including competitive pressures.

Economic inflation to name a few.

We have these challenges and associated we take these challenges and associated risks seriously.

We are strategically planning implementing mitigating strategies and executing deliberately for the long term success of the portfolio.

This includes planning for other changes such as climate change and aging population and any quality at.

Michael Markidis: Okay, that's interesting. On the vaccination centers, I appreciate that's an add back of non-recoverable OPEX, and rightly so in your FFO calculations. What I'm more interested in is are these centers counted as occupied space in your occupancy? Would be the first question, and are you receiving rent? I think the answer on the latter is no, but I'll just want to confirm that.

At Smart centers, we preferred to do the right thing and have the results speak for themselves our actions over the past three decades speaks to our commitment to the communities we serve.

As we have said before ESG is woven into the fabric of our organization.

ESG is embedded in everything we do and how we oversee our business engage with our communities and develop and energize our associates along with ESG, Although ESG is getting much more attention as of late.

Mitchell Goldhar: Yeah, we'll go in reverse order. No. We didn't charge the vaccination centers. You know, it was really very much we did that on behalf of, you know, everybody, for the communities that we're in. Something we don't talk about a lot. It was mentioned today, maybe for the first time, but we are in these communities and have been for decades. You know, we don't talk about it much, but we're involved with so much in these communities. They don't just shop with us, but they know us. We're their shopping center that they grew up with. We're involved with lots of community activities. Vaccination centers, you know, when we do something like that, it's great for, you know, the communities that we serve.

It is not something we just started talking about it as being part of our DNA since the beginning.

And when.

When you assess our portfolio you can see these principles implied everywhere, we've been working to formally improve our retail centers through BOMA Best Certificate certification through improved resource management.

Occupant safety and shareholder communication and continued to work towards an 80% certification by the end of 2022.

Further our $15 billion plus.

Predominantly smart living focused transformation plans to enhance Canadian communities are focused on canadians' desire for transit connected.

Mitchell Goldhar: No, it's in terms of, it's not part of our occupancy either.

Pedestrian focused homes with urban amenities.

Which contributes to the quality of the built environment and promotes sustainability.

Michael Markidis: Okay. Okay. Gotcha. No. Because what I was trying to get to is I was wondering if it was in your occupancy, in the actual upside on re-leasing, would be higher as these hopefully are not needed in the future. Then I guess just to close off on that point, are they now shutting down? Will this be

We are actively working on our ESG report, which we'll tell you more about our ESG priorities and rollout stay tuned.

Mitchell Goldhar: Yeah.

Michael Markidis: Space available?

Mitchell Goldhar: Yeah. Keep in mind also, Michael, some of them are actually. They were available in part because we're redeveloping some of those buildings, so they were available for that reason. Yeah, it was just also, you know, whatever. You know, it was good that they were available for the vaccination center purposes, but they're actually redevelopment spaces.

We are grateful for the exceptional work of our talented and dedicated associates, who represent the diversity of our community.

And the customers we serve.

Given all of this and notwithstanding the current economic climate, we see tremendous NAV creation being generated by our skilled development team executing and focusing on intensification and center around the best fit for each community.

But let's not forget our leasing team our stable of existing retailers and industry, leading occupancy that has set the stage for all this exciting growth.

Michael Markidis: Got it. Okay. Last one for me. Saw the note on the consolidation of the remaining 50% interest on the three properties. Just curious on the capital recycling side, if there are any dispositions that you've got planned for the rest of this year.

And with that I will turn it over to Rudy <unk> for an operational update.

Uh huh.

Yeah.

Mitchell Goldhar: Yeah, I mean, small, but it's not inconceivable that something will happen. In terms of officially, I would say, you know, at the moment in terms of dispositions, we don't have anything imminent. We are doing other things. I mean, if you're really asking about capital raise, I mean, we're doing a lot of things for capital raise. A dispo, you know, is not imminent, although it could happen before year's end. Lots of dealings with potential partners on a number of these developments. You would understand, since we emphasize that we are developing on owned properties, that partners come in at market. That is very much an active area, for, you know, for capital raising. Yeah.

Thank you Mitch.

And good afternoon, everyone.

Yeah.

Throughout the first quarter, we saw the underlying strength of our centers and driving leasing activity and customer traffic.

Tenants in virtually every category, we're back seeking more space.

And locking up locations in a high traffic centers.

And with virtually 100% of the reach properties, having a full line grocery.

A near 70%, including a Walmart supercenter, a wide variety of tenants were back adding locations to our well located centers.

Including dollar stores the T J S banners furniture Hell.

Health and beauty USR medical uses.

Full organic and specialty grocery stores.

Distribution and logistics home decor pet stores and much more.

All driving more traffic and improving our tenant mix in each community.

Michael Markidis: Okay, great. I have a few more, but I'm gonna turn it back and requeue it if others don't ask any questions.

So here are some highlights.

Mitchell Goldhar: Well, just, yeah, call us. Happy to take you if you want to call later.

Yeah.

We closed the first quarter with 97, 2% occupancy virtually all of this change from Q4 was the result of one tenant Alamo theaters, which closed all locations in Canada.

Michael Markidis: Thanks so much.

Operator: Thank you, Michael. The next question is from Tal Woolley from National Bank Financial. Please go ahead, Tal.

Tal Woolley: Hi, good afternoon, everybody.

Four within our portfolio.

Mitchell Goldhar: Good afternoon.

Michael Markidis: Afternoon.

Tal Woolley: Peter, maybe we can just start quickly. I appreciate you don't have any major refinancing to do for this year, but if you were seeking mortgage financing or unsecured financing right now, what sort of rates do you think you'd be getting shown?

You may recall that we negotiated a favorable buyout of a significant portion of the remaining 2022 to 2023 rents with this tenant in Q4.

We received payment and now we are close to renting three of the locations at the same or slightly higher rental rates.

Peter Sweeney: Well, as you would know, Tal, it's a function of term. So anything that would exceed 7 years currently, we'd be looking at something in excess of 4%, at least for now, Tal. And again, what we're thinking about for now is that we've got lots of runway available for the next almost 3 years when you look at our debt ladder. To the extent that we've got any of our mortgages maturing during that timeframe, you know, there is an opportunity for us to fill in that debt ladder for the next 2 to 3 years with just essentially shorter term renewals. Presumably over the next several years, I think it's fair to say the market is expecting to find its way back to lower interest rates.

With this we see occupancy improving in Q2 and throughout the balance of this year.

At the quarters end, we have already completed or near completed three 7 million square feet of the 2022 renewals representing 74% of the maturities in the year.

Over 150000 square feet of leases were executed in the quarter for build space.

New entrants to the market in a number of categories has started with strong interest in our open format and resilient portfolio.

We continue to work with our tenants, helping them to adapt any way, we can and meeting their real estate needs, which gives them the flexibility they need in a valued partnership.

Peter Sweeney: At least that seems to be the consensus these days, especially on the longer term stuff, just because of.

Peter Sweeney: At least that seems to be the consensus these days, especially on the longer term stuff, just because of. Some of the concerns that seemingly are out there currently vis-a-vis macro events. We may find ourselves, by the time we have to go back into, you know, the major markets, a year and a half or more from now, that we think more seriously about longer term financing options. For now, Tal, anything that we're at least thinking about would be shorter term. The rates that we would expect on those shorter term facilities would be commensurate with the rates that would be in place on those maturing facilities. I guess my point is that we wouldn't expect a tremendous dilution of FFO as a result of any financing activity that has to take place over the next 18 to 24 months.

We've been fortunate with no credit or filings in 2021 through to the first quarter of this year, which reflects the quality of our tenants.

Mitchell Goldhar: Some of the concerns that seemingly are out there currently vis-a-vis macro events. We may find ourselves, by the time we have to go back into, you know, the major markets, a year and a half or more from now, that we think more seriously about longer term financing options. For now, Tal, anything that we're at least thinking about would be shorter term. The rates that we would expect on those shorter term facilities would be commensurate with the rates that would be in place on those maturing facilities. I guess my point is that we wouldn't expect a tremendous dilution of FFO as a result of any financing activity that has to take place over the next 18 to 24 months.

And hopefully it reflects that the worst is behind us.

From a rent collection perspective, we ended the quarter at 98, 5%.

This is expected to improve throughout the quarter going forward quarters going forward and again, demonstrating the stability and the financial strength of our tenancies.

Regarding our premium outlets in Toronto, and Montreal, both continued to improve and are at 100% occupancy.

With the pent up demand accumulated disposable savings and they're returning tenancies, we have a solid start for 'twenty, two with near 100% cash flow.

Tal Woolley: Okay. Just from the DBRS, the trend watch, when do you expect to see a resolution on that?

From all perspectives 2022, a shaping up to be a strong year in retail and especially in the value segment, an area, where we dominate.

Mitchell Goldhar: That's a question that perhaps is better asked of DBRS, Tal. As you would expect, we're in continuous dialogue with them, and keeping them abreast of our progress at all levels. But I think with respect to, you know, how they view the world and certainly how they view SmartCentres' credit is really a question. You know, their timing on assessing us is really a question that maybe we should be asking DBRS.

Peter Sweeney: That's a question that perhaps is better asked of DBRS, Tal. As you would expect, we're in continuous dialogue with them, and keeping them abreast of our progress at all levels. But I think with respect to, you know, how they view the world and certainly how they view SmartCentres' credit is really a question. You know, their timing on assessing us is really a question that maybe we should be asking DBRS.

As we have said before this portfolio was built for heavy weather.

Our high quality tenants are adapting custom.

Customer traffic is improving occupancy and cash flows are back to near pre pandemic levels and most importantly, all of this is happening concurrently with the extensive mixed use development initiatives already identified or underway and over half of our centers translating into significant.

Tal Woolley: Okay. That's fair. Then just on the self-storage joint venture, obviously your partner's pursuing an IPO right now. Are their plans sort of changing at all with, you know, this evolution in their life cycle? Like, do you expect the JV to sort of continue as planned, or do you expect that could change going forward?

And EBITDA growth to come.

And with that I will now turn it over to Peter.

Thank you Rudy and good afternoon, everyone. The financial results for the first quarter reflect the continued steady improvement in our core business.

That Mitch had mentioned earlier for.

For the three months ending March 31, 2022, <unk> increased by nine 4% or $8 million over the comparable quarter last year.

Mitchell Goldhar: It seems like it's, I would say, unchanged or even maybe more, maybe a bit more aggressive, but definitely not slowing down.

This increase resulted principally from improvements in NOI lower ECL provisions.

Tal Woolley: Okay.

Mitchell Goldhar: Lots on the go with them on existing sites. Actually, they bring us, you know, we've got that kind of arrangement with each other. They actually bring us into some of their deals, at least give us the option to, so it's got great momentum.

Lower overall financing costs and contributions from our total return swap initiative.

As compared to the prior year's results.

On a per unit basis.

Tal Woolley: Okay. Just on the staffing side, you know, as we've sort of come out of COVID, there's obviously been a lot of factors, you know, that have, you know, caused people to look at, like, different careers. I'm just wondering if you can talk a little bit about turnover and hiring for, you know, on the development side and in your core leasing, how that's been over the last little bit.

F F O with adjustments increased to 52 cents per unit from 49 per unit for the same period last year and this level for 'twenty 'twenty. Two includes the impact of $200 million in new units being issued in December of 2021.

To accommodate the <unk> purchase of a two thirds interest in smart BMC west.

Mitchell Goldhar: Well, I mean, one thing about the development. We've always been a pretty strong. Like, we've had, you know, pretty strong gravity for people in development, especially young people, because it's just a good place to be if you're interested in development. You know, development is a generic term. It could be a land use planner, it could be financial analyst. You know, it could be, you know, even, you know, like a, you know, a junior architect. Could be an MBA, 'cause you're thrown right into it here, and you do see things happen that you work on within a few years. Luckily, when it comes to development, I think we're considered, you know, a good place for a lot, you know, for people.

The results also reflect.

<unk> fair value adjustments in our investment property portfolio, representing $271 million for the quarter, resulting in the reached total assets now exceeding 11 $7 billion.

241 million of this substantive increase is a result of progress in the zoning and entitlement process associated with several strategic properties.

Together with improved market conditions and is consistent with the approach to valuation for our development properties that we discussed on our last call.

Luckily, when it comes to development we're, I think we're considered, you know, a good place.

a lot, you know, for people. So we do attract a lot of people interested in development.

Mitchell Goldhar: We do attract a lot of people interested in development. It's a young, very energized, cool kind of department divided into business units, like regionals, regions across the country. With respect to leasing, I mean, we have a very stable leasing group. In general, you know, we're also seeing, you know, we're also experiencing turnover and the same challenges everybody else is experiencing in all sorts of departments. I would say, you know, those two departments that you specifically named, those are two, you know, areas of our very much our sweet spot expertise. We have a stable AA when it comes to HR.

And it's a young, very energized, cool kind of department.

Given the cash flow generated by the business, our rolling 12 months as CFO payout ratio ended the quarter at a very respectable 91% level.

divided into business units like regionals.

And then with respect to leasing, I mean, we have a very stable leasing group. But in general, you know, we're also seeing, you know, we're also experiencing turnover and, you know, the same challenges everybody else is experiencing in all sorts of departments. But I would say, you know.

And this level reflects the continuance of our annual distribution level of $1 85 per unit throughout the pandemic as Mitch had previously mentioned.

Those two departments that you specifically named, those are two, you know, areas of our very, very much our sweet spot expertise. We have very stable, you know, we have a stable, you know, we have stable.

Okay. And then this is a sort of a broader question, I guess, just about real estate markets in general. And I just wondering, you know, we're seeing some weakness on the, you know, the residential side of the market now as rates have climbed up. I'm wondering if, like, either yourself or anyone else on the team there, like, if you can just talk about how you think about what that weakness and that particular slice of the real estate world,

Tal Woolley: Okay. This is a sort of a broader question, I guess, just about real estate markets in general. I'm wondering, you know, we're seeing some weakness on the, you know, the residential side of the market now as rates have climbed up. I'm wondering if like, either yourself or anyone else on the team there, like, if you can just talk about how you think about what that weakness in that particular slice of the real estate world. Is there any chance like that sort of bleeds into other parts of commercial real estate in a way that maybe we wouldn't immediately register sitting here from the outside?

And NAV growth for many years to come.

We have also continued to focus on further fortifying the strength of our balance sheet.

In this regard we note the following strong debt metrics for the first quarter of 2022 as compared to the comparable quarter in 2021.

Firstly, our debt to aggregate assets ratio has now improved to 42, 5% as compared to 44, 7% in the comparable period.

Is there any chance like that sort of bleeds into other parts of commercial real estate in a way that maybe we wouldn't immediately register sitting here from the outside?

Secondly.

In keeping with our strategy to repay maturing mortgages and to grow our unencumbered pool of assets.

It certainly is a little weaker in terms of the residential, but it's a good thing.

Mitchell Goldhar: It certainly is a little weaker in terms of the residential, so. It's a good thing, I think, ultimately. You know, it's always hard to. You know, these things sometimes get overcorrected or whatnot, and so we can't know how that's all gonna play out with residential. It's a little bit softer for sure, which is good. Hopefully construction prices will follow. You know, a little bit of pressure, downward pressure on construction prices will follow. We don't feel it in the other commercial sectors like, you know, retail's got a little bit of a tailwind, I would say right now.

Unsecured debt in relation to total debt increased to 75% from 69%.

You know, it's always hard to, you know, these things sometimes get over-corrected or whatnot, and so we can't know how that's all going to play out with residential, but it's a little bit softer, for sure, which is good, and hopefully construction prices will follow. You know, a little bit of pressure, downward pressure on construction prices will follow.

And our unencumbered pool of assets has now grown to in excess of $8 $4 billion.

We continue to employ a strategy to repay most maturing mortgages and accordingly, we expect these metrics to further improve in the future.

But we don't feel it in the other commercial sectors. Like, you know, retail's got a little bit of a tailwind, I would say right now. And office.

This strategy permits as further agility, when considering opportunities and alternatives for our portfolio of mixed use developments.

Mitchell Goldhar: Office, believe it or not, I mean, we have some office deals going on that are not insignificant in terms of space, like would result in new space being built for office. I mean, we're gonna spec out a little office building actually up here in VMC. Don't feel it there yet. Like it's, I don't wanna get into it maybe too much for right now, but. The industrial seems to be coming off a little bit, but that was kinda sky high, so still strong. I don't know. I don't see it kind of, you know, like, you know, there's gonna be a general economic macro slowing down. I don't think just off the froth, I don't think it's gonna be like some kind of contagion.

Thirdly.

Pursuant to our refinancing activity over the last 12 months, our weighted average interest rate for all debt continued to decrease and at the end of the quarter was 3.09% as compared to $3 two 6% for the prior year comparable period, while concurrently.

some office deals going on that are not insignificant in terms of space.

would result in new space being built for office. I mean, we're gonna spec on a little office building actually up here in BMC. Don't feel it there yet. Like it's, I don't wanna get into it maybe too much for right now.

Our weighted average term of debt continues at approximately five years.

And then the industrial seems to be coming off a little bit, but that was kind of sky high, so still strong. But I don't know. I don't see it kind of, you know, being, you know, there's going to be a general economic macro slowing down. But I don't think, just off the froth, I don't think it's going to be like some kind of

This continued focus on both the weighted average term of our debt and fixing interest rates is deliberate and is yet. Another example of risk mitigation strategy that we've employed for several years now to insulate the trust from insulate sorry interest rate volatility.

As we are currently witnessing in this rising rate market.

As at March 31, approximately 85% of the Trust's current outstanding debt is fixed rate debt, which provides tremendous stability during periods of interest rate volatility.

And then just lastly, phase one in Cambridge, what sort of size and scope, you know, will that be? Like, is it a million square feet?

Tal Woolley: Okay. Just lastly, phase one in Cambridge, what sort of size and scope, you know, will that be? Like, is it 1 million sq ft? How are you looking at phase one?

How are you looking at phase one? Well, somebody earlier asked about the vaccination center. I mean, that's where that's where phase one is going to be there. Um, so.

And lastly.

Mitchell Goldhar: Well, somebody earlier asked about the VMC. I mean, that's where phase one is gonna be there. Yeah, I mean, no, I would say it's gonna be, you know, a tower with some mid-rise, like a 6-story, 4- to 6-story product, which will be rental. The tower will be likely to be condo and then some townhouses won't get up to 1 million sq ft. It's just based partly on kind of the market, you know, what we think the combination of the absorption rate is, where we feel, you know, we've got the space available to knock down. Then slowly but surely we're gonna move tenants around and just continue that. It's not small.

Our interest coverage ratio net of capitalized interest improved from the prior year level of three two times to three five times.

Yeah, I mean, no, I would say it's going to be, you know, a tower with

This in spite of the impact that COVID-19 has had on our operating results over the last two years and in addition, it reaffirms that foundational strength and stability of our core business, providing us with a substantive advantage from which to fund our pipeline of <unk>.

Some mid-rise, like a six-story, four-to-six-story product, which will be rental.

and the tower will be likely to be condo and then some townhouses.

<unk> activity.

And so we'll get up to a million square feet, but it's just based partly on kind of what we think the combination of the absorption rate is, where we feel we've got the space available to knock down, and then slowly but surely we're going to move tenants around and just continue that. But it's not small. I mean, what I just described would probably be goodness.

And refinance maturing debt.

From a liquidity perspective for the first quarter cash flows provided by operating activities exceeded distributions paid by $25 million.

Notwithstanding the macro challenges that have resulted in tremendous volatility in the capital markets over the last 24 months. Our business has continued to demonstrate its unique ability to generate sufficient cash flow to fund both operating needs.

Mitchell Goldhar: I mean, what I just described would be probably, goodness, you know, 5, 6, 7 acres of land, initially.

you know, five, six, seven acres of land initially.

Tal Woolley: Okay.

Mitchell Goldhar: Yeah.

And good demand for our markets like Cambridge. We're finding, like, you know, the market, this all a lot of COVID related things have played into the Cambridges and the Allistons and the Kincardines and Owensounds and, you know, Carleton Place and

Tal Woolley: All right.

Mitchell Goldhar: Good demand for our markets like Cambridge. We're finding like, you know, a lot of COVID related things have played into the Cambridges and the Alliston and the Kincardines and Owen Sound and, you know, Carleton Place and the Barrie, some of these markets where we're doing, you know, residential. We started that long before, but the market's kind of come to us in those places, which is great.

And distributions to our unit holders.

As we look to the immediate future and continue to manage through the current uncertain capital markets environment. In addition to the conservative debt metrics noted previously consider also that when factoring in our cash on hand, together with our new $300 million facility that was established subs.

some of these markets where we're doing residential. We started that long before, but the markets kind of come to us in those places where it's...

<unk> year end to support the BMC West acquisition, the $150 million new revolving line of credit that was completed last year and the $250 million accordion feature associated with our existing $500 million operating line.

Okay. That's great. Thanks very much, everybody. Thank you.

Tal Woolley: Okay. That's great. Thanks very much, everybody.

Mitchell Goldhar: Thank you.

Operator: Thank you, Tal. The next question is from Dean Wilkinson from CIBC World Markets. Please go ahead, Dean.

Thanks. Good afternoon, everyone. Just one question for me. Peter, have you seen any widening of the spreads on unsecured versus secured debt, or has it just moved up lock step with the rate move and what mortgages are doing?

Dean Wilkinson: Thanks. Good afternoon, everyone. Just one question from me. Peter, have you seen any widening of the spreads on unsecured versus secured debt, or has it just moved up lockstep with the rate move and what mortgages are doing?

Our liquidity position of in excess of $675 million provides appropriate flexibility for the capital funding requirements associated with our pipeline of development activity.

No, I think it's fair to say being particularly over the last

Peter Sweeney: No, I think it's fair to say, Dean, particularly over the last month or so, we have seen a widening of spreads on our bonds. That's for sure what we've seen relative to what may be available to us in the secured market.

In this regard we anticipate a requirement for additional funding over the next 12 months can be limited to construction and any potential acquisition financing requirements that may arise.

month or so, we have seen a widening of spreads on our bonds.

That's, for sure, what we've seen relative to what may be available to us in the secured market.

As the next series of debentures, and our debt ladder does not mature until may of 2023.

Dean Wilkinson: By how much would that have moved, do you think?

And finally.

Peter Sweeney: Well, I mean, if we're assessing it at the end of March, and granted, March is now a month and a half almost away, ago.

Well, I mean, if we're assessing it at the end of March and granted March is now a month and a half almost, certainly at the end of March, if we're looking at our 10-year term debt, the spread on a mortgage would have been about 130 to 140 basis points.

It is important that we can confirm our unwavering commitment to our balance sheet.

Dean Wilkinson: Yeah.

Peter Sweeney: Certainly at the end of March, if we were looking at our ten-year term debt, the spread on a mortgage would have been about 130 to 140 basis points. The spread at that point on unsecured debt would have been about 50 basis points higher than that. Typically, as you probably know, we look anywhere from 20 to 40 basis points as a spread.

It has withstood the unprecedented challenges that the past 24 months of profit.

It is permitted to reach development plans to continue without delay or impediment.

And it is in a position to serve as the backbone to fund and support the vast array of opportunities that lie ahead for smart centers.

And the spread at that point on unsecured debt would have been about 50 basis points.

higher than that. So typically, as you probably know, we look anywhere from 20 to 40 basis points as a spread between mortgages and bonds for 10-year term type facilities. So obviously, they're wider by at least 10, maybe even up to 25 basis points. 20 point. Right. Don't blink. That could change. That's all I had. Thanks, guys.

And now I will turn the call back to Mitch.

Thanks Peter.

As you can tell.

Dean Wilkinson: Yeah

Peter Sweeney: ... between mortgages and bonds for ten-year term type facilities. Obviously they're wider by at least 10, maybe even up to 25 basis points for now.

The portfolio remains strong and continues to improve.

Our tenants are priority.

And we will continue to strengthen our centers with new and exciting additions.

Dean Wilkinson: Twenty, twenty point. Right. Don't blink, that could change. That's all I had. Thanks, guys.

Cater to each community.

Peter Sweeney: Thank you.

We also continued to focus on every detail of every project.

Mitchell Goldhar: Yeah.

Operator: Thank you, Dean. The next question is from Mario Saric from Scotia Capital. Please go ahead, Mario.

And we are building our mixed used intensification project.

I want to come back to a comment you made about accessing different sources of capital, including selling wind at fair market value to potential JV partners on your developments. Is that something that's far along enough that you feel comfortable quantifying the range of those types of sales you could do this year?

Mario Saric: Hi, good afternoon.

Mitchell Goldhar: Hi.

Through our new smart living residential brand name.

Mario Saric: Mitch, I want to come back to a comment you made about accessing different sources of capital, including selling land at fair market value to potential JV partners on new developments. Is that something that's kind of far along enough that you feel comfortable kind of quantifying the range of those types of sales you could do this year?

A name that you will continue to become more and more familiar with it.

With that I will now turn it over to the operator and addressing your questions.

Thank you.

As a reminder for people on the phone if you'd like to queue up to ask a question at this time. Please dial star one on your phone's keypad. If you wish to withdraw from the question queue Press Star Zero, we already have one individual.

Mitchell Goldhar: Maybe not yet, but it's moving along. There's interest from very, you know, we consider to be, you know, very long-term minded, like-minded institutions. We're not at the point of knowing exactly, you know, what the magnitude is yet. You know, various banks, including your own, have been involved with us on that. It's going very, very well. I didn't mention, I guess maybe I should have, that there's other initiatives going on, like, you know, we, when we sell condos, we're in a sense, de facto raising capital, creating capital. We do have always at our disposal the ability to just sell a parcel instead of bringing in a partner, you know.

Um, maybe not yet, but it's what it's moving along. There's interest from very, you know,

Oh queued up.

we consider to be, you know, very long-term minded, like-minded institution.

Michael <unk> from <unk> capital markets. Please go ahead Michael.

Hi, Thanks, good afternoon everybody.

But we're not at the point of knowing exactly, you know, what the magnitude is yet. But, you know, various banks, including your own, have been involved with us on that.

I just want to start off I don't know if this was.

Particularly new but it didn't stick out to me within your commentary in the MD&A I was just curious if you could.

<unk> was a little bit.

More.

Detail and color around the Repurposing space for logistics got it that was in there or are there any examples of that.

I didn't mention, I guess maybe I should have, that there's other initiatives going on. Like, we sell condos. We're, in a sense, de facto raising capital, creating capital. And we do have always at our disposal the ability to just sell a parcel instead of bringing in a partner. So.

All right.

Okay.

Uh huh.

Yeah sure Yeah, No I think Michael Thanks.

Mitchell Goldhar: We hold that in our hip pocket as well if we want to execute on that, which is very, you know, quick and, you know, can be extremely lucrative. By the way, just in terms of a nuance there, what we're looking for in the partnerships are more the income, the multi-res. Whereas if we were to sell something off, well, we could sell something off for a condo. I can. I'm sure you can imagine the difference in terms of what that would mean in terms of equity raise. We're not really looking for partners per se, so much in condos, but more so in the, you know, in the multi-res, in our multi-res portfolio.

We hold that in our pocket as well if we want to execute on that.

I sort of was.

Sure.

In referring to that in part when I was talking about how retail is and retailers are using the retail space.

which is very quick and can be extremely lucrative. And by the way, just in terms of the nuance there,

They are adding.

What we're looking for in the partnerships are more the multi-res.

Some of the e-commerce fulfillment through their physical spaces as well as.

Whereas if we were to sell something off, when we could sell something off for a condo, and I'm sure you can imagine the difference in terms of what that would mean in terms of equity rates.

Interestingly enough, we've had entire spaces being leased for actual logistics and fulfillment.

So, yes, I mean.

So we're not really looking for partners, per se, so much in condos, but more so in

That's what I was referring to my in my opening remarks.

So it's kind of cool because we released some pretty big spaces to some logistics facilities.

you know, in our multi-res portfolio.

Right right in our retail centers.

Okay that's interesting.

Okay, that makes a lot of sense. Maybe an associated question then in a bigger picture.

Mario Saric: Okay. No. That makes a lot of sense. Maybe an associated question then, and bigger picture. Clearly you're very long-term in nature in thinking with respect to vision and strategy in terms of what you wanna accomplish. There's been a lot of volatility in the public markets in the short term. It's basically down about 15% year to date. It's not gonna outperform that, but you're still down as well. How, if at all, has kind of the short-term volatility in the public markets, which I think are essentially saying, cap rates for private market assets are going up, at some point, you know, out to the future. Does that change kind of the capital allocation decision for you, in the near to medium term?

On the AR on the vaccination centers.

I appreciate that's an add back of non recoverable opex and rightly so and your and your AR and your <unk>.

Clearly, you're a very long-term in nature in thinking what they're thinking, the vision and strategy, in terms of what you want to accomplish.

Oh calculations, but I'm more interested in is are these centers.

There's been a lot of volatility in the public markets in the short term, the space is down about 15%.

Counting as occupied space in your occupancy would be the first question and are you receiving rent.

to date, it's not going to be able to perform that, but you're still down as well. How, if at all, has kind of a short-term volatility in the public markets, which I think are essentially

I think the answer on the ladders, no, but I'll try.

Fair enough.

Yeah, we'll go in reverse order.

No we didn't charge vaccination centers.

the same cap rates for private market assets are going up at some point, and they're going to have to just in the future, but does that change?

He was really very much.

We did that on behalf of everybody.

For the communities that we're in.

Something we don't talk about a lot of it was mentioned today maybe for the first time, but we are we are in these communities and have been for decades, we don't talk about it much but.

and of the capital allocation decision for you in the near to medium term. For example, if you're coming into 22 with certain targets in mind and goals.

Mario Saric: Like for example, if you're coming into 2022 with certain targets in mind and goals, does that influence at all in terms of what you're seeing in the public market in the short term?

to that influence at all in terms of what you're seeing in the public market in the short term.

We're involved with so much in these communities.

They don't just shop with us, but they know us where they're shopping center that they grew up with it.

No, and yes, I mean, it's not changing, I mean, you know, the value creation is in the approval really a lot of it. The exposure and risk is on the execution, you know, so we will obviously weigh each time like we say before we go.

Mitchell Goldhar: No and yes. I mean, it's not changing. I mean, you know, the value creation is in the approval really, a lot of it. The exposure and risk is on the execution, you know? We will obviously weigh each time, like we say, before we go forward. You know, there'll be a different market for each one of these property and each one of these developments. Yeah, I mean, cap rates may be going up on certain things, you know, prices may be coming down, sale prices, but construction prices may be coming down, and it may just pencil very nicely and we'll proceed. If it doesn't, we won't. That's, you know, to say nothing of the cost of debt. I mean, you know, we're gonna weigh those things each time.

We're involved with lots of community activities for vaccination centers, when we do something like that it's a it's great for.

The communities that we.

That we serve and know it's.

In terms of.

It's not it's not.

You know, there'll be a different market for each one of these property and each one of these developments. And yeah, I mean, cap rates may be going up on certain things, you know, prices may be coming down sale price, but construction prices may be coming down and it may just.

Part of our occupancy.

Neither.

Okay. Okay got you.

What I was trying to get to as I was wondering whether in your occupancy in the actual upside or not really.

Higher fees.

So we are not needed in the future and then I guess just to close off on that point or are they now shutting down with us.

It just may pencil very nicely and we'll proceed if it doesn't, we won't. And that's, you know, to say nothing of the cost of debt. I mean, you know, we're going to weigh those things each time. But we're going to continue forging ahead, investing in our land use changes.

Yeah.

Yeah, but keep in mind also Michaels.

Some of them are actually they were available in part because we redeveloped.

Mitchell Goldhar: We're going to continue forging ahead, investing in our land use changes and set the stage. It's not all long-term, it's been going on for a long time, so it's short, medium, and long term. It is a long-term strategy, but it's been going on for a long time, so a lot of the fruit is, you know, starting to bear fruit. Yeah, and cap rates. Yeah, it doesn't. So it doesn't. Like the capital markets rising or depressing our unit price is not going to affect our investment in the long-term strategy. It just will maybe. Depends on how we raise capital and what the overall dynamics are influence whether we go or don't go. We don't have to do anything, okay?

Some of those.

and set the stage. And it's not all long-term. It's been going on for a long time. So it's short, medium, and long-term. But it is a long-term strategy, but it's been going on for a long time. So a lot of the fruit is starting to bear fruit.

Buildings. So they were available for that reason so.

Yeah. It was yours to also just.

Yeah whatever.

It was.

Good that they were available for the vaccination center purposes, but theyre actually redevelopment.

Spaces.

Got it Okay and then last one for me you saw the note on the.

Yeah, and it doesn't, like the capital markets rising or depressing our unit price is not going to affect our investment in the long-term strategy, it just will maybe, depends on how we raise capital and what the overall dynamics are, influence whether we go or don't go. We don't have to do anything.

Consolidation of the remaining 50% interest on the three properties.

Curious on the capital recycling side, if there are any dispositions that you've got planned for the rest of this year.

Yeah, I mean, a small but it's not.

Inconceivable that something will happen.

But in terms of officially.

I would say.

Mitchell Goldhar: Like, you know, our retail, our value retail is doing very well, you know. We don't have to do anything. I mean, our company's value is based on our retail income. Like there's no value in our stock on all of this stuff that we spend time talking about. So, like, we don't actually have to do anything. We don't have to grow into some unit price based on future development profits. So, you know, if the planets are all misaligned, we'll continue to operate our value-oriented retail, collect our rent, and, you know, wait for the planets to line up. I think we're in a very enviable position, but that's because we don't go around buying land at market and haven't. You know, we've got lots of great land, tons of surface parking, and we're, you know, we have development expertise.

you know, our retail, our value retail is doing very well, you know, we don't have to do anything. I mean, our company's value is based on our retail income. Like, there's no value in our stock on all of this stuff that we spend time talking about. So, like, we don't actually have to do anything. We don't have to grow into some unit price based on future development profit.

Moment in terms of dispositions.

<unk>.

Uh huh.

We don't have anything imminent, but we are doing other things I mean, if this if you're really asking about capital raise I mean, we're doing a lot of things for capital raise but a disposal.

It's not imminent, although it could happen before four years, and but lots of lots of dealings with potential partners on number of these developments.

So if the planets are all misaligned, we'll continue to operate our value oriented retail, collect our rent, and wait for the planets to line up. So I think we're in a very enviable position, but that's because we don't go around buying land at market and haven't. And we've got lots of great land, tons of surface parking, and we have development expertise. But, you know,

You would understand since we emphasize that we are developing on owned properties that partners come in at market.

So that is very much very much.

Active area.

Four.

Capital raising.

So yeah.

Okay, Great I have a few more but.

Ill turn it back and re queuing if oh.

Mitchell Goldhar: You know, we're not gonna bet the farm on any of this, as we're not gonna go forth blindly. We'll just operate our shopping centers and collect our rent if that's what the right thing to do is.

We're not going to, you know, we're not going to bet the farm on any of this is we're not going to go for it with forth glidely. We'll just operate our shopping centers and collect our rent if that, you know, if that's.

Yes Carlos.

Happy to take your if you want to call later.

Thanks, so much.

Thank you Michael.

The next question is from Tal Woolley from National Bank Financial. Please go ahead.

Have you seen any...

Mario Saric: That's fantastic. Have you seen any initial kind of cap rate changes for Walmart anchored, you know, high quality Walmart anchored malls to date? Like we keep hearing about this, maybe cap rates are coming up, but is there any indication whatsoever that it's actually happening?

Hi, good afternoon everybody.

Good afternoon.

Peter maybe you can just start quickly I appreciate you don't have any.

initial kind of cap rate changes for Wal-Mart anchored, you know, high-quality Wal-Mart anchored

Major refinancing to do for this year, but if you were speaking mortgage financing or unsecured financing right now what sort of rates do you think you'd be you'd be getting so.

To date, we keep hearing about this. Maybe cap rates are coming up, but is there any indication whatsoever that it's actually happening?

Yeah.

As you would know talent, it's a function of term.

Mitchell Goldhar: No. We feel resistance for cap rates going up on our stuff or our other peers with this stuff. We feel resistance. I think they value the. I mean, the cap rates are not low on our stuff. I mean, you know, if you're talking, you wanna talk about low cap rates, I mean, you know, look at industrial, look at res. I mean, we're at like, you know, close to 6%, you know, 5.8% or something. I mean, seriously. You know, we feel resistance for our cap rates to go up, but that's at the moment from our perspective, so far.

No, we feel resistance for cap rates going up on our stuff for our peers with this stuff. We feel resistance. I think they value the cap rates are not low on our stuff. I mean you know, you talk about low cap rates, I mean look at industrial, look at reds, I mean we're at like close to 6%, 5.8% or something. I mean seriously, you know.

So anything that would exceed seven years currently we'd be looking at something in excess of 4% at least for now now.

And.

Again.

What we're what we're thinking about for now is is that we've got lots of runway available for the next almost three years. When you look at our debt ladder. So to the extent that we've got.

I don't feel, and we feel resistance for our cap rates to go up, but that's at the moment from our perspective.

Any of our mortgages maturing during that timeframe. There is an opportunity for us to fill in that debt ladder for the next two to three years with just essentially shorter term renewals.

But OB I there what 4? But this maybe a nearro, just a finish ment. Just saw your.

Mario Saric: Great. Okay. For what it's worth,

Peter Sweeney: Hey, Mario. Just maybe, Mario, just to finish Mitch's thought here. Our appraisers, by the way, were of a similar opinion in assessing the portfolio's value at the end of the quarter as well. When you speak to the major appraisal firms in Canada, I'm sure you'll hear a similar sentiment to that that Mitch just shared.

And presumably over the next several years I think it's fair to say the market is expecting to find its way back to lower interest rates at least that seems to be a consensus these days, especially on the longer term stuff just because of some of the concerns that seemingly are out there currently vis vis macro events. So we may find ourselves.

were of a similar opinion in assessing the portfolio's value at the end of the quarter as well.

But when you speak to the major appraisal firms in Canada, I'm sure you'll hear a similar sentiment to that.

By the time.

We have to go back into the major markets.

Mario Saric: Yes. Well, for what it's worth, I took my kid bowling to your South Oakville Centre, a couple weeks ago, and I have no doubt that the value of that excess land at that mall is very significant, so.

For what it's worth, I took my kid in Bowling to your South Oakville Center a couple weeks ago, and I had no doubt that the value of that access land cut that model was very significant.

Year, and a half or more from now that we think more seriously about longer term financing options, but for now.

Anything that we are at least thinking about would be shorter term and the rates that we would expect on those shorter term facilities would be commensurate with the rates that would be.

Well, I hope you went into the winters in the metro and did some shopping as well later on.

Mitchell Goldhar: Well, I hope you went into the banners.

Mario Saric: I'll make that.

Mitchell Goldhar: In the metro and did some shopping as well while you were there.

I didn't, but my wife did, so you're good. Perfect.

Mario Saric: I didn't, but my wife did, so you're good.

In place on those maturing facilities. So we wouldnt expect I guess my point is is that we wouldn't expect a tremendous dilution of <unk> as a result of any financing activity that has to take place over the next 18 to 24 months.

Mitchell Goldhar: Perfect.

Operator: Thanks, guys.

Mitchell Goldhar: Thank you.

Operator: Thank you, Mario. The next question is from Pammi Bir from RBC Capital Markets. Please go ahead, Pammi.

And then.

Pammi Bir: Thanks. Hi, everyone. Maybe just coming back to the comments on stronger leasing and, you know, we've heard actually competitive tension mentioned a few times over the course of this earnings season, I guess, with tenants. Does it feel like you maybe now have some better pricing power going forward? And did Q1 perhaps mark the turn towards stronger leasing spreads?

Just from the <unk> the trend watch when when do you expect to see a resolution on that.

Thanks. Hi, everyone. Maybe just coming back to the comments on stronger leasing and, you know, we've heard actually competitive tension mentioned a few times over the course of this earnings season, I guess, with tenants. Does it feel like you maybe now have some better pricing power going forward? And did Q1 perhaps mark the turn towards stronger leasing spreads?

That's a question that perhaps is better better asked of DVR S. Tell me, where as you would expect continue.

Continuous dialogue with them.

And keeping them abreast of our progress at all levels, but I think with respect to.

How they view the world and certainly how they view smart energy credit is really a question in there timing on assessing us is really key.

Rudy Gobin: Hi, Pammi. You know, because of where we're located and because of the tenants that struggled during the 2020 start of the pandemic and what's happening now with the new entrants coming in, everyone is searching for space that already exists as a starting point, and we're doing new build. What we're finding is a you know, competing uses from different categories even. Like, we will have food in organic and food in specialty and mainline and discount food banners competing with, you know, the likes of the TJX and the Michaels and so on, furniture. So it's very interesting what's going on now. All of them feeling a little bit more bullish about coming back, the physical retail coming back with customers coming into the market.

Hi, Femi. Because of where we're located and because of the tenants that struggled during the 2020 start of the pandemic and what's happening now with the new entrance coming in, everyone is searching for space that already exists as a starting point and we're doing new build. So what we're finding is we're finding a

Maybe we should be asking either.

Okay Thats fair.

And then just on the self storage joint venture obviously your partners pursuing an IPO right now.

Are there plans sort of changing at all with this.

uh you know competing uses from different

Evolution in there.

categories even, like we will have food in organic, and food in specialty, and name line, and discount food banners competing with the likes of the TJX, and the Michaels, and so on, furniture, so it's very interesting what's going on now, and all of them feeling a little bit more bullish about coming back, the physical retail coming back, with customers coming into the market. I know Mitch sees this all the time, we talk to tenants all the time about their real estate needs.

Lifecycle.

You expect the JV to sort of continue as planned or do you expect that that could change going forward.

It seems like it.

I'd say unchanged or even maybe more.

Maybe a bit more aggressive.

But definitely not.

Slowing down.

Okay.

And lots of <unk> lots on the go with them.

Rudy Gobin: I know Mitch sees this all the time. We talk to tenants all the time about their real estate needs. That's the kind of competition we're seeing and a lot coming in, even in the smaller spaces, the QSRs. You know, pet stores. You can, you know, you can't go anywhere now without seeing someone walking their dog. All of the pet stores, PetSmart, Ren's Pets, Petland, Pet Valu are all, you know, health and beauty, very, very active. Health and beauty from the US, health and beauty here in Canada. You know, all the discount categories, again, you know, the dollar stores and so on are all wanting to lock up spaces quickly in these, especially in the unenclosed format, right?

On existing sites and actually.

They bring us.

Got that kind of arrangement with each other they actually bring us into some of their deals at least give us the option to.

That's the kind of competition we're seeing and a lot coming in even in the smaller spaces with QSRs, pet stores, you can't go anywhere now without seeing someone walking their dog and all of the pet stores, PetSmart, RensPets, Petland, PetValue are all health and beauty.

So it's it's got great momentum.

Okay.

And then just on the staffing side.

With.

Or come out of Covid, there's obviously been a lot of factors.

very, very active. Health and Beauty from the US, Health and Beauty here in Canada, all the discount categories, again, the dollar stores and so on, are all wanting to lock up spaces quickly, especially in the unenclosed format, right?

Got it.

Cause people to look at like different careers I'm. Just wondering if you can talk a little bit about.

Turnover in hiring for.

On the development side and in your core leasing how that how that's been over the last little bit.

Well I mean, one thing about the developed we've always been.

So when you add all of that up, we are seeing some very good activity and keeping our folks very busy trying to figure out the best fit for each of these centers because it's a little bit different.

Rudy Gobin: When you add all of that up, we are seeing some very good activity and keeping our folks very busy trying to figure out the best fit and for each of these centers 'cause it's a little bit different.

We've always been.

A pretty strong like we've had pretty strong gravity for people and development, especially young people because.

It's just a good place to be if you're interested in development and development is a generic term it could.

Pammi Bir: No, that's good color. Yeah, we've visited a few more pet stores with the new pet as well.

No, that's good colour. We've visited a few more pet stores with the new pet as well. I wanted to maybe go back to Artwalk, the comments you made there. The first, I guess, 320 units are sold out. I apologize if this was mentioned. I don't know if it was mentioned on the last call or not, but what was the average price per square foot on that initial phase?

Could be a land use planning can be financial analysts.

Rudy Gobin: Good.

Pammi Bir: Just on the, I wanted to maybe go back to ArtWalk, the comments you made there. It's the first, I guess 320 units are sold out. I apologize if this was mentioned. I don't know if it was mentioned on the last call or not, but what was the average price per square foot on that initial phase? Then I'm curious if there's been any signs of how you're thinking about Park Place once the sales actually start there.

It could be even.

<unk>.

Junior architect.

It could be an MBA.

Because you were thrown right into it here and you do see things happen that you worked out within a few years. So.

Luckily when it comes to the development where.

I'm curious if there's been any signs of how you're thinking, or maybe how you're thinking about Park Place once the sales actually start there.

I think we are considered a good place for.

For.

People.

So we do attract a lot of people interested in development.

Mitchell Goldhar: Yeah. No, you're right on, by the way. We did not mention it, and everything you said is totally accurate. Yeah, ArtWalk was sort of in the CAD 1,150 range average. And Park Place, as you said, we haven't actually gone to market. We put out a price sheet. I'll have you know, there are people walking in every day giving checks without even having contracts to secure units in Park Place. So good, needless to say, you know, prognosis there. The pricing there is a little bit, you know, on average between the closer to CAD 1,200. So, I mean, average.

Yeah, no, you're right on. By the way, we did not mention it. And everything you said is totally accurate. Yeah, our walk was sort of in the 1150 range average

Yeah.

And it's interesting young it is a young very energized cruel kind of department.

Divided into business units like regionals regions across the country.

And part place, as you said, we haven't actually gone to market, we put out a price sheet.

And then with respect to leasing I mean, we have a very stable leasing group.

But in general you know.

We're also seeing you know we're also experiencing turnover and you know the same challenges everybody else's.

I have, you know, there are people walking in every day giving checks without even having contract.

Experiencing in <unk>.

Sorts of departments, but I would say you know.

To secure units in Park Place, so good, needless to say, good, you know, prognosis there.

Those two departments that you specifically named those are too.

The pricing there is a little bit, you know, on average between the closer.

Areas of our very very much our sweet spot expertise or we have very stable area was stable.

We have stable when it comes to HR.

Pammi Bir: Interesting.

Mitchell Goldhar: Yeah.

Okay.

Yeah, interesting, I guess. So, you know, it sounds like higher than Artwalk, I guess, notwithstanding, you know, all the concerns around what's happening in the broader market in the macro environment and rising rates, etc. Yeah, a little bit. But also keep in mind, our average size of Park Place is a little smaller.

Pammi Bir: Yeah, interesting. I guess so. You know, it sounds like higher than ArtWalk, I guess notwithstanding, you know, all the concerns around what's happening in the broader market, in the macro environment, and rising rates, et cetera.

And then this is a sort of a broader question I guess, just about real estate markets in general.

Just wondering you know we're seeing some weakness on the.

Mitchell Goldhar: Yeah, a little bit. Also keep in mind, our average size at Park Place is a little smaller,

On the residential side of the market now as rates have climbed out wonder.

I'm wondering if like either yourself or anyone else on the team there like if you can just talk about how you think about.

which kind of influences that. But when you back that out it's still higher you know in terms of our walk.

Pammi Bir: I see.

Mitchell Goldhar: ...which kind of influences that. When you back that out, it's still higher, you know, in terms of ArtWalk. We deliberately priced and sized, you know, as our suite mix at Park Place was sort of geared around what we saw in the market. We think we've got it right, and that's one of the reasons we feel the market reaction's been strong and the price kind of seems to be on point, but lower average size than ArtWalk. Yeah.

What that weakness in that particular slice of the real estate world.

Is there any chance like that sort of bleeds into other parts of commercial real estate in a way that maybe we wouldn't immediately register sitting sitting here from the outside.

And, but, but that, we deliberately, you know, sized and, you know, our suite mix at Park Place was,

It certainly is a little weaker in terms of the residential so.

geared around what we saw in the market. So we think we've got it right. And so that's one of the reasons we feel.

But it's a good thing I think ultimately.

market the reactions been strong and for the price being kind of seems to be on point but lower average size

It's always hard to these.

These things sometimes get.

Over corrected or whatnot and so we can't know how that's all going to play out with residential, but so a little bit softer for sure which is good and hopefully.

Pammi Bir: Okay. Maybe just one last one is I think we've crossed the 60-minute mark here, and earnings onslaught will continue tonight. Mitch, you mentioned, you know, you frankly don't have to do anything with respect to the developments. I mean, you can continue to collect the checks on the rents on the existing portfolio. Does that mean maybe the best place to put capital today might be back into the units, at a high 6 implied cap?

Okay. Maybe just one last one as I think we've crossed the 60-minute mark here and earnings onslaught will continue tonight. Mitch, you mentioned, you know, you frankly don't have to do anything with respect to the developments. I mean, you can continue to collect the checks on the rents on the existing portfolio, but does that mean maybe the best place to put capital today might be back into the units at a high six implied cap?

Construction prices will follow you know a little bit of pressure downward pressure on construction prices will follow.

But we.

We don't feel it in the other commercial sectors like.

In our retail card a little bit of a tailwind I would tell you right now.

And office believe it or not I mean, we have some <unk>.

Mitchell Goldhar: You know, could be. I mean, we believe in our income, and we believe in our properties. I mean, I don't know. I think I'm way past harping about, you know, our unit price. I mean, it's a bit of a joke, really. I mean, you know, you go try and buy these properties, you know, and especially with our entitlements, and then, you know, our income being, you know, so solid. We just came through the toughest test of all. We did not cut distributions, and you can get, you know, a 6% return.

You know, could be, I mean, we believe in our.

Some office.

Deals going on that are not insignificant in terms of space like wood would.

in our income. We believe in our properties. So, I mean, I don't know. I'm way past the

A new space being built for office.

We're going to spend a little office building actually up here and BMC.

Don't feel it there yet like its I don't want to get into it maybe too much right now but.

I think I'm way past harping about our unit price.

And then the industrial seems to be coming off a little bit, but that was kind of sky high so still strong but I.

go try and buy these properties, you know, and especially with our entitlements. And then, you know, our income.

I don't know I don't see it.

Kind of.

<unk>.

Being a cook.

There's going to be a general economic macro slowing down but.

So solid, we just came through the toughest test of all. We did not cut distributions and you can get a 60% return. Like you can go hire all the geniuses.

I don't think just off the froth I don't think its going to be.

Mitchell Goldhar: Like, you can go hire all the geniuses, in the world to manage your money and, you know, tell me what you end up averaging, like, you know, after all of their gesticulations and their fees for that matter, versus just buying our stock. That's just our yield. You know, not to say anything about the potential of the appreciation of the units. Yeah, I mean, we know the company, of course, better than anyone, so it's not inconceivable that we would invest our money in that. We're never gonna do nothing, and obviously nothing's completely black and white, but we do have that for sure.

Like some kind of contagion.

In the world to manage your money and you know, tell me what you end up averaging like, you know after all of their gesticulations

Contagion.

Okay, and then just lastly phase.

Phase one in Cambridge.

What sort of size and scope.

and their fees for that matter, versus just buying our stock. And that's just our yield, you know, not to say anything about the potential of the appreciation of the units.

Will that be like is it a 1 million square feet of that.

How are you looking at phase one well somebody earlier asked about the vaccination Center I mean, that's where that's where the phase one is going to be there.

So, yeah, I mean, we know the company, of course, better than anyone. So.

So, yes, I mean, no I would say it's going to be.

It's not inconceivable that we would invest their money in that. We're never going to do nothing, and obviously nothing's completely black and white, but we do have that for sure. I mean, the world has priced their units where they are, which in a sense is a bit of a blessing because we don't have to grow into some, you know, some huge unit price based on, you know, a perfect, whatever it's called, you know, you know, perfect, perfect world. It's quite the opposite.

A tower.

With.

Some mid rise like a six storey four to six storey product, which will be rental and <unk>.

Mitchell Goldhar: I mean, the world has priced their units where they are, which in a sense is a bit of a blessing because we don't have to grow into some huge unit price based on a perfect world. It's quite the opposite. So yeah, just it's not gonna be all or nothing, but we certainly can tone it down as much as we want because of those reasons. We may very well be buying some of our units, yeah.

Tower will be likely be condo and then some townhouses.

And so it won't get up to a million square feet.

But it's just based partly on kind of the what we think the combination of the absorption rate is where we feel we've got the space available to knockdown.

You know, it's not going to be all or nothing, but we certainly can tone it down as much as we want because of those reasons. And we may very well be buying some of our units, yeah.

And then slowly but surely we're going to move tenants around and just continue that but it is not small I mean, what I just described would be probably goodness.

No.

Operator: That's great color. Thanks very much. Thank you. Our final question is from Jenny Ma from BMO Capital Markets. Please go ahead, Jenny.

<unk> hundred 67 acres of land.

<unk>.

Okay.

And good demand for our markets like Cambridge, we're finding like the market. This all lot of Covid related things have played into the Cambridge is in the allison's in the.

Jenny Ma: Hi, good afternoon.

Mitchell Goldhar: Hi, Jenny.

Jenny Ma: I just have, you know, a quick question on an update on your development pipeline. When we look at the yields that the numbers are from, you know, older disclosures, but you're yielding sort of in the mid-fours for multifamily builds and anywhere from 6% to 8% on the self-storage and the seniors housing. I'm just wondering if you can give us an update on the kind of ranges you're expecting for future projects and whether or not those ranges still hold or, you know, if you kind of take a bit off the top end, and whether or not market rents are, you know, keeping up with increases in construction costs and financing costs.

I just have, you know, a quick question on an update on your development pipeline. When we look at the yields that the numbers are from, you know, older disclosures, but you were yielding sort of in the mid-fours for multi-family bills and anywhere from six to eight percent on the self-storage and the seniors housing. I'm just wondering if you can give us an update on the kind of ranges you're expecting for future projects.

Can cartons and Owen Townsend.

Carlton place and.

Hum.

There is some of these markets, where we're doing residential and we started about long before but the market's kind of come to us and those places which is great.

Okay. That's great. Thanks, very much everybody.

Thank you.

and whether or not those those ranges still hold or you know if you kind of take a bit off the top end and whether or not market rents

Thank you Tal.

The next question is from Dean Wilkinson from CIBC World markets. Please go ahead Dean.

Thanks afternoon, everyone.

are keeping up with increases in construction costs and financing costs.

Just one question from me Peter have.

Have you seen any widening the spreads on unsecured versus secured debt or is it just moved up lockstep with the rate move and what mortgages are doing.

Yeah, the first, look at multi-res purpose-built is not an exciting G1 return. You kind of got to, you know, just kind of...

Mitchell Goldhar: Look at multi-res purpose-built is not an exciting day one return. You kinda gotta, you know, just kind of plug your nose a little bit and get started 'cause the worst pay is the first pay. Thankfully, you know, without much, you know, effort really in a way, I mean, you know, your occupancies are gonna be very high, and your rent's gonna go up every year. We obviously are wanting to get started on that, but that's just sort of cash-on-cash returns in some cases we're sort of putting it in at market, the land, when we say those kind of returns, so they can be a little bit better with some leverage, depends, you know, where priced at, where unit price, where interest rates are.

No I think it's fair to say, particularly over the last month or so we had seen a widening of spreads on the on our bonds.

your nose a little bit and get started because the worst day is the first day but thankfully you know without much

That's for sure what we've seen relative to what may be available to us.

In the secured market.

And by how much would that if move do you think.

Your occupancies are going to be very high and your wrench is going to go up every year.

Well I mean, if we're assessing it at the end of March and granted March is now a month and a half almost two.

So we obviously are wanting to get started on that. But that's just sort of cash-on-cash returns. And in some cases, we're sort of putting it in that market, the land, when we say those kind of returns.

But certainly at the end of March we were looking at our 10 year term debt.

This spread.

On a mortgage would've been about 100.

So they can be a little bit better with some some leverage depends on where price it were in a place where interest rates are and I

30% to 140 basis points.

And spreads at that point on unsecured debt would have been about 50 basis points higher than that so typically as you probably know we look anywhere from 20 to 40 basis points as a spread yes.

Mitchell Goldhar: Obviously the intent is to use the profits from the condos. We're not doing so many multi-res only properties. We're building condos, and then we're building multi-res. We're looking at that at all times. Construction prices have gotten almost, you know, sort of silly. I think it's kind of come off a little bit in the last couple weeks, but they were getting silly. You know, given what's going on in this slight little slowdown, we sort of expect construction prices to come off and obviously, you know, we're gonna be taking all that into consideration. At the moment, or sorry, for the last year, Jenny, as construction prices have gone up, sale prices have gone up disproportionately. Like, so we've actually done better.

from the condos, we're not doing so many multi-res only. Prode properties, we're building condos and then we're building multi-res.

Mortgages in bonds for 10 year term type facilities. So obviously they are wider.

We're looking at that at all times. Construction prices have gotten almost sort of silly. I think it's kind of come off a little bit in the last couple of weeks, but they were getting silly. So given what's going on in this slight little slowdown, we sort of expect construction prices to come off.

By at least.

And maybe even up to 25 basis points in 2020, right don't blank that could change.

That's all I had thanks guys.

Thank you.

Thank you Dean.

The next question is from Mario <unk> from Scotia Capital. Please go ahead Mario.

Obviously, you know, we're going to be taking all that into consideration at the moment probably sorry for the last year Jenny has construction prices have gone up, sale prices have gone up disproportionately.

Hi, good afternoon.

I want to come back to a comment you made about accessing different sources of capital including.

Selling land at fair market value.

So we've actually done better. You know, our returns are better today, let's say, than a year ago, even though.

Pencil JV partners on the developments.

Mitchell Goldhar: You know, our returns are better today, let's say, than a year ago, even though construction prices went up. That obviously is a liquid, not a solid. What the heck did I wanna tell you though? Oh goodness. Yeah. Shoot, sorry. I just lost my train of thought. Our storage is leasing up faster though, which is great income. You know, we've got our arms around those construction costs. By the way, actually, this is what I meant to tell you.

Is that something that's kind of far along enough.

Comfortable quantifying the range.

But that obviously is liquid, not a solid.

So you could do this year.

Maybe not yet, but it's moving along there is interest from very.

We consider to be very long term minded likeminded institutions.

I just lost my train of thought. Our storage is leasing up faster though, which is great income. And, you know, we've got a fairly good, got our arms around those construction costs. And by the way, actually, this is what I meant to tell you. We're very close to signing a national.

But.

We're not at the point of knowing exactly what the magnitude is yet but you know.

Various banks, including your own.

I've been involved with us on that.

Mitchell Goldhar: We're very close to signing a national framework agreement with a large general contractor who will be part of our upfront process so as to have some sort of inside track, let's say, on deliveries and pricing and value engineering in so many ways, you know, and preferred with, you know, preferred terms for them building our buildings. That's something that's been going on off stage for a year or so now, and it's just about to be done, so we'll probably announce something about that soon.

It's going very very well.

Framework agreement with a large general contractor who will be part of our upfront

I Didnt mentioned, I guess, maybe I should've, if theres other initiatives going on like we saw condos were insensitive echo raising capital.

process so as to have some sort of inside track, let's say, on deliveries and pricing and value engineering in so many ways.

Creating capital and we do have always at our disposal is the ability to sell a parcel instead of.

Bringing in a partner.

and preferred terms for them building our buildings. So that's something that's been going on offstage.

So.

We hold that air pocket as well, if we want to execute on that.

<unk>.

Very clear.

for a year or so now and it's just about to be done so we'll probably...

Quick and can.

Can be extremely lucrative and by the way.

In terms of the nuance there like.

Okay, so it sounds like those yield ranges are still holding considering market prices are keeping up.

Jenny Ma: Okay. It sounds like those yield ranges are still holding, considering market prices are keeping up.

What we're looking for in the partnerships are more the income.

Multi res.

Mitchell Goldhar: Yes.

Okay, great. I won't stand between everyone and their afternoons or earnings for the analysts, so that's it for me.

Whereas if we were to sell something off when we would sell something off for a condo.

Jenny Ma: Okay, great. I won't stand between everyone and their afternoons or earnings for the analysts, so that's it for me.

And I can I'm sure you can imagine the difference in terms of what that would mean in terms of equity raise.

Mitchell Goldhar: Thanks, Jenny.

Operator: Thank you, Jenny. There are no further questions at this time.

So we're not really looking for partners per se so much in condos.

Thank you all for taking the time to participate in our first quarter call. Please reach out to any of us for further questions. Stay safe and have a good rest of your evening.

Mitchell Goldhar: Thank you all for taking the time to participate in our Q1 call. Please reach out to any of us for further questions. Stay safe and have a good rest of your evening. Thanks, everybody.

But more so in the.

On the multi rig multi and our multi port portfolio.

Okay, no that makes a lot of them.

Maybe an associated question then.

Bigger picture.

Clearly, we're in a very long term in nature and thinking.

Operator: Ladies and gentlemen, this concludes the SmartCentres REIT Q1 2022 conference call. Thank you for your participation. Have a nice day.

The vision and strategy.

In terms of what you want to accomplish.

There's been a lot of volatility in public markets in the short term the season down about 15%.

Year to date.

Barclays will perform that.

Were still down as well.

How if at all has kind of a short term volatility in the public markets, which are essentially the same.

Cap rates for private market assets are going up.

0.2 different feature.

Does that change.

The capital allocation decision for you.

In the near to medium term for example, if youre coming into 'twenty, two with certain targets in mind and goals.

Does that influence at all in terms of what Youre seeing in the public markets in the short term.

No and yes, I mean, it's not changing I mean, you know the value creation is in the approval really a lot of it.

<unk> exposure and risk is on the execution you know so.

We will obviously way each time like we say.

Before we go forward.

So.

You know.

There'll be a different market for each one of these property at each one of these developments and yeah, I mean cap rates, maybe going up on certain things and prices may be coming down sale principal construction prices may be coming down and it may just it just my pencil very nicely and will proceed if it doesn't we won't and that's it.

To say nothing of the of.

The cost of debt I mean, you know we're going to weigh those things each time, but we're going to continue forging had investing in their land use changes.

And set the stage and it's not all long term, it's been going on for a long time. So it's short medium and long term, but it is a long term strategy, but it's been going on for a long time, so a lot of fruit as is.

It's starting to bear fruit.

But.

Yeah and.

Cap rates yet doesn't it.

It doesn't like.

I like the capital markets rising or depressing our unit price is not going to affect our investment in the long term strategy and just will maybe it depends on how we raise capital and what the overall dynamics are they influence whether we go or don't go we don't have to do anything.

Okay like.

Our retail our value retail is doing very well.

We don't have to do anything I mean, our company value is based on our retail income.

Like there's no value in our stock on all of this stuff that we spend time talking about it. So like we don't actually have to do anything we don't have to grow into some unit price based on future development profits.

No.

If the planets are all misaligned will continue to operate our value oriented retail collect our rent and.

Wait for the planets the lineup.

So I think we're in a very enviable position, but that's because we don't go around buying land at market and Havent and we've got lots of great land tons of surface parking and we have development expertise, but you know.

We're not going to we're not going to bet. The farm on any of this is we're not going to go forth.

Gladly.

It will just operate our shopping centers and collect rent.

That's the right thing to do is.

Yes.

Have you seen any have you seen any alright.

And this whole kind of cap rate changes for Wal Mart anchored.

Quality warm water I could.

Yeah.

Malls.

We keep hearing about this maybe cap rates are coming up is there any indication whatsoever.

Good question.

No we feel resistance for cap rates going up on our stuff for our other peers with Wifi.

We feel resistance I think they value the I mean, the cap rates are not low on our stuff I mean.

You're talking are you talking about.

Low cap rates I mean, you know look at industrial look at Red I mean, we're at like you know.

Close to 6% you know five eight or something I mean seriously.

No.

So.

I don't feel and we don't feel we feel resistance for ours cap rates to go up but.

That's at the moment from our perspective.

Okay.

Great.

For what it's worth but it should be of a narrow interest to finish Mr saw here.

Our appraisers by the way.

Whereas a similar opinion in <unk>.

And the portfolio's value at the end of the quarter as well so.

When you speak to the major appraisal firms in Canada, I'm sure you'll hear a similar sentiment.

Sure sure.

Yes.

But it's worth it to my kids bowling clear Socal call Center, a couple of weeks ago and are one of those.

The value of that excess land.

Very small.

Well I hope you and all that.

The Metro and did some shopping as well.

[laughter].

I didn't for my wife, so you're good.

Perfect.

Thanks, Greg.

Thank you.

Thank you Mario.

The next question is from a penny beer from RBC capital markets. Please go ahead Patty.

Thanks, Hi, everyone maybe.

Maybe just coming back to the comments on stronger leasing and.

We've heard actually competitive tension mentioned a few times over the course of this earning season I guess with tenants.

Does it feel like you maybe now have some better pricing power going forward and did Q1, perhaps mark.

Turned towards stronger leasing spreads.

Yeah.

Hi, Bonnie.

Because of where we're located and because of the tenant that.

Struggled during the 2020 started that pandemic and what's happening now with the new entrants coming in everyone is searching for space that already exists as a starting point and we're doing newbuild. So what we're finding is we're finding a.

Competing uses from different categories, even like we will have food in organic in food in and specialty and mainline and discount food banners competing with the likes of the T J X and the Michaels and so on.

Furniture, so its very interesting whats going on now.

And all of them feeling a little bit more bullish about the about coming back.

Retail coming back with customers coming into the market.

Mitch sees this all the time, we talk to tenants all the time about their real estate needs. So that's the kind of competition, we're seeing in a lot coming in even in the smaller spaces that <unk>.

Pet stores.

Can't go anywhere now without seeing someone walking their dog and all of the pet stores. The petsmart rents past past land pet value are all.

Health and beauty very very active health and beauty from the U S health and beauty here in Canada.

All of the discount categories again.

The dollar stores and so on are all the <unk> are all.

Wanting to lock up space as quickly in these and especially on the unencumbered format right.

So when you add all of that up we are seeing some very good activity in keeping our folks very busy trying to figure out the best fit and for each of these centers because it's a little bit different.

No that's good.

Good color and yes, we've been visited.

Pet stores with the new pet as well.

Yeah just.

Just on the I wanted to maybe go back to to art work. The comments you made there. It's the first I guess 320 units are sold out.

And I apologize. If this was mentioned I don't know if it was mentioned on the last call or not but what was the average price per square foot on that.

That initial phase and then Im curious if theres been any signs of how you think or maybe how you're thinking about park place once the the sales actually start there.

Yeah, no you're right on by the way, we did not mention it and everything you said is.

Totally accurate.

Yeah, our work with sort of in the $11 50.

Range.

Average.

Park place as you said, we haven't actually.

<unk> gone to market, we put out a price sheet.

Hum.

Have you know there are people walking in everyday doing checks without even having contracts.

So security units and park place.

So good needless to say good.

Prognosis there.

The pricing there is a little bit.

On average.

Between the closer to 1200.

So I.

I mean.

Average interest.

Yes.

Interestingly I guess, so it sounds like higher than art work I guess, notwithstanding all the concerns around what's happening in the broader market and the macro environment.

Rising rates et cetera.

Yes, a little bit, but also keep in mind.

Our average size of park place a little smaller.

Influences that but but but but when you back that out it is still higher.

In terms of our work.

Yeah.

But that we deliberately probe sized in our sweet mix of park place was sort of.

Geared around what we saw in the market. So we think we've got it right and so that's one of the reasons. We feel it's been the reaction has been strong and for the price being kind of seems to be on point, but lower average size of the Norwalk yep.

Okay.

Just one last one as I think we've crossed the 60 minute Mark here in earnings on Slide will continue Tonight, Mitch you mentioned.

You frankly don't have to do anything with respect to the developments in and then you can continue to collect.

The checks on the rents on the existing portfolio, but does.

Does that mean, maybe the best place to put capital today might be back into the units.

At a high six implied cap.

It could be I mean.

We believe in our.

In our <unk>.

And our income we believe hit her properties.

So I mean I don't know.

<unk> past.

Uh huh.

I think I'm way past the harping about.

Our unit price.

I mean, it's a bit of a joke really I mean.

You could try and buy these properties.

And especially with our entitlements.

And then you know.

Our income being.

So solid we just came through the toughest first of all we did not cut distributions and you can get a 6% return like you can go higher all the geniuses.

In the world to manage your money and.

Tell me what you ended up averaging like after all of their just stipulations and their fees for that matter versus just buying our stock and that's just our investors their yield.

To say anything about the potential of the appreciation of the units.

So yeah, I mean, we know the company of course better than anyone so it's not inconceivable that we would invest their money and that we're never going to do nothing and obviously nothing is completely black and white, but we do have that for sure I mean, the world has priced their units where they are which in a sense is a bit of a blessing because we don't have to grow into some.

No.

Some huge unit price based on.

Perfect.

Whatever its called.

Perfect perfect World, it's quite the opposite.

So yes just.

Just it's not going to be all or nothing, but we certainly can Tony town as much as we want because those are the reasons.

We may very well be buying some of our units yes.

That's great color, thanks very much.

Thank you.

And our final question is from JD mall from BMO capital markets. Please go ahead Jenny.

Hi, good afternoon.

I just have.

A quick question on update on your development pipeline when we look at that.

The numbers are from all the disclosures, but when you're running sort of in the mid fours or multifamily now only weapon.

On the self storage on <unk> on that whole category I'm. Just wondering if you can give us an apples on.

That kind of range as youre expecting for future project.

Whether or not those ranges still hold or you know, it's been kind of kicking that off the top end and whether or not market rent.

Are keeping up with.

On construction costs.

Okay.

Yeah, the first look at.

Multi res purpose built.

Is it.

The exciting day, one return you kind of got a you know.

Just kind of plug you know is a little bit and kick us out because the worst phase diversity, but thankfully.

Without much.

You know.

Effort really in a way I mean, you know.

Your occupancies are going to be very high and your rent is going to go up every year.

So we obviously are wanting to get started on that but that's just sort of cash on cash returns in some cases, we're sort of putting it in that market the land.

When we see those kind of returns.

So it can be a little bit better with some some leverage it depends on where prices were a unit.

Interest rates are.

And obviously the intent is to use the profits from the condos were not doing so many multi res only prone properties were building condos and then we're building multi res and so.

We're looking at that at all times construction prices are or have gotten almost sort of silly I think it's kind of come off a little bit in the last couple of weeks, but they were getting silly.

So you know given what's going on in the slate will slow down we sort of expect construction prices to come off in.

Obviously.

We're gonna be taking all that into consideration at the moment promo story for the last year journey as construct spruce from Europe sale prices have gone up disproportionately.

So we've actually done better our returns are better today, let's say.

Then a year ago, even though construction prices went up but that obviously is liquid not a solid.

<unk>.

With that I want to tell you though.

Oh goodness.

Yeah.

Sorry, just lost my train of thought our storage is leasing up faster, though which is great income.

And.

We've got a fairly good got our arms around that can show those construction costs and by the way <unk> what I meant to tell you we were very close to signing.

Our national.

Framework agreement with a large general contractor, who will be part of our upfront.

Process so as to.

Have some sort of inside track lets say on deliveries and pricing and value engineering in so many ways.

And preferred preferred terms for them building our buildings so.

That's something that's been going on all stage for for a year or so now and it was just about to be done. So we will probably announce something about that soon.

Okay. So it sounds like the yield range as our CFO .

Considering Michael.

Michael prices higher.

Yeah.

Yes.

Okay great.

I won't go on between number one in the afternoon her earnings for the analyst. So that's it for me.

Thanks, Jim.

Thank you Jenny.

There are no further questions at this time.

Thank you all for taking the time to participate in our first quarter call. Please reach out to do any of us for further questions.

Stay safe.

Have a good rest of your evening. Thanks.

Thanks, everybody.

Ladies and gentlemen, this concludes the smart centers <unk> Q1, 2022 conference call.

You for your participation.

Have a nice day.

Q1 2022 SmartCentres Real Estate Investment Trust Earnings Call

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