Q4 2022 SmartCentres Real Estate Investment Trust Earnings Call
Cost savings two communities and of course convenience such that Canadian families are able to live a better life.
That's not to say, we can't do better.
We are committed and energized by new and innovative ways to.
Wave two.
Sure.
Uh huh.
Innovative ways.
And do.
More than our share of good.
In this important area.
On a final note I would like to offer my thanks, and appreciation to our exceptional team of associates for their commitment and dedication to delivering on this long term vision of improving the lives of the communities. We serve every day.
And with that I will pass the call over to Rudy.
Thanks Mitch.
And good afternoon, everyone.
Operationally what started earlier in the year as a strong rebound in customer traffic.
And competing leasing interest for space in our centers carried all the way through the fourth quarter.
With over 700000 square feet of vacancy leasing completed in the year 2022 ended with a strong performance all around and back to our pre pandemic occupancy of 98%.
Demand was driven by a wide category of retailers, including full line grocers pet and dollar stores pharmacy, the T. J X banners of course and health and beauty.
Also in the non urban markets with consumer spending more of their more on their homes additional demand emanated from the furniture stores home decor appliance stores daycare and crafts stores.
Given that virtually 100% of our smart centers portfolio already have a full line grocery and nearly 70% with a Walmart supercenter it.
It should not be a surprise that all of our centers are doing well and in smaller markets, especially so as these centers are 100% leased and occupied.
Now for a few operational highlights.
Rent collection as Mitch mentioned earlier are now in excess of 99% on along with the fact that we have settled and collected virtually 100% of our deferrals offered.
Two tenants during and since the onset of the pandemic the covenant quality of our portfolio is now even stronger than it has ever been.
By year end, we renewed near nearly 90% of all maturing tenancies or four and a half million square feet.
Again, strengthening the portfolio with the best retailers in the country and added three 1% increase over maturing rents.
In addition, as of today, we are already at 50% renewed all of our 2023 maturities.
Demand for Newbuild retail space as Mitch mentioned earlier as well as also growing in a number of categories such as grocery pharmacy dollar stores liquor stores bank and <unk> and we intend to meet these demands where it makes sense to do so.
And where it does not interfere with our mixed use development plans.
Other signs that physical retail has quickly improving was reflected in the lack of any bad debt provisions being booked in the quarter, but rather throughout the year.
We reflected a recovery.
And I might add with no tenant restructurings are filings during the quarter.
Regarding our premium outlets. It is difficult to believe that we will be celebrating our 10 year anniversary of Toronto premium outlets in August of this year.
What a landmark and draw it has become and Q4 ended with 100% occupancy and sales and percentage rent exceeding pre pandemic levels in many categories EBITDA is expected to be the best year, yet in 2023.
Montreal opened later and in Q4 sales were also exceeding expectations and for 2023, we also present projecting a similarly strong performance.
As Michelle said before this resurgent in customer this resurgence in customer traffic and adaptive ness of our tenancies speaks to the resilience of this portfolio, which was built for heavy weather.
From virtually every perspective 2022 was a strong recovery in 2023 is shaping up to be more of the same physical.
Physical retail and especially our value oriented unemployed centers continue to be in high demand in communities across Canada.
Tenants are continuing to adapt to the needs of their customers through best locations store sizes and merchandize mix.
Aligned with our tenants smart centers will continue to deliver value to each community by meeting their individual needs through a comprehensive tenant mix ease of access and the optimal shopper driven experience.
And most importantly, all of this is happening concurrently with our extensive mixed use developments already underway and in the pipeline.
And with that I will now turn it over to Peter Science.
Thank you Rudy.
Our financial results for the fourth quarter reflected continued solid performance in our core business with results that are now trending above pre COVID-19 levels by virtually every measure.
<unk> net operating income payout ratio and average rent per square foot.
For the three months ended December 31, 2022, <unk> per fully diluted unit with adjustments and excluding various anomalous items was 60.
An increase of 7% from the comparable quarter last year.
Please note that these results include the noncash impact of a $6 $2 million gain for marking to market. The total return swap for the quarter.
Higher rental income was more than offset by higher interest expense. However, an improvement in G&A expenses helped the bottom line during the quarter.
As in prior quarters, we have also presented <unk> information net of the impact of certain anomalous items, including the gain from the total return swap or four cents per unit.
And the dilutive impact associated with units issued pursuant to the acquisition of the BMC West lands of two cents per unit.
Net rental income for the quarter increased by $2 $2 million or one 7% from the same quarter last year include.
Including our equity accounted investments, however, net rental income increased by $4 million or three 1% largely due to exceptionally strong performance at our Montreal and Toronto premium outlet centers that really just mentioned.
Same property NOI, including equity accounted investments increased by $5 $1 million or 4% in the quarter.
Leasing activity remained strong which is expected to drive continued but modest growth in NOI over the coming quarters.
Our occupancy levels, including committed leases leases was 98% at the end of Q4 virtually unchanged from the prior quarter, but up 40 basis points from a year earlier.
In terms of distributions, we have maintained our annual cash distribution level of $1 85 per unit throughout the COVID-19 period.
For the full year 2022, our payout ratio to a CFO , excluding the impact of the total return swap condominium and town house closings and the Smart BMC West land acquisition was 92, 6% representing a significant improvement from 96, 5% in 2021.
Total assets, including our proportionate share of equity accounted investments were $12 $1 billion at year end compared to $11 5 billion in the prior year.
For the quarter I F. R. S fair value adjustments in our investment properly property portfolio resulted in modest net gains of approximately $13 $4 million, principally reflecting additional leasing activity we.
We did not make any portfolio wide changes in our capitalization rate assumptions this quarter.
During the quarter, we repaid $176 million of debt.
The release of cash held as security for our Trs liability as well as proceeds from the repayment of loans receivable during the quarter were the primary sources of capital used to repay debt.
We expect to continue to repay debt over the course of 2023 using proceeds from our upcoming condo closings that transit city, four and five as well as from the recently completed sale of some park lands at the Metropolitan Centre, which closed earlier this week.
At the end of Q4, our depth of aggregate assets ratio stood at 43, 6% and our unsecured debt to secured debt ratio was 74%.
Total unencumbered assets to unsecured debt was two two times at year end up from one nine times a year earlier.
In terms of debt to EBITDA, our ratio on an unadjusted basis on an adjusted basis.
Including equity accounted investments was 10 three times at Q4 compared with $10 two in the prior year.
Excluding the liability associated with our total return swap brings this ratio down modestly to 10 times, both in Q4 and a year earlier.
We were pleased that our credit rating was reconfirmed at the Triple B high level during the quarter and we remain focused on continuing to strengthen our balance sheet and improving the outlook for our rating.
The weighted average term to maturity of our debt, including debt on equity accounted investments is approximately four years and it bears a weighted average interest rate of 386%.
We remain comfortable with our conservatively structured debt ladder.
Where are the most significant aggregate maturities are in 2025 and 2027.
We do have an upcoming maturity this spring with a $200 million debenture and we are currently exploring multiple refinancing options.
Proximately, 82% of our debt is at fixed interest rates, which has been a significant benefit to us during the recent rising rate environment.
In short our balance sheet remains strong it withstood the pandemic well and we believe that we are extremely well positioned to fund the various growth oriented development projects that are currently in our pipeline.
Just before we open up the lines for questions I want to touch briefly on some of our various mixed use development projects that are currently underway.
We have added some new disclosure on page 22 of our MD&A this quarter as Mitch referenced earlier that we hope users find helpful.
As you will see we have 11 projects under construction at the moment.
Including over 1000 condominium units another 1000 rental units comprising conventional apartments seniors in retirement units.
Along with 174, Townhomes 240000 square feet of industrial space and more than 2600 self storage units.
All of these projects are expected to be completed by the third quarter of next year with the first ones trends at city four and five the mill way rental project expected to be finished later this quarter.
<unk> the REIT share of the total expected project cost, including land is $539 million of which $304 million has been spent to date we.
We have more than adequate liquidity to finance the remaining $235 million of construction costs associated with these projects.
We intend to update this table quarterly so I expect that as the year progresses, you will see certain projects come off the list as they reach completion and other projects get added as construction commences.
This year for instance, we expect to add the Canadian tire site and lease side and the Artois condominium and rental developments at Smart V. M C.
Financing work on these developments has already begun upon completion each of these project. The project is expected to drive continued <unk> growth as well as allow us to recycle capital into other opportunities in our development pipeline and facilitate prudent management of our capital and liquidity needs.
And with that we'd be pleased to open up the line to your questions.
Operator can we have the first question on the line.
Oh certainly.
First question is from Mario <unk> from Scotia Capital. Please go ahead Mario.
Hey, good afternoon.
I wanted to touch.
Touch quickly on the operational side and just trying to establish kind of the building blocks.
In terms of potential kind of same store NOI in an ethical per unit growth in 2023 versus 22, so Rudy on on the 50% of the 'twenty three maturities lease maturities have been renewed can you give us a sense of what the lease renewal rates have been both including and excluding anchors.
Most of the 60% we've done now actually higher than this year's renewal rates, so far and I don't know if you recall last year. When we were doing this each quarter and we give the update them. We tend to have a strong list of tenants who want to renew earlier in the year. So right now we're north of.
North of 3% increase.
In our 50%.
Already renewed.
Compared to this year. So it's looking very good I don't have the breakdown area with regard to what it is with or without doubt our anchors, but that is an all in number. So it is looking stronger than 2022.
Got it okay.
And then.
But in terms of the occupancy I think in your disclosure. It was noted there was an expectation for higher occupancy in 2023, giving.
Given you're already kind of at a sector, leading 98% leased how much higher do you think the yard.
Occupancy gains can go and then Conversely, if Canada was to revert into.
Economic recession, how should we think about potential downside to occupancy levels in that scenario from here.
Yeah, I'll start with that first of all we're trying to trying to go we're trying to increase that by 3%.
Occupancy.
Okay.
Hmm.
Retail humor, 101%, but.
We.
We actually do well you know first of all Covid did do a lot of things with respect to.
A little bit of Darwin went on around Covid.
So we don't really have an <unk>.
<unk>, we I think we've all actually touched on the <unk>.
Focus on strengthening even even strengthen even more our our tenant profile from a credit worthiness point of view.
So.
Combine that with the fact that we're sort of value oriented here and we make up two thirds or more of our portfolio is basically just essential services.
We actually do well in.
Both.
Strong economic times in tough economic times, so we anticipate for a variety of reasons that you stated that.
We don't see.
A lot of exposure for downward.
Occupancy, but if it's a recessionary type environment in fact.
Given what's going on we might be actually a little bit stronger.
So that's.
Mike.
Part of the answer really yeah, and I would say to you know.
<unk> talked about a lot of different types of tenants, who have come to the table wanting space everyone from logistics to.
Distribution to last mile to furniture, and and crafts and so we have a we have a number of new tenants to the portfolio of wanting space.
That's a really nice mixed used to our to our centers. So they may see some churn like I mentioned earlier, where we were at 90% retention so that 10%.
Of our maturing maturities, which is around.
Roughly 5 million square feet a year churns so.
At any one point in time, it may be plus or minus but but generally we expect to maintain and improve that.
We're out a 2023.
Got it Okay, and then maybe just shifting gears a.
Two capital allocation.
What are your updated thoughts on the magnitude of potential asset dispositions.
In 2023.
Yeah.
Uh huh.
Often to.
To that subject to of course.
Sure.
Valuations.
Sure.
Well it can be achieved in terms of.
Prices.
We're not we're not going to we're not going to sell.
Our assets.
You know short if you will.
So we're open to it.
Last few months has certainly not been a.
Conducive to that so we had a number of different capital raising.
Activities going on going back a year ago, but that's certainly just kind of came to.
Standstill going back I don't know whenever sort of.
Inflationary in news and interest rate increases started.
But we stay in touch with all of the institutions are interested in teaming up.
And.
And of course, we get approached all the time for people, who want to acquire our assets but.
We're open to all the above subject to the details and.
Certainly.
I would say possible that something along those lines could happen this year.
Yeah.
Got it Okay and then my last question I believe in the last call the <unk>.
Q3 call you noted that a development budget for both 'twenty three and 'twenty four roughly about $250 million is that still a fair assessment or has anything changed in the past three months that would either accelerate that figure or decelerate it.
Oh.
Yeah, it's decelerated.
As we said on that call I'm glad that you.
You guys are listening actually it's great.
So yeah, we are going to slow it down because.
Because as we said on that in other calls we will always look at.
The environment and make development decisions based on you know.
Playing it safe so we have decelerated some of our.
Development initiatives things that are under construction are all locked in for pricing.
Pre sales this one but going forward each and everyone is being assessed very very carefully art work is highly likely to go ahead and.
I think Peter mentioned that already.
Couple storage probably proceed as well.
A few other things.
We're looking at very closely.
But others other things we have definitely.
The approval process no drawings no.
Testing on some some.
<unk>, but but we are definitely.
Going to slow down a number of our.
Slowdown initiating a number of our developments.
Got it okay. So look in terms of the $2 50, I think I said that.
To go through the math in terms of the cost of some of the things that you mentioned, but because that.
Was that $1 5200 versus 250 is that kind of the quantum of the slowdown that we should think about.
It's hard to say right now because theres a couple of big projects that if we don't proceed.
So it's big money Lucchino, so we're actually in the process of.
Really very much daily going through of a handful of projects that could.
There could could.
Candidates to start but are there implications are are huge whether we proceed or not Peter what else works. Yeah. So so you saw in our MD&A Mario.
We've got $235 million left to go on the 11 projects that are currently under construction, but that of course is over both 2023 and 2024 and so we haven't provided the breakdown of how much of that is in 'twenty, three and how much will be in 'twenty four and some of the new projects that Mitch described wont start until the second half of this year. So the the heavy.
<unk> from a budget perspective is into next year really.
I see okay. That's it for me thank you very much.
Okay.
Thank you Mario.
The next question is from a penny beer from RBC capital markets. Please go ahead Patty.
Hi, Good afternoon, just in terms of the disposition of that small piece of land there.
See what was the the motivation there to sell it or maybe just versus retaining it.
And I'm just curious.
How the price compared to the actual restaurants.
Yeah.
Yes, I mean.
So much of a motivation.
It's part and parcel of.
No.
Uh huh.
The process of developing requires.
Some contribution towards parks.
And so.
We wanted a large park in terms of the overall development of the BMC Smart BMC. So.
In certain respects exceeds.
What we are currently.
Obligated to so the the settlement with the city resulted in their acquiring.
The night, what is ultimately the nine acre park, there, which was always going to be a park.
And.
The valuation of the park.
Based on.
<unk> values. It was all third party.
He was all third party.
Phrases.
The satisfaction of the city staff City Council and then ultimately.
By us because we had to agree with it as well so yeah obviously.
It also is consistent with what we paid.
Ourselves for.
Lands recently on the west side of <unk>.
The smart BMC.
And just in terms of your question on the how it compares to the Ifr S values Tammy.
There was no there was no material gain or loss either way.
As you know it was two separate parcels of land.
And so they have slightly different valuations on our books.
But the prices Mitch notes was consistent with.
Both appraisals and our recent acquisition price and so there was no material gain or loss either way.
Okay, maybe just switching.
Maybe just touch on the self storage business.
How much have you invested in that.
At this point.
And I'm just curious it seems to be going quite well I think I think last quarter you had provided the disclosure.
The occupancy levels I'm not sure if it's still a nearby.
Just curious how how the.
At year end.
To be the target.
Okay.
You sort of you cut out at the end there.
About the.
I Couldnt hear you at the end of your question.
Oh, sorry, Yeah, I was just questioning the how the yields are coming in relative to the target I think your range is like 68%.
The business seems to be going quite well, but just wanted to see how that's tracking relative to expectations.
Yes, you are right I mean, we.
Number of years ago, when we commenced this program we sort of targeted.
Seven.
Percent.
Range.
Excluding the buy in.
By the partner.
But it is exceeding that.
We're very pleased with the.
With the performance both in terms of.
Pass through stabilization and also just overall.
Hi.
Total investment I don't know.
I've actually got that I don't think we've disclosed that.
Okay.
And then just.
Couple of housekeeping items I believe there was a larger increase in capitalized announced to G&A and interest in <unk>.
Q4 relative to last quarter, where are these just year end type catch ups or are those the sort of a reasonable run rate. So just didn't really see a big change in the development.
Alright, the properties under development I'm just curious.
Well, how we should think about that for the year ahead.
No I wouldn't I wouldn't characterize it as year end catch ups I think it's more a combination of rising interest rates.
On the interest capitalized and.
The G&A I think it's pretty pretty normal course theirs.
A few puts and takes but nothing unusual this quarter.
Okay last one for me just on the on the trains.
Four and five condo closings are those should all of those should be done before Q3.
And then just I.
I guess, maybe an add on to that is are you seeing any risk in any of those units, perhaps not closing.
Okay.
First of all the first part.
I would say that by the end of Q3 that will all be closed.
We haven't seen.
Any sign of of default.
A couple of assignments, but.
We don't see any we have not seen any signs of default.
I would also point out.
The third deposit.
Was due on artwork a 36 story.
Tower that we havent commenced construction, but will be.
And they were for all intensive purposes all received in January .
2023, just last month.
Great. Thanks, very much I'll turn it back.
Okay.
Thank you Patty.
The next question is from Sam Damiani from TD Securities. Please go ahead Sir.
Thank you and good afternoon, everyone. Mitch I think you may have just answered my first question, which is you know what what's changed at art work to give you a little bit more confidence and proceeding with construction and it sounds like the receipt of those deposits might've been it does that is that fair to say.
That's right yes.
Okay perfect.
And is it still going to be a partial rental buildings as was initially proposed yep.
It's a separate building shared underground.
Sure everything, obviously parking, but others things too and it's 15 stories.
It's a separate rental building, yes, it's it's also.
Going to go.
Same time I mean, it's still isn't a final decision to go by the way yet but.
But looking like.
Step closer for sure and there also be a small four story.
Office building along with that.
I see okay, and just on sort of a similar vein with the I guess, the the von northwest Townhomes that construction.
I think you said it may have actually already started.
The sales levels still at 60% I think I read what is what's going on in terms of sales. There do you expect those two to resume or pick up.
In the near term and are you going to build the ball and you know what.
Without without pre sales potentially.
We're servicing.
Are we disclosing the percentage of sale there are.
Yeah. So there are about 50% sold.
The sales has been.
Done by our partner.
And.
Yes, I mean, theyre Townhomes and Ah Townhomes are very <unk>.
Desirable product.
Desirable.
<unk>.
Census tract.
So sales continue.
We're not going to.
Build the actual town houses.
Theyre not sold the servicing for them.
As.
For all of them so it's quite normal.
To do that.
But we're optimistic about being able to sell the balance.
That's great.
Okay. Just final one is on.
On the potential headwinds.
I guess, that's Oh excuse me.
Bed Bath and beyond has been in the news over the last few months.
[noise] sale flows candidates Corona now.
Branded as Ronan now complete or at least in process are you concerned about any closures impacting your exposure to either of those retailers in the coming in the coming year.
So bed Bath <unk> beyond we have.
Some total of two.
Yeah.
One of them.
Yes.
One of them, we have we already have interest on the space and have for a long time.
Before they even sort of wind.
Public with some of their some of their financial situation.
And the other one.
And Cambridge.
As.
It was very close to where we are intending to do some residential development. So.
There was a scenario we were actually looking to relocate the bed Bath <unk> beyond there, but did not because for various reasons, including including that one so that would be the height that would be the.
The height of our concern with respect to OLED, Rudy illuminate a little bit more on the on the Rona lowest thing.
But bottom line is there's no concerns.
About them.
From our portfolio and our portfolio and.
And the other one.
Sure, which was in Rona and bed Bath yet.
As it was in <unk>.
Implying earlier.
There was some.
Some turnover over the last three years we've.
We have replaced a lot of that with strong tenants and the tenants that did do some closing.
<unk>.
Reconfirm their interest in our centers, so we're actually not bad shape.
Yes.
I would say for the certainly the foreseeable beating in the next 12 months, where do you want to add.
And I'd just add to niches comment Sam.
We have eight locations with them and we have a very strong relationship with Lowes, Canada.
U S as well for that matter all of their.
Locations, when we met with them at the ICSC last month.
They communicated all of them are in good shape, good standing and intending to remain that way. It's about I don't know 850000 square feet or so and as you can imagine you may recall, a couple of them those took sam's boxes back in the day.
And of course.
And those and those are <unk>.
He says the.
Their rental rates are good rental rates for loans and for that size projects. So and one in fact, they've come to us and asked to expand the store because it's too small so.
Very good.
A very good tenant for us and we are seeing things remaining strong with them I also add to that.
Mentioned sale I forgot sale.
We have.
One.
Situation with them vacancy and we actually have interest for the entire 70, we have multiple interests, we have more than 70000 square feet of interest.
Over the.
The one that's vacant the other one that we had been become Bacon has been leased on a temporary basis.
And.
At market rent, so actually I would say at the end of the day, we will probably end up a little bit ahead with respect to the sales that we got back sales meeting of the store.
Excellent. Thank you and I'll turn it back.
Yeah.
Yeah.
Alright, Thank you Sam.
The next question is from Tal Woolley from National Bank Financial. Please go ahead Tao.
Hi, good afternoon, everyone.
Good afternoon.
Let's just start with the no way, where where do you see asking rents.
As you start to lease up the building.
Are you picking candidates.
[laughter] no yeah.
Oh My God.
[laughter], so yeah I mean.
We had some patents on which unit in which building you're in Norway as in.
Actually.
In a sense sort of four different.
Types of spaces.
That is their podiums of four and five podium of tower in the tower itself. So it really depends but I will just say that.
Our leasing to date is exceeding.
Slightly our original budget, our original pro forma.
Like are we talking about like four bucks per square foot on average kind of or something below that hello.
Okay.
No.
Got it.
And then.
Yeah.
Just with the.
The delivery schedule that you've got for this year.
Is it is it possible to sort of estimate what.
You think like the.
NOI is that you know sort of the yields youre getting on the stuff you're completing this year.
I appreciate it varies a bit bye bye.
By asset type because obviously there is a mix of stuff in there, but I'm just wondering if we can get some sort of estimate of what you think is going to be on these projects.
Well until there until there.
Todd you were talking about apartment leases that lease up and as you know until the building is get to a sustainable state.
There'll be a lot of space, that's not at least up until again it gets to it gets to that.
Sustainable occupancy level. So we are in lease up year, and we have the <unk> building.
In Montreal Laval under construction and the first building is is obviously.
Obviously fully leased.
And middleware as Mitch just mentioned has just started so.
Will you be talking about those or something else, yes, I think I'm just looking at like you know like what do you guys intend to deliver through 'twenty, three and 'twenty four and I'm thinking you've got okay, youre spending about 540 million Bucks here or are we looking at.
Sort of yield of kind of like five to six.
Well the store of the storage is seven to eight.
The rentals are lower I mean.
<unk> first shares for sure.
With our residential rental I think you know the range of residential rentals I mean, obviously it makes up the bulk of the.
The.
Capital investment.
And then really the rest of it is condo.
As you can.
I think we've given you all the <unk>.
The numbers more or less.
On the on the condo. So you can probably do the math on that one so.
Yes, I would say.
I Hope I think you can I think you can.
Do the math.
You just summarized.
Okay.
And then just Oh.
You know I think bill 20, threes kind of shown for.
For the municipalities.
Especially those that were using development charges I think to finance growth.
Arguably more through sprawl that rather than density in some of the suburbs like obviously places like in Mississauga and Vaughan.
Aurora sort of stick out and come to mind.
They're these mayors now or in the press talking about.
Having the increased property taxes dramatically to make up the shortfall from the development charge relief.
The C V C.
Mayor of on talking about 75% plus increases in property taxes.
Just wondering like what your intelligence and the community is kind of thinking about how.
You know the shift here like are we going to see material increases in commercial tax rates in some of these suburban communities that have you got a finance a lot of their growth through sprawl.
Yes.
There's no question, we're in the political rhetoric stage on that.
We have a provincial government who are very.
Familiar with municipal politics, they come from.
Their origins are our local government and other a lot of them are running the provincial government. So its attention that's there.
Between the province wanting to stimulate.
<unk> growth and the municipalities wanting to.
Provide local.
Services and community services, such and so I think it has a lot of rhetoric, but off stage, how it's going to end up getting resolved.
Anyone's guess I think it would be pretty pretty risky for.
Municipal politicians to just vote.
Hi.
Boat higher property taxes.
As a.
Replacement for development charges, but may be some maybe maybe some variation of permutation.
On tax increases, but I don't know I think we've got a ways to go on that and don't forget province is ultimately big brother.
To the municipalities so.
I guess this is going to bring it to a head and eventually there'll be some kind of an agreement on how.
Municipalities can.
You know how they can both be happy I think the provinces basically communicating municipalities were getting a little bit.
Gold plated with their expectations and laying onto development development laying it onto the public and this is a way to try and get back to something a little bit more sustainable I think it's a stay tuned situation.
Okay.
And then I guess, just lastly, you've had.
Morals, obviously are retired.
I believe you're ahead of construction also retired in the last little while and you've brought in a team too as well from another firm. He just talk sort of about some of the changes that have gone on.
On the development side.
Yes.
How do you see that structure working going forward.
Yes, the bottom line is I mean.
We're in great shape in terms of our overall.
Staffing.
Moreau, who has 20 year plus veteran here.
Did a fantastic job.
There is a 150 or 60 people in the development.
Department here.
And so.
Sure.
A lot of horsepower a lot a lot of experience a lot of veterans a lot of 15 year 20 year people in that department.
And then.
In terms of construction <unk> did retire.
And.
But we had.
Main plans around that so we're in good shape, we did.
Acquire a team.
Construction of <unk>.
<unk> team of construction people recently.
And they are primarily high rise.
Focused.
Whereas our construction department it was built.
Step by step around the originally the construction excuse me Walmart stores.
Winners in Loblaw, Canadian tires, and home depots, and so on and so forth.
And they've done a great job Super Ing, the supers that as the PCL.
Brookfield, who built our high rise for us, but we want to be able to.
We want to be able to do everything that we are doing a lot of.
And that's why we don't outsource our leasing.
That's why we have.
It's legal.
We have in house sales for our residential.
We have now we have we have in house construction for our low rise and we have now in house construction for our high rise. So we're feeling very very good about.
Our construction department.
And our development Department.
Okay, and then just lastly, with the Walmart Canada leases are like are all of them do they all have like.
Going to bundle the wording here, but like an exclusive restriction. Unlike walmart can be the only food retailer onsite.
Good question it depends.
Some do some don't.
So.
<unk>.
It really depends in our portfolio I would suggest that.
It's probably.
Anything past, a certain data I don't even want to try and.
Come up with that date, right now, but probably they do have food restrictions, but before that data around or before that date, probably maybe not so much. We did the vast majority of them before that date. So.
That's why I say with us it really depends.
Okay.
And do you do you have a sense of how many of the locations actually have.
Full a full grocery offering.
I think all of ours.
Except maybe one have full fresh and departmentalized.
Supermarket offering.
And by the way I do want you to know that Walmart does I mean, not just Walmart.
In Canada, we have a very.
Very.
Our food store offering in Canada is among the best in the World.
And so they they actually do okay, even when they're on the same site.
And they also are often across the road from each other and so on so.
Even though the food.
Lots of retailers want and try to get restrictions on certain things with each other but when it comes to food.
You know at the end of the day, you can look around and you can see.
Food stores next to Walmart.
Loblaw stores next to Walmart.
And even Costco's next to Walmart.
Without getting into all the reasons, why which have to do with square footage.
Retail per capita but suffice to say that the actually often do better.
When they're when they're near next to each other.
And then when they are theyre not so they all know that too just FYI.
That's great thanks, very much gentlemen.
Thanks, Tom.
We still have time for another question.
One more.
This question is from Gaurav Mehta from <unk> capital markets. Please go ahead graph.
Thank you and good afternoon, everyone.
Last question I was just very curious to understand that comment a little.
About the slow down in future development initiatives I'm. Just wondering if there is a thought to naphtha class a property type, which is leading that slowed down over the other.
Yes.
Residential.
Because it's the most capital intensive.
It's the longest.
Term and longest range class it's the.
It's real.
So comparison.
Not that tough and it's also if it's.
Multi res, it's the lowest yielding initial.
Storage comes out of the gate Red Red Hot and low capital intensity and.
In retail there hasnt been a lot of it in the last number of years, but there is a little bit of an uptick in that here.
From our core retail base.
But again that one so a little bit more capital intensive is all going to be subject to construction prices.
But they are those are.
Hum.
We are dwarfed by the capital investment involved in a residential program.
Okay, great and if I can just squeeze in one more question how would that be okay.
Sure.
Fantastic.
But with the upcoming 200 million refinancing I wonder is it possible for you to discuss how pricing currently stands in the conversations that you're having.
Sure Gaurav I can give you a little bit of color, there, maybe not too much but a little bit so right now while the bond market appears to have tightened over the last couple of weeks and pricing on new issue basis, hypothetically has improved a little bit.
It's still fairly expensive and its certainly more expensive by maybe 50 or 60 basis points relative to the current cost of bank financing. So we're looking at it we still have several months to go between now and the maturity as you know and so hopefully hopefully that'll tighten a little bit we certainly like the idea of replacing a debenture.
Or I should say maintaining debentures to diversify our funding sources.
But you know, we're not going to we're not going to pay a big premium for that for that benefit. So we're watching the market carefully and we will make a decision with that with plenty of time prior to the upcoming maturity.
Fantastic. Thank you for the color gentlemen, I'll turn it back to the operator.
Thank you.
Sure.
Nope.
Okay.
So thanks, everybody for participating in our.
Our Q4 analyst call and please reach out to any of us for for any further questions and have a great day.
Thank you.
Yes.
Ladies and gentlemen, this concludes the smart centers REIT to Q4 2022 conference call. Thank you for your participation and have a nice day.