Q1 2024 CT Real Estate Investment Trust Earnings Call

Yeah.

Yeah.

Justin: Good morning. My name is Justin, and I will be your conference operator today. At this time, I would like to welcome everyone to the CT REITS Q1 2024 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise.

Good morning.

Justin: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star 11 on your telephone keypad. To withdraw your question, please press star 11.

Justin: My name is Justin and I'll be your conference operator today at this time I would like to welcome everyone to see T reached Q1 2024 earnings results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.

Justin: During that time simply press star one on your telephone keypad to withdraw your question. Please press star one one the spa.

Justin: The speakers on the call today are Kevin Salsberg, President and Chief Executive Officer of CT REITS, Jodi Spielberg, Jodi Shpigel, Senior Vice President, Real Estate, and Lesley Gibson, Chief Financial Officer. Today's discussion may include forward-looking statements. Such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in such statements. Please see CCT REIT's public filings for a discussion of these risk factors, which are included in their 2023 MD&A and 2023 AIF, which can be found on CT REIT's website at CDAR. I will now turn the call over to Kevin Salsberg, President and Chief Executive Officer of C.T. REIT

Justin: He goes on the call today are Kevin Burke, President and Chief Executive Officer, a C T right Jodi Spielberg.

Jodi M. Shpigel: Speak Jody spiritual gel.

Jodi M. Shpigel: In your Vice President real estate, and Leslie Gibson, Chief Financial Officer. Today's discussion May include forward looking statements such statements are based on management's assumptions and beliefs. These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please C C.

Jodi M. Shpigel: T Reits public filings for a discussion of these risk factors, which are included in their 2023 M. DNA in 2020, three Aif, which can be found on C. T rights website on SEDAR.

Jodi M. Shpigel: I will now turn the call over to Kevin Burke, President and Chief Executive Officer of C. T right Kevin.

Kevin Salsberg: Justin, good morning, everyone, and welcome to C.T. Reid's First Quarter Investor Conference Call. I thought I would start the call with a little color with respect to what we are seeing in the market. With respect to the economy at large, growth remains muted. Inflation has tempered, but it's still above the target rates set by our central bank, and housing affordability continues to become further out of reach for average Canadians, driven by high levels of immigration over the last few years, elevated construction costs, and excessively long timeframes that are required to complete new developments.

Kevin Burke: Thank you Justin.

Kevin Burke: Good morning, everyone and welcome to city rates first quarter Investor Conference call.

Kevin Burke: I thought I would start the call with a little color with respect to what we're seeing in the market currently.

Kevin Burke: With respect to the economy at large growth remains muted.

Kevin Burke: Inflation is tempered, but it's still above the target rates set by our central Bank and housing affordability continues to become further out of reach for average Canadians driven by high levels of immigration over the last few years elevated construction costs, an excessively long time frames that are required to complete new development.

Kevin Salsberg: For some time now, market prognosticators have been considering when interest rate cuts will begin and by how much we should expect rates to decline. The answers to these questions continue to seem uncertain and something to be determined at some point in the future. A lack of clarity, driven by the aforementioned factors, continues to constrain the property markets, and transaction volumes remain relatively muted.

Kevin Burke: For some time now market prognosticators have been considering when interest rate cuts will begin and by how much we should expect rates to decline.

Kevin Burke: The answers to these questions continue to seem uncertain and something to be determined at some point in the future.

Kevin Burke: Lack of clarity driven by the aforementioned factors continues to constrain the property markets and transaction volumes remain relatively muted.

Kevin Salsberg: Fundamentals for retail real estate, however, have been strong, as an increased population translates into new customers for our tenants, and the high cost to build coupled with the conversion of commercial assets into residential development sites has fueled a supply-demand imbalance that has favored landlords of late. Despite the turmoil of this mixed market, CTE continues to perform. And our Q1 2024 results are yet another example of the stability, reliability, and growth that we have delivered to date, irrespective of market conditions.

Kevin Burke: Okay.

Kevin Burke: Fundamentals for retail real estate, however have been strong as increased population translates into new customers for our tenants and the high cost to build coupled with the conversion of commercial assets into residential development sites have fueled a supply demand imbalance that has favorite landlords doublet.

Kevin Burke: Despite the turmoil of this mixed market C. T rieck continues to perform.

Kevin Burke: Our Q1 'twenty 'twenty four results are yet. Another example of the stability reliability and growth that we have delivered to date irrespective of market conditions.

Kevin Salsberg: From our successful IPO, through our initial phase of growth, to the COVID-19 pandemic and the more recent challenging economic conditions, CTREIT has proven its resilience time and again. In the first quarter, our durability and performance were once again on full display, and I'm pleased to report that we achieved growth in net operating income, or NOI, of 5.6%, growth in same property NOI of 4.1%, and growth in diluted AFFO per unit of 4.8%. All in all, a great start to the year.

Kevin Burke: From our successful IPO through our initial phase of growth to the COVID-19 pandemic and the more recent challenging economic conditions C. T. REIT has proven its resilience time and again.

Kevin Burke: In the first quarter, our durability and performance were once again on full display and I'm pleased to report that we achieved growth in net operating income or NOI of five 6%.

Kevin Burke: Growth in our same property NOI of four 1% and growth in diluted a F F O per unit or four 8%.

Speaker Change: All in all a great start to the year.

Kevin Salsberg: On the back of these strong results, we were pleased to announce that for the 10th straight year, our Board of Trustees has approved yet another increase to our distribution. The 3% increase is the 11th increase since our IPO and represents a cumulative increase of 42.3% over that time, which is a true testament to our success and stability over the last 10 plus years. An investor who has been with us since our inception would now be enjoying a 9.25% yield on their initial investment based on our new distribution rate. And our future continues to look bright.

Speaker Change: On the back of your strong results, we were pleased to announce that for the 10th straight year. Our board of Trustees has approved yet another increase to our distributions.

Speaker Change: A 3% increase as the 11th since our IPO and represents accumulative increase of 42, 3% over that time, which is a true testament of our success and stability over the last 10 plus years.

Speaker Change: An investor who has been with us since our inception would now be enjoying a 9.25% yield on their initial investments based on our new distribution rate.

Kevin Salsberg: We have over 740,000 square feet of gross leaseable area in our development pipeline, comprising one new Canadian Tire Store development, 16 Canadian Tire Store expansions, one redevelopment, and one site intensification for third-party. With respect to our balance sheet, our low leverage, strong coverage ratios, and liquidity position us well to manage our way through this higher-for-longer rate environment. We only have one debt maturity this year, a $200 million series of Class C LP units that Canadian Tire holds that will be reset effective June 1st, 2024, for an additional five years at a rate of 5.43%.

Speaker Change: And our future continues to look bright we have over 740000 square feet of gross leasable area in our development pipeline, comprising one new Canadian tire store development.

Speaker Change: <unk> Canadian tire store expansions.

Speaker Change: One redevelopment at one site and Densification for third party.

Speaker Change: With respect to our balance sheet, our low leverage strong coverage ratios and liquidity position us well to manage our way through this higher for longer rate environment. We only have one debt maturity. This year, a $200 million series of class C. L. P units. The Canadian tire holds that will be a reset effective June one 2024.

Kevin Salsberg: And we have no other upcoming debt maturities until midway through 2025. The strength of our balance sheet, the visibility of our cash flows, and our embedded growth all make CTREIT a very attractive option for investors as we continue to navigate these choppy waters. I'll now turn it over to Jodi and Lesley to provide some additional details on the quarter, our results, and our investment, leasing, and development activities.

Speaker Change: For an additional five years at a rate of 5.43% and we have no other upcoming debt maturities until midway through 2025.

Speaker Change: The strength of our balance sheet, the visibility of our cash flows and our embedded growth. All makes you T read a very attractive option for investors as we continue to navigate these choppy waters.

Speaker Change: I'll now turn it over to Jodi and Leslie to provide some additional details on the quarter, our results and our investment leasing and development activities Jody.

Jodi M. Shpigel: Thanks Kevin, and good morning everyone. As highlighted in our press release yesterday, we were pleased to announce one new investment this quarter. This new investment relates to the expansion of an existing Canadian tire store located in Donna Conna, Quebec. It is anticipated that this $11.1 million investment will be completed by the end of 2025 at a going-in yield of 7%. In Q1, we continue to focus on our existing development pipeline, building on the significant progress made in 2023.

Jodi M. Shpigel: Thanks, Kevin and good morning, everyone.

Jodi M. Shpigel: As highlighted in our press release yesterday, we were pleased to announce one new investment this quarter. This new investment relates to the expansion of an existing Canadian tire store located in Donna Connex back. It is anticipated that this 11.1 million dollar investment will be completed by the end of 2025.

Jodi M. Shpigel: Going in yield of 7%.

In Q1, we continued to focus on our existing development pipeline building on the significant progress made in 2023. The reach currently has 20 projects at various stages of development with three of these expected to be completed this year and most of the balance expected to be completed in 2025 and 2026.

Jodi M. Shpigel: The REIT currently has 20 projects at various stages of development, with three of these expected to be completed this year, and most of the balance expected to be completed in 2025 and 2026. These developments represent a total committed investment of approximately $287 million upon completion, $96 million of which has already been spent, and $52 million of which we anticipate will be spent in the next 12 months. Once built, these projects will add a total incremental gross leaseable area of approximately 742,000 square feet to the portfolio, 93.8% of which has been pre-leased at a quarter end.

Jodi M. Shpigel: These developments represent a total committed investment of approximately 287 million. Upon completion 96 million of which has already been spent and 52 million of which we anticipate will be spent in the next 12 months.

Jodi M. Shpigel: Once built these projects will add in total incremental gross leasable area of approximately 742000 square feet Cheetah portfolio 93, 8% of which has been pre leased at quarter end.

Jodi M. Shpigel: During the quarter, we extended one Canadian Tire Store lease while maintaining a nearly fully occupied portfolio, with our occupancy rate now reaching 99.5%. As at the end of Q1, the weighted average lease term for our portfolio was 8.2 years, which remains one of the longest in the sector. With that, I will turn it over to Lesley to discuss our financial results.

Jodi M. Shpigel: During the quarter, we extended one Canadian tire store lease while maintaining a nearly fully occupied portfolio with our occupancy rate now reaching 99, 5%.

Jodi M. Shpigel: I was at the end of Q1, the weighted average lease term for our portfolio with 8.2 years, which remains one of the longest in the sector with that I will turn it over to Leslie to discuss our financial results.

Lesley Patricia Gibson: discuss our financial issues Thanks, Jodi, and good morning, everyone. As Kevin highlighted, we are pleased with the strong results delivered by The Read again this quarter. Reflecting the solid growth within the portfolio, Samesore NOI grew 3.0% or $3.2 million. Drivers of the same store NOI increase were contractual rent escalations of $1.4 million, primarily the 1.5% average annual escalations included in the Canadian Tire leases, with the balance of the growth primarily from continued recovery of capital expenditures and interest earned on the unrecovered balance, which contributed approximately $1.9 million to NOI in the quarter.

Lesley Patricia Gibson: Thanks, Jody and good morning, everyone.

Lesley Patricia Gibson: Kevin highlighted we are pleased with the strong results delivered by the read again this quarter.

Lesley Patricia Gibson: Reflecting on the solid growth within the portfolio same store NOI grew 3.0 per cent or $3 2 million.

Lesley Patricia Gibson: Or is it the same store NOI increase where contractual rent escalations of 1.4 million, primarily being the 1.5% average annual escalations included nicknamed higher leases.

Lesley Patricia Gibson: The balance of the growth primarily from continued recovery of capital expenditures and interest earned on the Unrecovered balance, which contributed approximately $1 9 million to NOI in the quarter.

Lesley Patricia Gibson: Same property NOI grew by 4.1% or $4.4 million compared to the prior year. This was due to an increase in same store NOI noted, as well as from the intensifications completed in 2023. Overall, in the first quarter, NOI grew by a healthy 5.6% or $6.1 million, driven by the increase in same-property NOI and the completion of development projects in 2023. In the first quarter, excluding fair value adjustments, G&A expense as a percentage of property revenue was 3.7%, which is higher than the same period in the prior year of 3.0%.

Lesley Patricia Gibson: Same property NOI grew by four 1% or $4 4 million compared to the prior year. This was due to increase in the same store NOI noted as well as can be intensification is completed in 2023.

Lesley Patricia Gibson: Overall in the first quarter NOI grew by a healthy five 6% or $6 $1 million driven by the increase in same property NOI and the completion of development projects in 2023.

Lesley Patricia Gibson: In the first quarter, excluding fair value adjustments G&A expense as a percentage of property revenue was three 7%, which is higher than the same period in the prior year a 3.0%.

Lesley Patricia Gibson: This increase was primarily due to the timing of the Deterred Income Tax provision amounting to $503,000, which is expected to reverse over the balance of the year. The fair value adjustment of $23.6 million in the quarter was mainly driven by contractual rent escalations and leasing activity within the portfolio during the period. Investment metrics for the portfolio remained unchanged relative to the 2023 year-end.

Lesley Patricia Gibson: This increase was primarily due to the timing of the deferred income tax provision amounting to 503000, which is expected to reverse over the balance of the year.

Lesley Patricia Gibson: The fair value adjustment of $23 6 million in the quarter was mainly driven by contractual rent escalations and create and leasing activity within the portfolio. During the period investment metrics for the portfolio remained unchanged relative to the 2023 year end.

Lesley Patricia Gibson: In the quarter, diluted FFO per unit was up 3.4% to $0.331 compared to $0.322 in the first quarter of 2023. This growth can be primarily attributed to the intensification and developments completed during 2023 and the increased recovery of capital expenditures and interest earned on the unrecovered balance, as well as contractual rent escalations from Canadian Tire stores, other CTC banners, and third-party tenant leases partially offset by higher interest The growth in ASFO per unit on a diluted basis was strong for the same reasons, coming in at $0.308, up 4.8% compared to the Q1 of 2023.

Lesley Patricia Gibson: In the quarter diluted <unk> per unit was up three 4% to $33.01 compared to three 2.0 cents in the first quarter of 2023.

Lesley Patricia Gibson: This growth can be primarily attributed to the intensification and developments completed during 2023.

Lesley Patricia Gibson: And the increased recovery of capital expenditures and interest earned on the Unrecovered balance as well as contractual rent escalations from Canadian tire stores. Other C. T C banners and third party tenant leases, partially offset by higher interest costs.

Lesley Patricia Gibson: The growth in <unk> per unit on a diluted basis was strong for the same reasons coming in at 38 cents up four 8% compared to the Q1 of 2023.

Lesley Patricia Gibson: Distributions in the quarter increased by 3.5% compared to the same period in the previous year. As Kevin already mentioned, we were pleased to announce a 3% increase in the monthly distribution, effective with the July 2024 payment to unit holders. This is the 11th such increase, and we're pleased to have been able to raise our distribution at least once per year since IPO. AFFO's payout ratio for Q1 was 73.1%, slightly lower than the payout ratio of 73.8% in the same period last year. This decrease was attributed to the growth in the diluted AFFO per unit, outpacing an increase in the distribution per unit.

Lesley Patricia Gibson: Distributions in the quarter increased by three 5% compared to the same period in the previous year.

Lesley Patricia Gibson: As Kevin already mentioned, we were pleased to announce a 3% increase to the monthly distribution effective with the July 2024 payments unit holders. This is the 11th such increase and we're pleased to have been able to raise our distributions at least once per year since IPO.

Lesley Patricia Gibson: <unk> payout ratio for Q1 was 73, 1% slightly lower than the payout ratio of 73, 8% in the same period last year. This decrease.

Lesley Patricia Gibson: This was attributed to the growth and the diluted S. F O per unit outpacing increase in the distribution per unit.

Lesley Patricia Gibson: In Q1 2024, we continued repurchasing a modest amount of units through our MCIB facility, buying back approximately $3 million of our units below their intrinsic value at an average price of $13.92. Now turning to the balance sheet, our interest coverage ratio was 3.57 times for the current quarter compared to 3.70 times in the comparable quarter of 2023. The decrease was mainly driven by an increase in interest expense and other financing charges outpacing the growth in EBIT fair value.

Lesley Patricia Gibson: In Q1, 2024, we continued repurchasing a modest amount of units through our NCI b facility buying back approximately $3 million of our units below the intrinsic value at an average price of $13.92.

Lesley Patricia Gibson: Now turning to the balance sheet, our interest coverage ratio was 357 times for the current quarter compared to three seven times in the comparable quarter of 2023.

Lesley Patricia Gibson: The decrease was mainly driven by the increase in interest expense and other financing charges outpacing the growth in the EBIT fair value.

Lesley Patricia Gibson: The indebtedness to EBIT fair value ratio improved to 6.64 times, down from 6.83 times in Q1 of 2023, primarily because the growth of EBIT fair value outpaced the increase in indebtedness. Our debt ratio was up slightly to 41.4% from 40.7% in the same quarter of last year due to the issuance of the Series I debentures partially offset by an increase in fair value of the investment properties.

Lesley Patricia Gibson: The indebtedness to EBIT fair value ratio improved to $6 six four times down from $6 eight three times in Q1 of 2023.

Lesley Patricia Gibson: Primarily because the growth of EBIT fair value outpaced the increase in indebtedness.

Lesley Patricia Gibson: Our Denton this ratio was up slightly to 41, 4% from 47% in the same quarter of last year due to the issuance of the series one debentures I debentures.

Lesley Patricia Gibson: Partially offset by an increase in fair value of the investment properties.

Justin: Our indebtedness ratio continues to be within our target range, and considering the current macroeconomic backdrop and interest rate environment, we're pleased with the strength of our balance sheet. Lastly, with respect to liquidity, we ended Q1 with $50 million of cash on hand, and $297 million remains available under our committed credit facility. A further $300 million is available in our uncommitted facility with the entire corporation. And with that, I will turn it back to the operator for any questions, and thank you.

Lesley Patricia Gibson: Our indebtedness ratio continues to be within our target range and concerning the current metric not economic backdrop and interest rate environment. We're pleased with the strength of our balance sheet.

Lesley Patricia Gibson: Lastly, with respect to liquidity, we ended Q1 with $50 million of cash on hand, and 297 million remains available through our committed credit facility a further $300 million available on our uncommitted facility with Canadian Tire Corporation.

Speaker Change: And with that I will turn it back to the operator for any questions.

Justin: And thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then 1-1 on your telephone keypad. To withdraw your question, press star, then 1-1 again. We'll pause for just one moment to compile the Q&A roster, and one moment for our first question. And our first question comes from Sam Damiani from TD Cowen. Your line is now open.

Speaker Change: And thank you at this time I would like to remind everyone in order to ask a question. Please press Star then one on your telephone keypad to withdraw your question Press Star then one one again, we'll pause for just one moment to compile the Q&A roster and one moment for your first question.

Speaker Change: Okay.

Speaker Change: And our first question comes from Sam Damiani from TD Cowen. Your line is now open.

Kevin Salsberg: Thank you, and good morning everyone. The first question, I guess, is probably one I've asked before, which is just what is your vision for growth over the next decade, given the smaller pool of Canadian Tire and third-party-owned real estate that could come available or be shaken loose, and what is the REIT's appetite for materially diversifying the tenant base beyond Canadian Tire?

Sam Damiani: Thank you and good morning, everyone.

Sam Damiani: First first question I guess, there's probably one ive asked before which is.

Sam Damiani: Just what's your what's your vision for growth over the next decade, given the smaller pool of Canadian tire and third party owned real estate that could come available or be shaken loose and what is the rights appetite for materially diversifying.

Sam Damiani: The tenant base beyond Canadian tire going forward.

Kevin Salsberg: Yeah, good morning, Sam. You know, I'm not sure I would characterize the pool as shrinking or smaller. You know, I think we're at a point in time where both the REIT and Canadian Tires are being a little bit more prudent with our capital allocation and spend. There are projects that we're still interested in pursuing, but they've been perhaps deferred or delayed a little bit just in the interest of seeing where the market takes us.

Speaker Change: Yeah, Good morning, Sam.

Speaker Change: I'm not sure I would characterize the pool is shrinking or smaller I think we're at a point in time.

Speaker Change: For both the reason Canadian tires are being a little bit more prudent with our capital allocation and spending.

Speaker Change: There's projects that we're still interested in pursuing them, but they've been perhaps deferred or delayed a little bit just in the interest of seeing.

Kevin Salsberg: I still think there's a huge amount of pursuing those opportunities that we surface through our relationship with Canadian Tire. You know, we are always opportunistic about what's out there in the market and looking to add to our net lease portfolio unrelated to Canadian Tire, but you know, pricing relative to cost of funds for the last little while has been, the disconnect's just been too large. And then in terms of diversification, I think, you know, as you've seen in that first decade, it's something that happens almost naturally in the sense that as we buy or develop more things that have components that are Canadian Tire related, there's also often third party tendencies within those assets, but that's often offset by the amount of Canadian Tire-related activity that we do. So on percentage terms, it hasn't really moved the needle all that much.

Speaker Change: Seeing where the market takes us.

Speaker Change: Still think theres, a huge amount of opportunity pursuing those opportunities that we surfaced through our relationship with Canadian tire.

Speaker Change:

Speaker Change: We are always opportunistic about what's out there in the market.

Speaker Change: And looking to add to our net lease portfolio unrelated to Canadian tire, but.

Speaker Change: You know pricing relative to cost of funds for the last little while have been the.

Speaker Change: The disconnect has just been too large.

Speaker Change: And then in terms of diversification I think you know as you've seen in our first decade.

Speaker Change: It's something that happens.

Speaker Change: Almost naturally in the sense that as we buy or develop more things that have components that are Canadian tire related.

Speaker Change: There is also often third party tendencies within those those assets.

Speaker Change: But that's obviously, that's often offset by the amount of anti related activity that we've done so on percentage terms.

Speaker Change: Hasn't really moved the needle all that all that much so certainly could ebb and flow.

Kevin Salsberg: So, certainly, it could ebb and flow as time goes on, up or down, but diversification in and of itself is not a current strategic objective for the REIT. We have continued to lean into the opportunities that we gleaned through our relationship with Canadian Tire. And over time, if those opportunities change, we will certainly be open to a wider mix of tendencies. But I think Canadian Tire for the foreseeable future will make up the vast majority of the REITs.

Speaker Change: As time goes on up or down but.

Speaker Change: Diversification in and of itself is not a current strategic objective for the REIT, we have to continue to lean into the opportunities that we glean through our relationship with Canadian tire and.

Speaker Change: Over time, if those opportunities are.

Speaker Change: The change we will certainly be open to.

Speaker Change: A wider mix of tenancies.

Speaker Change: But I think in the entire for the foreseeable future will make up the vast majority of the the rates portfolio.

Kevin Salsberg: That's great. I really appreciate that. Very helpful. I guess just on Canadian Tire-related growth, could you quantify the potential opportunity in the next three to five years? What kind of trajectory do you think is possible, or what range of trajectories is possible?

Speaker Change: That's great I really appreciate that very helpful. I guess, just on Canadian tire related growth like could you could you quantify the potential opportunity.

Three to five years, what kind of trajectory do you think is possible or range of trajectories are possible.

Kevin Salsberg: Well, a couple of years ago, when Canyon Tower came out with their Better Connected strategy, there was a pretty large capital envelope that came along with that, you know, over a three to five-year period, call it that. And we made pretty good headway eating into that bucket.

Speaker Change: Well, a couple of years ago, where Canadian tire came out with their better connected strategy. There was a pretty large capital envelope that came along with that.

Speaker Change: Over a three or five year period call it.

Speaker Change: And we've made pretty good headway are eating into that bucket.

Kevin Salsberg: You know, our CapEx spend over the last three years has been slightly higher than our average, I would say. In the go forward, I think it all depends when, you know, consumer spending sort of recovers. I think there's still a belief that Canadian Tire, over time, wants to improve its store and supply chain networks. And when I say improve, I mean expand the size of their stores, bring it up to their current prototype, expand the availability of different fulfillment channels, buy online, pick up in store, greater showrooming, all the things that we've talked about in the past. So, I think it's a large opportunity set. I think it's just going to take longer to effect.

Speaker Change: Our capex spend over the last three years has been slightly higher than our average I would say.

Speaker Change: And the go forward I think it all depends when.

Speaker Change: Consumer spending sort of recovers I think there's still a belief that Canadian tire.

Speaker Change: Overtime wants to improve their store and supply chain networks, and when I say improve expand the size of their stores and bring it up to their current prototype expand the availability of <unk>.

Speaker Change: Different fulfillment channels, our buy online pickup in store greater.

Speaker Change: Greater showroom ing all the all the things that we've talked about in the past.

Speaker Change: So I think it's a it's a large opportunity set.

Speaker Change: It's just going to take longer to effect. We saw the number of engines. We can we can we can do over time from Canadian tire probably.

Kevin Salsberg: We still have a number of vendons we can do over time from Canadian Tire, probably, you know, we've estimated the pipeline there at 15 to 20 sites. You know, when we choose to work with the entire company and trying to buy those assets is market dependent. And also, you know, where we are within our growth stage and our desire to allocate capital in a given year. So no specific guidance there, but those assets also remain available for the REIT to consider purchasing over time.

Speaker Change: We've estimated the.

Speaker Change: The pipeline there at 15 to 20 sites.

Speaker Change: You know when we choose to.

Speaker Change: To work with the entire and trying to buy those assets.

Speaker Change: Is market dependent.

Speaker Change: And also you know where we are within our growth stage in our desire to allocate capital in a given year. So no specific guidance there, but those assets also remain available.

Speaker Change: For the REIT to consider purchasing overtime.

Kevin Salsberg: Okay, great, and last one for me just on the NCIB. It's been a pretty pretty steady sort of programmatic approach over the last few quarters. Just wondering if there is an appetite to, you know, materially step up that activity to take advantage of the current publicly traded valuation.

Speaker Change: Okay, Great and last one for me just on the in CIB, it's been pretty pretty steady.

Speaker Change: Programmatic approach over the last few quarters. Just wondering is there an appetite to materially step up that that activity to take advantage of the current publicly traded valuation.

Kevin Salsberg: I wouldn't say materially, Sam. I mean, that's something we've talked about in past quarters as well. It's hard to consider the trade-off between supporting the units and showing the market we believe we're trading at too wide a discount to our net asset value, but we also understand that our investors are really interested in us increasing our float and increasing our liquidity, which is something we're also desirous of over the long term. So I think what we've done is try to take a modest approach to supporting our unit price, and that's probably That's great. Thank you very much for answering those questions.

Speaker Change: I wouldn't say materially Sam I mean, that's something we've talked about in past quarters as well hard hard to consider the tradeoff between <unk>.

Speaker Change: Supporting the units are showing the market. We believe we're trading at too wide a discount to our net asset value, but also we understand that our investors are really interested actually in us increasing our float and increasing our liquidity.

Speaker Change: Which is something we're also desirous of over the long term so.

Speaker Change: I think what we've done is try to take a modest approach to supporting our unit price and that's probably what youll continue to see from us.

Kevin Salsberg: That's great. Thank you very much for answering those. Take care. Thanks, everyone.

Speaker Change: Next couple of quarters.

Speaker Change: That's great. Thank you very much for answering those trigger.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you.

Justin: And one moment for our next question, and our next question comes from Lorne Kalmar from the Jardins. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: Yeah.

Speaker Change: And our next question comes from Lorne Kalmar from Desjardins. Your line is now open.

Justin: Thanks. Good morning, everybody.

Lorne Kalmar: Thanks, Good morning, everybody.

Unnamed: [inaudible] Just on the, I know you don't have a lot of lease maturities coming up this year in 2025, but it looks like the majority of them are third-party or non-CTC leases. I was just wondering, you know, given the strength you mentioned in retail, what type of lists are you getting on the ones you've done so far and sort of expecting to get done on the remainder through 2025?

Lorne Kalmar: Yeah.

Lorne Kalmar: Just on the I know you don't have a lot of lease maturities coming up in this year and 25, but it looks like the majority of the marks our third party or non CTC leases I was just wondering given the strength you mentioned.

Lorne Kalmar: And in retail what type of lift are you are you getting on the ones you've done so far and sort of expecting to get done on the remainder of 225.

Jodi M. Shpigel: Good morning. It's Jodi.

Lorne Kalmar: Hi, good morning, it's Jody.

Jody: To answer your question, So we had a.

Jody: A fair number of renewals this quarter that as you noted or a third party or approximately 182000 a renewed.

Jodi M. Shpigel: To answer your question, we had a fair number of renewals this quarter that, as you noted, are third-party, approximately $182,000 renewed. And roughly speaking, we're seeing low double-digit spreads on those renewals, and I think we can expect to see that continue just based on the supply-constrained market and the fact that tenants are looking to renew. So, we're getting the benefit of that.

Jody: And roughly speaking, we're seeing low double digit spreads on those renewals and I think we can expect to see that continue just based on the supply constrained market and the fact that you know tenants that are looking to renew so we're getting the benefit of that.

Jodi M. Shpigel: Okay, and then you'll have to forgive me because I don't remember exactly what the typical lift is on a CTC lease, but given, you know, the broader strength in the market, is there any room to push that beyond current levels when, you know, there's some chunkier renewals coming up in 26 and beyond?

Speaker Change: Okay, and then and then you'll have to forgive me because I don't remember exactly what the typical lift is on a CTC lease, but given the broader strength in the market is there any room to push that beyond.

Speaker Change: Current levels. When you know there is some chunkier renewals coming up in 2006 and beyond.

Jodi M. Shpigel: Yeah, Lorne, historically, you know, we've continued on the average one and a half percent rent escalations that we enjoyed in the initial term through extension periods. You know, certainly the...

Speaker Change: Yeah, Lauren historically.

Speaker Change: You know we've continued on average one 5% a rescue rent escalations that we enjoyed in the initial term.

Speaker Change: Through.

Speaker Change: Through extension periods.

Speaker Change: Certainly the.

Jodi M. Shpigel: The one and a half percent as it relates to what we're seeing in the leasing market right now has been a hot topic for us and something we've engaged with the Canadian Tire Inn. There's been a bit of a unique attribute to the first couple sets of renewals that we've had to deal with through 2023 and 2024, and that is that they've been heavily skewed to smaller markets. I think as we get into the 2025 and 2026 renewals, it's more of an even mix between smaller markets and urban markets, and certainly in those larger centers where we're seeing higher renewal spreads. That's something we'll be addressing with Canadian Tire.

Speaker Change: The one 5% as it relates to what it is.

Speaker Change: What we're seeing in the in the in the leasing market right now has been a hot topic for us and something we've engaged with Canadian tire in.

Speaker Change: You know theres been a bit of a unique attribute to the first couple of sets of renewals that we've had to deal with through 2023, and 2024 and that that is that they've been heavily skewed to smaller markets I think as we get into the 25 and 26 renewals, it's more of an even mix between smaller markets and urban markets and certainly.

Speaker Change: And those larger centers, where we're seeing higher renewal spreads.

Speaker Change: That's something we will be addressing with Canadian tire.

Jodi M. Shpigel: Okay, so there might be some potential to see some of the lists pick up a little bit.

Speaker Change: Okay. So there might be some potential to see some lifts pick up a little bit.

Jodi M. Shpigel: Yeah, you have to also appreciate that 1.5% is the average over, you know, 25 million square feet of Canadian Tire stores. So, you know, rolling over 5-6% a year, it will take some time for that average to move, but that doesn't mean it's not a worthwhile endeavor and something we're not going to talk to Canadian Tire about.

Speaker Change: Yeah. I mean, you have to also appreciate the one 5% of the average over a 20 or 20 25 million square feet of the entire store so yes.

Speaker Change: Rolling over five 6% a year it will take some time for that average to move.

Speaker Change: But that doesn't mean, it's not a worthwhile endeavor and something we're not going to talk to Canadian tire.

Jodi M. Shpigel: Okay, great. And then I did notice, outside of the one you guys highlighted in the press release, there was another project, Winkler in Manitoba. I think that was added to the pipeline. I was just wondering, maybe you could give a little more color on that project.

Speaker Change: Okay great.

Speaker Change: And then I did notice I think outside of the one you guys highlight in the press release, there was another project Winkler and Manitoba I think that was added to the pipeline I was just wondering maybe you give a little more color on that project.

Jodi M. Shpigel: In Q4 we added Winkler, and this year we added it to the PUD table. So that's a mall in Winkler, Manitoba. It's Canadian Tire anchored, and there's an enclosed mall, and so the development relates to the enclosed mall portion of that property.

Speaker Change: Yeah. So I think Q4, we added Winkler and this year, we have moved added it to the pod table. So that's a mall in Winkler Manitoba.

Speaker Change: Our anchored and Theres, an enclosed mall and so the development relates to the enclosed mall portion of that property right. Thank you. Thank you for the reminder, and then just last quick little one for me are.

Jodi M. Shpigel: Right. Thank you. Thank you for the reminder.

Lesley Patricia Gibson: And then just last quick little one for me, capped interest came down a little bit. I think that's probably not entirely unexpected. But is that sort of a good run rate going forward given, you know, the $52 million development spend over the next 12 months?

Speaker Change: Capped interests came down a little bit I think that's probably not entirely unexpected.

Speaker Change: Is that sort of a good run rate going forward, given the $52 million development spend over the next 12 months.

Lesley Patricia Gibson: Yeah, Lorne, it's Lesley. That probably is given where we expect developments in the development spend to go for the balance of the year. Okay, great. Thank you so much for taking my questions.

Speaker Change: Yeah, Lauren it's Leslie that probably is given.

Speaker Change: Where we expect developments on the development spend to go for the balance of the year.

Speaker Change: Okay, great. Thank you so much for taking my questions I will turn it back.

Lesley Patricia Gibson: Thank you.

Speaker Change: Thank you and thank you.

Justin: And one moment for our next question, and our next question comes from Pammi Byer from RBC Capital Markets. Your line is now open.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Tommy buyer from RBC capital markets. Your line is now open.

Justin: Thanks. Good morning.

Thanks, Good morning.

Tommy Buyer: Kevin You mentioned deal flow, it's still limited in pricing is still disconnected can you maybe just talk about maybe what you have seen in terms of maybe whats come your way maybe any transaction that you have looked at.

Kevin Salsberg: Kevin, you mentioned, deal flow is still limited, and, you know, pricing is still disconnected. Can you maybe just talk about maybe what you have seen in terms of maybe what's come your way, maybe any transactions that you have looked at? What sort of pricing have you seen? And just curious, you know, what types of assets are these or even the vendor types? I know there's a lot in there, but just any additional color on the transactions.

Tommy Buyer: What sort of pricing have you seen and just curious.

Tommy Buyer: What types of assets are these or even the vendor types I know theres a lot in there, but just any additional color on the transaction side.

Kevin Salsberg: It's been a strange market, to be honest, Pammi. It's a little bifurcated right now.

Kevin Burke: It's been a strange market to be honest pardon me, it's a little bifurcated right now youre seeing some assets that are out of favor tray with seeing some office trades in the last quarter.

Kevin Salsberg: You're seeing some assets that are out of favor trade. We've seen some office trades in the last quarter. You've seen a lot of interest still in grocery-anchored essential needs retail, but there's not a lot out there to buy right now. Multi-families are obviously still very active, probably, I would think, the most active of the asset classes. Different pools of capital are chasing different things, and different buyer perspectives in terms of whether it's a good time to sell or not.

Kevin Burke: <unk> seen a lot of interest still in grocery anchored essential needs retail, but theres not a lot out there to buy right now.

Kevin Burke: Multifamily is obviously still still very active.

Kevin Burke: Probably.

Kevin Burke: I think the most most active of the asset classes, so different pools of capital is chasing different things different buyer.

Kevin Burke: Perspectives in terms of whether it's a good time to sell or not.

Kevin Salsberg: We've seen a couple of net-lease sites that we've looked at, single-tenant, I would say mid-market stuff, but we've been surprised by the degree to which we've been off on pricing. There are others who are looking at assets very differently, so I think that disconnect is real. And, you know, there's a couple of things we've gone down the line on. And, like I said, we've just been surprised by the degree to which we've been off on pricing.

Kevin Burke: You know we've seen a couple of net lease sites that we've looked at a single tenant I'd say mid market stuff.

Kevin Burke: But.

Kevin Burke: We've been surprised by the degree to which we've been off on pricing you know we have a view.

Kevin Burke: On risk and we.

Kevin Burke: Okay.

Kevin Burke: There are others, who are looking at assets very differently. So.

Kevin Burke: I think that disconnect is Israel and theirs.

Kevin Burke: Theres a couple of things, we've we've gone down the line on and like I said, we've just been surprised the degree to which we've been we've been off on pricing.

Speaker Change: Got it.

Unnamed: Got it. In terms of just one last one for me, the occupancy pickup this quarter, and I think Jodi mentioned it, was that partly driven by the shift of Winkler into properties under development, or was it just curious on the retail side that I think it was a 40 basis point pickup?

Speaker Change: In terms of just one last one for me.

Speaker Change: The occupancy pickup this quarter.

Speaker Change: And I think Jody mentioned it was that partly driven by the shift of Winkler into properties under development or just curious on the retail side that.

Speaker Change: I think it was a 40 basis point pick up.

Unnamed: Yeah, that's correct, Pammi. It's basically just the move of the asset into the...

Jody: Yeah, that's correct, it's basically just the move up.

Unnamed: Okay, and then just on Canada Square, a bit of an uptick there as well; was that some leasing that was completed in the quarter?

Jody: Yes at Interpublic.

Jody: Okay, and then just on Canada square a bit of an uptick there as well was that some leasing that was completed in the quarter.

Unnamed: It was, I would describe it as short term, nothing to write home about. Okay, so no big change in terms of the near-term release of some of that vacancy. No, we're still sticking with our asset plan. And, you know, the degree to which we can hold on to short-term income for longer is great, but still maintaining that flexibility to have access to the site to redevelop. Got it. Thanks very much.

Jody: It was I would describe it as a short term leasing those wouldn't be anything to write home about necessary. Okay. So no big change in terms of.

Jody: The near term re leasing of some of the vacancy.

Jody: No we're still sticking.

Jody: With our asset plan in their.

Jody: The degree to which we can hold onto short term income for longer is great but.

Jody: Still maintaining that flexibility to.

Jody: To have access to the site to redevelopment.

Speaker Change: Got it thanks very much.

Speaker Change: And thank you.

Kevin Salsberg: As there are no further questions at this time, I would like to turn the call over to Kevin Salsberg, President and CEO, for closing remarks.

Speaker Change: Yeah.

Speaker Change: As there are no further questions at this time I would like to turn the call over to Kevin Burke, President and CEO for closing remarks.

Kevin Salsberg: Thank you, Justin, and thank you all for joining us today. We look forward to welcoming you to our annual meeting of unit holders, which we will conduct virtually later this morning at 10am. We hope that you'll be able to listen in, and we look forward to speaking with you again in August after we release our Q2 results.

Kevin Burke: Thank you Justin and thank you all for joining US today, we look forward to welcome you to our annual meeting of unit holders, which we will conduct virtually later this morning at 10, a M. We hope that you'll be able to listen in and we look forward to speaking with you again in August after we released our Q2 results. Thank you.

Justin: This concludes today's call; you may now disconnect.

Speaker Change: This concludes today's call you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].