Q1 2024 Crombie Real Estate Investment Trust Earnings Call
Following the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero Cardio operator. This call is being recorded on May nine 2024, I would now like to turn the conference over to Ruth Martin. Please go ahead.
Thank you good day, everyone and welcome to Crombie Reits first quarter 2024 conference call and webcast. Thank you for joining US. This call is being recorded and live audio and is available on our website at www Dot Crombie dossier.
Good afternoon, ladies and gentlemen, and welcome to the Crown be weak Q1 earnings conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and.
To accompany today's call are available on the investors section of our website under presentations and events.
On the call today are Mark Holly, President and Chief Executive Officer, and care of Cameron interim Chief Financial Officer.
Answer session. If at any time during this call you require image assistance. Please press star zero pretty up later this call is being recorded on May nine 2024, I would now like to turn the conference over to Ruth Martin. Please go ahead.
Today's discussion includes forward looking statements.
As always we want to caution you that such statements are based on management's assumptions and beliefs.
Forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Ruth Martin: Thank you good day, everyone and welcome to Crombie reached first quarter 'twenty 'twenty four conference call and webcast. Thank you for joining US. This call is being recorded and live audio and is available on our website at www Dot comedy dossier.
Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these risk factors.
Our discussion will also include expected yield on cost or capital expenditures. Please refer to the development section of our management's discussion and analysis for additional information on assumptions and risks.
Ruth Martin: What's you accompany today's call are available on the investors section of our website under presentations and events.
Ruth Martin: On the call today are Mark Holly, President and Chief Executive Officer, and care of Cameron interim Chief Financial Officer.
I will now turn the call over to Mark who will begin the discussion with comments on crombie strategy and outlook.
Ruth Martin: Today's discussion includes forward looking statements.
Harold will review Crombie operating fundamental discuss our financial results capital allocation and approach to funding and Mark will conclude with a few final remarks over to you Mark.
Ruth Martin: Always we want to caution you that such statements are based on management's assumptions and beliefs.
Ruth Martin: These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Thank you Ruth and good day, everyone and thanks for joining us for first quarter earnings call.
Ruth Martin: Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these rest actor.
Earlier today, we held our annual general meeting in New Glasgow, Nova Scotia, where he outlined crombie strategy are key areas of focus and prospects for growth.
Ruth Martin: Discussions will also include expected yield on cost or capital expenditures.
Ruth Martin: Refer to the development section of our management's discussion and analysis for additional information on assumptions and risks.
Also discuss the broader macroeconomic landscape, including both the opportunities and challenges it presents for our industry today.
Ruth Martin: I will now turn the call over to Mark who will begin the discussion with comments on crombie strategy an outlaw.
Our team is committed to providing our unitholders with reliable long term cash flow and a clear consistent path to growth and value creation.
Ruth Martin: Terrible review Crombie operating fundamental discuss our financial results capital allocation and approach to funding and Mark will conclude with a few final remarks over to you Mark.
Our first quarter performance demonstrates the resilience of our coast to coast necessity based portfolio, the proficiency of our team and managing operation and.
Mark Holly: Thank you Ruth and good day, everyone and thanks for joining us for our first quarter earnings call.
And our steady advancement towards growth and further value creation.
Mark Holly: Earlier today, we held our annual general meeting in New Glasgow, Nova Scotia, where he outlined crombie strategy are key areas of focus and prospects for growth.
In the first quarter, we achieved same asset property cash NOI growth of three 2% and recorded a 7% increase in adjusted <unk> per unit.
Mark Holly: Also discuss the broader macroeconomic landscape, including both the opportunities and challenges it presents for our industry today.
Our leasing team successfully negotiated renewal spreads of 10, 1% on 249000 square feet of GLA during the quarter.
Mark Holly: Our team is committed to providing our unitholders with reliable long term cash flow and a clear consistent path to growth and value creation.
We continue to maintain a strong and flexible balance sheet ending the quarter with ample liquidity debt to EBITDA of $7 97 times leverage ratios well within our target ranges.
Mark Holly: Our first quarter performance demonstrates the resilience of our coast to coast necessity based portfolio the proficiency of our team in managing operations and our steady advancement towards growth and further value creation.
This positions us well on our path to enhance our investment grade rating.
While macroeconomic challenges persist crombie portfolio is strategically positioned in the most stable and thought off as asset classes in Canadian real estate, our grocery anchored retail assets supporting industrial and our mixed use residential are situated in the heart of Viper in towns.
In the first quarter, we achieved same asset property cash NOI growth of three 2% and recorded a 7% increase in adjusted <unk> per unit.
Our leasing team successfully negotiated renewal spreads of 10, 1% on 249000 square feet of GLA during the quarter.
Banding cities in major urban centers nationwide.
Mark Holly: We continue to maintain a strong and flexible balance sheet ending the quarter with ample liquidity debt to EBITDA of $7 97 times leverage ratios well within our target ranges this positions us well on our path to enhance our investment grade rating.
Designed to withstand the volatility of difficult environments crombie is positioned to leverage the resilience and flexibility of its portfolio.
Our strategy is built on two pillars value creation and solid foundation.
Our value creation is firmly anchored in our exceptionally strong balance sheet. We have three primary drivers to this value creation. These are owning and operating and intentionally curated portfolio optimizing our assets, including our substantial development pipeline and partnerships both deepening our mutually.
Mark Holly: While macroeconomic challenges persist crombie portfolio is strategically positioned in the most stable and thought off as asset classes and Canadian real estate.
Mark Holly: Our grocery anchored retail assets supporting industrial and our mixed use residential are situated in the heart of Viper in town expanding cities and major urban centers nationwide.
Initial relationship with Empire, and establishing new partnerships to tap into the embedded value within our portfolio.
Mark Holly: Designed to withstand the volatility of difficult environments crombie is positioned to leverage the resiliency and flexibility of its portfolio.
Today I'd like to touch on two of the three value drivers partnerships and portfolio optimization.
The pivotal role that partnerships play in our strategy.
Mark Holly: Our strategy is built on two pillars value creation and solid foundation our.
Crombie benefits significantly from its strategic partnership with Empire governed by strong principles.
Mark Holly: Our value creation is firmly anchored in our exceptionally strong balance sheet. We have three primary drivers to this value creation. These are owning and operating and intentionally curated portfolio optimizing our assets, including our substantial development pipeline and partnerships both deepening our mutually.
Through alignment of our real estate strategies, we collaborate to plan and deliver on programs that enhance the quality of our portfolio <unk>.
Including but not to limited to acquisitions of stable grocery anchored site.
<unk> banner conversions and construction are purpose built projects.
Mark Holly: Initial relationship with Empire, and establishing new partnerships to tap into the embedded value within our portfolio.
In the first quarter substantial completion was achieved at our next retail related industrial asset in Calgary, Alberta, which I'll speak to shortly.
Mark Holly: Today I'd like to touch on two of the three value drivers partnerships and portfolio optimization.
Mark Holly: First the <unk>.
Crombie unit holders directly benefit from the quality of the assets that have come up from this relationship as well as the inherent growth pipeline. It can provide.
Mark Holly: Pivotal role that partnerships play in our strategy.
Ruth Martin: Rami benefit significantly from its strategic partnership with Empire governed by strong principles.
In addition to the tremendous partnership we have with Empire, extending our partnership will be a key priority for crombie with a specific focus on forming alliances that enable us to unlock the value in our extensive development portfolio, while maintaining the strength of our top quality balance sheet.
Ruth Martin: True alignment of our real estate strategies, we collaborate to plan and deliver on programs that enhance the quality of our portfolio <unk>.
Ruth Martin: Including but not limited to acquisitions of stable grocery anchored site.
Ruth Martin: <unk> Nations banner conversions and construction are purpose built projects.
Collaborating with the right partners will enable us to strategically developed properties, while maintaining a disciplined focus on capital allocation and maximizing returns for our unit holders.
Ruth Martin: In the first quarter substantial completion was achieved at our next retail related industrial asset in Calgary, Alberta, which I'll speak to shortly.
Ruth Martin: <unk> unitholders directly benefit from a quality of the assets that have come up from this relationship as well as the inherent growth pipeline. It can provide.
One of our most more recent partnership is the co ownership of our mixed use residential asset the village at <unk> Harbour in Oakville, Ontario.
Ruth Martin: In addition to the tremendous partnership we have with Empire, extending our partnership will be a key priority for crombie with a specific focus on forming alliances that enable us to unlock the value in our extensive development portfolio, while maintaining the strength of our top quality balance sheet.
The collective team worked hard to generate significant leasing momentum over the year and in the first quarter of 2024, we achieved two important milestones at this location.
First we had projected reaching occupancy stabilization in the first half of 2024 and I'm happy to say that we reached it in the first quarter ending the quarter with committed and economic occupancy of 93% and 91% respectively.
Ruth Martin: Collaborating with the right partners will enable us to strategically develop properties, while maintaining a disciplined focus on capital allocation and maximizing returns for our unit holders.
And second.
Is that we secured <unk> financing on the asset at an interest rate of 435% harvesting significant interest savings through an approximate 275 basis point improvement over the debt that was previously in place.
Ruth Martin: One of our most more recent partnership is the co ownership of our mixed use residential asset the village it Brian take harbor in Oakville, Ontario.
Ruth Martin: The collective team worked hard to generate significant leasing momentum over the year and in the first quarter of 2024, we achieved two important milestones at this location.
We look forward to recognizing the benefit of stabilization and <unk> financing in quarters to come.
Ruth Martin: First we had projected reaching occupancy stabilization in the first half of 2024 and I'm happy to say that we reached it in the first quarter ending the quarter with committed and economic occupancy of 93% and 91% respectively.
Next I'll focus on portfolio optimization.
Optimizing our properties is key to our long term strategy for enhancing <unk> and net asset value.
Central to this approach is portfolio reinvestment.
Focused on identifying the most effective uses of our assets to maximize returns and strategically allocate capital.
Ruth Martin: And second.
Ruth Martin: Is that we secured <unk> financing on the asset at an interest rate of 4.35% harvesting significant interest savings through an approximate 275 basis point improvement over the debt that was previously in place.
Our development program is structured around two elements major developments and non major developments.
Major developments involve longer term commitments and total estimated costs greater than $50 million, while non major projects are typically shorter term with total estimated costs below the $50 million Mark.
Ruth Martin: We look forward to recognizing the benefit of stabilization and so it makes the financing in quarters to come.
Speaker Change: Next I'll focus on portfolio optimization.
Through this structure, we aim to unlock the full potential of our portfolio and drive sustained growth.
Speaker Change: <unk> our properties is key to our long term strategy for enhancing <unk> and net asset value.
Currently we have one active major development project underway Tomorrow stone, and Halifax, Nova Scotia, which will introduce 291 residential units to our expanding portfolio and will be a welcome addition to one of Canada's fastest growing city.
Ruth Martin: Central to this approach is portfolio reinvestment.
Ruth Martin: Focused on identifying the most effective uses of our assets to maximize returns and strategically allocate capital.
Ruth Martin: Our development program is structured around two elements major developments and non major developments.
Currently under construction the marlstone has already reached above grade levels.
Ruth Martin: A major developments involve longer term commitments and total estimated costs greater than $50 million, while non major projects are typically shorter term with total estimated costs below the $50 million Mark.
The third level of the residential structure to be completed by mid May substantial completion is expected in the first half of 2026.
Support the next wave of major development growth and create a well structured development pipeline. Our team continues to strategically advanced projects through the entitlement process.
Ruth Martin: Through this structure, we aim to unlock the full potential of our portfolio and drive sustained growth.
Ruth Martin: Currently we have one active major development project underway, the moral stone and Halifax, Nova Scotia, which will introduce 291 residential units to our expanding portfolio and will be a welcome addition, 20th candidates fastest growing cities.
Entitlement creates value at a low capital cost and provides optionality and flexibility.
We currently have eight locations within Canada's most notable cities that have zoning in place or three zoning application submitted.
Ruth Martin: Currently under construction the marlstone has already reached above grade levels.
These sites have the potential to add 5300 residential units equivalent to $4 6 million square feet of commercial and residential GLA.
Ruth Martin: The third level of the residential structure to be completed by mid May substantial completion is expected in the first half of 2026.
As I mentioned entitlements and unencumbered sites create optionality for crombie and from time to time, we may elect to sell an asset in our development pipeline to crystallize the value and recycle the proceeds into other strategic growth initiatives.
Ruth Martin: To support the next wave of major development growth and create a well structured development pipeline. Our team continues to strategically advanced projects through the entitlement process.
Ruth Martin: Entitlement creates value at a low capital cost and provides optionality and flexibility.
On our fourth quarter earnings call, we announced our intention to sell our 50% interest at our <unk> site in Toronto, Ontario to monetize entitlement value rather than to pursue development.
Ruth Martin: We currently have eight locations within Canada's most notable cities that have zoning in place or three zoning applications submitted.
As of April 30, we closed on the transaction above <unk> fair value for total proceeds of $13 million.
Ruth Martin: These sites have the potential to add 5300 residential units equivalent to $4 6 million square feet of commercial and residential GLA.
This transaction represents one of the many avenues for value creation available to crombie.
Ruth Martin: As I mentioned entitlements and unencumbered sites create optionality for crombie and from time to time, we may elect to sell an asset in our development pipeline to crystallize the value and recycle the proceeds into other strategic growth initiatives.
In response to the current macroeconomic environment, we heightened our focus to non major development program prioritizing shorter duration projects.
Burnt projects have a yield on cost in the range of five 5% to 7%.
Ruth Martin: On our fourth quarter earnings call, we announced our intention to sell our 50% interest at our <unk> site in Toronto, Ontario to monetize entitlement value rather than to pursue development.
And are a great way to strengthen our portfolio, creating NAV and driving NOI and.
In the first quarter, we advanced $1 $5 million of modernization and expanded our portfolio by 26000 square feet of industrial GLA through a 50% joint operation with Empire for their new Central kitchen, Commissary site in Calgary, Alberta.
Ruth Martin: On April 30, we closed on the transaction above IFA fair value for total proceeds of $13 million. This.
Ruth Martin: This transaction represents one of the many avenues for value creation available to crombie.
As Empire explore is expanding their network, we will actively seek opportunities to collaborate where and when it makes sense for Colombia.
Ruth Martin: In response to the current macroeconomic environment, we heightened our focus to non major development program prioritizing shorter duration projects.
Lastly, I want to highlight the amazing work the team has done in advancing our ESG commitments, we will release, our 2023 ESG report in the coming months, which will align our environmental social and governance achievements last year.
Ruth Martin: Current projects have a yield on cost in the range of five 5% to 7%.
Ruth Martin: And are a great way to strengthen our portfolio, creating NAV and driving NOI and.
Ruth Martin: In the first quarter, we advanced $1 $5 million of Modernizations and expanded our portfolio by 26000 square feet of industrial GLA through a 50% joint operation with Empire for their new Central kitchen, Commissary site in Calgary, Alberta.
ESG is not a standalone plan at crombie commitments to climate action, social responsibility governance accountability and transparency are embedded in our strategy. The work, we do and the decisions we make.
In April we were proud to announce that we have been named one of Canada's greenest employers in 2020 for the people who work to achieve our objectives do so with passion determination and integrity and together they have built an engaging high performing culture.
Ruth Martin: As Empire explore is expanding their network, we will actively seek opportunities to collaborate where and when it makes sense for crombie.
Ruth Martin: Lastly, I want to highlight the amazing work the team has done in advancing our ESG commitments, we will release, our 2023 ESG report in the coming months, which will light, our environmental social and governance achievements last year.
I will now hand, the call over to Carol who will highlight our third value creation driver operational excellence and the cornerstone of our solid foundation our balance sheet.
Ruth Martin: ESG is not a standalone plan at crombie commitments to climate action, social responsibility governance accountability and transparency are embedded in our strategy. The work, we do and the decisions we make.
Thank you Mark and good day everyone.
2020 or commenced on solid footing as evidenced by our first quarter operational results we are.
Ended the quarter with a minute and economic occupancy of 96, 2% and 95, 7% respectively.
Ruth Martin: In April we were proud to announce that we've been named one of Canada's greenest employers in 2020 or the people who work to achieve our objectives do so with passion and determination and integrity and together they have built an engaging high performing culture.
Did have a slight decrease in occupancy from Q4, 2023 up 30 basis points.
This is largely due to one tenant vacating at the end of their lease term which was expected.
Ruth Martin: Now I'll hand, the call over to Carol who will highlight our third value creation driver operational excellence and the cornerstone of our solid foundation our balance sheet.
A healthy level of turnover provides us the opportunity to garner higher rent in addition to rental grocery renewal.
Our in place annual minimum rents per square foot was $17 72 at the end of the first quarter, approximately 4% higher than 12 months ago.
Carol: Thank you Mark and good day everyone.
Carol: 2020 for human on solid footing as evidenced by our first quarter operational results.
Carol: We ended the quarter with a minute and economic occupancy of 96, 2% and 95, 7% respectively.
This growth is driven by new leasing activity renewal and contractual rent step ups positively contributing to same asset NOI and <unk> growth.
Carol: Did have a slight decrease in occupancy from Q4, 2023 up 30 basis points.
At the end of the quarter 94000 square feet of GLA was committed at an average first year rate of $20 66 per square foot, 17% above our in place portfolio rent per square foot.
Carol: It is largely due to one tenant vacating at the end of their lease term which was affected.
Carol: A healthy level of turnover provides us the opportunity to garner higher rent in addition to rental grocery renewal.
Included in committed space, our three non major development projects, which are expected to open throughout 2024.
Carol: Our in place annual minimum rent per square foot was $17.72 at the end of the first quarter, approximately 4% higher than 12 months ago.
The new mill, Alberta, Central kitchen, Commissary, a purpose built industrial asset and a national brand quick service restaurants, as well as repurpose existing vacant space within our portfolio for a new farm boy grocery store.
Carol: This growth is driven by new leasing activity renewal and contractual rent step up positively contributing to same asset NOI and <unk> growth.
New leases increased occupancy by 64000 square feet at an average first year rate of $23 <unk> boosting our in place rent per square foot and same asset NOI eight.
Carol: At the end of the quarter 94000 square feet of GLA was committed at an average first year rate of $20 66 per square foot, 17% above our in place portfolio rent per square foot.
84% of new leases were completed in rest of the Canada market.
Carol: Included in committed space, our three non major development projects, which are expected to open throughout 2024.
Going to the desirability of these primarily grocery anchored necessity based off that as they serve the needs of communities across the country.
Carol: Two new Bell, Alberta, Central kitchen, Commissary, a purpose built industrial asset and a national brand quick service restaurants, as well as repurpose existing vacant space within our portfolio, where a new farm boy grocery store.
Notable new leases include the recently constructed whose land in Mt Forest, Ontario, and Petsmart impart Macmurray, Alberta.
Lease renewal activity across our portfolio consisted of 249000 square feet at a 10, 1% increase for year, one over expiring rental rate.
Carol: New leases increased occupancy by 64000 square feet at an average first year rate of $23 enforce that.
Carol: In our in place rent per square foot and same ASUR NOI.
A 10, 6% increase when comparing the expiring rental rate the weighted average rental rates for the renewal term.
Carol: 84% of new leases were completed in rest of Canada market speaking to the desirability of these primarily grocery anchored necessity based off that.
It is our solid leasing performance over the last 12 months, primarily new leases and renewal that has led to a three 2% increase in same asset NOI compared to the same quarter in 2023.
Carol: There are the needs of communities across the country.
Carol: Notable new leases include the recently constructed whose land and Mt Forest, Ontario, and Petsmart in Fort Mcmurray, Alberta.
Adjusting for the land sale at our joint venture <unk> Ridge in Dartmouth, Nova Scotia that occurred in the first quarter of 2023, <unk> and <unk> per unit increased 8% and 7% respectively.
Carol: Lease renewal activity across our portfolio consisted of 249000 square feet.
Carol: At 10, 1% increase or year, one over expiring rental rate.
The improvement in adjusted <unk> and <unk> <unk> for the quarter was driven by higher property revenues from completed development leasing activity revenue from management and development services as well as higher capitalized interest.
Carol: A 10, 6% increase when comparing the expiring rental rate the weighted average rental rate for the renewal term.
Carol: It is our solid leasing performance over the last 12 months, primarily new leases and renewal that has led to a three 2% increase in same asset NOI compared to the same quarter in 2023.
It was partially offset by an increase in interest expense.
Our <unk> payout ratio was 86, 1%, while our <unk> payout ratio was 73, 6% both improving from Q1 of 2023.
Carol: Adjusting for the land sale at our joint venture Oakville Ridge in Dartmouth, Nova Scotia that occurred in the first quarter of 2023, <unk> and F. F L premiums increased 8% and 7% respectively.
Turning to our balance sheet and financial condition, we remain committed to upholding a strong balance sheet and disciplined approach to capital allocation.
Carol: The improvement in adjusted <unk> and F F L or you and ask for the quarter was driven by higher property revenues from completed development leasing activity revenue from management and development services as well as higher capitalized interest.
We remain committed to our goal of achieving an upgrades to triple the managed from our current triple B low stable trend from Morningstar D var.
With this objective in mind, we issued $200 million of six year unsecured notes at an interest rate of 514%. This was a highly successful issuance, reflecting our diligent market monitoring and strategic timing.
Carol: This was partially offset by an increase in interest expense.
Carol: Our <unk> payout ratio was 86, 1%, while our <unk> payout ratio was 73, 6% both improving from Q1 of 2023.
The issue demonstrates our ability to access one of the multiple sources of capital available to us, but also highlights our active balance sheet management as well as meeting our capital funding requirement.
Carol: Turning to our balance sheet and financial condition, we remain committed to upholding a strong balance sheet and disciplined approach to capital allocation.
Additionally, in the first quarter, we repaid $82 million in maturing mortgages.
Carol: We remain committed to Oracle all are achieving an upgrade to triple the emerge from our current triple B low stable trends from Morningstar D. The era.
<unk> eight mortgages were refinanced totaling $31 million at crombie share with a weighted average interest rate of five 3%.
Carol: With this objective in mind, we issued $200 million next year unsecured notes at an interest rate of 5.14%. This was a highly successful issuance, reflecting our diligent market monitoring and strategic timing.
All of the refinance mortgages are held in joint operations and refinancing was completed together with our partners.
As Mark mentioned at our joint venture property the village at Bondi Harbor.
Carol: The issue demonstrates our ability to access one of the multiple sources of capital available to us, but also highlights our active balance sheet management as well as meeting our capital funding requirement.
We closed on a $243 million mortgage loan equivalent to $121 $5 million at crummy sure.
And mortgage has an interest rate of 435% harvesting significant interest savings through an approximate 275 basis point improvement over previously in place debt.
Carol: Additionally, in the first quarter, we repaid $82 million in maturing mortgages of which eight mortgages refinanced totaling $31 million at crombie share with a weighted average interest rate of five 3%.
We are actively working towards securing GMAC financing through the MLR I thought program at the milestone and expect to have this in place over the coming quarters.
Carol: All of the refinance mortgages are held in joint operations and refinancing was completed together with our partners.
We ended the quarter with available liquidity of $737 million and our unencumbered assets increased from $2 6 billion at Q4 2023 to $2 8 billion in the first quarter of 2024.
Carol: As Mark mentioned at our joint venture property the village at broadly Harbor.
Carol: We closed on a $243 million mortgage loan equivalent to $121 $5 million at crummy share.
That to growth fair value was 42, 9% consistent with Q4 2023, and our debt to trailing 12 months. Adjusted EBITDA was 797 times an improvement from eight points here three times at December 31, 2023.
Carol: Mortgage has an interest rate of 435% harvesting significant interest savings through an approximate 275 basis point improvement over previously in place that.
Carol: We are actively working towards securing C. M. A C financing through the MLR I thought program at the milestone and expect to have this in place over the coming quarters.
Our operational and financial results are evidence of the value and strength of our necessity based portfolio our commitment to operational excellence and the active management of our balance sheet and financial condition.
Carol: We ended the quarter with available liquidity of $737 million and our unencumbered assets increased from $2 6 billion at Q4 2023 to $2 8 billion in the first quarter of 2024.
With that I will now turn the call over to Mark for a few closing comments.
Thanks Kara.
Carol: <unk> to gross fair value was 42, 9% consistent with Q4 2023, and our debt to trailing 12 month. Adjusted EBITDA was 797 times an improvement from 8.03 times at December 31st 2023.
We are off to a great start in 2020 for the business fundamentals are strong as evidenced by our metrics of success and our balance of stability and growth.
Our team's focus on financial health culture, and ESG enables us to make the right decisions for the long term good of our climate employees communities and business.
Carol: Our operational and financial results are evidence of the value and strength of our necessity based portfolio our commitment to operational excellence and the active management of our balance sheet and financial condition.
And with that we are pleased to answer any questions you may have.
Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad should you wish to decline from the polling process. Please press the star followed by the number two if you are using a speaker phone please lift the handset before.
Carol: With that I will now turn the call over to Mark for a few closing comments.
Mark Holly: Thanks Kara.
Mark Holly: We are off to a great start in 2020 for the business fundamentals are strong as evidenced by our metrics of success and our balance of stability and growth.
Pressing any keys one moment. Please for your first question.
Mark Holly: Our team's focus on financial health culture, and ESG enables us to make the right decisions for the long term good of our climate employees communities and business.
Your first question comes from the line of Laura Kalmar from <unk>. Your line is open.
Thank you very much and good afternoon everybody.
Speaker Change: And with that we are pleased to answer any questions you may have.
On the same property side of things you guys had a pretty decent print I think a little bit above the 2% to 3% range. You guys had discussed previously for 2024, and some pretty solid rent growth is there anything youre seeing out there right now that would cause the rest of the year to be any different than with office just be sort of the big bogey. How do you guys think about that.
Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad should you wish to decline from the appalling process. Please press the star followed by the number two if you're using a speaker phone. Please lift the handset before.
Hi, Lauren.
Thanks for the question.
Speaker Change: Pressing any keys.
We had a really down the fairway type of quarter and CNS that NOI of 3% is a strong number for us.
Mark Holly: Please for your first question.
Mark Holly: Your first question comes from the line of Laura Kalmar from Diego Dan Your line is open.
As we've talked about our target range at between 2% and 3% and as you know thats coming from new leases renewals <unk> modernization.
Lorne Kalmar: You very much and good afternoon everybody.
Lorne Kalmar: I'm on the same property side of things you guys had a pretty decent print I think a little bit above the 2% to 3% range. You guys had discussed previously for 2024, and some pretty solid rent growth is there anything you're seeing out there right now that would cause the rest of the year to be any different.
And as we.
Last quarter, we had a strong quarter, we had another strong quarter this quarter, but as we kind of talk about our target ranges, we're going to stick to our comfort zone of the 2% to 3%.
The team continues to work on new leases and renewals and there's good supply demand out there for our assets, but 2% to 3% as a range.
Mark Holly: With office, just be sort of the big bogey, how do you guys think about that.
Speaker Change: Hi, Lauren Thanks for the question, Yeah, we had a really down the fairway type of quarter and same asset NOI of 3% is a strong number for us.
It may be digging a little bit into that.
Is 2% sort of you know sorry to end up at the low end of the range would that kind of have to be like an issue in the office portfolio or or.
Lauren: As we've talked about our target range is between 2% and 3%.
Are you guys pretty confident in the fundamentals there.
Speaker Change: As you know that's coming from new leases renewals <unk> modernizations.
Yes, we have.
About 1 million square feet of office.
Speaker Change: And as we.
Romney right downtown Halifax.
Speaker Change: Last quarter, we had a strong quarter, we had another strong quarter this quarter, but as we kind of talk about our target ranges, we're going to stick to our comfort zone of the 2% to 3%.
Got a long Walt.
90% occupied.
We do see changes ebbs and flows in there. So if you kind of look at the occupancy numbers. They were slightly off this quarter, but that was from three tenants.
Speaker Change: The team continues to work on new leases and renewals and there's good supply demand out therefore for our assets, but a 2% to 3% is there a range.
That totaled 6000 square feet. So the office sector for US is strong it's much stronger than others in that market. So.
Lauren: It may be digging a little bit into that.
Lauren: Is 2% sort of you know sorry to end up at the low end of the range would that kind of have to be like an issue with the office portfolio or or.
It's not through the office, it's just throughout our entire portfolio and when you look at the spread between retail office and industrial.
Okay.
Mark Holly: Are you guys pretty confident in the fundamentals there.
And then on the Broadview deal is that you've got some pretty decent pricing there has that inspired.
Mark Holly: Yeah, we have about 1 million square feet of office.
Mark Holly: Romney right downtown Halifax.
So we would move forward with some more dispositions of other non core longer term development sites over the next little while.
Mark Holly: Uh huh.
Mark Holly: A long Walt it's 90%.
Mark Holly: Occupied.
Mark Holly: We do see changes ebbs and flows in there. So if you kind of look at the occupancy numbers. They were slightly off this quarter, but that was from three tenants.
Yes.
We do have an amazing pipeline of development assets and as we've always talked about it we look about it in multiple ways and one of them is from time to time, we will dispose of an asset.
Mark Holly: That totaled 6000 square feet. So the office sector for US is strong it's much stronger than others in that market. So.
Last year, we did awful rich this year, we're doing a broad view and where we're really pleased with the great work that our corporate development team did there and selling that asset significantly above our FRS.
Mark Holly: It's not through the office, it's just throughout our entire portfolio and when you look at the spread between retail office and industrial.
And we will do that from time to time that is a part of our game plan going forward.
Speaker Change: Okay, and then on the Broadview deal looks like you've got some pretty decent pricing there has that.
Nothing sort of imminent.
Over the balance of the year.
Speaker Change: Fired are you guys to maybe move forward with some more dispositions of other non core longer term development sites over the next little while.
Not at this point in Taiwan.
Okay, and then maybe just lastly, do you guys have a target as full payout ratio just trying to get an idea of.
Mark Holly: Yeah, we have we do have an amazing pipeline of development assets and as we've always talked about it we look about it in multiple ways and one of them is from time to time, we will dispose of an asset.
When you might start thinking about distribution increases.
Hi, Lauren it's Kara.
So we're not communicating any distribution increase plan at this point in time, we are focused on the improvement of our payout ratio and I think you can see that coming down over the past several quarters. So we're really pleased with where we're sitting at right now in terms of target were not actively communicating a specific target and we're balancing the needs of the.
Mark Holly: Last year, we did awful rich this year, we're doing a broad view and where we're really pleased with the great work that our corporate development team did there and selling that asset significantly above our FRS.
Mark Holly: And we will do that from time to time that is a part of our game plan going forward.
Mark Holly: But nothing sort of imminent are over the balance of the year.
Investments in the organization with the financing requirements and so.
Speaker Change: Not at this point in time Warner.
We will continue to do that.
Warner: Okay, and then maybe just lastly, do you guys have a target as full payout ratio just trying to get an idea of when you might start thinking about distribution increases.
Okay Fair enough I will turn it back.
Thanks Mark.
Once again, if you would like to ask a question simply press star followed by the number one on your telephone keypad.
Warner: Hi, Lauren it's Kara them. So we're not communicating any distribution increase plan at this point in time, we are focused on the improvement of our payout ratio and I think you can see that coming down over the past several quarters. So we're really pleased with where we're sitting at right now in terms of target were not actively communicating.
Your next question comes from the line of some dummy night from TD Colin Your line is open.
Thank you and good afternoon everybody.
I guess my first question just on those rules Vancouver sites, where <unk> agreed to amend the lease to facilitate future redevelopment is there any update on the status of either of those.
Warner: No specific targets and we're balancing the needs of the investments in the organization with the financing requirements and so we.
For Columbia's intentions with respect to them.
Mark Holly: We'll continue to do that.
Speaker Change: Okay Fair enough I will turn it back.
Okay, Sam Yes Lin.
Lynn Valeant Kingsway in time or the two sites out of Vancouver, and we're actively internally working on them.
Speaker Change: Thanks Mark.
Mark Holly: Once again, if you would like to ask a question simply press star followed by the number one on your telephone keypad.
Building out some design drawings.
Scalability number.
Residential units, we can build how does the foods or intersect the ground floor of that that's where we are today. We've started to do some dialogue with the community and we started to initiate some dialogues with the municipal level no formal applications at this point, but they are active files internally for chromium.
Speaker Change: Your next question comes from the line of some dummy night from TD Colin Your line is open.
Speaker Change: Thank you and good afternoon everybody.
Speaker Change: I guess my first question just on those whose Vancouver sites, where Empire agreed to amend the lease to facilitate future redevelopment is there any update on the status of either of those.
Okay, and switching over to Broadway and commercial.
Colin: Where columbia's intentions are with respect to them.
It looks like things are getting a little bit more in focus in terms of timeline there could.
Colin: Good afternoon, Sam, Yes, Lin Valeant Kingsway in high end or the two sites out of Vancouver, and we're actively internally working on them.
Could you give us any more detail on.
I guess, what would you expect to happen this year or next year.
Speaker Change: <unk> out some design drawings.
And I guess, how serious your intentions are.
Speaker Change: Scalability number.
Yes, the primary commercial has been a.
Sam: Residential units, we can build how does the foods or intersect the ground floor of that that's where we are today, we started to do some dialogue with the community and we started to initiate some dialogues with at the municipal level no formal applications at this point, but they are active files internally for crombie.
Project that we've been working up for a number of years as we've talked about.
Which the profile of <unk> from one condo into rentals to three rentals. We are still actively engaged with municipality, we're working through public open houses now.
Speaker Change: Okay, and switching over to Broadway and commercial it looks like things are getting a little bit more in focus in terms of timeline there could.
We have a bit of a.
Your line of sight on hoping to be entitled by the end of this year, which will then set us up for some.
Speaker Change: Could you give us any more detail on.
Decisions about detailed design work and where do we go with it after that but we got to get through this first hurdle. This is the most important one so between ourselves and our partner we're working on.
Speaker Change: I guess, what would you expect to happen this year or next year.
Speaker Change: And I guess, how serious your intentions are.
Speaker Change: Yes, the Broadway commercial has been a.
Painting, the highest and best use which is those three rental towers, probably by the end of the year.
Speaker Change: A project that we've been working for a number of years as we've talked about tweaks, we switch the profile of that from one condo into rentals to three rentals. We are still actively engaged with municipality, we're working through public open houses now we.
Okay, Great and last one for me is just on the desire to.
Get a notch up on the credit rating.
It's been running around eight times debt to EBITDA for a little bit is there a like what are the goalposts that are set that you need to achieve to.
Speaker Change: We have a bit of a.
Speaker Change: Your line of sight on hopefully to be entitled by the end of this year, which will then set us up for some <unk>.
To achieve that.
That upgrade.
Hi, Thanks for the question, Yes, we are focused on <unk> right now.
Speaker Change: Decisions about detailed design work and where do we go with it after that but we got to get through this first hurdle. This is the most important one so between ourselves and our partner we're working on obtaining the highest and best use which is those three rental towers, probably by the end of the year.
So we've got a secured debt to total debt at 43, 1%, which is a reduction from our $47 four at Q4 2023, and so we're actively chasing.
To be in that 60 to 40.
Speaker Change: Okay, Great and last one for me is just on the desire to.
Ratio on secured to unsecured debt ratios and so that's what we're really working towards.
Speaker Change: Get them notch up on the credit reading.
Achieving by the end of this year, and then really showing the stability of that and maintaining it over a longer course and that's.
Speaker Change: The REIT has been running around eight times debt to EBITDA for a little bit is there a like what are the sort of goalposts that are set so you need to achieve to.
The focus of our Chipotle mid path.
Speaker Change: To achieve that.
Speaker Change: That upgrade.
And then so it's not no no nothing to do on the debt to EBITA for the total size of the <unk>.
Speaker Change: Hi, Thanks for the question, Yes, we are focused on <unk> right now.
Speaker Change: So we've got a secured debt to total debt at 43, 1%, which is a reduction from our $47. Four at Q4 of 2023, and so we're actively chasing them to be and that 60 to 40.
EBITDA.
Yes, so we've met that obligation already on the debt to EBITDA, so are well within the ratios as laid out by the brs.
Sure.
Thank you and I'll turn it back.
Speaker Change: Ratio on secured to unsecured debt ratios and so that's what we're really working towards achieving by the end of this year, and then really showing the stability of that and maintaining it over a longer course and that's.
Your next question comes from the line of Brad Sturges from Raymond James Your line is open.
Hi, there.
Just to follow up on the.
The comments around.
On the Broadway project.
Speaker Change: The focus of our Chipotle mid path.
I guess the change from Canada rental does that require you to to resubmit.
Speaker Change: And then so nothing no no nothing to do on the debt to EBITA for the total size of the of the ear.
I was wondering applications and then what would be the timing.
Speaker Change: EBITDA.
You think would be the getting fully proved with us by the end of the year.
Speaker Change: Yes, so we're we've met that.
Speaker Change: That obligation already on the debt to EBITDA, so are well within the ratios as laid out by the brs.
Hi, Brad.
Yes Broadway in commercial.
We pivoted to that change we have been working with municipalities on that change for.
Speaker Change: Wonderful.
Speaker Change: Thank you and I'll turn it back.
Gosh six to nine months now and so the application that is before for the municipality and is without already in mind until the public open house.
Speaker Change: Your next question comes from the line of Brad Sturges from Raymond James Your line is open.
Brad Sturges: Hey, there.
Brad Sturges: Just to follow up on the.
We were preparing for in the next couple of months is with that design and all indications are that getting through public consultation will get us through the entitlement in the fall so we'll be fully entitled on the three rental towers.
Brad Sturges: The comments around.
Brad Sturges: Broadway project.
Brad Sturges: I guess does the change from Contador rental does that require you to to resubmit.
Speaker Change: I was wondering applications and then what would be the timing that you think would be the getting fully approved with us by the end of the year.
We're in the neighborhood of 970 units.
Okay. That's helpful and then my.
My only other question would be just on the non major development activity.
Speaker Change: Hi, Brad.
Brad Sturges: Yes Broadway in commercial.
I think you've talked about it being sort of.
Brad Sturges: We pivoted to that change we have been working with municipalities on that change for <unk>.
Important part of <unk>.
On the capital allocation that Youre doing just how do you think about the cadence of completions over the course of the year on that.
Brad: Six to nine months now and so the application that is before for the municipality and is with that already in mind until the public open house.
On that opportunity.
Yes last year, we were able to introduce about 83000 square feet of new GLA through non major developments were also do doing modernizations and some work with Empire.
Brad Sturges: That we were preparing for in the next couple of months is with that design and all indications are that getting through public consultation will get us through the entitlement in the fall so we'll be fully entitled on the three rental towers.
Seeing that.
We're protecting ourselves to be honest similar path.
Brad: Somewhere in the neighborhood of 970 units.
Today in the MD&A, we talk about land use intensification of about $50 to 60000 square feet and then in Modernizations Redevelopments and others at this point for showcasing that we've got about $8 billion of spend there.
Speaker Change: Okay. That's helpful and then my.
Speaker Change: My only other question would be just on the non major development activity.
Speaker Change: I think you've talked about it being sort of a.
Speaker Change: An important part of.
Speaker Change: So on the capital allocation that you're doing just how do you think about the cadence of completions over the course of your own on that.
Very much in focus, especially in this environment I really like the non major developments.
We are very much in and out within 12 months.
Speaker Change: On that opportunity set.
And we kind of showcase some of that work over the last four quarters or you continue to lean into that part of the program.
Speaker Change: Yeah last year, we were able to introduce about 83000 square feet of new GLA and through non major developments were also do doing modernization and some work with Empire.
Okay. That's helpful I'll turn it back thanks.
Speaker Change: We're seeing that.
Speaker Change: We're protecting ourselves to be honest similar path.
Your next question comes from the line of Rohit <unk> from BMO capital markets. Please go ahead.
Speaker Change: Today in the MD&A, we talk about land use intensification of about $50 to 60000 square feet and then in Modernizations Redevelopments and others.
Hi tanks.
Just a quick one for me can you give a little bit of credit understanding to watch list at the moment and also in occupancy for the remainder of the year.
Speaker Change: At this point for showcasing that we've got about $8 billion of spend there. So it is still very much in focus, especially in this environment I really like the non major developments. They are very much in and out within 12 months.
Yes for our watch list it is very very light.
Every every landlord has the watch list ours is very very small so it is a larger watch listed.
Speaker Change: And when you kind of showcase some of that work over the last four quarters or continue to lean into that part of the program.
Who is looking for space across our our grocery anchored sites coast to coast that has a list that is.
Speaker Change: Okay. That's helpful I'll turn it back thanks.
<unk> much more in focus for us.
Speaker Change: Your next question comes from the line of Rohit <unk> from BMO capital markets. Please go ahead.
Our occupancy is very stable strong and so when we are able to re merchandize, we're really zeroing in on that list of tenants that can fit the needs of the of the center.
Rohit: Hi tanks are just so just a quick one for me can you give a little bit of credit understanding to watch list at the moment and also in occupancy for the remainder of the year.
<unk> kind of fit the needs of the daily merchandize mix that you need for the community residents.
Rohit: Yes for our watch list it is very very light.
Thank you.
Rohit: Every every landlord has the watch list ours is very very small, but what is our larger watch list to the.
Your next question comes from the line of <unk> <unk> from CIBC. Your line is open.
Rohit: Who is looking for space.
Thanks, Hi, everybody missed.
Just a question on the land use intensification.
Rohit: Ross R. R grocery anchored sites coast to coast that has a list that is.
This call is 52000 square feet.
Rohit: Much more in focus for us.
That is implying a cost to complete up about <unk> 50, a foot which is.
Rohit: Our occupancy is very stable strong and so when we are able to re merchandize, we're really zeroing in on that list of tenants that can fit the needs of the of the center.
That's a fairly representative and current cost figure for these types of oftentimes the vacations.
Rohit: And kind of fit the needs of the daily merchandize mix that you need for the community residents.
Variance by my market or type of project.
I see why it wouldn't vary that much by type of market, but it will vary by what.
Speaker Change: Thank you.
The intensification is.
Speaker Change: Your next question comes from the line of <unk> <unk> from CIBC. Your line is open.
And so I wouldn't get fixated on a cost per buildable.
Just because that could include multiple locations that could be different tenant mix is and how we're deploying it.
CIBC: Thanks, Hi, everybody.
CIBC: So question on the land use intensification, that's close to 52000 square feet.
But one that I think is important to see is how many square feet, we're looking to add to the GLA and when that comes online.
CIBC: I guess it is implying a cost to complete up about <unk> 50, a foot would you say that that's a fairly representative and current cost figure for these types of fantastic vacations is there much variance by my market or a type of a project.
Okay.
And then I think there was a comment in the disclosure around.
Downsizing by a tenant was that just a one off situation.
Speaker Change: I see why it wouldn't vary that much by type of market, but it will vary by what the intensification is.
It was yes. It was one tenant we were fully aware of it.
Vacating and so our leasing and ops team are now working on actively on now how we're going to backfill it and help support the merchant mix of that center.
Speaker Change: And so I wouldn't get fixated on a cost per buildable.
Speaker Change: Just because that could include multiple locations that could be different tenant mix is and how we're deploying it.
Okay.
And then just lastly, touching on the leasing spreads almost 11, 5% for retail.
Speaker Change: But one that I think is important to see is how many square feet are looking to add to the GLA and when that comes online.
How do you expect the spreads to hold on for the balance of your leasing for the year.
Speaker Change: Okay makes sense.
Speaker Change: And then I think there was a comment in the disclosure around.
The team did a terrific job as you know we ended last year at about five 9% and each and every quarter, we're sort of growing on that I would say 10 is a high number for us and we.
Speaker Change: Downsizing by a tenant was that just a one off situation.
Speaker Change: It was yes. It was one tenant we were fully aware of it.
We did 249000 square feet of renewals in the quarter.
Speaker Change: Vacating and so our leasing and ops team are now working on actively now how we're going to backfill it and help support the merchant mix of that center.
The mix between fixed rates and negotiating arbitrate was slightly skewed more to negotiate an arbitrate.
So we are able to command a better.
Speaker Change: Okay.
Speaker Change: And our philosophy touching on the leasing spreads almost 11, 5% for retail.
At our lift on those.
As we've given some targets to the Investor community, we're still sticking to those targets of mid single digits.
Speaker Change: How do you expect the spreads to hold on for the balance of your leasing where they are.
Okay, great. Thank you.
Speaker Change: The team did a terrific job as you know we ended last year at about five 9%.
And there are no further questions at this time I'd like to turn it back to Martin for closing remarks.
Speaker Change: Every quarter, we're sort of growing on that I would say 10 is a high number for us and.
Thank you for your time today, and we look forward to updating you on our second quarter call in August.
Speaker Change: We did 249000 square feet of renewals in the quarter.
Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: The mix between fixed rates and negotiate an arbitrate was slightly skewed more to negotiate an arbitrate.
Speaker Change: And so we were able to command a better.
Speaker Change: A better lift on those.
Speaker Change: As we've given some targets to the Investor community, we're still sticking to those targets of mid single digit.
Speaker Change: Okay, great. Thank you.
Speaker Change: And there are no further questions at this time I'd like to turn it back to Martin for closing remarks.
Martin: Thank you for your time today, and we look forward to updating you on our second quarter call in August.
Martin: Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Martin: Yes.
Martin: [music].