Q1 2024 SmartCentres Real Estate Investment Trust Earnings Call
Please wait the conference will begin shortly.
[music].
Operator: Good day, ladies and gentlemen, and welcome to the SmartCentres REIT Q1 2024 conference call. I would like to introduce Mr. Peter Slan. Please go ahead. Good afternoon, and welcome.
Good day, ladies and gentlemen, and welcome to the Smart centers Q1, 'twenty 'twenty four conference call I would like to introduce Mr. Peter Flynn. Please go ahead.
Peter L. Slan: Good afternoon, and welcome to our first quarter 2024 results call. I'm Peter Slan, Chief Financial Officer, and I'm joined on today's call by Mitch Goldhar, SmartCentres Executive Chairman and CEO, and by Rudy Gobin, our Executive Vice President, Portfolio Management, and Investment. We will begin today's call with some comments from Mitch. Rudy will then cover some operational items, and I will review our financial results. We will then be pleased to take your questions.
Peter L. Slan: Good afternoon, and welcome to our first quarter of 2024 results call I'm, Peter Slam Chief Financial Officer, and I'm joined on today's call by Mitch Gold her smart centers executive Chair and CEO and by really go then our executive Vice President portfolio management and investments.
Peter L. Slan: We will begin today's call with some comments from Mitch Rudy will then cover some operational item and I will review our financial results. We will then be pleased to take your questions just.
Peter L. Slan: Just before I turn the call over to Mitch, I would like to refer you specifically to the cautionary language about forward-looking information, which can be found at the front of our MD&A materials. This also applies to comments any of the speakers make this afternoon. Mitch, over to you.
Peter L. Slan: Just before I turn the call over to Mitch I would like to refer you specifically to the cautionary language about forward looking information, which can be found at the front of our MD&A materials. This also applies to comment any of the speakers make this afternoon.
Mitch: Mitch over to you.
Mitch: Thanks to you.
Mitchell Goldhar: I'm Mitchell Goldhar. Good afternoon, everyone, and welcome to our call. I'm pleased to report a strong start to 2024, building on the momentum of last quarter and indeed last year. Before I get into some details... An invitation, if you haven't been to a SmartCentre, a Walmart-anchored location, I encourage you to visit. Anyone.
Mitch: Hi, Mr. Goldberg good afternoon every.
Mitchell Goldhar: And welcome to our call I'm pleased.
Mitchell Goldhar: To report a strong start to 2024.
Mitchell Goldhar: With me on the momentum.
Mitchell Goldhar: The last quarter and indeed last year.
Mitchell Goldhar: Before I get into some details.
Mitchell Goldhar: An invitation.
Mitchell Goldhar: Haven't been to a smart sensor Walmart anchor location recently.
Mitchell Goldhar: I encourage you to visit.
Mitchell Goldhar: The one.
Mitchell Goldhar: There surely is one near you. And that is... no matter where you are in Canada, there will be a SmartCentre in progress. What you will notice and feel.
Mitchell Goldhar: There surely is one near you.
Mitchell Goldhar: Okay.
Mitchell Goldhar: Okay.
Mitchell Goldhar: And that is.
Mitchell Goldhar: No matter, where you are in Canada.
Mitchell Goldhar: There will be a smart sensors.
Mitchell Goldhar: In proximity.
Mitchell Goldhar: What you will notice some steel.
Mitchell Goldhar: It's something new and obvious, increased activity, and traffic. Consumer Traffic, Brighter Lots, Easier Access, More Stores, and a wider selection of retail, such as daycare, fitness, and clinic. Pick-up locations for your click and collect, and, of course, great value, especially if saving money is your thing, which is, everybody's.
Mitchell Goldhar: It's something.
Mitchell Goldhar: Yeah.
Mitchell Goldhar: Hobbyists increased activity.
Mitchell Goldhar: Traffic.
Mitchell Goldhar: Consumer traffic.
Mitchell Goldhar: Great and what's easy to access more stores and a wider selection of retailers such as day care.
Mitchell Goldhar: Clinics.
Mitchell Goldhar: Implications for your kitchen kitchen, click <unk> collect.
Mitchell Goldhar: And of course, great value, especially if saving money.
Mitchell Goldhar: What I'm, saying, which is <unk>.
Mitchell Goldhar: These statements.
Mitchell Goldhar: Now for a few details. Renewals, which a lot of people refer to as renewals, are providing strong rental increases, of 8.9% excluding 4.4 million square feet, already extended, in Q1. Same property NOI is up $4 million or 3% in the quarter over the prior year. Cash collections remain strong, at 99%.
Speaker Change: Now for a few details.
Mitchell Goldhar: Lease extensions.
Mitchell Goldhar: Which a lot of people refer to as renewals.
Mitchell Goldhar: Carl providing strong rental increases.
Mitchell Goldhar: Of eight 9%, excluding anchors on 4.4 million square feet.
Mitchell Goldhar: Already extended.
Mitchell Goldhar: In Q1.
Mitchell Goldhar: Same property NOI is up $4 million or 3% in the quarter over the prior year.
Mitchell Goldhar: Cash collections remained strong.
Mitchell Goldhar: 99%.
Mitchell Goldhar: Portfolio occupancy was temporarily reduced in the quarter, as you have seen in our disclosure. This was almost all the result of two unrelated tenant vacancies in the quarter, which we fully expect to release in the next quarter or two, on Current Negotiations. Advanced Negotiation, with strong covenant tenancy, and on completion, will not only result in a 9.8% 9.84% increase in community occupancy, but we expect that it will be done at higher rents as well, with Stronger Leasing Interest, for both existing and new buildings. We expect our occupancy rate to improve even more, and Relatively Quickly, and much of it with stronger covenants and higher rent. For the first time in a while,
Mitchell Goldhar: Portfolio occupancy was temporarily reducing recorded as you have seen in our disclosure.
Mitchell Goldhar: This was almost all the result of two unrelated tenant vacancies in the quarter.
Mitchell Goldhar: Which we fully expect to release in the next quarter or two.
Mitchell Goldhar: Current negotiations.
Mitchell Goldhar: Advanced negotiations.
Mitchell Goldhar: With strong covenant tenants.
Mitchell Goldhar: Completion.
Mitchell Goldhar: Will not only result.
Mitchell Goldhar: In a nine 8% 184%.
Mitchell Goldhar: In place and committed occupancy.
Mitchell Goldhar: But.
Mitchell Goldhar: We expect that those will be done at higher rents as well.
Mitchell Goldhar: With strong leasing interest.
Mitchell Goldhar: For both existing and new build.
Mitchell Goldhar: We expect our occupancy rate to improve.
Mitchell Goldhar: Even more.
Mitchell Goldhar: And relatively quickly.
Mitchell Goldhar: And much of it with higher with stronger covenants.
Mitchell Goldhar: And.
Mitchell Goldhar: Higher rents.
Mitchell Goldhar: For the first time in awhile.
Mitchell Goldhar: We have executed over 200,000 square feet of New Build, please. Which will further expand our footprint across the country in the coming quarter. Growth is coming fast and strong, from recognizable names such as TJX Banners, Dollarama, Sharper Strugbert, LCBO, Banks, Canadian Tire, and some national grocers and general merchandisers, built on our stable cash-generating platform, we continue to build and secure significant mixed-use permission, with 56 million square feet already zoned. And remember, on lands we already own, which creates great value, and expansion We will, of course, be prudent and strategic in executing these projects when market conditions permit and with appropriate financing in place. Here's some, the highlights briefly.
Mitchell Goldhar: We have executed over 200000 square feet.
Mitchell Goldhar: Of Newbuild thesis.
Mitchell Goldhar: Which will further.
Mitchell Goldhar: Expand our footprint across the country in the coming quarters.
Mitchell Goldhar: Growth is coming fast and strong.
Mitchell Goldhar: Working with some recognizable names such as T. J X scanners, Tom <unk> co CEO.
Mitchell Goldhar: Canadian tire.
Mitchell Goldhar: In some national Grocers and general Merchandisers.
Mitchell Goldhar: Built on our stable cash.
Mitchell Goldhar: <unk>, leading platform, we continue to build and secure significant mixed use permissions with $56 million.
Mitchell Goldhar: Square feet already zoned.
Mitchell Goldhar: And remember <unk>.
Mitchell Goldhar: We already own.
Mitchell Goldhar: Which creates great value.
Mitchell Goldhar: And.
Mitchell Goldhar: Expansion value for about 10 days.
Mitchell Goldhar: Yeah.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: We will of course be.
Mitchell Goldhar: <unk> been strategic in executing these projects.
Mitchell Goldhar: That is when market conditions permit.
Mitchell Goldhar: With appropriate financing in place.
Mitchell Goldhar: Here's some.
Mitchell Goldhar: Specific.
Mitchell Goldhar: Highlights briefly.
Mitchell Goldhar: SiteWorks is continuing for our 40-story artwork project comprising 320 sold-out units right here in the VMC through our Smart Living Department. Our 458-unit Millway apartment rental project was fully completed during Q4 last year, and at this quarter end, we were.
Mitchell Goldhar: Site works.
Mitchell Goldhar: Continuing for <unk>.
Mitchell Goldhar: Output project, comprising 320 sold out units right here in the BMC.
Mitchell Goldhar: Sure.
Mitchell Goldhar: Two of our smart living Department.
Mitchell Goldhar: Our 458 unit middleweight apartment rental project.
Mitchell Goldhar: Was fully completed during Q4 of last year.
Mitchell Goldhar: And at this quarter and we were <unk>.
Mitchell Goldhar: 76% leased and now expecting to grow to 88% in the next quarter and into the mid-nineties before you're in. We have exceeded our reception, occupancy expectations, as well as our rental assumptions with this project in the heart of the Lorne Metropolitan Center, BMC. Construction of our Vaughan Northwest Townhomes with our partner is progressing well, with two closings taking place this quarter, and nearly all pre-sold units closing on schedule by year end. Four, in Leaside. We continue with our site work for a 224,000 square foot retail center, comprising primarily of the anchor tenant, Canadian Tire, of 200,000 square feet. Our new Whitby storage facility opened in March.
Mitchell Goldhar: 76% leased and now expecting to grow to 88%.
Mitchell Goldhar: In the next quarter.
Mitchell Goldhar: And into the.
Mitchell Goldhar: Maggie.
Mitchell Goldhar: Before year end.
Mitchell Goldhar: We have exceeded our lease up.
Mitchell Goldhar: Occupancy expectations as well as our rental assumptions with this project in the heart.
Mitchell Goldhar: Of the one metric goldenson BMC.
Mitchell Goldhar: Great.
Mitchell Goldhar: Construction.
Mitchell Goldhar: Northwest Townhomes with our partners is progressing well with two closing with two closings taking place this quarter and nearly all please so sold units expected to close on schedule.
Mitchell Goldhar: By year end.
Mitchell Goldhar: Four.
Mitchell Goldhar: And lease side.
Mitchell Goldhar: We continue with our site work.
Mitchell Goldhar: 224000 square foot retail center.
Mitchell Goldhar: Comprising primarily of the anchor tenants.
Mitchell Goldhar: Canadian tire.
Mitchell Goldhar: Of 200000 square feet.
Mitchell Goldhar: Our new would be storage facility opened in March.
Mitchell Goldhar: Adding to our operating portfolio with five locations remaining under construction, this portfolio continues to expand with two new locations in the process of obtaining municipal approvals, one within SmartCentres Laval East Centre and a new strategic site that was acquired with SmartStop, our partner, subsequent to the quarter end in Victoria, BC, just off the down. Lastly, we continue to be strategic with our portfolio development, and we'll execute on some limited capital recycling in unutilized lands to assist with debt reduction and development costs, the pace of which will depend on the market.
Mitchell Goldhar: Adding to our operating portfolio with five locations remaining under construction.
Mitchell Goldhar: This portfolio continues to expand with two new locations in the process of obtaining municipal approvals one within smart sensors to about <unk> <unk> sensor.
Mitchell Goldhar: And a new strategic site when it was acquired with smart stop our partner.
Mitchell Goldhar: Subsequent to the quarter end in Victoria, B C just off downtown.
Mitchell Goldhar: Lastly, we continue to be strategic with our portfolio development and we will execute on some.
Mitchell Goldhar: Limited capital we thought.
Mitchell Goldhar: In Unutilized labs to assist.
Mitchell Goldhar: With that reduction in development costs.
Mitchell Goldhar: The pace of which will depend on the market.
Mitchell Goldhar: As you can tell, we remain active in creating value in our retail operation and strategic in our significant development pipeline. We also take great care in maintaining our conservative balance sheet, which remains a high priority, along with maintaining a significant unencumbered pool of assets now standing at $9.2 billion. We will continue to manage our debt carefully and maintain ample liquidity, which Peter will speak to shortly. Before that, let me pass the call over to Rudy for some operational highlights. Rudy?
Mitchell Goldhar: As you can tell we remain active in creating value.
Rudy: Our retail operations and strategic.
Rudy: In our significant development pipeline.
Rudy: We also take great care, and maintaining a conservative balance sheet, which remains.
Rudy: A high priority for us.
Rudy: Along with maintaining a significant unencumbered pool of assets now standing at $9.2 billion.
Rudy: We will continue to manage that carefully.
Mitchell Goldhar: Maintain ample liquidity liquidity.
Rudy: Which Peter will speak to shortly.
Rudy: And before that.
Mitchell Goldhar: Let me pass the call over to Rudy for some operational highlights.
Mitchell Goldhar: Any.
Rudy: Thanks, Matt.
Mitchell Goldhar: Yes.
Rudy Gobin: And good afternoon, everyone. The MD&A, along with our press release, provided some expanded disclosure on the operations side of the business, but I will give you a few highlights.
Rudy: And good afternoon, everyone.
Rudy Gobin: The MD&A along with our press release provided some expanded disclosure on the operations side of the business.
Rudy Gobin: So let me give you a few highlights.
Rudy Gobin: As you have read, leasing was strong in the first quarter for both vacant space and Lisa of Newbills, as Mitch mentioned earlier. New build leases have been executed with tenants such as Shoppers Drug Mart, Winners, HomeSense, Dollarama, and Scotiabank. This momentum in demand has been building with our existing retail partners and also by some new entrants, in categories such as furniture and specialty foods. Health & Beauty, Fitness, and a number of service-oriented retailers. Our portfolio is in strong demand. Notwithstanding, the two are so independent and unrelated tenant departures, which created a data point this quarter, which we expect to revert shortly.
Rudy Gobin: As you have read.
Rudy Gobin: Leasing was strong in the first quarter for both vacant space.
Rudy Gobin: And lease up.
Rudy Gobin: Of Newbuild as Mitch mentioned earlier.
Rudy Gobin: <unk> leases have been executed.
Rudy Gobin: With tenants such as shoppers drug Mart winners home sense.
Rudy Gobin: Dollar Anna and Scotiabank.
Rudy Gobin: This momentum and demand has been building with our existing retail partners and also by some new entrants.
Rudy Gobin: In categories, such as furniture specialty foods.
Rudy Gobin: The beauty fitness.
Rudy Gobin: And the number of service oriented retailers.
Rudy Gobin: Our portfolio is in strong demand.
Rudy Gobin: Notwithstanding the two or so independent.
Rudy Gobin: And unrelated tenant departures, which created a data point this quarter.
Rudy Gobin: Which we expect to revert shortly.
Rudy Gobin: We continue to monitor tenants for any risks as well, risks of business restructurings or interruptions, and are pleased to report that, except for the two independent tenants just mentioned, there was virtually no impact to our portfolio in the quarter. Given our high-traffic centers, strong leasing demand, and value focus. The REIT is able to release space quickly, maintaining our high occupancy level. Various strong national tenants continue to expand across the country, with expanded store sizes and new build locations.
Rudy Gobin: We continue to monitor tenants for any risks as well risks.
Rudy Gobin: <unk> business restructurings or interruptions and are pleased to report that except for.
Rudy Gobin: The two independent tenants just mentioned there is virtually no impact to our portfolio in the quarter.
Rudy Gobin: Given our high traffic centers strong leasing demand and value focus.
Rudy Gobin: The REIT is able to re lease space quickly maintaining our high occupancy levels.
Rudy Gobin: Various strong national tenants continue to expand across the country.
Rudy Gobin: And with the expanded.
Rudy Gobin: And with expanded store sizes and Newbuild locations.
Rudy Gobin: In the quarter, we completed deals in Carleton, Halifax, and Bracebridge for new build locations for TJX banners. Also, national grocers such as Sobeys, Loblaws, and Metro are somewhat active exploring their opportunities for banners and customer reach.
Rudy Gobin: In the quarter, we completed deal in Carlton Halifax, and brace stage brace bridge for new build.
Rudy Gobin: Patients for T J X banners.
Rudy Gobin: Yes.
Rudy Gobin: Also national grocers, such as Salvi's Lovaas and Metro are somewhat active exploring.
Rudy Gobin: There.
Rudy Gobin: Opportunities for banners and customer reach.
Rudy Gobin: Our premium outlets continue to excel in driving traffic and improving sales, leading to meaningful increases in EBITDA and value to the company. Tenant Sales places our Toronto premium outlets in the top three highest performers in Canada and, for the first time, also in the top three of Simon's portfolio. Our Toronto and Montreal locations remain fully leased, even with one or two small tenants in financial difficulty because there is a lineup of interests, which, by the way, is causing some discussion with our partner about expansion, overall.
Rudy Gobin: Our premium outlets continue to excel in driving traffic and improving sales leading to meaningful increases in EBITDA and value to the right.
Rudy Gobin: Tenant sales places, our Toronto premium outlets and the top three highest performers in Canada and for the first time also in the top three of Simon's portfolio.
Rudy Gobin: Our Toronto and Montreal locations remain fully leased.
Rudy Gobin: Even with the one or two small tenants in financial difficulty because there is a lineup of interest which by the way is causing some discussion with our partner about expansion.
Rudy Gobin: Overall Q.
Rudy Gobin: Q1 has delivered a great start to 2024 in nearly every operational metric, NOI Growth, Cash Collections, Tenant Retention, and Rental Rate Increases, all while providing a larger and broader array of tenants. With that... I'll turn it over to Peter.
Rudy Gobin: Q1 has delivered a great start to 2024 in nearly every operational metric.
Rudy Gobin: Growth.
Peter: Cash collections tenant retention.
Peter: And rental rate increases.
Peter: All while providing a larger and broader array of tenants.
Rudy Gobin: With that I'll turn it over to Peter.
Rudy Gobin: Yes.
Peter: Thank you Rudy.
Peter L. Slan: The financial results for the first quarter once again reflect a strong performance in our core retail business and a continued contribution from our mixed-use development portfolio. For the three months ended March 31, 2024, FFO for fully diluted units was $0.48 compared to $0.54 from the comparable quarter last year. The decline is primarily due to the fair value decrease on our total return swap as a result of fluctuations in the REITs unit price, which amounted to $0.04 per unit, and the condominium closings that occurred in the prior year, which did not repeat this quarter. As a result, FFO with adjustments, which excludes both the townhome and condo profits and the TRS loss, was $0.52 per unit for the quarter.
Peter: The financial results for the first quarter once again reflect the strong performance in our core retail business and the continued contribution from our mixed used development portfolio.
Peter L. Slan: For the three months ended March 31, 2024, <unk> per fully diluted unit was <unk> 48.
Peter L. Slan: Compared to 54 <unk> from the comparable quarter last year. The decline is primarily due to the fair value decrease on our total return swap as a result of fluctuations in the <unk> unit price, which amounted to four cents per unit and the condominium closings that occurred in the prior year, which did not repeat this quarter.
Peter L. Slan: <unk> per unit.
Peter L. Slan: As a result, <unk> with adjustments, which excludes both the townhome and condo profits and the Trs loss was <unk> 52 per unit for the quarter.
Peter L. Slan: This was an increase of one cent from the comparable quarter last year and was due to higher rental income driven by increases in base rent from our shopping centers, primarily due to contractual rent step-ups and lease-up activity, as well as incremental rents from new self-storage and apartment properties, all partially offset by higher interest expense. Net operating income for the quarter increased by $5.9 million, or 4.7% from the same quarter last year, largely due to higher rental rates, lease-up activities, and continued strong performance at our shopping centers.
Peter L. Slan: This is an increase of <unk> <unk> from the comparable quarter last year and was due to higher rental income driven by increases in base rent from our shopping centers, primarily due to contractual rent step ups and lease up activity as well as incremental rents from new self storage and apartment properties all partially offset.
Peter L. Slan: Set by higher interest expense.
Peter L. Slan: Okay.
Peter L. Slan: Net operating income for the quarter increased by $5 9 million or.
Peter L. Slan: Or four 7% from the same quarter last year, largely due to higher rental rates lease up activities and continued strong performance at our shopping centers same property NOI, including equity accounted investments increased by $4 million or 3% compared to the same period in 2023.
Peter L. Slan: Same property NOI, including equity-accounted investments, increased by $4 million, or 3%, compared to the same period in 2023. Leasing activity remains strong during the quarter with 4.4 million square feet of lease extensions with a compelling average rent growth of 8.9%, excluding anchor tenants.
Peter L. Slan: Leasing activity remained strong during the quarter with $4 4 million square feet of lease extensions with a compelling average rent growth of eight 9% excluding anchor tenants.
Peter L. Slan: Our occupancy level, including committed leases, was 97.7% at the end of Q1, as Rudy and Mitch already described. In terms of distributions, we maintained our distributions during the quarter at an annualized rate of $1.85 per unit. The payout ratio to AFFO with adjustments, excluding the TRS and townhome sales, for the three months ended March 31, 2024, was 94.5%, an improvement from 99.9% for the same period a year earlier. This progress was mainly attributable to the increase in NOI and lower capital expenditure.
Peter L. Slan: Our occupancy level, including committed leases was 97, 7% at the end of Q1 as Rudy and Mitch already described.
Peter L. Slan: In terms of distributions, we maintained our distributions during the quarter at an annualized rate of $1 85 per unit.
Peter L. Slan: The payout ratio to <unk> with adjustments, excluding the Trs in a town home sales for the three months ended March 31, 2024 was 94, 5% an improvement from 99, 9% for the same period a year earlier.
Peter L. Slan: This progress was mainly attributable to the increase in NOI and lower capital expenditures.
Peter L. Slan: Adjusted debt to adjusted EBITDA was 9.8 times in Q1, representing a slight improvement from 10 times in the prior year but an increase from 9.6 times last quarter due to additional development spending and fewer condominium and townhome closings, as I mentioned during our Q4 call. Our debt-to-aggregate assets ratio was 43.8% at the end of the quarter, a 60 basis point increase compared to the same period a year earlier. Our unencumbered asset pool remains unchanged at $9.2 billion in Q1.
Peter L. Slan: Adjusted debt to adjusted EBITDA was $9 eight times in Q1, representing a slight improvement from 10 times in the prior year, but an increase from $9 six times last quarter due to additional development spending and fewer condominium and town home closings as I mentioned during our Q4 call.
Peter L. Slan: Our debt to aggregate assets ratio was 43, 8% at the end of the quarter, a 60 basis point increase compared to the same period a year earlier.
Peter L. Slan: Our unencumbered asset pool remains unchanged at $9 2 billion in Q1.
Peter L. Slan: Unsecured debt, including our share of equity-accounted investments, was $4.4 billion, virtually unchanged from the prior quarter, and represents approximately 82% of our total debt of $5.4 billion. During the quarter, we recorded a fair value reduction in our investment properties portfolio of $118.9 million. This adjustment was mainly attributable to softening market conditions in a small number of properties under development in non-core areas.
Peter L. Slan: Unsecured debt, including our share of equity accounted investments was $4 4 billion virtually unchanged from the prior quarter and represents approximately 82% of our total debt of $5 4 billion.
Peter L. Slan: During the quarter, we recorded a fair value reduction reduction in our investment properties portfolio of $118 $9 million.
Peter L. Slan: This adjustment was mainly attributable to the softening market conditions in a number of a small number of properties under development and noncore areas.
Peter L. Slan: From a liquidity perspective, we are comfortable with our current liquidity position. Approximately $448 million of undrawn liquidity as of March 31, 2024, including our share of equity-accounted investments and cash on hand, but excluding any accordion features. The weighted average term to maturity of our debt, including debt on equity-accounted investments, is 3.4 years. Our weighted average interest rate was 4.17%, a slight increase of two basis points from the prior quarter. Our debt ladder remains conservatively structured, where the most significant aggregate maturities are in 2025 and 2027. Additionally, approximately 81% of our debt is at fixed interest rates.
Peter L. Slan: From a liquidity perspective, we're comfortable with our current liquidity position.
Peter L. Slan: Approximately $448 million of Undrawn liquidity as at March 31, 2024, including our share of equity accounted investments and cash on hand, but excluding any accordion features.
Peter L. Slan: The weighted average term to maturity of our debt, including debt on equity accounted investments is three four years.
Peter L. Slan: Our weighted average interest rate was 417% a slight increase of two basis points from the prior quarter.
Peter L. Slan: Our debt ladder remains conservatively structured where.
Peter L. Slan: Were the most significant aggregate maturities are in 2025 and 2027.
Peter L. Slan: Approximately 81% of our debt is at fixed interest rates.
Peter L. Slan: Just before we open up the call to questions, I want to touch briefly on our development projects that are underway. Once again, we have updated our MD&A disclosure focusing on those development projects that are currently under construction. We have also added new information around our development pipeline this quarter on page 16 of the MD&A, including the amount of square footage in each stage of the development cycle. We have approximately 86 million square feet in the pipeline currently, including, as Mitch mentioned, approximately 6 million square feet of zoned lands at the REITs share.
Speaker Change: Just before we open up the call to questions I want to touch briefly on our development projects that are underway.
Peter L. Slan: Once again, we have updated our MD&A disclosure focusing on those development projects that are currently under construction.
Peter L. Slan: We have also added new information around our development pipeline this quarter on page 16 of the MD&A <unk>.
Peter L. Slan: Including the amount of square footage in each stage of the development cycle.
Peter L. Slan: We have approximately 86 million square feet in the pipeline currently including as Mitch mentioned, approximately 6 million square feet of zoned lands at the REIT share.
Peter L. Slan: As you will see on page 17 of the MD&A, there are currently 10 projects under construction, down from 12 last quarter. Additionally, there were two projects that were completed in Q1, namely the industrial project in Pickering and the self-storage project in Whitby. As noted, we also closed on the first two units of our Vaughan Northwest Townhomes project. We expect 95% of the pre-sold units to close this year. The REIT's share of total capital costs on these 10 development projects is approximately $512 million, with the estimated cost to complete standing at $352 million. And with that, we would be pleased to take your questions. So, operator, can we have the first question on the line, please?
Peter L. Slan: As you will see on page 17 of the MD&A. There are currently 10 projects under construction down from 12 last quarter.
Peter L. Slan: There were two projects that were completed in Q1, namely the industrial project in Pickering, and the self storage project in with me.
Peter L. Slan: As noted we also closed on the first two units of our bond Northwest Townhomes project, we expect 95% of the pre sold units to close this year.
Peter L. Slan: The REIT share of total capital costs on these 10 development projects is approximately $512 million with the estimated cost to complete standing at $352 million.
Peter L. Slan: And with that we will be pleased to take your questions.
Peter L. Slan: So operator can we have the first question on the line. Please.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad. We'll go first to Dean Wilkinson at CIBC. Thanks. Good afternoon, everyone.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad.
Operator: We will go first to Dean Wilkinson with CIBC.
Dean Mark Wilkinson: Thanks. Afternoon, everyone.
Dean Mark Wilkinson: Um, maybe just more of a strategy question for Mitch. You know, if we're in a world where it's, you know, high threes, maybe low fours on the interest rate spectrum, does that change your longer, longer strategic view around all of that excess density? And what would cause you to either bring stuff forward or push stuff out? And how are you thinking about sort of the cost of capital around here?
Dean Mark Wilkinson: Thanks afternoon, everyone.
Dean Mark Wilkinson: Maybe just more of a strategy question for Mitch if we're in a world where it's high threes, maybe low for us on the interest rate spectrum.
Dean Mark Wilkinson: Does that change your laundry longer strategic view around all of that excess density and what would cause you to either bring step forward or push stuff out and how are you thinking about sort of the cost of capital around that.
Dean Mark Wilkinson: Okay.
Dean Mark Wilkinson:
Dean Mark Wilkinson: Yes.
Mitchell Goldhar: If we got to low fives, high fours, we would be good. I mean, as in, you know, like putting a developer hat on, you really should be able to make things work at those kind of places across the capital. Yeah, they're not there at the moment.
Dean Mark Wilkinson: We got to low <unk>.
Mitchell Goldhar: Of course, it would be good.
Mitchell Goldhar: As.
Mitchell Goldhar: Yes.
Mitchell Goldhar: Putting a developer head on you really should be able to <unk>.
Mitchell Goldhar: To make things work out.
Mitchell Goldhar: Just kind of.
Mitchell Goldhar: Cost of capital.
Speaker Change: Yes, they're not there at the moment.
Mitchell Goldhar: And most of our.
Mitchell Goldhar: Most of our, You know, our residential entering into the residential space, our high-rise buildings, they take anywhere from 30 to 40 months, depending on, you know, depending on the buildings to build. So we just have to be super, super careful. I mean, we don't have to do any of these things. Um... So, you know, the way I look at it is, like, you know, it's ours to screw up. I mean, we're just not going to take any chances if it's borderline.
Mitchell Goldhar: Our residential entering into the residential space are high raise buildings they take.
Mitchell Goldhar: Anywhere from 30 to 40 months depending on.
Mitchell Goldhar: Depending on the buildings to build so we just have to be Super Super careful I mean, we don't have to do any of it.
Mitchell Goldhar: So you know the way I look at it is like.
Mitchell Goldhar: It's ours to to screw up I mean, we're just not going to take any chances that fits or loans.
Mitchell Goldhar: Luckily, and, you know, we're very lucky that these are properties that we already own. We don't have to buy properties on the market for the majority of what our plans are to get significant traction in the residential space, but we're just not going to play it, you know. We're just not going to play it close to the line. So, if it gets down, like, you know, in that range, and we feel that, you know, the outlook is stable, then we might initiate, you know, some more intensification projects.
Mitchell Goldhar: Luckily, we're very lucky that these are properties that we already own we don't have to buy properties that market.
Mitchell Goldhar: For the majority of our plans are to get.
Mitchell Goldhar: Here's to get significant traction in the residential space, but we're just not going to play it will just that can play a close to in line. So I think it's down like in those in that range and we feel that.
Mitchell Goldhar: Okay stable.
Mitchell Goldhar: Then we might initiate some more.
Mitchell Goldhar: <unk> projects, we may hedge with bringing in some partners.
Mitchell Goldhar: We may hedge by bringing in some partners and, you know, selling, you know, capitalizing on sort of 25 to 50% of those projects. We're just not going to take any chances. We do not need to do any of that, but it has an enormous amount of embedded value. I will say that. All right, you know, it is really just being patient and not being twitchy and not being, you know, Cowboys. But it's real value.
Mitchell Goldhar: Selling.
Mitchell Goldhar: To capitalizing them.
Mitchell Goldhar: 25% to 50% of those projects were just not going to take any chances we do not need to do we do not need to do any of that but it is an enormous amount of.
Mitchell Goldhar: Embedded value I will say that.
Mitchell Goldhar: Okay.
Mitchell Goldhar: Sure.
Mitchell Goldhar: It is really just being patient to not being twitchy and not being.
Mitchell Goldhar: It really is just finding the right moment in time, whether it be rates, cost of capital, or be it, you know, sale price, or be it construction prices, you know, the combination of that, it's massive, massive amounts of value that will be ultimately extracted, you know, if done properly, extracted to returns that are, you know, just far in excess of anything you see normally in the, you know, the regular, you know, internal growth, of Internal Growth, it'll far exceed the types of internal growth you see in typical retail.
Mitchell Goldhar: Cowboys, but it's real value. It really is just finding the right moment in time, whether it be rates kind of capital or did.
Mitchell Goldhar: Sale price bid construction prices.
Mitchell Goldhar: The combination of that is massive massive amounts of value that will be ultimately extracted.
Mitchell Goldhar: If done properly extracted.
Mitchell Goldhar: To returns that are.
Mitchell Goldhar: Our <unk>.
Mitchell Goldhar: In excess of anything you see normally in the.
Mitchell Goldhar: The the regular internal growth type of internal growth that will far exceed the types of insurer growth you see in typical rights.
Mitchell Goldhar: Yeah, I mean, it's unfortunate that the capital markets tend to look quarter to quarter, and as a developer, you can look out 10 years. Would there be circumstances perhaps where you might look to just, all right, get to the zoning, get to the entitlement, which as you pointed out is kind of where the big lift is, and then maybe just sell that off, or would you just want to keep the patience and hold those back and say, yeah, we don't want to leave anything off the table here?
Mitchell Goldhar: Yeah.
Mitchell Goldhar: Unfortunately, the capital market pencil a quarter to quarter and as a developer you could look out 10 years.
Mitchell Goldhar: Would there be circumstances, perhaps where you might look to just alright.
Mitchell Goldhar: Get get to the zoning get to the entitlement, which as you pointed out is kind of where the big lift is and.
Mitchell Goldhar: And then may be just sell that off for or would you just want to keep the patients and hold those back and say yes.
Mitchell Goldhar: We don't want to leave anything out.
Mitchell Goldhar: Off the table here.
Mitchell Goldhar: No, absolutely the former. There's no way we are not going to, you know, try and hold out for the last dollar and stay in and develop it all and everything like you were saying in the latter. You know, if and when the market comes back, you know, you can put it in your diary, it will happen, it will come back. And when it comes back, you know, depending on, you know, to what extent, we will, you know, willfully, willingly sell land to, you know, to, third parties at www.
Mitchell Goldhar: No absolutely the former.
Mitchell Goldhar: No way, we are not going to.
Mitchell Goldhar: Try and hold out for the last dollar.
Mitchell Goldhar: And stay in and develop it all in and everything like you are seeing in the ladder.
Mitchell Goldhar: You know if and when the market and it will come back.
Mitchell Goldhar: We put it in your diary it will happen it will come back.
Mitchell Goldhar: And when it comes back.
Mitchell Goldhar: Depending on.
Mitchell Goldhar: To what extent, we will see it.
Mitchell Goldhar: We'll fully willingly.
Mitchell Goldhar: No.
Mitchell Goldhar: Lans 222 to two parties.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: That density that you're referring to.
Mitchell Goldhar: With leaving things on the table for sure.
Mitchell Goldhar: You need to leave things on the table you want to leave things on the table.
Mitchell Goldhar: Because then you can do another deal and another deal in another deal and we have so much density because that is our gig that is our one of our differentiating factors.
Mitchell Goldhar: It's not going to mean that we're going to leave.
Mitchell Goldhar: SmartCentresRealEstate.com, everything on the table in every deal. We'll leave lots on the table for others to develop on some of these zone properties, but we'll have plenty to develop ourselves and move the needle in terms of our own footprint, residential footprint, and recurring income, but with the benefit, of course, of the capital that selling some of those will generate. I think it's an enviable position. In the meantime, our retail is strong, so we can hang out until that day comes, but we are absolutely not going to insist at all on holding out to develop it all and get the last dollar.
Mitchell Goldhar: Everything on the table on every deal we will we will.
Mitchell Goldhar: We will leave lots on the table for.
Mitchell Goldhar: For others to develop out on some of these.
Mitchell Goldhar: Zoned properties, but.
Mitchell Goldhar: But we will have plenty to develop it ourselves.
Mitchell Goldhar: And move the needle in terms of our own footprint residential footprint and recurring income.
Mitchell Goldhar: But with the benefit of course of.
Mitchell Goldhar: Okay.
Mitchell Goldhar: <unk> capital that selling some of those will generate so.
Mitchell Goldhar: I think its an enviable position.
Mitchell Goldhar: In the meantime, our retail is strong. So we can we can hang out until that day comes but we are absolutely not going to insist it all on holding out to develop it all and given the last dollar.
Dean Mark Wilkinson: That's great. Well, it is a really big table.
Speaker Change: That's great well it is a really big table.
Speaker Change: Thanks, I'll hand, it back thanks Mitch.
Speaker Change: Thank you.
Dean Mark Wilkinson: We'll move next to Sam Damiani TD Cowen.
Dean Mark Wilkinson: Yes.
Dean Mark Wilkinson: Thanks. I'll hand it back. Thanks, Mitch.
Speaker Change: Thank you and good afternoon, everyone.
Mitch: Great to see the leasing come together on the new on the Newbuild on the retail side that was something you guys talked about I think.
Sam Damiani: We'll move next to Sam Damiani at TD Cowen.
Sam Damiani: A couple of quarters ago, So 200000 square feet.
Sam Damiani: Thank you and good afternoon, everyone. Great to see the leasing come together on the new build. On the retail side, that was something you guys talked about, I think, maybe a couple of quarters ago, so 200,000 square feet. I was just wondering, you mentioned two or three locations for TGX, Carleton, Halifax, and Bracebridge.
Sam Damiani: Wondering if I guess you mentioned.
Sam Damiani: Two or three locations for TGF, Carlton Halifax, and brace bridge.
Sam Damiani: Are there any other locations that are, you know, particularly represented in that 200,000 square feet? And I guess the more important question I had is what kind of return on asset, like what kind of yield on cost, are you anticipating on these incremental expansions to these shopping centers? I'll answer the first part of this, Sam, and then I'll turn it over to Rudy.
Rudy Gobin: Are there any other locations that are particularly represented in that in that 200000 square feet and I guess more important question I had is what kind of return on an asset like what kind of yield on costs are you anticipating on these incremental these expansions into the shopping centers.
Rudy Gobin: All pass through.
Rudy Gobin: The first.
Rudy Gobin: Part of this.
Sam Damiani: Sam and then I'll turn it over to Rudy but.
Mitchell Goldhar: But, you know, we just named a few. We think that over the, whatever it is now, you know, 20 years, 19 years, Oh, yeah, it was actually 20. 21 years of doing this, something like that, you and others would pick up on the fact that we're a little bit understated, a little bit conservative with our choice of words.
Rudy Gobin: We just named a few.
Mitchell Goldhar:
Mitchell Goldhar: We think that over.
Mitchell Goldhar: Whatever it is now 20 years 19 years.
Mitchell Goldhar: It was actually 20 years 21 years.
Mitchell Goldhar: If something like that.
Mitchell Goldhar: You and others would pick up on the fact that we're a little bit understated.
Mitchell Goldhar: A little bit conservative with our choice of words.
Mitchell Goldhar: So, and we will continue to be, because it's probably the better way to do things, and it's a different way to do things. Those are really just, you know, a few examples of markets and tenants. There's other things going on, let's just say, leasing wise, in many different markets, with strong tens. You know, there was for sure 10 years ago, there were five years of investment in e-commerce and making sure that retailers made sure that they didn't slip with the Amazons and the others in terms of, you know, online shopping.
Mitchell Goldhar: So and we will continue to be.
Mitchell Goldhar: Because it's probably just too.
Mitchell Goldhar: The better way to do things in.
Speaker Change: It's true.
Mitchell Goldhar: A way to do things.
Mitchell Goldhar: Really just a few examples of markets and tenants there is.
Mitchell Goldhar: There's other things going on let's just say leasing wise in many different markets.
Mitchell Goldhar: With strong tenants.
Mitchell Goldhar: It was 10.
Mitchell Goldhar: 10 years ago, there was five years of.
Mitchell Goldhar: Investment in e-commerce, and making sure that retailers, making sure that they don't.
Mitchell Goldhar: Slip.
Mitchell Goldhar: With the Amazons and the others in terms of.
Mitchell Goldhar: Online shopping and then there was the there was a COVID-19 pandemic.
Mitchell Goldhar: And then there was the pandemic, you know; then there was COVID and the pandemic. So, you know, the population continued to grow every year. But there was really no retail growth, and you can also layer in that a lot of retail sites got redeveloped for residential. And if you put that all together, you know, put that all in a pot and stir it, you've got a real, you know, reduction in square footage per capita.
Mitchell Goldhar: No.
Mitchell Goldhar: The population continues to grow every year.
Mitchell Goldhar: But there was really no retail growth and you can also layering that water retail sites got redeveloped for residential and if you put that all together.
Mitchell Goldhar: That all of the patents through you've got a real.
Mitchell Goldhar: Reduction in square footage.
Mitchell Goldhar: And so what you're feeling and observing now is a little bit of a sort of resurgence. And with strong tenants, we're a bit of a go-to for certain types of national retailers, strong national retailers. They want to, you know, now make you catch up. And so we've got a lot going on. Those are just examples. So I'll turn it over to Rudy. Rudy, if you don't mind expounding a little bit.
Mitchell Goldhar: Per capita.
Speaker Change: So what's your what were feeling in observing now is a little bit.
Rudy Gobin: Sort of resurgence.
Rudy Gobin: And with strong tenants were a bit of a go to for certain types of.
Mitchell Goldhar: National retailers strong national insurers.
Mitchell Goldhar: Two.
Rudy Gobin: Now make you catch up.
Rudy Gobin: And so we've got a lot going on those are just examples so I'll turn it over to really really if you don't mind, expanding a little bit.
Rudy Gobin: Sam, yeah, we started talking about this a couple quarters ago, exactly what you said, and those locations with TJX are new builds, brand new builds, and you can see the markets. It's very interesting in those markets where they're putting those banners. Also, we're doing some expansions in existing banners where they're doing the combo store, so we didn't want to list all of that, but some of the other tenants that we have been doing deals with are, for example, Scotiabank, Marks, and LCBO, and Golftown.
Rudy Gobin: Fisher, Thanks, Sam Yes.
Rudy Gobin: We started talking about this a couple of quarters ago.
Rudy Gobin: Xactly, what you said and.
Rudy Gobin: No.
Rudy Gobin: <unk>.
Rudy Gobin: Those locations with T J X, our new build brand new build and you can see the market is very interesting in those markets, where they are putting in.
Rudy Gobin: Those banners also we're doing some expansions in existing banners, where theyre doing the combo store. So we didn't want to list all of that but some of the other tenants that we have been doing deals with.
Rudy Gobin: As for example, Scotiabank and Mark.
Rudy Gobin: LCBO and golf town, I think I mentioned that.
Rudy Gobin: I think I mentioned that in Quebec, so we're doing things from BC and Vancouver and Chilliwack all the way up through Ontario, all the way through Quebec as well, so those are some of the names. And you can well imagine why we're so excited because there's lots more discussions and negotiations currently happening that we'll be talking about in future quarters.
Rudy Gobin: In Quebec. So it is not like it's we're doing things from from.
Rudy Gobin: BC.
Rudy Gobin: And then coover in Chilliwack, all the way up through Ontario, all the way through in Quebec as well so.
Rudy Gobin: Those are some of the names that you can well imagine why why we're so excited is because theres lots more discussions and negotiations currently happening that we'll be talking about in future quarters.
Mitchell Goldhar: What Rudy was not naming were also some other types of tenants, which are, you know, very basic food and general merchandisers, which have also been, you know, holding back in the last 10 years. So And, of course, retailers have learned, everyone's learned that everyone loses money on home delivery. So, you know, the emphasis is not just on physical shopping by the retailers; they're motivated, but also by the consumer, you know, who the novelty of home delivery is over. It's very, very much here to stay. But people are social creatures, you know.
Speaker Change: That's very helpful, sorry to which youre not.
Mitchell Goldhar: What really was not.
Mitchell Goldhar: Naming were also some other.
Mitchell Goldhar: Types of tenant and switch very basic.
Mitchell Goldhar: Food and general Merchandisers.
Mitchell Goldhar: Which are also.
Mitchell Goldhar: We have also been.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: Hum.
Mitchell Goldhar: Holding back in the last 10 years so.
Mitchell Goldhar: And of course.
Mitchell Goldhar: Retailers have learned everyone's learned that everyone loses money on home delivery. So.
Mitchell Goldhar: The emphasis is on now.
Mitchell Goldhar: Not just.
Mitchell Goldhar: On physical shopping by the retailers they are motivated but also the consumer.
Mitchell Goldhar: Who the novelty.
Mitchell Goldhar: Home delivery is over it's very very much here to stay but.
Mitchell Goldhar: But people are social creatures.
Mitchell Goldhar: And it is more efficient and cheaper to shop online. But ultimately, it's cheaper to shop physically, as you'll see over time. And so that's, you know, a lot of emphasis and investment is going into that from the food and general merchandisers. We are a bit of a go-to for that. We have the larger sites, we have the lower coverage, we can always fit somebody, you know, pretty much any prototype into an existing center.
Mitchell Goldhar: And it is more efficient and cheaper to show ultimately it's cheaper to shop.
Mitchell Goldhar: Physically as Youll see overtime.
Mitchell Goldhar: So that's.
Mitchell Goldhar: A lot of emphasis and investment is going into that from the food and general merchandisers, where a bit of a go to for that we have the larger sites. We have the we have lower coverage, we can always get somebody.
Mitchell Goldhar: Pretty much any prototypes into an existing center.
Mitchell Goldhar: So, in addition to the intensification program for residential, you know, we are being asked to accommodate, you know, a demand for, you know, intensification of retail because we do have the lowest average coverage of, you know, pretty much anybody on site. And, of course, retailers are just, you know, much more flexible with respect to, you know, parking ratio. So, yeah, retail is steady, you know, let's just say, as an understatement. And across the board, including food and general merchandise.
Mitchell Goldhar: So in addition to the intensification program.
Mitchell Goldhar: Residential.
Mitchell Goldhar: Sure.
Mitchell Goldhar: We are being asked to accommodate it.
Mitchell Goldhar: Demand for.
Mitchell Goldhar: Intensification of retail.
Mitchell Goldhar: Because we do have the lowest average coverage.
Mitchell Goldhar: Hum.
Mitchell Goldhar: Pretty much anybody.
Mitchell Goldhar: On site and of course retailers are.
Mitchell Goldhar: Our.
Mitchell Goldhar: Yes.
Mitchell Goldhar: Much more flexible with respect to Q.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: Parking ratios so.
Mitchell Goldhar: Yes, the retail is steady.
Mitchell Goldhar: <unk> is an understatement.
Mitchell Goldhar: And from across the board, including food and general merchandise.
Rudy Gobin: With regard to the yield, each of these deals, by the way, as and when we do them, and given that construction costs are where they are, you can well imagine that the rents we're getting are higher than our average rents in the category. So, you can well imagine that, with construction costs, we're making sure that every deal we do because we're going to be very close to starting construction on all of these.
Speaker Change: Just as a follow up sorry, sorry go ahead sorry.
Speaker Change: As I said in the second part of your question, which I didn't answer.
Rudy Gobin: Yes with regard to the yield each of these deals by the way as and when we do it and given that construction costs are what they are you can well imagine that the.
Rudy Gobin: The rents were getting are higher than our average rents in the category. So.
Rudy Gobin: You can well imagine with construction costs, we're making sure that every deal we do it because we are going to be very close to starting construction and all of these they are not long timelines to get going that were looking and making sure were accretive on all of these deals. So I will tell you that all of these deals are accretive for us.
Rudy Gobin: There are not long timelines to get going that we're looking for and making sure we're creative on all of these deals. So I'll tell you that all of these deals are creative for us given our then cost of capital when we make these decisions and when we negotiate the rents we need to make this happen.
Rudy Gobin: Given our.
Rudy Gobin: And then cost of capital when we make these decisions and when we negotiate the rents we need to make this happen.
Sam Damiani: Okay, great that's really good color, and I just have a couple quick follow-ups on this. One, I'm not sure if these sites that you're pursuing here in the near term would be sites where that was subject to sort of their earnouts from prior years where you know the return that the REIT gets is kind of predetermined a little bit. Is it like that, or is it more like this is really on the And yes, these markets that we named, I guess they sort of highlight the fact that, you know, in those markets, where, you know, 20 years ago, 25 years ago, nobody really gave much or didn't pay much attention to, you know, Bracebridge or Carlton Place or whatnot.
Speaker Change: Okay, Great. That's really good color and I just have a couple of quick follow ups. On this is is one I'm not sure.
Sam Damiani: If the sites that you are pursuing here in the near term would they be sites, where that was subject to sort of the earn outs from from prior years, where.
Sam Damiani: The return that the REIT gets us kind of pre determined a little bit.
Sam Damiani: It's more of a is it like that or is it more like this is this is really on the account.
Sam Damiani: Account.
Sam Damiani: Purely.
Sam Damiani: Enjoying all the upside.
Speaker Change: It's hard to answer that off the cuff, but I'd say, mostly it's the reads on their own mostly.
Sam Damiani: There are some other notes for sure.
Sam Damiani: Yes.
Sam Damiani: These markets the renamed I guess face sort of highlight the fact that.
Sam Damiani: In those markets.
Sam Damiani: Hum.
Sam Damiani: 20 years ago, 25 years ago, Nobody really cave much or can pay much attention to.
Sam Damiani: Brace Bridger Carlton place or whatnot. These are places that have seen.
Sam Damiani: These are places that have seen growth, you know, an injection of economic activity. It's probably, you know, partly related to the pandemic, partly because of their proximity to larger markets, but we're very strong in those markets. Occupancy wise, you know, there's no, there's really no, no, no, there's, you know, we're strong in those markets, let's just say, so when certain retailers decide that those markets have sufficient populations and sufficient economic strength to enter, such as, say, TGX, you know, we're there with the strong, you know, with the dominant site.
Sam Damiani: <unk>.
Sam Damiani: Growth.
Sam Damiani: Injection of.
Sam Damiani: Economic activity.
Sam Damiani: Probably partly related to pandemic, partly because the proximity to large markets, but we are very strong in those markets occupancy wise.
Sam Damiani: There is really no no.
Sam Damiani: No.
Sam Damiani: We are strong in those markets was to say so when when certain retailers decide that.
Sam Damiani: Those markets have sufficient populations sufficient economic strength to answer such as <unk>, we're there with the stroke.
Sam Damiani: <unk> insight.
Sam Damiani: And, you know, our earnings and other metrics are quite sensitive to adding 20,000, 30,000, 40,000 square feet of new square footage at, as Rudy says, accretive rents in multiple locations. So that's without buying any more land, I'm just fitting them in. Some of them are on the outside. I'd say most of them are really, you know... 100% REIT, I'd say the majority of them.
Sam Damiani: R.
Sam Damiani: R R.
Sam Damiani: Our metrics are.
Sam Damiani: Our earnings and other metrics, so quite sensitive to adding.
Sam Damiani: 2030, 40000 square feet of New square footage Ed is really says.
Sam Damiani: Accretive rents in multiple locations so.
Sam Damiani: That's where they're buying any more land.
Sam Damiani: Putting them in some of the burner. So I'd say most of them are really.
Sam Damiani: Yes.
Sam Damiani: 100% of the majority of those perf.
Sam Damiani: Perfect. Thank you, and I'll turn it back now. Thank you.
Speaker Change: Perfect. Thank you and I'll turn it back thank you.
Operator: As a reminder, if you would like to ask a question, please press star 1. We'll go next to Lorne Kalmar at Desjardins.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one.
Operator: We'll go next to Lorne Kalmar at Dave Barden.
Lorne Kalmar: Thanks. Good afternoon, everybody.
Lorne Kalmar: Thanks, Good afternoon everybody.
Lorne Kalmar: I think Rudy might have alluded to it earlier, but is there any desire for Walmart to expand and if so is that something that's smart centers would participate in.
Lorne Kalmar: I think Rudy might have alluded to it earlier, but is there any desire for Walmart to expand? And if so, is that something that SmartCentres would participate in?
Lorne Kalmar:
Mitchell Goldhar: Um.., you know. I would always, I prefer Walmart, at the moment, speak for themselves if they're going to make any, you know, public statements about their plans. But I will say that the relationship, you know, we are Walmart's largest landlord in Canada. So that's that.
Lorne Kalmar: No.
Mitchell Goldhar: I would always prefer Walmart.
Mitchell Goldhar: Sure.
Mitchell Goldhar: At the moment in time.
Mitchell Goldhar: Speak for themselves.
Mitchell Goldhar: So youre going to make any public statements about their plans.
Mitchell Goldhar: But I will say that the relationship we are weir walmart's largest landlord.
Speaker Change: Thank you Paul.
Mitchell Goldhar: But intangibly, you know, we have very, very good relations. You know, we are constantly and continuously in contact with each other. The relationship, that goes back to the original Wal-Mart entry and expansion in Canada and growth in Canada, was done in a way between us that developed a very strong partnership, if you will, a small P partnership, actually a capital V partnership as well in real estate. And that has continued. It really has not changed.
Mitchell Goldhar: But in Intangibly, we have very very good relations.
Mitchell Goldhar: We are constantly and continuously in contact with each other.
Mitchell Goldhar: The relationship.
Mitchell Goldhar: That goes back to the original.
Mitchell Goldhar: What merck's entry and expansion in Canada and continued growth in Canada.
Mitchell Goldhar: It was done.
Mitchell Goldhar: So in a way between us.
Mitchell Goldhar: That developed.
Mitchell Goldhar: Very strong.
Mitchell Goldhar: Partnership if you will small P partnership actually capital will be partnership as well.
Mitchell Goldhar: In the real estate and that has continued that it really has not changed.
Mitchell Goldhar: I was at Walmart two days ago, spent many hours there, it's normal, sharing with each other, sharing our experiences, our information, and strategizing. So I'll leave it to Walmart to comment on any of their plans in Canada. But I would think, and I would like to think that if Walmart were interested in expanding in Canada, we would be a part of it.
Mitchell Goldhar: Two days ago.
Mitchell Goldhar: He spent many hours there it's normal.
Mitchell Goldhar: Sharing with each other sharing are.
Mitchell Goldhar: Our information.
Mitchell Goldhar: And strategizing so.
Mitchell Goldhar: I'll leave it to Walmart too.
Mitchell Goldhar: Ill maintain any of their plans in Canada, but I would I would I would think and I would like to think that it forward.
Mitchell Goldhar: We're.
Mitchell Goldhar: Yes.
Mitchell Goldhar: Interested in expanding in Canada that we would be a part of it.
Lorne Kalmar: I know you talk about all the density on existing sites, but for a Walmart expansion, would you actually have to go out and acquire new sites, theoretically, or would that be something you could accommodate on certain sites?
Mitchell Goldhar: And would.
Mitchell Goldhar: I know you've talked about all the density on existing sites, but for Walmart expansion would you actually have to go out and acquire new sites since theoretically or would that be something you can accommodate on certain sites.
Mitchell Goldhar: I would say, you know, It's really a good question, maybe, maybe there's more to the question than you really meant, but let's just say that. I mean, you know.
Lorne Kalmar: I would say.
Lorne Kalmar: No.
Mitchell Goldhar: Okay.
Mitchell Goldhar: It's really a good question.
Mitchell Goldhar: Maybe.
Mitchell Goldhar: Maybe theres margin progression and you really meant but.
Mitchell Goldhar: Let's just say that.
Mitchell Goldhar: I mean, you know.
Mitchell Goldhar: Walmart and the likes of Walmart haven't expanded, you know, lockstep with, you know, the things I mentioned earlier, population growth, you know, changes in, you know, demographics in various types of markets, medium sized markets, for various reasons that I mentioned. So the short answer would be there would probably be new stores, a lot of them. It would probably have to be new stores.
Mitchell Goldhar: Walmart and the likes of Walmart.
Mitchell Goldhar: They haven't.
Mitchell Goldhar: Expanded.
Mitchell Goldhar: Lock step with the.
Mitchell Goldhar: With the things I mentioned earlier population growth.
Mitchell Goldhar: Changes in <unk>.
Mitchell Goldhar: You did make graphics and various types of markets medium says markets because of various reasons that I mentioned so.
Mitchell Goldhar: The short and the short answer would be we would probably be new stores a lot of it you'd probably have to be new stores.
Mitchell Goldhar: So, on-site expansions will happen and on-site, you know, renovations to... You know, there'll be net new stores. And so we would be, if it was including us, would involve acquisitions of new properties and a total, you know, expansion of our footprint in markets that we're not currently in.
Mitchell Goldhar: So on site expansions will happen.
Mitchell Goldhar: And on site.
Mitchell Goldhar: When renovations too.
Mitchell Goldhar: Two stores will happen, but.
Mitchell Goldhar: I think I think there is any chance that there'll be.
Mitchell Goldhar: There'll be there'll be net new stores and so we would be if it was including us.
Mitchell Goldhar: We didnt involve acquisitions of new properties and at total.
Mitchell Goldhar: Expansion of our footprint in markets that we're not currently in.
Lorne Kalmar: Okay, and that's very helpful. And then maybe just the last one, the self-storage portfolio. You got nine now and another bunch under construction. How big are you comfortable, you know, growing this to?
Mitchell Goldhar: Okay.
Lorne Kalmar: That's very helpful. And then maybe just last one the self storage portfolio, you got nine now and another bunch under under construction.
Lorne Kalmar: How big are you comfortable.
Lorne Kalmar: Growing this too.
Mitchell Goldhar: We're very nervous, like everything we do. We're kind of always thinking about the worst case scenario. I don't know how much you know about my, you know, you know, just, you know, kind of history or whatnot.
Lorne Kalmar: We're very nervous like everything we do.
Mitchell Goldhar: Yes.
Mitchell Goldhar: But worst case scenario.
Mitchell Goldhar: I don't know how much you know about.
Mitchell Goldhar: My.
Mitchell Goldhar: Just.
Mitchell Goldhar: I mean, you know, so it's really it's, it's almost too good to be true, to be honest. So I know our self storage program is a wonder wonder child. I mean, Yeah, we don't believe in everything working out, you know, everything being, you know, just too good to be true. We don't believe in things that are too good to be true.
Mitchell Goldhar: You kind of history or whatnot I mean.
Mitchell Goldhar: So it's really it's so it's almost too good to be true to be honest so.
Mitchell Goldhar: I know our self storage.
Mitchell Goldhar: <unk> program is a wonder when your child.
Mitchell Goldhar: So yeah, we don't believe in it.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: Yeah.
Mitchell Goldhar: No.
Mitchell Goldhar: Everything working out everything.
Mitchell Goldhar: Just too good to be true, we don't believe it too good to be true. So we're constantly looking at the storage segment carefully.
Mitchell Goldhar: So we're constantly looking at the storage segment carefully. But I will say that even with that, you know, passing through the prism of being super, super careful and cognizant that, you know, you can overbuild and, you know, you can, you know, you can create, you can commit folly. At the moment, it really seems like there is still a little bit of runway there. We see it, you know, continuing.
Mitchell Goldhar: But I will say that even with that.
Mitchell Goldhar: Passing through the prism of being Super Super careful and cognizant.
Mitchell Goldhar: You can overbuild.
Mitchell Goldhar: You can.
Mitchell Goldhar: You can create you can commit a poorly.
Mitchell Goldhar: At the moment it really seems like there is still a little bit of.
Mitchell Goldhar: Runway there.
Mitchell Goldhar: So.
Mitchell Goldhar: We see it.
Mitchell Goldhar: <unk>.
Mitchell Goldhar: I will say that SmartSup is also excellent. Some of you should just take out a storage unit from there and just see, because you want to do analysis; it's another level of analysis, because they're really outstanding operators. Operating today is probably one of the biggest, really, challenges that people gloss over, you know, running a retail store, running a storage facility. So we're really lucky to be with some, with a company who are excellent operators.
Mitchell Goldhar: We'll say that smart smart also excellent operators.
Mitchell Goldhar: Some of you should just.
Mitchell Goldhar: Take out a storage unit, there and just see because you want to do analysis, it's another level of analysis.
Mitchell Goldhar: They are really outstanding operators operating today is probably one of the biggest really kind of challenges some peoples gloss over running a retail so we're running a storage facility.
Mitchell Goldhar: So we're really lucky to be with some with the company who are excellent operators.
Mitchell Goldhar: But we're cognizant of, you know, storage and supply demand, you know, per capita, all the rest of it. So, we'll probably, if ever we think there's any potential for any erosion of rental rates or supply-demand geometrics, we will be... We will be conservative, but I will say that we've taken that into account with everyone we've done so far. And, you know, fingers crossed, you know, we'll continue this trend of exceeding our [inaudible] timeframes and our rental rates, but we're quite sober about it, you know, and We'll be watching it, continue to be watching it very, very, very closely. But so far, it's really been quite a wonder child for us.
Mitchell Goldhar: But we're cognizant of store agent.
Mitchell Goldhar: Supply demand.
Mitchell Goldhar: Per capita all the rest of it so.
Mitchell Goldhar: We'll probably.
Mitchell Goldhar: If ever we think there is any potential for.
Mitchell Goldhar: Uh huh.
Mitchell Goldhar: For any erosion of.
Mitchell Goldhar: Rental rates are supply demand metrics.
Mitchell Goldhar: Will be.
Mitchell Goldhar: We will be conservative, but I will say that we take that we've taken that into account with everyone. We've done so far.
Mitchell Goldhar: And <unk>.
Mitchell Goldhar: Fingers crossed.
Mitchell Goldhar: Will.
Mitchell Goldhar: Continue this.
Mitchell Goldhar: The trend of having deal.
Mitchell Goldhar: Exceeding our.
Mitchell Goldhar: Our lease up.
Mitchell Goldhar: Our.
Mitchell Goldhar: Our.
Mitchell Goldhar: Lisa.
Mitchell Goldhar: Timeframes and our rental rates, but we're quite sober about it.
Mitchell Goldhar: And.
Mitchell Goldhar: We'll be watching it continue to be watching it very very very.
Mitchell Goldhar: Closely but so far.
Mitchell Goldhar: It's really been quite a wonder wonder channels for us.
Lorne Kalmar: All right, that's what we like to hear. And maybe one quick one for Peter, just on capped interest. Is the Q1 number a decent run rate for the balance of the year?
Speaker Change: Alright, that's what we'd like to hear and maybe one quick one for Peter just uncapped interest is sort of the Q1 number a decent run rate for the balance of the year.
Peter L. Slan: Yes. Perfect. Thank you very much. I will turn it back.
Lorne Kalmar: Yes.
Speaker Change: Perfect. Thank you very much I will turn it back.
Speaker Change: Thanks, Mike.
Pammi Bir: We'll go next to Pammi Bir at RBC Capital Markets.
Peter L. Slan: We will go next to Tony Barrett RBC capital markets.
Pammi Bir: Thanks and hi everyone. Nice to see that pick up in the same property and white growth this quarter, but I was a bit surprised by maybe the size of the growth given the occupancy drop. Can you maybe just provide some more color around that and then, secondly, should we expect that to maybe drop off a bit until maybe some of that space from a release standpoint is cash flow protected?
Pammi Bir: Thanks.
Pammi Bir: Everyone.
Pammi Bir: Nice to see that pick up in the same property NOI growth this quarter, but I wanted to get surprised by maybe the size of the.
Pammi Bir: The growth given the occupancy drop.
Pammi Bir: Can you maybe just provide some more color around that and then secondly should we expect that to maybe drop off of that.
Pammi Bir: Until maybe some of that space from a re leasing standpoint.
Pammi Bir: These cash flow producer.
Mitchell Goldhar: I'll start and then Rudy, you can jump in. Look at two. Two units, completely unrelated units, just happened to become vacant during this quarter and have led to an occupancy drop. But they really are, you know, really, it's anomalous. And it is not a reflection.
Speaker Change: I'll start and then really you can jump in I mean.
Mitchell Goldhar: Look at too.
Mitchell Goldhar: Two units completely unrelated units.
Mitchell Goldhar: Just help them too.
Mitchell Goldhar: Becomes vacant touring.
Mitchell Goldhar: This quarter.
Mitchell Goldhar: Hubs led to an occupancy drop but they really are really.
Mitchell Goldhar: It's anomalous and it is not a reflection.
Mitchell Goldhar: You know, it's sort of, in a sense, almost ironic because, you know, our leasing is steady, if not, you know, strong, and steady across the country, and I think there's some, you know, I'll say potentially good news with respect to our overall occupancy and leasing and even portfolio expansion. But then, you know, this quarter, we happen to have had two large vacancies that, um, you know, generate a number that is just not a reflection of what's going on at all at our shop. With respect to those two, there's actually a third that's smaller but doesn't really move the needle on its own.
Mitchell Goldhar: And since almost ironic because our leasing is steady if not.
Mitchell Goldhar: Strong.
Mitchell Goldhar: And steady.
Mitchell Goldhar: Across the country.
Mitchell Goldhar: And I think there is some.
Mitchell Goldhar: Let's say potentially good news.
Mitchell Goldhar: With respect to our overall occupancy and leasing.
Mitchell Goldhar: And even portfolio expansion.
Mitchell Goldhar: This quarter, we happened to have had two large vacancies that.
Mitchell Goldhar: You generate a number that is just not reflect just not a reflection of what's going on at all at our at our shops.
Mitchell Goldhar: With respect to those two there's actually a third that's smaller but doesn't really move the needle on its own.
Mitchell Goldhar: There's interest in those two units from companies that are, significant, very significant credit worthiness and additive to, you know, traffic generation, and at rents that are higher than what we were contracted for when they were occupied. So, you know, it's just a moment in time. I really, you know, I don't want to, You know, I don't want to say anything too, too, you know, too strongly, but I really would not obsess or focus on that. It just happens to be a moment in time. It's just not reflective of what's going on.
Mitchell Goldhar: Those two have.
Mitchell Goldhar: There is interest in those two units.
Mitchell Goldhar: Companies that are.
Mitchell Goldhar: Significantly.
Mitchell Goldhar: Very significant creditworthiness and.
Mitchell Goldhar: Positive too.
Mitchell Goldhar: <unk> generation.
Mitchell Goldhar: And at rents that are higher than what we were.
Mitchell Goldhar: Contracted when they were occupied so.
Mitchell Goldhar: So it's just a moment in time.
Speaker Change: Really you know I don't want to.
Mitchell Goldhar: Yes, I do.
Mitchell Goldhar: Don't want to say in Q2, two strongly but I really would not.
Mitchell Goldhar: Obsess or focus on that it just happens to be.
Mitchell Goldhar: Moment in time as.
Mitchell Goldhar: Is that reflective of what's going on so.
Rudy Gobin: So stay tuned. Projects take a little while, but the interest is real. We've negotiated a few leases in our day, so when I say that they're likely to happen, that's based on what we, you know, what we know from experience and, likely, very strong tenants, higher rents. So I wouldn't get thrown off course by those data points at this moment in time. Rudy, did you want to add something?
Mitchell Goldhar: Stay tuned into context.
Rudy Gobin: <unk> taken a little while but the interest is real we've negotiated a few leases.
Rudy Gobin: Sure.
Rudy Gobin: Say that they are likely to happen.
Rudy Gobin: That's based on what we what we know from experience and.
Rudy Gobin: Likely very strong centers higher rents so I wouldn't.
Rudy Gobin: Yet.
Rudy Gobin: Yeah.
Rudy Gobin: So the off course by those.
Rudy Gobin: Data points at this moment in time would you want to add something.
Rudy Gobin: Yeah, nothing to that part, Mitch, but the other part, including, you know, the independence of those tenants and Pammi, the You asked about the rental growth. We've been reporting these kinds of growths, I guess in the last You can see how the momentum and what's picking up, and you can see it in the new build. The new build, you can tell it's driving it, is pushing rents a little bit higher because, again, traffic is, as Mitch mentioned earlier, just... so much stronger than it would have been a year ago.
Rudy Gobin: Yes.
Rudy Gobin: Nothing to that part Mitch, but the other part including.
Rudy Gobin: The independent of those tenants and.
Rudy Gobin: Okay.
Rudy Gobin: Sure.
Rudy Gobin: You asked about the rental growth we have been reporting these kinds of growth I guess in the last.
Rudy Gobin: Three four quarters and I will tell you the momentum and what's picking up and you can see it in the Newbuild Newbuild that you can tell it's driving it.
Rudy Gobin: Is pushing rents a little bit higher because again traffic is as Mitch mentioned earlier traffic is just.
Rudy Gobin: Something.
Rudy Gobin: So much stronger than it would've been a year ago. So now what we're seeing is tenants certainly redeveloped thing growing adding square footage changing their offering.
Rudy Gobin: So now, what we're seeing is tenants certainly redeveloping, growing, adding square footage, changing their offering, and doubling down, I'm gonna say, on the locations. You can see that with 82% of our tenants already extending for the year by the end of the quarter, that is unprecedented from the previous first quarter. We expect to see more of the same going forward.
Rudy Gobin: And doubling down I'm going to say on the locations you can see that with 82% of our tenants already extending for the year by the end of the quarter that just that is unprecedented from prior first quarter. So we.
Rudy Gobin: We expect to see more of the same going forward.
Pammi Bir: Yeah, no, that's good to hear. Just to clarify, was the pickering industrial that was included in the drop in occupancy this quarter? If I'm not mistaken, is that correct?
Speaker Change: Great Yeah, no that's good to hear.
Speaker Change: Just to clarify was the Pickering.
Speaker Change: Pickering industrial that was included in the.
Speaker Change: The drop in occupancy this quarter, if I'm not mistaken is that correct.
Pammi Bir: That's correct. Okay. All right. Thanks very much. I will, I'll turn it back.
Speaker Change: That's correct.
Speaker Change: Okay, alright, thanks, very much I will turn it back.
Pammi Bir: Okay.
Sam Damiani: We'll take a follow-up from Sam Damiani. It's T.D. Cowan.
Pammi Bir: We will take a follow up from Sam Damiani TD Cowen.
Sam Damiani: Thank you. Yeah, I just wanted to maybe follow up on Pammi's question, trying to understand how the 3% same property and why growth was achieved given given the drop in vacancy. And I just want to kind of address the renewal schedule in the MD&A as well, on page 35. So are you saying that 4.4 million square feet rolled during the quarter, or is that a trailing 12-month number? And, you know, for the two larger vacancies that occurred in Q1, how much rent contributed to NOI from those? And do you want to just quickly address that with me? Yeah, for sure.
Sam Damiani: Thank you.
Sam Damiani: Yes, I just wanted to maybe follow up on Tommy's question trying to understand how the 3% same property NOI growth was achieved given given the drop in vacancy.
Sam Damiani: And I just want to kind of address the renewal schedule in the MD&A as well on page I think 35 so.
Speaker Change: Are you are you, saying that.
Speaker Change: $4 4 million square feet roll during the quarter or is that a trailing 12 months number.
Sam Damiani: And.
Speaker Change: For the two larger vacancies that occurred in Q1, how much rent.
Speaker Change: Contributed to NOI.
Speaker Change: From those two.
Sam Damiani: Hello.
Speaker Change: And can you just do you want to just quickly adjustment I mean, yes.
Rudy Gobin: Yeah, for sure. The $4.4 million, Sam, is the amount of extensions we completed in the quarter relating to the $5 point something million that is maturing in the year. So that's the percentage that we did because tenants are again coming to us early, wanting to lock up their space and negotiate deals. So it's that. So again, a high number for the quarter.
Speaker Change: Yes sure.
Rudy Gobin: The $4 4 million Sam is the amount of extensions, we completed in the quarter relating to the five point something million that is maturing in the year. So that is the percentage that we did because tenants are again coming to us early wanting to lock up their space.
Rudy Gobin: Negotiate deals so.
Rudy Gobin: It's that.
Rudy Gobin: So again, a high number for the quarter.
Rudy Gobin: The NOI growth, again, is the NOI growth notwithstanding the vacancies. It's just strong NOI growth. And again, NOI being everything, right, all in. It's not just the rent, not just the net rental increase. It's NOI relative to, which is revenues and expenses. So it's a little bit of apples and oranges to compare the rental extension rates with NOI changes because they do encompass all the operating costs as well.
Rudy Gobin: The NOI growth again is the NOI growth notwithstanding the vacancies, it's just strong NOI growth.
Rudy Gobin: And again NOI being everything right all in it's not just the rents not just a rental net rental increase.
Rudy Gobin: Yes.
Rudy Gobin: NOI relative to which is revenues and expenses, so it's a little bit of apples and oranges to compare.
Rudy Gobin: The rental extension rates with NOI changes because they do encompass all of the operating cost as well.
Speaker Change: So of course.
Rudy Gobin: But I mean, like the two vacant spaces, the larger ones, they were obviously different circumstances. But in the one case, I assume the rent was paid until until the space went vacant. And the other one, it just obviously was a bankruptcy. Yeah, but so how, like how much of the how much of the quarter did those two spaces contribute to rent?
Rudy Gobin: But I mean like the two vacant spaces, the larger ones. They were obviously different circumstances, but.
Rudy Gobin: In the one case I assume the rent paying until until that space when vacant and.
Rudy Gobin: And the other one.
Rudy Gobin: Obviously, it's a.
Rudy Gobin: A bankruptcy, but yeah. So.
Rudy Gobin: Like how much how much of the.
Rudy Gobin: How much of the quarter did those two spaces contribute rent.
Rudy Gobin: Oh, not much. The other tenant is, again, a logistics independent operator with one location, so not a significant impact on the overall rent. That's why you're not seeing an impact that you might have otherwise expected with two, you know, a little bit two plus of these kinds of tenants because, again, the renewals and the new deals that have started for lease up of space that was vacant at the end of the year last year, which we've done in the year, you know, probably around 150, 200, I can't remember exactly the number, a thousand square feet, also would have made up for some of that.
Speaker Change: Oh not much.
Rudy Gobin: Other tenants.
Rudy Gobin: Again in logistics independent operator, with one location, so not a significant impact on the overall rate that's why you're not seeing.
Rudy Gobin: And impact that you might have otherwise expected with led to.
Rudy Gobin: Although the two plus of these kinds of tenants because again the renewals.
Rudy Gobin: And the new deals that have started for lease.
Rudy Gobin: Lease up of space that that that was vacant at the end of the year last year, which we've done in the year.
Rudy Gobin: It will probably be around 150, 200, I can't remember exactly the number 1000 square feet also would have made up for some of that.
Rudy Gobin: The NOI.
Rudy Gobin: Yes.
Speaker Change: And I Wonder if you might go ahead.
Mitchell Goldhar: and I just sort of want it to be my... Sorry, but go ahead. So imagine, you know, you got like a 130,000 square foot building and somebody's taking it for like $5 a foot, okay? You know, so from an occupancy point of view, they left. So we got back 130,000 square feet. But we put them in sort of on the fly when the tenant comes in. When the original tenant that was occupying that building, when their term expired, we put in a tenant that was, you know, kind of, in a sense, sort of like a temporary tenant, which we would have had rights to terminate, but they were paying, let's say, net $5 a foot, and there were no land use amendments or anything related. So we did that because that was, on balance, attractive, especially during COVID, and then when nobody was doing anything.
Rudy Gobin: So imagine you got like 130000 square foot building and somebody's, taking it for like $5 a foot okay.
Mitchell Goldhar: No.
Mitchell Goldhar: From an occupancy point of view they left so we we got back 130000 square feet.
Mitchell Goldhar: But we put them in sort of on the fly when the when the tenants.
Mitchell Goldhar: When the original tenants was occupying the building.
Mitchell Goldhar: Uh huh.
Mitchell Goldhar: Near term.
Mitchell Goldhar: Fired we put in a tenant that was.
Mitchell Goldhar: Almost almost in a sense sort of like a temporary tenants.
Mitchell Goldhar: Which we would've had rights to terminate but they were paying let's say net $5 a foot. So they pay all the taxes and common area and $5 a foot on a huge amount of space, but immediately because their need to move and so so quickly.
Mitchell Goldhar: And then do some inventory or anything related so we did that and because that was on balance attractive.
Mitchell Goldhar: Specialty during COVID-19.
Mitchell Goldhar: But now, you know, things have changed, and we have an interest in that space. Had that tenant still been there? Now, we might. Double-digit rent, and a much stronger covenant.
Mitchell Goldhar: And then when nobody was doing anything but now.
Mitchell Goldhar: Things have changed and we have interest in that space had that tenants still being there.
Mitchell Goldhar: Now we might.
Mitchell Goldhar: Soon terminate them because we are interested in that space for somebody a double digit rents.
Mitchell Goldhar: Double digit rents.
Mitchell Goldhar: And a much stronger covenant.
Mitchell Goldhar: But in between, you know, it's vacant. So, you know, we report it as vacant, and then the bad boy space goes bankrupt.
Mitchell Goldhar: But in between.
Mitchell Goldhar: So we reported as our vacancy.
Mitchell Goldhar: And then the back office space.
Mitchell Goldhar: So, you know, we were very confident in that location, very confident in our building, and we have multiple interests in that space, and we fully expect to lease it within the next quarter or two. It'll probably be through the next quarter, but rent will start in the next quarter or two. And, you know, the Bad Boy deal, the building was built for Bad Boy, you know, nobody other than myself should take, you know, have responsibility for that deal. No, nobody. I have zero regrets about it.
Mitchell Goldhar: They went bankrupt so we.
Mitchell Goldhar: We're very confident in that location very confident in our building and we have but we have multiple interest in that space and we fully expect to lease it within the next quarter or two.
Mitchell Goldhar: You're probably at least through next quarter, but rent commence in the next quarter or two and the <unk>.
Mitchell Goldhar: Boy deal. The building was built for bad Boy you know.
Mitchell Goldhar: Nobody other than myself you should take.
Mitchell Goldhar: That's really for that deal.
Speaker Change: No no.
Mitchell Goldhar: Nobody.
Mitchell Goldhar: Yes.
Mitchell Goldhar: Okay.
Mitchell Goldhar: But.
Mitchell Goldhar:
Mitchell Goldhar: Zero regrets about the battery deal was done at below market rents and so even though it's in.
Mitchell Goldhar: The Bad Boy deal was done at below-market rents, and so even though it's work and it's a headache, we're sort of cut out for the work and the headaches part. We will probably lease that space for more than what we had rented it to Bad Boy for. So, I mean, you know, it's work and a headache, but, you know, and it's vacant right now.
Mitchell Goldhar: It's working it's a headache.
Mitchell Goldhar: For for the work and the headaches apart.
Mitchell Goldhar: We will probably add space at more than what we had rents to bad boy for.
Mitchell Goldhar: So I mean.
Mitchell Goldhar: Its work in the headache, but.
Mitchell Goldhar: Vacant right now, but it's a great building in a very strategic location. So we will probably really fat in the next quarter and rent will commence in the next two quarters. So yeah. I mean, that's that's a little bit more color on those two situations.
Mitchell Goldhar: But it's a great building in a very strategic location, so we'll probably release that in the next quarter, and rent will commence in the next two quarters. So, yeah, I mean, that's a little bit more color on those two situations. That's a really good color.
Sam Damiani: And I still want to be mindful of time. But if there's a, you know, a 60 second answer to this question, I'd appreciate it. And sort of back to my earlier question on the call, which is, you know, about all this retail development. Are you finding that, in some cases, it overlaps on sites that you had been contemplating high-density development, and are you presented with the opportunity to choose between developing something single story, fairly low risk, short term, quick get it done with a good attractive yield and forego that higher density land value opportunity? Is that something that's starting to play out? You should be a developer.
Speaker Change: That's really good color and so we want to be mindful of time, but if there is a 62nd answer to this question I appreciate it and sort of back to my earlier question on the call, which is about all this retail development.
Sam Damiani: Are you finding in some cases it <unk>.
Sam Damiani: Overlaps with on sites that you had been contemplating high density development.
Sam Damiani: And are you presented with the opportunity to choose between developing something.
Sam Damiani: <unk> story fairly low risk short term.
Sam Damiani: Quick get it done was good good attractive yield and forego that sort of higher density land value opportunity is that something thats, starting to play out or mostly yes.
Mitchell Goldhar: That's a very good question. That's really, really, you know, lateral thinking. Absolutely. We are doing some retail deals where we will preclude, we will forego density. But are we really foregoing density? Not really.
Speaker Change: You should be a developer that's very good question, that's really really well.
Speaker Change: <unk> thinking.
Speaker Change: <unk> we are.
Mitchell Goldhar: We are doing some retail deals.
Speaker Change: We will preclude we will forego density, but are we really foregoing density not really but.
Mitchell Goldhar: But, you know, in that specific location, will we give it a strong term? Because what we're trying to say to you in between the lines is that there is a lot of interest from strong tenants. Will we forego some density to get a new single-story retail deal done at a good rent from a strong tenant for a long-term lease? Yes. Why?
Mitchell Goldhar: In that specific location will we give term to its strong because what we're trying to say to you in between the lines is a lot of interest from strong tenants, where we forego.
Mitchell Goldhar: Some density to get a new single storey retail.
Mitchell Goldhar: Deal done at a good rent from a strong tenant for a long term lease yes.
Mitchell Goldhar: Because we have 50, 60, 70 million square feet of dense. We don't need it. We can give up, you know, 500,000 square feet of density to do a deal with, you know, a blank, strong double A plus retailer, okay? So, yes, we are absolutely doing that. It also obviously supports and augments the existing shopping center. And by the way, sophisticated retailers are very interested in talking about going on to the ground floor of some of our dense buildings.
Mitchell Goldhar: Because we are 50, 60 70 million square feet of that we don't need.
Mitchell Goldhar: We can give up.
Mitchell Goldhar: 500000 square feet of density to do a deal with.
Mitchell Goldhar: Blake strong double a plus retailer okay.
Mitchell Goldhar: So yes, we are absolutely doing that it also obviously support since augments the existing.
Mitchell Goldhar: Shopping center and by the way the sophisticated retailers are very.
Mitchell Goldhar: Interested not just opened but interested in talking about going onto the ground floor of some of our density.
Mitchell Goldhar: So in many cases, I would say, we are going to do both. But there are certainly a number of cases where we will forego some of that density for a good retail deal, that single-story at-grade parking, long-term lease that's accretive from a strong tenant.
Mitchell Goldhar: So in many cases I would say.
Mitchell Goldhar: <unk> are going to do both.
Mitchell Goldhar: There are certainly a number of cases, where we will forego some of that density.
Mitchell Goldhar: For a good retail deal that single story accurate parking long term lease that's accretive from a strong tenant.
Sam Damiani: That's great. Thank you very much, and I'll give it back.
Speaker Change: That's great. Thank you very much and I'll turn it back.
Mitchell Goldhar: And that concludes our session. I will now turn the conference back over to Mitch Goldhar for closing remarks.
Sam Damiani: And that concludes our <unk> session I will now turn the conference back over to Mitchell for closing remarks.
Mitchell Goldhar: Yeah.
Mitchell Goldhar: Thank you. I guess all of us.
Mitchell Goldhar: Okay.
Mitchell Goldhar: Thank you.
Mitchell Goldhar: Alright, guys.
Mitchell Goldhar: Yeah.
Mitchell Goldhar: Thank you all for participating. This is our Q1 Analyst Call, and we appreciate all the thoughtful questions. If there are any more questions or feedback, please feel free to reach out to any of us. In the meantime, have a good day, and thanks for taking the time to be part of this call.
Mitchell Goldhar: Alright.
Mitchell Goldhar: Thank you all for participating.
Mitchell Goldhar: This is our Q1 analyst call and we appreciate all the thoughtful questions.
Mitchell Goldhar: If there are anymore.
Mitchell Goldhar: <unk> or feedback please feel free to reach out to any of us.
Mitchell Goldhar: In the meantime.
Mitchell Goldhar: Have a good day and thanks for.
Mitchell Goldhar: Thanks for taking the time to be part of this call.
Mitchell Goldhar: Good day.
Operator: Ladies and gentlemen, this concludes the SmartCentres REIT Q1 2024 conference call. Thank you for your participation and have a nice day. Please wait; the conference will begin shortly.
Speaker Change: Ladies and gentlemen. This concludes today's Smart Center three Q1 2024 conference call. Thank you for your participation and have a nice day.
Operator: Please wait the conference will begin shortly.
Operator: Thanks for watching!
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