Q2 2024 CT Real Estate Investment Trust Earnings Call
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star 1 1 on your telephone keypad. To withdraw your question, please press star 1 1.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question answer session. If you would like to ask a question during that time simply press star one one on your telephone keypad to withdraw your question. Please press star one one the speakers on the call today are <unk>.
Unnamed Speaker: The speakers on the call today are Kevin Salsberg, President and Chief Executive Officer of C.T. Spiegel, Senior Vice President, Real Estate; and Lesley Gibson, Chief Financial Officer. Today's discussions may include forward-looking statements. Such statements are based on management's assumptions and beliefs. However, these forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Kevin Salzburg, President and Chief Executive Officer of C. T Rieck, Jodi Spiegel Senior Vice President real estate and Leslie Gibson Chief Financial Officer. Today's discussions May include forward looking statements such statements are based on management's assumptions and beliefs. These forward looking statements.
Are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see C. T reached public filings for a discussion of these risk factors, which are included in their 2023 managements discussion and analysis and 2023 annual information form.
Speaker Change: Which can be found on C. T reads website and on SEDAR, plus I will now turn the call over to Kevin Seles, Burke, President and Chief Executive Officer of C. T right Kevin.
Unnamed Speaker: Please see C.T. Reed's public filings for a discussion of these risk factors, which are included in their 2023 Management's Discussion and Analysis and 2023 Annual Information Form, which can be found on C.T. Reed's website and on CDER+. I will now turn the call over to Kevin Salsberg, President and Chief Executive Officer of C.T. Reed.
Speaker Change: Thank you Susie.
Kevin Salsberg: Good morning, everyone, and welcome to C.T. Reid's second quarter investor conference call. Despite a challenging economic backdrop, CTRE continues to perform well, and I am pleased with our results again this quarter as NOI and AFFO per unit increased by 4.4% and 3.6%, respectively. Our track record and ability to grow cash flow on a per-unit basis have allowed us to raise our distributions 11 times since our IPO in 2013, with the most recent increase in distribution payments being enjoyed by our investors starting last month.
Speaker Change: Good morning, everyone and welcome to <unk> second quarter Investor Conference call.
Kevin Salisbury: Despite a challenging economic backdrop C. P. REIT continues to perform well and I am pleased with our results again this quarter as NOI and <unk> per unit increased by four 4% and three 6% respectively.
Kevin Salisbury: Our track record and ability to grow cash flow on a per unit basis has allowed us to raise our distributions 11 times since our IPO in 2013 with the most recent increase in distribution payments being enjoyed by our investors starting last month.
Kevin Salsberg: Including this latest increase, our compound annual growth rate in distributions over the last five years is 4.1%, and we have achieved this growth while managing to improve our pay-o-ratio to its current level of just over 70%.
Kevin Salisbury: Including this latest increase.
Kevin Salisbury: Compound annual growth rate in distributions over the last five years is four 1% and we've achieved this growth while managing to improve our payout ratio to its current level at just over 70%.
Kevin Salsberg: I am also pleased that, notwithstanding a very slow property transaction market, we continue to be able to source strategic opportunities to grow our portfolio of net lease assets. We were happy to announce in our Q2 release that we acquired a Canadian Tire anchored property in a very strong market with high barriers to entry on the island of Vancouver in the province of British Columbia. Additionally, we sold a former Canadian Tire Anchor property in Chilliwack, BC, in Q2 to an end user at a price well above our IFRS value for the asset.
I'm also pleased that notwithstanding a very slow property transaction market, we continue to be able to source strategic opportunities to grow our portfolio of net leased assets. We were happy to announce in our Q2 release that we acquired a Canadian tire anchored property in a very strong market with high barriers to entry on the island of Vancouver.
Kevin Salisbury: Her in the province of British Columbia.
Kevin Salisbury: Additionally, we sold a former Canadian tire anchored property in Chilliwack BC in Q2, two and end user at a price well above our <unk> value for the asset.
Kevin Salsberg: Although our hope is that the recent moves by the Bank of Canada to continue to lower interest rates will spur additional market activity and deal velocity, we continue to manage our portfolio for the future and prudently seek out avenues for growth. As it relates to our balance sheet, we completed the previously announced rate reset on our Series 4 Class C LP units with Canadian Tire in the quarter and continued to buy back units under our NCIB program, taking advantage of the fact that we were trading well below net asset value.
Although our hope is that the recent moves by the bank of Canada to continue to lower interest rates will spur additional market activity and deal velocity, we continue to manage our portfolio for the future and prudently seek out avenues for growth.
Kevin Salisbury: As it relates to our balance sheet, we completed the previously announced rate reset on our series four class C. L. P units with Canadian tire in the quarter and continued to buyback units under N. CIP program, taking advantage of the fact that we were trading well below net asset value.
Kevin Salsberg: Finally, I am pleased to share that we recently released our third annual ESG report, detailing our efforts and achievements for 2023. The report is available for download on our website, and I encourage you to take a read as we are proud of the progress that we continue to make on our ESG journey. I will now turn the call over to Jodi and Lesley to provide some additional details on the corridor, our results, and our investment, leasing, and development activities.
Kevin Salisbury: Finally, I am pleased to share that we recently released our third annual ESG report detailing our efforts and achievements from 2023.
Kevin Salisbury: The report is available for download on our website and I encourage you to take away is we are proud of the progress that we continue to make along our ESG journey.
Kevin Salisbury: I will now turn the call over to Jodi and Leslie to provide some additional details on the quarter, our results and our investment leasing and development activities Jody.
Jodi Shpigel: Thanks, Kevin, and good morning, everyone. As highlighted in our press release yesterday, we were pleased to announce one new investment this quarter. This new investment relates to the acquisition of a property with a Canadian Tire store and a Mark store in Nanaimo, British Columbia. This investment of $45.2 million with a going-in yield of 6% will add 141,000 square feet of incremental GLA to the portfolio. As Kevin has already highlighted in Q2, C.T.
Jodi: Thanks, Kevin and good morning, everyone.
Jodi: As highlighted in our press release yesterday, we were pleased to announce one new investment this quarter. This new investment relates to the acquisition of a property with a Canadian tire store and a mark start in Nanaimo British Columbia. This investment of $45 2 million with a going in yield of 6% will go at 141.
Jodi: Square feet of incremental GLA to the portfolio.
Jodi: As Kevin has already highlighted in Q2 C. T. REIT has also saw the former Canadian tire property in Chilliwack BC for $19 million.
Jodi Shpigel: Reid has also sold a former Canadian Tire property in Chilliwack, B.C., for $90 million, and completed the previously announced intensification of a Canadian Tire store in Granby, Quebec. The total investment required for the Canadian Tire store expansion was $7.6 million, and this project added 27,000 square feet of incremental GLA to the portfolio. Building on the progress made in 2023, the REIT currently has 19 projects at various stages of development, with two of these expected to be completed this year, and with the remaining projects expected to be completed in 2025 and 2026.
Jodi: We completed the previously announced intensification of the Canadian tire store in Granby, Quebec, the total investment required for the Canadian tire store expansion with $796 million. In this project added 27000 square feet of incremental GLA to the portfolio.
Jodi: Building on the progress made in 2023. The REIT currently has 19 projects at various stages of development with two of these expected to be completed this year and with the remaining projects expected to be completed in 2025 and 2026.
Jodi Shpigel: These developments represent a total committed investment of approximately $283 million upon completion, $98 million of which has already been spent, and $85 million of which we anticipate will be spent in the next 12 months. Once built, these projects will add a total incremental GLA of approximately 715,000 square feet to the portfolio, nearly 94% of which has been pre-leased at quarter end. During the quarter, we extended three Canadian Tire store leases, as well as approximately 98,000 square feet of non-Canadian tire tenancies, and our occupancy rate is now at 99.4%.
Jodi: These developments represent a total committed investment of approximately 283 million. Upon completion 98 million of which has already been spent and 85 million of which we anticipate will be spent in the next 12 months. Once built these projects will add a total incremental GLA of approximately 700000.
16000 square feet to the portfolio nearly 94% of which has been pre leased at quarter end.
Jodi: During the quarter, we extended three Canadian tire store leases as well as approximately 98000 square feet of non Canadian tire tenancies and our occupancy rate is now at 99, 4%.
Jodi Shpigel: As at the end of Q2, the weighted average lease term for our portfolio was 8.0 years, which remains one of the longest in the sector. With that, I will turn it over to Lesley to discuss our financial results. Lesley? Thanks.
Leslie: I was at the end of Q2, the weighted average lease term for our portfolio with eight point theory years, which remains one of the longest in the sector with that I will turn it over to Leslie to discuss our financial results closely.
Lesley Gibson: Thanks Jodi and good morning everyone. As Kevin highlighted, we were pleased with the strong results delivered by the REITs again this quarter. Same store NOI grew by 1.0% or $1.1 million. Drivers of the same store NOI increase were contractual rent escalations of $1.8 million, primarily being the 1.5% average annual rent escalation including the Canadian Tire lease, partially offset by lower recovery of capital expenditures, which reduced NOI by $600,000 in the quarter, primarily as a result of the final billings completed in Q2 2023, which contributed over $1 million, excluding which our same property NOI would have been 2.2%, which is more in line with our historic average.
Leslie: Thanks, Jody and good morning, everyone.
Leslie: As Kevin highlighted we're pleased with the strong results delivered by the weak again this quarter.
Leslie: Same store NOI grew by 1.0% of $1 1 million.
Leslie: Drivers of the same store NOI increase where contractual rent escalations of 1.8 million, primarily being the 1.5% average annual rent escalations, including the Canadian tire leases.
Leslie: Partially offset by lower recovery of capital expenditures, which reduced NOI by 600000 in the quarter, primarily primarily as a result of the final billings completed in Q2, 2023, which contributed over $1 million, excluding which our same property NOI would have been two 2% which is more in line with our his.
Leslie: <unk> average.
Lesley Gibson: Same property NOI grew by 1.9%, or $2 million, compared to the prior year. This increase was primarily due to the increase in same-store NOI noted, as well as from the intensifications completed in 2023 and 2024. Overall, in the second quarter, NOI grew by a healthy 4.4% or $4.8 million, driven by the increase in the same property NOI, the completion of development projects in 2023, and from lease-to-render revenue, which contributed approximately $1 million.
Leslie: Same property NOI grew by one 9% or 2 million compared to the prior year.
Leslie: This increase was primarily due to the increase in same store NOI noted as well as from the intensification is completed in 2023 and 2024.
Leslie: Overall in the second quarter NOI grew by a healthy four 4% or four pretty a million dollars driven by the increase in same property NOI. The completion of development projects in 2023 and some lease surrender retina, which contributed approximately $1 million.
Lesley Gibson: In the second quarter, excluding fair value adjustments, G&A expense as a percentage of property revenue was 2.8%, which was lower than the same period in the prior year, 3.1%. This decrease was primarily due to the timing of the Deferred Income Tax provision amounting to $525,000, which is expected to reverse over the balance of the year. The fair value adjustment of $22.9 million in the quarter was driven by a combination of contractual rent increases and the leasing activity within the portfolio during that period, as well as a gain from the disposition of a property which accounted for about half of the quarter's fair value increase. Investment metrics for the portfolio remained unchanged relative to Q1 2024.
Leslie: In the second quarter, excluding fair value adjustments G&A expense as a percentage of property revenue was two 8%, which was lower than the same period in the prior year three 1%.
Leslie: This decrease was primarily due to the timing of the deferred income tax provision amount of 525000, which is expected to reverse over the balance of the year.
Leslie: The fair value adjustment of $22 9 million in the quarter was driven by a combination of contractual rent increases and our leasing activity was in the portfolio during that period.
Leslie: As well as a gain from the disposition of a property, which accounted for about half of the quarter's fair value increase.
Leslie: Investment metrics for the portfolio remained unchanged relative to Q1 2024.
Lesley Gibson: In the quarter, Duluth's FFO per unit was up 2.1% to $0.337 compared to $0.330 in the second quarter of 2023. This growth can be primarily attributed to the intensifications and developments completed during 2023 and 2024, the contractual rent escalations in our Canadian Tire leases, and the previous mentioned surrender revenue, partially offset by higher interest costs. Growth in AFFO per unit on a diluted basis was strong for the same reasons, coming in at 31.5%, up 3.6% compared to Q2 of 2023.
Leslie: In the quarter diluted F. L. P unit with up to 1% to $33 seven compared to 33.0 cents in the second quarter of 2023.
Leslie: This growth can be primarily attributed to the intensification and developments completed during 'twenty, three and 'twenty four it contractual rent escalations and a Canadian tire leases and the previous mentioned surrender revenue, partially offset by higher interest costs.
Leslie: Yeah.
Leslie: Growth in <unk> per unit on a diluted basis was strong for the same reasons coming in at 31.5 cents or three 6% compared to Q2 of 2023.
Lesley Gibson: Cash distributions paid in the quarter increased 3.5% compared to the same period in the previous year due to the increases in the monthly cash distribution paid in July 2023. And, as announced last quarter, we have, for the 11th time in as many years, declared a further increase to our distributions of 3%, which is effective for the cash distribution payment made on July 15th. This represents a cumulative increase of 42.3% since our IPO in 2013. The AFFO payout ratio for Q2 was 71.4%, which was unchanged from the same period last year.
Leslie: Cash distributions paid in the quarter increased three 5% compared to the same period in the previous year due to increases in the monthly cash distributions paid in July 2023.
Speaker Change: And as announced last quarter, we I feel that at the time in as many years declared a further increase to our distributions of 3%, which was effective for the cash distribution payment made on July 15th.
Leslie: This represents a cumulative increase of 42.3% since our IPO in 2013.
Leslie: The <unk> payout ratio for Q2 was 71, 4%, which is unchanged from the same period last year.
Operator: In Q2 2024, we continued repurchasing our units into the NCIB facility, buying back approximately 8.4 million units at an average price of $13.37 per unit, which is below their intrinsic value. Now turning to the balance sheet, our interest coverage was 3.59 times for the current quarter, compared to 3.74 times for the comparable quarter of 2023, with a decrease mainly driven by the increase in interest expense and other financing charges outpacing the growth in EBIT fair value.
Leslie: In Q2, 'twenty 'twenty four we continued repurchasing our units to the N C. I b facility buying back approximately eight 4 million of units at an average price of $13.37 per unit, which is below their intrinsic value.
Leslie: Now turning to the balance sheet, our interest coverage was $3 five nine times for the current quarter compared to $3 seven four times for the comparable quarter of 2023, but.
Leslie: But did you increase mainly driven by the increase in interest expense and other financing charges outpacing the growth in EBIT fair value.
Operator: The indebtedness to the EBIT fair value ratio improved to 6.59 times, down from 6.83 times in Q2 of 23, primarily because of the growth in EBIT fair value outpacing the slight increase in indebtedness. Our indebtedness ratio was up slightly to 40.9% from 39.9% in the same quarter of last year due to the issuance of the Series I Senior unsecured debentures partially offset by an increase in Our indebtedness ratio continues to be within our target range, and considering the current macroeconomic backdrop and interest rate environment, we're pleased with the strength of the balance sheet.
Speaker Change: The Dennis to EBIT fair value ratio improved to $6 five nine times down from $6 eight three times in Q2 of 'twenty three primarily because of the growth in EBIT fair value outpacing the slight increase in indebtedness.
Leslie: Our indebtedness ratio was up slightly to 49% from 39, 9% in the same quarter of last year due to the issuance of the series of ice senior unsecured debentures, partially offset by an increase in fair value of investment properties or.
Speaker Change: Our indebtedness ratio continues to be within our target range and considering the current macroeconomic backdrop and interest rate environment. We're pleased with the strength of the balance sheet.
Operator: Lastly, with respect to liquidity, we ended Q2 with $31 million of cash on hand, and $297 million remains available through our committed credit facility. A further $300 million is available in our uncommitted facility with Canadian Tire Corporation. And with that, I'll turn the back call back to the operator for any questions.
Speaker Change: Lastly, with respect to liquidity, we ended Q2 with $31 million of cash on hand, and 297 million remains available through our committed credit facility. A further 300 million is available on our uncommitted facility with Canadian Tire Corporation.
Leslie: And with that I'll turn the back call back to the operator for any questions.
Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then one on your telephone keypad. To withdraw your question, press star, then 11 again. We'll pause for just a moment to compile the Q&A list. Our first question comes from the line of Lorne Kalmar from Desjardins.
Speaker Change: Thank you.
Speaker Change: This time I would like to remind everyone in order to ask a question. Please press Star then one one on your telephone keypad to withdraw your question Press Star then one one again, we'll pause for just a moment to compile the Q&A roster.
Speaker Change: Our first question comes from the line of Lorne Kalmar from Desjardins.
Lorne Kalmar: Thanks, and happy Friday, everybody. Morning, maybe just good morning. First on the dispositions. I haven't been covering you guys for that long, but I believe this is not typical. Is this something we can expect more of going forward? And maybe you can give us a little bit of an idea of what the genesis of the transaction was.
Speaker Change: Thanks, and happy Friday, everybody.
Leslie: Maybe just good morning.
Speaker Change: Just first on the dispositions.
Lorne Kalmar: I haven't been covering you guys for that long, but I believe this is not typical is is this something we can expect more of going forward and maybe you can give us a little bit of an idea of what the genesis of the transaction.
Kevin Salsberg: I would say broadly, no, I wouldn't expect a lot more of that in the future. I mean, typically, our preference, you know, in this instance where Canadian Tire had relocated from the site, would be to redevelop it and try to create incremental value. This particular location, a strong retail node, Chilliwack, in the lower mainland of British Columbia, a really strong site. We had an end user who came along and made us a very compelling offer.
Speaker Change: I would say broadly no I wouldn't expect a lot more of that in the.
Speaker Change: Future I mean typically.
Leslie: Our preference in this instance, where a Canadian tire had relocated from the site would be to redevelop it and try to create incremental rental value.
Leslie: This particular location and the strong retail node chilliwack.
Leslie: Lower mainland and in British Columbia.
Leslie: Really strong so we had an end user who came along and made us a very compelling offer.
Kevin Salsberg: Canadian Tire still had some lease term with us, so a couple of strong offers with a lease surrender buyout arrangement. And the financials were just, I guess, too compelling to hold on to the asset. So we've made the decision to sell it.
Leslie: Can you still had some lease term with us so a couple of a strong offer with at.
Speaker Change: At least surrender buyout arrangement.
Leslie: And the financials are just.
Leslie: I guess two compelling to hold onto the asset so.
Speaker Change: We've made the decision to Tucson.
Lorne Kalmar: Fair enough, and that kind of dovetails with my next question. Is the least term income related to the disposition?
Speaker Change: Fair enough and that kind of dovetails to my next question is the lease term income related to the disposition.
Kevin Salsberg: It's not related to the disposition in that it wasn't, you know, directly tied to the purchase agreement, but the end user did want vacant possession, so indirectly, yes.
Speaker Change: It's not related to the disposition that it wasn't.
Leslie: Directly.
Speaker Change: Tied to the purchase agreement by the end user did one vacant possession, so indirectly yes.
Lorne Kalmar: Okay, fair enough. And then maybe just last one for me, I know kind of the last few quarters have benefited from the higher rate on the recovery of capital expenditures, and you know with rates coming off, is it sort of fair to expect maybe below typical same asset NOI, same asset NOI growth profile for the next few quarters?
Leslie: Okay fair enough.
Speaker Change: And then maybe just last one for me I know kind of the last few quarters. It benefited from the recovery at a higher rate on the recovery of the capital expenditures.
Leslie: With rates coming off.
Speaker Change: Is it sort of fair to expect maybe at below typical say asset NOI.
Speaker Change: Same asset NOI growth profile for the next few quarters.
Lesley Gibson: Lawrence, Lesley, this quarter was maybe a little bit tougher one to comp over because of some final billings in the prior quarter. Obviously, rates have come down and are coming down, and we will expect that. So, we will be comping off a little bit of low interest expense, but I think that the bigger delta quarter of our quarter this year will be the final billings that were done in Q2 of 2023. The interest change in the rate will be, perhaps, a little bit more modest going through the other quarters as it is only going down another quarter point.
Speaker Change:
Speaker Change: Leslie the this quarter was maybe up a little bit tougher when to comp over because of some final billings in the prior quarter.
Lorne Kalmar: Okay, thank you very much. I will turn it back. Thank you.
Speaker Change: And you know obviously the rates have come down and are coming down and we will expect that so we will be comping off a little bit a little bit of lower interest expense, but I think the bigger delta quarter over quarter. This year is to find out from final billings that were done in Q2 'twenty three on the interest a change in the rate will be perhaps a I think a little bit more.
Speaker Change: Modest going through the other quarters, that's it's only go down another quarter quarter quarter point.
Speaker Change: Okay.
Speaker Change: Thank you very much I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Pammi Bir from RBC Capital Markets.
Pommy beer: Our next question comes from the line of Pommy beer from RBC capital markets.
Pammi Bir: Thanks. Good morning.
Speaker Change: Thanks, Good morning, I wanted to come back to the <unk> acquisition can you maybe provide a little more color on that one.
Speaker Change: And just give me maybe a bit more of a favorable rate environment I'm curious if you're starting to see.
Speaker Change: Similar attractive opportunities start to shake loose from third parties.
Kevin Salsberg: I wanted to come back to the BC acquisition. Can you maybe provide a little more color on that one? And just give them maybe a bit more of a favorable rate environment? I'm curious if you're starting to see some more
Speaker Change: I'm sure if I may I'll, I'll take that and good morning.
Speaker Change: Off market deal. This was a relationship we had with the existing.
Kevin Salsberg: Sure, Pammi, I'll take that, and good morning. Off-market deal, this was a relationship we had with the existing supplier, or the vendor, I guess, and we had been in discussions for some time. It was part of a larger asset that is part of a broader redevelopment scheme that they're contemplating, and this component of the property was more stabilized. So, yeah, lots of discussions. We've been in, I guess, negotiations and under contract for some time as it did require a subdivision. So this is something that we have had in the pipeline for, I guess, an extended period of time.
Speaker Change: The vendor I guess.
Speaker Change: And we have been in discussions for some time and it was part of a larger asset that is part of a broader redevelopment scheme that theyre contemplating.
Speaker Change: And this this component of the property was more stabilized.
Speaker Change: So.
Speaker Change: Yes lots of discussion.
Speaker Change: We've been in I guess negotiations and.
Speaker Change: Contracts for some time as it did.
Speaker Change: It require a subdivision.
Speaker Change: So this is something that we had in the pipeline for.
Speaker Change: I guess, an extended period of time, but.
Kevin Salsberg: But, you know, very happy to be transacting one in British Columbia and two on the island of Vancouver. Obviously, tough to come by assets at prices that we feel are compelling there. So we thought the financial parameters of the deal were attractive for us. And certainly, repatriating Canadian tire stores fits squarely within our strategic plans.
Speaker Change: But you know very very happy to be transacting, one in D C and two on the island of Vancouver, obviously tough to come by assets at pricing that we feel is compelling there. So we've got the.
Speaker Change: The financial parameters of the deal.
Speaker Change: We are attractive for us.
Speaker Change: And certainly repatriating Canadian tire stores is.
Speaker Change: Squarely within our strategic plans.
Kevin Salsberg: In terms of the broader market, I haven't seen really much movement in the way of pricing or additional volume, I would say. Marketed transactions right now seem light to me by comparison, at least specifically for retail assets. You know, Q1 was very light in terms of investment volumes, and I think you're seeing that reflected in our fair value assessment for the quarter, where we essentially just held things flat. You know, could these recent moves by the Bank of Canada give buyers and sellers a little bit more confidence that it's time to start moving the needle on both exchanging assets and pricing? It's entirely possible, but I think... You know, we'll have to see how the rest of the year shapes up.
Speaker Change: In terms of the broader market haven't seen really much movement in the way of pricing or additional volume I would say marketed transactions right now seems light to me by comparison at least specifically for retail assets.
Speaker Change: Q1 was very light in terms of investment volumes.
Speaker Change: And I think youre seeing that reflected in an hour.
Speaker Change:
Speaker Change: Our fair value assessment for the quarter, where we essentially just help things flat.
Speaker Change: Could the recent moves by the bank of Canada.
Speaker Change: Buyers and sellers, a little bit more confidence.
Speaker Change: It's time to start moving the needle on both.
Speaker Change: Exchanging assets and pricing entirely possible that I think.
Speaker Change: We'll have to see how the rest of the year shapes up.
Speaker Change: And what.
Speaker Change: While we might see in the market.
Pammi Bir: I don't know that's a helpful color. Just on maybe one more on that acquisition. What's the term left on the Canadian Tower lease, or I guess The Mix of Weezes from the Canadian Tower Band, um, and
Speaker Change: Got it.
Speaker Change: That's helpful color, just maybe one more on the on that acquisition what's.
Speaker Change: Whats the term left on the on the key entire lease or I guess.
Speaker Change: Some leases from the Canadian tire vendors in there.
Speaker Change: And.
Speaker Change: I guess it's.
Speaker Change: Would there be any changes I guess to maybe reflect.
Speaker Change: Is that a more similar to the city REIT portfolio.
Kevin Salsberg: Good morning. So, in terms of the lease term, there are many, many years with options left on this term. It goes for an extended period of time, and so that was another part of the reason why it was compelling for us to purchase it. We do have a lot of lease term left on this asset between the Canadian Tire and the Mark. Yeah, I think the Canadian Tire is north of 10 years for sure. Oh, yeah. It has definitely been north of 10 years with us.
Speaker Change: Yeah.
Speaker Change: Hi, good morning, so in terms of the lease term a there's many many years had options left on this Germany goes for an extended period of time and so that was another part of the reason why it was compelling for us to purchase we do have a lot of lease term left on this asset right between the Canadian entire end market I think the canyon tires, north North of 10 years for sure.
Speaker Change: It is definitely worth it.
Speaker Change: Options after that.
Speaker Change: Got it.
Pammi Bir: And just on the development pipeline, it seems to be holding steady. I guess, you know, one, one expansion was done in a quarter. But, you know, as you think about maybe the next year or so, how do you see that unfolding? Just curious if maybe, you know, there is any chance it starts to expand again or any or any
Speaker Change: And just on the on the development pipeline it seems to be holding steady I guess, one more expansion was done in the quarter, but as you think about maybe the next year or so how do you see that unfolding I'm just curious if maybe any.
Speaker Change: It starts to expand again or any or possibly on the other side maybe projects getting pushed back at all.
Kevin Salsberg: So the project delays have sort of already been baked in. I mean, I think that's what we've seen over the last few quarters.
Speaker Change: So the project delays have sort of already been baked in I mean, I think that's what we've seen over the last few quarters. The current pipeline at about 715000 square feet too.
Kevin Salsberg: The current pipeline, at about 715,000 square feet, 280-ish million dollars, is pretty close to our historic average run rate, so we're happy with the pipeline. I think, you know, in terms of monies to be spent call it that over the next 12 months versus the back, back part of it, probably a little bit more weighted to the back part right now. I think the number was $85 million that we intend to spend in the next year.
Speaker Change: $281 million is pretty close to our historic average run rate. So we're happy with the pipeline.
Speaker Change: I think in terms of money to be spent call. It over the next 12 months versus the back back.
Speaker Change: Part of it probably a little bit more weighted to the back part right now I think the number was $85 million that we intend to spend in the next year.
Kevin Salsberg: And there's been about $95 million spent to date. So call it a little over $100 for the back part of the development pipeline horizon. You know, the pace of new projects has certainly slowed. I think, you know, again, and I think that dovetails between two things. One, Canadian Tire's intention, and I think they're still of the firm belief that investing in the retail bricks and mortar network is core to their strategy
Speaker Change: And there's been about 95 million spent to date so call. It a little over a 100 for the back part of the development pipeline.
Speaker Change: Horizon.
Speaker Change:
Speaker Change: The pace of new.
Speaker Change: Projects has certainly slowed.
Speaker Change: I think you know again dovetail.
Speaker Change: Dovetails between two things one.
Speaker Change: Canadian tire is intention and I think there are still of the firm belief that investing in the retail bricks and mortar network is core to their strategy.
Kevin Salsberg: Certainly, you know, the last couple quarters have been a little tougher for them than, say, 2022, 2023, so I think that's playing into this lower pace. And then, you know, the interest rate story and our ability to fund those projects creatively, which also dovetails into the cost to build these stores. So all that's playing together to, say, slow that pace. But I do think at the appropriate time, we'll have additional projects that we revisit, and we'll be working with Canadian Tire closely on
Speaker Change: You know the last couple quarters have been a little tougher for them and say 'twenty two 'twenty three so I think that's playing into this.
Speaker Change: Lower pace.
Speaker Change: And then you know the interest rate story, and our ability to fund.
Speaker Change: Those projects Accretively.
Speaker Change: Which also dovetails into the cost to build these stores. So all that is playing together to say.
Speaker Change: Slow that pace.
Speaker Change: But I do think at the.
Speaker Change: The appropriate time.
Speaker Change: We'll have additional projects that we revisit and we'll be working with Canadian tire closely on our joint ability to move those forward.
Pammi Bir: Got it. That's helpful. Thanks very much, Kevin. I'll turn it back.
Speaker Change: Got it.
Speaker Change: That's helpful. Thanks, very much Kevin I'll turn it back.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Sam Damiani from TD Cowen.
Speaker Change: Our next question comes from the line of Sam Daman Damiani from T D Cohen.
Sam Damiani: Thank you. Good morning, everyone. Most of my other questions were asked. So yeah, just on the third priority and the CPC leases that were extended, I wonder if you could just provide some color on the spreads that you experienced in the quarter versus the prior.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: And I just wanted to.
Speaker Change: Really just touch on renewal leasing spreads I didn't catch that and.
Speaker Change: Most of my other questions were asked so yeah, just just on the third party and the CTC leases that were extended I'm wondering if you could just provide some color on the spreads that you experienced in the quarter versus the.
Speaker Change: Prior history.
Jodi Shpigel: Good morning, Sam. It's Jodi.
Jodi: Good morning, Sam its Jodi, so total renewals this quarter, including the <unk> stores are for approximately 300000 square feet. So that 1% of the portfolio are.
Jodi Shpigel: So, total renewals this quarter, including the CT stores, were approximately 300,000 square feet, so about 1% of the portfolio. That includes, obviously, the combination of fixed and market renewals. The three Canadian tire stores that renewed this quarter were at 1.5%, pretty typical, as you know, for the CT renewals. In terms of the non-Canadian tire renewals, those were in the high single digits, so we're pleased with that, in terms of the spread. So, I'd say it was a pretty normal quarter in terms of volume and renewal rates.
Jodi: That includes obviously the combination of fixed and market renewals the three Canadian tire stores that renewed this quarter. We're at the one 5% pretty typical as you know for the Cte renewals in terms of the non Canadian tire renewals those were in the high single digits.
Speaker Change: We're pleased with that in terms of the spread so I'd say pretty normal quarter.
Speaker Change: And in terms of volume and our renewal rates.
Speaker Change: Yeah.
Sam Damiani: That's great, Jodi. And just sort of generally in the market today, I mean, I think it was double digits last quarter, high single digits this quarter. I mean, is that a reflection of any change in the market or just a different mix of leases that were transacted this quarter? I mean, what's your sense of the overall leasing environment now versus three, six months ago? The same, better, or worse?
Speaker Change: That's great Jodi and just I guess just sort of.
Jodi: Generally in the market today, I mean, I think it was double digit last quarter high single digits this quarter.
Jodi: Is that a reflection of any change in the market or just a different mix of leases that were transacted. This quarter I mean, what's your sense on the overall leasing environment now versus three six months ago seemed better worse.
Jodi Shpigel: I'd say pretty normal. In this quarter, I think we just had a higher amount of fixed renewals versus market renewals, so that's why high singles versus low double digits, but pretty much on trend with what we would expect.
Speaker Change: I think again.
Speaker Change: Pretty normal it in this quarter I think we just had a higher amount of fixed renewals versus market renewal. So that's why high single versus low double digits, but pretty much on trend with what where you would expect and.
Jodi Shpigel: And although the market renewal piece was probably smaller this quarter than in the past, that was done pretty much around that 10%. [inaudible]
Speaker Change: Although the market renewal piece was probably smaller this quarter than in past that was done pretty much around that 10%.
Speaker Change: Spread number so kind of similar to past experience, there, where we had a little bit more pricing power.
Speaker Change: Yeah.
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.
Operator: Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. As there are no further questions at this time, I will turn the call over to Kevin Salsberg, President and CEO, for closing remarks.
Jodi: Yeah.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced toward the draw. Your question. Please press star one one again.
Jodi: As there are no further questions at this time I will turn the call over to Kevin Salisbury, President and CEO for closing remarks.
Kevin Salsberg: Thank you, Gigi, and thank you all for joining us today. We look forward to speaking with you again in November after we release our Q3 results, and I hope everybody has a great long weekend.
Kevin Salisbury: Thank you Gigi and thank you all for joining US today, we look forward to speaking with you again in November after we release, our Q3 results and I hope everybody has a great long weekend.
Operator: This concludes today's call. You may now disconnect.
Speaker Change: This concludes today's call you may now disconnect.
Jodi: [music].