Q4 2024 CT Real Estate Investment Trust Earnings Call
Okay.
Speaker Change: Good morning. My name is let's say is and I will be your conference operator today.
Speaker Change: At this time I would like to welcome everyone to C. P rates Q4, 'twenty 'twenty four earnings results Conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press star one on your telephone keypad.
Speaker Change: To withdraw your question. Please press star one one.
The speakers on the call today are Kevin Salzburg, President and Chief Executive Officer of C. T right.
Speaker Change: Jody Spiegel senior Vice President real estate, and Leslie Gibson, Chief Financial Officer.
Speaker Change: Today's discussion may include forward looking statements.
Speaker Change: Such statements are based on management's assumptions and beliefs.
Speaker Change: These forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Speaker Change: Please C C T reach public filings for a discussion of these risk factors, which are included in their 'twenty 'twenty four management's discussion and analysis and 2024 annual information form which can be found on C. T reached website and on Cedar class.
Speaker Change: I will now turn the call over to Kevin Salisbury, President and Chief Executive Officer of C. T right Ken.
Speaker Change: Kevin.
Ken: Thank you Latif.
Ken: Good morning, everyone and welcome to city rates fourth quarter Investor Conference call.
Ken: In a world of heightened volatility and uncertainty C. T. REIT continues to be a beacon of stability and resilience.
Ken: Our relationship with Canadian Tire Corporation.
Ken: Our near fully occupied portfolio of properties with its long weighted average lease term and embedded rent growth and our strong balance sheet forms the bedrock upon which our durability reliability and the growth of our base.
Ken: This solid foundation has once again this quarter allowed us to deliver growth in our key operating metrics and source new strategic investments.
Ken: All while prudently managing risk and ensuring we retain flexibility to capitalize on new opportunities in the future.
Ken: In Q4, we achieved a three 6% increase in net operating.
Ken: One 5% growth in same store NOI, 2% growth in same property NOI and one 7% growth.
Ken: Per year.
Ken: For the full year, we achieved a four 3% increase in net operating income one 6% growth in same store NOI to 4% growth in same property NOI and an impressive 3% growth in <unk> per unit.
Ken: This growth contributed to our ability to yet again increase our distributions last year, our 11th increase since our initial public offering in 2013.
Ken: These increases represent over 42% and the amount paid to our unit holders since that time.
Ken: In 2020 for despite a challenging investment backdrop, we are pleased to be able to source and deliver just shy of 500000 square feet of new gross leasable area through our development and acquisition program at a total investment of just over $156 million.
Ken: With respect to our balance sheet, we continue to maintain our leverage and coverage ratios at the more conservative end of our peer group.
Ken: This strategy has allowed us to generate increasing free cash flow over time as well as currently provides us with a great deal of flexibility to fund current and potential future investment opportunities as they arise.
Ken: Through the course of 2024, we also repurchased over 875000 and C. T. REIT units through our normal course issuer bid program at a weighted weighted average purchase price of $13 50 per unit for a total cost of just under $12 million.
Ken: As I reflect upon the past year and the unpredictable nature of the world around US today, I am proud of our achievements and hopeful and optimistic about what city REIT can accomplish going forward.
Ken: We have a robust development pipeline that is anticipated to add over 600000 square feet of gross leasable area to the portfolio in 2025 alone.
Ken: We have ample liquidity and a balance sheet that will allow us to execute not only on this development program, but also find additional future investment opportunities as they arise and we have a proven strategy that fits these times and allows us to continue to leverage our relationship with Canadian tire, our largest tenant and majority of unit holder in order to surface value for all of our year.
Speaker Change: I'll now turn it over to Jodi and Leslie to provide some additional details on the quarter, our results and our investment leasing and development.
Ken: Okay.
Jodi: Thanks, Kevin and good morning, everyone as highlighted in our press release yesterday, we are pleased to announce three new investments this quarter.
Jodi: These new investments related to the development of a new 186000 square foot Canadian tire stores in Colorado that British Columbia.
Jodi: The expansion of the Canadian tire store located in Winnipeg, Manitoba, as well as the redevelopment of vacant property invite Mr. Alberta.
Jodi: These new investments totaled $59 million are expected to earn a going in yield of eight 1% and will add approximately 284000 square feet of incremental GLA to our pipeline of projects and our high quality portfolio.
Jodi: The fourth quarter. It was a busy period for <unk> as we completed several previously disclosed projects, including the Belgian have a Canadian tire store in Winnipeg, Manitoba.
Jodi: And the London at a property containing Canadian tire marks and dollar around the stores and not try and block, Quebec. Additionally, CTV completed two Canadian tire store expansions and Kirkland, Quebec and Martinsville, Saskatchewan. These.
Jodi: These investments totaled $103 million and added 322000 square feet of incremental GLA to the portfolio in the fourth quarter. CTV also sold a portion of our property and are really Ontario for $4 million.
Jodi: Our development pipeline remains strong with 19 projects at various stages of development with approximately half of these expected to be completed this year and the remainder expected to be completed in 2026 and beyond.
Jodi: These developments represent a total committed investment of approximately 328 million on completion 107 million of which has already been spent and 156 million of which we anticipate will be spent in the next 12 months.
Jodi: Once built these projects will add a total incremental GLA of approximately 881000 square feet to the portfolio approximately 90% of which had been pre leased at quarter end at the end of the quarter CTV maintained its 99, 4% occupancy rate representing a portfolio that is substantially.
Jodi: Believe east a true indication of the quality and strength of our properties for.
Jodi: For the full year CTV completed for Canadian tire store lease extensions as well as the lease extension with Canadian tire for its head office at Canada Square.
Jodi: For the full year, we also extended over 400000 square feet of non Katie entire store or head office leases.
Jodi: Glenn did 10, 3% spread over expiring rents as at the end of Q4, the weighted average lease term for our portfolio with 7.7 years, which remains one of the longest in the sector with that I will turn it over to Leslie to discuss our financial results Leslie.
Leslie: Thanks, Jody and good morning, everyone.
Leslie: As Kevin highlighted we were pleased with the results delivered by the read again this quarter.
Same store NOI grew by one 5% a $1.6 million drivers of the same store same store NOI increase where contractual rent escalations, one 4 million primarily being the one 5% average annual rent Escalations included in the Canadian tire leases.
Leslie: As well as an increase in property operating expense recoveries of zero point $4 million in the quarter.
Leslie: Same property NOI grew by 2.0% or $2.3 million compared to the prior year. This increase was primarily due to the increase in same store NOI noted as well as an increase of <unk> 6 million from the intensification completed in 'twenty, three and 'twenty four.
Leslie: Overall, the fourth quarter NOI grew by a healthy three 6% or $4 million driven by the increase in same property NOI as well as the acquisition and acquisitions of <unk>.
Leslie: And completion of development projects in 'twenty, three and 'twenty four.
Leslie: In the fourth quarter, excluding fair value adjustments G&A expense as a percentage of property revenue was two 9%, which was higher than the same period in the prior year a two 6%.
Leslie: This increase was due to both an increase in compensation expense as well as the timing of it when expenses were incurred.
Leslie: The fair value adjustment of $54 8 million in the quarter was driven by changes to the underlying cash flow assumptions and investment metrics for certain retail properties based on recent market activity.
Leslie: For the full year, the fair value adjustment was an increase of $119 million, primarily driven by contractual rent increases leasing activities in the portfolio as well as changes to underlying cash flow assumptions and investment metrics.
Leslie: Over the last year, we've seen a little overall change in the portfolio investment metrics.
Leslie: Q4 portfolio terminal capitalization discount rates decreased by one basis point.
In the quarter Duluth.
Leslie: Diluted <unk> per unit was up one 2% to $33.04 compared to 33.0 cents in the fourth quarter of 2023.
Leslie: This growth can be primarily attributed to the acquisition intensification and developments completed in 'twenty three 'twenty four partially offset by the higher interest costs related to the debentures issued in Q4 of 2023 and the Q2 interest rate reset for the series four class C units for the full year diluted <unk> per unit was up one.
Leslie: 9% to $1 33.
Leslie: Broke the SFO per unit on a diluted basis was strong for the same reasons and with the inclusion of the cash increases in base rents and came in at 38 cents up one 7% compared to Q4 of 2023.
Leslie: On a full year basis diluted <unk> per unit was up three points are percent to $1 23 nine per unit.
Leslie: Cash distributions paid in the quarter increased again by 3% compared to the same period in the previous year due to the 11th distribution increase in as many years that Kevin referred to earlier.
Leslie: <unk> payout ratio for Q4 was 75 points are a percent which is in line with the same period of last year of $74 three.
Leslie: During the year CPU re bought back over 875000 units at an average price of $13 50 per unit.
Leslie: In the fourth quarter, we renewed the M C. I b facility for another year, allowing us the opportunistically purchase up to 1.8 75 million units through November 2025.
Leslie: Now turning to the balance sheet, our interest coverage ratio was 352 times for the current quarter compared to three six times in the comparable quarter of 2023.
Leslie: With the decrease May leader in by the increase in interest expense related to the new financings mentioned earlier.
Leslie: In 2025, we anticipate refinancing certain maturing debts of higher interest rates, which will lead to an increased net interest expense compared to the previous year.
Leslie: Specifically the $452 million of debt maturing in Q2. This year, we subject to these higher rates comprised of 200 million $252 million of class C. L. P units at the end of May and $200 million of public unsecured debentures that are maturing in early June.
Leslie: The indebtedness of EBIT fair value ratio was $6 eight one times for the quarter stable compared to last year's ratio of 683 times.
Leslie: Our indebtedness ratio was 41, 1% for the quarter, which is comparable to the indebtedness ratio from last year, our indebtedness ratio continues to be within our target range.
Leslie: Lastly, with respect to liquidity, we ended Q4 with 3 million of cash on hand, and 295 million remains available through our committed credit facility.
Leslie: 200 million is also available available under our uncommitted facility with Canadian Tire Corporation.
Leslie: And with that I will turn the call back over to the operator for any questions.
Leslie: Thank you as a reminder to ask a question you will need to press star one on your telephone.
Leslie: Move yourself from the queue you May press Star one one again, we ask that you. Please limit yourself to one question and one follow up to allow everyone the opportunity to participate please.
Leslie: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Lorne Kalmar.
Dan: Days are Dan capital markets. Your question. Please Lauren.
Lauren Kalmar: Thank you very much good morning, everyone and congrats on.
Dan: Another solid quarter.
Dan: I just wanted to focus in on the <unk>.
Dan: New projects announced this quarter the going in yield was.
Dan: Quite a bit higher than it has been I guess as it relates to the projects announced throughout the earlier parts. In 2024 I was just wondering is this just a driven by the composition of these projects and perhaps the land lease or is there an opportunity for the REIT to take.
Dan: Advantage, some higher yielding opportunities going forward.
Dan: Good morning Lauren.
Speaker Change: Thank your supposition is correct.
Speaker Change: The land lease it was driving a higher return based on the.
Speaker Change: The type of project. It is the redevelopment is also.
Speaker Change: A little bit higher yielding than our than our average.
Speaker Change: So it's the combination of those two.
Speaker Change: The store expansion, which would be more in line with.
Speaker Change: Our typical <unk>.
Speaker Change: <unk> yields.
Speaker Change: What's driving that.
Speaker Change: Plus 8% return.
Speaker Change: Okay. So I guess going forward. This is the exception not the norm probably you'd be back in that six to mid six range for projects in 2025.
Speaker Change: Assuming the composition of those projects is more in line with our conventional store expansion new store development on freehold lands, Yes, I think that's correct.
Speaker Change: Okay awesome. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Giuliano Thornhill of National Bank Financial Your line is open at Giuliano.
Giuliano Thornhill: Hey, guys good morning.
Speaker Change: Good question on the acquisitions why like why do you guys like those markets and kind of why did you decided to do it.
Giuliano Thornhill:
Giuliano Thornhill: Well I mean, the only acquisition type.
Giuliano Thornhill: <unk>.
Giuliano Thornhill: Project and the three we announced this kalana.
Giuliano Thornhill: August Cologne has a really strong market for Canadian tire there.
Giuliano Thornhill: Investing.
Giuliano Thornhill: Constructing a new store alongside the REIT.
Giuliano Thornhill: Great demographics.
Giuliano Thornhill: Seasonal obviously in terms of what it has offered a tourist perspective also a lot of people have been retiring spending more time in markets like Cologne up you see it's been a strong GDP growth perspective so.
Giuliano Thornhill: Yes, we're very comfortable there.
Giuliano Thornhill: Canadian tire.
Speaker Change: A track record of performing well in all markets large and small so typically as long as we can work alongside them secure a long term lease.
Giuliano Thornhill: We have great comfort investing in all parts of the country quite frankly.
Speaker Change: And then just the next one is just on the GLA under construction creeped up this quarter what factors do you think.
Speaker Change: Need to happen to kind of reach that 2021 area, where you guys had $1 $3 million or so.
Speaker Change: Your development pipeline is it just a function of the lower rates as a function of the related party I was just curious about how we could maybe end up getting back to that level.
Speaker Change: Yes, I think it's probably more of the related party I mean, our development pipeline.
Speaker Change: Probably 80% K entire projects.
Speaker Change: The degree to which they're investing in there.
Speaker Change: Okay.
Speaker Change: Capital Theyre out lengths bricks and mortar projects.
Speaker Change: Okay.
Speaker Change: Influences that I think in 2021, we also had a large industrial project in our pipeline, which would have skewed. The total so if you sort of normalize for the smaller retail footprints relative to industrial projects, where we're actually kind of close to that.
Speaker Change: That larger.
Speaker Change: The total composition of projects.
But certainly the pace.
Speaker Change: Consumer spending given the uncertainty of the economy.
Speaker Change: On new capital projects, even though we've had a bit of a robust go to the last two quarters.
Speaker Change: Is slowing.
Speaker Change: So the expectation on new development projects for the balancing or I would say is probably less than what we've what we've announced this quarter and last.
Speaker Change: But we're very happy with where the pipeline is today and we're going to try to find opportunities to keep it at the current level.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Michael markets of BMO Capital markets. Please go ahead Michael.
Michael: Thank you and good morning, everybody.
Speaker Change: Kevin could you, maybe just give us a little bit more color on the redevelopment and ROI administer what type of property that is and what it entails.
Speaker Change: Sure so.
Speaker Change: I think it's an IPO property that was tenanted by Canadian tire.
Speaker Change: A couple of years ago.
Speaker Change: Like Kalana as a productive market for Canadian tire they chose to relocate the store into a larger.
Speaker Change: Fox, which maybe average CD rate.
Speaker Change: We are under that development project.
Speaker Change: So in the context of them relocating.
Speaker Change: The property became vacant.
Speaker Change: Now.
Speaker Change: Later stages of finalizing leases, we have conditional lease in place.
For an anchor tenant.
Speaker Change: We'll be devising the boxing for a three tendencies.
Speaker Change: And hopefully delivering that in the later part of this year.
Speaker Change: Okay great.
Speaker Change: Helpful. And then just so was that property was there any income residual even after the relocation or was it was a dark from an NOI perspective.
Speaker Change: There's a gaspar onsite that remained operational that continued to pay rent at the size of that mill.
Speaker Change: Okay. So the $8 one as then just the incremental over the gas part ramp or does the gas per day, how does that work.
David Weinberg: It's David Weinberg.
Sorry go ahead.
David Weinberg: The incremental revenue or NOI over the.
David Weinberg: Cost.
David Weinberg: Got it okay.
David Weinberg: Just with respect to the unsecured markets are really.
David Weinberg: In my opinion anyways very favorable.
David Weinberg: Because a sub seven times debt to EBITDA, and obviously theres a pace with.
David Weinberg: Canadian tire that's.
David Weinberg: That's progressing.
Speaker Change: I guess, how do you guys think about your cost of debt and obviously you can look at on a blended cost of equity, but how do you look at maybe taking leverage up.
Speaker Change: And with respect to how you are seeing any third party acquisition opportunities out there today.
Leslie: Mike It's Leslie.
Leslie: No I think as Kevin mentioned, our balance sheet does have the capacity to increase our debt levels were at 41, 1% Levered right. Now you know could that be a few a couple of points. If that's the route we chose and Joseph seem to find things.
Leslie: Through the the unsecured market I agree with you there really healthy right now you know rates in the last week sort of simple, especially the underlying gse's have come down so.
Leslie: So please can I just sort of hopefully help some of those projects, perhaps kick start but.
Leslie: Yes, we do have lots of flexibility and I think for their for the rate for the right acquisition or the right development or the right.
Leslie: Opportunity for growth that would be something we would consider too.
Speaker Change: Thank you. Our next question comes from the line of Sam.
Sam Damiani: Sam Damiani.
Speaker Change: TD Securities. Your line is open Sam.
Sam Damiani: Thank you can you hear me okay.
Speaker Change: Yes, good morning.
Sam Damiani: Okay. Thank you thank you new phone.
Speaker Change: Good morning, and I just wanted to say congratulations on these these are these two pretty interesting projects in Cologne and administer clearly our Canadian tire. So it was very good very good business there.
Speaker Change: The relocated store and expanded store offers the opportunity to backfill these former locations.
Speaker Change:
Speaker Change: Which I'm just wondering I guess, you've kind of talked about low administer but I was just thinking kalona.
Speaker Change: How do you how do you see that site being repurposed once once can you tell me does relocated into the news.
Speaker Change: In terms of the store.
Sam Damiani: Yes, I mean, we're working on that right now Sam.
Speaker Change: Nice thing about Canadian tire stores is typically.
Speaker Change: As these boxes are easily devisable theyre more rectangular square.
Speaker Change: And splitting them up provides opportunities for.
Speaker Change: Bankers or mid box tenants to come in then.
Speaker Change: And finally space, we've talked a lot about the supply demand imbalance in terms of no new.
Speaker Change: Little new retail GLA being built so.
Speaker Change: We're in discussions with any of those types of retailers.
Speaker Change: We administer it was great.
Speaker Change: In terms of finding the right tenants in.
Speaker Change: Pro forma tumble for us.
Speaker Change: Recall, we had a similar situation in chilliwack.
Speaker Change: Sure.
Speaker Change: Last year mid year, we actually sold that box, because we got to a very attractive.
Speaker Change: <unk> to purchase so I think our first and best option is always to.
Speaker Change: Redeveloped, but in certain markets.
Speaker Change: No there is a shortage of <unk>.
Speaker Change: Commercial property or commercial property that can be converted.
Speaker Change: And so we will always assess our various options.
Speaker Change: And determine the best path.
Speaker Change: Okay, great looking looking forward to hearing out how that goes and quota and just on the pipeline.
Speaker Change: We will discuss it as it is.
Speaker Change: Got quite big.
Speaker Change: There's a lot of deliveries scheduled for later this year, but just for modeling purposes of that 881000 square feet. How much of that is currently producing NOI.
Speaker Change: Are we clear redevelopment would be.
Speaker Change: The largest single.
Speaker Change: Project.
Speaker Change: There is some NOI being generated.
Speaker Change: Beyond that I think.
Speaker Change: Everything is incremental.
Speaker Change: Okay.
Speaker Change: And in terms of 2025, the expectation inclusive of <unk>, which is about 141000 square feet is to deliver.
Speaker Change: 600000 square feet or so.
Speaker Change:
Speaker Change: With that I'll give you a rough order of magnitude.
Speaker Change: Yeah. That's helpful. Thank you.
Speaker Change: Two more two more quick questions for me Firstly just on the.
Speaker Change: The renewal leasing spreads Jodi you mentioned I apologize I didn't quite a quite catch exactly what you said.
Speaker Change: I heard it was 400000 square feet renewed in the quarter.
Speaker Change: 10% spread but I didn't I didn't get the mix between the entire versus non Canadian tire and sort of office versus retail.
Sam Damiani: No problem good morning, Sam so.
Our third party renewals for the year were around 400000 square feet at a spread of 10, 3%.
Sam Damiani: And then beyond that a related party renewals, where there's a little north of 300000 square feet for the year typical and typical increases that you would expect.
Speaker Change: Okay is it fair to say that because the entire renewals in Q4 were 20 year renewals with did I see that correctly.
Speaker Change: Typically our renewals with Canadian tire for five years.
Speaker Change: Okay, Yeah. It just looks like the Oh skirts were rescheduled.
Speaker Change: In 2044.
Speaker Change: Okay and.
Speaker Change: And so when we look at Canada square in order to get a lot of discussion with the LRT limbo or whatever but I'd love to hear that it's actually going to open this year.
Speaker Change: Tony.
Speaker Change: Intelligence no matter what.
Speaker Change: We appreciate it.
Speaker Change: Some nearby but just thinking about phase one of that.
Sam Damiani: Sam are you there you kind of.
Speaker Change: Well it looks like we're going to the next.
Sam Damiani: <unk>.
Speaker Change: Our next question comes from Sumit.
Sam Damiani: C N of CIBC World markets.
Speaker Change: Your line is open.
Speaker Change: Yeah. Thanks, good morning.
Speaker Change: Just following up on on the leasing activity on the third party GLA side, just wondering how are the spreads trending on deals done, let's say post Q4 to date and is that 10% range still.
Speaker Change: Holding on.
Speaker Change: Yeah, I would I would say it is that member it were to continue to be in a supply constrained market not a lot of new retail coming online.
Speaker Change: So throughout the quarters of 2024, we were seeing that north of double digit spreads and so I would expect that to continue.
Speaker Change: Until such time as new retail development starts to take place.
Speaker Change: Okay.
Speaker Change: I just had a question on <unk>.
Speaker Change: On the fair value gains, let's say about half the gains for the year came in Q4, if you could just walk through the drivers there and any sort of notable market activity.
Speaker Change: Hum.
Leslie: It's why it's Leslie.
Leslie: The there were a number of like the developed world the development completions that come towards the end of the year. So that would have skewed some of it.
Leslie: As I've mentioned there as you know we did have a number.
Speaker Change: Turner law appraisals, and we sort of had put that to the portfolio the observation.
Leslie: Albeit one basis point.
Leslie: And decrease to the to the metrics are also pushing pushing sort of that valuation is true in Q4, but probably the largest driver really was the the rest release of development completions that came online towards the end of the year.
Leslie: Okay got it.
Leslie: And then just lastly on the capital allocation side, how active do you.
Leslie: To be on the CIP Northern obviously, the stock has moved up quite a bit from where you were buying back all of last year.
Leslie: Yes, I think.
Leslie: We were quiet on the <unk> front in Q4.
Leslie: And.
Leslie: When we look at where we want to play I think the average price at which we're buying back.
Leslie: Through the course of 2024 being $13.50 would be kind of a good guy.
Leslie: Guiding principle in terms of where.
Leslie: Our heads are at I mean, we've always talked about in the past.
Leslie: The liquidity factor and trying not to.
Leslie: Over literally but trying to support the units and also send the signal market. So.
Leslie: We'll just keep watching that lines.
Leslie: It stays up in these current levels.
Speaker Change: Yes, Duffy allocated capital sports sports that but.
Speaker Change: There's so much going on right now and so much volatility that.
Speaker Change: We're living it day to day, not even week to week, so, let's see where it goes.
Speaker Change: Got it thank you I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Come from the line of.
Matthew: Hey, Matthew <unk> of Scotia Bank. Your question. Please you mentioned.
Speaker Change: Great. Thank you and good morning.
Speaker Change: So just got a question.
Speaker Change: Retail narrative has been good.
Speaker Change: Getting better.
Speaker Change: Rents are improving.
Speaker Change: Obviously, you are getting you know, 10% plus leasing spreads maybe more in some cases.
Speaker Change: How is that translating into cap rate compression at all in your product.
Speaker Change: Obviously, you know for this year.
Speaker Change: It was flat this call trade, how many debit as well.
Speaker Change: How do you see values evolving in the near term.
Speaker Change: It's a great question.
Speaker Change: It remains to be seen quite honestly I mean investment volumes in the Q4 and 2024 overall, we're quite low.
Speaker Change: Retail is certainly in demand, we're seeing in Africa with cap rates surveys and given our experience in the market.
Speaker Change: I think the economy and rates and tariffs and all of these.
Speaker Change: Macro.
Speaker Change: Headlines are certainly influencing.
Speaker Change: People's perception of the degree to which they want to allocate capital into risk assets for 2025. So I think it's an evolving story I mentioned I mean, it's hard to predict.
Speaker Change: I think the fundamentals of the retailers still very strong.
Speaker Change: Anecdotally I'm hearing up more.
Speaker Change: Institutional players, who are looking thats done and closed retail as a as an asset class they want to get into to a greater expense. So I think that should bode well generally for our assets and our fair value but.
Speaker Change: Things are changing so quickly, it's really hard to pin down.
Speaker Change: That's fair.
Speaker Change: Fair enough.
Speaker Change: And then obviously, adding the tariffs to the equation.
Speaker Change: Are you having discussions with.
Speaker Change: Obviously, CTC like how does that impact the <unk>.
Speaker Change: The expansion plans are developing plans to add.
Speaker Change: And I see you know I think couple of properties you can move that in London.
Speaker Change: So I think they were previously disclose as in Densification they were removed as well.
Speaker Change: So just wondering that.
Speaker Change: Is that also the reason for it.
Speaker Change: Slowdown in development.
Speaker Change: In between.
Speaker Change:
Speaker Change: The removal of those two projects had nothing to do with tariffs I think that was changing priorities.
Speaker Change: Capital allocation decision, making.
Speaker Change: Tires perspective.
Speaker Change: Yes, we are in discussions with my entire about.
Speaker Change: The changing landscape.
Speaker Change: But I think like seating you're right. We're all just watching day to day in terms of how things evolve and are cautiously optimistic.
Speaker Change: Optimistic about.
Speaker Change: The strength of the business and certainly we're in a better spot.
Speaker Change: Today than we were a year ago.
Speaker Change: But at the same time managing the business.
Speaker Change: Two.
Speaker Change: The plan for the unknown so.
Speaker Change: I think pre tariff announcements capital deployment into new.
Speaker Change: New retail projects was already starting to slow a little that was more based on where the economy where that consumer spending.
Speaker Change: Performance.
Speaker Change: The degree to which that.
Speaker Change: If that changes overtime.
Speaker Change: I think it remains to be seen at this point.
Speaker Change: Fair enough. Thank you still clear in the sense you know a lot of unknowns here. So thank you for that.
Speaker Change: Yes, no problem.
Speaker Change: Thank you.
Speaker Change: Our next.
Speaker Change: Question comes from the line of Pammy birth of RBC capital markets. Your line is open.
Pammy Birth: Thanks, Good morning.
Pammy Birth: Could you maybe talk a little bit about just the entire lease extension at the head office.
Speaker Change: Square, just any color on the square footage the term any changes in the rent et cetera.
Speaker Change: Good morning, Jody So on candidate square it was a short term lease renewal for our Canadian tire.
Speaker Change: As you know we have the this is I think you said, 50% property with us, but at 100%. It's a little over 200000 square feet that got renewed and really the short term nature of it just gives them time to finalize their workplace strategy and set yourself up for sure.
Speaker Change: Okay. So no there's no change in the in the rent.
Speaker Change: We're not going to comment on the rent pardon me, but just what I'll say is we continue to work with Oxford and Canadian tire on the future and a square in claims <unk> involvement in the complex and this renewal sort of as Julian mentioned sets us up to be in a place to hopefully.
Speaker Change: Finalize something this year for the longer term.
Speaker Change: And if and when that should come to pass, but we'll obviously provide some additional color and details claim.
Speaker Change: On where that lands.
Speaker Change: Okay.
Speaker Change: Just last one for me just on the the series B I think thats coming due later and as well as the class six class C units just thoughts on.
Speaker Change: Maybe more so on the class B is what youre thinking in terms of refinancing from a term standpoint, and where youre seeing rates at this stage.
Tony: Tony Yes for the.
Tony: The public debentures coming due in June.
Tony: You know, we're looking at a number of things obviously the debt markets are very healthy right now.
Tony: We're probably looking more towards sort of a five year versus some of the longer seven and 10 years that we were doing just given maybe the relativeness.
Tony: The spread between those tenors.
Tony: You know right now.
Tony: Five year like five years would be just over 4% for us so.
Tony: We'll see where things are but nowhere, we're definitely taking a look at what those are all the different options around the table in terms of.
Tony: How exactly to refi those and we will Oh.
Tony: Well, probably more plans to either with the May call.
Tony: Okay.
Speaker Change: Thanks, very much Leslie I'll turn it back.
Tony: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Sam Damiani.
Speaker Change: TD Securities. Your line is open Sam.
Sam Damiani: Thank you I apologize about that earlier.
Sam Damiani: So I was just I was just going to ask about the both the candidate square project.
Sam Damiani: I guess any any.
Sam Damiani: New thoughts as to the composition of phase one which.
Sam Damiani: Was to include.
Sam Damiani: Some office space. So is there any reconsideration there given just given the overall kind of changing in the market and everything.
Speaker Change: Youre welcome back Sam.
Speaker Change: I guess, what I'd say it depends on how youre, describing phase one for us phase one is.
Speaker Change: The determination.
Speaker Change: Future plans as it relates to the existing buildings so that.
Speaker Change: Is and will remain likely office.
Speaker Change: As it relates to the first new construction, which is a little further away today.
Speaker Change: At one point that was contemplated to be entirely office, and then that reverted to a scheme, where there was less office and I think it's moving to a state where there'll be no offense. So.
Speaker Change: That's how we're thinking about it from a mass.
Speaker Change: The Master planning perspective.
I see okay.
Speaker Change: Helpful.
Speaker Change: Im sorry, Im sorry, we have no Sam I just wanted to say we have no further indication of when the allergy is going up.
Speaker Change: Yeah, Yeah, yeah, it'd be nice [laughter], okay. Thank you and just last one just on the topic of tariffs I Wonder if Jody you could just tell us if you're hearing any change in the leasing markets.
Speaker Change: As a result of the threat of tariffs are tenants starting to pull back on decision, making specifically related to the threat of tariffs.
Speaker Change: Yes.
Speaker Change: It's a bit early days for that so we're not seeing anything yet on that front and not sure. If we will actually tenants seem to be wanting.
Speaker Change: I wanted to expand and are at the ICSC conference there was a lot of.
Speaker Change: A lot of people wanting to extend their network do you new deals a lot of positive momentum I would say.
Speaker Change: However of course, as you know and announcements today Tomorrow next week whenever could that could change things or change the sentiment, but right now I'd say, it's the same as it was prior to the potential for tariffs cutting.
Speaker Change: That's helpful. Thank you very much and I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brad Sturges of Raymond James. Please go ahead Brett.
Brad Sturges: Hey, good morning.
Speaker Change: Great.
Speaker Change: Just to go back to Kendall square for a second.
Speaker Change: The first phase.
Speaker Change: <unk>.
Speaker Change: My understanding of it was.
Speaker Change: It would you would kick off once you got the right.
Speaker Change: Level of pre leasing done on the office side I'm just.
Speaker Change: Curious at this stage kind of what activity levels, you are seeing for the space Youre looking at least before you would.
Speaker Change: Commenced the first phase.
Speaker Change: I would say we are in active discussions and working on paper over.
Speaker Change: The amount of pre leasing we would require in order to move forward with the first phase.
Speaker Change: Okay.
Speaker Change: At this point.
Speaker Change: Yes.
Speaker Change: I'll be a little bit too early to say, but are you still thinking about it is.
Speaker Change: Project for 2025 or 2026.
Speaker Change: I think the.
Speaker Change: The reality is we will be spending redevelopment funds through the course of 2025 and any actual construction will occur in.
Speaker Change: In 2026 P M.
Okay. Thanks.
Speaker Change: Thank you I'll turn it back.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: From Lorne Kalmar.
Speaker Change: These are then capital markets. Please go ahead Laura.
Thanks, just one quick follow up.
Speaker Change: Obviously, you guys talked about tenants looking to expand so and you talked about the leasing environment.
Speaker Change: Heard from some of your open air peers that Theyre getting more favorable terms as it relates to rent escalators I was just wondering do you expect to see any of that.
Speaker Change: Positive momentum I suppose on the Cte leases, namely in the form of.
Speaker Change: Rent escalators above the one 5% or is that pretty much set in stone.
Speaker Change: No we've talked about this before learning that.
Speaker Change: For some time, obviously, especially as inflation was elevated.
Speaker Change: Appropriate level of escalation meetings.
Speaker Change: Those annual rent bumps and we've had lots of conversations with TTC lots of negotiations.
Speaker Change: <unk> had success in negotiating higher rent escalations and certain lease renewals.
Speaker Change: Specifically in more urban markets.
Speaker Change: So I think we will continue to push the envelope on that as we can and as appropriate.
Speaker Change: To remind you we're still in the early days of these fuels. If you think of or at lease maturity chart in the sort of bell shaped curve.
The forefront of it still currently so even with the.
Speaker Change: Occasions, where we are able to negotiate in group terms on average I think for some time.
Speaker Change: The average rent bumps.
Speaker Change: Bumps in those leases will continue to be one 5%.
Speaker Change: It will take some time to flow through the entirety of the portfolio portfolio. If we are able to.
Speaker Change: We continue to successfully negotiate higher escalations, but.
Speaker Change: Yes, we are we are working through that and there.
Speaker Change: There are occasions, where we are able to negotiate.
Speaker Change: Okay. Thanks for the reminder, I appreciate it.
Speaker Change: Thank you.
Speaker Change: Thank you our next.
Speaker Change: Question from.
Speaker Change: From Mike Mark Headers BMO capital markets. Please go ahead Mike.
Speaker Change: Thanks, Operator, just a follow up for me.
Speaker Change: I think if I heard you correctly, you said just on.
Speaker Change: If you were to do a financing or leaning more into five year can you can you help us understand that logic I mean.
Speaker Change: It's cheaper yes is it on the view that.
Speaker Change: Curve continues to steepen in five year rates are going down or or is it based on a 50 basis point.
Speaker Change:
Speaker Change: Advantage savings and if so how would that sort of compare to where term premiums would be historically.
I think you put it it's a it's more to do I think with the stupid.
Speaker Change: The steepness of the curve and the relative pricing between five seven and 10.
Right now where things are I mean, we obviously have different places we were looking to sort of ladder out the maturities and so that also works for us from that perspective.
Speaker Change: And so you know.
Speaker Change: In the five years is works out and in and things like that price right now.
Does the decline in your weighted average term to maturity factor into that discussion I guess I'm just kind of come in.
Speaker Change: Over the past several years.
Speaker Change: Yeah, I would say not really I mean, it is coming in obviously as we do start to use five year renewals to the Canadian tire leased with a weighted average term will naturally start Tim will continue to decline.
Speaker Change: Yes that Matt just I guess shorter term, but.
Speaker Change: I will say, we do have a mix of playing in sort of the medium or longer term. Its biocidal. Even if this one looks at you with five year. Another one down the road could could easily be a seven year two.
Speaker Change: Okay got it thanks.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I will turn the call over to Kevin Salzburg, President and CEO for closing remarks.
Thank you Latif and thank you all for joining us today.
Speaker Change: We look forward to speaking with you again in May after we release, our Q1 results have a good day.
Speaker Change: This concludes today's call you may now disconnect.
Speaker Change: Okay.
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