Q4 2024 SmartCentres Real Estate Investment Trust Earnings Call
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Speaker Change: Please standby for the smart centers read Q4, 'twenty 'twenty four conference call. The call will begin shortly as a reminder, you make you have to ask a question any.
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Speaker Change: Good day, ladies and gentlemen, welcome to the smart centers reach Q4, 'twenty 'twenty four conference call I would like to introduce Mr. Peter Slim. Please go ahead.
Speaker Change: Thank you operator, and good afternoon, and welcome to our fourth fourth quarter and full year 2024 results call I'm, Peter Flamm, Chief Financial Officer, I'm joined on today's call by MS. Gould her smart centers executive chair and CEO and by really Goldman our executive Vice President portfolio management and investments.
Speaker Change: We will begin today's call with some comments from Mitch Rudin.
Speaker Change: Rudi will then provide operational highlights and I will review our financial results.
Speaker Change: We will then be pleased to take your questions 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 that any of the speakers make this afternoon Mitch.
Mitch Rudin: <unk> over to you.
Mitch Rudin: Thank you Peter good afternoon, and welcome everyone.
Mitch Rudin: The retail sector in Canada continues to power along with strong fundamentals in the basin.
Mitch Rudin: Food general merchandise.
Mitch Rudin: And household value.
Mitch Rudin: Pharmacy.
Mitch Rudin: General color.
Mitch Rudin: It's smart centers has historically dominated the slice that as values can be weekly meetings.
Speaker Change: His sales Supercharge and Africa.
Speaker Change: Rental growth was eight 8% at least expenses, excluding acres and six 6% from growth.
Speaker Change: Cash collections are above.
Speaker Change: 99%.
Speaker Change: And then same property NOI continued to deliver.
Speaker Change: With three 8% growth.
Speaker Change: All driving occupancy to a new five year high of 98, 7%.
Speaker Change: It is one thing.
Speaker Change: To say it is one thing for us to say.
Speaker Change: Smart centers has real estate of strategic appeal.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: With the retail.
Speaker Change: <unk> values.
Speaker Change: Yes.
Speaker Change: But it's another thing for the retailers themselves.
Speaker Change: So.
Speaker Change: World's largest.
Speaker Change: With its 90.
Speaker Change: 7% occupancy.
Speaker Change: Across the spark centers portfolio.
For the quarter, we executed a 192000 square feet.
Speaker Change: For vacant space and for the year, we executed 253000 square feet Appeals for new retail construction.
Speaker Change: Walmart.
Speaker Change: Richard.
Speaker Change: As with all of our great National brands, our tenant partners relationships continue to deepen with same store expansions.
Speaker Change: And new stores.
Speaker Change: In that respect I am proud to say.
Good after the year end <unk> executed a new Walmart lease for our South Oak Hill Center.
Speaker Change: This represents just one of the opportunities we are working on with Walmart and with others.
More conveniently serve markets that are steadily.
Given rapidly growth in population over the last 10 years.
Speaker Change: But if not grow proportionately or at all in retail.
Speaker Change: Walmart will take possession of the South Oak Hill store later this month.
Speaker Change: And we'll open this new store.
Speaker Change: In late summer.
Speaker Change: In addition, I'm also pleased to announce our new Costco lease deal at Winston Churchill for one.
Speaker Change: Sure.
Speaker Change: And the vacant ex Rona store.
Speaker Change: And while we are satisfied with the contracted with what the contracted rents.
Speaker Change: Will contribute financially in both locations.
Speaker Change: It is their non financial contributions that are the most valuable.
Speaker Change: The enormous amount of additional traffic.
Speaker Change: An enormous amount of additional shopping traffic to.
Speaker Change: So these two large centers will ultimately spread much additional economic activity across each center filling vacancies improving renewal rates, providing further expansion opportunities.
Speaker Change: In addition.
Speaker Change: We have a number of new build locations underway or to begin construction shortly.
Speaker Change: Names such as Canadian tire.
Speaker Change: Winners.
Speaker Change: LCBO so marvellous.
Speaker Change: <unk> culture.
Speaker Change: <unk> had more.
Speaker Change: This higher level of construction activity.
Speaker Change: As Rob can seen for some time.
Speaker Change: And we believe.
Speaker Change: We will continue.
Speaker Change: Spread wide array of tenants and our smart centers locations.
Speaker Change: As we work closely with our tenants every detail matters.
Speaker Change: It is this attention to detail and enhances our tenants and customers experience.
Speaker Change: Which by year end has resulted in another metric attain.
Speaker Change: Attaining a five plus year milestone.
Speaker Change: It is expanding.
Speaker Change: Over 91% of the five 4 million square feet of tenant maturities in 2024.
Rudy: Rudy will have some further color in a minute.
Rudy: But here are a few more operational highlights and some worthy of repeating.
Rudy: Same property NOI, excluding anchors for the three months ending December is up 6% and <unk>.
Rudy: Cooling anchors.
Rudy: Yes.
Rudy: Our millwork apartment leasing has reached a 95% occupancy level well ahead of budget.
Rudy: From a rental perspective.
Rudy: Yeah.
Rudy: Cash collections remained strong at over 99% again reflection.
Rudy: Quality.
Rudy: Yep.
Rudy: The strength of our tenant mix.
Rudy: We expect this momentum carry on through the year and then Q2.
Rudy: 2006.
Rudy: Yes.
Rudy: Built on the top of this strong retail platform, we continue to build secure significant mixed use permissions with over 59 million.
Rudy: Square feet already so as you know.
Rudy: No.
Rudy: Lance we already own.
Rudy: We will continue to be careful and strategic execution.
Rudy: When market conditions permit.
Rudy: With appropriate financing in place.
Rudy: You can read about many of our future mixed use development potentials in our MD&A.
Rudy: A few highlights.
Rudy: Our development teams continue to secure residential and other mixed use commissions across the country and were successful and were successful achieving one 8 million square feet of permissions in Q4.
Rudy: Bringing the year to a total of $9 8 million square feet.
Rudy: These and our other 15 billion square feet of residential and mixed use zoning.
Rudy: Achieved allow us to immediately launch when market conditions permit.
Rudy: In the meantime, we will continue adding these higher and better uses to our properties.
Rudy: Improving.
Rudy: ABB flexibility and readiness for execution.
Rudy: And someday somebody other than us.
Rudy: Sure.
Rudy: Thanks, Bruce and excavation were.
Rudy: Were completed and construction and advancing four or 36.
Rudy: Sure the BMC compressing it.
Rudy: 320.
Rudy: So the condominium units configured.
Rudy: Through our smart living brand.
Rudy: The mill we are.
Rudy: 458 unit apartment rental approach, which was completed late last year was 95% leased at quarter end and above plan.
Rudy: Yes.
Construction of our bond northwest Townhomes with our partner is progressing well with 11 more closings take place in Q4, bringing the total to 96% of the 120 pre sold units now close.
Lisa: And Lisa construction is continuing for a 224000 square foot retail center comprising.
Lisa: Comprising primarily of a 200000 square foot flagship Canadian tire store opening remains on schedule for early 2026.
Lisa: Our self storage portfolio comprises 11 operating units, which now accounts for over one 4 million square feet at 100% with three remaining projects under construction, which are completion will bring the total to $1 9 million.
Lisa: This portfolio continues to excel, we intend to continue expansion as we are doing with our two new locations one in the middle East Jason to our shopping center.
Lisa: Any other inventory inventory MPC.
Lisa: Just off the downtown core.
Lisa: Overall, the business continues to expand and strengthen.
Lisa: And we continue doing.
Lisa: So we have a strong balance sheet.
Lisa: While carefully managing our overall debt.
Lisa: And the amount of floating rate debt.
Lisa: We have increased our unencumbered pool nine 5 billion.
Lisa: And maintain our conservative metrics, which Peter will speak to in a moment.
Sure.
Lisa: But before that.
Lisa: Let me turn it over to Rudy.
Lisa: For some more operational highlights.
Lisa: Sure.
Lisa: Yes.
Lisa: Thanks, Mitch and good afternoon, everyone.
Lisa: The fourth quarter was once again a standout.
Speaker Change: Every meaningful aspect and operating metric Ken.
Speaker Change: Tenant demand for space remains strong with near 200000 square feet.
Speaker Change: They can see leasing in the quarter delivering high quality income across all provinces in both large and small centers deliver.
Speaker Change: Delivering that 98, 7% occupancy that may spoke about same property NOI continued its momentum with three 8% growth over the period.
Speaker Change: And prior year.
Speaker Change: There are $5 5 million square feet of space matured in 2024 and for the first time in a long time tenant retention was above 91%, reflecting the improved the traction of the portfolio and with rental spread of eight 8%, excluding anchors and six 1% all in.
Speaker Change: Cash collections continued to exceed 99% in the quarter.
Mitch Rudin: And on a more exciting note as Mitch mentioned.
Speaker Change: Released.
Speaker Change: The Rona space at our 550000 square foot Winston Churchill, and 401 center to Costco at meaningful market rent.
Speaker Change: We also completed a new Walmart lease for the ex target space in South Oakville with imminent possession in summer Grand opening.
Speaker Change: The relaxation of grocery restrictions will not only continue to benefit large open format retail, but we believe we'll also accelerate the pace of tenant demand and customers to our center, maintaining strong cash flow and high occupancy.
Speaker Change: We have been adding uses such as medical Daycares Entertainment health and beauty fitness pet stores and more providing that one stop convenient place to shop.
Speaker Change: Our premium outlets continue to excel in driving traffic and improving tenant sales leading to strong growth in EBITDA and value to the REIT tenant sales has our Toronto premium outlets and the top three highest performers in all of Canada.
Speaker Change: And remains an outperformer in assignments portfolio.
Our Toronto, and Montreal locations remain 100% lease and rental with rental lifts in EBITDA, continuing continuing to come in ahead of budget and well above the prior year.
Speaker Change: These affordable luxury centers and World class brands continue to dominate in their segment.
Speaker Change: Yes.
Speaker Change: Overall, the REIT continues strengthening its cash flow and stability, while reducing risks through strong rental less higher covenant quality introduction of new brands.
Speaker Change: And more grocery we expect this momentum to continue throughout 2025.
Speaker Change: With that I will turn it over to Peter Peter.
Speaker Change: Peter.
Peter: The financial results for the fourth quarter and the full year once again reflect the strong performance in our core retail business with improved occupancy and same property NOI growth and the continued contribution from our mixed use development portfolio for.
Peter: For the three months ended December 31, 2024, net operating income increased by $12 3 million or.
Peter: Or 9% from the same quarter last year, primarily due to lease up activities for retail and mixed use properties and an increase in cam recoveries relative to the same quarter last year.
Peter: <unk> per fully diluted unit was <unk> 53 in the quarter compared to 59 in the comparable quarter last year. The decrease was primarily due to a fair value adjustment on our total return swap, resulting from fluctuation in our unit price, partially offset by the increase in NOI.
Peter: For the three months ended December 31, 2024, <unk> with adjustments, which excludes the townhome profits and the total return swap was 56 per unit compared to <unk> 51.
Peter: In 2023.
Peter: This increase of five.
Peter: Or nine 8% was primarily due to lease up activity and an increase in cam recoveries, partially offset by an increase in net interest expense compared to the prior year period.
Peter: We maintained our distributions during the quarter at an annualized rate of $1 85 per unit the payout ratio to <unk> for the full year ended December 31, 2024 was 91, 7%.
Peter: Adjusted debt to adjusted EBITDA was $9 six times for the Rolling 12 months period, ending in Q4, which is a decrease from $9 eight times last quarter, primarily due to growth in EBITDA.
Peter: Our debt to aggregate assets ratio was 43, 7% at the end of the quarter, a 10 basis point increase compared to the prior quarter.
Peter: Compared to Q3, our unencumbered asset pool increased by approximately $100 million to.
Peter: To $9 5 billion.
Peter: In Q4 <unk>.
Peter: On secured debt, including our share of equity accounted investments was $4 5 billion at Q4 virtually unchanged from the quarter from the prior quarter.
Peter: And represents approximately 83% of our total debt of $5 4 billion.
Peter: From a liquidity perspective, we remain comfortable with our current liquidity position at December 31, 2024, we have approximately $833 million of liquidity, which includes both cash on hand, and undrawn credit facilities, but excludes any accordion features.
Peter: Subsequent to the quarter, we increased our liquidity through the issuance of $300 million.
Peter: A $4 73, 7% series, a b senior unsecured debentures for six and a half year term.
The proceeds from this offering were used to repay our series and debentures upon their maturity earlier this month and to repay higher interest floating rate debt on our operating lines.
Peter: The weighted average term to maturity of our debt, including debt and equity accounted investments is three one years, our weighted average interest rate was 392% a decrease of 17 basis points from the prior quarter.
Peter: Our debt ladder remains conservatively structured with the recent unsecured debenture offering extending our weighted average term to maturity.
Peter: Approximately 89% of our debt is at fixed interest rates.
Peter: Just before we open the call up to questions I want to touch briefly on our development programs that are underway.
Peter: As in previous quarters, we have updated our MD&A disclosure focusing on those development projects that are currently under construction.
Peter: As you'll see on page 17, there were 10 projects under construction at the end of Q4 up two from last quarter.
Peter: The self storage facility in Stony Creek was completed and opened in Q4. So it came off the list and three additional self storage projects were added with estimated completion dates in 2026.
Peter: The REIT share of total capital cost of these 10 development projects is approximately $515 million with our share of the estimated cost to complete standing at $288 million.
Peter: And with that we would be pleased to take your questions. So operator can we have the first question on the call. Please.
Peter: Certainly as a reminder, if you'd like to queue up to ask a question. Please press star one on your phone's keypad.
Speaker Change: First question is from Michael Marquis from BMO capital markets. Please go ahead.
Michael Marquis: Thanks, operator, and good afternoon everybody.
Michael Marquis: Peter just a technical one to start off the 4 million dollar variance and camera recoveries that you noted is that to say that you had a benefit this year I E income recorded in Q4 or was it that you had a penalty sort of a negative true up in the prior year I guess, just trying to get a sense of if there is.
Michael Marquis: Any element of income that we need to strip out of the run rate going forward.
Michael Marquis: Yeah, there was a true up in the prior year and 2023, we did it we did.
Michael Marquis: Launched a new accounting package don't want to get too detailed in the accounting weeds, but we did use a new software package in 2024 that allows us to bill on actual cam versus budgeted it came with a true up at year end.
Michael Marquis: So there was a little bit of that.
Michael Marquis: Okay, but for this quarter is there any catch up payment that will come off in Q1, we're now at such a clean no. This quarter is a good run rate okay.
Speaker Change: Okay awesome. Thank you.
Speaker Change: Okay, and then would that would that impact also helped the same property NOI comparison for the quarter.
Speaker Change: Yes little bit.
Speaker Change: Okay, and then I don't know if you break this out it may be useful going forward, but do you have an extent.
Speaker Change: The developments that you completed in 2023, because I think you do it on your annual number wouldn't include those developments, but I guess he delivered something before Q4.
Speaker Change: It would get into your Q4 pool Q4, 'twenty three do you have a sense of what the developments that you delivered would be contributing to same property NOI.
Speaker Change: So the biggest one would be the mill way, which came on stream at the end of 2023 and so it would be in our same property NOI. When we compare Q4 'twenty four against Q4, 'twenty three that would be the biggest one and I.
Michael Marquis: I would say, it's about equally split roughly Michael between.
Michael Marquis: New projects, including no way and self storage and and the existing retail portfolio.
Michael Marquis: Okay.
Sam: Sam Thanks for that and then I guess just more of a a high level question here.
Speaker Change: Maybe for Matt you mentioned congrats brought by the way on the getting the Costco deal Winston Churchill and Walmart.
Speaker Change: So Phil just with respect to Walmart and there are $6 5 billion dollar announcement in dozens and I think we're all trying to figure out what dozens means new stores over the next five years.
Speaker Change: Just curious if you are able to share to the extent any preliminary discussions you've had with them and what that opportunity set might look like for smart centers going forward in terms of opening or development of new stores.
Speaker Change: Yes, I mean.
Speaker Change: We're not we're not able to talk about specifics, but I mean.
Speaker Change: We will be.
Speaker Change: Doing more than <unk>.
Speaker Change: Ed.
Speaker Change: So yes.
<unk>.
Speaker Change: Obviously were.
Speaker Change: Sure.
Speaker Change: We're tight with Serena will close with Walmart in terms of being a large landlord of theirs.
Speaker Change: A large percentage of the walmarts that we do have in our portfolio and beyond were developed.
Speaker Change: By Smart centers, so would be I would guess it would be.
Speaker Change: Natural too.
Speaker Change: Assuming that we will do some we certainly can add to all of them.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: We in terms of announcements coming those will be forthcoming over the next foreseeable.
Speaker Change: Next year or so.
Speaker Change: Mostly probably announced by Walmart, but.
Speaker Change: In some cases.
Yes.
Speaker Change: In a position to announce some of them ourselves.
Speaker Change: So we're going to be some ground.
Speaker Change: Okay, so vacancy with Dolby cinema.
Speaker Change: Development credit.
Speaker Change: Walmart's new developments.
Speaker Change: Across the country.
Speaker Change: Yes.
Speaker Change: Okay that sounds exciting.
Speaker Change: Look for that and I'll turn it back to the queue. Thanks.
Speaker Change: Thank you.
Speaker Change: The next question is from Sam Damiani from TD Securities. Please go ahead Sam.
Speaker Change: Thanks, and good afternoon, everyone.
Speaker Change: So just on the Winston Churchill I'm, just curious was that was that lease enabled by the relaxation of grocery lease restrictions just wondering.
Speaker Change: Why Costco was looking at that site now and not not two or three or five years ago.
Speaker Change: So Sam I'm sure you've heard from all your.
Speaker Change: Contacts and relationships out there that does take a while to do a costco deal. So.
Speaker Change: Don't assume it's related to.
Speaker Change: The discussions going on about grocery and club grocery competition.
Speaker Change: But in any event.
Speaker Change: It did have that.
Speaker Change: No.
Speaker Change: That debt.
Speaker Change: That facility under lease for a long time when it was when it was not occupied are operated by them.
Speaker Change: So it really is.
Speaker Change: Yes.
Speaker Change: The combination of a lot of things.
Speaker Change: And so we've taken it back we've had it back here a little bit now.
Speaker Change: Yes, we've been negotiating with Costco for quite some time.
Speaker Change: As you know it takes a long time to do a custodian.
Speaker Change: Absolutely and just on the I think I said somewhere you signed around 200 or 250000 square feet.
Speaker Change: Of new retail leases for new construction.
Speaker Change: Can you be more specific does that include Blair can the entire you know what does that include is that over and above the current disclosed development pipeline and what would be the timing on that.
Speaker Change: Okay.
Well, yes, no no longer subject Canadian tire, which by the way you should go buy can see right now.
Speaker Change: The garage underground garages.
Speaker Change: Fully formed basically.
Speaker Change: Okay.
Speaker Change: Kind of order of magnitude of that of the Canadian tire, but it's unclear.
Speaker Change: I mean.
Speaker Change: Obviously, we were dealing with a variety of.
Speaker Change: Different sized retailers so.
Speaker Change: It's across the board the list I think we gave you speak.
Speaker Change: Speak to a little bit more.
Speaker Change: The second.
Speaker Change: So, yes, I mean.
Speaker Change: As we said that we anticipate that momentum to continue.
Speaker Change: Yes.
Speaker Change: But yes. It is stuff that we do not have currently under construction.
Sam Damiani: Sure and I had mentioned a little bit of this before Sam.
Sam Damiani: Some of these were or are went into when we start construction, we'll be in some smaller markets to not just all urban market. So we're pretty excited about that and they include all of the T. J X banners.
Sam Damiani: Dollar ramp.
Sam Damiani: The shoppers' LCBO.
Sam Damiani: So it's a wide sort of a wide variety of infill.
Speaker Change: And adjacent to our existing shopping centers and all new construction, yes.
Speaker Change: And that would come online over the next one to two years for the most part yeah. We'll start we'll be starting construction. This year on almost all of that so yeah. Within the next end of this year and into next year, yeah. Okay. Okay great.
Speaker Change: The distinction is between that and some of the new.
Speaker Change: Potentially new Walmart sites, which will not be on existing sites.
Speaker Change: So we were just talking about are mostly additions to existing sites.
Speaker Change: Which is great.
Speaker Change: Of course.
Speaker Change: Hopefully we will we will announce.
Speaker Change: The acquisition of additional lands to be anchored by <unk>.
Speaker Change: Sure.
Speaker Change: Understood that's helpful.
Speaker Change: Last one for me is just on sort of a residential development outlook, how how would you characterize any change in yes.
Speaker Change: The outlook or expectations for for construction starts are.
Speaker Change: Or or asset dispositions versus last quarter.
Speaker Change: Yes.
Speaker Change: I mean the only.
Speaker Change: The only residential.
Speaker Change: Development.
Speaker Change: We've got going on really is.
Speaker Change: As art work.
Speaker Change: For all intents and purposes.
And we are.
Speaker Change: We don't anticipate going to market on anything new.
Speaker Change: Yes.
Speaker Change: In the foreseeable future foreseeable meeting within our budget.
Speaker Change: Plans are in essence.
Speaker Change: Anything can happen.
Speaker Change: But if market conditions change we will be.
Speaker Change: We'll be ready to either go to market sell some sites.
Speaker Change: We don't have any we sold <unk>.
Speaker Change: We sold it to a partner that we own a building with in miscarriage.
Speaker Change: And so that.
Speaker Change: One was I think remember fourth quarter, but.
Speaker Change: We don't have.
Speaker Change: Anything to announce right now in the way of dispositions.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: I'll jump back.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you'd like to chew up to ask a question at this time. Please press star one on your phone's keypad. The next question is from lowering Kalmar from a digital bank capital markets. Please go ahead.
Thanks, Good afternoon, everyone.
Speaker Change: Maybe going back to the Walmart announcement.
Speaker Change: I was just wondering could you give us any additional color on the lease I guess theres rent escalators, a bit or if it will be.
Speaker Change: There'll be more akin to the historical leases you have in the portfolio.
Speaker Change: Yes, I mean.
Speaker Change: For the purposes of your question.
Speaker Change:
Speaker Change: No.
Speaker Change: They won't be akin to.
Speaker Change: To the old leases there'll be.
Speaker Change: It will be.
Speaker Change: There'll be some.
Speaker Change: There'll be some escalations.
Speaker Change: Yes.
Speaker Change: What you're really asking.
Speaker Change: During the principal term.
Speaker Change: And at.
Speaker Change: At least the ones that.
Speaker Change: Yes.
Speaker Change: And im.
Speaker Change: The ones that are.
Speaker Change: Phil.
Speaker Change: <unk> is not a flat lease.
Speaker Change: It has for trusting in.
Speaker Change: I would.
Speaker Change: Anticipating that.
Speaker Change: Yes.
Speaker Change: Always one by one and the circumstances, but.
Speaker Change: Visibility on.
Speaker Change: On some of the other ones will be some bumps as well.
Speaker Change: Okay.
Speaker Change: And then wood.
Speaker Change: Would you like what would you need to see and I know, it's market dependent but maybe a rough idea. If you can in terms yes.
Speaker Change: Net rents to justify or to make ground up development work and what kind of yield would you like to get I don't know what's easier to answer.
Speaker Change: Yeah, No I mean I understand.
Let's put this way I mean.
Speaker Change: We're not doing freestanding Walmart stores.
Speaker Change: On their own to own I mean for the most part.
Speaker Change: It might be some set of circumstances.
Speaker Change: So we don't need to bother getting into but so it's part of a larger a larger shopping center. So you can't look at the Walmart in isolation.
Speaker Change: But.
Speaker Change: We don't build the Walmart just the Walmart either we build the Walmart and its parking, but we have to build PE.
Speaker Change: Pay forward for a lot of infrastructure.
Speaker Change: And <unk>.
Speaker Change: All sites road improvements intersections pawns storm water management.
Speaker Change: We prep the pads for future retailers and so on so.
Speaker Change: But I would for the purposes of just giving you. Some some guidance I mean, we don't do we don't do Walmart.
Speaker Change: Yeah.
Speaker Change: We don't like Walmart stores to be dilutive, but start with that.
Speaker Change: So you.
Speaker Change: But there is I don't want to get into any more than that but for all intents for so you can assume they are not dilutive.
Speaker Change: O K I would hope not.
Speaker Change: Is there any more locations like you had with that it will target box, where you could slot them in in the portfolio or is that kind of a one that sort of worked out with that.
Speaker Change: Well, we're going to call you. After this call and see if you want to on a job in the leasing department.
Speaker Change: It's a very very good where to go mentally.
Speaker Change: So there might be there's certainly interestingly.
Speaker Change: Uh huh.
Speaker Change: No.
Speaker Change: Some potential for Walmart going onto existing sites ground up on existing sites. So okay.
Speaker Change: We might we might be able to.
Speaker Change: You announce something like that in terms of existing.
Speaker Change: Vacancies unlikely.
Speaker Change: But.
Speaker Change: Hang on one second let me just check some yep.
Speaker Change: But we have leased some large vacancies.
Speaker Change: Theyre not to Walmart.
Speaker Change: Mainly because.
Speaker Change: Very close by to their existing.
Speaker Change: These vacancies were close to Walmart, but for example appeared and <unk>, we have a rona at old Rona store.
Speaker Change: Oh, I'm, sorry, Lowes store.
Speaker Change: That.
Speaker Change: But they did not renew in.
A year ago were not quite coming up to a year.
Speaker Change: I think they were paying about 12, 50 or something a foot on a 130000 square feet, maybe being 134, well anyway, we just released it.
Speaker Change: Four plus or minus let's say on either side to say.
Speaker Change: High teens, 18, 1920 somewhere in there I don't want to.
We don't we don't.
Speaker Change: Publish specific rent so just giving you a range so in that range.
Speaker Change: For that entire premises to a single user.
Speaker Change: Just for example, so that's first quarter stuff.
Speaker Change: We also.
Speaker Change: Hold on one second let me just check something.
Speaker Change: Never right.
Speaker Change: That's about it we can talk about right now, but there is activity going on.
Speaker Change: In large former anchor tenant type space.
Speaker Change: Essentially lease up for efficiencies led to Walmart others. Okay. That's fair enough and then one other question maybe for Peter I was wondering if you could give us because I know the premium outlets are a big contributors and they're doing really well, but maybe give us an idea of what the.
Speaker Change: NOI from overage rents were in <unk>, how much that contributed to same property NOI growth something along those lines.
Speaker Change: Yes, I learned acuity I don't have that handy in terms of what that breakdown is in terms of the NOI from from Overages overdrafts, but I can we will have a look and get back to you on that okay.
Speaker Change: Okay I appreciate it. Thank you guys so much.
Speaker Change: Awesome.
Speaker Change: Alright. Thank you. The next question is from Matt <unk> from National Bank Financial. Please go ahead, Matt.
Matt: Hey, guys actually that this may be a follow on to Lauren's question, there, but just wanted to understand there was a pretty good acceleration in base rent from Q3 to Q4, I think roughly 2% and then also your miscellaneous revenues high but I think it maybe dips in Q1, but can you give us.
Speaker Change: Maybe the seasonality.
Speaker Change: In Q4, if there is anything and how we should think about.
Speaker Change: The run rate number and also.
Speaker Change: Like there wasn't a big change in the in place occupancy and think there is a ton of leasing done.
But we will get more steps for next year in Q1.
Speaker Change: But if you could give us a sense of kind of what the drivers are and how much of that's maybe lease up of storage assets versus kind of the the retail component.
Speaker Change: Yes, there is seasonality.
Speaker Change: And some of that.
Speaker Change: Because of.
Speaker Change: Certain assets that.
Speaker Change: Pick up certain times of the year.
Speaker Change: <unk>.
Speaker Change: And I guess theres some parking in there which.
Speaker Change:
Speaker Change: Which I guess also may have a little bit of seasonality.
Speaker Change: So.
Speaker Change: Peter do you want to Matt what was your question on storage.
Speaker Change: Just trying to figure out as well I mean, some of it it sounds like it is the <unk>.
Speaker Change: <unk> lease up but like.
Speaker Change: Where are the storage assets are.
Speaker Change: Like are they in your occupancy or are they separate.
Speaker Change: They're not in our occupancy.
Speaker Change: They're not in our occupancy we have we have 11 storage assets that are up and running.
Speaker Change: Eight of them are the what we would characterize as stabilized which means they've been open for at least a year.
Speaker Change: And we've been able to put.
Speaker Change: Term financing on them and pay pay off the construction facilities.
Speaker Change: And the other three are and open up for less than a year and so they are not yet stabilized, but we'll we expect to add them to the stabilized portfolio. Later this fall as they as they season.
Speaker Change: And they are performing very well, we've disclosed separately the occupancy for just the eight of the 11 that are stabilized but it is not included in the 98, 7% overall occupancy that's retail only.
Okay. No I appreciate that and then maybe just in terms of the broader leasing stats.
Speaker Change: I know you're kind of into Q1, you probably know what the 2025 number looks like for the most part but.
Speaker Change: Is it similar or have you seen further acceleration versus that kind of 6% total and 9%.
Speaker Change: Excellent.
Speaker Change: On the new leasing spreads.
Speaker Change: Our new and renewal.
Speaker Change: Similar.
Speaker Change: Good similar don't think we where we want to make any predictions quite yet still a little bit early but.
Speaker Change: But at the moment things look.
Speaker Change: The same steady interest is strong.
Speaker Change: We're hopeful.
Speaker Change: Slightly slightly sloping towards optimistic but.
Speaker Change: Steady.
Speaker Change: Okay, and I mean, it doesn't seem like at least in conversations with some of your peers, but.
Speaker Change: The dislocations or potential dislocation, if and when we ever get to.
Speaker Change: Sense of whats coming out of the U S. Do you expect that to impact the business or consumers at.
Speaker Change: At the end of the day or the retailers that you're dealing with her.
Speaker Change: Any kind of expressed any concerns at this point about potential economic dislocation. If there is a trade war.
Speaker Change: Of course.
Speaker Change: I guess.
Speaker Change: You know we.
Speaker Change: We assume that people will there'll be.
Speaker Change: More emphasis on value.
Speaker Change: Even with the.
The idea in the air.
Speaker Change: So we think we're quite.
Speaker Change: Projected and well aligned with.
Speaker Change: With what market. We're in you know the reality.
Speaker Change: The economic reality of the.
Speaker Change: Canadian consumer and if it does get really ugly I guess.
Speaker Change: Nobody can predict that.
Speaker Change: Or.
Speaker Change: So.
Speaker Change: That part, we really can't predict but we think we're in good position, we're well positioned for for.
Speaker Change: For everybody.
Speaker Change: Just.
Speaker Change: Budgeting and hunkering down.
Speaker Change:
Speaker Change: And we like our covenants.
Speaker Change: We were not a percentage rent company and we're not.
Speaker Change: Short term.
Speaker Change: Leases are long term, especially the largest space so.
With very strong covenants, so were pretty clear.
Speaker Change: Feeling pretty good about rent collections even in.
We're really in a period of really great work.
Speaker Change: Scenarios.
Speaker Change: I think we.
Speaker Change: We're having troubles with Wal Mart paying rent yet.
Speaker Change: I, probably got bigger issues than smart trading thanks, Ed.
Speaker Change: Yes.
Speaker Change: Is it too.
Speaker Change: Yes.
Speaker Change: Alright, thank you.
Speaker Change: The next question is from <unk> <unk> from RBC capital markets. Please go ahead Bobby.
Speaker Change: Thanks.
Speaker Change: One.
Speaker Change: And I apologize if this was already answered, but coming back maybe to some of the new Walmart Lisa Gill.
Speaker Change: Or maybe some potential new ones.
Speaker Change: Are you, putting any additional capital or higher than typical capital into the space.
Speaker Change: In exchange for the rent steps.
Speaker Change: We don't do that.
Speaker Change: Pretty much I mean, I don't want you to remind me that I said this someday, but for all intents and purposes, we don't do that.
Speaker Change: No.
Speaker Change: For anybody we don't.
Speaker Change: I mean it is done.
Speaker Change: We don't do it.
Speaker Change: It is.
Speaker Change: More towards tenant improvements for.
Speaker Change: Hi, Laurence.
Speaker Change: So the.
Speaker Change: Short answer to the Walmart question is no.
Speaker Change: And.
Speaker Change: And to others is also note.
Speaker Change: Okay.
Speaker Change: Units. So we don't we don't pay a check right.
Speaker Change: So fair to say that the <unk>.
Speaker Change: These types of deals will be sort of market level.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: In terms of <unk>.
Speaker Change: Maybe some of the new potential developments that you're undertaking.
Speaker Change: Do you plan to undertake on somebody's expansion, what sort of Unlevered yields would you be looking to target.
Speaker Change: We don't do it quite well.
Speaker Change: We don't usually do one deal at a time.
Speaker Change: And so it doesn't work that way.
Speaker Change: We don't say, we're targeting this return by the way.
Speaker Change: When you do a deal.
Speaker Change: Actually collect the rent for a year or two like with retail.
Speaker Change: Obviously with residential.
Speaker Change: Three and a half three three and half years, but anyway.
Speaker Change: So you can target, which you want thinking you know what you need but you don't really borrow that money or lock into that money for a year or two but.
Speaker Change: But generally speaking for a variety of reasons.
Speaker Change: Sure.
Speaker Change: Was there a accretive deals going in.
Speaker Change: We don't do.
We don't we don't do deals just for the sake of doing deals. So they are accretive I will point out that the retailers that.
Speaker Change: We deal with for the most of it they know what their stores costs. They know what the custom money is.
Speaker Change: And they know what it costs to develop in addition to the building of the store so it's not like.
Speaker Change: And they want their stores.
They don't want to delay haggling, I mean, theres no haggling, we're not going to develop the store and that's the other thing we're not we're not a startup.
Speaker Change: And we're not buying a site because of that tenants interest.
Speaker Change: The site has operated for the most part and it is what it is.
Speaker Change: No.
Speaker Change: The good news is we can do things pretty competitively because we already own the land.
Speaker Change: Secondly, well good news is I guess.
Speaker Change: We don't have to do the deal and they know that so.
They are accretive.
Speaker Change: They are fair to both sides.
Speaker Change: And <unk>.
Speaker Change: They get done pretty quickly.
Speaker Change: So.
Speaker Change: Yes, that's sort of color around the negotiation with those sub anchors.
Mitch Rudin: Okay, Yes, thats helpful. Mitch.
Mitch Rudin: Just on the <unk>.
Mitch Rudin: To come back maybe to that same property NOI.
Mitch Rudin: <unk> closed out with a pretty good year.
Mitch Rudin: I guess I just wanted to clarify you do include self storage sites in Norway.
Mitch Rudin: In Europe.
Mitch Rudin: Same property.
Mitch Rudin: A few years.
Mitch Rudin: The first question and then just maybe coming back to I think last quarter.
Talked about sort of a range of maybe 3% to 5%.
Mitch Rudin: Sustainable maybe run rate for.
Mitch Rudin: The organic growth.
Mitch Rudin: As we go forward. After I think Q3 was pretty strong. So just curious if you. If you still are comfortable with that target as we think about 2025.
Mitch Rudin: As to your thinking.
Mitch Rudin: So on your first question, Yes. We do include those self storage projects that are stabilized as I mentioned earlier that have been opened for at least a year in the same property number.
Mitch Rudin: And then your second question.
Mitch Rudin: <unk> is also included because that was opened in Q4 of 2023, and then I think the third part of your question was on the guidance that really talked about on last quarter's call, 3% to 5% I think that is still our view, albeit we'll probably be at the lower end of that range, but I expect will be.
Mitch Rudin: Within that range for 2025.
Speaker Change: Thanks, very much Peter I will turn it back.
Speaker Change: Thank you we have a follow up question from Michael <unk> from BMO capital markets. Please go ahead Michael.
Michael Marquis: Yes, thanks operator.
Speaker Change: Just with respect to I think Lorraine asked the question.
Michael Marquis: But I didn't get the answer like how many of those.
Speaker Change: Sort of.
Speaker Change: Dark.
Anchor boxes.
Former target and former former Rona would be in the portfolio.
Speaker Change: That you had better.
Speaker Change: The ability to backfill in this type of manner.
Speaker Change: We have.
Speaker Change: I would say I call it three.
Speaker Change: <unk> argue over what.
Speaker Change: When does it become like had acre sort of.
Speaker Change: But.
Speaker Change: I'd say, we've got Kitchener, Cambridge.
Speaker Change: That's where we all agree but we also have Aurora.
Speaker Change: Which we own the old Canadian tire.
Speaker Change: So.
Speaker Change: We've resolved that we were in a row with some fantastic site for pretty much anything.
Speaker Change: So we got it zoned for residential and we were we were going to redevelop it.
Speaker Change: Still considering it.
Speaker Change: For residential, but we've kept that vacant because we're going to redevelop it severe on young Street.
Speaker Change: But.
Speaker Change: In two of the three cases Aurora in.
Speaker Change: In Cambridge, we have.
Speaker Change: I'd say.
Speaker Change: Five to six out of 10.
Speaker Change: Interest level of interest for those entire premises.
Speaker Change: In those cases and so.
Speaker Change: Cambridge is pretty big well.
Speaker Change: Kitchen in Cambridge, a pretty big but we hope that we will get Aurora and Cambridge release this year.
Speaker Change: If we're lucky.
Speaker Change: We might also get.
Speaker Change: Kitchen early so.
Speaker Change: Our goal in here is that we don't release all three of those this year.
Speaker Change: Phil.
Phil: We're pretty optimistic about that.
Phil: Okay, and then and that's in addition to South Oakville, Winston Churchill and DMC that you noted right. Those haven't contributed yet those are gone.
Phil: Those are done those or at least so those three are now there.
Phil: They're not contributing anything to year no no.
Phil: Yes.
They're contributing to lowering our stress level.
Phil: Yes.
Speaker Change: Just again, so I guess these sites are I imagine there they are in development. So they are not in your occupancy figures.
Phil: Cash flow perspective, when they come online.
Phil: The impact can be pretty significant.
Phil: So let's go in reverse yes, still do something for sure. Although some of them were going to be developed so that might be coming out of pud.
Phil: All of them were in the rezoning process to new residential.
Phil: But in terms of earnings in terms of.
Phil: NOI.
Phil: In terms of.
Phil: <unk> et cetera, yes.
Phil: Even occupancy.
Speaker Change: We'll be affected because they are all 100% leased so.
Phil: Yes.
Phil: So it doesn't contribute all way around big spaces.
Phil: And we'll rent.
Phil: <unk> net.
Phil: On spaces that have been empty.
Okay.
Phil: No written nothing collecting taxes et cetera, so yes.
Phil: Sure.
Phil: Okay.
Phil: That's very helpful. Thanks, so much.
Phil: Thank you.
Speaker Change: Next question is from Mario <unk> from Scotia Capital. Please go ahead Mario.
Phil: Alright, thank you.
Speaker Change: Just two quick follow ups first maybe for Peter on that.
Phil: Same property NOI expectation of 3% to 5% this year can.
Speaker Change: Can you perhaps talk about the <unk>.
Phil: <unk> ability to <unk>.
Phil: Kris you contractual annual escalators.
Phil: On new leases and 25, we put a lot.
Phil: In 24 with respect to.
Phil: More pricing power going towards the landlords.
Phil: Implementing these types of contractual rental escalators that are above average clinic are you seeing that in your portfolio as loans maybe.
John: Sure John.
Phil: Our ability to drywall.
Phil: Yes.
Phil: I mean, we have.
Phil: There is a lot of interest going on it didn't stop with the year end.
Phil: Over the quarter end.
Phil: It's going on so.
Phil: From strong retailers that we have.
Listen there so.
Phil: With those leases.
Phil: Yes.
Phil: The metrics the data points, we will.
Phil: We will change for the better.
Phil: So we're being cautious with our.
Phil: Our.
Phil: Our guidance, but.
Phil: We're feeling.
Phil: Feeling pretty we're feeling the same way now as we did a few months ago in terms of the level of interest.
Phil: So you can sort of see it starting to kick in I mean, a year ago. We started talking about this I think we were sort of warning you all try to anyway.
Phil: So it's starting to materialize and that's still going on and it will continue to materialize.
Eric: Eric do you want to add.
Eric: Yes, Mario like like we were talking about earlier last year as Mitch said.
Eric: These things take time to do these deals like Mitch said mentioned about Costco and Walmart.
Eric: Food and what's happening in the grocery business and all of this takes time by the time the tenant deals done and they get fixed during and before they open so.
Eric: While we don't want to sound.
Very enthusiastic we are very much believing that the market 2025 will be a strong year, but it will take time for that to happen. So that's why we're.
Eric: Aaron on the side of being on the lower end of that range on a same property NOI.
Eric: Because it'll take time for that to happen, but demand is good grocery is good.
Eric: Tenant interest is strong newbuild like I mentioned earlier, the 250000 square feet, we signed for Newbuild construction, which will start in 2025, probably won't open until the end or into 2026.
Well that will take place, but all the time I would like to add so you guys understand like $2 50.
Eric: That's what aside.
Eric: It's all strong it's all food store.
Eric: Food store <unk>.
Eric: Pharmacy.
Eric: So long term leases.
Eric: Strong covenants.
Eric: Huge contributors to traffic so.
Eric: That is also continuing to go on we're negotiating quite a bit of that but the reason we're being cautious.
Eric: We live in right now, it's a very volatile world.
Eric: And we don't want to.
Eric: Have the.
Eric: So the hubris to predict.
Eric: Everything just kind of be status quo continue on.
Eric: Yes.
Speaker Change: I'm sure we can all imagine different scenarios so if.
Speaker Change: If nothing changed and we lived in a static system.
Speaker Change: On the optimistic and but we can't be.
Speaker Change: We can't predict so.
Speaker Change: That's a little bit more color behind what's going on and how we are factoring in what we will actually get done.
Speaker Change:
Speaker Change: Given everything that's going on.
Speaker Change: Treater in the World Forever.
Speaker Change: Got it Okay and then.
Speaker Change: If you look at the 25 Expiries.
Speaker Change: The mix between Expiries with fixed rate renewals versus.
Speaker Change: Market rate renewals.
Speaker Change: Different.
Speaker Change: Historical average.
Speaker Change: I don't have that in front of me, but I don't think so I think our portfolio is pretty well <unk>.
Speaker Change: Consistent year over year, So I expect 25 to be relatively the same Mario.
Speaker Change: Okay.
Speaker Change: Last question, it's been asked a couple of times.
Speaker Change: Potential development yields going forward, Mitch I think you mentioned.
Speaker Change: They are accretive.
Speaker Change: The definition of accretion can vary.
Speaker Change: So I'm just curious in terms of how internally.
Speaker Change: Think about accretion whether it's <unk>.
Speaker Change: Now, whether it's referenced the distribution yield or yield spread the implied cap rate.
Speaker Change: How do you internally think about the definition of accretion NAV accretion for example.
Speaker Change: Yes, I mean first of all.
Speaker Change: Sure.
Speaker Change: Uh huh.
Speaker Change: We're pretty conservative with our cost estimates and so on so we're hoping we're going to be on the right side of that.
Speaker Change: Things will get better I mean, we always want to be accretive to <unk>.
Speaker Change: And as it was saying earlier, we don't have to do these.
Speaker Change: We are very will be much more motivated on a vacancy obviously, but.
Speaker Change: But newbuild, we do want to have some cushion there so.
Speaker Change: But we never know until we build do we don't know exactly what the costs going to be we don't go to tender before we signed a lease.
Speaker Change: Yes.
Speaker Change: If it's if it was.
It was the tower today of any kind, we would probably want to go almost all the way to tender for our bread and butter single storey stuff I mean, we pretty have a pretty good feel across the country, what it's going to cost Bill and we leave some room, there and we're hoping we'll get some we just tender or something.
Speaker Change: That were released and we're going to start building and we had we came in.
Speaker Change: Really nicely under what we had estimated.
Speaker Change: Rents were based on higher construction prices so.
Speaker Change: Somewhere between mid high to high single digits, we would always be in this environment, we'd always be.
Speaker Change: Not a bad place to start.
Speaker Change: For the kind of covenants that we get and the lease terms on lease terms and.
Speaker Change: With the multiple deals that we do.
Speaker Change: So.
Speaker Change: Yes.
Thank you we have no further.
Speaker Change: We have no further questions at this time.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yep.
Speaker Change: Thanks for participating.
Speaker Change: So our Q4 call. Please feel free to reach out to any of US. If you have any further questions.
Speaker Change: Have a great rest of your day.
Speaker Change: Ladies and gentlemen, this concludes the smart centers read Q4, 2024 conference call. Thank you for your participation and have a nice day.