Q1 2025 Choice Properties REIT Earnings Call
Audra: Good morning, my name is Audra and I will be your conference operator today.
Good morning, My name is Adrienne and I will be your conference operator today.
Audra: At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Speaker Change: At this time I would like to welcome everyone to the choice properties Real estate investment Trust first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Audra: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: To withdraw your question Press Star one again.
Simone Cole: I will now hand the call over to Simone Cole, General Counsel and Secretary. Please go ahead. Thank you.
Simone: I will now hand, the call over to Simone call General Counsel and Secretary. Please go ahead.
Simone: Thank you.
Rayl Diamond: Good morning and welcome to Choice Properties Q1 2025 conference call. I am joined this morning by Rayl Diamond, President and Chief Executive Officer, Niall Collins, Chief Operating Officer, and Aaron Johnston, Chief Financial Officer. Rayl will start the call today by providing a brief recap of the first quarter performance and providing an update on our transaction activity.
Simone: And welcome to choice properties Q1, 2025 conference call I'm joined this morning by real Diamond President and Chief Executive Officer, Noel Collins, Chief Operating Officer, and Aaron Johnson, Chief Financial Officer Rail will start the call today by providing a brief recap of the first quarter.
Simone: Foremost and providing an update on our transaction activity Niall will discuss our operational results and development pipeline and Erin will conclude the call with a review of our financial results before we open the line for Q&A.
Simone Cole: Niall will discuss our operational results and development pipeline and Aaron will conclude the call with a review of our financial results before we open the line for Q&A. Before we begin today's call, I would like to remind you that by discussing our financial and operating performance and responding to your questions, we may make forward-looking statements, including statements regarding choice properties, objectives, strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook, and similar statements concerning anticipated future events, results, circumstances, performance, or exceptions that are not historical. These statements are based on current estimates and assumptions and are subject to risks and uncertainty that could cause actual results to differ materially from the conclusions in these forward-looking statements.
Simone: Before we begin today's call I would like to remind you that by discussing our financial and operating performance and responding to your questions. We may make forward looking statements, including statements regarding choice properties objectives strategies to achieve those objectives as well as statements with respect to management's beliefs plans estimates.
Simone: Intentions outlook and similar statements concerning anticipated future events results.
Simone: Stances performance or exceptions that are not historical facts. These statements are based on current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward looking statements.
Simone Cole: Additional information on the material risks that can impact our financial results and estimates, and the assumptions that were made in applying and making these statements, can be found in the recently filed Q1 2025 Financial Statements and Management Discussion and Analysis, which are available on the website and on CDAR.
Simone: Additional information on the material risks that can impact our financial results and estimates and the assumptions that were made in applying in making these statements can be found.
Simone: In the recently filed Q1 2025 financial statements and management's discussion and analysis, which are available on the website and on SEDAR.
Rayl Diamond: And with that, I turn the call over to Rail. Thank you, Simone. And good morning, everyone. Welcome to our Q1 conference call. We had a very strong start to the year and our Q1 operating and financial results were solid. A high-quality, necessity-based portfolio continues to deliver stability and growth. In the first quarter, we maintained near-full occupancy at 97.7%, achieved same achieve strong same asset cash NLR growth of 2.9% and FFO growth of 1.9%.
Ralph: And with that I'll turn the call over to Ralph.
Ralph: Thank you, Steve and good morning, everyone welcome to our Q1 conference call.
Ralph: Had a very strong start to the year.
Ralph: Q1, operating and financial results were solid.
Ralph: High quality necessity based portfolio continued to deliver stability and growth in the first quarter, we maintained near full occupancy at 97, 7% achieved same.
Ralph: <unk> achieved strong same asset cash NOI growth of two 9% and <unk> growth of one 9%.
Rayl Diamond: In light of the current macroeconomic environment, I'd like to start by expressing my confidence in our portfolio's exceptional positioning amidst broader economic uncertainty. Before diving into the details of our quarterly activities, it's important to highlight that choice remains in an enviable position. In retail, we continue to see strong performance and retention in our well-located necessity-based properties. Our portfolio continues to demonstrate its ability to deliver stable and growing cash flows throughout varying economic cycles and conditions, and we believe this year will be no different. Our industrial portfolio is extremely high quality and generic in nature, with properties located in key distribution markets across the country.
Ralph: In light of the current macroeconomic environment I'd like to start by expressing my confidence in our portfolio's exceptional positioning and broader economic uncertainty.
Ralph: Diving into the details of our quarterly activities. It is important to highlight that choice remains in an enviable position.
Ralph: In retail we continue to see strong performance and retention in our well located necessity based properties. Our portfolio continues to demonstrate its ability to deliver stable and growing cash flows throughout the economic cycles and conditions and we believe this year will be no different.
Ralph: Our industrial portfolio is extremely high quality and generic in nature with properties located in key distribution markets across the country.
Rayl Diamond: Based on the current tariffs announced, our industrial portfolio has limited exposure to sectors impacted by these tariffs and will continue to capitalize on embedded rent growth within the portfolio from strong leasing demand for our properties. In our transit-orientated mixed-use and residential portfolio, our portfolio is benefiting from the lease-up and stabilization of our two most recent residential development completions, which are now near full occupancy. Our remaining mixed-use and residential portfolio continues to perform well.
Ralph: Just on the current tariffs announced our industrial portfolio.
Ralph: Exposure to sectors impacted by these tariffs and we will continue to capitalize on embedded rent growth within the portfolio from strong leasing demand for our properties.
Ralph: And our transit oriented mixed use and residential portfolio. Our portfolio is benefiting from the lease up and stabilization of our two most recent residential development completions, which are now near full occupancy.
Ralph: Mixed use and residential portfolio continues to perform well.
Rayl Diamond: Choice's strong balance sheet and prudent approach to financial management has allowed our team to focus on executing our strategic goals, including our active capital recycling program that is focused on maintaining the quality of our portfolio. During the first quarter, we completed approximately $95 million in total real estate transactions, including approximately $33 million of strategic acquisitions and $62 million of non-core asset dispositions. In the quarter, we continue to buy high-quality assets from Loblaw, acquiring a retail property in Brampton for a purchase price of approximately $33 million. The property totals approximately 120,000 square feet and is anchored by Fortino's Banner with a 15-year lease term and annual rent increases of 2%.
Ralph: Choices strong balance sheet and prudent approach to financial management has allowed our team to focus on executing our strategic goals, including our active capital recycling program that is focused on maintaining the quality of our portfolio.
Ralph: During the first quarter, we completed approximately $95 million, a total real estate transactions, including approximate mentally 33 million of strategic acquisitions and $62 million of noncore asset dispositions.
Ralph: In the quarter, we continued to buy high quality assets from loblaw acquiring a retail property, Brad said for purchase price of approximately 33 million.
Ralph: <unk> totaled approximately 120000 square feet and is anchored by 14th banner with a 15 year lease term.
Ralph: <unk> ranks increases up 2% asset benefits from favorable demographic trends and is exceptionally well located nearby the Mount Pleasant conversation and our recently completed residential asset unity at Mount Pleasant vintage.
Rayl Diamond: The asset benefits from favorable demographic trends and is exceptionally well located nearby the Mount Pleasant GO Station in our recently completed residential asset, Unity, at Mount Pleasant Village. On the disposition front, in the quarter we completed the sale of three non-core retail properties including two assets in Aurora and one in Montreal for combined proceeds of approximately $54 million. In addition, we sold the land parcel in Edmonton for approximately $8 million.
On the disposition front.
Ralph: In the quarter, we completed the sale of three non core retail properties, including two assets in Aurora and one in Montreal for combined proceeds of approximately $54 million. In addition, we sold a land parcel in Edmonton for approximately $8 million.
Rayl Diamond: Subsequent to quarter end, we're able to leverage our relationships and industry-leading balance sheet to take advantage of acquisition opportunities. In April, we completed two industrial transactions totaling $340 million, bringing year-to-date acquisitions to approximately $373 million. These acquisitions included a $1.1 million square foot industrial distribution asset from Loblaw for approximately $182 million, which was concurrently leased back to Loblaw for a 10-year term with 2% annual growth. The asset also has significant excess land that offers 1.2 million square feet of future intensification potential and is well located in Ajax along Highway 401, providing 30-minute access to the city.
Ralph: Subsequent to quarter end, we're able to leverage our relationships and industry, leading balance sheet to take advantage of acquisition opportunities in April we completed two industrial transactions totaling 340 million, bringing year to date acquisitions to approximately 373 million. These acquisitions included.
Ralph: A $1 1 billion square foot industrial distribution assets from Loblaw for approximately 182 million, which was concurrently leaseback to loblaw for 10 year term with 2% annual growth. The asset also has significant excess land that office, one 2 million square feet of future intensification potential and as well.
Ralph: Located in Ajax along highway for one providing 30 minute access to the city.
Rayl Diamond: We also acquired a portfolio of eight industrial outdoor storage sites for approximately $158 million. The portfolio includes approximately 140 acres of land across core Canadian markets. These sites are complementary to our existing industrial portfolio and are leased to TenCanada, one of Canada's largest commercial, trailer, rental, leasing and maintenance companies at an attractive price per acre and yield.
Ralph: We also bought a portfolio of eight industrial outdoor storage sites for approximately $158 million.
Ralph: The portfolio includes approximately 140 acres of land across core Canadian markets. These thoughts are complementary to our existing industrial portfolio and are leased to 10, Canada, one of Canada's largest commercial trailer rental leasing and maintenance companies at an attractive price per acre and yield.
Rayl Diamond: Our team also continued to advance our development pipeline in the first quarter with approximately $44 million of development spend primarily related to active construction at Choice Caledon Business Park.
Ralph: Our team also continued to advance our development pipeline in the first quarter with approximately $44 million of development spend primarily related to active construction at choice Calvert business. Paul will also transfer to retail and transportation in Ontario, and one in Alberta totaling 97000 square feet.
Rayl Diamond: We also transferred two retail intensifications in Ontario and one in Alberta totaling 97,000 square feet. Our intensification pipeline is another example of how we continue to take advantage of the demand for retail space to add value to our portfolio.
Speaker Change: Acacia Potline is another example of how we continue to take advantage of the demand for retail space to add value to our portfolio now will speak more about our intensification initiatives shortly.
Rayl Diamond: Now we'll speak more about our intensification initiative shortly.
Rayl Diamond: Finally, I want to acknowledge the release of our 2024 Environmental, Social and Governance Report. This year's report summarizes many of CHOICE's successes over the last year and showcases CHOICE's commitment to ESG and the great work being done by teams across the business. The report can be found in the sustainability section of our website and I encourage you to take a read.
Speaker Change: Finally, I want to acknowledge the release of our 2020 for environmental Social and governance report. This year's report summarizes many of choices successes over the last year and showcases choices commitment to ESG and the great work being done by teams across the business. The report can be found in the sustainability section of our website.
Speaker Change: I encourage you to take a REIT.
Niall Collins: With that, I'll pass the poll over to Niall to discuss our operation results in more detail. Niall? Thank you, Raylan. Good morning, everyone. As Raylan mentioned, once again, we have delivered stable operation results in the first quarter, and we continue to see strong demand across our portfolio. The overall portfolio remains at near full occupancy, ending the quarter at 97.7%. This reflected an increase of 10 basis points compared to the prior. During the quarter, we had approximately 1.1 million square feet of leases expire, of which we renewed 934,000 square feet, achieving an 82% tenant retention. These renewals were completed at an average rent spread of 11.7%.
Speaker Change: With that I'll pass the call over to now to discuss our operational results in more detail now.
Speaker Change: Thank you, Rob and good morning, everyone as Earl mentioned once again, we are delivered stable operation results in the first quarter and we continue to see strong demand across our portfolio.
Speaker Change: The overall portfolio remains at near full occupancy ending the quarter at 97, 7%.
Speaker Change: This reflected an increase of 10 basis points compared to the prior quarter.
Speaker Change: During the quarter, we had approximately $1 1 million square feet of leases expiring of which we renewed 934000 square feet, achieving an 82% tenant retention. These renewals were completed at an average rent spread of 11, 7%.
Niall Collins: We also completed 253,000 square feet of new leases.
Speaker Change: <unk> completed 253000 square feet of new leasing.
Niall Collins: resulting in positive absorption of 53,000 square feet which was largely driven by our Alberta Retail Portfolio. Turning to each of our asset classes, in our necessity-based retail portfolio, occupancy increased 20 basis points to 97.8%. During the quarter, 715,000 square feet expired, of which we renewed 635,000 square feet for an 89% tenant retention rate. Lease renewal spreads average 10% above expiring rents, with particularly strong growth in the speciality and value sector. We also completed 165,000 square feet of new leasing in the quarter, with average rents over the lease term 32% higher than our average in-place rent.
Speaker Change: Faulting and positive absorption of 53000 square feet, which was largely driven by Alberta retail portfolio.
Speaker Change: Turning to each of our asset classes and are a necessity based retail portfolio occupancy increased 20 basis points to 97, 8%.
Speaker Change: During the quarter 715000 square feet expired of which we renewed 635000 square feet for an 89% tenant retention rate <unk>.
Speaker Change: These renewals spreads averaged 10% above expiring rents with particularly strong growth and especially obviously in that sector.
Speaker Change: We also completed 165000 square feet of new leasing in the quarter with average rents over the lease term, 42% higher than our average in place rents.
Niall Collins: This more than offsets the 80,000-square-sheet of expiries that did not renew in the quarter. To date, 42% of the space is committed to backfill in 2025, with rents 28% higher than prior tenants' expiring rent, and our team is actively working on deals for the remaining space. In our industrial portfolio, occupancy at 97.7% was 20 pips lower than last quarter. We had 418,000 square feet of expiries all within our Alberta and Atlantic portfolios and renewed 299,000 square feet for a 72% retention rate. These renewal spreads remain strong, averaging 17% above expiry and are indicative of the geographic market.
Speaker Change: This more than offsets the 80000 square feet of expiring that did not renew in the quarter.
Speaker Change: Today's 42% of the space is committed to backfill in 2025, but rents 28% higher than prior tenants expiring rent and our team is actively working on deals for the remaining space.
Speaker Change: In our industrial portfolio occupancy at 97, 7% was 20 bps lower than last quarter.
Speaker Change: We had 418000 square feet of Expiries, all within our Alberta Atlantic portfolios and renewed 299000 square feet.
Speaker Change: 72% retention rate.
Speaker Change: These renewals spreads remained strong averaged 17% above expiring and are indicative of the geographic market.
Niall Collins: We also completed 78,000 square feet of new leasing in the quarter, where the average rent over the lease term is 55% higher than our average employment. Small occupancy decline in the quarter was expected and will be temporary as our leasing team is already in negotiations on 24,000 square feet and actively working to address the remaining space.
Speaker Change: We also completed 78000 square feet of new leasing in the quarter, where the average rent over the lease term is 55% higher than our average in place rents.
Speaker Change: Yeah.
Speaker Change: The small occupancy declined in the quarter was expected and we will and will be temporary as our leasing team is already in negotiations on 24000 square feet and actively working to address the remaining space.
Niall Collins: As I communicated on the last call, we expect industrial occupancy to improve in the second half of 2025, ending the year above 98% based on strong tenant retention, vacant space being Lastly, our mixed-use and residential portfolio continues to perform well with occupancy at 94.9%, which is up 80 basis points from the last quarter. Finally, turning to developments, as Raël mentioned, our team continues to deliver on our development pipeline. During the quarter, we completed three intensifications, totaling 97,600 square feet. These intensifications included a 72,600 square foot ground lease to the Nautica Lands Group in Belleville, Ontario, at a yield of 9.9%, directly adjacent to a choice on property known for its land.
Speaker Change: As I communicated on the last call, we expect industrial occupancy to improve in the second half of 2025, ending the year above 98% based on strong tenant retention vacant space being released.
Speaker Change: Lastly, our mixed use and residential portfolio continues to perform well with occupancy at 94, 9%, which is up 80 basis points from the last quarter.
Speaker Change: Finally, turning to developments as rail mentioned our team continues to deliver on our development pipeline during the quarter. We completed three intense locations totaling 97600 square feet. These include intensification included a 72600 square foot ground leased to the multiple lines group and <unk>.
Speaker Change: Ontario at a yield of nine 9% directly adjacent to a choice on property sales rose.
Niall Collins: This was our second ground lease intensification with Nautical Lands and we continue to believe that this great partnership. for choice generating stable and growing cash flow stream while augmenting the performance of adjacent retail sites. Shoppers Drug Mart in Mississauga totaling 17,000 square feet at a yield of 6.3% which was one of eight Shoppers Drug Mart intensifications in our Active Development Pipeline. We also have an additional 5 Shoppers Drug Marts and Planning and finally a CRU Strip at a 50% co-owned site in Edmonton totalling 8,000 square feet at share delivering a 5.7% Overall, our active development pipeline totals 17 projects of approximately 1.1 million square feet at an average forecasted yield of approximately 7%.
Speaker Change: This was our second ground lease intensification methodical lands and we continue to believe that this great partnership.
Speaker Change: For choice generating stable and growing cash flow stream, while augmenting the performance of our adjacent retail site.
Speaker Change: Shoppers drug Mart in Mississauga, totaling 17000 square feet at a yield of six 3%, which was one of eight shoppers drug Mart intensification and our active development pipeline.
Speaker Change: We also have an additional five shoppers drug Mart and planning and finally cru's trip at a 50% co onsite indemnity totaling 8000 square feet at share delivering a five 7% yield.
Speaker Change: Overall, our active development pipeline totaled 17 projects of approximately one 1 million square feet at an average forecasted yield of approximately 7% looking.
Niall Collins: Looking ahead for the remainder of the year, our major active development is progressing well at Choice, Caledon and Bismarck.
Speaker Change: Looking ahead for the remainder of the year, our major active development is progressing well with a choice covet and business Park.
Niall Collins: Construction is on schedule on our NLS building with possession in September of this year.
Speaker Change: Construction is on schedule on our end of that's building with possession in September of this year.
Aaron Johnston: I will now pass it over to Aaron to discuss our financial. Thank you, Nao, and good morning everyone. We are very pleased with our financial performance in the first quarter as our business continued to deliver stable and consistent growth. Our reported funds from operations for the first quarter was $190.9 million or $0.264 on a per unit diluted basis, reflecting an increase of 1.9% compared to the first quarter of 2024. In the quarter, we had a modest amount of non-recurring items totaling $2.9 million, limited to a property tax incentive of $1.4 million recognized at 500 Lakeshore and $1.5 million of fee income recognized in relation to the termination of the Golden Mile Purchase Agreement.
Speaker Change: I will now pass it over to Aaron to discuss our financial performance.
Aaron Johnson: Thank you.
Aaron Johnson: And good morning, everyone. We are very pleased with our financial performance in the first quarter as our business continues to deliver stable and consistent growth.
Aaron Johnson: <unk> funds from operations for the first quarter was $190 9 million or $26.04.
Aaron Johnson: Unit diluted basis.
Aaron Johnson: Finding an increase of one 9% compared to the first quarter of 2024.
Aaron Johnson: In the quarter, we had a modest amount of nonrecurring items totaling $2 9 million.
Aaron Johnson: Limited to a property tax incentives of $1 4 million recognize that 500 Lake shore.
And $1 5 million of fee income recognized in relation to the termination of the golden mile purchase agreement.
Aaron Johnston: Comparatively, in the prior year, we had $4.5 million of non-recurring items, which included a $2 million condo gain and $2.5 million of lease termination income. Normalizing for these non-recurring items, FFO per unit growth was approximately 3.2%. This increase was primarily due to higher same-asset cash NOI and contributions from developments, partially offset by higher interest expense and lower interest income. Turning to our Properties, Same Asset Cash NOI increased by $7.2 million or 2.9% compared to the first quarter of 2024, driven by strong leasing and renewal activity. By Asset Class, Retail Same Asset Cash NOI increased by $2.8 million or 1.5%.
Aaron Johnson: Comparatively in the prior year, we had $4 5 million of nonrecurring items, which included a $2 million condo gains and $2 5 million of lease termination income.
Aaron Johnson: Normalizing for these nonrecurring items.
Our unit growth was approximately three 2%. This increase was primarily due to higher same asset cash NOI and contribution from development.
Aaron Johnson: Actually offset by higher interest expense and lower interest income.
Aaron Johnson: Turning to our properties same assay cash NOI increased by $7 2 million or two 9% compared to the first quarter of 2024, driven by strong leasing and renewal activity.
Aaron Johnson: Asset class retail same asset cash NOI increased by $2 8 million or one 5%. The increase was primarily driven by higher base rent from renewals, new leasing and contractual rent steps.
Aaron Johnston: The increase was primarily driven by higher base rent from renewals, new leasing and contractual Industrial same asset cash NOI increased by approximately $2.8 million or 6.1%. This increase was also primarily due to higher base rent from renewals, new leasing, and rents. and mixed-use and residential same-asset cash NOI increased by approximately $1.5 million or 15.3%. This increase was primarily due to the property tax incentive recognized at 500 Lakeshore and higher base rents from leasing activity and rent steps. Excluding the previously noted property tax incentive, total same-asset cash NOI growth would have been 2.3%. Turning to our balance sheet, our IFRS NAV for the quarter was $14.17 per unit, an increase of 76 million or 0.7% over the last quarter.
Aaron Johnson: She will say Lazar cash NOI increased by approximately $2 8 million or six 1%. This increase was also primarily due to higher base rent from renewals, new leasing and rent and.
Aaron Johnson: And mixed use and residential same asset cash NOI increased by approximately $1 5 million or 15, 3%. This increase was primarily due to the property tax incentive recognized 500 Lake shore and higher base rents from leasing activity and rent steps.
Aaron Johnson: Excluding the previously noted property tax incentive total same asset cash NOI growth would have been two 3%.
Aaron Johnson: Turning to our balance sheet, our iron bus now for the quarter was 14 point $14 17 per unit, an increase of $76 million or 7% over the last quarter.
Aaron Johnston: Our NAV growth was driven by a net contribution of $46 million from operations and a net fair value gain of $480 million on our investment property. offset by a decline of $9 million on our investment in Allied Properties. As a reminder, we are required under IFRS to mark-to-market this investment to its trading price each period end. Our fair value gain on investment properties in the quarter was primarily driven by favorable leasing activity and contractual rent steps across the retail portfolio. Turning to our financing activities, we continue to take a prudent approach to capital management and benefit from the stability provided by our industry-leading balance sheet.
Aaron Johnson: Our NAV growth was driven by a net contribution of $46 million from operations and net fair value gain of 400 million on our investment properties.
Aaron Johnson: Offset by a decline of $9 million on our investment in ILEC properties. As a reminder, we are required under IRS to mark to market. There is investment to its trading price each period.
Aaron Johnson: Our fair value gain on investment properties in the quarter was primarily driven by favorable leasing activity and contractual rent steps across the retail portfolio.
Aaron Johnson: Turning to our financing activities, we continue to take a prudent approach to capital management and benefit from the stability provided by our industry, leading balance sheet. Once again, we ended the quarter in a solid financial position with strong debt metrics and ample liquidity.
Aaron Johnston: Once again, we ended the quarter in a solid financial position with strong debt metrics and ample liquidity. Our debt to EBITDA ratio was 7X and we continue to maintain a fully undrawn $1.5 billion corporate facility. This is further supported by approximately $13.1 billion of unencumbered properties. As we mentioned on our last conference call, we had two major financing activities during the quarter. We issued our $300 million Series B Senior Unsecured Debenture at an all-in rate of 4.293%, with proceeds used to partially repay our $350 million Series J Senior Unsecured Debenture. We also funded $136 million mortgage at share on the Loblaw Grand Lease at Choice Caledon Business Park.
Aaron Johnson: Our debt to EBITDA ratio was seven times and we continue to maintain a fully undrawn $1 5 billion corporate facility. This is further supported by approximately $13 1 billion of unencumbered properties.
Aaron Johnson: As we mentioned on our last conference call. We had two major financing activities during the quarter, we issued our 300 million series B senior unsecured debenture and an all in rate of $4, 93% with proceeds used to partially repay our $350 million series J senior unsecured debenture.
Aaron Johnson: We also funded 136 million mortgage that sure.
Aaron Johnson: The ground lease at choice Calvin business Park. This loan as co chairman is with Marvell has 25 year ground lease with an all in interest rate of four 8%.
Aaron Johnston: This loan is coterminous with Loblaw's 25-year grand lease with an all-in interest rate of 4.88%. Overall, we are pleased with another strong quarter. The first quarter was a solid start to the year. And looking ahead, we continue to have a conviction in our ability to deliver on our operational and financial goals and we are well positioned to achieve our 2025 outlook. We plan to continue to advance our development pipeline with the majority of our spend focused on the advancement of our industrial development at Choice Caledon Business Park and our retail intensification program. Lastly, we remain committed to maintaining the strengths of industry-leading balance sheet and expect debt to EBITDA to remain below 7.5 times.
Aaron Johnson: Overall, we are pleased with another strong quarter. The first quarter was a solid start to the year and looking ahead. We continue to have conviction in our ability to deliver on our operational and financial goals and we are well positioned to achieve our 2025 outlook.
Aaron Johnson: Plan to continue to advance our development pipeline with the majority of our spend is focused on the advancement of our industrial development at choice Calvin business Park, and our retail intensification program.
Aaron Johnson: Lastly, we remain committed to maintaining the strength of our industry, leading balance sheet and expect debt to EBITDA to remain below seven five times.
Aaron Johnston: With our financing activity in the quarter, we have addressed a significant portion of our 2025 maturities.
Aaron Johnson: With our financing activity in the quarter, we have addressed a significant portion of our 2025 maturities with that real now and I would be glad to answer your questions.
Rayl Diamond: With that, Raelle, Niall, and I would be glad to answer your question. Thank you.
Aaron Johnson: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Audra: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.
Mark Rothschild: We'll take our first question from Mark Rothschild at Canaccord. Thanks. Good morning, everyone. Real, you made a comment that you don't expect tariff.
Speaker Change: We will take our first question from Mark Rothschild at Canaccord.
Speaker Change: Thanks, Dan Good morning, everyone.
Aaron Johnson: You made a comment that you don't expect tariffs.
Aaron Johnson: Either way to really impact your industrial portfolio too much if at all but there has been a notable increase in vacancy in industrial markets in general to what extent do you believe that.
Rayl Diamond: Who isムthe investor and whyג€™s Closing Novel Annual Investment Trust? Yeah, look, I think just coming back to the tariffs and then I will speak to the sustaining of our NOI growth. But look, we've spoken before that we've completed a real detailed review of our industrial portfolio. And we've looked at every single tenant and where we believe they have exposure. And we do not believe there is any material risk in our portfolio. You know, if we take a very negative view, we maybe think there's a couple of million dollars of negative, you know, or potential exposure, but it's not material for us.
Aaron Johnson: Same property NOI growth that you've had of late can be sustained over the next year or two based on where your in place rents are and where market is now.
Aaron Johnson: Yeah look I think just coming back to the tariffs and a novel speak to.
Aaron Johnson: The sustaining of.
Aaron Johnson: NOI growth, but look we've spoken before there we've completed a real detailed review.
Aaron Johnson: All of our industrial portfolio and.
Aaron Johnson: We've looked at every single tenant and where we believe.
Aaron Johnson: They have exposure and.
Aaron Johnson: We do not believe there is any material risk in our portfolio.
Speaker Change: If we take very negative view, we may be think there's a couple of million dollars.
Aaron Johnson: <unk> of negative.
Aaron Johnson: Or a potential exposure, but its not material for us and then when you look at 2025, you have to remember that 80% of our renewals already committed and locked in and we have pretty good visibility on.
Rayl Diamond: And then when you look at 2025, you have to remember that 80% of our renewals are already committed and locked in.
Niall Collins: And we have pretty good visibility on, you know, next year as well, just given we're already in discussion with those tenants, maybe I'll just let Niall comment on the growth. Yeah, just to support what you're saying, for the balance of the year, the vast majority of our leasing is done. So, we feel quite confident for 2025. And again, we have a very generic portfolio and great location, so we don't see a lot of impact. The tenant base we have, we don't see any major impact, none of them are in that category that's sensitive to some of the tariffs that are being floated out today.
Aaron Johnson: Next year as well just given we already in discussion with those tenants maybe I'll just let now comment on.
Aaron Johnson: On the growth.
Speaker Change: Yes, Brad just to support what you are saying for the balance of the year. The vast majority of our leasing is done. So we feel quite confident for 2025 and again, we have a very generic portfolio in great locations. So we don't see a lot of impact.
Speaker Change: The tenant base, we have we don't see any major impact none of them are in that category that sensitive to some of the tariffs that are being sold today.
Mark Rothschild: And as Niall and Erin have mentioned on last call, we do see industrial in our growth year improving in the second half of this year, along with occupancy. Great, thanks.
Speaker Change: And as mentioned on last quarter, we do see the industrial NOI growth year over year, improving in the second half of this year along with occupancy.
Speaker Change: Okay, great. Thanks, and maybe just on the.
Rayl Diamond: Maybe just on the acquisition of the outdoor storage sites, to what extent do you view this as? A little bit different from what you normally acquire from your industrial portfolio. How does this strategically fit in? Is this different at all and what's the opportunity there? Look, I think if you even go back to what Niall said on the call, he spoke about the partnership with Nautical. And we've always liked stable, growing cash flow, land use assets. And so this fits in. And then if you think about it on the industrial side, if you go back, I think it was around three years ago, we bought a portfolio from Canada Cottage.
Speaker Change: With the acquisition of the outdoor storage sites.
Speaker Change: To what extent do you view this does something a little bit different from what you normally acquire for your industrial portfolio. How does this strategically fit in is this different at all and what's the opportunity there.
Speaker Change: Yes look I think if you even go back to what <unk> said on the call he spoke about.
Speaker Change: The partnership with nautical and we've always liked.
Speaker Change: Stable growing cash flow <unk> assets and.
Speaker Change: And so this fits in and then if you think about it on the industrial side. If you go back I think it was around three years ago, we bought a portfolio from Canada cottage. So very similar portfolio was about 56 acres be bolt in.
Rayl Diamond: So very similar portfolio, it was like 56 acres we bought then. So this is another 140 acres. So we have truly, you know, 196 acres of this industrial outdoor storage. And as I said, it's stable, strong cash flow growth, you know, very low capex or no capex from our side. You know, the tenant sometimes has improvements on the site. And it gives us optionality to use the land for something else if they're not there. So as I said, so we have 196 acres of this already. And then if you add, you know, again, think of what we've done with Loblaw recently to land leases, as well as we have one with Amazon and land lease, and you add all of that.
Speaker Change: And so this is about 140 acres. So so we are truly.
Speaker Change: 196 acres of this industrial outflow storage and as I said, it's stable strong cash flow growth.
Speaker Change: Low capex or no capex from outside the tenants, sometimes as improvements on the site.
Speaker Change: And it gives us optionality to use the land put something else if they knocked out so as I said, so we have 196 acres.
Speaker Change: This already and then if you add again think of what we've done with <unk> recently to then leases as well as we have one with Amazon and that lease and you add all of that so we have almost.
Rayl Diamond: So we have almost, you know, call it 365 acres of industrial property on land leases, which we think fits wonderfully in the region. Okay, great.
Speaker Change: Quality 365 acres.
Speaker Change: All of industrial property on land leases, which we think fits wonderfully in the REIT.
Mark Rothschild: Thank you so much.
Speaker Change: Okay, great. Thank you so much.
Sam Damani: We'll go to our next question from Sam Damani at TD Security. Thanks, Dan.
Speaker Change: We will go to our next question from Sam Damiani at TD Securities.
Sam Damiani: Thanks, Dan and good morning, everyone and congratulations on the acquisitions for sure.
Rayl Diamond: Good morning, everyone. And congratulations on the acquisitions, for sure. I just wonder, Rayl, if you could just address, I guess, capital allocation going forward in light of the trade war with the U.S., how it's changed, if at all. Yeah, look, I think we're in a unique position, Sam, that our balance sheet is really strong, our assets are performing very well, and if we can find good opportunities, we'll continue to take advantage of those opportunities. And as we said at the start of the year, we believe in 2025 we'll be net acquirers of assets, but there's nothing else significant that we're currently underwriting.
Speaker Change: I guess I Wonder if you could just address I guess capital allocation going forward in light of the trade war with the U S. How how it's changed.
Sam Damiani: If at all.
Sam Damiani: Yeah look I think I think when you're in a unique position that our balance sheet is really strong our assets are performing very well and if we can find good opportunities and we will continue to take advantage of those opportunities and as we said at the start of the year. We believe in 2025 will be net acquirers.
Sam Damiani: Of assets, but theres nothing nothing else significant that we are currently underwriting.
Sam Damiani: Yeah.
Rayl Diamond: Okay, and with the rather substantial acquisition already in Q2, you said you'd be a net acquirer, but you plan to offset that at least to some degree with some dispositions near term to keep the leverage around seven times, or are you happy to let it drip up? No, there's some acquisitions, sorry, some dispositions we're in the process of working on which hopefully will have more color next quarter. It's probably around $100 million of dispositions.
Sam Damiani: Okay and with the rather substantial acquisition already in Q2 is there you said you'd be a net acquirer, but do you plan to offset that at least some degree with some dispositions there turn to to keep the leverage around seven times are you happy to let it drip drip.
Sam Damiani: No the Sem acquisition, sorry, some dispositions to be in the prices of working on which hopefully we'll have more color.
Sam Damiani: Next quarter.
Sam Damiani: Probably around $100 million of dispositions.
Rayl Diamond: Okay, that's helpful. And I guess last one for me, you talked about, you know, going through the industrial portfolio in in detail. What if we just describe how you sort of categorized the most risky elements of the tenant base, just in terms of industry or how you looked at that sort of small exposure? You know, what industries are those? So it would be, I'm just trying to find something, but it would essentially be automotive with very small exposure, you know, some consumer goods. But we went, our team went tenant by tenant and, you know, looked at, you know, the type of tenant, you know, and how they were using the space and looked at, you know, exposure to the U.S.
Sam Damiani: Okay. That's helpful and I guess last one for me you talked about going through the industrial portfolio in detail.
Sam Damiani: I Wonder if you could just describe how you sort of categorized the most risky elements of the tenant base just in terms of industry or how you looked at that sort of small exposure.
Sam Damiani: How would you what industries are those.
Sam Damiani: So it would be I'm, just trying to better assess you'd be.
Sam Damiani: <unk>.
Sam Damiani: Automotive, we're very small exposure.
Sam Damiani: Some consumer goods, but we weren't athene when tenant by tenant and looked at the.
Sam Damiani: Type of tenant.
Sam Damiani: And how they were using the space and looked at exposure to the U S.
Rayl Diamond: You know, again, it's very hard to say exactly how everyone's business will get affected, and that's why I say we took a pretty conservative view.
Sam Damiani: It's very hard to say exactly how everyone's business will get affected and that's why I say, we took a pretty conservative view.
Sam Damani: Okay, great.
Speaker Change: Okay, great. Thank you and I'll turn it back.
Sam Damani: Thank you.
Sam Damani: And I'll turn it back.
Lauren Calmar: Our next question comes from Lauren Calmar at Desjardins Capital Markets. Thanks, good morning.
Speaker Change: Our next question comes from Lorne Kalmar at Desjardins capital markets.
Lorne Kalmar: Thanks, Good morning.
Niall Collins: Maybe switching over to the retail side of things. Obviously Loblaws is continuing to look to grow, a lot of the major retailers are. But are you seeing any apprehension on the part of any smaller or regional tenants to execute on their growth plans in light of what's been developing south of the border?
Speaker Change: Maybe switching over to the retail side of things.
Speaker Change: Obviously <unk> is continuing to look to grow a lot of the major retailers are but are you seeing any apprehension on the part of any smaller or regional tenants to execute on their growth plans in light of.
Speaker Change: Whats been developing that south of the border.
Speaker Change: Okay.
Niall Collins: Hi Lorne, it's Niall. I would say, look, there's some cautious optimism with retailers. But as I said, all of our retail leasing of the vast majority for the year is completed. So we're not seeing any challenges. They have the capital, and they're continuing to expand. And I think, again, we got to remember that there is limited supply of good retail in the country. So again, that's that's in our favor, too.
Speaker Change: Laurence I would say look there is some cautious optimism with retailers, but as I said all of our retail leasing that the vast majority for the year is completed so we're not seeing any challenges.
Speaker Change: They have the capital and <unk>.
Speaker Change: To expand and I think again, we've got to remember that there is limited supply of good retail that the countries. So again, that's in our favor too.
Niall Collins: Okay, let me just follow up on that. Now, I was going to add, if you If you look at yesterday's news article on interest in HBC boxes, I think that's again an indication that tenants are actively looking for new space. Yeah, that was a nice surprise to see the high level demand there, despite everything going on.
Speaker Change: Okay, and then maybe just following on that.
Speaker Change: Okay.
Speaker Change: No go ahead go ahead if you.
Speaker Change: If you look at yesterday's news article on interest in HBC boxes I think.
Speaker Change: Again, an indication that that tenants.
Speaker Change: Tenants are actively looking for new space.
Speaker Change: Yes that was a nice surprise to see that the high level demand despite everything going on.
Niall Collins: How do you see retail occupancy trending over the balance of the year, do you think it kind of sticks around the high 97 range or do you think you can push it higher? It's going to be flat for these first two quarters, but the back end of the year, it is going to pop, as I mentioned. We do expect it to go into the 98s, but it is going to be a Q3, Q4 phenomenon based on our leasing and commencement.
Speaker Change: How do you see retail occupancy trending over the balance of the year, you had kind of sticks around the high <unk> 97 range or do they can push it higher.
Speaker Change: Lauren it's going to be flat for the first two quarters with the back end of the year. It is going to pop as I mentioned, we do expect is expected to go into the 98.
Speaker Change: But it is going to be a Q3 Q4 phenomenon based on our leasing and Commencements.
Lauren Calmar: Okay, that's very helpful. And then just last one, and Real, I think you kind of alluded to it earlier, but I just wanted to confirm, I think last quarter you talked about there being two industrial assets from Loblaw for about 350 million bucks you were looking at. I'm assuming the Ajax one was one of them. Are you guys no longer looking at the second one? No, sorry. The two industrial assets we're looking at were the ones we just acquired with the one from Roblo and the one from the third party. Got it. Okay. Thank you very much.
Speaker Change: Okay. That's very helpful. And then just last one in reality. Thank you kind of alluded to it earlier, but I just want to confirm I think last quarter, you talked about there being two industrial assets from loblaw for.
Speaker Change: For about 350 million Bucks Youre looking at are assuming the Ajax won with one of them are you guys no longer looking at the second one.
Speaker Change: No sorry.
Speaker Change: The two industrial assets, we're looking at where the ones, we just acquired with okay.
Speaker Change: Okay.
Speaker Change: And the one from the third party got.
Speaker Change: Got it okay. Thank you very much.
Pommy Burr: We'll move next to Pommy Burr at RBC Capital Markets. Thanks, good morning. I wanted to come back to the iOS acquisitions. Can you just provide a bit more color on the locations? I didn't catch the tenant that you mentioned and maybe a cap rate range if that would be helpful. So, Tommy, there are eight locations across Canada. The tenant is TEN Canada, which is Transportation Equipment Network. The locations are anywhere from Toronto, Delta, BC, Calgary, Edmonton, Montreal, there's Winnipeg in there as well, but I'd say the majority of the locations of the eight are all in major markets, and then TEN Canada is the largest trailer leasing network in Canada, and I think they have 26,000 vehicles.
Paul Bieber: Well move next to Paul Bieber at RBC capital markets.
Paul Bieber: Thanks, Good morning.
Speaker Change: Just wanted to come back to the iOS acquisitions can you just provide a bit more color on the locations I didn't catch the tenant that you mentioned and maybe a cap rate range.
Paul Bieber: Yes that would be helpful. Thanks.
Speaker Change: Sure.
Speaker Change: So.
Speaker Change: The eight locations across Canada.
Speaker Change: Tennant is.
Speaker Change: 10, Canada, which is transportation equipment networks.
Speaker Change: The locations are.
Speaker Change: Anywhere from Toronto Delta BC, Calgary Edmonton Montreal.
Speaker Change: These winnipeg in there as well.
Speaker Change: I'd say the majority of the locations on the ASR all in.
Speaker Change: In in major markets and then Canada is the largest.
Speaker Change: Our network of.
Speaker Change: Yes.
Speaker Change: I'll, just I think trade.
Speaker Change: Leasing network in Canada, and I think that 26000.
Speaker Change: Vehicles.
Pommy Burr: Okay, and just in terms of the lease mechanics, what's the duration of these leases and what sort of rent steps do you see in there? Yeah, I'm sorry, I didn't answer your first question on the cap rate. I'd say the blended cap rate between both industrial acquisitions is called a mid-sixes. And then the lease terms, they roll over various times, but the years that the tenant has control is around 15 years for each site, and the leases step with CPI. on an annual basis. Got it. Okay.
Speaker Change: Okay, and just in terms of the.
Speaker Change: Lease mechanics, what's the duration of these leases.
Speaker Change: And what sort of rent steps do you see in them.
Speaker Change: Yes, I'm sorry, I didn't answer your first question on the cap rate.
Speaker Change: Blended cap rate between both the industrial acquisitions is call it mid sixes.
Speaker Change: And then the lease terms the role of the various tasks, but they use that the tenant has control is around 15 years.
Speaker Change: For each site and the leases step with CPI.
Speaker Change: On an annual basis.
Speaker Change: Got it Okay and then just.
Rayl Diamond: And then just, you know, coming back to maybe one of the earlier questions, you know, are there more of these perhaps with others that you're looking to acquire in the near term or is this kind of like a one-off opportunity that emerged? No, look, I think we'll keep leveraging our relationships with, you know, tenants in the industry, and we would love to acquire more of these. We think, as I said earlier, you know, it's great as a class to fit within our industrial portfolio.
Speaker Change: Coming back to maybe one of the earlier questions are there more of these perhaps with others that.
Speaker Change: If youre looking to acquire in the near term or was this kind of like a one off opportunity that emerged.
Speaker Change: No look I think we will keep we're leveraging our relationships with.
Speaker Change: Tenants in the industry and we would look to acquire more.
Speaker Change: Of these we think as I said earlier.
It's great asset class to fit within our industrial portfolio.
Pommy Burr: Last one for me, just coming back to the industrial portfolio, obviously it sounds like things have been trending pretty well and quite stable, but are you seeing any changes in terms of how tenants or how long it takes to maybe get leases signed? Any indication that tenants might be slowing their expansion plans or anything of that nature, just any shift in behavior? I wouldn't say there's a strong shift in behavior, probably it's not the leasing we again, we're a lot of releasing for the remainder of the year is completed. We didn't see any challenges. 2026 as well.
Speaker Change: Okay last one for me just coming back to the industrial portfolio.
Speaker Change: Obviously, it sounds like things have been trending.
Speaker Change: Pretty well and quite stable, but are you seeing any changes in terms of how tenants or how long it takes to maybe get leases signed.
Speaker Change: Any indication that tenants might be slowing their expansion plans or.
Speaker Change: Or anything of that nature, just any shift in behavior.
Speaker Change: I wouldn't say, there's a strong shifting do you have your opponents.
Speaker Change: The leasing we again were a lot of our leasing for the remainder of the year is completed we didn't see any challenges.
Speaker Change: 2026, as well there is some expansion and Theres capital. So again are generic and our type of user groups.
Niall Collins: There is still expansion. There's capital. So again, our generic and our type of user groups. They don't seem to be as affected, and it isn't slowing down these things.
Speaker Change: They don't seem to be as affected in addition, slowing down leases.
Pommy Burr: I'll also add that we have seen a pickup in RFPs on our Caledon Business Park. We recently responded to a couple of RFPs, and we're hopeful that we get more traction on those. And would that pick up in RFPs be from domestic companies? I'm curious if there's any change between domestic and foreign tenants perhaps looking at expansion plans in Canada. You know, some of them are from, you know, large global 3PL networks, so we don't know who the ultimate client is, pardon me, but, you know, strong covenant from our point of view. Thanks very much, Raoul.
Speaker Change: Ill also add that.
Speaker Change: We have seen a pickup in rfps on our Calvin business Park.
Speaker Change: We have recently responded to a couple of Rfps and we hopeful that.
Speaker Change: Hey.
Speaker Change: We get more traction on those.
Speaker Change: And with those would that pick up in rfps be from domestic companies.
Speaker Change: Im curious if theres any change between domestic and foreign.
Speaker Change: Tenants, perhaps looking at expansion plans in Canada at all.
Speaker Change: Some of them are from large global <unk> networks. So we don't know who the ultimate client is pommy bet.
Speaker Change: Strong covenant from my point of view.
Ralph: Thanks, very much Ralph I'll turn it back.
Mike Merkides: I'll turn it over.
Mike Merkides: We'll take our next question from Mike Merkides at BMO Capital Markets. Thank you, operator. Well, you kind of stole my thunder a little bit because you touched on it with the HBC lease news, but I was just curious if you give us a little bit of additional color. Are you concerned at all, I mean obviously the demands there, would you characterize that as being pent-up demand or are you concerned that maybe this robs from demand a couple years out that might have been there otherwise? It will be interesting to see who the ultimate tenants are.
Speaker Change: We will take our next question from Mike Makita at BMO capital markets.
Speaker Change: Thank you operator.
Speaker Change: Well, you kind of stole my Thunder, a little bit because you've touched on it with the hps the lease news, but I was just curious if you could give us a little bit of additional color.
Are you concerned at all I mean, obviously the demands there would you characterize that as being pent up demand or are you concerned that maybe this rob Spurs demand a couple of years out that might've been there otherwise.
Speaker Change: Okay no problem.
Speaker Change: See who the ultimate tenant saw.
Mike Merkides: We have heard that there's one foreign tenant or new entrants into the Canadian market. I don't know, again, how many locations they'll be taking. But generally, we don't really see much of an impact given the nature of our portfolio. And we, you know, we do see it as an opportunity in some locations to actually, you know, try and pull tenants out of some of these malls, because in some of these locations, we think the malls now challenge. Right. And I guess that's the other part of it, right? There's, I guess, 65 plus 95 or 95 plus 65.
Speaker Change: Haven't heard that Theres, one foreign tenant or lots of new entrants into the Canadian market I don't know again, how many locations that would be tanking, but generally we don't really see much of an impact given the nature of our portfolio.
Speaker Change: And we do see it as an opportunity in some locations to actually.
Speaker Change: Try and pull tenants out of some of these malls.
Speaker Change: And some of these locations we think the malls now challenged.
Speaker Change: Right and I guess thats the other part of it right. There's I guess 65, west 95, or $95 65. So there would be properties that you have that might be benefiting from a decline in that joining me.
Mike Merkides: So there would be properties that you have that might be benefiting from a decline in that joining property. Okay. Got it.
Speaker Change: Property Okay.
Mike Merkides: And then just maybe a last one for me. You know, your stock's obviously done very well, macro related. Well, I mean, obviously you guys are doing everything you can to justify it, but it's been aided by a macro tailwind. And as you look forward, you've always been conservative in nature. Your stock's in the low sixes from the implied cap rate basis and you're buying in the mid sixes. So just with respect to your leverage targets, are you thinking about, you know, is seven the right number? Are you thinking about maybe testing to see if you should bring that down over time?
Speaker Change: Got it and then just maybe last one for me.
Speaker Change: Your stock has obviously done very well macro related.
Speaker Change: Obviously, you guys are doing everything you can to justify it but its been aided by a macro tailwind.
Speaker Change: And as you look forward, you've always been conservative in nature.
Speaker Change: And the low sixes implied cap rate basis, and you are buying in the mid sixes. So just with respect to your leverage targets or are you thinking about seven.
Speaker Change: Seven the right number or are you thinking about maybe testing the CB should bring that down over time, just curious as to your thoughts there.
Mike Merkides: Just curious as to your thoughts. I make it there and I'd say that we're comfortable where we are with leverage. We've always said that our target seven and a half. But when we look at the next couple of years, just based on the where our developments are and our capital recycling program, it'll probably stay in the low seven. Okay, so no real change there. Great. That's all I have. Thank you so much. Thanks, Mike.
Speaker Change: And then I guess, Darren I would say that were comfortable where we are with leverage we've always said that our target seven and a half but when we look out. The next couple of years just based on the way our developments are and our capital recycling program it'll probably stay in the low sevens.
Speaker Change: Okay. So no real change there great. That's all I have thank you so much.
Speaker Change: Thanks, Mike.
Himanshu Gupta: Our next question comes from Himanshu Gupta at Scotiabank.
Speaker Change: Our next question comes from Himanshu Gupta at Scotia Bank.
Himanshu Gupta: Thank you and good morning. Just to follow up on the industrial acquisition, I think Ray you mentioned mid-six cap rates. How would you say for Ajax Industrial Distribution Center? Is it like very similar mid-six as well? Yeah, when I commented on the Midsex was the blend of the two was a Midsex, so they're both very similar. Okay. Very soon. Okay. And then on the Ajax Industrial Property, you mentioned about, I think, over one million square feet of future intensification potential as well. Is that something you look to pursue in the near term or is it more like a medium to long term initiative?
Himanshu Gupta: Thank you and good morning.
Himanshu Gupta: Just to follow up on the industrial acquisition I think you mentioned mid six cap rate.
Speaker Change: How would you see Egypt's.
Himanshu Gupta: Yes, industrial distribution sector is it like very similar metrics.
Himanshu Gupta: Yeah.
Himanshu Gupta: Yeah, we've not commented on the mid six was the blend of the two is about six.
Himanshu Gupta: It's very similar.
Himanshu Gupta: Okay.
Himanshu Gupta: Hey.
Himanshu Gupta: And then on the edges.
Himanshu Gupta: <unk> you mentioned about I think over 1 million square feet of future densification potential as well.
Himanshu Gupta: Something you'd look to pursue in the near term or is it more like a medium to long term initiated that.
Rayl Diamond: Yeah, look, I think when you just, I don't give you a chance to look at the Google Earth image of the property, but I think what you will see when you do look at it, you'll see, we acquired essentially 126 acres. So and there's only a 1.1 million square foot building on it. And you'll see on the east side of the site, there's a vacant piece of land that we can intensify immediately. Then if you go south of that land, there's another 600,000 feet, which the tenant is currently using for, I believe, trailer washing. So I just think there's lots of potential and we'll just have to assess where demand is.
Himanshu Gupta: Yes look I think when you when you just.
Himanshu Gupta: I didn't have any transfer match you to look at that.
Himanshu Gupta: Google image of the property, but but I think what you will see when you do look at it.
Himanshu Gupta: Youll see we acquired essentially 126 acres.
Himanshu Gupta: So.
Himanshu Gupta: And is there any I'll call. It a $1 1 million square foot building on it and Youll see on the east side of the soft there's a vacant piece of land that we could intensify immediately then if you go south of that land, there's another 600000 feet, which.
The tenant is currently using for I believe train in Washington.
Himanshu Gupta: So I just think there is lots of potential and we will just have to assess.
Himanshu Gupta: Demand is a good thing and we haven't allocated any excess value to this texas potential density.
Rayl Diamond: And the good thing is we haven't allocated any excess value to this excess potential density. Got it.
Himanshu Gupta: Got it okay. Thank you.
Himanshu Gupta: Okay, thank you. I'll say the last thing just on the theme of, you know, just on the theme of our industrial outdoor storage. If you just think about, you know, a lot of people classify, you know, industrial outdoor storage where the building represents, call it 20% of the land coverage. And I think, you know, Ajax almost fits in that category, given the low south coverage on the property as a whole. Okay, fair enough. Thank you. And then in terms of the acquisition pipeline from Loblaw, I mean, obviously, you have the Brampton side and the Ajax one.
Himanshu Gupta: And I would say the last thing just on the theme of.
Himanshu Gupta: Just on the theme of our industrial outdoor storage.
Himanshu Gupta: If you just think about a lot of people classify.
Himanshu Gupta: Industrial auto storage, where the building represents call it 20% of that coverage and I think <unk> fits in that category given the low soft coverage.
Himanshu Gupta: On the property as a whole.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: And then in terms of the acquisition pipeline from Loblaw I mean, obviously you had the Denton side in the Egypt one.
Rayl Diamond: So are you done in the near term? I mean, how's the pipeline? I am into and there's not a lot left with Ajax would be the most significant one this year. We also did Worthington earlier in the year. And when we look ahead to what Loblaw has left, plus what we've been looking at, there's a couple of small retail acquisitions, but not a lot in the pipeline this year, if anything. Okay. And Aaron, on these, just on the financing of these acquisitions in the post-quarter, $300 million acquisitions, will that be mostly on debt or you could use some Class B units as well?
Speaker Change: Are you done in the near term and How's the pipeline looking there.
Speaker Change: Thank you.
Speaker Change: And there's not a lot left with Asia would be the most significant one this year. We also did Worthington earlier in the year and then when we look ahead to what Loblaw has last plus what we've been looking at Theres, a couple of small retail acquisitions, but not a lot in the pipeline this year if anything.
Okay.
Speaker Change: And all.
Speaker Change: All of these.
Speaker Change: Just on the financing of these acquisitions in the fourth quarter I'd say it hasn't been about acquisitions.
Speaker Change: <unk>.
Speaker Change: That would be mostly on debt.
Speaker Change: Could use some class b students as well.
Aaron Johnston: We've put those all on our mind. All on the line okay okay and I guess 100 million disposition planned as well I mean that could partly Acquisitions. Okay, okay. I'm just going to say there'll be probably more dispositions if you think about the whole year when we're always quoting 100 million, we will probably see that in Q2 and then there'll be a bit more in the third, fourth quarter, but we'll still be a net acquirer. Okay, awesome. Last question from me, where is the cost of debt financial today, you know, secure or insecure? And has anything changed in response to, you know, the uncertainty, which we have seen recently?
Speaker Change: We've put does all of that airline.
Speaker Change: Okay, Okay, and I guess 100 billion disposition planned as well that good backing.
Speaker Change: Yes.
Speaker Change: Okay. Okay.
Speaker Change: And that's really just going to stay until they probably more dispositions. If you think about the whole year, when rallis quoting a $100 million.
Speaker Change: We see that in Q2, and then there'll be a bit more in the third and fourth quarter.
Speaker Change: We'll still be a net acquirer for the year.
Speaker Change: Okay awesome.
Speaker Change: Last question for me what is the cost of debt financing to be secured or unsecured and has anything changed in response to the uncertainty because we have seen please.
Aaron Johnston: Yeah, so if we think about the cost of 10 year debt, it's probably around, you know, 5.2. Spreads have definitely widened as you would have seen since we went to market in January. And if we think about if you take say a 10 year mortgage versus a 10 year unsecured, I think we're seeing spreads Secured market hasn't widened as much and I think there's probably a 40 to 50 basis point spread between choices on secured rate and secured rate. Okay, awesome.
Speaker Change: Yes, so if we think about the cost of 10 year debt is.
Speaker Change: Probably around five point too.
Speaker Change: Spreads have definitely widened as you would've seen since we went to market in January and then we think about if you take a 10 year mortgage versus a 10 year unsecured.
Speaker Change: I think we're seeing spread.
Speaker Change: Secured market has it widened as much and I think there's probably a 40 to 50 basis point spread between choices are secured rate and secured great.
Speaker Change: Okay awesome. Thanks.
Gaurav Mathur: Thank you.
Audra: And I'll tell. and as a reminder if you would like to ask a question please press star 1 on your telephone keypad.
Speaker Change: Thank you and then I'll turn it back.
Speaker Change: And as a reminder, if you would like to ask a question. Please press star one on your telephone Keypad will go next to Gaurav Mehta at Green Street Advisors.
Gaurav Mathur: We'll go next to Gaurav Mathur at GreenStreet Advisor. Thank you and good morning everyone. Just staying on acquisitions for a minute, we've been noticing more industrial portfolios hit the market. Just wondering if that's something that would interest you opportunistically and in the near term going forward. Yeah, look, I think, Gaurav, thanks for your question. We underwrite everything we see on the market, and if we think it represents good value and a good long-term asset, certainly something we will be interested in. But as I said earlier, there's nothing right now that we're actively pursuing on the acquisition side.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: Just sticking with acquisitions for a minute.
Speaker Change: Noticing more industrial portfolios hit the market.
Speaker Change: I'm wondering if that something that would interest you opportunistically.
Speaker Change: Near term going forward.
Speaker Change: Yes look I think Gregg. Thanks for your question, we underwrite everything we see on the market and if we think it represents good value.
Speaker Change: And a good long term asset savings I think we will be interested in but as I said.
Speaker Change: Earlier Theres nothing right now that we actively pursuing on the acquisition side.
Gaurav Mathur: Thank you for that, Raoul.
Speaker Change: Well. Thank you for that trial and just my last question almost switch gears here to the condominium market last quarter and Golden Light you did indicate that condominium construction is not feasible.
Rayl Diamond: And just my last question, I'm going to switch gears here to the condominium market. Now, last quarter on Golden Mile, you did indicate that condominium construction is not Could you provide some more color on what you're seeing currently in the condominium market and if that would affect any of your other projects? One of the reasons we paused on Golden Mile was more on an infrastructure cost base not necessarily the market and we're working with the city to try and resolve on that.
Speaker Change: Could you provide some more color on what you're seeing currently in the condominium market then that would affect any of your other projects in the pipeline.
Speaker Change: One of the reasons, we paused on Golden model was more on an infrastructure cost base not necessarily the market and we're working with the city to try and resolve on that in terms of the overall <unk>.
Rayl Diamond: In terms of the overall general condo market we don't have a lot of exposure to that. Our portfolio is rental, and as it plays out over the next 12-18 months, it's very hard to predict what that level of absorption will be.
Speaker Change: The condo market, we don't have a lot of exposure to that.
Speaker Change: Our portfolio is rental.
Speaker Change: As it plays out over the next two.
Speaker Change: 118 months, it's very hard to predict.
Speaker Change: The level of absorption.
Speaker Change: Corrupt the active development sites that we trying to advance this no exposure to condo, we'd not reliance on condo to get those started.
Gaurav Mathur: Thank you very much.
Speaker Change: Okay. Thank you very much.
Audra: I'll turn it back.
Speaker Change: Back to the operator.
Rayl Diamond: Thank you and that concludes the question and answer session.
Speaker Change: Thank you and that concludes the question and answer session I will now turn the call back over to Raphael Diamond for closing remarks.
Rayl Diamond: I will now turn the call back over to Rayelle Diamond for closing remarks. Thank you, Audra. As I mentioned at the outset of the call, that we are really in an enviable position. This quarter marks another example of our ability to consistently generate strong and stable growth. Our team remains focused on executing on our plan in 2025. Thank you for your interest, your investment in choice and for joining us this morning.
Raphael Diamond: Thank you all that as I mentioned at the outset of the call that we are really in an enviable position. This quarter marks. Another example of our ability to consistently generate strong and stable growth. Our team remains focused on executing on our plan in 2025. Thank you for your interest your investment in choice and for joining us.
Speaker Change: This morning I will.
Rayl Diamond: Our AGM will follow this morning at 11 and we look forward to you joining us.
Speaker Change: AGM will follow this morning at 11, and we look forward to you joining us there.
Audra: And this concludes today's conference call. Thank you for your participation. You may now disconnect. Please wait.
Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Audra: The conference will begin shortly. Please wait. The conference will begin shortly.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: [music].