Choice Properties Real Estate Investment Trust

Good morning, and welcome to the Choice Property Real Estate Investment Trust third quarter 2022 earnings. My name is Colby, and I will be your conference operator today. Today's call is being recorded, and all lines have been placed on mute. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to hand the conference over to your first speaker today, Erin Johnston. Please, go ahead.

Thank you. Good morning, and welcome to the Choice Properties Q3 2022 conference call. I am joined here this morning by Rayl Diamond, President and Chief Executive Officer, Mario Berrafato, Chief Financial Officer, and Anna Radek, Executive Vice President, Leasing and Operations. Before we begin today's call, I would like to remind you that by discussing our financial and operating performance and in 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 facts. These statements are based on our 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. 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 Q3 2022 financial statements and management discussion and analysis which are available on our website and on CDAR. And with that, I will turn the call over to Rael.

Thank you, Erin, and good morning, everyone. To start the call, I'll provide a brief recap of our quarterly performance and cover the highlights of our transaction and development activities. Anna will cover our operational results, followed by Mario, who will conclude the call with a review of our financial results before we open the lines for Q&A. Through our remarks today, you will hear a common thread, and that is how well we are positioned to withstand the economic challenges that this environment may bring. I say this because we have a strong and talented team. Our core portfolio is stable, yet positioned for growth. Our strategic relationship with our major tenant, Love Law, is strong. Our balance sheet is rock solid, and finally, George Weston, our largest unit holder, is committed to supporting us as a long-term owner, manager, and developer of a high-quality real estate portfolio. Turning to our business, we delivered solid operating and financial results in the quarter. Our performance was underpinned by our team's consistent execution of our long-term strategy. We continue to deliver stable and consistent cash flows driven by the strength of our grocery anchored and necessity-based retail portfolio and the realization of embedded rent growth in our industrial portfolio. We further increased the quality of our portfolio through our capital recycling program. We unlocked significant value in our development pipeline, driving NAV growth, and we continue to manage risk and maintain flexibility through our industry-leading balance sheet. Looking at our operational performance, the strength of our portfolio and the hard work of our talented team is clearly apparent. With occupancy at 97.7%, we are near full in our retail and industrial asset classes. Our business once again delivered strong same-asset NOI growth of 3.4%. Normalizing for large, single-tenant industrial building in Montreal that we backfilled with Amazon, our same-asset growth was 4 percent. Moving to transactions, we continued to execute on our capital recycling program, completing 59.2 million of transactions, including 19.9 million of acquisitions and 39.3 million of dispositions during the quarter. On the acquisitions front, we completed the purchase of approximately 34,000 square foot anchored retail asset located in an established residential area in Toronto for $19.2 million. As part of this transaction, we entered into a new lease with Loblaw on the site with 15 years of fixed term. The site is a long-term covered land play given the location, mixed-use designation, and immediate area demographics. On the disposition front, we continue to focus on exiting offers as an asset class. and in the quarter completed the disposition of an office property in Montreal for $27 million. We have four remaining office assets which we plan to sell over time. These examples illustrate the thoughtfulness of our capital recycling program. While we remain active, we are currently in a period of price discovery with smaller bid pools being experienced across all asset classes. We are closely monitoring the market and seeing the impacts on pricing firsthand for both IPP and land transactions. Given our overall financial strength, we are not under any pressure to sell. We'll continue to sell when the time and price is right and acquire assets only when they increase the quality of our portfolio. That said, we expect that over the next few quarters, attractive opportunities will be unearthed in the current market, and we have the balance sheet to execute on these opportunities. We saw NAV growth in the quarter, primarily from the advancements of our development pipeline. We invested $55 million of capital in development and unlocked value by achieving key zoning and entitlement milestones at two of our development projects, Tullamore, an industrial development in Calgary, Ontario, and Golden Mile, a mixed-use development in Toronto. First, on industrial. Last quarter, I spoke about the size quality and growth potential of our industrial portfolio, including our ability to significantly increase the size and value of our $3.3 billion income-producing portfolio through development. Industrial fundamentals remain strong. We have seen this firsthand through the significant rental growth we have achieved on industrial renewals in 2022. In the third quarter, we demonstrated our ability to create value through our industrial development pipeline. Our 7 million square feet industrial development pipeline is now fully zoned and we continue to advance our active developments. At Tullamore, we hold an 85% interest in 380 net developmental acres. We achieve zoning in the quarter. This zoning allows for development of a warehouse distribution and industrial uses totaling over 6 million square feet and unlocks significant value on the site. As a result of achieving this zoning milestone, we recorded a fair value gain of approximately $204 million. We have assembled the land at Tullamore at a cost of approximately $740,000 per acre, or totaling $281 million at share. Based on the current zoning and market transactions, Our current I4S value is $1.6 million per acre, with a total value of approximately $515 million at share. We expect to recognize further value on this development as the project progresses and expect to start grading the site by the end of 2022. With zoning achieved, our partner and leasing team are actively responding to RFPs and seeing increased interest in the site. Now, starting in East Guinevere, Ontario, we made progress in the quarter on our 75% interest in 154 acres of fully zoned industrial land. As we discussed on a previous call, Loblaw has entered into a land lease and plans to build a 1.2 million square foot distribution facility on the first phase of the site. During the quarter, the foundation permit for the first phase was issued and the pad was delivered to Loblaw. Novlois started construction with rent commencement in Q1 2024. We expect an initial yield of between 6.5% and 7% on this first phase. Moving to our mixed-use development pipeline, we also achieved zoning in the quarter for approximately 19-acre Golden Mile development in Toronto. The current redevelopment plan contemplate a large mixed-use master plan community to be built in phases with a focus on high density residential and rental units. Working with our partner Daniels, we're on track to be the first development in the Golden Mile area. Assuming favorable market conditions, we will be in a position to commence the first phase of the project in approximately 18 months. Lastly, our balance sheet remains strong. We entered the quarter in a strong liquidity position with approximately $1.3 billion of available credit under the trust revolving credit facility, a $12.2 billion pool of unencumbered properties. I'm now going to pass the call on to Anna to discuss our operational results.