SmartCentres Real Estate Investment Trust

Good afternoon and welcome to our first quarter 2023 results call. I'm Peter Slan, Chief Financial Officer, and I'm joined on today's call by Mitch Goldhar, Smart Center's Executive Chair and CEO, and by Rudy Gobin, our Executive Vice President of Portfolio Management and Investments. We will be We will begin today's call with some comments from Mitch. Rudy will then cover some operational items, and I will review our financial results. 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, over to you.

Thanks, Peter. Good afternoon. Welcome everyone. We kicked off 2023 on a much higher note than we experienced just one year ago. Operational results continue to improve driven by Canada's best retailers, driving higher consumer traffic to our convenient open format centers. Occupancy improved to 98% from 97.2 in the prior year. Renewals are up 3.4%, NOI improving by 4.3%, and collections in excess of 99%. All in all, retailers who set the agenda and who make up our core retail base are investing in their physical platforms in the form of renovations, expansions, e-comm fulfillment integration, and new stores. Toronto and Montreal premium outlets are fully leased, with 12-month rolling sales now exceeding 2019 levels. Rudy will get into the operational details in a few minutes. On the land use permission front, so far this year, we achieved residential zoning approvals in three projects, which added yet another 3.4 million square feet to our future. Two are in Ontario and one is in Quebec. We continue to stay focused on getting valuable permissions, laying the groundwork for providing us with ready-made options for future growth. Recall that in 2022, we achieved over 6.1 million square feet of new mixed use permissions in urban locations with high demand for housing. So 2023 is off to a great start ahead of last year's pace. I will remind you that these proposed developments are on lands we already own, sit in the midst of highly populated communities in every major market across Canada. You can read the details of many of our developments planned in the portfolio in our MD&A. So I will not go through them all here except to say that Transit City 4 and 5 sold out condos at VMC 1,050 units will all be closed this year. The Millway purposely built rental building here at the VMC is near completion with occupancies already commencing. Art Walk Our new condo at BMC is sold out of the release unit and pre-construction mobilization will commence within 60 days. Mascouche, our purpose-built rental in the greater Montreal area is 76% leased and is expected to be leased out by October ahead of schedule. Our 240,000 square foot industrial initiative in Pickering is complete, and the first tenant for half the building has moved in. In Ottawa, our 402 unit seniors residence, which is under construction, has been delayed because of financial challenges of our partner, which are close to being resolved in December. root of that we have taken over the development and construction management contracts earthworks are now complete and construction will commence within two months on our townhouse development with our partners in vaughn northwest with respect to self-storage we opened our eighth In this quarter, 133,000 square foot Brampton facility on the surplus lands we own at Kings Point Plaza. Two others are under construction in the GTA, Whitby and Markham. We have commenced discussions with potential new partners and buyers of selected assets within the portfolio, which will assist in funding development debt reduction and diversification. While only a small part of the portfolio, we see this as an ongoing capital recycling program, which will not only strengthen our balance sheet, but de-risk future cash flow streams. Once again, you can see this current construction activity in our expanded disclosure in the MD&A, as well as a list of additional projects scheduled to commence construction in the next two years. And while we have delayed the start of a few projects owing to the current market conditions, our efforts in obtaining additional land use permissions, such as residential continues in the normal course. On the financial side, Peter will provide a full update in a minute, but let me emphasize a few of the more pertinent elements. Maintaining our conservative balance sheet remains a significant priority for us, along with maintaining a significant unencumbered pool of assets, which now stands at $8.7 billion. Our respectable debt level at 43.2% is important to us, along with maintaining significantly liquidity and the strong support from our partners and lenders, all firmly in place. We are committed to doing the right thing for the long term. Like decisions made in the past resulting in our strategic real estate, current occupancy levels, and our strong tenant mix and rent collected, so is the approach to decisions taken today to ensure a stable and sustainable growth tomorrow. Very recently, doing the right thing has been encapsulated in the term ESG, environmental, social, and governance, a concept that has been sweeping the corporate world. But for us, ESG is just a different way of describing what we have been doing all along. It is woven into the fabric of our organization and how we oversee our business, interact with our tenants, and engage our associates and communities. Of course, it also means careful consideration for the environment. Our three-year action plan in which we are developing and implementing our ESG strategy is posted on our website, and I invite you to assess our portfolio where you will see ESG principles applied throughout. On a final note, I would like to once again offer my thanks and appreciation to our exceptional team of associates for their commitment and dedication to delivering on this long-term vision of improving the lives of the communities we serve every day. And with that, I will pass the call over to Rudy.

Thanks Mitch, and good afternoon everyone. I'll just touch on a few of the things Mitch has said and give a little bit of an operational update. The first quarter continued to build on the momentum of last year with strong interest from many of our dominant retailers who shaped the open format shopping landscape. TJX, Canadian Tire Banners, pet stores, banks, dollar stores, liquor, QSR, full and ethnic grocers, were all very active picking up vacant space in our high-traffic Walmart-anchored centers. And given our proximity to residential being in the center of communities and their strong financial footing, a few new entrants were engaging us with their space needs, including discounters, experiential, entertainment, gaming, logistics, and a few light industrial users as well. Finding their preferred locations on our website and calling with competitive rent and covenants to match. It's interesting that for a lot of this latter group, they have figured out what our national retailer is always new. Location matters. High traffic matters. It matters who you co-locate with if you want your name and brand remembered. It matters that their customers enjoy the experience, access, and convenience of their weekly trip. We've heard it from so many retailers. Our real estate strategy is simple. Find a Walmart Anchored Center and get into it. The cross-shopping, high traffic, convenience, frequency of visits, and the value to our customers is clear, in their words. For smart centers, delivering on this vision and strategy have led us to the results we have seen before and continue to see this quarter, which speaks to themselves. With a sector-leading 98% occupancy, over 99% collections, 4.3% same property NOI growth, even planning new build retail, and not just in urban centers, but in places like Carlton, Cambridge, Alliston, Chilliwack. Renewal spreads on over 3 million square feet of leasing at 4.3% ex-anchors. So while the pandemic gave retailers good reason to pause and rethink their strategy, their path is now clearer than ever. They stay close to their customers, offer great value, make it convenient in proximity and access. and co-locate with the best in the country so that customers have one place to do all of their shopping for their daily needs. Even with this strong recovery there's no doubt that the market will see a small handful of retailers struggling to adapt, mostly in the enclosed mall space which is not our space. Bed Bath & Beyond is one such example but for us that was only two locations in our 35 million square foot portfolio and both locations have already been taken without any rental interruption. The strength at the top keeps getting stronger. Walmart, Canadian Tire, Winner's HomeSense, Grocers, Dollarama are reinvesting heavily in their store network and simultaneously growing their footprint. And as a reminder, virtually all of the Smart Centre's locations across the country includes a full grocery, accessible at-grade parking, and a tenant mix that satisfies the weekly living needs of its community. With that said, here are a few other operational highlights. In addition to the larger dominant retailers, a number of smaller size tenants are wanting space across the country for personal care, beauty supplies, spas, hair salons, daycares. When combined with entertainment, such as indoor golf, gaming, and racquet sport facilities, We're developing well-rounded centers, most of which, as you know, are in the planning, pre-construction, or construction phases of becoming city centers, utilizing our excess lands for residential and other mixed uses, as Mitch mentioned earlier. Development of our millway apartments is on track in the first phase of units in the north tower being brought to market, and 50% of those leased. That being said, there's lots more to go and leaving just over 350 units on stream to come over the balance of the year in the East Podium and West Tower. Our first pre-lease industrial new build tenant took occupancy just after the quarter in our Pickering project and given to the modern design, location and current discussions, we're expecting the balance of the space to be leased shortly. Our premium outlets in Toronto and Montreal continue to exceed our expectations and dominate their markets. Tenant sales in Toronto are well over 1,000 per square foot and have exceeded all prior years. 2023 EBITDA is trending to exceed the 2022 levels by over 10%. With traffic continuing to grow, plan your trips accordingly to take advantage of the great luxury brands such as Prada, Kate Spade, Gucci, Hugo Boss, Santiago, Versace and Ferragamo, to name a few, and all at affordable outlet prices. All in all, even with the few economic challenges facing us all, 2023 is shaping up to be a step up over the prior year in nearly every metric, delivering NOI growth, leading occupancy levels, stronger tenant covenants, all while executing on our mixed-use development strategy for the long term. Thanks, and now I'll turn it over to Peter.