Good morning, everyone, and welcome to the Crombie REIT's Q4 earnings call conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on February 23rd, 2023. I would now like to turn the conference over to Ruth Martin. Please go ahead.
Thank you. Good day, everyone, and welcome to Crombie's fourth quarter 2022 conference call and webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations and Events. On the call today are Don Clow, President and Chief Executive Officer, and Clinton Keay, Chief Financial Officer and Secretary. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our MD&A and Annual Information Form for a discussion of these risk factors.
I will now turn the call over to Don, who will begin our discussion with comments on Crombie's overall strategy and outlook, along with a development update. Clinton will review Crombie's operating fundamentals and then discuss our financial results, capital allocation, and approach to funding. Don will conclude with a few final remarks. Over to you, Don.
Thank you, Ruth. Good day, everyone, and thanks for joining us. When we look back on 2022, our significantly improved financial condition with solid growth is really the story of the year. We have proven over many years that we are prepared to make hard decisions in the short term for success in the long term. We're proud of our strength and balance sheet, lower debt levels, leading to improved debt to EBITDA and debt to gross fair value metrics, our ample liquidity and an increase in our unencumbered asset pool. This significant improvement in our financial condition occurred at the same time as we delivered solid growth in AFFO and NAV by delivering on our strategy of outstanding operations, including record occupancy and responsible investment in grocery-anchored retail in partnership with Empire, and into sustainable development with an award-winning and engaged workforce.
We are proud of the fact that we've remained focused on our long-term sustainable growth despite the volatility of the capital markets and ongoing macroeconomic and geopolitical pressures. One of our guiding values at Crombie is to embody integrity. We do what we say we will do. We are pleased to report that our adjusted same asset cash NOI and AFFO are in line with our target annual increases in same asset cash NOI of 2%-3% and AFFO growth of 3%-5%. Our major development projects have been largely completed on time and on budget. Our relationship with our strategic partner remains strong and our fundamentals continue to improve year-over-year. Our team and culture have been recognized again this year for their fine work, and we were recently named one of Atlantic Canada's top employers for the seventh time.
I'm also humbled to be a recipient of Waterstone's Most Admired CEO Awards this year. For that, I give full credit to the culture of our team that's built at Crombie. The stability of our organization has once again demonstrated over the last quarter and year through our high occupancy, healthy NOI growth, steady new leasing, and renewal activity. Our ability to be agile is underpinned by our intentionally curated portfolio, which consists of the most desirable asset types in Canada: grocery-anchored retail, industrial, and mixed-use residential. In 2022, multiple new tenants moved into our top 20, of which 60% is now investment-grade and demonstrating the attractiveness of our portfolio and the quality of our cash flow. The relationship with our strategic partner, Empire, continues to be an important driver of our success. In 2022, Crombie spent CAD 191 million on Empire-related initiatives.
We are committed to spending between CAD 100 million to CAD 200 million annually. This spending will come in the form of modernizations, acquisitions, conversion to grocery stores, as well as the build-out of Empire's Voilà Grocery eCommerce hub and spoke network. This commitment to Empire provides many attractive risk-adjusted opportunities, often with shorter project durations, and allows for stable growth and value creation for our unitholders. As our largest tenant, Empire also plays a significant part in supporting our sustainability growth as we move forward. We've proven over the last few years that development of all sizes is a key component to our long-term strategy. In light of the current economic environment, we've adjusted our annual spending range to be CAD 100 million to CAD 250 million on developments, including non-major projects from a previous range of CAD 150 million to CAD 250 million.
A lower spending will likely be on the lower end this year. Due to the ongoing uncertainty in the economic and geopolitical environment, we have steadfastly focused on unlocking the embedded value within our portfolio. The team continues the hard work of advancing projects through the entitlement process to create value and provide optionality of project size and timing of commencement in some of the most desirable locations across the country. At the end of 2022, four projects have zoning approval in place and two projects have zoning applications submitted with the potential to add approximately 3.3 million sq ft of GLA, including 3,700 residential units.
In the fourth quarter of 2022, we reached substantial completion at our retail-related industrial development, Voilà CFC 3 in Calgary. This CFC is the third state-of-the-art Empire eCommerce fulfillment hub in Canada, the second in Crombie's portfolio, and is powered by Ocado's industry-leading technology, including a robotic grid platform. The 304,000 sq ft facility will service the majority of Alberta with economic occupancy and rent expected to commence in mid-2023. Lease-up continues at Le Duc in Montreal and Broadway Village in Oakville. Le Duc is 93% leased as of February 10th, 2023, at rents over 5% above pro forma. Stabilization of NOI was achieved in December 2022, ahead of the previously expected timeline of March 2023.
We are thrilled with the progress that has been made at Le Duc, with a special thanks to our partner, Prince Developments, for their hard work and leadership. Broadway Village continues lease up as 52% or 249 units have been leased as of February 10, 2023, at rents 10% above pro forma. Stabilization of NOI is expected to be reached in May of 2024. We are always seeking ways to optimize the value of our development pipeline while balancing capital allocation priorities in line with our strategy. We're particularly proud of a milestone achieved in the fourth quarter, the sale of our King George site in Surrey, BC. This transaction is a great example of the tremendous underlying land value held in our portfolio and highlights one of the many value creation opportunities available to Crombie.
In consideration of our current opportunities, we have elected to monetize the remaining residential development parcels at our major development, Opal Ridge in Dartmouth, Nova Scotia, rather than proceed with the residential development option. Given this direction, Opal Ridge was removed from our development pipeline in the fourth quarter. Before handing the call over to Clinton, I wanna take a moment to highlight Crombie's commitment to sustainability. Throughout 2022, we focused on and formalized our ESG policies and strategy while continuing to improve and advance several important initiatives. We updated our sustainable development policy, introduced portfolio-wide ESG risk assessments, set internal ESG targets to advance our impact, and have gathered an inventory of greenhouse gas emissions and identified reduction pathways. Leaders on our team have built relationships with our peers as well. Together, we are working to improve our industry's carbon footprint.
We continue to uphold white-glove governance, and all of our broad committees have mandates that include ESG oversight. On the social aspect of ESG, our Diversity, Equity and Inclusion committee continued its work on creating a more welcoming workplace for all, including inclusive communications training. We continue to accommodate flexible work options and encourage our teams to volunteer for community organizations across Canada. In 2022, our employees volunteered over 6,000 hours to volunteer organizations of their choosing. We are truly committed to doing our part to build a Canada where everyone can thrive. Measuring and tracking our progress and how we impact our environment and society takes time and energy, but it's absolutely worth it, and I'm proud of our team for their dedication to this work.
I'll now turn the call over to Clinton, who will highlight our fourth quarter operational and financial results and discuss our capital funding approach.
Thank you, Donnie, and good day. Two new leases increased occupancy by 349,000 sq ft at a weighted average first-year rate of CAD 21.59 per sq ft. At the end of 2022, 394,000 sq ft of GLA was committed at an average first-year rate of CAD 20.50 per sq ft, which will boost future NOI growth as tenants take possession throughout 2023. During the fourth quarter, 374,000 sq ft of renewals were completed at an average increase of 12.9% over expiring rental rates. Included in this activity was a large office renewal at a significant increase over expiring rental rates. Excluding this lease, renewal spreads for the quarter would have been 3.3%.
The primary drivers of renewal growth in the quarter were in our office and retail plaza portfolios. For the full year, total renewal activity consisted of 1,056,000 sq ft with an increase of 7% over expiring rental rates, or 4.2% including the previously mentioned office renewal. On a cash basis, quarterly same asset NOI increased 0.9% and 1.6% for the full year. Primary drivers are strong occupancy, higher supplemental rent from modernizations and capital improvements, and increased parking revenue. This is partially offset by a decrease in lease termination income. Excluding lease termination income, same asset cash NOI increased by 2.4% for the fourth quarter and 2.6% for the full year.
For the quarter, AFFO and FFO per unit were CAD 0.25 and CAD 0.29 respectively, both consistent with the same quarter last year. AFFO and FFO on a per unit basis were diluted by the equity issuance in January 2022. On a dollar basis, AFFO increased CAD 4.6 million and FFO increased CAD 5.2 million. The increase in AFFO and FFO for the quarter is primarily due to lower finance costs from operations, increases in income from acquisitions, modernizations, and capital improvements, a higher contribution from our equity account and investments, and a decrease in G&A expenses due to a reduction in unit-based compensation costs. AFFO and FFO payout ratios in the quarter were 88.1% and 76.2%, respectively. Fourth quarter G&A was CAD 6.1 million or 5.6% as a percentage of property revenue.
Excluding the impact of unit-based compensation of CAD 1.4 million, G&A was 4.3% of property revenue. Crombie continued to reduce risk and build financial strength in 2022 through a disciplined approach to financial management and responsible capital allocation, providing significant financial flexibility. These actions have led to our strengthened balance sheet having ample liquidity, notable de-leveraging, well-laddered debt maturities with balanced near-term expiries, and a healthy weighted average term to maturity. All of which are extremely important, especially during the current challenging macroeconomic environment. We ended the year with available liquidity of CAD 583 million, and our unencumbered asset pool reached CAD 2.2 billion, increasing from CAD 1.8 billion in Q4 2021, primarily due to acquisitions, mortgage maturities, and development completions, and partially offset by dispositions.
As a percentage of unsecured debt, unencumbered assets represent 192%, up from 129% in the fourth quarter of 2021, providing Crombie with additional financing optionality. Debt to gross share value was 41.8% at the end of Q4, a significant improvement from 45.3% at Q4 2021. The improvement in our leverage ratio was primarily the result of lower debt outstanding, resulting primarily from mortgage repayments, as well as an increase in total gross fair value of $95 million from the substantial completion of Broadway Village in early 2022. Acquisition activity and investment in developments. We end up the quarter with debt to trailing twelve-month adjusted EBITDA at 8.02 times, down from 8.99 times at December 31st, 2021.
The improvement is primarily due to lower outstanding debt as a result of mortgage repayments and higher adjusted EBITDA, driven by increased operating income and higher net property income from joint ventures. In the fourth quarter of 2022, Crombie entered into a credit agreement for an unsecured non-revolving credit facility. The credit facility has a maximum principal amount of up to CAD 200 million with a maturity date of November 2025. CAD 150 million was used to fund the redemption of Series D unsecured notes. The credit facility allows us to maintain ample liquidity while also providing maximum flexibility with respect to the timing of obtaining longer-term unsecured debt.
Crombie had a weighted average cap rate of 5.74% inclusive of joint ventures at the end of the fourth quarter, compared to 5.54% at the end of the third quarter in Q4 2021. The recent expansion in our weighted average cap rate has been partially offset by new development completions and a continued strong demand for grocery-anchored assets. With that, I will now turn the call over to Don for a few closing comments.
Thank you, Clinton. Today is a bittersweet one for me as I take my last analyst call for Crombie. For almost 14 years, I've met with you approximately 55 times on a quarterly basis to share our team's results, and I've enjoyed our time together despite your sometimes hard-hitting questions. A CEO's primary objective is to leave an organization better than they found it, and I feel immense pride in the Crombie from which I'm retiring. We've achieved incredible success over the years, and I'm proud to say with top-quartile total unit holder return. We've evolved from a regional landlord into a national owner, operator, and developer of great properties across Canada. We've curated a portfolio that is largely comprised of the three most highly sought-after asset classes in the market: grocery-anchored retail-related industrial, and residential properties from coast to coast.
Our strategic relationship with Empire has become a more impactful driver of growth over the last five years and has empowered many mutually beneficial opportunities. Our balance sheet is strong, as are our fundamentals, we are well-positioned to weather any economic storms we may face over the next few years. We've strengthened our team substantially over the last decade and a half and employed well-educated, highly skilled people who are as resilient as they are smart. It is this team who together have made everything possible. Peter Drucker once said that culture eats strategy for breakfast, and Crombie is proof of this statement. Next week, I'm humbled to be receiving an award as one of Canada's Most Admired CEOs. While this award is being presented to me, it is primarily a testament to the culture that we built at Crombie.
At a time when attrition is at an all-time high, when every business journalist is writing of the war on talent, Crombie's engagement scores have risen. We've doubled down on the importance of our people, and together reconfirmed our guiding values. We embody integrity, we care passionately, we deliver excellence together, we outperform expectations, and empower one another. Every day, I see our team employ these values to guide decision-making and the way we work together, and I know that this team will continue to enhance neighborhoods across Canada through long-term sustainable growth. I am so pleased to introduce my successor, Mark Holle, who will lead this team to ongoing growth and success and take it to the next level. Mark is a strategic leader with a proven track record of more than 20 years in real estate development, operations, and capital management.
He is recognized within the industry as an exceptional communicator, collaborator, and relationship builder with deep expertise across the entire real estate development cycle. Mark joins us from Empire, where he led the firm's real estate business and had the opportunity to collaborate closely with the Crombie executive leadership team on a range of successful initiatives that have generated substantial value for both companies. I sincerely thank you for the respectful discourse we've enjoyed over the last 14 years and now proudly hand things over to Mark. Mark?
Congratulations on your retirement. A truly amazing career. After five years of working as a partner to Crombie, I'm thrilled to be joining this amazing organization. I'm looking forward to carrying the successes that have made Crombie one of the top-performing REITs in Canada, and I look forward to meeting all of you in the near future. Thank you.
That concludes our prepared remarks. We are now happy to answer your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Mario Saric with Scotiabank. Please go ahead.
Hi, good afternoon.
Good afternoon, Mario.
I just want to start off by congratulating you, Don, on the news and welcoming Mark as well. I'm sure a lot of people would echo the view that you've achieved your initiatives and your goals that you set out. Congratulations on the move.
Thank you.
Good luck going forward.
Thank you.
With that said, I wanted to focus a bit on the same store NOI growth in 2023. I think you mentioned kind of a target 2%-3%, which is your traditional target. Outside of potential substantial economic deceleration which we can't control, is there anything notable from a leasing perspective in 2023 that could drive that number either higher or lower than the 2%-3% traditional number?
You know, no, Mario. I think generally things will be steady course. You know, we continue to, you know, lease up our residential properties, which we think in the future is if we do consolidate those results for people, we'll end up showing, call it, maybe an increasing range of expected growth or guidance. In general, our portfolio has been doing that for a long time on the retail side, and it's been, I'll call it, you know, we've been up covenanting the portfolio, I think, through COVID and continue to see that trend. I think to the downside, we're quite pleased with where we stand.
You know, to the upside, we think it's probably more to that end of the spectrum just because, again, we don't really consolidate our residential properties, and we're trying to figure out a way in the future to show the growth from that and which is actually quite interesting and proving to be as we thought, which is seeing solid growth in the various residential markets. I'd say generally steady course with a little more opportunity, hopefully to the upside as we move forward.
Got it. In terms of tenant watch lists and things like that or notable leases that are set to expire in 23, there isn't anything of note?
No.
All right. Okay. In terms of parking revenue, in the portfolio, is it now back to pre-pandemic levels, or is there still some upside to achieve there?
We're getting close to pre-pandemic levels, but we still do have some upside, on a full year basis. Yeah, I'd leave it at that.
Okay. My second question, just in terms of capital deployment, I can appreciate that the development cycle may be a little bit slower or the spend may be a bit lower than what you've achieved the past couple of years. I'm curious in terms of how that impacts the expected spend on the Empire-driven initiatives. That CAD 100 million-CAD 200 million per year. Is there a governor in place like on that range? Why not CAD 200 million-CAD 300 million, for example, in a year where development spend is coming down?
You know what I'd say is that the relationship's never been better and never more creative. The initiatives I see coming forward are, I think, are exceptional in terms of their quality for both, you know, driving results for Empire and driving results for Crombie. We did show, call it, you know, closer to the CAD 200 million level of spending in 2022. Our forecast this year and next would be, call it at the higher end of that spectrum. There is a possibility you can go over, just because the relationship is so good and Empire, you know, is continuing with Project Horizon and, you know, continuing to look for, you know, an evolution of their network plan and continued efficiencies in that network plan.
We just, I think, are well positioned to work with them to, you know, create opportunities for Crombie to invest. I'd say higher end of that range is probably in the next year or two, is likely. Again, those types of projects have solid risk-adjusted returns and shorter durations in general. For us, it's more, it's faster activation of AFFO growth for Crombie in that part of our capital allocation. Yeah, I'd say that's probably where we land.
Okay. Just my last question, just on the 20 basis point cap rate, IFRS cap rate jump quarter-over-quarter, it was a bit higher than what we would have anticipated and a bit higher than what the peers recorded this quarter. How much of the increase would you say is supported by actual transactions versus, something else driving that conviction?
They're not. I'd say on the year. Have a look at the year because I think if you look at ourselves and our peers, we're all right around the same number. You know, some of them might have adjusted second quarter or third quarter, and we just have to adjust a little bit in the fourth quarter more. On the total for 2022, the numbers appear to us to be roughly the same. Again, they're not really substantiated by significant transactions. There just aren't a lot of transactions when you're considering grocery-anchored retail, industrial, or apartments. For us, we're quite comfortable and feel like our numbers are conservative.
At the end of the day, we have a good process where, you know, our valuation committee is has a very robust discussion and evaluation and lots of opinion, but not a lot of, call it evidence underneath it. We're kind of reaching a little bit, but at the end of the day, we're comfortable with it. The good news for us is that our NOI keeps growing and we are entitling projects, et cetera. I noticed our debt to GBV fair value actually stayed the same despite a reduction in the value of the portfolio by $200 million. It shows you the, you know, how things do balance out in general.
Right. I guess what we've been hearing is, from a transaction perspective, the bigger deals seem to be on pause within the retail landscape, but smaller assets are very much in demand, especially by private equity or private groups. Is it your sense that we could see a decent amount of deal flow in the first half of this year to better substantiate where transactions or valuations could be?
I think it's a difficult question to answer. I honestly, the people who own it are well funded, and it's generally fairly consolidated, especially for grocery-anchored retail. You are seeing a large deal, obviously, this summer. We want to congratulate our friend Paul Dykeman and Lou Maroun on an amazing transaction. That's, you know, large portfolio, and obviously the folks at Dream Industrial for doing that deal. I think really that pricing was totally disconnected from the market in industrial. We are not expecting to see large chunks of grocery-anchored retail or apartments.
I don't feel that it might happen, but don't think it's going to happen too much because the people who own it want, in general, long-term cash flow growth and solid cash flow that's resilient in the face of a lot of economic uncertainty right at the moment. I will tell you that there's, you know, significant interest in those types of real estate. If we did want to sell, we could, but we just don't in general. I suspect most of the owners that we know feel in a similar way. I don't know if that's helpful.
No, that's great. Thanks, Don. Congratulations again, for not having to endure a 56th analyst call.
That's a large number, Mario. Thanks very much for everything. We really appreciate it.
That's it for me. Thank you.
Cheers.
Your next question comes from Lorne Kalmar with Desjardins. Please go ahead.
Thanks. Good afternoon, and congrats to Don and Mark.
Thank you.
Just on occupancy, you guys seem to be hitting record quarter after quarter. Now, you know, close to 97, starting to look pretty full. How much further do you think you can take it? Are you kind of comfortable with that 97% occupancy range, and then you can kind of start pushing rents a little bit more?
You know, we often get asked what is, call it full occupancy, and we've generally told people 1% to 2% has some structural issue to it, and we're working on it. I'd say that's still roughly the case. We're, you know, pretty close to full occupancy. We are pushing rents, I would say, at the moment. You saw some in office and you saw, otherwise, in the retail portfolio. For us, it's an ongoing process. It's not easy. The economy has challenges for everybody. I'd say it's more of a balanced marketplace today than something that, you know, people can really push it. For us, it's as steady as she goes is probably the more apt description. I can put it that way.
I'm noticing a theme with the steadiness. On the Opal Ridge, any idea on timing or expected proceeds? I know it's probably still a little bit early, but figured I would put that out there.
Yeah, no, I'd say over 2023.
Okay, easy enough. Just on the office, which you mentioned, obviously, you did a pretty good lease there in the quarter. What's the thoughts on holding onto those or maybe looking to dispose of them as time allows?
Look, we own the best office in Halifax in my mind, and we've outperformed the market. We have an outstanding team at Halifax Developments in Scotia Square. It's a key part of our portfolio and performing very well, roughly 94%-95% occupancy in a market that's got roughly now 86% occupancy. We've outperformed the market. You know, we've just renewed a number of leases, as you see, with strong uplift. For us, it's a strong performer. Yeah. I just leave it at that. We don't have any plans to sell office now, even though it is a small or part of our portfolio, just because it's so well managed, such a strong performer. Yeah.
It's nice to hear some positive commentary on office for once. Just last quick one. Any idea on the expected yield on the Westhill on Duke?
Yeah, you know what we've said is call it in the high fives. We won't get into much more than that. You know, we've historically, when we say those numbers, we've been able to deliver it. We're, we're, you know, that's roughly where we're working, as we look forward on the project.
That's great. congrats to you both again, and I'll turn it back.
Okay, thanks so much.
Thanks.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Sam Damiani with TD Securities, please go ahead.
Thank you. Congratulations to both of you, Donny and Mark as well.
Thanks.
Look forward to meeting you, Mark, at the nearest opportunity. I apologize for the background noise, if you can hear it. I guess my first question would be on the residential developments. It's an evolving program. Based on, you know, the good success that the REIT has achieved on its first projects, what would be the most important lesson learned that would inform the go or no-go decision on future projects?
You know, today, it's probably managing costs in a higher inflationary environment and doing so in a market where you still have growing rents, where you can call it pass those costs on to a consumer, in the form of higher rents. We're very fortunate to have, you know, the bulk of our property development portfolio in Vancouver and also in places like Halifax, where there's significant rise in population and increasing rents on a continuous basis, at relatively high levels. For us, that is a learning. We built our first three projects through a relatively low inflationary environment and dealt with still, nevertheless, a fair amount of uncertainty, which is normal in development. This inflation has added an additional layer. Also, obviously, interest rates is planning the financing of these projects.
In general, you know, Sam, we're continuing to work on entitlements, continuing to give ourselves options. The delays, you know, if I could say it in terms of approving the next project, it's really been more of a macro issue and looking for things to normalize or just at least show stronger signals of normalization in my mind. It's probably me. With Mark taking on the leadership, he'll bring some fresh thinking to that.
Again, I think the good news is that development's been very well done by our team and our partners, and we're very enthusiastic about how it matches the profile of investment in Sobeys in terms of increasing our growth, diversifying to some degree our income stream and increasing the quality of our portfolio and increasing the percentage that's in the major market. It's got a lot of attributes that are really positive. Again, as we said in our remarks, we are prepared to do, you know, in the short term, we'll sacrifice to some degree to do what's right in the long term. Maybe a short, I'll call it, slowdown is okay.
In the meantime, again, we are also continuing to invest in stuff that's under CAD 50 million that adds up to over CAD 100 million in total on development, which is, you know, still very profitable for us. It's a nice combination, a balanced approach.
That makes sense. Appreciate that. Just looking maybe, Clinton, over to you on the excess density inclusion in your fair value disclosure. Is there anything there now? What do you see maybe over the next year or two as sites get approved for including some fair value bumps going forward?
Yeah. I would say you're right about the accounting treatment that's required. As we get the entitlements.
Okay.
At a spot where we get fully entitled from the municipalities, we're in a position to take the fair value bumps. I can't give any guidance at this time other than to say, obviously, as we get to those milestones, there will be bumps in the fair value in the quarters.
Yeah. Sam, I'll jump in. I've said it for many quarters. I think we have CAD 500 million to CAD one billion worth of excess land value that's not recognized under IFRS, and rightfully so. We have lots of debates internally about the timing and/or amounts, but it's real value. We were, I think, quite thoughtful in terms of executing on King George, that it's proof of that concept. We're proud of that effort and the transaction with Westbank. It is important to show that it's proof of concept, we have a large number of other properties like that. It is just a matter of time, it's something where we have to respect the accounting rules and the process, we continue to be, I'll call it, relatively conservative.
It is the way it is.
I appreciate that. Last one for me. It's great to see Crombie fully participating in the strong retail leasing environment that we're in. When we just look at some of the turnover, and I recognize it's rather low these days, but when tenants are deciding to not renew, what would be the biggest one or two reasons that you're seeing out there? Is there any read-throughs into your expectations for 2023 and 2024 as a result of those departures?
You know, it's, we haven't seen any big credit type issues. We've seen maybe a couple of small ones. We've seen more, I'll call it, you know, people moving to different parts of the market. Importantly for us, as you'll see in our occupancy rate, we backfilled quickly and generally with better quality covenants and at, you know, higher rents. We've been, you know, good and lucky, I think at the same time in our leasing, and that's always a healthy combination. Our turnover hasn't bothered us, to be frank. We've not had a lot, it hasn't bothered us at all. Grocery anchored still honestly is very popular, Sobeys is very successful, and the traffic they generate is very desirable for our tenants.
Yeah, we're super pleased with our portfolio and that's performance in that regard.
That's great. Thank you. I'll turn it back.
Okay, Sam. Thanks so much.
Your next question comes from Pammi Bir with RBC Capital Markets. Please go ahead.
Thanks. Hi, everyone. Don, Mark.
Hi.
Congratulations again.
Thank you.
Unfortunately, I missed the early part of the call, so I do apologize if this has been addressed. Just coming back to Opal Ridge, can you just maybe expand on the comments on the decision to monetize it versus, you know, building it? Then just secondly, it looks like Broadway Commercial, the rezoning expectation is being pushed to 2024. Just curious what you can share with us on those two.
Yeah. Opal Ridge, let's call it a smaller development opportunity for us in many ways, and we had a good partner, and these are tough decisions. I mean, we're honestly, we have a predisposition for building things and ultimately gathering solid cash flow and good cash flow growth over time. We're, You know, that project is gonna be a good one. It was just on the smaller end, I think, at the end of the day for us, and we felt it was better done by someone else. Broadway Commercial, on the other hand, is an ex-amazing opportunity. The number one transit node in Western Canada, number three-ish in all of Canada, and a great partner in Westbank.
We had an opportunity to increase the density there as we were essentially deferred last July by the municipal process. For us, that's an opportunity to get some increased affordable housing in the marketplace. Again, for us is extra density. For us, it's a natural part of development. These things occur. We couldn't control it. It's an external factor and but we're gonna hopefully be able to work with it and work with the city and delays us by a bit. At the end of the day, we think we'll end up with a more profitable project that's gonna really serve the community a lot better too. Everybody wins, hopefully.
Got it. Just maybe on Opal Ridge, did you disclose what the estimated proceeds would be? Secondly, has the fair value mark on that... 'Cause I think it was already zoned. Is that already reflected in your IFRS fair value?
Yeah. We can't disclose the number unfortunately, but it was at or above IFRS. Yeah.
Just lastly, on Broadway Village, just any update there in terms of the leasing? It seems to be going still a bit slow, but Le Duc is has done better. What can you share just in terms of the lease at the Broadway Village and where you think it may end or get to by the end of this year?
You know what? We're pleased actually, with our leasing overall. With Davie Street, we were well ahead of schedule and, you know, call it record performance in that part of the marketplace in Vancouver. At Le Duc, we're ahead of schedule by a quarter and at, you know, 5% above pro forma. Bronte's, you know, call it a little slow, but it's a large project in a, call it a sub-market of Toronto. You know, so it just takes extra time. Our view is that once it's fully leased, it'll be, call it stickier, or people will generally, you know, stay longer.
Then I'll remind people that inflation, when you've already built the asset, inflation's actually your friend, and that competitors will have to pay, you know, 20% or 30% more to build a competing project, and therefore, have to come out at higher rents. For us, it, you know, yeah, it's taking just a little extra time. As we said in our remarks, we're coming still at 10% above pro forma. We're confident in those numbers. We think the project has a really good community feel. Largest part of that, you know, tenant base is people who are downsizers. For us, it's having a solid community for those people that, you know, really works for them, in that type of transition in their lives. It's, I think it works.
It's just a matter of getting through marketing, getting, you know, a little, hopefully the leasing is completed in the next, you know, in the next 12 months.
That's great. Thanks very much.
Okay.
I will, I'll turn it back.
Thank you.
There are no further questions at this time. I will now turn the call over to Ruth Martin for closing remarks.
Thank you for your time today, and we look forward to updating you on our first quarter call in May.
Thanks, everyone.
Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.