Earnings Call: Q4 2020

Feb 9, 2021

Good morning. My name is Alana, and I will be your conference operator today. At this time, I would like to welcome everyone to C. T. REIT's Q4 and Full Year 2020 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. To the conference. After the speakers' remarks, there will be a question and answer session. To the number one on your telephone keypad. The speakers on the call today are Ken to Silver, Chief Executive Officer of C. T. REIT Leslie Gibson, Chief Financial Officer of C. T. REIT and Kevin Selzberg, Chief Operating SIR of C. T. REIT. Today's discussion may include forward looking statements. 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. To C. T. REIT's public filings for a discussion of these risk factors, which are included in their 2020 DNA and AIF, which can be found on C. T. REIT's website and on SEDAR. I will now turn the call over to Ken Silver, Chief Executive Officer, C. T. REIT. To Ken. Thank you, operator, and good morning, everyone. Thank you all for joining us for CTE REIT's Q4 2020 investor conference call. To 2020 was clearly not a year any of us expected or planned for. We have all been challenged to navigate the twists and turns, to the conference call. And on countless individual lives has been immeasurable, yet we continue to work together to get through this and we have much to be grateful for. To the CTE team who have risen to the occasion to support one another, our tenants and their communities to get the job done no matter the obstacle. While daily case and death rates continue to dominate the headlines, to the conference call. We do see the light at the end of the tunnel. Spring will come and vaccines will eventually roll out. In that spirit, the conference call. I'm pleased to report on the highlights of 2020. Since our IPO in 2013, we have used the tagline, Growing, Reliable and Durable to described C. T. REIT. And while we have consistently delivered performance that supports that description, to 2020 certainly provided a significant stress test. And CTEREIT once again delivered to the operator. With healthy growth in AFFO per unit for the year, over $200,000,000 in new investments, occupancy and rent collections to the Q4, stronger debt and credit metrics and 2 distribution increases for a total of 7 since our IPO. To This combination of growth and resilience is the hallmark of CTE REIT. In Q4, we reached the milestones of 10,000,000 square to the portfolio or committed and $2,000,000,000 invested since our IPO. To. This growth in assets has delivered compound annual growth in AFFO per unit that has been amongst the strongest in the REIT sector. To our business model focused on net lease assets with investment grade tenants and long lease terms, combined with conservative financial management, the company's financial performance. Our privileged relationship with Canadian Tire, our largest tenant and majority unitholder, to provide strategic insight, growth opportunities and a distinct competitive advantage. Our significant portfolio of low risk assets to the next question and answer session. A case in point is our joint venture with Oxford Properties to the operator at Canada Square at Yonge and Eglinton in Toronto. In December 2020, Oxford submitted an exciting redevelopment application to the City of Toronto for this landmark 9 acre site on 2 subway lines in this growing node in Midtown Toronto. To the project obtaining the necessary approvals and proceeding to construction in the next couple of years. To the conference call. 2021 is off to a good start. In early January, we closed on our successful unsecured debenture offering to the company's financial results. We are now ready to begin the Q1 of 2019. We are now ready to begin the Q1 of 2019. We are now ready to begin the Q1 of 2019. To I'm pleased we've hit the ground running with our newly announced investments and the disposition of one of our completed redevelopment projects. To Last but not least, I'm delighted to congratulate Kevin Salzberg on his being named as President and Chief Operating Officer of CTE to the company's financial performance, effective March 1. His promotion is a reflection of the growth of the REIT and its evolving organizational needs and of course, on Kevin's performance, his contribution to the REIT's evolution and the leadership qualities he's shown since joining the REIT almost 5 years ago. To the operator. With that, I'll turn things over to Kevin and Leslie to discuss our results in more detail. Kevin? Thanks, Ken, and good morning, everyone. To As outlined in yesterday's press release, we are pleased to announce 4 new investments this quarter that will require an estimated $65,000,000 to complete. To these new projects include the vend in of a Canadian tire store and Canadian Tire Gas Plus Gas Bar in Quebec City, Quebec the vend in of a Canadian tire store in Lower to the company's full Nova Scotia and the expansion of an existing Canadian Tire store in Cochrane, Ontario. Also included is the expansion of the Canadian Tire Distribution Centre in Coteau du Lac, Quebec, just outside Montreal. Upon completion, This industrial asset, which serves the Canadian Tire Store network in Eastern Ontario, Quebec and Atlantic Canada, will grow by over 320,000 square feet to a total GLA of nearly 2,000,000 square feet. When completed, these investments are expected to earn a weighted average cap rate of 6.41 percent to and represent approximately 510,000 square feet of incremental GLA. With respect to previously announced investments, CTE Recompleted the 3rd party acquisition of 3 Canadian Tire stores in Drayton Valley and Leduc, Alberta and Saint Jean sur Richelieu, Quebec, acquired a property from a third party consisting of 2 freestanding buildings leased to Marks and Tim Hortons in Yellowknife Northwest Territories Completed the first phase of its development at Fort St. John, BC, consisting of new Canadian Tire and Mark stores completed Phase 1 to the Orillia Square Mall in Orillia, Ontario, which comprised the development of a new Canadian Tire store in the former vacant Target box to the operator and completed the intensification of an existing Canadian tire store in Buckingham, Quebec. The REIT invested approximately $139,000,000 in to the company's previously announced projects, which added approximately 440,000 square feet of incremental GLA in the quarter. To Subsequent to quarter end, CTE REIT sold its Arnprior Mall property in Arnprior, Ontario for approximately $21,000,000 to After redeveloping this enclosed mall and bringing occupancy from 53% at the time it was acquired to 97% currently and to the company's Investors and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance and Deliverance. To The REIT continues to hone its focus on net lease assets, and it was determined that in line with our core strategy and based on the fact that we had successfully added value to this property, to the sale. Highlighting our full year activity and despite an initial pullback in capital spending to preserve liquidity at the outset of the pandemic, C. T. REIT invested approximately $209,000,000 in 2020 and grew the portfolio by approximately 800,000 square feet. To the operator. At the end of the Q4, C. T. REIT had 16 properties that were at various stages of development. These projects represent a total committed investment approximately $191,000,000 $57,900,000 of which has been spent to date and $32,000,000 of which we anticipate will be spent in the next 12 months. To Excluding the Canada Square redevelopment in Toronto, Ontario and the development lands that we own in Calgary, Alberta, these projects will add a total incremental gross leasable area of to the portfolio upon completion, over 93% of which has been pre leased. To the operator. As at year end, CTE REIT's occupancy rate was 99.3%, slightly better than the 2019 year end occupancy rate of 99.1%, to the Q3 2020 due to the lease up of the 11 Dufferin Place Southeast Industrial Property in Calgary, Alberta. To the impact of COVID-nineteen on our property operations, we are pleased to share that tenants representing approximately 99.4% to the range of annual base minimum rent fulfill their January 2021 financial obligations to the REIT, a slight improvement relative to the 99.2% to the Q1 of 2019 for December November 2020 and the 99.1% received in October 2020. With that, I will to turn it over to Leslie for a review of our financial results. Thanks, Kevin, and good morning, everyone. Despite challenges from the ongoing pandemic, We are very pleased with the strong Q4 and full year results delivered by the REIT. In the quarter, we reported a diluted AFFO per unit of 0.26 to 0¢, an increase of 3.2 percent compared to the $0.252 per unit in Q4 of 2019. This brings the full year reported diluted AFFO per unit to $1.032 representing growth of 2.5% versus 2019. To the call. In the quarter, diluted FFO per unit increased 1% to $0.296 versus the $0.293 in the prior year. To the operator. On a full year basis, 20 20 diluted FFO per unit increased by 0.5 percent to $1.1801 to the operator. Net operating income was $96,900,000 a 3.7% increase over the $93,400,000 in Q4 of 2019. To the Q1. We break this headline growth into its components being a 1.2% growth on a same store basis, 1.8% growth on a same property basis to the Q and A balance as a result of net acquisition, disposition and development activities. Full year reported NOI to the Q1 of 2019 was $381,600,000 a 3.5 percent increase over the $368,800,000 in 20.19. The 1.2% same store NOI for Q4 is a result of the contractual rent escalations contributing nearly $1,800,000 to the company's financial results, which includes the 1.5 annual rent escalations on average contained within the Canadian Tire Store leases, partially offset by the expected to credit losses for tenants who are significantly impacted by the pandemic, including the bad debt expense related to the rental abatements. Q4 2020, G and A expenses as a percent of property revenue were 2.5%, which is in line with the 2.4% for Q4 2019. To our AFFO payout ratio at the year end was 76.8%, an increase of 2.1% from the same period in 2019, due to the increase in monthly distribution rate exceeding the increase in the AFFO per unit. Not affecting AFFO, but perhaps noteworthy, to The REIT changed the valuation methodology that had been using for its single tenanted properties from the overall capitalization rate approach to the discounted cash flow approach. To the company's financial results. All properties are now valued on the discounted cash flow approach. This better allows for the updating of assumptions based on changing market to the company's operations to be incorporated into the REIT's property valuations. In Q4, the REIT recorded a relatively small 0.9% and negative fair value adjustment, the Q1 of 2019, which reflects the resilience of our core portfolio despite continuing challenges from the broader retail sector. To the balance sheet, the financial position continues to be strong and liquid. The interest coverage ratio increased to 3.5 times in Q4 compared to 3.44 for the Q4 of 2019. The increase in interest coverage ratio is primarily due to the growth in EBITSV, to the Q4, excluding the growth in interest and other financing charges, despite the inclusion of the debenture prepayment costs in the Q4 financing charges. The quarter over quarter interest expense decreased primarily due to the rate reset of the Class C LP units that took place in the Q2 of 2020. To the conference call. The continued resilience of our business model was put to the test in 2020 and the results underscore our continued belief that this is the right model for us. The call. We maintained a conservative 76.8 percent AFFO payout ratio, while increasing distributions and continued our trend of low debt to gross book value of 42.9%. We have just under $300,000,000 available through our committed credit facilities and cash on hand, CTO REIT's $6,200,000,000 assets are 97% unencumbered. To the next question. And with the redevelopment progression Ken mentioned on our Canada Square development, we moved Phase 1 of that project into PUD at the end of Q4. To the operator. In addition, as of December 31, 2020, The REIT's book value per unit was $14.62 which is slightly higher than to our 2019 year end value of $14.61 primarily due to net income exceeding distributions. And this is despite a negative fair value adjustment that is included in this year's net income as a result from the impact of the pandemic. Before I pass it back to Ken, a brief remark on our debt profile. As Ken mentioned, on January 6 this year, C. T. REIT successfully completed the issuance of $150,000,000 of unsecured debentures with a 10 year term and a coupon of 2.371%. To the company's press release. The proceeds were used then used to complete the early redemption of the $150,000,000 unsecured debentures originally set to mature on June 1, 2021. To the Q2 of 2020. The financials. The interest rate on the new series of the unsecured debentures was the lowest ever interest rate on a 10 year bond issued by Canadian REIT. To the operator. After these transactions, CTE REIT's weighted average term to debt maturity has increased from 7.5 years to 8.1 years. And with that, I'll turn things back to you, Ken. Thank you, Leslie. While I'm proud of CTE REIT's 2020 results, to I'm sure you, like me, are glad to see 2020 in the rearview mirror. While 2021 continues to be challenging, we have cause for optimism and look forward to a return to normal life. I know it's a busy time for many of our listeners, so I will turn the call back to the operator for any questions. To The first question is from Himanshu Gupta with Scotiabank. Please go ahead. Thank you and good morning. Good morning. So just for the new investments, to It includes intensification of over 300,000 on the existing distribution center in Quebec. Just wondering how much are you looking to spend here on a dollar per foot basis and what are the timelines there? Hey, Himanshu, it's Kevin speaking. So the investment in that particular to the presentation. It's just over $30,000,000 and it will probably be spent in the early part of 2023. To So it's about $100 a foot. Got it. And do you see any more opportunities in the near term where to Canadian Tire is looking to add or expand distribution centers. We're definitely in dialogue with Canadian Tire and their to the real estate group on the supply chain needs and as well as the supply chain group within Canadian Tire. To I think that's an evolving story as they continue to obviously benefit from increased sales related to to the circumstances of the last year, so stay tuned on that one. Fair enough. To And then just staying on the transaction activity, the disposition of Antwerp Mall for $21,000,000 to What was the cap rate on that property? I know you mentioned the sale price was in line with the IFRS value. Anything on the valuation there? To Yes. We're not disclosing the actual cap rate, but I can indicate it with a, call it, a mid to high 6% cap. Mid to high 6% cap. Okay. That's great. And then just one more question on the lease expiries in 2021. I know it is very small, to the to the Canadian dial events which are coming up for renewal. So I mean my question is just wondering how the market rents for Canadian dialysis have performed over the last, say, 5 to 7 years? To Sure. I can take that one too. So I think in 2021, we actually only have one Canadian Tire lease coming up to That's expiring and that was a property we acquired from a third party. So I think the rent is actually preset for the extension term. More broadly, I think our belief is the Canadian Tire rents are at market. To Got it. Okay. Thank you. That's it from me and congratulations to you, Ken. Thank you. Thank you very much. To. Thank you. The next question is from Sam Damiani with TD Securities. Please go ahead. Thank you. Good morning, everyone. And I'd like to go the congratulations as well, Kevin. And I'll keep the questioning at you as well. To Just looking at the rent collections, which great to see them ticking higher and higher, any impact from the recent lockdowns at all that you're seeing? Maybe to any comment you can make on February to date? I know it's still early in the month. Yes. I mean, the trends we're seeing in February are pretty similar to January to the Q1. So far, obviously, there's a negative impact on retailers more broadly. Obviously, we have a high percentage of to open and essential needs retailers, so that benefits our portfolio. We're starting to see the benefits of the SIRS to the next question and answer session. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. To Seacra, is from a landlord's perspective, things have gotten a little bit more opaque. Seacra, which we were to Obviously, the counterparty to make the application, and there's a lot more information sharing in order to make the necessary submission, whereas SIRS is entirely on the tenants to deal with those forms and application portals and therefore the information flow we're seeing has slowed down a little bit. So it's a to the Q1 of 2019. It's a little bit more qualitative at this point in terms of the ongoing conversations we're having. Obviously, if somebody for one reason or another isn't receiving to the payment or needs to come to us for additional rent relief, those are when we would have more access to information. So Although, Seacra administratively was not a great program, at least from a visibility perspective, as a landlord, we saw a little bit more. To That's helpful. And the tenants that I guess benefited from the SACRA program, are they also to benefiting from SIRS in the sense that it hasn't had any negative impact on overall rent collections, it's Perhaps been a positive impact of the switching program? I think so. I think SIRS is doing a better job than Secret did to Supporting tenants and their ability to pay the rents. Okay. That's helpful. Thank you. Maybe over to to Ken. Looking at the distributions that were increased a little bit during the, I guess, the Q3 of last year, to there was no follow on distribution increase in 2020. When you look to 2021, is this a temporary sort of to pull back on the sort of annual bumps with perhaps a catch up sort of outsized bump maybe potentially to Later on in 2021, assuming everything starts to get back to normal in a meaningful way? Or how do you how should we think about distribution bumps going forward? To Well, Sam, of course, we've reviewed the monthly distributions and the Board approves them every month. And to We were on a pretty regular cycle until the pandemic struck. So clearly, we're monitoring to both the REITs financial situation, but also the external marketplace. I mean today, obviously, we're in the 2nd wave of the pandemic and lockdowns haven't been lifted. So it's a situation we'll continue to monitor into 2021. Okay. And I guess just looking out also on 2021, you resumed your investment activity a few months back. Do you Anticipate maintaining that pace and are you starting to see more third party acquisition opportunities? To I'll take that, Sam. I think the pace has picked back up, and I think our expectation is to It would continue. Obviously, there was some deferred projects and some delays and some of the stuff we were working on as the pandemic hit. So I to I think you'll see hopefully some continued announcements from our part in the same course. Completions for 2021 though to the operator. Obviously, it will be a little quieter than in previous years. On the 3rd party front, I would say the year has started off slowly. I think there was to some transaction volume heading into year end that picked up off the strength of the late summer, early fall and the reopenings of various businesses and to some of the essential needs retailers. There's still lots of interest in grocery anchored, essential needs anchored retail. To We obviously got our Pryor Mall property sold at the beginning of the year, which was great for us. To But I think there is still a bit of a bid ask gap between buyers and sellers, a little bit of price discovery still going to Low bond yields, obviously, supporting transactions more broadly in hard assets. So to I think there's an appetite and there's a lot of cash on the sidelines waiting. It's I think finding the right product at the right price. That's the challenge right now. To Thanks. That's helpful. I'll turn it back. Thank you. The next question this from Jenny Ma with BMO Capital Markets. Please go ahead. Thank you and good morning. Kevin, congratulations on your promotion. Thank you very much. A quick question back to Arnprior Mall. Just wondering if you could share with us the rough to the next question and answer session. And whether or not you could comment on what you think their investment thesis or reasoning what interest in the property was. The buyer was private, private individual. To I think their interest in the property was based on the strength of the underlying leases. I mean, as we've detailed, we bought them all. To It was half empty. We brought Canadian Tire in. We expanded the grocery store on-site. To Yes. We were calling it an enclosed mall, but we pretty much eliminated the majority of the enclosed mall components to the property. So I think 85% of the NOI was from investment grade anchor tenants and then there was a stub to the next piece with some smaller tenants in it. So all in all, a fairly stable property with long term leases to I guess based on where bond yields are trading, the investor felt to the Q1. The return was decent and being private probably levered it up and got a nice levered IRR associated with to the cash flow profile. And was this a relatively local investor? No, no, not a local investor. To domestic? Domestic, yes. Okay. Okay. That's good to know. Wanted to turn to the change in the valuation methodology. To the Q1 of 2019. What really led to that change in the approach? And I see that the terminal cap rates have to the operator. And I'm not sure if that's due to a change in some of your assumptions or maybe it's just a weighting change given that the majority of assets to the operator. We're under OCR, so I'm not sure if it's just a formula driven change or if there's a market condition change behind it. To Jenny, it's Leslie. I think the OCR approach for the majority of those standalone single tenant to have been used since IPO and appropriately so. But as obviously we go down from to an average 15 year term at IPO down to sort of 9 and it continues to shrink just as time goes forward. I think we really felt that the OCR wasn't to the right approach as we continue to shrink as things continue to get smaller. To it's a bit tougher with that approach to put in changes. So, with changing the DCF and to the metrics that you noted. It's our predominantly, I would say, market assumptions and changes that there's still sort of continued to some continued pressures on some of the retail real estate. And so, when we move things over, we're also updating that now that there are a few transactions here and there to the marketplace. Obviously, with transactions being fairly sparse still, there's definitely we're to We're definitely looking at what that could be, but yes, the transactions are really more market driven, etcetera. But that's really our ability to sort of change those to change the inputs in those assumptions is something that we think is going to be the right move for the rest of the years. To the operator. Okay. And it looks like the whole period went up a bit from 10 to 12 years, but you mentioned that the lease terms are kind of coming down. So, how do I reconcile those changes to the change in the hold period. I think that there's a change in the hold period, I probably wouldn't read too much into that. I think we have pretty good visibility to the Canadian Tire stores and high degree of confidence that to those stores will continue to be there. And I think just for modeling purposes, we'll be moving things over as we don't typically to the hold period if we have to roll over an expiry from those ones. So it could just really be as we moved and shifted the portfolio over to the DCF that ticked up a little bit. But to the next question. I think we're the whole period, there's nothing sort of magic different about that other than to That's sort of just what we looked at and probably had to move a few things around as we looked at what rolled over in year 10. Okay, that's fair. And then last question, with regards to the prepayment of the Series C debentures, there was a prepayment to the fee that was incurred in Q4. How much was that fee? And I assume that it was all expensed in Q4, not expected to recur in Q1? Yes, Jenny. The prepayment penalty on the Series C was about $750,000 and that was all expensed in Q4. To the operator. Perfect. Thank you very much and congrats on a strong year. Great. Thanks, Jenny. Thank you. The next question is from Pammi Bir with RBC Capital Markets. Please go ahead. To the call. Thanks and good morning. Just with respect to Canada Square, what can you share with us with respect to the first phase, to what that will look like, when it may start and I guess some of the potential costs that you expect for that phase. To Hi, Pammi. It's Ken. Pardon me. The first phase of the Canada Square redevelopment would be the north end of the site to the operator and would incorporate a mixed use commercial residential tower to above a replaced bus depot that is currently operating on the site. So it will be relocated to the north end of the site. And there will be some public amenities that will be included in that first phase as well to above and beyond the Buff Depot, including the new transit entrances and some public green space. To With respect to costs for that phase, we're still working through the costing exercise or Oxford Properties is on our behalf. To So I don't have anything to share with you on that front at this point. From a timing perspective, to We continue to aim to start construction when we get the land that we would be building on to, in essence, back from CrossLink, which is the contractor developing the Eglinton cross to the LRT. So it's largely driven by firstly, the municipal approval process and secondly, when the LRT is completed. To Got it. I guess just on the mixed use tower, would that be a condo or would that be rent to residential with to at this point, we're contemplating that it will be to with some retail at the base of the building. To Got it. Just one more. I guess looking at the development pipeline, Kevin, I think you mentioned to the operator today. Sorry, it might have been Ken, sorry, you mentioned this year will be kind of light. It looks like it's more heavily weighted toward 2022 to in terms of the completions. So as you think about the year ahead for this year, what are your thoughts with respect to putting capital to work, whether it's in acquisitions to our overall development spending. Yes, Pammi, it's Kevin. We'll obviously look for 3rd party acquisition to the next question. As we have in the past, which is basically opportunistically, if there's something out there that we feel to the operator. Suits our criteria and fits our strategy and is financially worthwhile, we'll pursue it. To There is some activity that we are funding and working through some of our other development programs, Pad developments or 3rd party developments and a few Canadian Tire related activities that we'll see completion in the year. But to We made a decision to preserve liquidity at the outset of the COVID-nineteen pandemic. And obviously, to the company. So we'll work a little harder on the organic growth side and look out for to opportunistic 3rd party deals as well. Thanks very much, Kevin. I'll turn it back. Thank you. The next question is from Tal Woolley with National Bank Financial. Please go ahead. To Hi, good morning. Can you hear me okay? Yes, we can hear you great, Tal. Thank you. Perfect. So maybe just to start, like, I guess, it's probably best for Ken. Just from your perspective, like from the CTV perspective, going through this to the Q1 of Hyre, like has there been any sort of shift to your in your sense about how they're looking at their store base to Going forward? Well, I think it's a continuation. And with many to the next question. I would say that the pressure that we had been seeing from to Canadian Tire in recent years was to make the stores larger. So we had already to the company's expanded or had approved expanding 50, 60 stores over the last number of years. To our recent announcements include further expansions. So I think the impact of the pandemic has probably reinforced to the importance of the store network in a multichannel retail environment. And obviously, to Canadian Tire and we think the Canadian Tire store network is particularly well placed, both in terms of the configuration of the stores and the location of the stores across the country to work in a multichannel to the distribution system. Okay. And then just I think it was Jenny's earlier question just about the methodology to the operator language around that. So the primary rationale for making this shift was to The maturity of the Canyon Tire leases was starting to shorten. Do I have that correct? Alex, it's Leslie. To Yes, that was. That was we've been looking at this sort of change for a little while, and that was sort of the primary driver. And to I think also coupled with wanting to be able to make potential cash flow changes to models and put other assumptions in that the DCF was more suited to that. To Okay. And so like from your perspective, because I know like obviously doing a valuation change like this, to There's lots of irritations that come along, frictional costs that sort of come along with it. Can you just sort of explain maybe Why you think this is sort of the better approach going forward? To the operator. I think the better approach for us, I think it enables us to take a look at particular markets or make assumptions about a store, whether it's to growing or shrinking or putting other things into there, applying a winnable probability, I think, to The direct cap approach, obviously, was very linear in what it delivers. So, I think obviously in this pandemic when we're taking a much more to tighter view about every one of the assumptions in the models and what's going on in the marketplace. That to reinforce their decision to move to the DCF method. So if I'm paraphrasing this correctly, it's that there's to The fact of the pandemic like and the volatility that it sort of creates, the fact that you sort of get to This TCF allows you to kind of like play with those interim years a little bit more like or figure not play with, but like you're able to do a better job sort of like to forecasting the interim steps. Is that maybe a better way to think about it? It would be for, I guess, the multi tenant properties. Obviously, the vast to A majority of what we switched over from OCR is single tenant Canadian Tire. And so there's not a lot of moving parts in those leases to really until we get to sort of the maturities and the rents even after that are fairly to the they're within bands and sort of have floors and ceilings on them. So I mean, yes, we can play within those a little bit more easily. But I I think it was driven by that. So lease term was probably the primary driver, and I think just the things in the pandemic made us solidify and really cement that decision. Yes, Tal, it's Ken. I just would add that we contemplated doing this to In advance of the pandemic, it wasn't as a result of the pandemic. And we just felt from a methodology perspective, to the operator. It was more appropriate and flexible going forward. It just happened to coincide with the pandemic. Okay. That's perfect. Thanks a lot. I was just going to add, to It also aligns with the way we would underwrite our own investing strategy where the longer the lease term, the more to Cap rate base, we might look at something, but as the lease term gets shorter and shorter, we would obviously have to start making some assumptions about what would happen on roll to the market rents and renewal probabilities and all that stuff. So I think just that from a general investment valuations perspective, we're now just to Align more broadly across our spectrum of assets and the way we view them. Okay, perfect. Thanks a lot guys. Thank you. To The next question is a follow-up question from Sam Damiani with TD Securities. Please go ahead. Thank you. Just a couple to the next question. Just on the IFRS, just to sort of make sure I understand this. The net result was a $54,000,000 provision in the Q4. I mean apples to apples, is it a result of a change to In terminal cap rates and discount rates or is it more a change of cash flows that you're forecasting? Like how should we think about that? To the call. Sam, it was a little bit of both. When we moved the properties over to the DCF method, to the Q and A. We did look at, as Kevin mentioned, about renewal probabilities, lease up assumptions, downtime. So there were changes to the cash flows, to And we also looked at the cap rates in the marketplace, so a combination of both. Okay. And the previous pool of assets that were valued on a DCF, like did those metrics Change materially or was the bulk of the $54,000,000 result as a result of the pool switching from OCR to DCF? To the Q and A. There were some changes made to all the assets, but I would say the bulk of the change related to the assets that were moved. To Okay. And just finally, I noticed that the redrew on the Canadian Tire credit facility, not the bank facility. Just curious, to I guess there was a reason for that. There's not a financial reason. Our terms of borrowing are to the same, so it's more effective for us to borrow under the CTC facility. Got it. Great. I'll turn it back. Thank you. To the operator. Thank you. As there are no further questions at this time, I will turn the call over to Ken Silver's CEO for any closing remarks. Thank you, operator, and thank you all for joining us today. We look forward to speaking with you in May. Have a good day. To the conference call. Thank you. This concludes today's call. You may now disconnect.