All participants, thank you for standing by. Your conference is ready to begin. Ladies and gentlemen, thank you for standing by. Welcome to the First Capital Realty Q2 twenty seventeen Results Conference Call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session. I would now like to turn the conference over to Adam Paul. Please proceed with your presentation.
Okay. Thank you very much, Vincent. As usual, we'll start with the typical cautionary comments. Please note that forward looking statements may be made during today's conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control.
These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in our various securities filings, including our management's discussion and analysis for the quarter ended June 3037, and our current annual information form, which are available on SEDAR and on our website. These forward looking statements are made as of today's date and except as required by securities law, we undertake no obligation to publicly update or revise any such statements. Okay. With me today are several members of our executive team, including Kay Brecken, Jordy Robbins, Jodi Spiegel and Karam Franchella.
The consistent performance of our business extended in the second quarter. In short, our Q2 results continued to deliver meaningful growth in same property NOI, lease renewal rate increases, occupancy, OFFO per share and NAV per share. More importantly, we are very well positioned to continue delivering growth into the future. We believe there are profound differences between the sound fundamentals of the First Capital business model and the generalized commentary about the broader retail environment. As I mentioned last quarter, history shows that as retail changes, there are always winners and losers.
Future business performance will likely be different across universe. And in this regard, First Capital is and continues to be very well positioned. Notwithstanding the impact of technology, e commerce and various other shifts occurring in retail, demand for well located, well designed retail space in Canada's largest urban growth markets is and should continue to be very solid. These are the most dense locations in Canada with the most robust population growth and where the greatest amount of retail spending takes place. These are also the markets that have the highest barriers to entry for new retail supply and where assembling functional, well designed space is the most complex.
These are also the markets where retail sales continue to increase at the highest rate and consequently where the greatest rental rate growth potential exists. And because of the proactive work we started many years ago to reposition the portfolio, it is where over 90% of our rent is generated today. We've said that the most successful retailers of the future will require both a strong physical and digital presence. We believe this is true for many of our retail tenant categories, including our largest, which is grocery stores. Since our last conference call, Amazon agreed to acquire Whole Foods for a cash equity value of US13.7 billion dollars Now there are many ways to analyze this transaction.
And while it's too early to make a well informed assessment on Amazon's strategy, it seems obvious that the transaction further validates the value of well located retail locations in urban markets with strong demographics. As Canada's leading necessity based landlord of urban retail properties, supermarkets are our largest tenants. We reviewed a lot of good news for FCR regarding the grocery segment on our last conference call. And since then, we continue to do new lease deals with four more supermarket locations in Toronto and Calgary. Grocery stores are an important part of our shopping centers.
So naturally, we spend a lot of time reviewing and analyzing these stores and the business they conduct in our space. We also allocate resources to further improve our properties and the sales our tenants achieve in them, whether it be by adding new access points, traffic lights, parking spaces, loading docks, the rent new tenant or use and so on. So when you couple this proactive approach with our long term focus on only high quality locations with robust demographic profiles, it serves our grocery tenants very well. And I'll explain further. But first, a quick look at the demographic profile of our portfolio.
On average, our properties have over 208,000 people within a five kilometer radius with average household income that exceeds $106,000 As you can see on Slide five, these demographics are industry leading in Canada, especially the density number, which we lead by a very wide margin. So it's no surprise that the grocery stores in our portfolio are significantly more productive than the grocery industry average. In total, 81 of our grocery store locations report sales. The average sales of these stores in 2016 was $680 per square foot. This is an exceptionally strong sales figure, much higher than average, which speaks to the strength of our real estate.
And the trends continue to be positive. Notwithstanding deflation faced by the grocery segment last year, the grocery stores in our portfolio reported 2016 sales that were 3.3% higher than the prior year, again a very strong figure. The bottom line is that our properties are situated in very dense locations. We invest our expertise and our capital to constantly improve functionality, merchandising mix and so on. This results in higher sales per square foot with higher growth rates and consequently higher rents over time, which we have and continue to achieve.
Before I pass things over to Kay, I'll touch on our major active developments, where we continued to make meaningful progress during the quarter. For clarity, the major active projects I'm referring to include three thousand and eighty Young at the corner of Yonge Street and Lawrence, Yorkville Village and King High Line, all in Toronto, the Brewery District in Edmonton and Mount Royal Village in Calgary. We reviewed the significant progress we've made in these development projects at our AGM in May. For those of you who were not able to attend, the webcast is still posted on our website. Since last quarter, we made further progress, which I'll quickly talk about today starting in Yorkville.
First, SoulCycle, who just opened their second Canadian location in our property. And the balance of the year has a lot in store for them all with many new tenants opening, including the first Canadian boutiques of both Belstaff and Eleventy, Palm Lane restaurant by The Chase Group, John Paul Fortin's latest footwear boutique and a very exciting deal that was just signed in the last couple of weeks, Bellefoy Gallery, one of Canada's most recognized independently run art galleries, who will expand for the first time in almost four decades from Montreal and open a 5,000 square foot gallery in our mall later this year. This is great news not only for our mall, but for the Yorkville area in general. As you can see on Slide 6, there's a lot of activity on our street front assets. A couple of weeks ago, we commenced demolition of one hundred two, one hundred and four, one hundred six and one hundred eight Yorkville to make room for new buildings that will advance the transformation underway on Yorkville Avenue.
This neighboring set of properties beside our upcoming Chanel store will be the future home of several new to market retailers such as Jimmy Choo and a still confidential luxury retailer. We've also entered into a lease for the entire Third Level, including a spacious outdoor terrace with Her Majesty's Pleasure, who will expand from King West and is a great fit for the Yorkville neighborhood. Referring to Slide eight, during the quarter, we formed part of a group that acquired Toronto Fashion Week, which is being relaunched and naturally relocated to Yorkville. Toronto Fashion Week will occur twice per year with the first event taking place this fall immediately before TIFF. A road closure permit has been obtained so the runway and events can take place directly on Yorkville Avenue in front of our mall.
Jean Paul Gautier and Derek Blasberg from CNN Style will be featured as well as a Salvador Dali themed art and fashion exposition named Dali X Yorkville Village. There are many more new components of the relaunch of Toronto Fashion Week in Yorkville Village. This is another good example of the many innovative initiatives we are pursuing to enhance the experience in our properties and to elevate them as vibrant retail environments with a strong sense of place. Before moving on from the Yorkville area, I refer you to Slide nine, where we also announced that we have entered into a lease with McEwen's, who have leased the entire concourse level of 1 Bloor Street each, which is under development at the corner of Yonge And Bloor. The new 18,000 square foot gourmet store will include both a significant prepared food offering as well as a grocery offering.
Subsequent to last quarter, we also announced our two anchor tenants for the retail component of our mixed use King High Line development in Liberty Village as you can see on Slide 10. We have signed leases with Longos for a 30,000 square foot grocery store and Canadian Tire for a 42,000 square foot space. Both retailers are scheduled to open in the second half of twenty eighteen. So in total, these five large active developments will be substantially complete by the end of next year. These five projects total 1,300,000 square feet with a total cost of roughly CAD1 billion.
Individually, each of these are exceptional pieces of real estate with an NOI growth profile well above average, but it is the collective effect that will be most impactful. This CAD1 billion group of properties will further strengthen our presence in our core urban markets and they will significantly increase the bar on our weighted average asset quality, which is already very high. In addition to the foregoing, our development pipeline will further progress or will further this progress, which stands at over 14,000,000 square feet of incremental density, including the former Christie Cookie site, which will be another very substantial marquee urban asset for First Capital. So with that, I'll now pass things over to Kate to review our second quarter results in detail.
Thank you, Adam. Good afternoon, everyone, and thank you for joining us on our call today. As Adam mentioned, we were pleased with our overall results for the quarter. We generated solid growth in same property NOI, which was up 2.8% and in operating FFO, which was up 4% over the prior year period. Additionally, as expected and as we indicated on our prior call, our portfolio occupancy rate improved by 50 basis points over Q1.
Starting on Slide 12 of our conference call deck. Our operating FFO for the second quarter increased 4% or $01 on a per share basis and 9.8% or $6,300,000 in dollar terms versus the prior year period. The growth in operating FFO per share was primarily due to same property NOI growth of $2,500,000 This was driven by higher rental rates and also by a $2,300,000 increase in interest and other income as a result of higher loans and deposits outstanding over the prior year period. This includes the deposit we made on the forward purchase of 1 Bloor, which is expected to close in the fourth quarter of this year. Moving to Slide 13.
Our Q2 same property NOI increased by 2.8% versus the prior year period, primarily due to rent escalations, lifts on renewals and reduced operating cost. On Slide 12, we continue to achieve solid lifts on our lease renewals. Our Q2 same property lease renewal lift was 9.6% on 345,000 square feet of renewals. Our Q2 total portfolio lease renewal lift was 8.6% on 387,000 square feet of renewals, slightly lower due to leases renewed in properties currently undergoing or slated for redevelopment. Moving to Slide 15.
Our average net rental rate grew 2.3% or $0.43 over the past twelve months to $19.39 per square foot, primarily due to rent escalations and lifts on renewals. In the second quarter, we transferred 18,000 square feet of new GLA from development to income producing properties, bringing our year to date development completions to 62,000 square feet of new GLA with an invested cost of $44,800,000 The majority of this space is leased at an average rental rate of $33.3 per square foot, 72% higher than the average rental rate for our portfolio. On Slide 16, our total portfolio occupancy rate increased by 50 basis points since Q1 as higher performing retailers paying higher rents took possession during the quarter of 105,000 square feet of space at two of our properties that had increased vacancy in the prior quarter. At quarter end, we were holding 0.8% of our portfolio intentionally vacant for redevelopment. Slide 17 highlights our five largest developments that accounted for the majority of the $38,300,000 in development and redevelopment spend in the quarter.
Our development pipeline at quarter end totals 14,000,000 square feet of additional density, including 2,800,000 square feet of retail density and 11,300,000 square feet of residential density with 555,000 square feet currently under active development. I also want to touch on the growth in NAV per share during the quarter. Our NAV increased by $1.12 per share or 5.5% during the quarter. Approximately 40% of this growth was due to higher rents and NOI with the remainder due to lower cap rates on assets primarily located in Toronto as a result of an external appraisal on a major Toronto asset and recent market activity. Slide 18 shows the factors driving the growth in operating FFO during the quarter and the year to date period.
This slide also highlights our year to date operating FFO payout ratio, which improved to 75.4% from 78.2% in the first half of last year. Slide 19 summarizes our new ACFO metric. As discussed on our last call, effective Q1, we adopted the ACFO cash flow metric as defined by RealPAC to replace AFFO, our prior cash flow metric. Our ACFO working capital adjustments primarily relate to prepaid and accrued realty taxes due to seasonal variances in these items over the course of the year. Our CapEx deduction as actual maintenance CapEx spend in the quarter, which includes both revenue sustaining and recoverable CapEx.
Our Q2 ACFO was down $5,100,000 or 7.9% versus the prior year period, primarily related to higher maintenance CapEx spend in the quarter. This was due to the timing of the spend this year versus last year. We expect our full year spend for 2017 to be consistent with our average spend for maintenance CapEx over the past two years, which was $28,000,000 Slide 20 touches on our other gains, losses and expenses. We had minimal other gains and losses during the quarter. In the prior year period, we recognized $3,200,000 in Target proceeds related to the 2015 closure of two Target stores in our portfolio.
Excluding these proceeds, our Q2 FFO per diluted share was up 6.3% over the prior year period. Information on our recent financing activities is on Slide 21. Post quarter end, we issued $300,000,000 of Series U ten year unsecured debentures at an effective interest rate of 3.7% and redeemed in cash $51,000,000 of Series I convertible debentures with an effective interest rate of 6.2%. Slide 22 summarizes the size of our operating credit facility and our unencumbered asset pool as well as our key financial ratios. During the second quarter, we extended the term of our $800,000,000 operating facility by one year to remain at a five year term.
Our net debt to total asset ratio improved by 60 basis points since Q2 of last year to 42.5%, while our unencumbered asset pool grew by $1,100,000,000 to $7,200,000,000 or 74% of our total assets over the same time period. Slide 23 shows our ten year debt ladder post our new 300,000,000 unsecured debenture offering in July. Our weighted average interest rate has declined to 4.4% and our weighted average term has increased to five point six years. We continue to have future opportunity for interest rate roll down in our near term maturities. We have $175,000,000 in remaining twenty seventeen debt maturities with a weighted average interest rate of 5.4%.
Overall, we are pleased with our strong financial position and our solid results for the quarter and the year to date period. At this time, we would be pleased to take any questions you have. Vincent, can you please open the call for questions?
You there Vincent?
Yes, thank you. The first question is from Sam Damiani. Please go ahead.
Thank you. Good afternoon. Adam, the comments you made on the grocery stores I think you mentioned there were 81 stores that were represented by that $680 sales figure. Is that right?
That's right. And what percentage of
the total store count would that be for the company?
So as of Q2, we had 132 grocery stores. So it's roughly 60% of the total.
And do you have sales figures for other categories of retail besides groceries?
No. Look, in the unenclosed retail format where we operate, as you probably know, it's not typical to receive reported sales from tenants generally. Going back many years, we made a concerted effort to try and include that. We there's a lot of categories like grocery where even without reported sales, we can generally get a good sense of where they are by walking the stores, utilizing our expertise. A lot of people in our company came from the grocery industry, talking to people within our company, within the grocers themselves.
And that's the same for other retailers. But we do put more emphasis on the grocery segment in terms of a barometer of how much traffic is generated in the properties and how healthy things are. But grocery would be the category where we actually receive the most formal reporting of sales of any other tenant category.
Okay. And would you want to add any color in terms of the grok ratio or the rent that these grocers are paying in terms of any indication in terms of uptick to market as these leases roll over in the future?
Yes. I mean, what I would say is if you look at our average in place rent, which is just under $20 given the grocers are anchors for a lot of these properties, the average for our grocers is less than the average in our portfolio. So you very quickly linking together the net rent and generally what the additional rents are in the properties, you get to a range of where they're paying relative to the $6.80 a foot, the grox are exceptionally healthy on average. And clearly, there's over time a of runway in terms of at least what their ability to pay is notwithstanding where market is relative to in place rents.
And I think you mentioned you did four grocery deals since last quarter, think. Does that include a TransCanada Centre in Calgary? Has that been finalized?
That one has been finalized. That one is included, yes.
Okay. Just switching over to guidance. I think it was introduced at the beginning of the year for low single digit, quote unquote, OFFO growth. What's your sort of outlook today given half the year is under your belt at about 4% growth so far year to date?
Sam, we were pleased with our year to date operating FFO growth of 3.8%, which came in at the high end of our guidance range. We expect this solid performance to continue in the second half of the year and that our full year results will also come in at the high end of our guidance range.
Okay. That's helpful. And is there any specific impact from One Blue East, how that asset is going to either contribute in the third and fourth quarter and just timing of cash flows?
Sam, we would expect upon closing that a portion of the space will remain under development as we continue our work to improve the functionality and the presentation expense of the space. We would expect this work to take us the next several months to complete. And we also expect that a portion of the space will be ready for tenant possession and at closing will become part of our IPP portfolio.
And closing is October?
Yes, that's where we're tracking. So based on what Kay said, there should not be a material impact positively or negatively in the fourth quarter. We think once we complete the redevelopment of part of the space and the lease up that there certainly is the opportunity for a positive impact, but it will not be in the fourth quarter of this year. It will be sometime later than that.
Great. Thank you.
Okay. Thanks, Sam.
Thank you. The next question is from Pammi Bir. Please go ahead.
Thanks. Good afternoon. Just maybe sticking with OneBlur, based on the McEwen lease, where does that put you, I guess, in terms of what you were targeting from an unlevered yield standpoint?
Well, I think we've talked about publicly where we were targeting from an unlevered yield basis. But what I can tell you is that the McEwen lease rates are at the high end of what we had underwritten for the space. And we're hoping to do better than that because to the extent that they do exceptionally well, which we believe they will, we would have a participation factor in that as well.
Okay. And I guess can you just remind us how much of that space is left to address at this stage?
Yes, it's Jordan. It's about 27,000 square feet of spaces remaining.
And how are the prospects for the rest of that?
Well, have to say we're really pleased. I mean after the announcement of McEwen, the response has been overwhelming in fact. We're, I would say, in active discussions with a number of retail tenants today in a variety of uses.
Okay. And then just maybe another way, if you look at the return that's being earned on the deposit, I guess once it's all said and done, would you expect to be ahead of that once it's all leased?
Yes. I mean when we entered into the transaction, Pammi, we had indicated that we believe under kind of our worst realistic case scenario that's where we would end up. We still feel that way now. I'd be very surprised if we ended up there and not better. But really until the last 27,000 square feet is left, we won't know for sure.
But certainly our thesis going into the investment is played out the way we expected or slightly better. And look at the end of the day, is young and bluer. So we knew going in there was never a question to us whether we could lease the space. It was how much rent can we generate from the space. And we don't have a lot of space left.
We understand the value of the space. It's very high for all the reasons it should be. And so we're going to be selective on who we ultimately complete transactions with and what the lease rates are.
Got it. Maybe just switching gears, Kay, I think your comments earlier with respect to the increase in the NAV, you referenced one of your major Toronto assets. Can you be a little more specific? And also would you are you open to sharing the cap rate that was applied to that asset?
Yes. As I said, Pammi, the fair value change in the quarter, 40% of it really related to stabilized NOI growth rate within the portfolio and the remainder of the cap rate compression. We saw a number of data points in the market that supported that. Certainly the appraisal on a very large asset in Toronto was part of that. But we don't disclose individual cap rates on our assets.
Okay. How much was the how much like what was the compression in the cap rate? I'm just curious. You don't have to give the specific the absolute number for the cap rate, but curious how many basis points you brought it down?
Sure. 25 basis points on that asset in Toronto.
Okay. And just switching gears, if you look at just going back to the 62,000, I guess, square feet of development that was completed, Am I correct that roughly that in terms of the lease rate and the occupied space, you're basically looking at about $2,000,000 of NOI?
Yes, you can simply do the math on it, Pammi, in terms of the square footage times the average rental rate.
And so at $45,000,000 in terms of the cost that was transferred, I mean, is that roughly again sort of looking at a 4.5 yield?
You have to be careful on taking that formula in any one specific quarter because it's very hard to allocate costs and various components of the development specifically to lease of Blair. And so you're going get some quarters like this one where you look at the cost per square foot and it's higher than the overall development notwithstanding the rents may not be. So I would strongly encourage you, Pammi, to take that metric over several quarters if you're trying to figure out development yields. We disclose the development yields on the portfolio of active developments That's generally where they're coming in. So I think looking at it on a single quarter basis, you just got to be careful because it can be a bit lumpy.
Sure. So generally speaking, you expect based on the commentary to sort of get into that five range, the low 5s on a stabilized basis?
Yes, that's the weighted average that we're expecting for the properties that we've disclosed that are under active development.
Okay. Thanks very much.
Okay. Thank you.
Thank you. The next question is from Michael Smith. Please go ahead.
Thank you and good afternoon. I mean you've had some nice fair value marks in Q1 and Q2. Do you expect that trend to continue?
Michael, that's really dependent on leasing activity within our portfolio and if we have additional improvement in NOI that wasn't reflected in our valuation models at the end of the quarter. And additionally, any new market activity which would indicate changes to cap rate assumptions that are necessary.
And what's your sense of cap rates?
In terms of?
Like direction.
Well, I mean there's a number of other factors that go into that in like interest rates and a bunch of other things that I'm not sure our opinion. I wouldn't put a lot of weight in our opinion personally on that. But what we have noticed over the years is for urban retail real estate like we own, the correlation between let's say moves in interest rates is less so than it used to be. So we have more foreign capital that's investing in this type of real estate. And in some cases, especially the European capital, they have a different set of fundamentals that drive what yields they view value in and are prepared to accept.
So it certainly seems stickier in terms of cap rates. And look,
we've
talked about this before. There are inherent limitations in IFRS valuations with respect to cap rates that we're working on providing better tools for investors to see through that and to be able to determine value more in our view more appropriately. But it's tough to call where cap rates are going Michael. Where we were focusing more is where NOI is going and that's what's a lot more in our control and we're encouraged with the activity that we're seeing in the business.
Okay, good. And just switching gears, could you I know it's early going, but any color on Christie Cookie site? What activity you're doing? How that's going?
Well, we can tell you, yes, we're very encouraged and have a lot of conviction in the fact that given the opportunity to bring everything we've learned in urban development into a massive site where we have full control, that will be one of our marquee assets undoubtedly and I think we're going to make a lot of money through the process. But in terms of exactly where we're at now, I'll have Jody let you know where we're at in terms of the overall process.
Hi, Michael. Just to add to Adam's comments, that we spent the last year since we bought the property meeting with various ratepayer groups and resident groups and of course the City of Toronto, people at Metrolinx as well. These are all the stakeholders that we're working with to try to advancing to the advanced discussions. This will this is a complex project. There's a lot of things that will go in.
So we're trying to bring our experience and also working along with municipality and other governments to advance things. So that's how I expect things will continue over the next while before we have anything further to announce.
And you're happy with the way things are going?
Yes, I am.
Okay, good. And just lastly, just to clarify on the per share FFO guidance. So it seems like it's coming in at the high end of the range. Is the range low single digit or low to mid single digit for the full year?
It's still at low single digits, Michael.
Okay. All right. Thanks. Thank you.
Thank you. The next question is from Dean Wilkinson. Please go ahead.
Thanks. Good afternoon, everyone. Kay, just wanted to make sure that I understood what you said around that increase in the fair market value during the quarter. 40% of about the $172,000,000 was from stabilized NOI growth. Is that correct?
That is correct.
So what I would say that the other 100,000,000 is then just mark to market gains against the appraisal or other assets within the portfolio?
That is correct.
Okay, perfect. And I think that the asset under appraisal, Adam, had disclosed in Q1 that, that was Liberty Village. That is
correct, correct?
That is the one.
That's the one. Perfect. Could you tell me, shot in the dark here, of that $100,000,000 mark, how much of that was related to Liberty Village?
We don't disclose that.
Fair enough. I thought I'd try. Last one for me, a real small one. On the Mackenzie Scotiabank in Calgary, was there a large amount of excess land associated with that acquisition? No.
No. So the price is more a strategic acquisition relative to it being in proximity to something you already own?
Yes. I mean Mackenzie is one of our has been one of our most successful assets and developments and we're pretty much out of development space there. So naturally when the Scotiabank property was available for purchase, it was one of the only things in the shopping center we didn't own. And so certainly we would have a strong desire to do it and we were able to buy it at a reasonable price. So it yes, clearly it made a lot of sense for us.
That was the rationale behind it.
Okay. Makes sense. That's it. Thanks. I'll hand it back.
Okay. Thank you, Dean.
Thank
The next question is from Matt Kornack. Please go ahead.
Hi, guys. Just wondering, in your view, Christie Cookie be the next large development that you'll pursue within the portfolio or are there others that you're currently looking at that haven't been identified as such currently?
So I'm going to let Jody answer that. But I mentioned that we really have five major active projects underway right now and they wrap up or get substantially complete by the end of the year. And so we've done a lot of work and Jody group has done a lot of work to analyze the portfolio. And so we will undoubtedly start other projects before Christie Cookie. We've got a lot of pre physical construction work to do on Christie Cookie before we actually do that.
So with that, I'll pass it over to Jody.
Hi, So as you know from our disclosure, we have a very deep development pipeline. And so with the exception of Christie Cookie, most of the properties that are in our development pipeline are income producing shopping centers, which gives us the ability to manage the timing that's most suitable. So what we're doing is we're looking at the best properties that will have the lowest risk profile and the highest returns to develop. And then we'll manage the timeline when we want to start the development or the redevelopment of those properties. So I do actually have a list of there's about 10 that we're going through the process of identifying now.
They are strong candidates for the next round of developments. The first one has already been touched on is 102 To 108 York Hill. As you saw from the photos, started in this quarter and we've demolished the existing buildings. Also in Yorkville, 101 Yorkville that we purchased a year ago will be a future development. 1071 King, which is in Liberty Village will be another one.
Humbertown Shopping Center, most people are familiar with that. Rutherford Marketplace, we have a piece of land that's slated for residential development that will be next year. Royal Orchard Shopping Centre, is in Thornhill is a future redevelopment. Parkway Shopping Centre at the Northeast End of Toronto is going to is in Phase one of development now and Phase two, which is more substantial will be next year. Wilserton Shopping Centre, is in Montreal also is a next year project.
Semi Amu, which is in South Surrey, is also a future project. And then finally in North Vancouver, we have property called 200 Esplanade and that will be a future redevelopment. So of those 10, we are doing our analysis and assessing which ones we'll bring forward.
And for the most part in all of those projects that would involve taking down existing structures that are leased or is it on adjacent land that you'd be doing that?
Depending on the situation, some of them are redevelopments. The case of Royal Orchard would be a redevelopment. In other cases, it's intensification. So it really does depend on the actual property.
Okay. And in terms of timing with regards to disclosing potentially which of those are going to be prioritized? Is that something you'd expect sort of by next year? Or will they just be announced as they start?
Yes. Look, once we have clarity and we feel that the disclosure is appropriate and at the right time, then obviously that's the point where we'll come forward with it. So I would expect it to be done piecemeal like we did this quarter. We included one hundred two, one hundred four, one hundred six, one hundred eight Yorkville for the first time. And as others as we make decisions on others and commit to moving forward, then we'll include them in the disclosure at that time.
Okay. Fair enough. And just switching topics with regards to occupancy, Ontario, Alberta, BC, all in the 95% to 97% range. Quebec has fallen off, but sequentially was fairly strong. Is there anything I mean, do you see Quebec getting back up into the 94% to 95% range?
Or is that vacancy going to stay in and around the 8% area for a while here?
Yes. Look, as you've seen last quarter and this quarter, the occupancy can bump around quite a bit, especially when you take sub portfolios, which actually doesn't notwithstanding our overall portfolio is pretty substantial when you take sub portfolios, it doesn't take a lot of square footage to move the needle. But basically, we expect to get back to where we were. We don't think we're staying 8% vacant in the East or in Quebec. And there's a number of deals that I know KARM is working on that's slated to come through the pipeline over the next several quarters.
Okay. So that presumably will drive aggregate numbers positively as well. I think Quebec probably contributed a little bit in this quarter to the sequential increase. And then finally, with regards to the credit facility, you've drawn more on it, which I think is a good thing because it's a cheaper cost of capital. But in terms of reducing that over time, do you foresee using the unsecured market mortgages equity or how are you looking at that at this point?
Well, had it drawn at the end of the quarter, but then we subsequently did the $300,000,000 unsecured, which immediately paid it down. So the way we view the credit facility is a certain amount which is less than half we expect to generally draw not on a long term basis, but to keep room for when an unsecured may make sense or other forms of capital that may be coming into the business. So it's a good place to draw on. I'd say close to half is really there as almost an insurance backstop. We have a robust development program.
We have wonderful urban assets that we're investing capital in. Inevitably at some point there will be a major economic situation that could impact the cost and availability of capital and we don't want to put ourselves into a short term position where that drives decision making at the real estate level. And so that gives us a lot of comfort that we can get through a reasonable period of time where things are very unfavorable on the capital side and still progress our real estate projects the way they should progress keeping the long term nature in mind. That's how we view the credit facility.
Okay. That's great.
Thanks guys.
Okay. Thank you, Matt.
Thank you. The next question is from Sam Damiani. Please go ahead.
Thanks. Just wanted to touch on a couple of things. First off, on the banks. It's been topical for about a year in terms of prospect of branch closures and whatnot. I'm just wondering what you're seeing in terms of your locations, obviously given the higher quality urban nature.
I'm just curious what you're seeing in that regard? And then I have a follow-up.
Well, we're still a little surprised because I would have guessed that we would have seen a reduction in our bank branch total right now, but that has not played out. We still believe that will play out. But I think we signed three new bank deals either this quarter or the last two quarters. So they still make obviously great tenants for the real estate. And while the size of the branches are a little different in the way that they're building them out and the activities that are taking place in them are evolving.
There still seems to be pretty strong demand from the banks for a lot of our real estate. So it's pretty obvious to us speaking to some of the bank CEOs and executives that there will be a reduced store count in the future, but it's going to be a more gradual and slower transition than I think we probably initially thought.
And you would expect given the locations, the strong locations as you say, rents that you could get from another retailer category would be comparable or better
in most cases? Yes. I mean that's the idea. For banks that have been there for a while, paying rental rates that were negotiated five or ten years ago, there a number of them are well under market. But we have done a lot of work in anticipation of potentially getting a lot of the bank space back.
In many cases restaurants actually make for a great repurposing of the space in locations where the banks are in pads, which is in a lot of spots in our portfolio. They have drive through, so they're great for quick serve food retailers. Oftentimes they're on end caps in some of our multi tenant buildings with great unutilized patio potential. And restaurants is an expanding category in the urban centers. Do pay strong rents.
So we don't see an issue in the event that we end up turning over a bunch of bank branches over time. We don't see an issue in terms of rental rates rolling down. In fact, we believe the opposite will happen.
Thank you. I just wanted to also touch on the completions of the major projects next year and how they phased sort of out of construction into IPP and the timing versus interest expense no longer being capitalized and the NOI eventually ramping up to stabilized levels. Is there some downtime that we should be modeling? And Kaye, if you have any ability to quantify that at this point, that would be helpful.
Yes, we laid that all out in the MD and A Sam in terms of the expected completion dates of everything that's under development. I wouldn't be modeling some specific downtime into that. I think we're tracking well up against what we've disclosed in terms of those completion dates.
So the lag between interest expense coming on and NOI reaching stabilization, would you say is typically a quarter, two quarters?
Yes, I think that's a fair assumption.
Okay. Thank you.
Okay. Thanks, Sam.
Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Adam.
Okay. Well, thank you very much everyone for your interest in First Capital and for attending the Q2 conference call. Have a great afternoon. Enjoy the rest of your summer. Bye bye.
Thank you. Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you now disconnect your