Good morning, and welcome to H and R Real Estate Investment Trust 2019 Second Quarter Earnings Conference Call. Before beginning the call, H and R would like to remind listeners that certain statements, which may include predictions, conclusions, forecasts or projections In their remarks that follow may contain forward looking information, which reflect the current expectations of management regarding future events and performance and speak only as of today's date. Forward looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties, and actual results could differ materially from the statements in the forward looking information. In discussing H and R's financial and operating performance and in responding to your questions, you may reference certain financial measures which do not have a meaning recognized or standardized under IFRS or Canadian Generally Accepted Accounting Principles and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H and R's performance, liquidity, cash flows and profitability.
H and R's management uses these measures to aid in assessing the REIT's underlying performance and provides these additional measures so that investors can do the same. Additional information about the material factors, assumptions, risks and uncertainties that could cause actual results to differ materially from the statements in the forward looking information and the material factors or assumptions that may have been applied in making such statements, together with details on H and R's use of non GAAP financial measures, are described in more detail in H and R's public filings, which can be found on our website at www.sedar.com. I would now like to introduce Mr. Tom Hofstetter, Chief Executive Officer of H and R REIT. Please go ahead, Mr.
Hofstetter.
Thank you, operator, and good morning, everybody. As is our custom, we'll start off with Larry giving an overview of the financials and then hand it over to Pat and Philippe to give an overview of their divisions and opening it up to questions. And on that note, Larry? Thanks,
Tom. Good morning, everyone. The largest impact this quarter was the sale of the Atrium. In 2011, H and R purchased the Atrium, a 1,100,000 square foot office and retail complex in Toronto for $344,800,000 Since the acquisition, H and R increased annual net operating income by $6,500,000 creating substantial value for unitholders. The atrium's IFRS value as at March 31, 2019 was CAD 600,000,000 and on June 6th, H and R sold the atrium for €640,000,000 recording a gain on sale of approximately €34,000,000 after deducting closing costs.
The sale price equates to capitalization rate of 4.56%. The property was unencumbered and H and R provided the purchaser with a vendor take back mortgage of $256,000,000 bearing interest at an annual rate of 4.5% to 6% and maturing in January 2020. The proceeds received, that is net of the VTB, have been used to fund $102,300,000 of acquisitions, dollars 126,500,000 of developments and CapEx to repay and to repay debt. Debt to total assets has decreased from 44.6% at the beginning of this year to 44.0%. On June 30, H and R had cash on hand of $119,000,000 which is mostly used to repay $150,000,000 of Series M senior debentures on July 23.
After this debt repayment, pro form a debt to total assets is 43.5%. As H and R has executed on its capital reallocation strategy, dollars 1,700,000,000 of asset sales have occurred over the past 18 months compared to acquisitions of CAD563,000,000 Financial results have reflected the impact of these net asset dispositions over the last 18 months. In addition, our Q2 2019 funds from operations, FFO, was approximately CAD5.8 million lower than the previous quarter Q1, primarily due to lower lease termination income. We received $200,000 of lease termination income in Q2 2019 compared to $6,000,000 in Q1 of 2019. Normalized FFO was CAD 0.43 per unit in Q2, down from CAD 0.44 from last quarter, primarily due to the sale of the Atrium and not fully deploying the cash from the sale lower retail NOI, which Pat will speak about soon some industrial vacancy, which reduced NOI and some higher interest costs as we are borrowing more on our credit lines until Atrium was sold.
As a reminder, last quarter we announced we had extended office leases with Bell Canada in Toronto, Montreal and Ottawa, totaling 2,200,000 square feet. While the cash rent payable in 2019 will decrease by CAD7,300,000 compared to 2018, these leases have on average 16 years remaining with annual contractual rental increases of 1.5% per annum. This bodes well for our office portfolio, which should see good organic growth from next year. Our industrial occupancy dropped to 97.5% this quarter. But with industrial market rental rates continuing to rise and the construction start on 3 new industrial buildings, we are excited about our industrial portfolio's growth next year.
We also expect completion of developments and new lease commencements in both the retail and residential segments to contribute to positive growth in FFO as you will hear from Pat and Philippe. And with that, I will turn the call over to Pat.
Thank you, Larry, and good morning. The Retail segment delivered steady results in the Q2 with relatively flat same property NOI overall. Growth in grocery anchored properties increased by 4.2%, which was offset by 1.9% decline in the enclosed mall portfolio. While we are clearly quite pleased with how the grocery anchored portfolio is performing, the enclosed mall performance warrants further discussion. Our enclosed malls delivered a decline in both same property NOI and sales performance.
The same property NOI performance was impacted by ongoing redevelopment at several properties, including Sherwood Park Mall, where the 50,000 square foot former Safeway premises is being re demise for 3 new tenants with occupancy scheduled for Q1 2020, as well as the bankruptcy of Payless Shoes. While neither of these significant drivers of the decline in NOI, same property NOI this quarter are unusual in the mall business, they are not indicative of a trend. In fact, we are seeing healthy leasing demand in all our properties. Primaris enclosed malls had 13 Payless stores and in the 5 months since the surprise closure of all Payless stores, 6 have been released with 2 in advanced negotiations. Our competitive advantage as owners and managers of retail is that we require tenants to report sales.
Sales reports enable us to proactively manage our relationship with tenants. We monitor sales for weakness, tailor marketing programs to boost sales of tenants approaching the breakpoint or nearing expiry and adjust our merchandise mix to adapt to changing consumer demands. Sales were down 2.3% on a same store basis during the quarter and 1.9 percent on an all store basis. Short term changes in our tenant sales have been driven more by remerchandising and fluctuations in sales of specific tenants at specific properties rather than a broader retail industry trend. Let me address 3 dynamics affecting our sales statistics being statistical calculation, remerchandising and redevelopment.
Statistical calculation. CRU's same store sales performance numbers are impacted on a monthly basis by the additional removal of tenants from the report. Tenants classified as major tenants, which typically occupy premises over 15,000 square feet are not included in our reported sales figures. New tenants are not considered to be same store tenants until they have been open and operating for 2 years. When an existing tenant relocation expands, they are reclassified as non comparable for 2 years, unless that tenant expands to more than 15,000 square feet, in which place they are reclassified as a major and removed from the sales report.
Over the past few years, a number of tenants have been expanded to major tenant status such as Shoppers Drug Mart at Park Place, Ardena Park, Plaza Royal and Urban Planet at Sunridge. Within a given quarter or year, the number of tenants added and removed from the same store calculations combined with a broad range of sales performance among different retailers can have an outsized impact on sales. By way of example, a successful local electronics store occupying 1600 square feet performing at more than 2,500 per square foot closed at Dufferin Mall in March 2018 as the owner decided to retire. The removal of this tenant had a significant negative impact on shopping center productivity. However, the well located space was quickly released.
Similarly, while the name all store sales implies that this statistic captures all stores in the mall, it does not. It captures small CRU tenants excluding tenants over 15,000 square feet and can be impacted by the number of statistical factors, including a reduction in the CRU growth rates for area and the addition of non reporting uses such as financial institutions, medical and dental uses and vacancy. As part of a strategic plan for our shopping centers, we have been reducing the CRU denominator in several of our properties. Since 2017, the CRU denominator in the enclosed mall portfolio has been reduced by approximately 2%, with the majority being at a few properties, primarily Place Orleans and Place Dorey M. These two malls represent 62% of the portfolio decline in all stores sales.
However, both have shown positive productivity gains in both all store and same store over this period. Both Plasteroyen and Plasteroyum and Plasteroyum had too much CRU for the respective markets. At Platts Royal and we have converted CRU space into several large format tenants including our Denon Old Navy. At Platts Dorelin's, in addition to amalgamating CRU for large format uses, users such as H and M, we are relocating the food court to lower level and are converting the upper level for additional space. 2nd point, remerchandising.
Remerchandising impacts tenant sales. We have created a remerchandising plan for each property and the portfolio based on data from our sales reports. These plans call for reducing the amount of area dedicated to small shop fashion due to the addition of large format tenants such as H and M, Urban Planet and Winners, while working towards the addition of more productive food, health and beauty and personal care service tenants. Similarly, we have noticed a softening in a highly productive jewelry category in the past few years and have taken a position to maintain or shrink the category where possible. These tenant changes mix changes can reduce the CRU GLA and shift sales performance from CRU to non reporting tenancies impacting our tenant sales figures.
By proactively managing our merchandise mix, we are working to stabilize category sales and improve productivity over the long term. 3rd point, redevelopment. Beyond the regular cadence of tenant turnover and tenant mix management, the replacement and redevelopment of former anchor tenant spaces can be quite disruptive to other tenants with the vacancy and related redevelopment work reducing foot traffic, impacting tenant sales and same property NOI. Both Target and Sears closures have weighed on mall performance. Redevelopment of the former Target locations is essentially completed.
Seven tenants operating from an area exceeding 100,000 square feet in total are due to open at Sunridge this fall and will drive incremental revenue growth in Q4 2019 and throughout 2020. With respect to Sears, at the end of the second quarter, we had committed conditional transactions in place representing approximately $3,600,000 in annual base rent at H and R share or just over 50% of our anticipated total rent upon completion. Subsequent to the end of the quarter, we completed transactions with a 36,000 square foot Cineplex and a 38,000 square foot grocery store to replace the Sears store at Kildona Place in Winnipeg. We are being selective with replacement tenants focusing on those tenants that are prepared to pay market rents and enhance our merchandise mix. Several of our redevelopment plans include partial demolition of Sears and the addition of outparcel redevelopment.
Rental income from these redevelopment projects will start in Q4 2019 with the substantial completion of all projects in late 2021. The first completed Sears redevelopment is at Medicine Hat Mall, which from which our Den, Dollarama and Old Navy will open in October 2019. To conclude on this topic, a year after softening sales, listeners might be inclined to conclude this trend is likely to continue. While there are clearly headwinds facing the retail industry, we expect our portfolio to return to same positive same property NOI performance over the next year and resume steady tenant sales. Through the 1st 2 quarters of 2019, our Primaris leasing team has completed just over 200 lease transactions, which is a typical figure over the past 5 years.
However, these 200 transactions represent approximately 1,150,000 square feet, considerably greater than our average of approximately 700,000 square feet. Within the Canadian retail portfolio, we have completed more than 70 percent of 2019 expiries with average renewal rents increasing by 2.2% during the quarter. Moving into Q3 and through Q1 2020, we will see significant positive rental growth from new large format tenants opening from former vacant premises not within the Target and Sears stores. These include a 40,000 square foot Marshalls HomeSense at Garden City Square, Winnipeg, a 19,000 square foot plan of fitness opening at Garden City Square and Best Buy opening a 35,000 square foot store at Sunridge. Thank you.
And I will now turn the discussion over to Filip.
Good morning, everyone. We've been active as usual in 2019 and so we have a few notable updates from Lantau Residential. Firstly, we are happy to announce 2 new acquisitions. On July 13, we closed on Lantau Grand Flats, which is a brand new 314 Unit Class A property in the coveted high growth I-four tourism corridor of Orlando, Florida. The immediate area is anchored by white collar employers such as Lockheed Martin and Darden Restaurants headquarters and is also close to major employers in Orlando's booming tourism industry.
Namely Universal Studios recently formally announced their new 750 Acre Park named Epic Universe that is now under construction. Located less than 10 minutes away from Grand Flats, Universal's Epic Universal employee over 14,000 people, further supporting the strong fundamentals that the submarket has benefited from in recent years. Since acquisition, Grand Flats has performed exceptionally well for us and has maintained occupancy above 95%. We also took advantage of the recent decline in treasury yields with a 65% LTV loan, 10 year term at a favorable 3.55 interest rate. Additionally, we are delighted to announce that on July 31, we closed on Land Tower Garrison Park in Charlotte, North Carolina.
The 322 Unit Class A property received final certificate of occupancy in June of 2019 and is experiencing a strong lease up with over 53% of its apartments leased. We expect Garrison Park to stabilize in the Q1 of 2020. The property benefits from 3 large business and research parks that collectively make up University City, which boasts over 75,000 jobs. Additionally, the property is a short commute to the major local university UNC Charlotte. We are currently investigating early rate lock financing options in order to take advantage of historically low treasury yields.
On the portfolio front, the Lantau Residential portfolio now consists of 7,907 apartments across 24 properties, when excluding Jackson Park. At the end of the second quarter, the Land Tower portfolio was approximately 93.1% occupied, excluding Jackson Park and was nearly 95% occupied when excluding our lease up properties representing strong portfolio performance. On the financial front, our same asset quarter end operating income increased in U. S. Dollars from $11,237,000 in the Q2 of 2018 to $11,520,000 in the Q2 of 2019.
This equates to the same asset quarter over quarter operating income growth of 2.5%. On the management front, Land Tower Property Management's division, Land Tower Luxury Living now manages 100% of our portfolio and successfully internalized our 2 newest acquisitions, Grand Flats and Garrison Park. We continue to experience increased personnel recruiting power and operational efficiencies that come as a benefit from a vertically integrated multifamily platform. On to New York City, Jackson Park is currently 99% complete with only a few remaining punch list items remaining. Leasing velocity remains strong over the summer months as 1805 leases have been signed, representing 96 percent leased.
Occupancy across the three towers totaled 87.3% as of the end of the second quarter and we still expect stabilization to occur sometime in Q3. As we've conveyed over recent quarters, Land Tower has elected to focus some of its growth strategy to ground up development due to favorable financial returns and value creation. We have added another development to our pipeline with the 3 21 Unit Class A Garden style multifamily project in Orlando, tentatively called Sunrise. The development site benefits from a short commute to Orlando's largest employer, Walt Disney World. The property was secured via leasehold interest with favorable terms and an option to purchase the land in the future.
The transaction structure enabled Land Tower to lower its cost basis by entering into lease payments far lower than our cost of capital and opportunity cost, thereby creating additional value within a ground up development. The Sunrise project with 100 percent H and R equity is scheduled to break ground in the Q4 of this year. And with that, I will pass along the conversation back to Larry.
Thanks, Philippe. I think we are ready to open up the lines for questions.
And your first question comes from the line of Sam Damiani of TD Securities. Please go ahead. Your line is open.
Thanks. Good morning, everyone. Just to start off on Jackson Park, I wonder if you could tell us a little bit more about how these new rent controls are going to impact the lease up and the operation of the building in terms of the number of the portion of suites impacted, the rents that you can get initially and a turnover?
Sure. I'd happy to answer the question. I think at the end of the day, the destination remains the same. It's just a matter of how we're going to get there. I was in New York City a couple of weeks ago and I spoke to some of the most active brokers and property owners.
And candidly, everyone agrees that this is far too early to make any accurate prediction as to the impact of the new law. I will say as it relates to Jackson Park, our best guess as of right now is ultimately what we think is going to happen and the main driver of NOI growth is essentially we're going to see a situation where broker locator fees are abated, vacancy will pick up. Obviously, rents won't escalate as quickly as they were originally projected, but that will be significantly abated by a compression in expenses and ultimately lower turnover. And so we anticipate high occupancy at Jackson Park, very little turnover, very little broker costs, very little expenses related to turnover and ultimately that will be the driver to NOI growth. So all in as a summary, I don't think it's going to be impactful to our NOI projection.
And we will get to where we thought we'd be. We're just going to go about it a different way.
Just to be clear, you did change the guidance on Jackson Park, lowered in terms of NOI this quarter and that was as a result of the new rent control, is that right?
Yes. That was as a result of the new rent control and our petitioners release our partners forecast on the rental increases that they're projecting. But most of that, as Philippe said, with the lease up, there was a lot of concessions giving, 1 month or 2 months free rent. So that's what the new rent controls will be falling away. And we will get to $34,000,000 of net property net operating income in 2020.
That's the target and that's what it is revised to. So we're pretty confident that that will be able to be achieved.
So what is sorry, go ahead.
No, I was going to say Sam, without boring with all the details, I would say that the majority of the impact of the new law will affect a different segment of the multifamily market than the one that we're involved in. And so I think that it had, if I recall, there was 15 or 16 new segments that are long, and I think only 2 of them really impacted us.
Okay. Okay. Just moving on then, the low interest rate environment that we're looking at today is very attractive. Long term lease properties with escalating rents and credit tenants should be pretty valuable. Wondering, Tom, if you've got any updated thoughts on selling a partial interest in the bow?
We are still and have always with day 1 worked on it. We have a strategy in place. We hope to have clarity, I would say, before the year is out, if we can actually execute on our plan.
Okay. That sounds good. And just finally before I wrap up here, the pie charts in terms of fair value breakdown, how do you see that changing in the most material way in the next sort of 1 to 3 years? What's your sort of next steps in terms of this evolution of H and R?
Well, the big question, Mark, is the VOS. So again, within the next short while, we'll have an answer to that. That will give clarity. And that will bring down could bring down our office segments significantly. And then the question is
I'm sorry?
Where do we allocate the funds to and that will remain to be seen as what is the best opportunity at the time?
Thank you. I'll turn it back.
And our next question comes from the line of Mario Saric of Scotiabank. Please go ahead. Your line is open.
Hi. Thank you. Good morning. Just following up on Sam's two questions with respect to the strategy in the bow. Does the level of the interest rates at all impact your ability to execute by year end?
The answer is absolutely with that question. It's not dependent totally on that. We actually when we started this at the root we're growing, the interest rates were significantly higher. They've come down a lot. The question is what does that mean relative to the bond market versus the spread market and we're optimistic that we'll achieve better than our projections, but we'll all know soon enough.
Got it. Okay. And then with the potential at least partial kind of sale of the stake in the bow, your U. S. As a percentage of overall fair value of 42% today.
So presumably that will go up consistent with the allocation of capital to Land Tower over time. Like how high do you feel comfortable going in terms of your exposure to the U. S. In this macro environment?
So I think the answer to the question is really opportunity driven. It's not an allocation, a percentage of which asset class and how much you want to expand on that. And it's really a question of the opportunity. You're right about the residential market softening. I think the better opportunity is development, but development is a slower process, so it's a slower allocation of capital.
So I don't want to go the route of allocating a percentage because simply I just don't know.
Okay. And then maybe shifting gears to River Landing, it looks like the cost and 30 year olds were pretty firm curve over quarter. Can you give us an update in terms of where pre leasing stands on both the office and retail performance today?
So the retail were 65% signed leases. We go to 79% signed LOIs and we're pretty confident that all those LOIs that are signed are going to translate into leases. And then it's bits and pieces to just infill after the we get the anchors up. All the anchor space is leased targets sorry, public should be the 1st tenant in Q1 2020. The office space is not leased.
The office space, we have strong discussions, right, with 4 potentials. When that's actually or if it's going to transpire into a signed document, I don't know. But there is strong interest. Miami is a small tenant market and we have a large floor plate. We're institutional.
So we're capturing besides the public space, demand for space is also a high-tech space, which is coming into Miami and has a shortage of the type of space we're offering, which is relatively high ceiling, large floor plates, very strong utilization of space. We have good demand for our higher end riverfront restaurants. We have approximately 17,500 square feet of those deals under signed LOI, signed designs, signed off on it and just negotiating the end of the leases. So we're optimistic about the retail, which is obviously far along and we're optimistic about the office. Got you.
And then based on kind of the various like the retail office resi mix, what's your best estimate today in terms of the expected spread to this in private market cap rates that the 5.7% would represent?
That's a tough one. I don't know. It really depends on how we lease up the office and how successful the retail is. It's early days to answer that question.
Okay. Thank you.
And our next question comes from the line of Jenny Ma of BMO Capital Markets. Please go ahead. Your line is open.
Thanks. Good morning. Just wondering if you can comment on what you're seeing in terms of pre leasing on your Caledon Industrial developments?
So we are not historically, as this is the case right now, you usually don't see a lot of pre leasing until you have the steel up. And we're just starting construction. We're just scraping right now. We won't have the steel up for another few months. We didn't expect and it's we're just in discussions, things just with potentials.
But nothing really happens until they see that it's a real project with steel up. Otherwise, it's just a piece of land and it's a totally different story. We're very optimistic the rental rates are going up as we are speaking. Quite frankly, we projected high 7s net and we're projecting in the 8s right now. So we don't and we're not losing any sleep about it, but it's not normal for us to be pre leasing with signed documents until this deal is up.
They want to see that the project is real.
Okay. So you're confident that you'll basically start out stabilize essentially when it's done?
Yes. I mean that's the market today. It seems to be that everybody is.
Okay. Sausage gears to retail for Pat. Is Primera still in the market to be selling partial interest in some of the malls? And can you comment on what you've been hearing as far as volume or interest or any market color?
I think in terms of selling partial interest, we're not in any active discussions right now to do it. It's something we could always consider if the opportunity presented itself, but there's nothing happening at the moment. Your second question about is there any other activity we've heard, nothing of note that I've heard. I've heard there's been discussions that have happened, but nothing's transacted.
Is it just simply that the gap is too wide between what buyers and sellers are expecting or is there just not much interest in terms of from the buyer side?
I think everybody has with the target and the Sears box creating until those the target in Sears, primarily Sears now is resolved. I think there's people want to clean up their vacancy before they can get realized the value they would want. I do think Ivanhoe did have some properties they had in marketing for some time and my understanding is that they were very aggressive in their expectations on cap rates. So I think some of the major landlords are going to have to relook at their numbers going forward. But yes, that's all the insight I have.
Okay. Thanks for the color on the same store sales impact. I guess just to boil it down, could you give us sort of a ballpark of what you think the sales the real number would have been if you strip out all the factors that went into the statistics the calculation of
that number? So it's really hard to explain sales in a nutshell. There's so many moving parts in a sales report. We don't really work towards the numbers so much. We work towards driving revenue and doing what's right for the tenants.
So I'll give you an example. We had a national shoe retailer that wanted to expand. They were performing at double the sales productivity in all of our malls. And but they wanted to expand and they did and their sales went up. Their productivity has dropped because they've increased their size.
They're still going to perform above mall average, but they're under same store sales now for 2 years. So there's lots of moving parts like that. So it's really hard to say what the number would have been had we done this or that because it moves on a monthly basis.
I mean, could you at least ballpark it, say like modestly positive, modestly negative or just give us some semblance of what like I guess I'm just trying to boil it down to a real view of what same store sales or mall sales would have been?
Well, just to help that out a little on all store sales, we had the CRU space decrease about 2.5 percent 2.4 percent overall, and that's kind of been the same trend in those sales numbers that they've also decreased accordingly according to the square foot reduction of that space.
Okay. Okay, great. Thank you very much. I'll turn it back.
Your next question comes from the line of Matt Kornack of National Bank Financial. Please go ahead. Your line is open.
Hi, guys. Just following up on Jenny's comments there with regards to Primaris. What are your thoughts on occupancy for that portfolio? And are the target in Sears is releasing, will that be in same property NOI growth or is that being carved out as sort of other income?
The Sears and Target are primarily large format tenants, so they're not included in the same sales at all. There are some pockets that Medicine had in St. Albert in the Target, we are minimizing where we did some smaller shop stuff. That hasn't made its way into the same store sales report. They're in the all store number right now.
But they haven't been 2 years for the most part. So the Medicine Hat Food Corp, for instance, hasn't migrated into the same store number. And that's why the same store number is rather as much lower as Medicine Hat than it will be. I think the food court is doing about 1900 a foot. So that number will have a material impact on same store when it moves in.
Okay, fair enough. But for your reported same property NOI growth number for the REIT, do you
know if that's Yes. So those target and Sears returns would be in our same store numbers.
Okay. So
it sounds like that materially ramps up the back end of this year and then into next in terms of the leasing that's been done on target and Sears?
Yes.
Okay. And then where would you think occupancy I mean before Target and Sears, occupancy was pretty high in the mall portfolio. Is the view that you get back to high 90s for your enclosed mall portfolio? And then I guess secondary to that, have you had any discussions at this point with the Bay? I know there's been some noise around that one as well.
In terms of occupancy, yes, we anticipate it'll move up. But with the targeted Series redevelopment, there's a lot of moving parts that will get cleaned up when the projects are finished. We're downsizing some of the Sears boxes, but right now we're showing the full DLAs of the former Sears box and occupancy number. So when the redevelopments are done and we're right sizing that, that will get reflected in terms of the actual size on completion. The CRU GLA, we anticipate we'll get back to historic norms once we moved it through this target and Sears redevelopment process.
It's really been a tenant's market while all these anchors have been empty. And we saw the tail end of the target before Sears filed, we saw the tail end of the target process that we were really making good headway getting at growing our CRU occupancy and Sears happened and a lot of focus has been on that back filling those tenancies. So as we move forward in that process, we feel positive.
Okay.
The Bay we've really had no dialogue with them. I've talked to a lot of the other major landlords. Nobody's really had any dialogue with the Bay. Outside of discussions, I've heard about them trying to wind up their home affairs business, nothing about the in line stores.
And in terms of their performance in your malls, are they reasonably good base stores or?
I would say that they don't report sales and I really can only guess at what they do. They have invested some money in a few of the stores in the past few years, which is always a sign that they're doing positively. They extended their lease for 10 years at Sunridge, I believe it was last year. So for the most part, my understanding is there's no issues in our portfolio.
Okay. Larry, on straight line rent, is that all the sequential increase, is that all the full recognition of Bell? Or is there something else in there that would be non recurring?
In Q2, Q2, I don't believe there was anything that was not occurring. So that was Bell and everything else as normal. Nothing unusual items in Q2 straight line.
Okay. And then on the industrial portfolio, in terms of the vacancies there, where would those have been and what are the prospects for releasing?
So we have one building in Oakville that's just about buttoned up and leased to a major tenant. And there is just 1 or 2 here or there that's accounts for the space, but it's all accounted for basically.
Okay. And then the held for sale Boucherville property, is that just because it's a one off in Quebec or is it because you're getting interesting pricing in that market?
Because they had an option to purchase, so they're just exercising their option.
Fair enough. Okay. Thank you, guys.
There are no further questions. I will turn the call back over to Mr. Hofzer for final remarks.
Thank you, everybody, for
Bye.
This concludes today's conference call. You may now disconnect.