Good afternoon. I would like to welcome everyone to the Plaza Retail REIT third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to advise everyone that this conference call is being recorded. Now I will turn the conference over to Kim Strange, Plaza's General Counsel and Secretary. Please go ahead, Ms. Strange.
Thank you, operator. Good morning, everyone, and thank you for joining us on our Q3 2021 results conference call. Before we begin today, we are legally obliged to advise you that in talking about our financial and operating performance and in responding to questions today, we may make forward-looking statements, including statements concerning Plaza's objectives and strategies to achieve those objectives, as well as statements with respect to our plans, estimates, and intentions, or concerning anticipated future events, results, circumstances, or performance, which are not historical facts. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.
Additional information on the risks that could impact our actual results and the expectations and assumptions we apply to making these forward-looking statements can be found in Plaza's most recent Annual Information Form for the year ended December 31, 2020, and Management's Discussion and Analysis for the period ended September 30, 2021, which are available on our website at www.plaza.ca and on SEDAR at www.sedar.com. I will now turn the call over to Michael Zakuta, Plaza's President and CEO. Michael?
Thank you, Kim. We are very pleased with our solid Q3 results. Our portfolio, dominated by essential needs, value, and convenience retailers, continues to deliver solid results. Our operating environment has rebounded to pre-pandemic levels. We are very optimistic about our future as leasing activity for new developments, redevelopments, and existing centers is strong, especially with essential needs and value retailers, as well as quick-service restaurants. Year-to-date, we have leased over 935,000 sq ft of space, 754,000 sq ft of renewals, 106,000 sq ft for new projects, and 75,000 sq ft for backfilling of vacant space. Our current development and redevelopment projects are progressing well. Our development pipeline has grown largely due to new demand from our core retailers and the availability of redevelopment opportunities.
Sales performance for the majority of our tenants is at or above pre-pandemic levels. The attrition of weaker retailers and the resulting decrease in occupancy that we experienced in 2020 and early 2021 is largely complete as we have moved back occupancy over 96%. We continue to finance our new projects and refinance our existing properties at historically low long-term interest rates. We are being opportunistic as we sell non-core assets at robust prices and recycle the sales proceeds into much higher yielding new projects. Our liquidity is stronger than ever. There is still instability in the market that we expect will be resolved over time. Mainly, construction pricing is volatile and construction material delivery dates remain in flux, requiring us to carry higher than typical contingencies. Our retailers are challenged by staffing issues and product delivery that impact the timing of new store openings.
There remains some travel hesitancy, which is delaying retailer site visits, therefore affecting the timing of some new deals. The market for essential needs assets is very tight. There is strong demand for this asset type, and prices are very high. We benefit from the ability to source and develop or redevelop essential need assets. In public markets, this makes us a rare species. Investors want to acquire and own essential needs assets, but very few can create this product. The only way to make superior returns is to create your product. Plaza has consistently demonstrated its ability to do so as we develop or redevelop high quality essential needs assets across Atlantic Canada, Quebec and Ontario. We are very excited about the future of our business of developing, redeveloping, and owning open air retail in primary and strong secondary markets.
Our solid portfolio and growing pipeline, supported by our entrepreneurial value add business strategy, will continue to generate solid results and future growth. I will now turn the call over to Jim Drake, Plaza's CFO. Jim?
Thank you, Michael. Our operating environment has continued to improve, and although the pandemic may not be completely behind us yet, as Michael mentioned, we are effectively operating at pre-pandemic levels. Our rent collections remain one of the highest in the retail industry, at over 99% in Q3 and October to date. During the quarter, there were only nominal deferrals granted, and we took a small CAD 80,000 bad debt provision. Same asset NOI is up 3.5% for the quarter and 2.1% year to date. Excluding the impact of lease buyouts, bad debt, and pandemic-related provisions, same asset NOI for the quarter would have been consistent with last year.
FFO and AFFO per unit for the quarter, which benefited from growth from same assets and developments, lower admin expenses and finance costs were CAD 0.11 and CAD 0.92 respectively, up 21% and 14% over last year. Year-to-date, excluding the impact of lease buyouts, bad debt, and pandemic-related provisions, FFO and AFFO per unit were up 8% and 1% respectively over last year. Our payout ratios have improved significantly as well with year-to-date at 64% of FFO and 74% of the AFFO. Our liquidity at quarter end totaled CAD 57 million, including cash, operating line, and unused development and construction financing facilities. We are exiting the pandemic with liquidity stronger than ever.
For long-term debt, we placed CAD 41 million of mortgages year to date at a weighted average interest rate of 2.75%, and we continue to place debt at very attractive rates. At September 30, we had CAD 16 million of long-term mortgages rolling for the remainder of the year. Subsequent to quarter end, we refinanced CAD 14 million of those mortgages with the final CAD 2 million underway. Under our development program, during the quarter, we advanced a number of our projects and started construction on a few redevelopments in Ontario, and we're also actively pursuing numerous other opportunities across our geography. On asset sales, we sold a few QSRs during the quarter, bringing our net proceeds year to date to CAD 13 million. We are seeing very strong demand for our small non-core assets at very attractive pricing.
Our Capital Recycling Program remains a very efficient source of equity, allowing us to reinvest the proceeds in new projects, which are generally grocery-anchored strips at very healthy spreads over the hurdle rates on sales. Finally, on fair value, we recorded a CAD 16 million gain on investment properties during the quarter as a result of cap rate compression and appraisals obtained. Our weighted average cap rate is now 6.99%, which we believe remains conservative. As retail cap rates continue to stabilize, we anticipate further fair value appreciation going forward. Those are the key points relating to our results for the quarter. We will now open the lines for any questions. Operator?
Thank you, sir. Ladies and gentlemen, we will now conduct a question-and-answer session. If you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Your questions will be pulled in the order they are received. If you would like to decline from the polling process, please press the star followed by two. Please ensure that you lift the handset if you are using a speakerphone before pressing any keys. One moment please for your first question. Your first question is from Lorne Kalmar at IA Capital Markets. Please go ahead.
Hi. Good afternoon.
Good afternoon.
Just a quick question for me. Well, it's actually a two-pronged question. Regarding acquisitions, just looks like some of your peers might further dispose of retail assets. Could this translate into acquisition opportunities for Plaza? I was wondering if you can comment on any opportunities for you guys in regards to potential non-core retail assets that could come to the market subsequent to the Cominar deal from one of the acquirers.
Okay. For the first part of the question, I believe that, yeah, there are opportunities for us to acquire certain assets that, you know, are part of some of the disposal campaigns of larger either REITs or institutions. Yeah, we're on that. You have to understand that we're more focused on value add opportunities. If it's polished and mixed finished product, we don't spend any time on it. That's not what we do. If there's some vacancy and some other challenges or some opportunities to redevelop or add value, that's obviously of interest to us. I don't see any opportunities in the Cominar REIT portfolio. There are some assets that will probably be sold, but I think some of the acquirers will look to do their own value add.
I don't think, you know, we look at it carefully, and I don't think that there are opportunities for us. That's our conclusion to date. I guess we'll wait and see how that transaction unfolds, you know, before saying anything definitive.
Mm-hmm. That's great. Thank you so much. That's it for me. I'll turn it back. Thanks.
Thank you. Ladies and gentlemen, if there are any additional questions at this time, please press star followed by one. Also keep in mind if you're using a speakerphone to please lift the handset before pressing any keys. Mr. Zakuta, at this time. Oh, I'm sorry. We do have a question from Jenny Ma at BMO. Please go ahead.
Hi. Good afternoon.
Hi, Jenny.
Hi, Jenny.
Congrats on a strong quarter. I just have some quick questions on the capital structure. You got a couple of small mortgage bonds coming due shortly, and I'm just wondering if there's any view of, you know, refinancing them with lower cost secured debt or if there's a specific reason why these pieces are structured as such.
I'll take that.
Jim, answer that, yep.
Thank you, Michael. We've used those mortgage bonds in the past because although the coupon may be slightly higher, the transaction costs are nominal. The all-in cost for us is very similar to secured debt. We will do something on those bonds that are coming up early next year, whether we roll them or refinance them, hopefully at a slightly lower rate. Again, the all-in cost for us on these mortgage bonds is very similar to secured debt.
Can you maybe expand on that just because I think the delta looks on the surface to be quite wide. What am I missing in terms of understanding how that squares up?
We do the mortgage bonds interest only, so there's no principal pay down. Like from a cost perspective-
Okay.
The cost is actually lower than secured debt. On closing costs, we're generally placing these ourselves, so we have next to nothing for closing costs versus a conventional secured mortgage. We're spending a little bit of money on legals, fees for the lender, et cetera.
Okay, okay. Gotcha.
Jenny, there's like a mezz component in the mortgage bonds because we can deploy them at 90% of cost. I think, Jim, correct me, you know, if I'm wrong.
That's correct.
There's a mezzanine component there. It's replacing equity for some redevelopment projects. When the project is finished obviously we're typically able to then finance at market value and then recycle that money. Recycle that mezzanine piece.
Okay, that makes a lot more sense now. That's definitely helpful. Maybe Jim, can you comment on what indicative mortgage rates you're seeing in the market as of late? I mean, it sounds like the 2.75% that you've gotten year to date is quite attractive, but have you seen that move quite a bit already recently?
It's moved a bit with bond yields obviously. We generally prefer longer term, I don't know, always with a view of staggering our debt maturities and matching these terms whenever possible. We'll generally err on the side of longer term. We're seeing rates in the low- to mid-, possibly high 3s, depending on product and depending on how long ago.
Low-mid to high 3s. Okay, great. That's all for me. Thanks a lot.
Thanks, Jenny.
Thank you. Once again, ladies and gentlemen, if you have any additional questions, please press star followed by one on your touchtone phone. Mr. Zakuta, there are no further questions at this time, sir.
Well, thank you for joining us this afternoon, and thank you, operator.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your line.