Good morning. I would like to welcome everyone to the Plaza Retail REIT Second 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 is having any difficulties hearing the conference, please press star zero for the operator. I would now like to advise everyone that this conference is being recorded. I'd now like to turn the call 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 Q2 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 that 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 applied in making these forward-looking statements can be found in Plaza's most recent annual information form for the year ended December 31st, 2020, and management's discussion and analysis for the period ended June 30th, 2021, which are available on our website and on SEDAR at www.sedar.com. I will now turn the call over to Michael Zakuta, Plaza's President and CEO. Michael?
Good morning. I'd like to welcome Kim Strange, our General Counsel and Secretary, to our call today. Kim was recently promoted to this position. She's based in Fredericton and is a useful veteran and part of our executive team. We felt that it'd be appropriate to have her with us on these calls in the future. Our outlook continues to be very positive. Our portfolio of essential needs and value retail open-air centers located in primary and strong secondary markets across a wide geography are performing well. Our focus has clearly shifted from managing the effects of the pandemic to pursuing growth opportunities. Plaza achieves growth in different ways. One, meeting demands of retailers. Plaza communicates with major retailers to identify development and/or redevelopment opportunities.
Our Hogan Court Plaza development in Halifax, Nova Scotia, is a result of Atlantic Superstore's desire to be in this market, and their new store opened in March. We currently have similar projects in planning or under development and other new opportunities in our pipeline. Two, redeveloping well-located retail properties. To date, we have successfully redeveloped 14 enclosed malls into open-air centers and have successfully redeveloped numerous retail projects, including repositioning and filling empty box stores. A good example is our recent acquisition of the grocery-anchored Northern Avenue Plaza in Sault Ste. Marie. The lease buyout of a non-operating large box tenant this past quarter allows us to redevelop and fill the large box space with multiple tenants. Three, actively managing our portfolio. Plaza is constantly evaluating its existing portfolio for opportunities to improve its tenant base and grow future revenues.
We strive to actively manage our properties in order to maintain high occupancy levels and strong retail mixes. We do not hesitate to turn over space and replace retailers whose business models are no longer relevant with successor retailers who offer a much more relevant retail offering. This active management of our portfolio creates growth opportunities for Plaza. We are now seeing a notable increase in acquisition development and leasing momentum across our geography. Retail centers that require our expertise are starting to be marketed for sale, and this should provide acquisition and redevelopment opportunities for Plaza. We're also continuing to pursue off-market acquisitions. We are seeing increased demand from major retailers, especially grocers and value retailers, for new stores. Leasing momentum for existing projects and our development and redevelopment has been strong.
Rising construction costs remain a factor, and we are looking to offset their effect with higher rents where possible and lower financing costs. It is not always possible to move rents higher, but we are benefiting from lower interest rates and lower cap rates that help us to maintain our net development margins. Our financing sources are readily available at very attractive terms. We are confident in our future prospects as we benefit from our highly engaged management team's capability to execute a business plan and our leasing and development team's ability to lease and develop high-quality projects.
Our core portfolio of pharmacies, grocery stores, dollar stores, and other essential needs tenants that have performed exceptionally well over the last 16 months, our value retailers who have shown that they can prosper in open air centers during difficult times, our large network of properties that are an important part of any retailer's strategy to sell products through multiple channels, and our strategy of being diversified across a wide geography with open air properties that often dominate within their community. As a small cap REIT, we are nimble enough to adjust to changing market conditions. We are managing and allocating our capital carefully. We build what we lease, often in multiple phases, and are rewarded on our development program with attractive yields. We are successfully selling non-core assets well over IFRS values.
We are observing real demand from investors for quality grocery, pharmacy, and dollar store open-air centers or strategically located single-use sites. This demand should eventually translate into higher IFRS values for our assets. The Plaza team is excited to be focusing on growth again and is looking forward to presenting continued growth in our per unit results. I will now turn the call over to Jim Drake, Plaza CFO. Jim?
Thank you, Michael. Despite some lingering impacts from the pandemic felt during the quarter, our operating environment has improved and continues to improve. Our results this quarter reflect this. Our rent collection rates remain one of the highest among our retail peers, at over 98% in Q2 2021 and July to date. We also continue to collect the vast majority of deferred rent in accordance with the agreed repayment schedules. During Q2, there were only nominal deferrals and abatements granted to accommodate certain tenants in jurisdictions that have experienced lockdowns. We took a CAD 50,000 bad debt provision.
FFO and AFFO per unit for the quarter, which benefited from growth from developments, lower bad debt, and admin expenses, as well as CAD 3 million of lease termination fees, were CAD 0.127 and CAD 0.108 respectively, up 65% and 59% respectively over last year. Year to date, excluding bad debt and pandemic related write-offs, insurance proceeds, and the impact of lease buyouts, FFO and AFFO per unit were up 3% over last year. Reported same asset NOI year to date is up 1.3%. Excluding bad debt and pandemic related write-offs and the impact of lease buyouts, year to date same asset NOI would've been down 1.4%. It is important to note, though, that this second measure still includes certain other impacts from the pandemic on NOI, such as its impact on occupancy.
Our liquidity at quarter end totaled CAD 42 million, including cash, operating line availability, and unused development and construction financing facilities. We also had unencumbered assets with a value of approximately CAD 21 million. Subsequent to quarter end, we increased liquidity by increasing our operating line limit from CAD 46 million to CAD 55 million. For long-term debt, we placed CAD 26 million of mortgages year to date at a weighted average interest rate of 2.74%, and we continue to place debt at very attractive rates. As at June 30th, we had CAD 31 million of long-term mortgages rolling for the remainder of 2021. Subsequent to quarter end, we refinanced CAD 3 million of same, with CAD 20 million of the remainder relating to grocery or pharmacy properties, or with commitments to refinance already in place.
With an overall loan to value of approximately 45%, we are confident we will refi these mortgages. During the quarter, we issued a CAD 12 million convertible debenture via a private placement, with demand for the issue being very strong. The proceeds were used to repay CAD 9 million of maturing debentures, with the remainder used to enhance liquidity and fund our development program. Under our development program, during the quarter, we delivered on a few pads and expansions across our portfolio and closed on land in Barrie via a 50/50 joint venture. This land will be developed for a grocery-anchored strip in future. We also advanced a number of our projects and are actively pursuing numerous other development and acquisition opportunities across our geography. For asset sales, we sold a few QSRs during the quarter, bringing our net proceeds year to date to CAD 7 million.
As Michael mentioned, 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 capital, allowing us to reinvest the proceeds in new developments and redevelopments, which are generally grocery anchored strips, at healthy spreads over the hurdle rates on the sales. Finally, on fair value, we recorded a CAD 9 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 at 7.11%, which we believe remains very conservative. As retail cap rates continue to stabilize, we do 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. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your first question comes from Kyle Stanley with Desjardins. Please go ahead.
Good morning, guys.
Good morning.
Good morning.
Would you be able to just talk a little bit more about your plans for Northern Avenue Plaza now that the lease buyout has been done?
Yes. What we were doing here is similar to what we did in Chicoutimi and Brockville. We took back large Sears spaces. We've taken back the large Lowe's premises, and it will be divided up into some multiple units. About half of it is now leased, and construction will start here in the next 60 days. Instead of seeing one large box store, you'll be seeing probably about four or five different retailers taking up most of the space. Again, just creating a strip center visual, if you wish, as opposed to a box store.
Okay, great. What would the timeline for construction be there?
For this project, the first phase is retaking the box store. It's going to take about probably 12 months. There are also some pad opportunities that are being pursued, and we are also reorganizing some of the existing CRU space as we speak. This project is probably 12 - 18 months to finish.
Okay, that makes sense. I guess, just broadly speaking, looking at the transaction market, from your perspective, we've seen pretty strong demand for whether it be grocery anchored or just open air retail strips in the market so far this year. I'm just wondering, in terms of your portfolio, do you see a lot more opportunity to complete some dispositions? On the other side of that, you mentioned that you are focused on growth at the moment. Could you just speak a little bit about what you're seeing in terms of acquisition opportunities?
Okay. First point, in terms of disposition, I don't think you're going to be seeing us selling any of our pharmacies or grocery properties. That to us is very core. What we have been selling very successfully are some of the old KFC sites where highest and best use is not a quick-service restaurant. That's been a very good business for us. We've also converted a number of these KFCs into other uses, financial institutions, cannabis stores, et cetera. We're selling some of these because it's a good capital recycling opportunity. It's not core to our business, so dispositions are going to be well controlled. I don't think you're going to see us doing any kind of material disposition. Certainly not looking to sell the core assets.
What's really interesting today, versus six or seven months ago, I thought by the end of 2020, we'd start to see a lot of redevelopment opportunities. You look back, we really didn't. Now we are definitely seeing that. We do have some different product under contract or about to go under contract, which would be either a mall to open air conversion. Those are good meaty deals for us. We're also doing some due diligence on box stores to strip conversions. We'll buy a box store, we'll peel off the front, and then we re-tenant it with multiple tenants. A little bit like we talked about a few minutes ago. Just a different location and a different sort of variation on the same theme.
Okay.
That answers your question?
Yes, it definitely does. That's very helpful. Thanks. I'll turn it back.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Sumayya Syed with CIBC. Please go ahead.
Thanks. Good morning.
Good morning.
Good morning.
Just wanted to confirm that the lease buyout this quarter was all on the Northern Avenue box tenant space?
Yes, it was. Vast majority of it was.
Okay. Thanks. I guess in your commentary, Michael, you noted the cost inflation pressures. How would you say that's affected your yield expectations?
Oh, boy. It's interesting. We've awarded a number of contracts, and we've kind of skated through. We're wrestling with one right now where I'm not very happy with the numbers. That's forced us to go back sometimes to the retailer. There's definitely pressure out there. It's more than just price pressure. There's delivery issues. That's a challenge, because we've committed to delivering, and all of a sudden, you're not able to get the materials, and we have to go back to the retailer and in effect, organize some more time. That's creating some problems, and that means your project takes longer to organize. I think it's going to have some impact on yields. Like I said, interest rates remain very low, and we think evaluations are going up.
It's going to make up for some of the price inflation, but not all of it. It means we're going to have to settle for some lower yields in certain circumstances. In those circumstances, we're making very good returns and will continue to do so. It's project by project related from our experience.
Okay. That's fair. That's all the questions I had. Thank you.
Thank you.
Thank you.
There are no further questions. Please proceed.
Well, thank you, operator.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.