Good morning. I would like to welcome everyone to the Plaza Retail REIT first quarter 2023 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 the time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to advise everyone that this conference is being recorded. I would now like to turn the conference over to Kimberly Strange, Plaza's General Counsel and Secretary. Please go, Strange.
Thank you, operator. Good morning, everyone, and thank you for joining us on our Q1 2023 results conference call. Before we begin today, we are 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 them, 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 applied in making these forward-looking statements can be found in Plaza's recent information form for December 31st, 2022, and management's discussion and analysis for the three months ended March 31st, 2023, which are available on our website at www.plaza.ca and on SEDAR at www.sedar.com. We will also refer to non-GAAP financial measures widely used in the Canadian real estate industry, including FFO, AFFO, NOI, and Same-Asset NOI. Plaza believes these financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of Plaza. These financial measures do not have any standardized definitions prescribed by IFRS and may not be comparable to similar titled measures reported by other entities.
They should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. For definitions of these financial measures and where to find reconciliations thereof, please refer to part seven of our MD&A for the three months ended March 31st, 2023, under the heading Explanation of non-GAAP Measures. I will now turn things over to Michael Zakuta, Plaza's President and CEO. Michael?
Thank you, Kimberly. Good morning. Plaza's business and tenants focused on essential needs, value and convenience offerings in open-air centers remain strong and resilient and will continue to perform well. This quarter is a building block for future growth, with record committed occupancy level, healthy renewal spreads, and robust development pipeline, which will contribute incremental income and value over the next few years. We completed 2022 with the most robust development pipeline in our history. Our focus for 2023 is the execution and delivery of these projects. During the first quarter, we began seeing the results of these efforts with Mark's opening a new store at our project in Bedford, Halifax, Nova Scotia; Princess Auto opening stores at our centers in Chicoutimi, Quebec and Sault Ste. Marie, Ontario; Dollarama opening at our center in Cambridge, Ontario.
Construction is underway with new grocery-anchored centers in Stewiacke, Nova Scotia, community just outside of Halifax, in Dieppe, New Brunswick, and Oshawa, Ontario. We have delivered new Winners stores in Sault Ste. Marie and Rouyn-Noranda, Quebec, that will be opening soon. We're also in the final stages of planning new grocery-anchored centers in Barrie, Ontario and Welland, Ontario, both of which we expect to start constructing within the next 12 months. Demand from grocery and other essential needs as well as value retailers remains strong. Our development projects have generated significant pre-leasing activity. Our existing portfolio continues to benefit from strong demand, which is reflected in our widening renewal spreads in the highest occupancy level in our history. In the quarter, excluding the renewal of one larger size enclosed mall tenant, rents for renewals increased by 7.3%.
Over the last year, we continued to face inflation in construction costs and supply chain challenges that delayed delivery of new stores and the resulting revenues. Our last two construction tenders that recently closed showing much better pricing than anticipated, 10% and 6% below budget respectively, leading us to believe that we have finally turned the corner on construction inflation for open-air style centers. We are still experiencing delivery delays for certain critical building components. We anticipate that these delays will dissipate as demand for construction materials softens through 2023. Our underlying business remains very strong. It's interesting to note that our portfolio quality is improving in a meaningful way. We have, and continue to successfully shed non-core assets at robust selling prices.
We are redeploying the capital from these sales to develop new high quality, grocery anchored, essential needs, and value open air centers across our geography. We are very confident that our business strategy and our tenants will withstand the macroeconomic challenges that everyone is facing. I will now turn the call over to Jim Drake, Plaza's CFO. Jim?
Thank you, Michael. Good morning, everyone. Although our results were muted for the quarter, as Michael mentioned, this quarter is setting us up for future growth. On those results, Same-Asset NOI, which was impacted by minor bad debt allowances at a few properties this quarter, was up 0.8%. FFO and AFFO per unit were down versus last year, in part due to an allowance provided to a tenant at a development property for late delivery of their premises. Higher interest rates also had an impact this quarter. The repayment of our CAD 47 million convertible debentures at quarter end will save us CAD 2.4 million in annual interest costs going forward. For our development program, during the quarter, we completed the redevelopment of a QSR in London, Ontario.
We also anticipate further completions in Q2, including Tri-City Centre in Cambridge, Ontario, and two new buildings in Saint-Jérôme, Quebec, which will contribute to earnings growth going forward. The committed occupancy level Michael mentioned, which was 97.6% at quarter end, is a record level for the third consecutive quarter and up 130 BPS over last quarter. Combined with the higher renewal spreads, this will also contribute to NOI growth going forward. On the balance sheet, the notable news this quarter was our CAD 40 million equity issue and the repayment of our CAD 47 million convertible debentures at quarter. This was a significant transaction, particularly in this market, our first equity issue since 2016. It has allowed us to reset our balance sheet, avoid additional floating rate debt, and provide additional flexibility.
Our debt to total assets ratio decreased considerably from approximately 56% at year-end, now at 52%, including land leases, or 49% excluding land leases. Our unit price was impacted shortly after our equity, a result of the U.S. regional banking failures and fear of contagion, we remain very confident in our business. Our liquidity remains sufficient and at quarter end totaled CAD 71 million, including cash, operating line, and unused development and construction facilities. We also had CAD 18 million of unencumbered assets at quarter end. For mortgage rollovers, we have only CAD 13 million of fixed-rate mortgages maturing for the remainder of 2023, with an overall loan to value of 38% and weighted average rate of 5.1%. This rate is slightly above current rates, which we are generally seeing at around 5% or under.
We continue to see strong interest in our mortgage offerings for both construction financing and term debt. We utilize various sources of debt, including banks, Life Cos., funds, and others. We are not experiencing any material tightening of credit availability or terms at this point. Secured debt remains readily available for Plaza. Finally, on cap rates and valuation, we see strong demand for essential needs and convenience such as ours. The sales of non-core assets during the quarter were at prices 16% above IFRS values. Cap rates were essentially flat quarter-over-quarter. We took a CAD 1.3 million write-up this quarter. Our weighted average cap rate is now 6.7%. Those are the key points relating to us for the quarter. We will now open the lines for any questions. Operator?
Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press the star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Your questions will be posed in the order they are received. If you wish to decline from the polling process, please press star followed by two. Please ensure you leave the handset if you are using a speakerphone before pressing any keys. O ne moment please for your first question. Your first question comes from the line of Gaurav Mathur from iA Capital Markets. Please go ahead.
Thank you. Good morning, everyone. Just looking at the rent spreads this quarter, would that be a fair run rate for the year ahead, or are you expecting any moderation?
I think, I don't expect any moderation in run rate. I see, spreads getting a little better going forward.
You know, just staying with the tenant base for the moment. You know, we have seen some tenants stabilizing their revenues. In some cases, you know, we've seen some tenants be in trouble as well. Any read throughs to, you know, net new store openings or closures across the portfolio?
We're definitely seeing, as we said, very, very strong demand for, again, essential needs, the value guys. You look at some of the stores we've recently opened or about to open, the Princess Autos, the Dollaramas, the Winners, those businesses are performing very well. The grocers, particularly in the disc sector, are performing very, very well. Again, the QSRs continue to perform well as people trade down looking for value propositions. You know, whether it's at a restaurant or at a grocery store or using a dollar store or any of other those value propositions, there's a, there's a lot of runway for that presently. Again, a lot of our stuff that's coming due, you know, we're a lot more sensitive about driving rents forward and hopefully you'll...
We'll see, I think we'll see some better spreads going forward. There always are exceptions. There always are some, always a tenant or two that's struggling, whether in good times or bad, you know, from our experience.
Okay, great. Just switching gears here, towards the dispositions done in the quarter. Could you perhaps provide a cap rate or a range at which, you know, these assets were disposed of? You know, how the buyer pool's been reacting to transactions on the market?
Maybe Jim will talk about cap rates, the buyer pool is private. It's private money. These are small transactions. There's lots of demand. We just had a deal with unconditional bids on, you know, on a small single tenant asset, sub five cap rate. You know, we're seeing that in our world. These are, you know, very bite-sized deals, CAD 1 million-CAD 2 million. Again, there's lots of demand for that. We sold all the way up to, like, CAD 14 million-CAD 15 million, non-core to private investors.
There seems to be solid demand and clearly a very, a larger disconnect between public market pricing of certain types of these assets and what people are prepared to pay for the CAD 1 million, CAD 2 million, CAD 3 million sort of management-free assets. That demand remains strong and present. I don't know, Jim, you wanna give any color on cap rates?
I'll add a bit of color here. Cap assets that we sold were probably in the 5%-6% range. We also look at hurdle rates. We look at, you know, getting up on FFO and cash flow versus the cash or the equity that we're generating. We're seeing some hurdle rates for FFO at 6% or 7% on some of these sales. We can immediately redeploy that capital into paying down our upline, for example, so that at that point we're neutral and even accreted for FFO. Obviously longer term, we're using those proceeds to fund the development program, not only improving the returns but also improving the quality of the portfolio.
Great.
Just to add.
Sorry. Please go ahead.
It's really interesting. I made the comment, we're really shedding, say, the non-core, and we're replacing it with much better quality, of assets. I think that's over, you know, over a long-term game, real estate being a long-term game.
Mm-hmm.
We're very excited about that.
Great. That's a great segue into my next question, because from an acquisitions viewpoint, you know, some of these higher quality assets, would you find any of them in the distressed market, that could potentially fit into your portfolio?
We're not seeing distressed styles opportunities that would fit into that category. If you look at the development that we're undertaking, it's either raw land or it's a worn-out old building that we're tearing down to essentially create raw land. Take Welland, for example. We acquired 15 acres with a small bowling alley on it. The bowling alley will eventually disappear. Some land is sold off for residential, and we keep 10 acres for our development. It's essentially raw land that helping today. If you look at Stewiacke, we bought raw land. Dieppe, we bought raw land. In some cases, you know, we'll have to buy houses and buildings and tear them down to create raw land. We're not seeing the distressed opportunities yet. It's relatively quiet.
Thank you for the color, gentlemen. I'll turn it back to the operator.
Thank you.
Thank you.
Thank you, ladies and gentlemen. If there are any additional questions, please press the star followed by the one. As a reminder, if you are using a speakerphone, please lift the handset before pressing the keys. Your next question comes from the line of Munish Kaur from Laurentian. Ask your question.
Hi, good morning, everyone. Just one for me. Could you provide some more color on the delayed delivery development properties? Whether these are like one-offs or you could see some more coming in the upcoming quarters. Thank you.
We've had a number of store deliveries being delayed. It's been part of the reality of being a developer today. We are seeing stuff coming, but it should have come on stream either in, you know, last year in the fourth quarter. It's gonna come on stream in the second quarter and not the first quarter. We're definitely living that on a number of locations and sites. You know, we can't give tenants, for example, permanent power. We can a storefront door, or we can't install, we don't have HVAC to install. You know, we're definitely dealing with that. It is getting much better, but it's not behind us entirely. It does delay the start of revenue for certain projects.
We're definitely living it, again, I think that it's getting better. We're definitely seeing, as I mentioned, softer pricing from the contractors, that's good for business again, should lead to more consistent deliveries than what we've been experiencing over the last 12 months.
Maybe I'll just add quickly. Generally, those delays would result in a delay in the rent start. The penalty that we incurred this quarter was more of a one-off.
Okay, great. That's wonderful. I'll turn it back. Thank you.
Thank you.
Thank you once again. That is star and one to ask a question. Mr. Zakuta, there are no further questions at this time. Please continue.
Well, thank you for joining us this morning. Operator?
Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.