Good afternoon, everyone, and thank you for joining us today for RioCan Real Estate Investment Trust 2022 Investor Day. My name is Kim Lee, and I'm the Vice President of Investor Relations at RioCan. I'm coming to you from The Well, one of our exciting mixed-use developments, which is still an active construction site. Throughout the following sessions, we will make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives, statements regarding the growth and financial targets that RioCan aspires to achieve, our future financial position, business strategies and plans, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts.
These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions, forecasts or projections made today. In discussing financial and operating measures of performance, we will also be referencing certain financial measures that are not generally accepted accounting principles measures, GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS 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 earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows, and profitability.
Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making those forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in our most recent financial statements and management's discussion and analysis related thereto. As applicable, together with RioCan's most recent annual information form that are all available on our website and at sedar.com. RioCan cautions that such list of factors is not exhaustive, and when relying on forward-looking information to make decisions with respect to RioCan, listeners should carefully consider these factors, as well as other uncertainties and potential events and the inherent uncertainty of forward-looking information. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
The forward-looking information contained in these sessions is made as of the date hereof. Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. We acknowledge that our properties reside on traditional territories which form part of Turtle Island, North America, that is still home to many First Nations, Métis, and Inuit peoples. Over the next few hours, you will hear directly from our senior leadership team at RioCan. Please note that much of today's content has been pre-recorded. Through a series of presentations and panel discussions, we will provide detailed insight into how we're positioned to drive differentiated value to our unitholders in the years ahead. Following some brief concluding remarks from Jonathan, we will take a brief five-minute break, after which we will host a live Q&A session.
As a reminder, the event will be video webcast and is available through RioCan's website. A replay and related presentation materials will be available on the website following the event. Now let's get started. It's my pleasure to introduce Jonathan Gitlin, President and Chief Executive Officer at RioCan.
Thanks, Kim, and welcome everyone. Thanks so much to all of you for joining us this afternoon. Now, we'd hoped to be hosting our Investor Day in person here at The Well, one of our new mixed-use developments. We wanted to host you here just to show you firsthand what RioCan is capable of. What can I tell you? COVID sucks, and we're hoping that this will be one of the last live event casualties of this pandemic. At least we're able to interact with you today in a virtual environment. Now, these volatile and uncertain times, they've tested RioCan. However, we've responded with resilience and agility. We've emerged stronger with a clear strategy to accelerate growth and deliver long-term value to all of our stakeholders. Now, today, we're gonna share with you the strategy and introduce you to the team that's gonna execute with excellence.
Now, the theme for today is the combination of two key attributes, quality and growth. We intend on delivering both through the successful execution of our strategy. The quality represents the strong fundamentals of our business upon which we'll continue to build. Growth is defined by our ability to capitalize on the opportunities in front of us. Quality and growth are mutually reinforcing. The quality of our portfolio provides the foundation for further expansion, and our growth initiatives will increase the quality of our assets, our financial results, and ultimately, the value that we deliver to our unitholders. The strategic plan we'll present today is built upon a very clear vision, to create spaces where we can all prosper.
Put differently, we're creating value for all of our stakeholders as we continue to take full advantage of the opportunities in front of us. Now, the five-year strategy we're walking you through today is the outcome of many, many months of detailed analysis, planning, and decision-making. Most importantly, at the heart of our strategy lies a clear ambition. That ambition is to capitalize on our unique mix of best-in-class properties, our embedded development pipeline, and our compelling growth prospects to deliver solid performance and maximize unitholder returns. Through the successful execution of our strategy, we expect to deliver annualized total unitholder returns of 10%-12% throughout the five-year period of our strategic plan, those years being 2022-2026. It all ultimately comes back to today's theme of quality and growth.
The quality of our assets will generate a steady and reliable 4%-5% annual return through our monthly distributions. The growth we expect to deliver through execution of our strategic plan will contribute a further 5%-7% annual increase in funds from operations. Now, this is gonna come in the form of higher same property net operating income, plus returns from our development and acquisition activities. To fulfill our ambition, we're making strategic choices on 4 key dimensions or 4 strategic pillars, which are reimagine retail, intelligently diversify, enhance customer centrism, and grow responsibly. Now, our first pillar, reimagine retail, is about committing to and continuing to reimagine our retail core. Now, our track record in retail properties in Canada is, well, I'm gonna say it's second to none, but we haven't reached that position by simply standing still.
In this retail environment in which we're operating, well, it's fast changing. We're highly confident in our retail core, particularly as we made the shift to focus on Canada's top six markets. We've proven our ability to adapt to trends in retail, and we're fortunate to have well-positioned real estate holdings. With these great holdings built up over the past 27 years, come strong growth opportunities. Further, we're reacting to market demands and continuing to evolve our property and tenant mix to make them more essential, resilient, and synergistic. Now our second pillar, being intelligently diversify, refers to several different types of diversification, our asset base, our income streams, and our overall tenant mix. Historically, RioCan has been highly concentrated in a specific asset class and business model. Depending on the context, diversification offers a range of benefits.
It offers additional revenue, reduced risk, greater stability, and a higher overall quality of our portfolio. Next, we'll strive to enhance customer centrism. In short, this means better understanding and meeting the needs of our tenants, our joint venture partners, and our LP investors. Now we succeed when these stakeholders succeed. We'll be proactive in seeking their views, managing our relationships with them, and investing to enhance our value proposition. Our fourth pillar is grow responsibly. Well, this to us means a few critical things. It means fostering a culture of excellence throughout our entire organization. It means continuing to play an ESG leadership role in our industry. And of course, it means maintaining a balanced and intentional approach to capital management. Grow responsibly is interesting because it's a strategic pillar in its own right, and at the same time, it supports or underpins the other three pillars.
We place the highest priority on each of these areas, ESG, culture, and balance sheet management, and ensure that we carefully consider them in all our decision-making. Now, my colleagues will expand on each of these topics in the upcoming sessions, but as CEO, I would like to take a moment to focus on ESG and culture. I've said it before, and I'll continue to say it. Our commitment to ESG, it's organic. It's not manufactured. We focus on ESG because not only is it the right thing to do, but it's also a key driver of long-term value creation. Our position on ESG can be summarized by three principles. We'll lead in ESG by becoming a net positive business. We'll give back more than we take from the community, and we'll generate long-term value by adopting sustainable strategies.
We've made great progress in our ESG journey since launching a sustainability strategy back in 2016. Worth noting is that we've been ranked first among our Canadian peers for ESG disclosure for the second year in a row. Another important aspect of the grow responsibly pillar is to foster a culture of excellence. Here's how we view culture at RioCan. To us, it's the intersection between our values, performance, and leadership. RioCan's culture is a key differentiator that drives results and retains, develops, and attracts top talent. We see culture as a source of sustainable competitive advantage. At our core is our entrepreneurial spirit, which encourages us to move with speed and vision. We're also insights-driven, which enables us to execute with a clear purpose and direction.
Our strategic plan sets out a cultural roadmap to create consistency, understanding, and accountability across the entire organization. I am confident in our ability to successfully execute on our strategy and to achieve our growth targets. Much of that is predicated on what we've already achieved, which provides an extremely robust foundation upon which we can continue to build. We're executing from a position of strength as our strategy is underpinned by a best-in-class property portfolio, our compelling embedded near-term development pipeline, and strong market demand drivers for our properties. Let's now reflect on some of the basics for a minute. RioCan is one of the largest REITs in Canada with a total enterprise value of CAD 14 billion based on recent trading prices.
We currently have 207 properties in our portfolio, representing 36 million sq ft of aggregate net leasable area, and we have a further 13.8 million sq ft in our development pipeline that is fully entitled. Those portfolio metrics reflect the success of the major market strategy we've been executing for several years now. We've taken very decisive steps to reshape our business for long-term success. It started back in 2016 with the sale of our U.S. property portfolio. We've also sold 90 properties in Canadian secondary markets. Now, these dispositions generated net proceeds of approximately CAD 1.7 billion, which we've been deploying towards other new priorities. Specifically, we focused on Canada's top six urban markets. Today, our properties are concentrated in prime, high-density, transit-oriented areas.
The markets where we now generate over 90% of our revenue are Toronto, Vancouver, Montreal, Calgary, Ottawa, and Edmonton. These are all high-growth markets with attractive demographics. Another compelling advantage of being in desirable locations is the potential for mixed-use development. Now, mixed use will be a recurring topic today. You see, it enables us to make the highest and best use of our properties while addressing the residential supply gap found in major markets. Our portfolio is dominated by resilient assets with necessity-based retail anchor tenants. We focus on grocery, pharmacy, and value retailers, some of whom you'll hear from later today. All of these drive traffic to the property and are valued by consumers and other retail tenants, as well as by residents in the case of mixed use. Our commercial occupancy rate is 96.8%, and we believe there is upside to this figure.
Approximately 85% of that rental revenue comes from what we classify as strong and stable tenants. Embedded within this great retail portfolio is a compelling pipeline of near-term development opportunities. Now, as we continue to execute on our development plans, particularly as it relates to our five-year strategy, I look at our development program as a flywheel. We have an advanced pipeline with a consistent stream of development activity. We're establishing momentum by delivering a steady series of successes. Over time, the cumulative effect will be significant. We're delivering completed projects in the near term and beyond. We plan to deliver 1.7 million sq ft of completed projects by the end of next year. Over the next 5 years, we'll be delivering half a million sq ft on average each year. Importantly, these are high-quality projects that will deliver significant net asset value to our unit holders.
They also make our communities better. We're creating vibrant spaces where people want to shop, to live, and to work. We've been very deliberate about shaping our portfolio to hold properties that will continue to do well as macro-level trends evolve. Now, I'm not telling you that all retail is perfect, but for RioCan and its well-positioned assets, there's still much growth potential. Our properties are benefiting from several major demand drivers. One is increasing population in key markets, that being the six urban centers where we focus, all of which are seeing ongoing densification. The retail experience is evolving in a number of ways. The merger of brick-and-mortar and online retail has emphasized the critical nature of physical stores. Simply put, COVID raised some initial questions about the future of retail.
Two years later, the answers that have emerged reinforce our confidence in retail, particularly necessity-based, major market, open-air retail. As you will have heard me say before, e-commerce and physical retail, they don't just coexist. They have a relationship and well-placed physical retail, exactly the types of retail properties RioCan owns, play a vital role. Tight residential supply is an ongoing issue in the major markets, especially as housing prices skyrocket and more people look to rentals or condos. This is a key factor in our evaluation of mixed-use opportunities as well as our expansion into residential, with seven buildings and more than 1,800 rental units, and an ambition to increase this statistic, as my colleagues will shortly address. Our team has built detailed models based in part on demand drivers like these to help inform decisions on which properties would benefit from further investment or redevelopment.
On that note, I think it's time for you to hear from the subject matter experts. Hear them talk about our strategic pillars in action. Delivering on our 2026 targets can only be achieved with an exceptional and dynamic leadership team, and that's exactly what we have here at RioCan. Chief Operating Officer John Ballantyne and members of his senior leadership team, Jeff Ross, the Senior Vice President of Leasing and Tenant Construction, and Oliver Harrison, Senior Vice President of Operations. They'll be discussing our five-year strategy in the context of our existing commercial portfolio. Andrew Duncan, our Chief Investment Officer, he'll be walking you through our four pillars as they relate to our development pipeline. Dennis Blasutti, our Chief Financial Officer, will then take you through the financial implications of our strategy, including the building blocks that take us to our targets.
John Ballantyne will be joined by Terri Andrianopoulos, our Senior Vice President, People and Brand, and Jennifer Suess, our Senior Vice President, General Counsel, and Corporate Secretary, to provide a more detailed look into our ESG strategy and commitments. How am I gonna judge success for today's proceedings? Well, success to me means that you leave with a solid understanding of these four things. Our clear strategic direction, our bold growth objectives, our plans for execution, and confidence in the dynamic team leading RioCan along this exciting path of growth and success. Now let's get to it. Over to John and his team.
Thank you. There's further opportunity to optimize our assets as we execute against our four strategic pillars. Let's take a look at our portfolio. The foundation for today's theme, namely quality and growth, was laid in 2017 when we commenced our strategy to exit low-growth secondary markets and minimize our exposure to enclosed malls. Since 2017, we have amplified our focus on the right assets in the right markets. In 2017, we had 289 assets comprising 44 million sq ft. Today, we have 207 optimally located retail and mixed-use properties with an aggregate net leasable area of 36 million sq ft. To say it simply, it was addition by subtraction, and the overall quality of our portfolio has subsequently improved dramatically.
91% of our annualized revenue is generated from Canada's six major markets, up significantly from the 76% in 2017. Approximately 51% is generated from the high-growth Greater Toronto market. These six major centers are considered Canada's most in-demand and growing markets. The vast majority of our properties are located within the first ring or inner suburbs of these markets, typically close to transit routes. You can stand at virtually any major intersection in Canada, and you'll be within blocks of a RioCan center. Within five kilometers of our properties, there's an average population of more than 200,000 people, a 32% increase since 2017. The average annual household income is CAD 124,000, up 22% since 2017.
By any definition, this is a dense and desirable customer base for most retailers. The quality of our portfolio is evident through a number of other measures, including the diversity of our asset mix. While retail continues to represent more than 90% of rental revenue, office has grown to almost 8%, and multi-family rental residential is approaching 2%. You will see today that the residential share will increase meaningfully over the next 5 years. Committed commercial occupancy at year-end 2021 was 96.8%, and based on current leasing velocity, we expected to exceed our historical average of 97% shortly. Our strength during the pandemic was great evidence of the resilience of our portfolio, due in large part to the quality of our tenants. Approximately 85% of rental revenue comes from what we classify as strong and stable tenants.
54% of our retail centers are anchored by grocery stores, and mixed-use properties represent 22% of our portfolio. Our mixed-use assets are especially attractive to retailers as they bring a built-in customer base to our tenants' doorstep. Another measure of the quality of our portfolio is the mix of our tenants. We have a curated and diversified tenant base that perfectly suits changing consumer spending patterns. The largest segment is grocery, pharma, and liquor stores at 20% of rental revenue, followed by essential personal services at 14%. These are all necessity-based categories that drive healthy, stable traffic to the properties and provided resiliency of income during the pandemic. Each additional category plays a key role in the overall retail mix in our centers, providing convenience and complementary uses to the communities we serve and the residents of our mixed-use buildings.
We now have a short video that better illustrates why we're winning with tenants. Jeff Ross, our Senior Vice President of Leasing and Tenant Construction, is at Litho, one of our newest mixed-use developments.
Thanks, John. Hi, everyone, and welcome to Litho. Completed last fall, Litho is one of our new mixed-use developments. It includes about 30,000 sq ft of ground-level retail space and a 9-story rental residential development with 210 units. Litho is a great example of our unmatched locations, which are transit-oriented and in high-growth markets, our deep tenant relationships, as reflected in the stellar overall retail tenant base and the overall quality of the development itself, which is built to meet our tenants' needs for today and well into the future. Litho represents the very best balance between great retail and residential. Owning both components, we can create a sustainable model where the retail serves as an amenity, a draw for residents, and where the residents serve as a constant consumer base for the retailers.
This makes for a successful community where residents, retailers, and the surrounding neighborhood all benefit. It brings to light the competitive advantages that keep us winning in all the markets that we focus on. That said, what's particularly important for me to point out is that we have great locations focused on high-traffic intersections, close to transit, and in areas with excellent demographics. These competitive strengths are fundamental to our strategy, and they're driving the success of our developments, such as Yonge Sheppard Centre. Yonge Sheppard Centre, or as we refer to it, YSC, has been recently redeveloped, reskinned, and updated. YSC includes Pivot, our 361-unit professionally managed residential rental building that offers its tenants superior amenities and forward-thinking design. Pivot has direct access to the intersecting subway lines of Yonge Street and Sheppard Avenue through its connection to YSC.
This mixed-use development allows residents to shop, live, and work in one well-designed development. The revamp of YSC's retail and food service offerings features compelling tenants such as Longo's, Winners, and Shoppers Drug Mart. In Calgary, we felt our 5th & Third development was better suited for residential ownership, so we sold the air rights for condo development. With 5th & Third's retail space, we're providing a one-stop shop to all East Village residents with tenants such as TD Bank, Scotiabank, and an urban format, Real Canadian Superstore. There's RioCan windfields in Oshawa. windfields is a multi-phased mixed-use project in the rapidly expanding area of North Oshawa. It's been in the making for more than 10 years when we first assembled 100% ownership of this 160-acre site.
Today, we have helped to create a vibrant community with roughly 100,000 sq ft of retail already in place, providing this neighborhood community with convenient retail such as a grocery store, an LCBO, bank branches, quick service restaurants, a pet store, and a daycare. This is a great example of the inherent benefit of our mixed-use development strategy as astute retail tenants understand the opportunities that arise from being part of and servicing new communities such as this. The residential portion of this project is in partnership with Tribute Communities for the development of townhouses and condos. To date, we've sold out three phases of townhouses and the first of multiple condo towers. This represents approximately 890 units sold. The second condo is in presales and has already reached nearly 80% sold as of our last report.
At the end of the day, we have phenomenal assets, full stop. We have great real estate. We're at the forefront of urban development. We're known as the preeminent retail developer, and we have a diverse portfolio of mixed-use retail and residential assets. On that note, back over to you, John.
Thanks, Jeff. We'll now turn to our strategic plan and how it will serve to enhance our existing income-producing portfolio. The first of the key pillars that Jonathan described is reimagining retail. Retail is and will continue to be the foundation of our revenue stream. We've made great advances on the composition of our portfolio. We are now gonna enhance the quality of our sites. As Jonathan described earlier, the retail landscape is rapidly evolving. RioCan will continue to strategically differentiate our sites through customer centrism and intelligent diversification to grow FFO and maximize net asset value. Providing good locations isn't enough. RioCan will continue to lead by providing our tenants with the tools to help them thrive.
We will optimize for an omni-channel shopping experience through programs like RioCan Curbside Collect and other modifications to our centers that will support our retailers' online transactions that are subsequently picked up at the physical stores. We'll maintain a hyper-focus on proximity to consumers. This means curating and continuing to prune the portfolio to ensure we provide the optimal locations as well as adding mixed-use development with a residential component. We will focus on strategic leasing to improve the merchandising mix, taking advantage of vacancies and being more discerning with expiring leases to add resilient, compelling retailers. We don't want to just fill space. We want to improve the space by investing capital to upgrade the aesthetics and the functionality of the real estate and to integrate new and more synergistic commercial uses. We'll ensure that our team consistently provides high touch, high-quality tenant service and support.
In today's environment, that can mean adding community outreach, social media presence, and new technological solutions to the services we already provide. A central part of reimagining retail is the application of disciplined criteria to inform our capital expenditure decisions. We've assessed every property in our portfolio on numerous dimensions, including its location, the resiliency of its tenant mix, and the long-term growth potential. Ultimately, a dollar invested in a property that has significant same property NOI and NAV upside is much more valuable than a dollar invested in a property with more limited growth potential. With this in mind, we strategically allocate our CapEx into those properties where the additional investment will translate into the most significant returns.
Following the assessment, we take the most appropriate action for each site, be it through reinvesting capital to modernize the asset in order to make it more attractive to consumers and potential tenants, as well as to reduce operating costs, refining the retail mix to make the property more resilient or converting it to its highest and best use through renovation, redevelopment, or intensification. Our goal is to grow same property NOI by approximately 3% per year. To achieve this, we'll focus our investment team on progressive enhancements to strong-performing assets, and we will continue to exit our position in weaker performing assets. If an asset has limited opportunity for growth, it no longer fits within our priorities. Proceeds from divestments will be reallocated to more productive uses, such as strengthening our existing properties and funding development.
Our strategic plan reimagines retail by increasing the amount we spend on enhancing our properties to best serve the needs of tenants. We plan to increase our revenue-enhancing CapEx by 150% or CAD 30 million-CAD 35 million per year over the next 5 years, commencing 2022. We'll use the capital to create distinct RioCan standards. These are aesthetic standards our properties will meet to improve the customer experience and help them recognize that they are shopping at a RioCan property. We expect these investments to drive higher customer traffic and increase tenant productivity, which will in turn drive higher revenues through better tenant retention and attraction of more desirable retailers. Oliver Harrison, our Senior Vice President of Operations, will now discuss the RioCan standard in more detail.
Thanks, John. With over 5,000 tenants across our portfolio, continuing to strategically invest in our properties is an important driver of our business. Great locations are no longer enough. To remain the landlord of choice, we need to continue to invest in our assets. While it's always been a focus for us, under our five-year plan, we are investing at an even higher rate. We've developed a RioCan standard, which is about bringing our brand to the forefront and creating a consistent experience for our tenants and shoppers alike. From the pylons to the building elevations to branded elements such as bike racks and benches, this is a purposeful initiative that I believe is far more comprehensive an effort than anything we are seeing from our peers.
We are also investing in technology, including a new online tenant portal, RioCan Connect, to better facilitate two-way communication and then drive overall tenant engagement. We believe these investments will drive foot traffic, tenant retention, and attract new tenants, which will ultimately translate into increased revenues. While not under the more formal program, Durham Center, which we completed phase one of in 2021, showcases some of the key elements of the program. In the case of Durham, we focused on the bigger components, including a complete exterior modification, creation of new marquees, major structural elements, and a cleanup of tenant signage to create more consistent focal points. In total, there are 44 assets contemplated for renovation under our 5-year plan, with key markers for success being completing the projects on time, on budget, and in line with the design standards.
However, the greatest testament to the success of the program will be positive tenant feedback. What is also important to note is that the success of these initiatives for our existing income-producing properties sets the baseline for our development pipeline, a key long-term growth driver. We are excited to officially kick off the initiative with 21 projects nationally, starting in 2022. With that, I'll turn it back to you, John.
Thanks, Oliver. An important objective for us is to actively evolve our tenant mix to make it more essential, resilient, and synergistic. The challenges of the pandemic have made us more methodical about assessing our tenants based on a set of criteria that segments them into one of three categories. Strong and stable tenants are characterized by stable rent-paying ability, strong covenants, and sustained foot traffic. Our target is to derive 85%-90% of our revenue, rental revenue, from this category. Compelling traffic drivers are retailers that may be less national in nature, however, they drive meaningful traffic or incremental business to our properties to the benefit of the other tenants in the community. Our target is for 5%-10% of our tenants being in this group.
Finally, transitional tenants are those that currently fulfill their rent obligations, but can be transitioned out for stronger covenant tenants that drive meaningful traffic. Our goal is for less than 3% of our rental revenue to come from this category. These targets will factor into our leasing decisions as we evaluate both new retailers for vacant space or existing tenants on expiring leases. There are also opportunities to intelligently diversify our tenant mix. When it's appropriate to do so, we will seize opportunities to diversify our tenant mix with non-retail uses such as medical offices, educational sites, community spaces, or fulfillment centers. We consider several criteria in evaluating this type of candidate. Does it drive footfalls and incremental visits? Is it complementary to the existing retail tenants? Finally, is it enhancing and additive to the property from a community and consumer perspective?
We'll now hear from Jeff Ross. This time, he'll give more context on our tenant strategy.
Continuing to optimize our retail tenant base across our existing portfolio is the core focus for my team. We're constantly monitoring our centers to ensure that they continue to grow as markets change. By the very nature of retail leases, they're generally 5- or 10-year terms, so there's always rollover return. However, the key to our successful tenant mix is our ability to always have an eye on the best use for our properties at all times. Our goal is to always strike a balance between driving revenue growth and maintaining a bulletproof revenue stream with strong covenant tenants. We're always reviewing our roster of tenants to constantly upgrade for both quality and increased revenue, as areas are always gentrifying and changing. Suddenly, just rolling that tenant over at a marginal increase to what they were paying before may no longer be the best outcome.
Perhaps there's a higher and better use to go into that location and an even greater revenue opportunity. For example, re-leasing to essential retailers like grocery stores, pharmacies, and government services. In Calgary, we're adding an H Mart, an ethnic grocer, at our Beacon Hill Centre to replace a soft good tenant, London Drugs at our Shawnessy Centre, and we're backfilling space at RioCan's Northgate Village with a center for newcomers, a government-backed initiative to welcome newcomers to the community. When it comes down to it, there's two factors, understanding our market, where they are today, and where they're going. Understanding what our tenants want, hearing it directly from them, and acting as a partner as they build their businesses for the long term. Through this approach, we're creating winning properties that attract top tenants.
It's essential that we are a trusted partner, building deep tenant relationships that can benefit multiple properties across the country. Passing it back to you, John.
Thank you, Jeff. Jonathan spoke earlier about enhancing customer centrism as a key pillar of our strategy. We've always been focused on maintaining strong tenant relationships, and through the strategic planning process, we've identified opportunities to deepen the emphasis on our customers. We will enhance our value proposition to tenants by investing more in our retail assets to improve appearance and drive greater traffic. We will look for additional ways to reduce operating costs, to lower chargebacks, and increase the value to tenants. We will leverage technology to improve tenant experience and increase efficiency. As always, we'll communicate with our tenants frequently to ensure we are connected to them and responding to their evolving needs. Let's bring back Jeff one more time to discuss the importance of customer relationships.
Another key, and what I believe is most important to our success, is our relationships. My leasing team is the keeper of those relationships, and simply put, our relationships equal tenancy equals increased revenue. First of all, we know how to design spaces so that they have strong utility and our tenants can grow with us. Over RioCan's 28 years, we've lived through so many different cycles. We have a long history of adaptability and foresight, and this is why we tend to be the first stop for any tenant looking for space. Second of all, our tenants have long-term strategies they are executing on, and we can show them something that works for them today and allows us to grow with them as their needs change down the road. We can show them a coast-to-coast solution with major stops in the six major Canadian markets.
With our portfolio and development pipeline, we give our tenants a much longer runway for growth. While everyone knows us by reputation given our size, it goes beyond what we can physically show our tenants. It's about the pace of transactions, how open and transparent we are, and how committed we are to these relationships, how deep they truly run. Frankly, I believe we do it better than anyone in the industry, and we're known for that both with tenants and on the very important brokerage side. With that, I'll turn it back to John.
Thanks again, Jeff. The last topic I'll discuss is how we measure the success of our enhanced emphasis on customer centricity. Ultimately, our success will be measured by same property NOI growth. This will come from retaining our strong and stable and compelling tenants, attracting new tenants, maintaining a resilient synergistic tenant mix, and driving strong customer traffic. All of this will translate into positive occupancy trends. It will deliver improved leasing spreads on both new leasing and renewal of expiring leases, which will ultimately increase our average rent per square foot. All of which will drive the ultimate measure of success, namely same property NOI growth. Our CFO, Dennis Blasutti, will provide details on a number of our financial targets. First, another valuable measure of success is the feedback we receive from our tenants.
We are fortunate to have two of our national tenants and a leading international retail broker join us for a panel discussion on their perspectives about commercial real estate and how they make decisions about retail locations. We're hosting a discussion on Canada's current retail environment, and I'm very fortunate to be joined by three authorities on the subject. True leaders in the retail industry have been kind enough to take time from their busy days to provide their perspectives. I'll give you a quick introduction to the panelists, and we'll get right to the questions. First, we have Richard Dufresne, President and Chief Financial Officer of George Weston Limited, who, among their many holdings, are Canada's largest food and drug retailer through their ownership of Loblaws and Shoppers Drug Mart. They are also RioCan's third-largest tenant. Secondly, we have Jeff York, founding force of grocer Farm Boy.
Jeff is now partnered with the current owner of Farm Boy, Empire, on their aggressive expansion of the banner. Jeff is an industry veteran who works with a number of thriving retailers in Canada, including Bouclair and Altea Active, to name just a few. Finally, we have Tim Sanderson, Executive Vice President at JLL. Tim provides retail advisory services for retailers looking to enter, expand, and operate in Canada. The list of retailers Tim has represented is as expansive as it is diverse, and includes Costco, Apple, Cineplex, LA Fitness, Old Navy, Anthropologie, and many others. Gentlemen, thank you so much for being with us today, and we'll get right to the questions. As one of Canada's largest retail landlords, we often face the question regarding the future of bricks and mortar.
The narrative, especially as of late, over the last few years, has been the retail apocalypse is upon us. Richard and Jeff, you obviously have a strong physical store presence. You play a critical role in fulfilling consumer needs. Can you share your perspective? I mean, put bluntly, is physical retail dying? Jeff, can I ask you to kickstart the discussion?
I think it's the world has changed, and I think great retail is never gonna go away, whether it's physical store, online, or a combination of both.
Yeah, I totally agree with Jeff. I think especially in the sector we operate, being food retail and drug retail, like, the experience in store cannot be matched online. When I look at the future, I see physical stores playing an important role in both of these sectors, and probably the predominant role for a long time. Because for me, the example I use on grocery is my brain is not big enough to remember all the stuff I need to buy every week. As we were locked down and I was doing more online grocery, I figured out that over time I was buying all the same things.
It's when I came back to a store and saw all the assortment that was not in my head, that I was able to build a bigger basket. That tells me, and our customers are telling us also, that the store will remain the predominant outlet to, for both food and drug retail going forward.
Excellent. Music to our ears. Of course, it's something we have supreme confidence in, but again, to get your perspective on this is so valuable. Look, it's no secret, the impact of COVID accelerated e-commerce and the impact of e-commerce over the last few years. Richard, how has the role of e-commerce played into your business strategies? How do you connect that physical footprint, and how are you looking at it on a go-forward basis?
Very important question here. Like, for us, we want to be able to serve our customers the way they want. Our strategy has been aimed about being agnostic to whatever customer want. Therefore, for us, there are three ways today that customer gets served in, to get food specifically: in store, pickup, or delivery. We want to be the outlet where you can go in, either online or in store and get served by all of our services. That's that is our vision, and we feel that speed and convenience are gonna be the key factor driving these businesses going forward.
Excellent. Tim, look, you know, on the grocery side, obviously the physical store will always have a very strong place. There is a relationship between e-commerce and physical retail, and that's only getting stronger. You obviously represent some clients who could probably only sell their goods through e-commerce, but still maintain that physical presence. You know, interested to hear your perspective on what that looks like now and on a go-forward basis.
Well, a couple of thoughts on that, John. The proof is in the pudding when you look at these online retailers who end up opening stores in a market, and almost to a company, they will tell you that when they open physical bricks and mortar stores in a trade area, they actually expand their market share beyond just what they're selling online. That speaks to the whole notion that people like to go and be in a physical space.
You know, one of the research items or one of the stats rather that we pulled in reference to this, comment is, in 2021, 72% of shoppers said they would go to a physical store to buy or pick up goods, and that's higher than the 67% of people who responded the same way in 2019. What happened during COVID is curbside pickup became a real thing, and it's here to stay. One goes, they might be going to a, an outdoor center or like a RioCan, power center, and this is more applicable to a neighborhood or an outdoor center than necessarily to an enclosed regional mall or simply anything with a roof on it.
If they're going there, they might say, "Oh, gee, I'm here to pick up such and such at curbside, but I'm gonna park the car and run in there and go do that errand." So that's behooving more people to shop more, and it's a pure bricks and mortar play.
Well, with regards to physical stores, obviously, there's a bunch of key considerations when evaluating potential locations. You got market demographics, accessibility, competition, parking, loading. Beyond these fundamentals, though, how important is it to the retailers, Tim, to have a forward-looking landlord to help, you know, decide on factors outside of just the location? Like, what would distinguish a landlord like a RioCan to ultimately win retailers' businesses?
Well, listen, it comes down to the word partnership between tenant and landlord is perhaps an overdone commentary in the industry, but it is true. When you look at the fact, as you pointed out at the top, that you have deep relationships with your retail clients, John, that speaks to the operating principles that RioCan runs itself by. I would say one of the most important things, especially in these times, is when a developer says, "I will deliver you your premises, Mr. Retailer, on the third of October," it better be ready on the third of October.
Because with all the supply chain issues going on in the world, with the cost of putting goods in the warehouse, we all know what's happening in the industrial markets, with you know, with just-in-time delivery, those products are gonna be in that store, and they're gonna be in that store on the fourth of October, the day after you deliver the premises or if it's a building. Having a landlord that you can rely on in that regard is absolutely integral to the process.
Yeah. I think the thing with RioCan is we just opened a site on DuPont, right? The ex-Jaguar dealership, and it's a... What we worked with was because RioCan understands retail, they understand that you need proper receiving, proper lighting, proper ceiling height, the entrance in the right place. I find for the developer needs to work with the target retailer early to make sure these aspects are all covered off. If you think like a customer when you're developing your mixed use projects, get your target retailer involved early. Figure out all these things because they're extremely important. Like, how do you get rid of the heat out of these buildings when we're cooking food in our HMR things?
A lot of the developers are, "Oh, we'll slap up a condo, and we'll rent out to somebody." Well, you can only put so many nail bars and so many Rexall in all of these little places, right? You have to think about a large surface retailer and then what are their needs. I think we really accomplished that in our DuPont store. Like, we worked really closely with your team on the entrance, on the parking, on the lighting, and I think it's turned out fabulous.
Yeah. For me, it's a big picture comment here is having a top-to-top relationship is really important, and there are few landlords that do a good job. RioCan is one of them. Like, Jonathan and I meet, like, periodically, and we go through big picture stuff. Like, he comes to me sometimes alone, sometimes with some of your team members and say that, "Hey, we've got this project that we're thinking of doing this. You have a Shoppers on site or a Loblaws on site, like, would you be amenable to this?" And sometimes we bring Choice Properties to the table, and we try to find solutions that work for all of us.
I admire people who come up with ideas like that so that we can together build a better business. That's why I'm on this panel because I've got a good rapport with all of you, and I appreciate the relationship.
Those are all excellent points. Obviously, RioCan is a mixed use developer now. You know, our roots have always been in retail, and we will always drive that retail and make sure it is the most efficient and the most customer friendly that we can possibly provide retailers so retailers can thrive. Excellent comments. To end today's discussion, final question is about outlook. Can you each briefly speak to your real estate strategies going forward? Perhaps speak to a few of the biggest changes or evolutions over the last few years, be it because of COVID impact or otherwise. Jeff, why don't we start with you?
Ours is a guess right now on what normal is gonna look like, specifically with the urban centers, right? With the remote working. One of the things, we've had a bunch of sites we've had to pause on down in the urban core because is remote work going to be two days in the office, three days in the office, four days in the office downtown? Because there is no weekend business downtown, so you rely on the customers down there. If people are working remote two days a week, that's a 40% decrease in customer foot traffic. We're trying to gauge when it's gonna come back. We're looking at the GTA as are there...
Is there enough density of people living in the areas to support the store? It's almost like pockets of dense retail, densification of people living in the towers, not investors. I'm talking living in we opened on Front and Bathurst right down from where the RioCan, the big RioCan site is going up, right? There's a lot of people that live there. We're doing really well because even during COVID, 'cause there's people that were there in the store shopping for lunch and dinner. We're looking at kind of like little pockets of urban dense areas of people living full-time, eating, live, work, play, let's just call it. That's kind of what our vision going forward. Those are the sites we're looking for.
I think you're gonna like my answer. If you look at our square footage growth over the last five years, it's actually been quite timid as we were building our omni-channel strategy. Last year when we were looking at sort of the state of the market, it became really clear that we see immense opportunity for new builds. You will actually see us accelerate our build of new stores over the next few years. Obviously, it takes time to build a pipeline of new sites, but we are aggressively looking for new sites, both on the food and drug sites. This is not new. We've discussed that with our shareholders over the last few quarters.
You can definitely expect us building more over the next few years.
There certainly is a renewed interest among the international retailers to look at the Canadian marketplace. Granted, for the most part, that's the major markets, ostensibly Vancouver and Toronto and Montreal to some degree. They're being a lot more particular. The good news is I think a lot of them spent time studying the markets when they were locked up for the last two years at home.
When they come to us, they say, "Hey, I wanna be on Bloor Street," or, "I wanna be in this center," or, "I wanna be in that market." I will say the one thing that I think is gonna be increasingly important for landlords going forward of any asset class type, whether it be power centers or enclosed regional malls, the digitization factor and the fact that somebody can hold a device in their hand and make that shopping decision before they leave home and say, "Okay, I'm driving to my favorite RioCan center today, and I'm gonna go in and look for this shirt because I just saw it online and I know I can get it for this price. They've got my size." People want that. They're demanding it. It's a fact of life going forward.
There's plenty of third-party providers out there in the marketplace that a landlord can team up with to do that.
Well, that's something we're hearing. We are looking to innovate and become more efficient on the property level, not just through technology, but, you know, changing our parking fields, giving retailers more space where people can swing in and pick up things more quickly, helping them build out pick up vestibules. So we're definitely hearing that from the retailers and pivoting accordingly. Well, thank you very much. Tim, Richard, and Jeff, thanks again for taking time out of your really busy schedules to share your perspectives today. We greatly appreciate it. That concludes our tenant panel discussion. I'd like to now turn it over to Kim to introduce our next section of the day.
Thanks. This will be a Q&A session where I run through a series of questions with Andrew Duncan. John Ballantyne will also provide greater detail on one of our competitive advantages, RioCan Living. First question. Andrew, when we look at our overall development pipeline, it equates to 43.1 million sq ft of high quality opportunities. While such a sizable embedded pipeline is compelling, can you help contextualize what this means for RioCan from a near, mid, and long-term perspective?
Sure, Kim. As Jonathan said, development plays a major role in our strategy to grow and diversify our income streams. Unlocking the value of an additional 43.1 million sq ft through development will drive significant increases in our net operating income and an expansion of our net asset value. Our advanced pipeline is providing development deliveries in the near term that will diversify our portfolio and increase the percentage of income from the residential rental asset class. Importantly, as Jonathan noted, we have momentum in our pipeline that is delivering value today, tomorrow, and well into RioCan's future. It's important to understand the quality of the opportunities in our pipeline.
All of our properties are located within the six major markets. Three-quarters of these properties are located in the Greater Toronto Area. 83% of the net leasable area in the pipeline is residential, and 70% are located on a transit route, which is an important attribute for our prospective tenants. We have very deliberately assembled a high grade and stable pipeline that we can develop over a number of years. Our development program is generating significant net asset value in the near, mid, and long term. We are executing on the plan today with shovels in the ground. Some key figures on our development portfolio. 13.8 million sq ft, representing 38 different projects, have zoning approvals in place. 3.1 million sq ft are in the active pre-development phase, where we are diligently working on planning approvals and securing rights from our tenants to redevelop.
2.4 million sq ft are shovel-ready, which put differently, is 2.4 million sq ft of mid-term value creation. Finally, 2.1 million sq ft of the pipeline is currently under construction, representing near-term value creation. We are capitalizing on actionable opportunities to deliver mixed-use projects at a scale no one else can currently match, and we are building them at attractive yields that are accretive to NAV and will deliver real returns to investors. Let's take a closer look at our upcoming development deliveries. We are on track to deliver 1.7 million sq ft over the next 24 months alone. In 2022, that totals 750,000 sq ft of net leasable area, representing an estimated CAD 28.3 million in incremental NOI upon stabilization. In 2023, we will deliver another 714,000 sq ft, representing CAD 28 million in stabilized NOI.
Every development property that we expect to contribute NOI by 2026 or sooner is already effectively underway, be it under construction or soon to commence. Another important aspect of our plan is that project timelines are staggered, so we see a steady stream of completions each year going forward. There are some key advantages to a staggered approach. We always have shovel-ready projects ready to go so that we can redeploy capital in a timely manner, all while maintaining a strong balance sheet. We can ensure that we have the team in place that we can effectively manage and oversee the projects that we have underway. This staggered approach means our future development deliveries will provide a relatively steady and predictable growth in our net leasable area, our NOI, and our NAV.
We expect development activity to continue to deliver the benefits of asset diversification, NOI creation, and NAV creation for the foreseeable future.
Andrew, why is RioCan well positioned for success in new developments?
Well, Kim, I believe we have five important competitive advantages. First is our sizable land bank. Development-ready land in major markets remains in high demand. Our ability to control land costs and generate land gains is a significant advantage. Second is our established development expertise. We have an in-house team of experienced professionals that have a deep understanding of the entire development process, from entitlement through project completion. Third, the RioCan Living team, which, as we will hear from John, is completely focused on residential. Fourth is our strong relationships with our tenants, partners, development consultants, and construction trades. These relationships allow us to unlock development opportunities and plan, design, construct, and deliver our projects on time and on budget. Finally, our strength in both the retail and the residential asset classes. These are unique but complementary capabilities, and we are leveraging all that experience to create successful mixed-use developments.
Development is in our company DNA. We have always had an entrepreneurial mindset and a strong drive to create value balanced with a responsible management of risk. As many of our unit holders are aware, the RioCan team has a long and established track record of creating value through property development. What is particularly important to point out is our ability to deliver above-market returns because of our competitive advantages. Let's talk about these advantages in practical terms. Let's look at the returns of five of our recently completed residential rental projects. These five projects, completed between 2019 and earlier this year, represent a total of 871 rental units at 100% interest.
All of these projects were developed with 50-50 joint venture partners where RioCan earned fees, and in most cases, RioCan recognized land gains upon bringing the joint venture into the project. Two of these projects are in Toronto, two are in Ottawa, and one is in Calgary. The average stabilized cap rate of these projects is currently 3.7%. The average joint venture development yield that our partners enjoyed on these projects was 4.2%. For RioCan, the average yield on these projects, taking into account land gains and fees earned, was a remarkable 4.9%. In the case of these five projects, RioCan's competitive advantages resulted in the delivery of high-value, purpose-built rental product at a RioCan yield substantially above the current stabilized cap rate while still providing our partners a competitive development yield.
On average, these projects yielded 120 basis points above the market cap rate. Going yield is just part of the story here. These assets will provide us with income that will continue to grow for the years to come. This case study reinforces why we believe development is a key part of our strategy that allows us to deliver intelligent diversification, NOI creation, and NAV creation. Now, I'm gonna turn it over to John to explain one of those competitive advantages, RioCan Living, in greater detail.
Thanks, Andrew. While residential is currently a small part of our existing portfolio, it plays an important role in our long-term plans, be it through standalone initiatives or mixed-use developments. We have been building our pipeline of mixed-use development opportunities for more than a decade now. Over that time, we have built a depth of knowledge and experience through our various projects. In 2021, we established a dedicated residential team under the RioCan Living banner. We redevelop and intensify existing RioCan properties that are strategically located on existing or emerging transit lines. By building multi-family residential, we are addressing Canada's housing shortage, particularly in the country's largest cities. Based on our solid foundation, I am incredibly confident that we are more than ready to drive the growth and further expand our residential portfolio.
We have the right team in place, both on the rental income and condo side. We listen to our communities, and we understand what our residential tenants want. Each of our developments is a unique experience, designed and developed for the specific needs of the neighborhood and residents in mind. We've already made exciting progress with our residential program, and there's more to come to fuel our growth in the near, mid, and long term. We have set distinct targets for where we want residential to be by 2026. Based on where we are today, combined with the opportunities ahead, we are well on track to achieving our expectations. With that, I'll turn it back to you, Andrew.
What role does residential play in our overall development pipeline?
By further diversifying our portfolio with residential NOI, we're effectively enhancing the quality and security of our income. We see an opportunity to grow our residential NOI to between CAD 55 million and CAD 60 million in the near to mid-term. We will do this in two ways. First is by continuing to execute on our development pipeline, which will consistently deliver residential NOI in the upcoming years as we complete projects. Second is the strategic investment in mixed-use residential buildings that will add NOI to our growing residential portfolio. When we benchmark against the current residential rental landscape, we believe CAD 55 million-CAD 60 million NOI is the amount required to achieve the appropriate multiple recognition for our growing residential portfolio.
Can you tell me what role does mixed-use development play in RioCan's strategy?
For RioCan, mixed use generally marries bricks and mortar retail and residential in a single building, creating profitable projects that revitalize urban spaces. This is a very good fit for our business. We already own the properties where retail wants to be, and we have a proven ability to adapt the evolving needs of retail to win today and into the future. There's great synergy between the different classes of tenants. As Jeff mentioned, retail facilities on site, especially necessity-based retail, are an excellent amenity for our future and current residents. Residents serve as a built-in customer base for retail. The demand for residential and mixed use is strong. Between 2015 and 2020, the overall Canadian market saw an average annual growth in residential rental rates of approximately 4%. Major markets like Ottawa, Vancouver, and Toronto were key drivers of that growth.
Residential income in markets like these is typically very stable and highly valued. Redeveloping selected properties into mixed-use assets will be an important source of growth in NOI for us in the coming years.
Jonathan spoke about our strategy to reimagine retail. What does that mean in the context of development?
As Jonathan and John mentioned, retail is always evolving, and we must continue to adapt in order to win our tenants and their customers' business. In terms of development, reimagining retail is informing us as we plan, design, and construct our new mixed-use projects. We're maintaining our focus on the six major markets and, in particular, high-density, transit-oriented locations where people shop, live, and work. We will continue to actively shape our portfolio. For example, while we will sell certain low-growth retail assets, we will continue to strategically invest in selected properties with high growth potential or unrealized development opportunities. Our goal is to take our properties to their highest and best use. We will make sure our developments keep pace with the emerging success factors in retail. These include integration with e-commerce business models, proximity to customers, and developing a sense of community.
We are leveraging the distinctive RioCan brand, as Oliver discussed, to drive customer traffic and attract tenants. We will maintain our ESG leadership position through our innovative green development initiatives. Lastly, we're evolving our retail tenant mix to make it more essential, resilient, and synergistic. By keeping these factors central to our decisions throughout the development process, we will meet the needs of both our retail and residential tenants.
Jonathan spoke about intelligently diversifying as another pillar of our strategic plan. How does the need to diversify factor into our development program?
Development is at the core of our intelligently diversified strategy. The strategic plan calls for us to diversify in two ways, our asset base and our income streams. Diversifying our asset base means growing our residential portfolio through a combination of mixed-use development and opportunistic acquisitions. Diversifying income streams means expanding beyond rental income to include, for example, development fees. We will generate these fees primarily through our partnerships on development projects. These fees generate a one-time impact to FFO, but the incremental income will help close and stabilize the cash flow gap between development yield and operation.
Another core pillar of our strategy is customer centrism. We heard a lot from John, Jeff, and Oliver on how we are taking a more customer-centric approach. What does this mean in the context of development? Who are the customers we are referring to, and what are our key areas of focus?
Customer centrism means fully understanding and meeting the needs of our tenants, our joint venture partners, and our LP investors, and delivering a distinct value proposition to each of these stakeholders. In terms of our JV partners and LP investors, they truly do well when we do well. Our focus is on working collaboratively and maintaining strong relationships through cross-functional teams and custom reporting. Partners look to us for our expertise. We will generate sustainable fees through our best-in-class platform to help guarantee our JV partners and LP investors achieve compelling returns.
Our last question, Andrew: How will we measure the success of our development program?
Our 5-year strategy sets out very specific targets on outcomes which my team will deliver. Over the next 5 years, our plans are to deliver on an average of half a million sq ft each year, of which 57% will be residential space. As always, we plan to be on time and on budget. The successful achievement of these goals will contribute to 3 results for RioCan. Diversification of our asset base, the creation of meaningful NOI, and the creation of net asset value. On the basis of the development plan we have in place, our proven ability to execute, I am confident we will achieve these targets.
Thank you, Andrew. A great way to illustrate many of the concepts we have been discussing is to take a closer look at one of our marquee projects of the past couple of years. We will close out the development section with a virtual tour of The Well, a mixed-use retail office and residential development in Downtown Toronto.
Hello, everyone. Welcome to The Well. I'm here at the corner of Front and Spadina, where the main entrance to our office tower is located. From here, visitors to The Well can access the rest of the development with a sight line to the retail component right behind me. This is one of the many entrances to the project that is designed to integrate seamlessly into the King West neighborhood. This particular entrance is designed to provide a prominent entrance to the office tower and act also as a gateway to the three levels of retail in the project. We have paid careful attention and leveraged our retail experience to ensure footfalls are balanced between those three levels of retail as people enter the project. Let me start with a brief overview of RioCan's marquee mixed-use project, The Well, that we are developing jointly with our partners at Allied Properties.
The project has been more than 10 years in the making. It is one of the largest construction sites in the country, an ambitious project that required complex coordination to build three of different asset classes, involving various partnerships and multiple construction contracts. When complete, The Well will offer more than 3 million sq ft of space, combining an elevated retail experience, distinctive office space, and modern residential in an amenity-rich urban neighborhood. Let's head inside. We'll start upstairs in the office tower. Here we are on the 3rd floor. The Well features 1.1 million sq ft of LEED Platinum office space. I want to highlight a couple things about our incredible office design. First is the unique side core design. This provides more flexibility for our future tenants to lay out their space and unobstructed views of the entire floor plate.
Second is the variety of size of floor plates the building offers. This allows us to offer space to a variety of tenants with different space requirements. Third is our raised access floor system that distributes heating and cooling and power throughout the floor plate. This is more efficient and moves services from the ceiling to the floor, allowing for a cleaner look. Up here on the 32nd floor of the office tower, you can get a really good view of the residential buildings as they are nearing completion. In total, The Well comprises six residential towers, with housing options for young professionals, growing families, and the empty nester. You can see here, 450 The Well, the 46-story, 600-unit residential rental tower, which we retain the 50% interest in in partnership with Woodbourne.
From here, you can also see the canopy over the retail spine of The Well. In keeping with creating an authentic urban and pedestrian-focused design, the canopy has been constructed to protect visitors from the elements. Now, over to Jeff, who's down there right now.
Hi, everyone. It's me, Jeff, and thanks for joining me from the heart of The Well. Not only is it the heart of The Well, it's the heart of all of Downtown West. We've taken a lot of time and effort to curate this development, so we have the right tenant mix in it. It's necessity-based. It's service-based. It's tenants that work well in there with a residential community and office community. This becomes the center of Downtown West, so it's the right thing for the right market in the right area. We're 50% pre-leased currently. We have another 12% that we should have under control in the next 30 days. I can honestly say, here at The Well, what I'm most proud about is that we've created a center of community, a place for everyone to come to, local, regional, tourists, everybody.
Everyone is going to come to The Well for an unbelievable experience, and we hope to see you here in 2023. Over to you, Andrew.
Now, we're here at the loading levels for The Well. This 8-acre level allows us to provide tractor-trailer access and moving van access for our future commercial tenants and residents. As a true mixed-use development located in an extremely dense urban environment, we have designed traffic flow and loading to mitigate the challenges of delivery in the heart of the city. Our loading and receiving floor takes up an entire 8-acre floor below grade. This allows us to provide a pedestrian-focused environment above grade, free of truck and car traffic. This loading floor has more than 20 loading docks, allowing us to accommodate the tractor-trailer that our tenants need and the small moving van that our residents will use to move in. All this can happen below grade on this level without interrupting the shopping, working, and living environment above.
This level also provides back-of-house elevator access to all the residents and commercial space above. This ensures that materials can be received and garbage can be removed from every space in the project without interfering with any of the front of house operations. Now, let me tell you about our state-of-the-art Enwave thermal battery. This battery is a 7.6 million liter water storage tank we constructed beneath The Well. This thermal battery will provide The Well and the surrounding communities with access to low carbon heating and cooling. It is designed to store energy at night during off-peak times, easing strain in the electricity grid and reducing cost. The system is efficient, resilient, and has a greater capacity that can now supply low carbon heating and cooling to an additional 17 million sq ft beyond the project.
Thank you for taking a virtual tour of The Well with us. As demonstrated through the virtual tour of The Well, in collaboration with our trusted partners, we are building dynamic and iconic development projects that enhance the communities in Canada's major markets. With that, I will turn it over to Dennis Blasutti to discuss the financial considerations and implication of our five-year plan in greater detail.
Thank you, Andrew. Good afternoon to our RioCan unit holders and welcome back to The Well. Growth has been one of the dominant themes throughout today's presentations, and one of our key pillars of our strategic plan is to grow responsibly. I'm gonna talk about the financial aspects of this, and then we have a panel that will cover our approach to ESG, which is core to this pillar. From a financial perspective, grow responsibly means that we strike the right balance between opportunity and risk as we execute our strategy. We manage this in an intentional way, with the overall goal of delivering total unit holder returns that are attractive on a risk-adjusted basis. Our growth targets were determined based on a straightforward set of key value drivers outlined in the previous presentations. Same property NOI growth and completion of development projects are the primary drivers.
These will be supplemented by select investments that we will pursue opportunistically, and we expect our fee income to grow as we leverage our expertise in land bank to attract institutional partners who want to participate in our developments. In the years to come, these activities will consistently drive our targeted growth in funds from operations and net asset value. Working in concert, each of these strategic pillars discussed today are designed to drive us towards our annual and long-term targets, and the equation is very simple. The quality of our portfolio provides us with the resilient income required to maintain sustainable and growing distributions. The growth in our FFO should drive increases in our net asset value over time. The combination of these two factors add up to a compelling total unit holder return.
Breaking this down further, our total unit holder return will be delivered from three simple building blocks. The first component is a distribution yield of 4%-5%, which is in line with where it was at the end of 2021. Having reduced our distribution in early 2021, we consider this to be very reliable and expect continued sustainable distribution increases. Second is consistent same property NOI growth of approximately 3% a year, supported by our strong locations and the initiatives we outlined today. We built up this target through a property-by-property business planning process, and I will provide further details on this component in the coming slides. The third driver is development and investment activity contributing 2%-4%.
This is largely driven by the delivery of development projects discussed previously, as supplemented by opportunistic acquisitions and partially offset by dispositions as we continue to prune and reposition our portfolio. Assuming a constant multiple, we would expect net asset value per unit to grow as FFO per unit grows. Based on the combination of these factors, we are targeting total unit holder return of 10%-12%, which we believe is highly achievable. As mentioned, we have not assumed any expansion of our FFO multiple in our target total unit holder return. However, we believe that there are attributes of our business and strategy that may provide upside through multiple expansion. This includes the quality of our portfolio as it stands today, the near-term and ongoing growth potential from our substantial development pipeline, and increased residential income over time.
Now let me recap our targets for 2022, which we announced in conjunction with our most recent results, and which build on the strength of our business that was demonstrated in 2021. Our 2022 targets include FFO growth of 5%-7%, which translates to FFO per unit of CAD 1.68-CAD 1.71. Our confidence in this growth was reinforced by our announced distribution increase of 6.25%, while also maintaining a disciplined FFO payout ratio of 55%-65%. Same property NOI grew by 3.4% in 2021, supported by strong occupancy and leasing spreads. We expect this progress to continue in 2022, with same property NOI growth expected in the range of 3%-4%, slightly above our longer term target of 3% as pandemic-related effects subside.
The remaining FFO growth will come from the ramp-up of developments that were delivered over the last couple of years, as well as additional deliveries this year. This will be partially offset by reduced FFO due to our large asset disposition program in 2021. Going forward, we expect two key factors to drive our growth in same-property NOI, occupancy levels returning to pre-pandemic norms and strong growth in our commercial rents. These main drivers will be supplemented by growing residential rents and reduction in costs across our portfolio, as well as some shorter-term factors such as ancillary revenues and accounts receivable provisions returning to pre-pandemic levels over the course of 2022 and 2023. In the second half of 2021, we saw an upward trend in occupancy rates with committed occupancy of 96.8% at the end of the year.
As we look ahead over the next 5 years, we are targeting 97%-98% committed occupancy. Our confidence in our ability to achieve these targets is driven by the fact that, 1, we've been there before. Pre-pandemic occupancy levels were above 97%. Two, the quality of our properties and tenants is superior today and will continuously improve, driven by the many initiatives presented earlier. The continued strength of our portfolio positions us very well to retain existing tenants, as well as attract new ones. We have properties located where they want to be, and the demographics around our major market portfolio continue to improve. Many of our tenants have performed and recovered well over the last year, and so now are back in the pursuit of growth. In our markets, very little new supply of retail real estate has been developed for many years.
These factors position us well in pricing discussions. We are targeting approximately CAD 22.50 average net rent per sq ft on existing assets by the end of our 5-year plan. This is driven by straightforward assumptions. We expect that the gap between existing rents and market rents would result in high single-digit leasing spreads, consistent with past performance and current market conditions. Over the next 5 years, approximately 60% of our currently occupied net leasable area will come up for renewal, and we expect that those will be renewed or replaced at our expected leasing spreads. New leases will be signed at market rents for existing vacant space as occupancy ramps up. Finally, we expect that contractual rent increases will contribute CAD 0.80-CAD 1.00 per sq ft over the 5-year plan.
Note that this average net rent target in this section refers to existing space only. It does not account for new developments such as The Well, where we expect to command rental rates well above our current average. If we include these, our average net rent target is closer to CAD 24 per sq ft. Another major driver of growth will be our development deliveries and continued advancement of our development pipeline. We plan to spend an average of approximately CAD 500 million annually, while we will deliver approximately CAD 3 billion worth of projects over the course of the next 5 years. Given this, we have reached a point in our development cycle where we expect to deliver more than we spend over this time frame, and we expect this flywheel effect will continue for the foreseeable future as we launch our next wave of projects.
Another key attribute of responsible growth is that our development program will be self-funded. We are redeploying capital to generate higher returns without diluting the positions of our unit holders. We have three main sources of cash that will fund our program. First, based on our payout ratio targets, we retain AFFO of over CAD 150 million annually, which contributes to the equity component of the project funding, and this number will grow over time. Second, we plan to use project-level leverage of 60%-65% of project costs, representing approximately CAD 250 million. Third, we expect capital recycling to generate CAD 100 million-CAD 200 million per year, which includes asset sales as well as proceeds from condo sales. Collectively, these sources will provide sufficient capital to fund our development program.
In addition, we can supplement these sources of funding through partnerships, which also have the added benefit of generating fee income. Another critical aspect of responsible growth is to maintain a balanced and intentional approach to capital management. We take a simple and straightforward approach that ensures we maintain the financial flexibility required to take advantage of opportunities while protecting ourselves against potential risk. This includes ensuring that the maturities in our debt ladder are adequately spaced out, maintaining significant levels of liquidity, currently at CAD 1.3 billion, reducing our proportion of secured debt, thereby increasing our unencumbered asset pool, which currently stands at CAD 9.4 billion or 2.3 times our unsecured debt balance. In terms of our overall debt levels, we are targeting debt to EBITDA of between 8-9 times.
At the end of 2021, this ratio was at 9.6 times, and we see a clear path to being below 9 times as the EBITDA from our developments ramps up. Finally, we ensure that our ability to fund our development pipeline, as discussed on the previous slide, will be maintained going forward. To this end, we target projects under development on our balance sheet to be approximately 10% of total assets, and we target an FFO payout ratio of 55%-65%, ensuring that we retain the cash flow required to fund our growth. We are confident this capital management strategy preserves the financial flexibility and capacity to fund our growth while appropriately managing risk.
To summarize, our strategic plan sets out a clear path to responsible growth over the next five years. We are confident that we are well positioned to deliver solid financial performance and compelling total unit holder returns while maintaining a strong balance sheet. Now, prudent financial management is obviously a key component of responsible growth, but it doesn't stand alone. RioCan is a leader in ESG, and our ongoing commitment to embedding ESG best practices into all aspects of our business is critical to the delivery of sustainable results. Our panel will take you through RioCan's approach to ESG.
Thanks, Dennis. Today I'm joined by John Ballantyne, our Chief Operating Officer, who you heard from earlier today, Terri Andrianopoulos, Senior Vice President, People and Brand, and Jennifer Suess, Senior Vice President, General Counsel, and Corporate Secretary. With our focus on three pillars, environment, community, and people, each of them plays an integral role in our ESG initiatives at RioCan. John has overseen our ESG program since its inception five years ago. Terris focus is on RioCan's people, culture, and brand, and Jennifer brings a governance perspective. Through the recent expansion of her role, she will lead oversight for ESG at RioCan moving forward. With a commitment to embedding ESG considerations throughout every aspect of our business, it's safe to say that we could talk about this topic for hours.
However, for now, we will focus on a few key areas and we'll provide an opportunity to address other areas of interest as it relates to ESG in the Q&A portion to follow. To start, John, five years ago, RioCan accelerated its focus on ESG. What was your plan of attack at that time to make the portfolio more sustainable?
Well, back in 2017, we had focused on ESG, but it was a little scattered amongst our properties, and we weren't really doing a good job of communicating our efforts to the public markets. At that point in time, we formed a department, a sustainability department with a dedicated lead to come up with a more consistent, unified approach of rolling out sustainability ESG initiatives across our entire portfolio and embedding sustainable thinking into our company. To communicate it better to the public markets, we really embraced two things. One was certification. The BOMA BEST and the WELL certification for existing properties and LEED certifications for developments. You know, back in 2017, we had a handful of properties that weren't certified. We now have six...
Over 60% of our portfolio is certified, and, you know, our target is 85% in the next 5 years. Second of all was the Global Real Estate Sustainability Benchmark, or better known as GRESB, which is really an investor-recognized benchmark that measures not only our progress in ESG, but also our progress against our peers or relative to our peers. To that end, we've made tremendous progress since first participating in 2017. We've more than doubled our score over that time. We've achieved the five-star rating, which is the highest GRESB rating you can get, and we're second amongst our peers in North America.
Great. Thank you. Shifting now to the social aspect side of things, a big focus for us is our communities. We talk about our desire to give back more than taking from the community. Can you provide some specifics around what we mean by that?
Sure. Of course, social is a hugely important part of ESG. You know, it's incumbent on us as a corporate citizen and as a large major landlord in Canada. It's also, quite frankly, good for business. You know, as we talked about in the earlier presentation, you know, it's not enough just to have great locations. We have to bring something to our sites, you know, for our retailers, and that means bringing consumers to our sites. There's really no better way to do it than through initiatives that, you know, both engage and benefit the community.
By doing things like having dedicated space in our properties, by having not-for-profit daycares, by actually giving portions of our shopping center parking lots to communities for events and programs is a hugely important way to be part of the community and to bring the community to your center. Over the pandemic, we embraced RioCan Cares, which is a component of RioCan that really reaches out to the community and has community-related services. Terri, do you want to expand on that?
RioCan Cares program was really a dedicated program to help ensure that we are not just providing space for people to purchase their everyday essentials. It's about engaging with the community and being a place where people want to gather. That can be from everything from hosting rib fests. It could be the Sound of Music Festival. It could be farmers markets through the summer. In addition to that, we provide space free of charge for charitable organizations to come and do their fundraising within our facilities. They raised more than half a million dollars worth of donations to fund their community efforts over just 2021 alone.
Jennifer, I wanna turn to you next to discuss climate change and governance. Currently, our GHG targets are to reduce like for like emissions by 15% by 2030 based on a 2017 baseline. What are the steps that we're taking?
Thank you, Kim. As everyone knows, climate change poses significant environmental, social, and business risks, and RioCan is taking many steps to address these needs in different ways. To begin with, investing in climate resilient real estate is critical to meet our sustainable and responsible growth
Doing so also allows us to meet the United Nations sustainable development goals, and I'm proud to say that RioCan is one of over 2,000 companies which has signed on to the task force in climate-related disclosure. This will enhance our disclosure and our transparency when it comes to all climate-related issues in the years to come. Internally at RioCan, of course, we're taking many steps, one of which has been the initiation of a cross-functional climate committee, which is specifically tasked with looking at this issue in a variety of ways.
Governance from a broader perspective sometimes gets lost in the ESG discussion. Can you speak to me about board oversight and how it impacts RioCan's strategy?
Absolutely. As everyone knows, governance is something near and dear to my own heart. At RioCan, ESG is formally overseen by a subcommittee of our board of trustees. In fact, beginning in 2021, we felt so strongly about the need to embed ESG in all areas of our business and strategy that we formed a dedicated subcommittee known as the Nominating and ESG Committee. This committee oversees all of these matters, and in addition, issues of environmental compliance are escalated to the audit committee whenever necessary. At the management and employee level, we have now also proceeded to a level where we embed ESG-specific objectives in every single bonus-eligible performance scorecard. This makes ESG a meaningful and day-to-day reality for all of our employees in everything we do.
We also strongly follow the SASB guidelines on sustainability topics for guidance in terms of where we should focus and move forward to remain at the forefront of best practices in this area.
Thanks, Jen. Often, the key to success with external communities is driven by the strength of the community and culture within the workplace. Terri, establishing a culture of excellence is a big focus for you. What does that mean to you?
Culture of excellence is about so much more than employees just coming to work and being engaged. It's about every single person that works for the organization being aligned to a common vision and purpose. We've ensured that that's the case at RioCan and that every single employee as part of their impact scorecard, that's our performance management tool, can see very obviously how their own contributions ladder up to the growth and success of RioCan. In addition to that, we understand that every employee is looking for a growth and development. When you join a company like RioCan, you do it because it's large and there's going to be limitless career opportunities, and we're investing in that when many companies, frankly, we're scaling back on employee initiatives. In 2021, we hired a dedicated director of talent management.
We also launched a best-in-class mentorship program where we've encouraged every single employee, regardless of level, to participate either as a mentor or a mentee, or ideally, as both. There's a labor challenge. Everybody knows that right now the labor market changed, and we are responding to ensure that we can continue to attract and retain the best talent in the industry. Last, we have also integrated a DEI council, and that's to ensure that every single employee that joins RioCan is given their opportunity to succeed, be heard, be valued, and thrive. We're contributing to the success of all.
Great. Can you talk a bit more about DEI, our short and long-term goals, and the tangible actions that we're taking?
Absolutely. DEI is not new to RioCan. RioCan, actually, with Jennifer, was one of the first real estate companies in Canada to launch an employee resource group, and that was the WIN initiative or the Women's Initiative Network. We are proud to say that more than 50% of our employees are female, more than 40% of the people in our management positions are women, and 33% of our board is actually women as well. DEI is bigger than just focusing on women. We are proud signatories of the BlackNorth CEO Pledge. As part of that, and beyond it, we are committed to ensuring that there is representation of the BIPOC community in commercial real estate. We know that we will all be better for more representation.
Thanks. I really appreciate that. As a final question, Jen, what comes next?
As you heard from my esteemed colleagues, we are so proud to be Canada's leader in the real estate industry when it comes to ESG. It is embedded throughout everything we do in every area of RioCan. In the near future, you can expect to see us mapping our climate strategy and ensuring that we are ready to implement the task force on climate-related disclosure recommendations. We will be updating our materiality analysis to ensure that it properly reflects the very real concerns of our stakeholders in the ESG front. We will continue to refresh our ESG strategy to ensure that strategic objectives and actionable initiatives that matter to our investors are at the forefront.
Thanks, Jen. There is so much we could continue to discuss today with respect to our ESG initiatives and areas of focus. However, what is most important to take away is that from our strategic decisions to our interactions with employees, tenants, partners, those in our supply chain, and the communities in which we operate and develop, ESG considerations are embedded in the way we think and do business at RioCan. On that note, this wraps up our ESG discussion. Thank you, John, Terry, and Jennifer for all of your insights today. I will now turn it over to Jonathan for some concluding remarks before we open it up to Q&A.
Thanks so much, Kim. Thanks, John, Terri, and Jennifer. Thanks to the rest of the leadership team for taking some time to share their plans and insights with all of you today. Now, before we get into Q&A, and then breakouts for those of you who are participating, I just wanna quickly wrap things up today. The theme that we focused on today, it's quality and growth. That's exactly what we're poised to deliver. We have a focused long-term strategy that leverages our core strengths, is grounded in our activities to date, and it's driven by insight. Our strategy includes four key pillars. Reimagine retail, intelligently diversify, enhance customer centrism, grow responsibly. This strategy is underpinned by a strong foundation. Our best-in-class major market portfolio comprised of resilient assets, our compelling embedded near term development pipeline, and the strong demand drivers for our properties.
In closing, as I said at the start of today's presentation, at the heart of our strategy is a very clear ambition to capitalize on our unique mix of best-in-class properties, embedded development pipeline, and compelling growth prospects to deliver solid performance and maximize our unitholder returns. The combination of our strategy, strong fundamentals, self-funded growth plans, dynamic leadership team, and entrepreneurial spirit is what gives me the confidence that we will deliver on our clear ambition and ultimately achieve our total unitholder return targets. Thank you to everyone who's tuned in. Thank you for your time. Thank you for your attention. We're now gonna have a much-deserved five-minute break for all of you who've been watching. Please join us back here for a Q&A with our great executive team.
Welcome back, everyone. As Jonathan mentioned, all of our presenters are here with us today to answer your questions. Before we start, first, some housekeeping. The end of our Q&A period will conclude the formal event. For breakout sessions, attendees, please use your sign-in login to participate. Now, let's begin with questions. From the research analysts that cover RioCan, they are joining us on video today. Our first question comes from Mario. Mario, would you like to ask a question?
Hi, Kim. Sure. Can you hear me okay?
Yep.
Perfect. This question is maybe for Dennis or for John, just with respect to the same-property NOI growth forecast of 3%, that forecast is well above long-term average, which has been closer to 1%. When I look at the components of the same-property NOI growth forecast, whether it's occupancy, annual rent growth of 2.5% or so, or blended high single-digit lease spreads, all of those tend to mirror kind of historical results that ultimately drove the 1% growth. I guess the question is, outside of residential coming online, can you provide a bit more color in terms of what's driving the improved expected efficiency in terms of converting that rent growth into actual same-property NOI growth going forward? Thank you.
Dennis, you wanna-
I can start with this one. Thanks, Mario. Thanks for the question. Yeah, the drivers are really three kind of main components. The first one being leasing spreads, as you mentioned. The second one being built in leasing or rent increases that are built into our contractual rents today. We'll see those continue over time. Those ones actually contribute about equal amounts. Then the next piece is occupancy ramping up to that call it 97%-98% level. When we put those pieces together, that really gets us to about 80% of the equation.
The remaining components are, you know, the residential rent increases that we would expect to kick in over time, as well as a few other shorter-term factors like ancillary revenues. Of course, there's this in the first couple of years, unwinding of some of the pandemic effect that gets us the rest of the way there.
I'll add briefly to that, Mario. The portfolio is quite a bit different than our historical portfolio that you would've obviously gathered those statistics from. Remember that in 2016, 2017, 2018, we did a fair amount of secondary, tertiary market dispositions. We sold also some enclosed malls. In that same period of time, we've delivered new dynamic urban development sites. I think when you take the combination of that sort of addition by subtraction plus the addition of new build dynamic urban and suburban assets, those will also help drive that same property NOI number higher.
Thank you. We'll take another question. I'll go with Sam at TD Securities.
Thanks, and good afternoon, everyone.
Hi, Sam.
Just on the same property and the wide growth, I guess, one of the differences between, you know, the last 10 years and going forward is you're not gonna have a Zellers go bankrupt, a Target come and go, and a Sears go bankrupt. And I'm sure that's a big difference between the 1% that Mario was talking about and the 3% going forward. You know, what sort of black swan event do you see happening on the tenant side going forward, and how does that factor into your guidance?
Well, I can take this and then hand it over to maybe Mr. Ballantyne to help. I really think, Sam, that there aren't a lot of significant negative events we see hitting one of the larger tenancies. Keep in mind, one of the fundamental attributes of RioCan since its inception really is that we have no exposure to one single tenant that is more than 5% of our overall revenue. At this point, the three largest tenants we have are, I mean, I would say, beyond reproach in terms of their covenant, in terms of their balance sheet stability.
If we had the negative impact of a tenancy going bankrupt, it would, you know, I would assume it would be one of the tenants that make up a smaller component of our overall revenue. I think if you look at the way we handled the Target exit from Canada, the Sears exit, we've actually managed to build quite a bit of growth out of those unfortunate events and make them into positive events for RioCan. John Ballantyne, if you have anything to add to that, feel free.
No, I'd agree, Jonathan. You know, even if you look over the last couple of years, we haven't lost a lot of large box space where we have. We lost a Lowe's in Calgary last year. It's actually turned into a pretty big driver of same property growth. You know, we've got the capabilities, the in-house team to convert this space to put the right tenants in. Ultimately, we make the shopping centers better. Not only are we driving higher revenue through the box space, but it has that ripple effect throughout the rest of the shopping center on renewals and bringing in new tenants as well.
Great. Thank you, John. I'll take the next question from Jenny Ma at BMO.
Oh, physically raise your hand. Gotcha. Okay, thank you.
Go ahead, Jenny.
Thanks. Good afternoon, everyone. I wanted to ask a question about development yields. Based on the numbers that you put up on the screen, you're talking about getting a 120 basis point premium on the RioCan side. But what your JV partners are getting suggests it's a 50% development premium. I'm wondering, for RioCan, what is the minimum development yield that you'd be willing to accept, when embarking on these projects? Is there a difference between what you're looking for from a residential development versus, the commercial component of a mixed-use development?
I'm happy again to start that off and then hand it off to Andrew Duncan. We have started looking at things not necessarily just from a going in yield perspective. When you take that angle, Jenny, it distorts things a little bit, and I think the better understanding of how a development will pan out is to look at a 10-year IRR. When you reflect on the type of growth you can get out of an asset, it gives you a better understanding of how that asset, that development is gonna impact the overall organization. That's really the way we've been looking at things. We don't necessarily have thresholds when it comes to going in yields. It's more IRR thresholds at this point.
I'm happy to turn it over to Andrew Duncan to give you some more color on that.
Thanks, Jonathan. And thanks for your question, Jenny. I think I'll echo John's comments. A couple things I'll add is, I think, Jenny, you're kind of inferring the fact that if it's, you know, if we're doing a purely retail development or we're delivering a development yield that is greater than the market cap rate, which provides a spread, which is what we try to do. And especially on the residential side, same thing. Obviously, those two asset classes have very different cap rates, especially in today's market. I think Jonathan's point about trying to focus on growth long term means that we should be looking at not only going in yield, but also more significantly long-term IRR because we are in the income business, especially in these mixed-use assets.
Great. Thank you. We'll take our next question from Tal Woolley at National Bank.
Oh.
Oh, that's Tammy.
I think, Tal, you're on mute.
Hello.
Hi.
There you go.
You're back.
Okay. Perfect. I'm seeing Tammy on my screen. You look great. Anyways, I'd just like to start with sort of challenges and obstacles. When you put together a big plan like this, what were the most challenging assumptions to make, and what are some of the most plausible obstacles you expect to face in completing this plan?
Well, it's a great question as always from you, Tal, and I think that, you know, the challenges are always when you look out five years, there are so many unknowns. What we try to factor in are the things that we have control over, and then using our best capabilities to make assumptions around those things that we have control over. What are the things that we don't have control over and trying to figure out what the best mitigants are to manage those uncontrollable aspects of our business. When you talk about the biggest risks in going forward, I think right now, and these risks are always malleable. They change depending on the environment you're in. Over the last two years, I think you could agree that the environment is constantly changing.
To me, I've said this quite often, and this isn't an indictment against government, but there is always an inability to read what government policy will do to your business. You know, potentially the residential business, but even the way we're taxed, there are different things that governments can do that would have an impact on our business model. Again, as I said before, we do our best to try and mitigate against those circumstances. I think a large component of that is really diversifying the types of businesses and income that we're in, so that if there is one element of our business that is hit particularly hard because of a new policy that is put in place, we can always pivot and rely on others, or it won't be too damaging to us.
I'd say that is a significant risk. Of course, given that we are in the development business, there is always certain elements of developments that you cannot predict, like cost increases or if there is a slowdown in the demand for housing. You know, as I said, we're always looking for mitigating factors for those risks, and I think we've been very public about the way we've mitigated risks when it comes to our mixed-use developments. We're building on land we already own, which is income producing until we start building on it. We bring in partners, and oftentimes, if we're building condos, we sell out before we actually start developing or sell a large part of it. And that's just a few to start. Hopefully that answers your question, Tal.
Thank you for that question, Tal. Our next question comes from Mark Rothschild at Canaccord.
Thanks. Good afternoon. You sort of touched on this in some of the other comments, but maybe in regard to development projects going forward, as you get bigger and the risk to development relative to the balance sheet becomes smaller, what are your thoughts on taking on partners? You've partnered with some leading real estate companies and REITs in the past. Is that necessary going forward, and would it depend on the asset class?
Thanks, Mark, and happy to see you here. I think that there are a few factors involved in how we decide to bring on partners. Some of them are less relevant than they used to be. We used to seek out partners that had expertise where we didn't. I'm pleased to say that now based on, well, this team around me, and the teams around them, that we've got a great deal of knowledge on developing and also managing all different types of asset classes. We no longer have to rely on subject matter experts as our partner.
When it comes to spreading out capital and bringing in other people's capital, not only is it good to mitigate risk, and we'll continue to do it, but it's also good to garner fees for the expertise that I spoke about before. I think that will become more and more of a significant part of our business and balance sheet going forward. Also keeping in mind the model that we've talked about for condo projects going forward, we've acknowledged condo is not our core business. It's not something that we are going to. It's something that will form part of our developments going forward, without a doubt, but it's something that we are gonna strive to bring in limited partner investors where RioCan will serve as the general partner. I think that's a model that we're gonna continue to utilize.
when it comes to multi-res rental and mixed-use developments, that's something that we will, by and large, seek to keep as much as possible for ourselves and no longer really need, certainly expert partners and capital partners, depending on how our balance sheet is year after year. It's not a necessity for those types of developments.
Thanks, Mark. We have a follow-up question from Sam at TD.
Thanks. Just on your targeted CAD 55 million-CAD 60 million of rental residential NOI in 5 years, by my math, that's around 8% or 9% of the total portfolio NOI. I wonder if you could just confirm that. I wonder if you have a plan to, you know, target some other level in terms of the mix beyond that level 5 years from now.
Well, I'm going to turn that over to Dennis to take a stab at. Sam, great to see you back in your offices, by the way.
Yeah, sure. You're right in terms of that percentage. I think the sizing that we came up with when creating this five-year plan was less about the amount as a percentage of our overall portfolio, which continues to grow as well, albeit at a slightly you know slower rate given where we are with the resi portfolio, but more about the absolute amount of NOI that we're creating, where we think it's a level where we've created enough scale for it to effectively stand alone as a business. That's how we size that target as opposed to actually targeting a percentage of the overall.
Thank you. Our next question comes from Pammi Bir at RBC.
Hi, everyone. You talked about stronger rent growth and improving leasing spreads, the average high single-digit % range over the next five years. I'm curious, is that something that you think is achievable within the next couple years, or is that gonna be a bit more back-end weighted? I do have a second part to the question, or a separate question. The 2%-4% annual FFO per unit contribution from developments, is there a rough range of how much of that will be coming from rental income-producing projects versus condos or inventory gains? Thanks very much.
Okay. I'm going to start with the first question and hand it over to Jeff to help with that one. I'm gonna hand it over to Dennis, actually, and Franco maybe for the second one. For the first question, you know, Jeff, who's much closer to the demand drivers and the tenants who are seeking space, will probably give you some better and more thorough color. My view is that it will be balanced over the 5 years. I don't think if you look at our model, which we put a lot of effort into, there's necessarily heavier weight in the front end relative to the back end.
We've got a lot of great new space that is coming on, you know, over the course of that five years, and I think the demand drivers in each and every one of those years will be similar to one another. I don't think there's any spikes or valleys in those numbers. Jeff, happy to get your perspective on this.
Yeah. Thanks, Jonathan, and thanks for the question. I mean, what we've seen and what we've heard and what we've been talking about for a decade now is the squeeze that we saw coming on retail inventory. There hasn't been a lot of new development, certainly, in the enclosed section, and there's been a real slowdown even in the unenclosed, even the suburban market. What we're seeing is less vacancies. It's helping to drive rental rates. The demand that we're seeing from the retailers are they're starting to get a lot more strategic and looking further ahead of the curve to try to lock down their spaces because we just don't have that same inventory glut that we once had. It's helping to serve to drive rental rates in the right direction.
On the next phase of the question.
I'll take a crack at that. I'll try to answer it maybe a couple different ways that I hope helps to clarify it. The first is that when we look at the projects that are coming online over the next couple years, so 2022 and 2023, and start to stabilize after that, the stabilized NOI on those are a bit north of CAD 60 million, whereas we're gonna have about CAD 20 million-CAD 25 million of condo gains in that kinda same timeframe. Now, when we get to the outer years of the model, we do have some larger condo gains with projects like 11YV kicking in, which will you know ultimately actually spike us a little higher than that 2-4 range in a single year.
You know, I think the other way to answer the question is that when we think about our 5%-7% FFO growth target, both our, I guess, what we call our total or headline FFO and our what we call core FFO, which excludes the condo gains, on a CAGR basis end up in that range, over the course of the 5-year plan.
Great. We have time for one last question. I'll take a follow-up question from Tal Woolley at National Bank.
Great. Thanks again. While most of you are not new faces to RioCan, this is a relatively new C-suite, and you're coming out today with a five-year plan that the market is gonna hold you accountable for. My question really is: how will or how have the management incentive structures changed to align with the goal of the plan?
Great question from you, Tal. I think that the management team that you see in front of you was brought together to come up with this plan. I think everyone on this stage in front of you plays a part in coming up with this five-year vision for this organization. It wasn't as though I dreamt up this five-year vision and then imposed it upon this group. This was a collaborative effort, and everyone on the stage is committed to and dedicated to achieving it because you said the right word, Tal, accountability.
I think the reason that we wanted to come out with this kind of guidance and this kind of vision for you and the investor community to see is just exactly that, to hold us accountable to something, to give us a North Star, to give us a vision that if we fail to do, we've set these parameters for ourselves. You know, if we fail to achieve them, then well, it's our own fault. Again, we, every one of us, provided the ingredients to come up with a strategy, and we have conviction in achieving these objectives. It's really no one's fault other than ours if we can't achieve it.
It's a wonderful amount of accountability that we've all brought into, and I think all stand behind, and I think that's why I have such great confidence in our ability is because of the individuals on the stage, not only them, but the 600 strong that work for RioCan.
Thank you. That concludes our Q&A. We are now going to move into our breakout sessions, and if you have registered for those, please log in. Thank you for your questions. We've actually reached our allotted time. For those questions that we were unable to address during this session, please reach out to the investor relations team, and we will get back to you. As I noted at the start of today's event, presentation materials and a replay will be available to all interested parties through RioCan's website. We hope today's presentations have helped you gain a deeper understanding of how we're positioned to deliver long-term growth for our unit holders. On behalf of the entire RioCan team, thank you for your interest and support. This concludes the formal event. For those attending breakout sessions, please log off and log in using the link to your assigned breakout session.
Have a great day, everyone, and thanks again.