Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust 4th Quarter and Year End 2020 Conference Call. At this time, all participants are in a listen only mode. After management's presentation, there will be a question and answer session and instructions will follow at that time. I would now like to hand the conference over to Jennifer Suss, Senior Vice President and General Counsel. You may begin.
Thank you. Thank you, and good morning, everyone. I am Jennifer Suss, Senior Vice President, General Counsel and Corporate Secretary for RioCan. Before we begin, I would like to draw your attention to the presentation materials that we will refer to in today's call, which were posted together with MD and A and financials on RioCan's website earlier this morning. Before turning the call over to Jonathan, I am required to read the following cautionary statements In talking about our financial and operating performance and in responding to your questions, we may make forward looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives 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 in these forward measures that are not generally accepted accounting principle 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. RioCan's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks That could impact our actual results and the estimates and assumptions we applied in making these forward looking statements, together with details on our use of non GAAP financial measures, can be found in the financial statements for the period ended December 31, 2020, 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 www.sedar.com.
Thank you, Jennifer, and thanks for joining us today. I'm pleased to be here and be surrounded virtually by our Great senior management team at RioCan, and I'm happy to provide an update on our 4th quarter operational highlights as well as our 2020 results. I'm going to focus today on what will continue to drive stronger FFO, namely our underlying operating performance, our increased focus on mixed use developments and the strength of our tenants who are largely classified as strong or stable. I'll also focus on how we continue to upgrade our portfolio through dispositions and tenant mix evolution, so that we will continuously reduce our exposure to non essential businesses. But before doing that, it's critical to acknowledge the challenges that the real estate industry and our business faced in 2020.
I The impacts of COVID-nineteen, they tested our team and our portfolio, and we consistently demonstrated strength, resiliency and the ability to mitigate the impacts. We're pleased to report that RioCan ended the year with record liquidity and that we achieved our FFO per unit guidance of 1.60 We made the responsible decision to reduce our distributions effective in January of this year, which does enhance our financial flexibility and allows us to advance our goals and to absorb the impact this pandemic has on our business. While we continue To face the pandemic and an uneven road to economic recovery, I've got total confidence that RioCan's team is well positioned to unlock the value that's embedded in our incredible portfolio. So now let's focus on the 4th quarter operating results. The second wave of the pandemic in the 4th quarter resulted in restrictive measures, including the closure of non essential businesses in a number of provinces.
In fact, 75% of our tenants remained open and operating as of December 31. But in spite of this, we collected 94.2% of our total 4th quarter rents and just shy of 92%, 91.7% of our January billed gross rents as of February 10, and we're not done yet. Throughout this crisis, We've been responsible, protective and forward looking by balancing our tenants' needs with the well-being of our unitholders. When Secla launched in the Q2 of 2020, we actively participated on behalf of around 1800 $14,400,000 in gross rents. We continue to work with tenants whose businesses have been affected by the pandemic.
The SIRS program replaced in the Q4 and SIRS funding, which is provided directly to tenants without the requirement of landlord rent abatement is in effect until June of 2021. Now we view CIRS as a positive initiative that will provide a lot of short term relief for businesses that are in need. To provide further support, RioCan has established an ambassador program to assist our tenants with the online SIRS application process. We continue to use our expertise to ensure that The bottom line remains the same as we reported in Q2 and Q3. Every dollar matters to We're using our resources, energy and a thoughtful strategic approach to maximize rent collection.
To the extent that we need to make some concessions, we lease amendments that will benefit the trust over the long term such as redevelopment rights that will support our ability to unlock so much future value. Now as anticipated, same property NOI growth continued to be impacted. We ended the quarter at minus 7.9%, stronger than the previous quarter, but obviously very far from our historic norms, which we intend to return to. Now while we can't predict the length The extent of the mandated closures, the strength of our tenant base insulates RioCan's income from temporary disruption. In fact, 79% of our tenants we classify as strong or stable.
These are primarily grocery, pharmacy, liquor, essential services and value retailers that have strong covenants and have demonstrated resilience in volatile economic cycles. The stability is highlighted by RioCan's collection of over 98% of the total gross rent that was billed to these tenants in the 4th quarter. The remaining 21% of our tenants, we classify them as potentially vulnerable. Now most of these tenants are going to survive and we've collected more than 80% of their rent. Some of these tenants such as restaurants and gyms, while they're vulnerable in the face of COVID, well in our minds they make up a very important part of the retail landscape And we think they will do just fine in the future.
These are the kinds of uses that are poised to prosper when commercial exuberance rebounds after months of suffocation. Now I'm not going to downplay the volatility in the industry, but I want to be clear that to date, the relative ReoCann's revenue is manageable and we're positioned to see significant improvement as the impact of COVID starts to dissipate. And in regards to leasing, in spite of the pandemic, our 4th quarter leasing renewal and retention results were strong and very much in line with our historic pre pandemic results, thanks to the good and very hard work of our team here at RioCan. Our committed occupancy ended the year at 95 point 7%. Our leasing team completed 359,000 square feet of new leasing and renewed 1,200,000 square feet during the quarter.
We achieved a blended leasing spread of 3.8% for the quarter and 5% for the year. New leasing Spreads for major market properties was 8.3% for the year. Our renewal in new leasing spreads demonstrate that there's still a healthy upside between our average portfolio and the market rents. Our retention was 85.8% for the quarter and 86 point 7 percent for the year and average net rent per square foot for new leases was just under $44 for the quarter and just over $32 for impressively above the Trust's portfolio average rent of $19.80 per square foot. Now I'm going to turn to residential.
We collected over 98% of residential rent in the 4th quarter, which is really a testament to the desirability strength of RioCan Living's offerings. Our residential rental portfolio continues to grow and currently has more than 1200 units in 4 buildings, eCentral and Pivot in Toronto, Frontier in Ottawa and Brio in Calgary. The total NOI from rental operations was $8,200,000 for the year, which was up $5,800,000 from 2019. We will see this number continue to increase as new projects are completed throughout the course of this year. As of February 10, Frontier and eCentral were 97.8% and 1st occupancy of Pivot's 361 units took place in December of 2020.
Now it's understandable that the pandemic has really temporarily affected leasing at eCentral and Pivot. It's challenging to lease space with virtual And we also can't ignore the short term pressures in the multi res rental space. However, we are confident that all RioCan Living offerings will thrive in the long Not only because we have well positioned properties, but also because enhanced immigration and a resurgence in economic material impact on the pace of our most significant construction projects. We continue to look ahead to ensure continuous growth through sustainable development pipelines. As we complete developments, we break ground on new ones, we achieve zoning on others and initiate the zoning approval process on Stillmore.
This pipeline translates into lucrative opportunities, real as a virtuous cycle that was well demonstrated throughout 2020. We validated how profitable our rezone land is by selling interest in several GTA and Ottawa properties at very strong pricing. We have so many of these projects that will take us well into our future. They include Laird and Eglinton here in Toronto, Shoppers Will Branson up in Branson and RioCan Hall in Downtown Toronto. And this is just to name a few of so many that we have in our tremendous pipeline.
We saw value creation through the successful closing of the sale of 50% non managing interest in eCentral at attractive capitalization rates and a value far above our cost, further supporting the long term strategic importance and NAV growth potential of our development pipeline and residential rental business. We also completed approximately 530,000 square feet of new development GLA. This included developments such as 5th and Third in Calgary and Winfield Farm in Oshawa, which continues to see great growth. In addition to the completed projects I just referenced, we've got more than Sorry, 1400 residential rental units currently under construction and this is between 6 projects and estimate that we'll have an additional 1500 or over 1500 residential rental units in different phases of development by 2022. We've got a 50% interest in 3 condo or townhouse projects at various phases of presale and construction.
This includes 11 YV condos in Yorkville and UC Uptowns and UC Tower condominium projects at Wingfield Farm in Oshawa. I'm proud to say that these projects include 12 42 units and were 98% presold with deposits paid in full. And what should also be noted is that the proceeds from our condo sales provide an alternative source of revenue and an important bridge of FFO that will Our productive core commercial portfolio going forward. Moving to The Well, our iconic mixed use community in Toronto's Downtown West, The office tower, if you haven't seen it, has reached its final 36 story and is expected to be topped off next month. The project is on track for the initial office tenants to take possession later on this year and retail leasing is advancing well.
We intend to continuously use our vast pipeline of air rights and will seek out partners to validate value, reduce our overall development exposure and equally important to get paid for our deep and experienced development platform through equitable fee structures. We're going to use this strategy not only in residential rental projects, but in condo projects as well. Subsequent to quarter end, RioCan made its final capital contribution to the HBC joint venture, which brings our ownership interest in this well positioned portfolio of properties to 20%. The properties in which we've increased our interest include Downtown Vancouver, Montreal, Ottawa, Calgary as well as destination shopping centers such as Yorkdale and Our position in these properties is consistent with our strategy towards dominant well located urban assets, and we're going to work with our partner to potential uses for these properties, be they existing retail uses or dynamic mixed use concepts. We've also reached an arrangement with HPC to clear up all rental arrears that had accrued over the course of 2020.
It's important to highlight that while our focus is obviously on managing our business and tapping into growth opportunities, our commitment to 5 star rating from GRESB or Gres, never know how to pronounce it, for our ESG performance and sustainability best practices. RioCan is also ranked 1st amongst Canadian peers in the GRAV's public disclosure assessment. And in terms of our culture, maintaining a connected and engaged team has been critical during these challenging times and we're proud to be named 1 of Greater Toronto's top employers and we achieved the highest employee engagement score Our 2020 employee engagement survey results exceeded the industry benchmark for overall engagement by 10 points. We're committed to investing in our corporate culture and the development of our expert talent. We'll continue to support excellence and empower our people to drive our collective Success.
RioCan's history is a story of successful transition. This won't stop as we seek to drive sustainable profitable growth in 2021. Looking ahead, we will continue to reshape our tenant base to focus more than ever on resilience, sustainable growth and value creation. We've got the team, the locations and the balance sheet. We have the drive, the expertise and relationships to weather this storm And as always, adapt and thrive, and we are poised to advance our business as COVID and its impact become less relevant, which will, Mark my words, happen soon.
And before I close out, I want to express my gratitude to Ed, the RioCan Board of Trustees, the team here at RioCan And of course, you are unitholders for your confidence in me as RioCan's next Chief Executive Officer effective April 1, 2021. I'm really excited and really privileged to lead RioCan through this complex period in our history and into our next phase of remarkable growth. And with that, I will turn it over to my colleague, Qi Tang, for her CFO report.
Thank you, Jonathan, and good morning, everyone. As Jonathan noted, RioCan reported FFO per unit of $0.39 for the 4th quarter and $1.60 for the year, in line with our guidance. Our $1.60 FFO per unit for the year was net of $42,500,000 pandemic related provisions for rent abatements and bad debt, which represented 5.2% of our billed gross rents from Q2 to Q4. Our net contract receivable was about $44,000,000 as of the year end, which is expected to be collected in due course. Despite the challenging environment under pandemic, including a much less active transaction market.
We continue to service value of our portfolio and closed with a weighted average capitalization rate of 6.31 percent based on in place NOI and RMB 127,000,000 were development properties with no in place NOI. In addition, As of February 10, 2021, we have closed or entered into firm or conditional agreements to expose 100 percent of partial interest in a number of properties for total sales proceeds about 2.90 1,000,000 This included RMB151,000,000 for the sale of a 50% non managing interest In eCentral and Commercial component of ePlace at 3.5% and 4.5% capitalization rate, respectively, based on stabilized NOI, which was closed in mid January 2021. Overall, since the beginning of 2020, we have closed or entered into firm and conditional deals totaling $483,000,000 This included about $241,000,000 of income producing properties with a weighted capitalization rate of about 5.5% based on in place NOI. Our ongoing disposition program not only realizes the value inherent in our development pipeline, but also enables us to fund mixed use development, mitigate risk, share costs, earn additional fee income and attract new partners or strengthen relationships with existing partners. Our reduced distribution payout will provide about $152,000,000 of additional cash flow annually, which will also serve to fund development projects as well as other value added initiatives such as debt repayment and unit buybacks through our NCIB program.
We remain committed to our development program and unlocking the significant value inherent in our portfolio. Residential development accounts for about 83 and all about 35,000,000 square feet of our 42,000,000 square feet of development pipeline. Our residential projects will serve to address the growing demand for housing as Canada's population grows, particularly when the government resumes its immigration plans. As announced in October 2020, The Government of Canada plans to welcome an average 411,000 new immigrants per year over the next 3 years. The majority of the new Canadians will make their homes in one of Canada's 6 major cities, where all of our mixed use residential developments are located.
In fact, typically, more than 30% new Canadians or over 1 100,000 a year called Toronto Home, where 74% of our projects are located, often in close proximity to major transit lines. Looking ahead to 2021, We estimate development spending to be in the $500,000,000 range, net of projected cost recoveries and proceeds from air ride sales. This spending estimate includes about $400,000,000 for properties under development and approximately $100,000,000 for residential inventory projects, which are condominium or townhouse project. In addition to meeting market demand for homeownership, condominium or townhouse Projects enable us to accelerate capital recycling to further fund our development program. 2021 development expenditures will allow us to develop deliver a significant portion of our flagship development, the well and complete other mixed use developments such as LISO on DuPont Street and Strata on College Street, both in Toronto as well as the 2nd phase of our Gloucester project, Latitude in Ottawa.
With these completions in 2021, the staggered nature of our pipeline and cost sharing with existing and future partners will allow us to lower our annual development spending in 2022 beyond. In general, We expect to keep our total IFRS value of properties under development and residential inventory on consolidated balance As of a percentage of consolidated gross book value of assets at about 10% or lower, Despite the 15% limit submitted under our various credit facilities, as of the year end, This matrix was 10.3%. Now let me turn your attention to our balance sheet metrics. We closed the year with record liquidity at $1,600,000,000 in the form of cash and cash equivalents and undrawn committed revolving lines of credit and other credit facilities. This was partly as a result of the $500,000,000 green bond we issued in December 2020.
This green bond effectively refinanced our $550,000,000 debenture maturities in 2021. Subsequent to the year end, We prepaid our $250,000,000 December 2021 debenture maturity in full at a total redemption price of $256,000,000 plus accrued interest. We will repay the $300,000,000 debenture due in April 2021 in due course. Out of our total $380,000,000 mortgage maturities in 2021, About $229,000,000 have already been repaid, refinanced or have refinancing commitments in place as of February 10, 2021. Overall, we expect to continue to maintain our strong liquidity in 2021.
Further, we continue to have a large unencumbered assets pool of RMB 8,700,000,000 On proportionate share basis, which generated about 59% of our annualized NOI and provided 2.15 times coverage for our unsecured debt as of the year end. This unencumbered asset pool will offer additional flexibility as we manage our liquidity during the year while maintaining compliance with various debt covenants. Our debt to adjusted EBITDA metrics was 9.47 times and leverage was 45% as of the year end. The increase in the two metrics year over year were driven by the impact of pandemic on property operations and valuations over the 3 quarters in 2020 and the timing of development spending and completions. We wrote down our investment properties by about $527,000,000 or 3.7 percent during the year.
While we expect the 2 debt metrics to increase marginally in the near term, given the impact of the pandemic on a 12 month trading basis, We maintain our long term goal of keeping our leverage and debt to adjusted EBITDA within the target range of 42% or lower and around 8 times, respectively. Our cost of debt continued to decline with the weighted average Effective interest of 3.2% on proportionate share basis, which compared to almost 3.5% as of last year end. Our floating interest exposure decreased to 1.9% as of the year end from the 6.4% as of last year end, which was partly due to timing of the December 2020 green bond issue and no utilization on the floating revolver. We remain committed to a consistent and disciplined approach To managing our balance sheet and capital structure, to maintain strong liquidity, financial flexibility and to position us well to navigate through crisis and invest in accretive initiatives to create value for the long term. With that, I'd like to turn the call over to Ed for his closing remarks.
Thank you, Chi. Thank you, Jonathan. Thank you, Jennifer. And they certainly are closing remarks for me, Because as most of you know, this will be my last conference call as CEO of RioCan. It's certainly an unusual one.
I can't see the rest of the RioCan executive team or see when they roll their eyes during part of my remarks. So that's probably good. On April 1, I'll be passing the CEO baton to Jonathan Gitlin and move to a new role as Non Executive Chairman. In that seat, as well as working with our Board, of course, I will be available to Jonathan for any advice he wants or just to bounce around some of the dynamic new ideas and strategies that I have no doubt he will bring to the job. Astonishingly enough, this is my 108th quarterly report.
Thank you to everyone for putting up with me for 27 years. It's certainly a long time and lots of excitement, new initiatives, crises and setbacks over those many years. I won't reminisce today or at least not much. You'll have to come to a post COVID party for that. But it's remarkable When I look back and recall that the first 2 or 3 years of investor meetings and calls, and of course then they were all in person, were mostly taken up with explaining what a REIT was and why it was a good investment, which it was.
And today, it's even better, quite frankly, with the way the Market has reacted. As a side benefit to everything I did for or we did in creating this helping to create this industry. We've actually created a lot of job for real estate analysts. So some of you here might keep that in mind when you write your reports. I generally don't have regrets, but simply move on to the next decision.
I do regret, however, that we found it appropriate to reduce our distribution as of January 1, 2021. It took a once in a century pandemic arriving right in the middle of an expansive development program to lead us to this difficult decision. But it was the correct one, freeing up over $150,000,000 in cash and equity, which together with our other initiatives will enable us to keep our balance sheet extremely strong while continuing to build value and cash flow through our development efforts. The stability of our cash flow is indicated by the numbers for 2020, including the metric that became so important early last year, Rent collection are clear. Recan's portfolio was created over the last 27 years, Curated particularly over the last decade and its strength, resilience and future potential are hopefully becoming apparent to all.
It is a portfolio that was partly acquired and partly developed and my opinion could not be duplicated today. Besides the stability it has demonstrated, We are only at the beginning of surfacing the inherent value it contains, maybe in the second inning. We took a conservative approach to valuations in 2020, writing our portfolio down by $527,000,000 or 3 point 7% as G mentioned. But whatever my personal opinion of our being the most conservative amongst our peers is, It certainly created more runway for surfacing and increasing value over the ensuing time. In addition to the portfolio itself, the quality and experience of RioCan's team also differentiates us and will enable us to achieve the value and cash flow growth that I'm confident they're coming.
No point in complaining about our unit price, but I will simply point out that not only is it well below our beaten up NAV, A huge discount, probably the biggest it's ever been, but that NAV reflects none of the great things that are being created nor much of the most of the development pipeline that we've already zoned, not just thought about or applied for. I mentioned earlier that I rarely have regrets. But while it is the right time for me to transition to Chair, I do regret That I will be in a watching role as opposed to a doing one, while Jonathan and his team create enormous value and new cash flows for our unitholders over the next few years. Mind you, as a significant unitholder myself And as Non Executive Chair, I will certainly be cheering them on and watching with pleasure. That's it For my remarks, I'd like to turn it back to Melissa for any questions that anybody has.
Thank Our first question comes from the line of Mark Rothschild from Canaccord. Your line is open.
Thanks and good morning and Congratulations, Heather. Good morning, Heather. I'll give you thank you as well. So, Jonathan, I heard your optimistic comments about more troubled operators such as Jim's and Restaurants, maybe give some additional color on what extent will they be able to pay the prior level of rent as Exit these lockdowns and do you expect some of the spaces will ultimately need to be re leased?
Go ahead, Jonathan.
Thanks Mark. Yes, I think that those categories movie theaters and restaurants are going to see some disruption. Movie theaters, I think that there will be, let's say, a reduction in the amount of space required, but I do think the movie Vision business will continue to be part of the Canadian retail landscape. I think it will be just Smaller, I think both the number of theaters that are out there will be reduced a little bit and perhaps the size of some of those theaters will be reduced a little But I do think that where there are theaters that are high performing, they will continue to be high performing in the future. Thankfully, a lot of ours are.
And I think that we will be able to maintain the rents, which we've already seen decline a little bit over time. So I think they're not at a high level to start with. But I do think some of those theaters will come back to us. And what I would say is from reviewing every one of them, Mark, which we do constantly to ensure that we have contingency plans Depending on what happens to those theaters, the majority of them can be utilized for other things, be it a redevelopment entirely Or simply redefining the space as something else be it retail or industrial. But by and large, we We think that the majority of our theaters will continue to be in existence and we don't see significant rental pressure Going forward on all of our locations, but some of them we certainly will.
And then with respect to restaurants, I mean, look, I think this pandemic has had a serious short term impact on restaurants, but I don't believe that restaurants, particularly some of the ones that we're dealing with Have a larger balance sheet and I would say a fairly sizable infrastructure, like recipe foods. I really don't believe That their business model is going to be affected significantly in the long term. I do think the next year is going to be extremely tough for them. And I think there will be some banners That will lighten, but I do think that the trend towards eating out at restaurants will reinvigorate itself on the other end of this And therefore demand will increase again and there will be again I think the opportunity particularly in some of our very well located properties To increase rent over time, but again, the next year, that won't be the case because there's simply I mean, they are suffering quite tremendously.
Okay, thanks. Maybe just one more question. Over the past number of years, RioCan had been extremely active in divesting assets and obviously that took a pause. We saw over the past number of months some other retail REIT sale properties with interest rates where they are. There's understandable interest in well leased assets.
Should we expect a pickup in asset sales this year? And maybe related, do we need things to stabilize more before investors kind of more confidence in what
I think you're going to you will see an uptick in Divestments this year and recycling of capital. And we're starting to see the investment market slowly come back to life. It all depends on the type of asset, Mark. And I think on basically on your question, I'd answer. Stay tuned.
Okay. Thank you very much.
Your next question comes from the line of Howard Leung from Veritec. Your line is open.
Thanks. Good morning. Any idea of the amount of tenants or percentage of tenants currently on the new rent program?
That's been relatively opaque, but let me turn the detail if we have a detailed answer on that to Jonathan.
Thanks. Yes, it is opaque is the right word on this one because the landlord involvement has been somewhat disintermediated. We don't Have a clear sight other than anecdotal as to who's using it. As I suggested in my notes, there was we have set up an ambassador program. So we are Being utilized as a resource for a lot of these tenants to help them with the application process, but we have not yet got a clear sense as to exactly Who or how many of our tenants are utilizing it?
My sense is though that as tenants become a little more comfortable with it and they recognize the benefit in it, there's going to be an uptick. And because it is retroactive to October of 2020, we do believe that that is one of the elements that will actually Prove still our 2020 early 2021 rent collection numbers, but I can't answer your question with any definition at this point. But as I said, the number of tenants are increasing as months go on and as the process becomes a little less
We find that a lot of our tenants are a Little more wary of dealing with the CRA than they were with the CMHC under the original rent program. A CRA tends to scare a lot of people. So I think that's been one of the reasons for the slow take up.
Right. No, no, I understand that. I want to also turn to the renewals. The amount of square feet renewed this quarter was pretty healthy. Spreads were a little light, I think, even compared to the past few quarters.
Are you seeing kind of maybe a trade off there, at least In these past few months as the lockdown persists that maybe you have to line the spread a bit in order to get more renewals?
I think there's an element of truth in that. I think we always have 2 goals in mind when we approach and renewal, keep the tenant and increase the rent. And depending on what's going on in the world, those Assume relative importance. Right now, I think the importance is keeping the tenant And the tenant has a bit of a stronger hand, particularly when he's not being allowed to operate, which is the case in some of these things Or when you're renewing empty office space that's not being used. So if to the extent we've erred, we've erred on the side of keeping the tenant.
And I think you'll see those spreads as this pandemic hopefully comes to an end sooner rather than later, I think you see those spreads increase back to more normal levels.
And I can add one thing to that Well thought that answer, which is that when we are doing lighter than average renewals, we will keep the term short because in recognition of the fact that this is not A terminal condition, right? I think that the conditions will improve. So we very methodically worked with the tenant
Okay, great. No, that makes sense. And then just maybe one final question on the credit ratings. DBRS has put you on negative trend. And how are the discussions with them going?
And should there be a downgrade? Does that Really impact your strategy going forward or do you think that you can mitigate that?
I think if I'll let Chi add to my comments If she wishes to, we're in constant contact with the 2 rating agencies, S and P and DBRS. We found S and P is taking a bit of a longer term view of this pandemic. And so far, obviously, there's been no activity Keep in mind DBRS had us rated 1 notch higher than S and P, we certainly don't want to be downgraded by anybody, but we're very, very committed to keeping our investment grade status. And at the end of the day, I think if the worst happens with D of ARS, I'm not sure it would make that much difference
No, Ed. I think
you answered it very well. I can keep in mind just one thing. I mean, we've always run the ship, so to speak. And I don't want to make light of our credit rating because believe me, we're without one eye on that credit rating and wanting to keep our development program going, We would not have even considered reducing the distribution because certainly financially we can afford it. But this is like but we didn't want to sell stock to raise equity and quite frankly reducing the distribution was the equivalent of doing 150 odd 1,000,000 Dollar equity deal, but quite frankly giving away stock at these prices in my opinion.
So this was the lesser evil. And it was that credit rating is top of mind. But we've always run our balance sheet where unsecured debt is Probably, well, I think it's about 40% right now, but it's certainly less than half of our total debt. And the secured debt market is alive and well and actually in many cases right now cheaper than the unsecured. So we always have options, Lots of options.
But when you're sitting with $8,000,000,000 plus of unencumbered assets.
For sure. And the spreads, I think, between BBB, high and BBB are not that far. So that's good to know. So thanks again and congrats again to Ed and Jonathan, I'll pass the line.
Thank you.
Your next question comes from the line of Sam Damiani from TD Securities. Your line is open.
Thanks and good morning. Just firstly on the office tenant departure, I'm pretty sure that was a pre COVID decision. Could you confirm that and also clarify when the rent on that lease stop or will stop?
Yes. I'm going to turn that over to Jonathan. I'm pretty sure you're right. This particular they were talking about Consolidation like over a year ago, so it was a pre COVID decision, I think. And I know your last name is Damiani.
Hi, Sam. Yes, Ed is right. This was something that has been in the works for a little while. We had pre planned and started looking for tenants quite some time ago. Obviously, the impact of the pandemic has made that Search for new tenants is a little more challenging, but given the nature of the space, we feel that over time we will get at least up or at least The majority of it, but we did lose it pursuant to plans that were in place a while ago.
And I believe the rent has already stopped.
Okay. Thank you. And next question just on to leasing. The new leasing has It's come back pretty nicely in the latter part of 2020. What is the pipeline looking like right now for leasing active leasing discussions,
Job of pivoting to look at tenants that are a little bit more unconventional than what we're used to. And we've because of that we have Actually, particularly in our well located major market centers, decent demand for space and we're seeing empty boxes that have arisen as a result of apparel Kevin is leaving, backfilled pretty quickly. And an example of that is we have a welcome center in Calgary In over 20,000 square feet of space, they took an old furniture store at a higher rent, which is effectively a government tenant that allows for new residents in to come and visit this place to get, I guess, just get a sense of what's available in Calgary to them. And it actually creates a great cross shopping Opportunity and it's a good co tenant, and that's one example of many. There are health care uses that we're now starting to see more of.
And then the categories that are growing are the ones that you'd expect in this pandemic and we continue to see that kind of growth and we think it will happen after. Those are a lot of the value oriented retailers, which include grocery stores, of course, but also the likes of Dollarama and TJX Banners. And we're seeing growth from all these different places. There's not enough talk about Those elements of the commercial landscape here, a lot of people are focusing on those that are shrinking their footprints like apparel, which is understandable because people tend to focus on some of the negative aspects, but we are actually seeing some
And finally, Would you have like a specific outlook for in place occupancy in Q1 or maybe even as far ahead as Q2 based on what you're seeing today?
You know what, today is so unpredictable. I mean, you tell me, Sam, when the lockdown will finish and when we can actually Start showing tenants space live. I mean, I think our leasing guys have been remarkable in doing the amount of leasing and so on where property tours are just not done and travel to go take a tenant So I think when things go a little bit back to normal, we'll be able to give you Solid answer to that. My feeling and I welcome Jonathan's comments, it's bottomed out. And over the course of 2021, it's going to get better as far as options.
Yes, I would concur with that entirely. I think that we did reach a trough in late 2020 and now from based on the momentum we're seeing, it will start to increase over each quarter this year.
Yes. People do see an end to this, Sam. I mean, it's an end that's sort of moving around with the rollout of the vaccine being To be complementary, weak. And but they know that sometime this year, You will get people out there and whatever passes for normal in the second half of twenty twenty one, we'll get there. So QSR restaurants are signing up new deals for openings and there's lots of deals that are being And we'll continue to be done where tenants look to, well, okay, if I can open at the end of 'twenty one or the beginning of 'twenty two, that's good.
And there is starting to be that confidence out there.
Thanks. I'll turn it back. But Ed, congrats again and looking forward to We're seeing you on BNN from time to time.
Well, you'll see me on in about 40 minutes.
Your next question comes from the line of Tal Woolley from National Bank Financial. Your line is open.
Hi, good morning everybody.
Good morning, Tal. Hey, Tal.
Just on the tenant side, I'm wondering when you look at sort of the vulnerable slice of your tenant role, If these guys have made it this far, do those tenants still, when you're talking to them, feel committed to continuing and how are they feeling about operating in a post SECRA, post SIRS World.
Yes. Let me take the first shot at that and Jonathan can add as he wishes. Included in that 22% of what we call Potentially vulnerable as opposed to vulnerable, are some pretty big names. And At the risk of insulting any of them, that includes Cineplex, that includes all our gyms, Good Life LA Fitness includes Big chain bookstores. And in talking to those tenants, which we constantly do, yes, they're very committed to the post pandemic Future.
Does that not mean, as Jonathan mentioned, there may be less theaters a year or 2 from now than there are today? Probably will be. We're expecting that. And in fact, in some cases, where we have redevelopment plans, we're encouraging that. But certainly, Jim's, I have no doubt that once they're allowed to operate in even a relatively normal way, They will be back in business and just the way it was before essentially.
Good Life, I know, is so committed to their survival. If I'm not mistaken, they announced they had taken a large A government leaf program loan, I think in the neighborhood, if my recollection is correct or not, in excess of $300,000,000 So that's how committed they are to getting through this thing because if you remember the details of that, that's quite an intrusive program.
Yes. And so I'll just add a little bit to that good answer, which is that we do speak to our tenants that we consider vulnerable all the time and this ranges from the larger ones like Ed said, which are some of the gyms and bookstores and movie theaters, but also some of the midsized and smaller ones. And The response that we have received is exactly that. Hey, we've made it this far. We want to enjoy the other side of this.
And I think there's a general sense and I think they've gleaned this from also happening in the U. S. That there is going to be commercial exuberance in Canada once there is an ability to open up in a safe manner. And I the same way we are optimistic about the end of 2021, they too are optimistic and really don't want to miss out on this. And because they've weathered the So much and granted a lot of those storms were floated through on the backs of generosity of landlords and the government programs that However, it's arisen, a lot of these tenants feel that there is a lot of upside coming at the end of 2021 or hopefully in the middle of 2021.
And that is certainly the feedback we've received from a number of them.
And if you look at like some of your smaller Tenants, a lot of them have gotten sort of pushed into offering some sort of online e commerce, click and collect kind of service That maybe they probably weren't offering before. I guess their tone changed about how, they're thinking about the business, Their own businesses too?
I think they all know that they have to have more online capabilities. Using myself as an example, I can tell you at the beginning of the pandemic last spring, I ordered some books from Indigo. At the time they were using the Canada Post effectively for the delivery, it took almost, I think about 10 days to get here. And I ordered some books about well, at the beginning of this week, and they took 2 days to get here. So clearly in their logistics, Indigo has adapted and because a 10 day delivery time It's unacceptable to anybody.
So but does that mean they're giving up stores? No. The people who love books Love browsing in a bookstore. I'm one of them. And while I'll order online when I have to, I far prefer to go to The store.
And I think you'll see a lot of the particularly smaller retailers continue to build their online presence. But the I think the model is the Target stores down in the United States, even though I hate using their name because of what they did to Canada, where they make the store the center of their online business. And I think you'll find a lot of these smaller tenants will be in exactly the same position. The ones that are going to succeed, they must have an online presence, But they also have to have that bricks and mortar store. The take up in our curbside collect program that we started Really, it's pretty early in the pandemic.
I think it's increasing by the week. Anyway, Jonathan, anything you want to add?
Yes. I think that I mean, there's a reason Shopify is doing so well. A lot of the tenants, big or small, they're figuring out how to establish online presence. But as I said, I mean, what we're trying to do is help our tenants change or adapt because this buy online, Pickup in store or click and collect model is taking on a lot of prominence and it's really much more efficient for these retailers to do it that way Rather than delivering to 1's front door and delivering to 1's front door is also not ideal for a consumer either. And this is the feedback we're getting from a host of our tenants We really do believe in the economic virtues of having these what are really just fulfillment centers that have And so we do believe that there's absolutely a need for these tenants to pick up their game when it comes to online, But they also recognize the need to make their stores more valuable and useful in furtherance of getting consumer goods to consumers' homes.
Okay.
On the balance sheet side, the debt to EBITDA ratio is obviously above your longer term target of 8 times. You've got a fairly hefty development spending commitment this year. How should we expect to see that ratio kind of evolve Over the course of 2021 2022. Obviously, it will be better by the further out we go. But I'm just wondering in the near term quarters, like should we be anticipating that ratio to probably rise through the first half of the year and then maybe start to come down after that?
I think you may see a gentle rise of it and it will be gentle in the Q1 or 2. I think it's going To depend and again, we're always juggling a few balls as I say on how Quickly, we're able to move on some of our disposition plans as we responded to Mark Right at the beginning of the question time. And, but we're going to have one eye on that. I don't think you'll see it move much In the 1st 6 months, but I definitely think that after we get past midyear, you'll start to see the ratio improve.
Okay. And then just lastly on the Hudson's Bay JV. In 2000 I can't remember 2014 or 2015 when the deal got struck. I remember that you guys had a committed a capital commitment that they could That the JV could call over time if you put some more money into that. Have you committed the full amount now?
Yes, it's 100% invested. There is no further call.
Okay. And When do you anticipate the process of starting to rethink some of those urban flagships will begin?
Well, I think it has begun in some ways. I know Hudson's Bay, which is taking the lead of it, Has been exploring the market, for example, specifically with Vancouver and Montreal. They got to figure out, which I know they are in the process of doing, what they want their own footprint to look like in those properties On a go forward basis, but the and they want the pandemic to be finished. So, I mean, quite frankly, I don't think you'll see anything happen until 2022 or even a little later, but I know there are constant discussions. I mean The property in Vancouver, which is an incredible property, whether you look at it for I mean, it's attached to the Pacific Mall from a retail perspective underground and it's in the heart of the city.
And so whether you look at it from an office perspective or residential perspective or retail perspective, it's got incredible value. And to say the exact same about the one in Montreal. Calgary may take a little longer just because it's in Calgary. Ottawa, I think, may move forward fairly quickly, too. So, but we're sort of in the hands of HBC.
Keep in mind, we get paid a pretty good rent and they're totally current on that, I might add, on the joint venture rents
And that pretty good rent, would you do you feel that that's like At market levels?
It may be Given how the environment changed? Yes. Given how the environment changed, Probably above market, but keeping in mind that Hudson's Bay is paying 80% of that rent to itself. It's really not a problem. Like I say, it gets paid and we're confident that it will get paid and it gives us, I think, Jonathan, pretty close to a 6% or about a 6% return right now on invested capital.
While we're waiting for some transactions to happen, which I have no doubt they will. Mr. Baker is a very clever, creative man.
Okay. That's great. Thanks very much. Congratulations, Ed. Thank you.
Thanks, Al. Any further questions, Melissa?
Yes. Your next question comes from the line of Pammi Bir from RBC Capital Markets. Your line is open.
Hi, Bonnie.
Hi, everyone. Ed, Jonathan, Chi. Just I'll try to be quick because I know we're kind of hit the 60 minutes. So last year was obviously more pronounced in terms of bankruptcies and closures. But maybe just based on your discussions and I guess an extension of some
of the comments you made
call. What are your thoughts on how this year may shape up?
Jonathan?
Yes. So Last year we had I mean about 0.9% or under 1% of our income was affected by bankruptcy stores that actually closed because of bankruptcy. Because remember a lot of these CCAA restructurings were in fact the leases are restructured and they subsist beyond the CCAA filing. And truthfully, usually in the normal Of course, we see a lot of fallout in January. And quite honestly, we didn't see really any this January.
And hopefully, that's a sign of the fact that there's generally a little more health out there than perception would dictate. But we're not and we're not hearing any Rumblings of additional filings. I mean, if you think about it, most of the weaker apparel tenants already did this, Right. And then some of the other tenants that are in a perilous situation, again, they are getting helped substantially by the government to bridge them through this. And I think their uses are actually quite relevant in a post COVID society.
So I don't See a huge number of bankruptcies coming, but again, it's always unpredictable. You never know how tenants are looking at the world. So I mean, it's a bit of a vague answer because it's a bit of a big concept, but that's the sense we're getting. And as I said, usually it's January where these things happen.
Got it. No, that's good color. Thank you. And just maybe lastly, coming back to the theater exposure, you mentioned you're anticipating or planning I guess less exposure over time. But how much of your exposure do you think may actually decline over the next, call it, 12 to 24 months?
Well, declines I mean, it has declined recently through dispositions, and we fully expect that over time just through normal course, Redevelopments, dispositions, etcetera, it will decline a little more. And we're certainly it's going to also be we're not doing any more I mean, I can't imagine there'll be More growth in that part of our portfolio. So I do think over time it will continue to decline, but it's going to be incremental.
Okay. That's it for me.
Thanks very much and congratulations again on the retirement.
Thank you.
Thanks, Brian.
Your last question comes from the line of Dean Wilkinson from CIBC. Your line is open.
Thank you. Good morning, everybody.
Good morning. Good morning, Dave.
Ed, I time this to be your very last question.
Okay. Thank you.
If Tom Brady doesn't have to retire, I don't think you do, but that's an entirely different story.
Yes, I'm a couple of years older than him, but just as good looking, I think.
Yes, exactly. As you look back on the 27 years and thank you for the education,
What do you think
the biggest change in the business has been? And what does that mean for the next 27 years for Jonathan? And kind of What can we take from what you've seen and how the industry has kind of evolved over that time?
Well, I think the Biggest evolution over the years has been the concentration on the major markets. I think we were 1st to figure that out and but everybody else has figured that out. And the second, whereas It used to be back in the first, I'll call it 5, 6, 7 years of this industry, well, you know, a dollar of Loblaw's income In Sault Ste. Marie, it was probably worth $1 It was the same kind of income as $1 of Loblaw's income in Toronto. Over time, everybody started to figure out that, that wasn't really the case, Because you were able to get better growth from your ancillary tenants, Loblaw's was doing more sales per square foot in the major markets And all of that related back to population growth.
So you saw a movement over the years to the major markets. I think Starting about 7, 8 years ago, certainly in our case, maybe even longer, everybody also started to realize that the biggest asset In these major markets that the REITs had was these large land holdings at critical locations. By definition, you built a shopping center at the intersection of 2 major streets, so people can get in and out easily. And guess what, that's where the cities are growing And because transit lines are being put on in those major streets. And everybody realized that to as The Internet grew in popularity.
You really needed to create value from the assets you held. It means everybody had to go into development. When we first started doing development in ways probably close to the beginning of this century, we were the only guys doing it. And now I think everybody is doing that right from us to Crombie, maybe not CTEREIT, but Those captive REITs are a little bit different. But the I think those are the biggest changes That growth is important.
20 years ago it was, hey, you actually sent me a check this month. Thank you very much.
Well, that's great. That's and I can say, I think we're all looking forward to the post COVID retirement Hardee, so
fun. Okay. Thanks for everything and stay well. Okay, Dean. Thank you.
Melissa, I think that marks the end of this conference call. I'd like to thank everybody who's still on that called in. And I won't say I look forward to speaking to you next quarter because you'll You don't get to hear from younger and smarter people than me exclusively. Anyway, Thank you, guys. Thank you, Jonathan.
Thank you, Chi. Thank you, Jennifer. And you know what, I guess that's it. And I'm sure Chi will be talking to many of you 1 on 1 later in the day. And for those who have any interest, I'll be on CNN in about 23 minutes.
BNN. BNN, CNN, they only got time for the Senate. Okay, everyone. Goodbye.
Bye.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.