Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust 4th Quarter 2019 Conference Call. I would now like to hand the conference call over to Jennifer Sous, Senior Vice President and General Counsel. You may begin.
Thank you, Jody, and good morning, everyone. I'm 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 the 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 statement. 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 looking statements. In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial 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, 2019, 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 to everyone for taking the time to hear about our operational highlights for 2019. Thankfully, there were many. 2019 was an important year for RioCan. We worked hard to shape Canada's preeminent major market portfolio. Our results reflect the benefits of 90% of our revenue coming from our strong properties in Canada's Bechtel markets.
52.4 percent of our revenue is now coming from the GTA. Now how did we get here? As most of you know, we achieved the bulk of the transformation through an intensive disposition process that included the sale of over $1,600,000,000 of largely secondary market properties. We complemented these dispositions with development completions and strategic acquisitions, all in the major markets. Now to put it simply, we've repositioned our portfolio.
And because of this, we set ourselves up for greater success now and into the future. Retailers, office tenants and residents appreciate the quality of our locations and as a result, there's demand to be part of them. While there's no question the retail landscape is evolving and is full of challenges, RioCan is ideally suited to succeed in this environment. We're confident that our combination of strong locations, sound operating principles and diversified revenue streams along with the best team in Canada will continue to generate growth. And to be more specific, we've evolved our inherently value rich portfolio.
It consists primarily of necessity based retail and urban mixed use properties. These properties are positioned in the transit corridors in some of Canada's most desirable high density locations. Mixed use urban and grocery anchored centers account for more than 60% of our annual rent. These asset classes are attractive to a growing customer base. They are also compelling to the strongest tenants.
Further, our tenant portfolio consists primarily of retailers from sectors that have demonstrated resilience and growth. 74.5 percent of our revenue is derived from necessity based and service oriented tenants. 50.2% of our tenants are in the grocery, pharmacy, liquor, restaurant or service sector. We've reduced our exposure to the more Internet sensitive tenants such as department stores and apparel to less than 8.5% of our total revenue. Our locations are desirable and because of this, our major market properties deliver consistently strong results.
We ended the year with 2.5% same property NOI growth and 97.7% occupancy, plus an extremely healthy leasing spread of 9.7%. I'm also thrilled to report on the success of the first two RioCan Living residential rental buildings, East Central here in Toronto and Frontier in Ottawa. Frontier is now stabilized a year after opening with rents that are higher than pro form a, with leased 97% of that building. And eCentral is 86% leased and is expected to achieve stabilization in the next few months. In their 1st year of lease up, these two towers generated residential rental NOI of $2,400,000 The stabilized NOI between the two properties is expected to be approximately $13,300,000 at RioCan's interest.
The success we've achieved with our first foray into residential validates RioCan's instincts regarding the demand for quality, well located rental residential within these mixed use communities. We see these 2 residential properties as emblematic of our numerous residential developments that are nearly complete. We're going to implement the best practices learned from our first two residential projects and apply them to all our future RioCan living properties. We're also looking ahead to ensure continuous growth through a sustainable development pipeline. As we complete developments, we break ground on new ones, achieve zoning on others and initiate the zoning approval process on still more.
It's a virtuous cycle. This cycle was well demonstrated by RioCan's development team through 2019. We completed approximately 530,000 square feet of new development GLA. We increased our development pipeline by 2,800,000 square feet and we ended the year with 29,000,000 square feet of development potential. With this pipeline, our balance sheet and our great team, RioCan will continue unlock the significant value that's inherent in our existing assets.
And in so doing, we're going to continue to improve the profile of our portfolio. We're going to add substantial net asset value and as well as diversify our sources of revenue. Moreover, we get the earned income from our properties while we wait to develop them. The transformation of our portfolio will take further strides forward in 2020. We're going to commence operations at 5th and Third, our mixed use project in Calgary.
We're going to start leasing units at Pivot, the 36 story, 361 unit residential rental tower at Yonge and Sheppard in Toronto, and as well in Brio, the 12 story, a 163 unit rental residential tower in Calgary. We're planning on breaking ground on 11 YV, our Yorkville condominium project here in Toronto, which I should add recently won the Multifamily Community of the Year Award by the National Association of Home Builders. We'll also complete the 1st phase of construction of the commercial portion of Winfield Farm in Oshawa, and we'll commence construction on the condo tower along with our partners at Tribute Communities. This condo tower is 503 units that are currently about 75% presold and it's expected to generate value creation in the range of 17% to 20% at our interest. The construction of an additional 150 3 condo townhouses in the same area will also start in 2020.
Now before I hand the call over to Chee, I want to highlight the important progress we've made this year in delivering on our sustainability goals. We successfully executed key sustainability milestones, including publishing our 1st sustainability report. We improved our global real estate sustainability benchmark assessment score, well that's a mouthful, by 77% over our 2017 score. From a development perspective, the EnWave Deep Lake Water Cooling System at the well is becoming a reality. The big hole that will house 7,600,000 liters of water is fully dug.
The energy output from the water in that tank will be supplied to the entire Downtown West District and ease the load on the electricity grid. Meanwhile, Frontier Rental Residential is using a high efficiency geothermal system that reduces carbon emissions and saves on water and electricity use. I would also like to mention the continuous improvement demonstrated by our operations team. With a renewed focus on utilizing our scale and national presence, we're seeing significant operating cost savings. In reducing these operating costs, we can maintain gross occupancy costs for our tenants and allow those savings to be allocated toward net rents.
Ultimately, these savings are good for RioCan, they're good for our tenants, and they certainly contribute to sustainable growth. So to wrap up, the desirability of RioCan's locations, its tenant mix, its proven operational excellence, the diversity of the revenue sources and extensive pipeline of value creation opportunities leave us well placed to drive unitholder value. On the back of these attributes, RioCan is well positioned to achieve our goal of strong unitholder returns to ever increasing FFO quality and continuous growth. Qi, over to you.
Thank you, Jonathan, and good morning, everyone. The Q4 was another successful quarter for RioCan. It contributed to a strong 2019 for the trust. RioCan recorded FFO per unit of $1.87 a $0.02 increase over 2018. This increase was achieved despite the dilutive effect of $500,000,000 dispositions completed in 2019 and full year dilutive effect of nearly $1,000,000,000 dispositions completed in 2018, dollars 35,600,000 in lower realized marketable security gains $5,000,000 in lower capitalized interest as a result of substantial development completions and $2,200,000 in higher condominium marketing costs.
These factors, in aggregate, negatively impacted this year's FFO per unit by about $0.22 A number of key growth drivers, however, more than offset these dilutive factors and led to the FFO per unit growth year over year. Such positive factors included higher residential inventory gains and NOI from our residential rental business, same property NOI growth, transaction gains from equity accounted investments and lower G and A costs. As a result of the growth in FFO per unit, our FFO payout ratio further improved from 78% in 2018 to 77% in 2019. As of the year end, our IFRS book value per unit grew to $26.14 a 4% increase compared to 2018. There is significant NAV growth embedded in the trust Currently, the tribe has the highest loan entitlements among our peers based on available public information.
Specifically, out of our 29,000,000 square feet development pipeline, 50% or 14,600,000 square feet is already zoned and another 23% or 6,500,000 square feet have zoning applications submitted, representing a total of 73 percent of our pipeline. The Trust has $266,000,000 of cumulative fair value or $0.84 per unit recognized on the balance sheet relating to 3,600,000 square feet of incremental density for our project with detailed cost estimates. This averages to about $64 per incremental billable square foot. To put things into perspective, the Trust's current 29,000,000 square feet development pipeline includes 24,700,000 square feet of incremental density. This development pipeline relates to 61 projects out of our 220 property portfolio.
Our pipeline will continue to grow as we identify more intensification projects. As of this year end, the chart's average net rent per occupied square feet was $19.75 This represents a compound annual growth rate of 3.7% since the end of 2015. It highlights the significant improvement we've made to our portfolio over this period as we surpassed our strategic milestones related to our major market and GTA focuses. The improvements in our portfolio have resulted in strong blended leasing spreads as well as a resilient and diversified property and tenant mix. Since 2016, the average population within 5 kilometer radius of our portfolio has increased to about 198,000 as of the year end, a 31% increase.
While average household income within the 5 kilometer radius of our portfolio has increased to $115,000 a 17% increase over the same 3 year period. About 67% of the Trust development pipeline is located in the GTA. Within a 5 kilometer radius of these development projects in GTA, the average population is about 322,000 and the average household income is about $129,000 These demographics demonstrate the quality of our urban, transit oriented, mixed use development. We continue to prudently manage our development program and balance sheet. As at year end, our development cost balance on the balance sheet amounted to 9% of our total assets.
This is well below the 15% limit permitted under our revolver and other unsecured credit facilities. Our debt to adjusted EBITDA was at 8.06x on a proportionate share basis. This was accomplished despite the completion of nearly $1,000,000,000 strategic acquisitions during the year and the development cost of balance of $1,400,000,000 Excluding the $1,400,000,000 development cost balance, our debt to adjusted EBITDA would have been 6.3 times. Our leverage as at year end was 42.1 percent, unchanged from 2018. Our pool of unencumbered assets grew to $8,900,000,000 a nearly $1,000,000,000 increase from the prior year end.
And our debt composition was about 60% unsecured and 40% secured. These unencumbered assets generate 58.5% of our annualized NOI and provide 2 27 percent coverage over our unsecured debt, well above our internal targets. As at year end, the Trust reduced its floating interest rate debt exposure to 6.4% from 16.4% last year. As a result of our strong balance sheet, the quality and strength of our portfolio, we continue to enjoy ample financial liquidity and one of the lowest cost of debt in our industry. Subsequent to year end, the Trust closed its 1st CMC insured mortgage, a 10 year about $29,000,000 loan at RioCan's interest for Frontier in Ottawa.
It bears an annual interest of 2.63%. The Trust also expect that its existing 11 year $150,000,000 2.58 percent mortgage at eCentral in Toronto will become CMC Insurance upon the property stabilization in the spring this year. This will then reduce our interest rate for this loan to 2.33%. Maximizing CMC Insurance Mortgages is an important component of our debt strategy. It provides access to a new unit growth in the future.
Overall, we are pleased with our operational and financial results for 2019, and we look forward to building on our positive momentum in 2020. With that, I would like to turn the call over to our CEO, Ed, for his closing remarks.
Thank you, Jennifer, Jonathan and Qi. You have gone over more numbers than even I can absorb, But they're all important and they really indicate where what we achieved in 2019 and some pretty good hints at what we've got coming up in 2020. I'll largely stay away from numbers, although they are necessary of course in dimensioning what RioCan has achieved over the last several years. We're now in the unique position and I think that is pretty well unique amongst all our peers of having over 50% of our revenue coming from the fastest growing area in North America, namely the Greater Toronto Area, GTA. And that percentage will grow as well over 60% of our current and planned development activity is in that very GTA.
But before I speak about what we are so furiously building, I will dwell a bit on where we are in the transformational journey on which RioCan embarked several years ago. First, it's worth noting that we have reduced our retail footprint by almost 10,000,000 square feet in secondary markets over the last couple of years, and I'm sure that almost 10,000,000 will become over 10,000,000 fairly shortly. While dramatically increasing our major market assets simultaneously. Our remaining secondary market exposure of less than 10%, a number that will continue to decline is composed almost exclusively of dominant open air centers in such strong markets as Kingston and Sudbury. At this juncture of RioCan's transformation, I believe we have already created a portfolio that will give us that 3% plus same property growth that we have been striving to achieve.
There will be bumps in the road caused by the continuing shakeout in the retail industry, but the power of RioCan's portfolio and the strength and depth of its team will enable us to turn every bump into an opportunity for growth. And so while these bumps may cause some quarter to quarter variability, we are in a place where 3% same property growth on an annual basis will become our norm. And when we add in development growth, that number will be closer to 5%. But the portfolio owned by RioCan today and its platform for growth is only the current stage of our evolution. Yet it is a critical one as it provides the cash flow and financial strength to fund our ongoing significant development program and of course fund our ongoing obligations to our Of our over 29,000,000 square feet of identified density in our existing properties, as Qi has said, about half is already zoned.
Our challenge over the upcoming years will be to pick out the most promising and profitable developments out of this cornucopia of opportunities, while staying within our financial means and keeping our balance sheet ever strong. While media and analyst attention focuses on such mixed use projects as the Well, Yonge and Eglinton and Yonge and Sheppard And this is certainly understandable as the high profile and quite frankly eye popping value creation and cash flow at these very large scale and intensely urban properties is remarkable. We have many other mixed use developments underway. What we are creating on 120 acres of land at CIMCO and 407 in Oshawa has been mentioned in the past and was mentioned as well by Jonathan today. But in addition to a completed first phase of townhomes, we are commencing this spring a high rise condominium, which Jonathan mentioned of over 500 units, which is 75% pre sold, something I never thought even 2 years ago I'd be able to say to you about a property in Oshawa.
And at the same time, this spring, we're commencing about 116,000 square foot supermarket anchored retail facility, which is already about 2 thirds pre leased and a second phase of about a further 150 townhomes, which in only 3 weeks of marketing has been pre sold at about 50% at the 50% level. This will truly be a mixed use project in North Oshawa where the retail feeds the residential and the residential feeds the retail all between 2 major institutions of higher learning called Ontario Tech and Durham College, which again, not sure anybody could have really contemplated several years ago, but here we are doing it. Similar projects will be commenced over the next 18 months in Brampton, Ajax, Ottawa and other places. And I'm pleased to note that we will soon be commencing our 1st rental building in Surrey, British Columbia. This one is particularly gratifying and symptomatic of RioCan's reach and abilities.
A small pad on the edge of a very successful shopping center called Strawberry Hill in Surrey, which for some reason could never be married to a suitable retailer. So it lay fallow and actually unpaved for well over a decade. And now sometime this year, we will be commencing a 120 unit apartment building on this very pad. Stories such as this are constantly being created at RioCan, both as a result of our superb property portfolio and our creative and extremely experienced team. The value creation and cash flow growth that is occurring at RioCan has not yet been recognized by the public markets.
I believe they will be eventually, but at present, the private markets and deep institutional pockets are well ahead of the public markets in their recognition. The Continuum transaction last year and the Northview REIT transaction announced this very morning are examples of private money value new assets considerably higher than the public markets. And I suspect you will continue to see additional transactions of this nature, not necessarily always on an entity basis, but certainly on an individual and portfolio scale. That's it for me. And I think we're now happy to open it up for questions to anybody in this well
Our first question comes from the line of Kyle Luly of National Bank Financial. Please go ahead. Your line
is open. Hi, good morning.
Good morning, Tal.
Let's maybe start with a couple of questions. Just on the balance sheet, given where rates are right now, how are you thinking about potentially extending the term on your balance sheet as you start to refinance some issues going forward?
That's exactly what we're doing. I think in the MD and A, we mentioned we just refinanced a fairly large in excess of $100,000,000 mortgage on a property in also in Surrey actually, Grand View Corner Shopping Center, where I think we did $106,000,000 at a 10 year term at 3.02%. So, that's just an example of what we're doing. Essentially, where we're doing secured debt, which is probably now under 40% of our overall debt, We're typically going for 10 years unless there's a very good reason not to like imminent redevelopment or something like that. And our unsecureds, we do intend to take advantage of the current very favorable interest rate climate to extend out the term of our overall debt profile.
Is there a target that you're looking to hit on that front or you're just going to move along as you can?
Yes. I think I don't think we've set an actual target. I think we're probably as of the current moment that a term of under 4 years, about 3.75, something like that. I'd like to get that closer to 5, sure. But when you're dealing with about $6,500,000,000 of debt, it takes time.
So, we are just going to incrementally move that into a longer fixed rate environment without setting any specific target because it's so opportunistically driven.
And then just on the well, you're talking about the Air Rite sale will soon close. The net proceeds that you guys expect from that transaction will be approximately what?
I think between us and Allied and a little bit going to Diamond Corp, it was in that, makes about $180,000,000 plus or minus $10,000,000 I hate to speak so expensively. But that should happen, I think, towards the end of this year and the beginning of next year. It will be phased in as we reach platform level on the various buildings. And keep in mind, we've of the largest residential building, of course, we can retain 50%. Actually, we retained 40% and we're buying 10% from our partners.
And it's I think it's probably one of the most exciting developments in Canada. And I think within a year or 2, everyone will agree with me.
Okay. And Chi, you had discussed the parts of your pipeline on which you had recognized density in your fair value. Can you just talk about and I apologize if I missed this earlier on the call, we've double booked, but can you just talk to which specific projects those fair value gains were recognized on?
Yes. I'll let Qi sort of figure that one out, but I will tell you our policy, which is a little bit different perhaps than everybody else, is to from an IFRS and value recognition point of view, we don't recognize anything until there are detailed construction estimates and or there's a transaction, I. E, by selling a 50% interest that obviously triggers track of it ourselves. It's an extremely significant number, but it is not reflected in our IFRS values or in the NAV numbers that Qi quoted before. And I'll turn it back to Qi.
Thanks, Thad. Tao, just to answer your specific question, the $266,000,000 fair value I mentioned earlier, that refers to the first category in our development pipeline. That is the project that's already under construction.
And that but do you know like where those rights were? Is it predominantly GTA, I'm assuming?
Predominantly, Toronto area, for example, includes a fair value we've already recognized on eCentral, on Shepherd Center. So on these projects, the pivots under construction on these type of projects that's either near completion or in advanced stage of construction.
Okay. And then just my last question, I think, Jonathan, you had made reference to this earlier is that you're trying to work your cost structure and try and find some OpEx savings that you hopefully can pass on to your tenants and keep a little bit for yourself in net rents. Is there can you give some examples of just exactly what projects you're undertaking to do that? And then is there a target that you guys have in terms of margins or something like that to try and drive that process? Sure.
So some
of the programs that we're focusing on are a thorough review of the way we manage parking lots, underground and otherwise, where we've tried to coordinate 1 single manager as opposed to having disparate managers across provinces, which is related to which has realized quite a significant savings in operation costs. But there are also things as mundane as snow removal contracts, heating and energy contracts and just qualifying that we are able to do with our large platform. But there are too many to list on this phone call, Tal. There's a broad initiative that we're doing in every line item of our budgets, quite honestly. And wherever there is the opportunity to centralize that procurement, we are taking advantage of it.
And so it is a substantial cost savings. With respect to a target or a margin level, we haven't I mean, what we're in now is, again, we're doing this thorough, thorough review and we're implementing a number of changes. But until we've assessed exactly what opportunities are out there, we haven't pinpointed a budget number yet. It is substantial, but we will look to do that on an annual basis in the coming months, I would suggest, which is set a budget target for cost savings.
I might add to that and certainly no numbers either that we're probably just at the very beginning of our progress in incorporating a lot more technology into our quite frankly our entire operations and we're particularly well suited for this I mean, for example, here at Yonge and Eglinton between what we already own at East Central and at Yonge Eglinton Center, we have, I don't know, 1,500,000 square feet and or plus and that's probably going to keep growing with some of the announced acquisitions we've made going up the Yonge Street corridor, Shepherd Center and of course, obviously, The Well. But generally, there's so much technology out there that I know we spend a lot of time just sitting through presentations just trying to figure out what actually will work for us, sometimes what actually will work. And I think technology use over the next few years will actually generate not just fantastic efficiency and better service to both our residential and commercial tenants, but also cost savings. For sure. Agreed.
Okay. Thanks very much guys.
Thanks, Kyle. Thanks, Kyle.
Our next question comes from the line of Pammi Bir of RBC Capital Markets. Please go ahead. Your line is open.
Thanks and good morning. Ed, just going back to your comments on the public private disconnect, what are your thoughts in terms of maybe means through which you could perhaps help narrow that gap?
Well, I think trying to get the analyst community to recognize more than just our last quarter's numbers, but to really take a hard look at what we're creating both from a value and cash flow platform point of view and the real value, I mean, that we're creating. I told that little story about Surrey, where we had a pad of land that obviously had zero value, didn't even have paving on it. I've been out to look at it probably a decade ago and beat up on poor Jeff Ross, our Head of Leasing, say, why can't you find a tenant like this? And then when I saw it, I realized why we couldn't find a tenant. It was really at the back edge of the shopping center.
And yet, we're going to build 120 unit plus or minus apartment building. I think for us relatively low rise, but 11 stories?
Yes. Yes,
11 stories. So it will be relatively quick to build. And I wouldn't even hazard a guess as to what the cap rate would be on a brand new apartment building in Surrey, British Columbia, where the housing is very expensive and very scarce, but it's material and it will be from nothing to a lot. And we have dozens of those that I'm not sure the public markets actually focus on. I think even on our IFRS valuations,
and I'm quite proud
of this, I think we are relatively conservative. I'm not saying we're overly conservative, but when even our auditors, when they're asked by our audit committee, they say, on the sort of spectrum of aggressive on one side and very conservative on the other, where would you put RioCan's valuation? Always a tense moment in an audit committee meeting. And our external auditors said, well, we'd actually put it right in the middle. And that made everybody very happy.
But I'm not sure the public markets and the analyst community take into account that IFRS values are actually largely I shouldn't say largely, have a large dose of subjectivity in them. And that if you drill down into everybody's IFRS values, they're not all created equal. And I think ours as compared to everybody else's are probably understated. So I think and I understand analysts have to look at numbers and I understand all that, but I think when we get the analysts and the public markets, which are starting to look beyond those quarter to quarter numbers because this is not a quarter to quarter business. This is a long term business.
And what I'm quite proudest of RioCan is that we've taken made very long term changes we've done in a few years, which is lightning speed for a entity of having properties in excess of $15,000,000,000 of value. So, I think that's part of what we have to do. That's the educational part. And Chi and Jonathan and myself to a much lesser extent will be out there pounding the pavement, meeting with whoever wants to meet us both in Canada, the United States and even other places to hear exactly what we think is going on here. So that's one part of it.
Other part of it will be quite simply like we've done in the past, but we will continue to do it to do actual transactions with 3rd parties, which unlock that value and give us cash. Like in Mississauga, what was a without being too demeaning to our own property, a Value Village anchored shopping center at Sandalwood and Huron, Ontario. And we did a deal with our wonderful partner Boardwalk REIT where they bought a 50% interest and I think the value is about $80 per square foot on something that had again had no value at that moment. And we sold half. Obviously, at that point, we could recognize our half as being worth $80 And we've done those with Kilimarete.
We've done them quite frankly in quite a few places. That will continue as one way of really unlocking that value and making people understand. I think we will do it probably more often with financial partners than just operating partners because over the last several years, I think we've understood we've learned a lot from our partners and from our own experience. So, I think we're ready to go more financial than operating, but we're certainly not going to abandon our wonderful partners that we already have ranging I'll even give a shout out to Woodburn on that one where we've done a lot of deals with and we'll continue hopefully to do some. So those are the two ways that I know of to try to narrow that gap between what we really think RioCan is worth and what the public markets are prepared to pay for it.
And if you can think of any other ways, I'd be happy to hear about them privately or publicly if you wish.
No, that's a very good color. I guess, in short, educate and sell.
That's it.
Okay. So just maybe one follow-up on that with respect to the density value. We've heard some discussion from maybe some of your peers as to perhaps altering or giving more credit to that value in their IFRS or for GAAP purposes. Have you considered that at all in terms of changing perhaps how you book that value other than just on sales or on actual projects?
We look, it's something we continuously talk about and I'm not certainly not going to speak to how we account for things. I think the way I've managed to stay where I am, One of the ways is to, at the end of the day, vow to our very excellent CFO and finance team and external auditors. And when it comes to financial accounting and reporting, we're not going to be the guys that push the envelope. Having said that, I've thrown around some what some people might think as crazy numbers in the past, but I think as the years go by, you will see they are not crazy. And that number that I've thrown out in the past, which is still there even though because as Jonathan quite rightly pointed out, even as we realize and harvest some of what we've continued to do, we're creating new.
So I've thrown around the number of $1,000,000,000 of value in the past. I firmly believe it's there in some of this density. And quite frankly, it's probably a number that's grown since I started throwing around because the values of zone density, particularly in the GTA where, as Chia said, well over 60% of ours is, has quite frankly even astonished me in the last year or 2 to throw around numbers of $100 a foot for zone density today is considered giving it away. And that may apply to locations like well outside of the 416. And values that are in the downtown area, I don't even know what they are anymore, but they are in the multiple $100, dollars 300 to $400 quite frankly on occasion.
And what is the value which today we don't even carry of where we're now zoned and on at Eglinton and Laird where we're pretty well through the process of close to 1,500,000 square feet of a mixed use development of which about $1,300,000 is residential I think, maybe $1,250,000 a little bit of office and a little bit of retail a tiny bit of retail in the scheme of things. What's the value of that today? I honestly couldn't tell you. It's material. I can't tell you or where we are well down the road, for example, at RioCan Hall, which is probably the last major privately owned undeveloped piece in the entire entertainment area.
We're going to end up with about 850,000 square feet of density there. Got a lot of community sign off, a lot of political sign off. We're not all the way there yet. That will take us some time still. What is that worth?
Beats me right now. But I'll tell you, it's a lot worth a lot more than what we're carrying that property at on for IFRS. So I could bore you with many, many examples. Those are just a couple of high profile ones that people on this call may know them.
Thanks very much. I will turn it back.
Okay. Thanks, Fami.
Our next question comes from the line of Sam Damiani of TD Securities. Please go ahead. Your line is open.
Thank you. Good morning, everyone. Just a follow on similar question line there. How quickly do you expect RioCan Hall, Eastside and also Edmonton East to achieve zoning status or any of these 2020?
No. There's as I think we've mentioned before, there's always 2 aspects to redeveloping these properties. 1 and a very important one is the zoning. Good news is once you get it, you get it and you keep it. And lease side, the Edglington and Laird property, we'll have that in what I'll call pretty final form this year.
We've gone through all the major hoops. Now it's, dare I say it, and our development group will probably cringe when I say this, just paper work now. The creativity has actually already been accomplished. RioCan Hall probably finished zoning sometime in early 2021, I'm going to guess. But then comes quite frankly the second part of the whole equation.
It's called working with your tenants to actually make the property available for redevelopment. Not always in our control. Certainly, it's eventually in our control because every lease does have an end date and a 5 year period. But we have we are just about sometimes it's bad, but most times it's good. We are just about everybody's largest landlord.
And that gives us a very deep relationship with every single tenant that we have in those two properties, for example. So while I can't tell you today when either one of those will actually start, I can tell you that most likely the Eglinton cost down will actually be finished before we start and lease side. But it really depends on when our remaining tenants there, which were essentially down to 1 or 2. When they and we're working with them constantly on this, find suitable relocation premises, not the easiest thing in a very busy city like Toronto. But once we've achieved that zoning, we can be remarkably patient.
And keep in mind that even once you have your zoning, and that's how glacially this process works and why we're so proud that we started many years before everybody else and why we already have buildings in operation. From the time of actually getting your zoning to actually being able to put a shovel in the ground because of site plan agreements, Section 37 agreements, building permit applications and all the other hoops you have to jump through that I dismissed as mere paperwork. It's probably a year and a half. It's certainly a minimum of a year. So I would hope that Alaire can get started sometime in 2023.
I don't think it'll be much before then. It might be a little bit later depending on our tenants. We can haul would be later than that just because we're not zoned yet and we've got quite a few more tenants to somehow accommodate. Does that give you some that was a very long answer, but I could talk for about an hour on this.
Yes. No, that was very helpful. Maybe just switching gears to occupancy. Do you have some guidance for 2020 both for year end and maybe Q1? And also how are the backfilling of Home Outfitters, Bombay and Payless going so far?
Two questions there. Yes.
In terms of our occupancy guidance, I mean, I think it's going to be consistent with where we are now. I think that we've we have seen a couple of tenant bankruptcies at the beginning of 2020. But at the same time, we're doing quite well in the backfill of our Bombay Payless and sorry Bombay Bowring and Payless. So I don't see any significant spike in occupancy nor do I see any significant decline in occupancy going forward. With respect to the backfill of Bombay, Barring and Payless, our leasing team is doing a great job as we suspected they would.
I mean a lot of these operations were paying below market rent and in the backfill we are achieving well above what they were paying. So far, we've leased by area about 67% of the Bombay Bowring stores. They've been backfilled. And there's good progress on the remainder. And with respect to sorry, and by minimum rent, we're already at about 87% of the prior income coming out of Bombay Bowering.
And then with respect to Payless, we're at 69% of the space and about 92 a little over 92% of the revenue. And again, great leads on the remaining space. So as you can see, the leasing team has made significant progress and continues to. And I think that story will be wrapped up by the middle to end of this year.
That's great. And maybe one last question. How is it going with the well in terms of the retail leasing?
It's going very well, no pun intended. I can't help but use that line way too often. I mean, at this point, we're still a couple of years, least couple of years away from an opening. And so this really is the year 2020 where we're going to see a lot of sort of finalized deals and a lot more traction on the back of some of those finalized deals. And so we are in deep discussions with many tenants and we've already completed a few deals.
But I think by the middle to end of this year, there will be some more thorough and very impressive updates in that regard.
Great. Thanks. I'll turn it back. Thank you.
Thanks, Sam.
And our next question comes from the line of Dean Wilkinson of CIBC. Please go ahead. Your line is open.
Thank you. Good morning, everyone.
Good morning, Dean.
Just going back to your comment, which I think most people agree with on the balance sheet being understated. And then just looking at the capital structure, you've got sort of debt to adjusted EBITDA at 8x, but if you back out the development costs 6x, 6.5x. That's right. So if you normalize the EBITDA that you would expect from those development costs, would we be looking at perhaps like a sub-six times? And then when you're looking at your debt to gross book value or debt to total assets, perhaps something in the low 30% range?
Well, that is a future that quite frankly we're striving to. Like say, Eddie, you got it, Reece Anne has got a great balance sheet. And my answer is always, we want it to be a lot better. And we want to ultimately be able to compare ourselves to our American peers rather than our Canadian, which at the risk of sounding really snotty, I don't think we actually have any in Canada. But so, we have not done this tailed work that you suggested.
It's actually an enormous task and we do 5 year projections. But as you can imagine, there's an awful lot of moving parts in those things. And what are one I can't remember which famous British Prime Minister said it, but his comment was things happen. And they do, things happen. So these long term projections are very, very difficult to take a lot of comfort and meaning from.
But having said that, the kind of numbers you're mentioning is what we are ultimately and it'll take a few years striving to become.
And then when you look at sort of that percentage of PUD on the balance sheet then, I guess sort of where I'm getting to is, it looks like there's a runway to materially increase that. And you actually won't be de facto taking on more leverage. In the absolute sense, you will, but on the stabilization of those developments that we could see a material increase in the PUD without the requirement of any additional capital coming in and the leverage ratio is flat.
I think that's correct in some parts. I don't think at least in the short term of the next couple of years, you will see a material increase in PUD because things are as we recognize the value of these completed developments will go down as a percentage
of
our assets. That's the plan.
Okay, great. No, it sounds good. That was it for me. I'll hand it back. Thanks everyone.
Thank you. Thank you, Dean. Are we out?
We do have one question left.
Okay.
Your next question comes from the line of Johan Rodriguez of Raymond James. Please go ahead. Your line is open.
Hi. Most of my questions have been answered. Just a couple. 1, in terms of zoning, are you is the expectation that you get 100% of what's submitted or are you grossing up and applying for a bit more with the expectation that you get 0.5? I'm kind of
expecting that. I don't know what you mean by the 6.5, but basically
The zoning, the applications that have been submitted.
I think by and large, we are not sort of your typical private developer. We approach things where we have many community and political consultations before we ever put together a final zoning plan. So that by the time it is actually submitted, we're pretty comfortable that what we are asking for within, I'll say, 5% tops will be what we get. And I think a pretty good example of that is Eglinton and Laird, which we've been in the process of community consultations, meeting with actually 2 successive counselors because with the change in writing boundaries that occurred in 2,000 I guess in 2018, We inherited a different counselor. So there's been much, much consultation also very much at the staff level.
And I think we've always talked about $1,400,000 to $1,500,000 That's sort of what we asked for and that's what we're ending up. So by and large, we expect to get what we asked for because of that factor that is maybe a little different than the way other do things.
Okay. Thanks. And is there an expectation for asset sales this year?
I think you're always going to see some asset sales from RioCan. It's going to be much more opportunistic this year. We are under no self imposed numbers anymore. We achieved the milestones that we set out to just over 2 years ago, 2.5 years ago to achieve, I. E, over 90% of our revenue from the 6 major markets and over 50%, actually 52.4% we're at from the GTA.
So we don't feel the necessity to do any particular asset sales. So having said that, I have no doubt that we will do some asset sales as the opportunity arises and people seek out what we own.
Okay. Thanks. I'll turn it back.
Thank you.
And there are no further questions at this time. I will turn the call back to Mr. Sunshine for closing remarks.
And thank you very much. And somehow everything is working out perfectly like it seems to in our zoning programs. It's 11 am. Thank you very much for calling in. And if we don't talk to you sooner, we'll talk to you in 3 months.
Bye 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.