Good morning. My name is Lindsey, and I will be your conference operator today. At this time, I would like to welcome everyone to the RioCan Real Estate Investments Trust First Quarter 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
2 days. And without further ado, I'm going to turn it over to Christian Green to provide the introductions and the appropriate warnings.
Thank you, Ed, and good morning, everyone. I'm Christian Greene, AVP, Investor Relations for RioCan. Before we begin, I'd 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 Qi, I'm 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. Also, when discussing our financial and operating performance and in responding to your questions, we will 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 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 on the financial statements for the period ended March 31, 2018, and management's discussion and analysis related thereto, as applicable with RioCan's current annual information form that are all available on our website and at www.sedar.com.
Chi?
Thanks, Christian, and good morning, everyone. We are pleased to review RioCan's first quarter results that were released earlier this morning. It was another strong quarter for RioCan to get 2018 off to a great start. Our same property NOI grew by 2.6% in the Q1, which is net of the negative impact of Sears closures. Our major market same property NOI grew even stronger at 3.3%.
Committed occupancy for major market properties grew by 30 basis points from the last quarter to 97.9% at March 31, 2018. For the entire portfolio, our committed occupancy and in place occupancy remained high at 96.6 percent 95.7 percent respectively and grew by 40 basis points and 130 basis points from a year ago. Rex will speak shortly about the strong momentum in our key operational performance metrics. Despite of the ongoing strategic dispositions, our FFO per unit grew from $0.44 in Q1, 2017 to $0.46 in Q1, 2018, a 6.1% increase. FFO excluding gains from the sale of marketable securities grew from $0.40 to $0.42 a 4.3% increase over the same comparable period.
This strong growth was primarily driven by $4,300,000 same property NOI growth and $800,000 of incremental NOI from development completions as well as the accretion from our NCIB program. The 2 lease cancellation fees in the quarter were offset by the $1,100,000 lower straight line rent and $1,500,000 lower dividend income from marketable securities given that we have been selling such investments since last year. As a result of the FFO growth, our FFO payout ratio improved from 83.9% for the comparable period in 2017 to 78% in Q1 2018 improved by 5.9% and outperforming our 80% target. Our Q1 2018 SFO payout ratio also improved by 80 basis points compared to the last quarter. This is with the annual $0.03 or 2.1 percent increase to our unitholder distribution effective January 1, 2018.
Looking more closely at our same property NOI performance in the quarter. Approximately $2,700,000 or 60 3 percent of the $4,300,000 same property NOI increase is related to higher occupancy, renewal rent growth and contractor rent increases. And $1,500,000 is due to target backfills and other expansion and redevelopment projects completed in 2017 and in Q1 2018, which was net of $700,000 negative impact of Sears closures on same property NOI. Our same property NOI from properties located in Canada's 6 major markets increased by 3.3% over the same period in 2017, while Synchrony NOI growth from properties located in secondary markets remained flat for the Q1. This further validates and highlights the strategic rationale behind our ongoing disposition program.
Speaking of our disposition program, as of yesterday May 8, 2018, the Trust has either completed or entered into a firmer agreement to sell $583,000,000 of properties in secondary market at a weighted average cap rate of 6.14% based on in place NOI. There are additional $225,000,000 of assets that are under a conditional contract, which if completed as country contemplated will bring total sales to 40 properties with gross proceeds of $808,000,000 or 40% of our overall disposition target at a weighted average cap rate of 6.4% based on in place NOI. The aggregate sales price are in line with the trust IFRS valuation. Given our ongoing $2,000,000,000 disposition program over the next 2 to 3 years, we expect our normalized CapEx will decrease in 2018 and going forward. This is because our major market assets tend to be younger and have lower tenant turnover and require less CapEx on a per square foot basis.
Our income producing properties net leasable area is also expected to decrease as we sell assets. As a result, the Trust estimates its normalized capital expenditures for 2018 to be about $45,000,000 based on 1.16 dollars per square foot and approximately $38,800,000 average NOA for the year after taking into consideration the ongoing property dispositions. For Q1 2018, our actual maintenance CapEx was $3,900,000 lower than our normalized CapEx about $11,300,000 for the quarter due to lower costs and timing of maintenance capital expenditures. Next, let's take a look at our development program, which is an important element of our growth strategy. As at March 31, 2018, our development pipeline remained high at 26,200,000 square feet at RioCan's interest.
47% of our pipeline or 12,200,000 square feet are zoned plus another 21% of the pipeline or 5,500,000 square feet with zoning application submitted. The extent of zoning approvals that we have for our development pipeline provides us with a significant competitive advantage considering the uncertainties associated with Ontario's transition to the local planning appeal tribunal or LPAC structure for municipal loan approval due to its unclear mandate at the current stage. After years of development and housing boom in Canada's major markets, there are a number of emerging factors that are affecting development risks that the trust faces, such as rising construction costs and development charges, as well as a shortage of experienced labor in certain construction related trades. RioCan's disciplined approach to development and our 5 to 7 year head start over our peers in residential mixed use development enable us to achieve major residential project deliveries in late 2018 early 2019, while managing development risk prudently. We remain committed to self funding our development with the main source of funding coming from disposition net proceeds.
We will continue to manage our leverage in the 38% to 42% range and ensure our total development exposure remain no more than 10% of growth assets. We may exceed the internal target temporarily on a quarterly basis, but we'll be well within debt covenant and declaration of trust permitted levels due to the timing of NCIB purchases and disposition proceeds and before several large residential development projects are completed in late 2018 early 2019. Looking briefly now at our capital structure and key leverage metrics. At the end of the quarter, debt to adjusted EBITDA was at 7.63 times on a proportionate share basis, slightly above the 7.57 times as of last year end, but below our target of 8 times and was one of the lowest among our peers. Our leverage ratio on a proportionate share basis at the end of the quarter was 42.4%, slightly above the upper of our 38% to 42% target range.
This was because we maximized our NCIB purchases prior to entering the blackout period in late March due to quarter end reporting and in anticipation of receiving substantial disposition proceeds in April 2018. This was also the reason why our debt to EBITDA ratio was slightly higher this quarter. Since the renewal of our NCIB in October 2017, we have purchased and canceled 9,800,000 units at a total cost of $240,000,000 Our pool of unencumbered assets has further grown to $8,100,000,000 dollars as of the Q1 and generates 58.4 percent of our annualized NOI, above our target of 50% and further improved from last quarter. Our unsecured versus secured debt ratio has reached 59.3% unsecured debt and 40.7% secured debt. Subsequent to March 31, 2018, the trust extended the maturity date on its $1,000,000,000 revolving unsecured operating line of credit to May 31, 2023.
All other terms and conditions remain the same. Overall, we are very pleased with our results for Q1 2018 As reflected in strong FFO per unit and same property NOI growth, good progress on our strategic disposition and disposition prices achieved, ongoing smooth execution of our development program and continued success in our capital management. With that, I would like to turn the call over to Rex for updates on RioCan's operations this past quarter.
Thank you, Qi, and good morning, everyone. I am pleased to provide the operational highlights for the Q1 of 2018. Our Q1 results continue to show improvements in the operating performance of the portfolio. We are making excellent progress with regards to our secondary market disposition strategy, which will allow us to increasingly focus on Canada's 6 major markets. In reviewing our Q1 results, I will focus a discussion on our primary market portfolio to provide you with better visibility on the portfolio excluding the properties, which are expected to be sold.
As Qi highlighted, our Q1 2018 same property growth was 2.6%. These results show that the overall health of our existing portfolio is strong. Our outlook for the remainder of 2018 continues to be positive, and our expectations for same property growth for the full year 2018 are in the range of 2% to 3%. Same property growth in the primary market portfolio was very strong at 3.3% in the Q1. With respect to the leasing environment, grocery and certain large format retailers are continuing with their expansion and repositioning strategies.
Numerous categories, including food, entertainment, beauty, health and value continue to expand. And overall, there is high demand for space in the 6 major markets where population growth is highest. RioCan's committed portfolio occupancy rate remained steady at 96.6% in Q1 2018 versus 96.6% in Q4 'seventeen. Retail occupancy increased from 96.6% in Q4 'seventeen to 96.7% in Q1 'eighteen despite the completion in the Q1 of 2 lease buyouts with anchor tenants where the space was dark. These buyouts were completed in the first case to allow us to redevelop and intensify an existing site in Ottawa and in the second case, to allow us to re tenant the space and add value before disposing the secondary market site.
The increase in retail occupancy was offset by a decrease in office vacancy from 96% in Q4 'seventeen to 94.1% in Q1 'eighteen caused by 2 vacancies totaling 51,000 square feet at RioCan's insurance this quarter, which we expect to lease in the ordinary course. Committed occupancy in the primary market portfolio increased from 97.6% as of Twelvethirty Oneseventeen to 97.9% as of March 31, 2018. The portfolio in place occupancy increased from 95.6 percent in Q4 'seventeen to 95.7% in Q1 'eighteen. In place occupancy in the primary market portfolio increased from 96.5% at Q1 sorry, at December 31, 'seventeen to 97% as of March 31, 'eighteen. We continue to make advancements with our former Sears premises.
To date, RioCan has either completed deals, conditional deals or in advanced lease negotiations for 85% of the GLA. These deals represent 133 percent of the net revenue loss on 100% of the former Sears locations and to RioCan's proportionate ownership percentage. The first of the replacement tenants will take possession in Q3 2018 and commence paying rent in Q4 2018. So majority of the replacement tenants are forecast to be operated and paying rent in early 2019 and will contribute to same property growth next year. Our quarterly leasing and renewal results continue to be strong in Q1 2018.
RioCan completed 417,000 square feet of new leasing in the first quarter at an average rent of $23.28 per square foot. 179 renewals totaling 1,100,000 square feet of space was completed during the Q1 of 2018 at an average rental rate increase of $0.70 per square foot of 4.3%. The average growth rate on renewals was negatively impacted this quarter due to decreases in rent upon renewal of several fashion tenants. The average rental rate increases of renewals completed in the primary market portfolio was portfolio was $1.04 per square foot or 5.8 percent. Our retention ratio for the quarter remained strong at 87%.
With regards to our major market expansion and redevelopment, urban intensification and greenfield development programs, an additional 118,000 square feet of space and RioCan's interest was completed and became income producing in Q1. Highlights include 491 College Street in Toronto, where LCBO took possession of a new premises in January 2018 and are scheduled to commence operations in June 'eighteen. LC Re Own's relocation from 555 College from the 555 College site allows us to proceed with a 54,000 square foot rental residential redevelopment on the former site. Construction on this project will commence in 2018 and is expected to be completed in early 2021. At 642 King Street in Toronto, construction is nearing completion on this 4 floor urban mixed use redevelopment.
The deal was completed in Q1 2018 with a software company to take all of the office space at the property, and the property is now 100% leased. 2 restaurant tenants took possession in Q1 2018, and the office space will be in occupancy in Q3 2018. At East Hill Shopping Center in Calgary, development is also steadily advancing. A 30,000 square foot cineplex commenced operations in April 2018. Construction on 2 additional buildings totaling 10,000 square feet will be completed in Q3 'eighteen, and construction is scheduled to begin on 1 additional building totaling 7,000 square feet in Q3 'eighteen.
Construction at King Portland Centre in Toronto is nearing completion. Spotify and Indigo have leased all 14 floors of the office tower, and both are expected to take possession in Q3 'eighteen. All 132 condominiums have been sold and expected to be occupied in March 2019. Constructed at Shepherd Center continues to progress. The 2 retail anchors, LA Fitness and Longo's, are expected to take possession in Q2 2018 and Q3 2018, respectively.
A broad ground construction will commence on the Phase 2 residential building in Q3 2018. Upon completion in 2020, this 36 story residential tower will feature 361 rental units. Construction is advancing at a number of our projects, including 740 DuPont, Bathurst College Centre and The Well, all in Toronto and Brentwood Residential and 5th and Third East Village in Calgary. 2018 will also see completion of 2 of our residential rental projects, being East Central at Yonge and Eglington in Toronto and Frontier in Ottawa. Both are high quality projects located in prime areas adjacent to main transit lines that well represent our vision of our future residential portfolio.
We are forecasting the completions from our expansion and redevelopment, greenfield and urban intensification development programs will deliver an additional 853,000 square feet or 546,000 square feet at RioCan's interest in the remainder of 2018. From Q2 2018 to the end of 2020, we're expecting to complete approximately 2,800,000 square feet at 100 percent or 1,000,000 1,700,000 square feet at RioCan's interest, net of air rights sales. These new development completions will make significant contributions to our growth going forward, and the value created through the completion of our development projects is significant as the annualized stabilized NOI is expected to be in the $50,000,000 to $55,000,000 range of RioCan's interest. In conclusion, our Q1 results were strong and continue to show improvements. Our Q1 primary market results were even better and supports our strategic decision to focus primarily on major market assets.
Our primary market portfolio is currently nearing nearly 78% leased and produced same property growth as well in excess of 3% in Q1. We currently generate approximately 80% of our revenue from our 6 major markets, with 43% of our revenue coming from the GTA. These percentages and our results will steadily improve as we complete our planned dispositions. In the meantime, we will continue to unlock the tremendous amount of value that exists in the portfolio for our urban intensification and residential development programs.
Those are
the operational highlights. I'll now turn the call over to Ed.
Greg, thank you. And Chi, thank you. Often people greet me with how is business Eddie, often accompanied with a concerned look on their face. My usual answer is a lot better than most people think. Reason for my response is the constant media theme of the retail apocalypse being either on us or on the horizon.
No doubt that the retail environment has been undergoing tremendous change. The changes are driven by growth in e commerce, changing consumption habits and accelerating urbanization resulting in many more people living and shopping in a much smaller geographical footprint. However, the operating results for Q1 of RioCan simply confirm what we have been telling those who will listen for quite some time. Notwithstanding the vacancies created by Sears finally shuttering its doors at the end of 2017, RioCan's occupancy rates and same property growth rates are in the neighborhood of historic highs. And we are optimistic about the balance of 2018 and that this theme will be continued.
In fact, as we complete the leasing of the Sears space and get the tenants and occupancy at open, we expect to perhaps even better our current growth rates as we move into 2019 and as the focus of our portfolio becomes almost exclusively better than 90% major markets. Tremendous strength of our portfolio and the skill and reach of our leasing team is even more impressive. When one focuses exclusively on the major market components thereof and the occupancy and growth rates indicated. We've begun to highlight this as we fully expected to be over 90% of our overall holdings by sometime in 2019 from the 80% level, which we quickly reached at the end of Q1. I believe that our strategies to ensure growth and solidity for the next 25 years of RioCan are clear and fairly well understood.
1st, an almost complete focus on Canada's 6 major markets 2, accelerating our long standing disposition program of secondary market assets and using the proceeds to fund our development program and an aggressive NCIB program. 3rd, as part of the intensification of our existing properties, creating Canada's best multi residential rental portfolio, all new, all in major markets and all transit oriented. And 4th, and certainly last but not least, maintaining the strongest balance sheet amongst our peers as best evidenced by our most important debt metrics. Wise man once told me that many people can come up with good strategies. What separates the winners from the also rands is the execution of those strategies.
I think RioCan's success in executing our strategies has been proven over Our execution of creating a residential portfolio is becoming apparent as our first buildings in Toronto, Ottawa and Calgary near completion with many others following closely behind. And certainly, our sale of our secondary market portfolio is proceeding according to plan. It's been a long haul, but as a tidal wave of development completions becomes income producing over the next few years, our portfolio strategy of owning iconic properties in Canada's best locations will become clearer and more complete. As I've said to many, our strategies and perhaps imitation is the best form of strategy are being echoed by many, but ours are well into the execution phase. We're way beyond talking and over the course of this year and the next few, you will see them being completed.
And with that, I'm going to end my very short remarks so that we have lots of time for questions if there are any and turn it back to Lindsay to narrate them.
Our first question comes from the line of Dean Wilkinson with CIBC World Markets. Your line is now open.
Thanks, Lindsay. Good morning, everybody.
Good morning.
Ed or maybe to John Gitlin, on the development side of things, we're seeing a lot of cost inflation, through structural steel, glazing, labor, etcetera. Are you finding that the rents are keeping up or is the inflation running ahead of that or would you
say they're roughly even? There certainly is cost inflation in parts of the construction cycle. Happily, they are restricted to certain trades, probably rebar, concrete and a few others, glazing being a big one. However, we're finding it's very Toronto centric. Our budgets for Ottawa and Calgary, quite frankly, are coming in on the buildings we have under construction and the ones we're going out to tender on are coming in basically where we expected.
So we're not seeing that same coin inflation, although glass is a problem everywhere in Canada as far as we can determine. The good news is, and I think the media for once are getting this one right, Rental rates are quite frankly going in the right direction and moving even more quickly than costs. So we haven't seen any change in our bottom line of the performance notwithstanding the increased costs that we're bringing in as we go to tender on various projects, including projects like the well, which is quite frankly enormous and not to say there haven't been increases, but the bottom line is that in our new builds across the really across the country, we're still hitting when you just isolate that part of our development and redevelopment program, pretty close to or above 6% yield on new money that we're putting into the projects. So quite frankly, we're comfortable. That doesn't mean that as we roll forward on our development program, if this cost escalation continues, we're in a wonderful position.
Our properties are income producing. If that means that we have to sit and wait till costs come down a bit, we'll probably do so on selected properties. We don't have that time clock running against us like somebody who just goes out and buys piece of land and has to build it because the clock is ticking. We have income coming in. So, I think we're best suited to handle it, but so far so good.
Great. And I guess the other element of costs and I'm going
to risk waiting into the political side of things here is development charges and fees. I mean there was a report out from Build Toronto earlier this month that said like an average apartment condo, you're looking at charges in the area of north of $120,000 a door now. And that's like a tenfold increase over the past 20 years. You layer on top of that, that the buildable rights are pushing towards $200 a foot. You're in through half of your construction budget before you've sort of laid down the first piece of rebar and ports and concrete.
Do you think at some point this is going to break like at the front end you're getting hit with the development charges going up tenfold and on the back end there's rent control. Is this going to wind up absent the fact that you've got very low cost base on the land, like is it going to take other builders and just blow them right up? Like how are you looking at that?
And again, we are waiting into the political here, but our own view, my own view, I'll restrict to myself is that between the cost escalations that are happening, rising interest rates, stress tests that the feds put in on the banks and the increased development charges. I would not be surprised to see a significant slowdown over the next year or 2. Certainly, prices of land, I don't expect them to go down because land in the desirable locations is scarce. And certainly the value of zone land with the changes to the OMB, lest we forget, has gone up quite frankly dramatically in the gap between zoned and unzoned land values has widened to one that we haven't seen in a few years. So, all those things are going to mitigate against the speculative condominium builders.
They're going to mitigate against the people who are less well capitalized than us and people who quite frankly don't already own the land and are positioned to wait this out a little. So I think when you do see a slowdown and I really do expect to see it in the next couple of years, I wouldn't be surprised to see more cancellations of buildings that are already pre sold for example, like we've already seen. But interestingly enough, we probably won't see them in the highly desirable locations. You'll see those more on the peripheries of the city and the spots where somebody says, oh, here's a spot, let's put up a building. That's very unlike what we've got.
Ultimately, I think a slowdown like that will quite frankly be to RioCan's advantage. Again, I can't overemphasize it because we already own lots of zoned sites. We're in a position to wait out any bad stuff because of the income coming in. And we have the balance sheet to go forward and just move it along. So yes, the industry is getting tougher.
There's no doubt. At some point, government's going to realize that the construction and development industry are a significant driver of the economy and as it slows down solely economy. So we've both given speeches, Dean.
With that, I'll hand it back for it to become a little less political. Thanks, Ed.
Thank you.
Our next question comes from the line of Sami Damiani with TD Securities. Your line is open.
Thank you and good morning.
Good morning, Scott.
Just on the balance sheet, the leverage did tick up and you gave the reasons why. What should we expect for Q2 with the decision proceeds coming in post Q1?
Well, first of all, what you should expect is a much greater focus on debt metrics rather than the percentage. In other words, you should expect a greater focus on numbers that really don't contain any discretion on the part of management. I always find it interesting that everybody's focus is on that percentage, while the denominator of that percentage calculation is one that has a large element of discretion and quite frankly, has a lot of disparity between what I see as similar portfolios in some cases. But leaving that aside, I think you'll see us possibly it really depends on what opportunities we get in the NCIB and the timing of the disposition program. So those are sort of the variables that may see it pop either side of 42%, but certainly over the course of the year, we expect to be well within that 42% number.
You mean below the 42% ceiling?
Correct.
Okay. And just on the cap rates on the dispositions, I guess you've been selling a little bit more of the sort of smaller tertiary properties over the last month or 2. The cap rates have started to move a little higher. What is your outlook today for cap rates or the depth of demand for secondary retail assets today versus 6 months ago when you started selling?
It's surprisingly good. We're in the I probably can give you a better idea of that in a couple of months from now. When we go through the next quarter, we have quite a few $100,000,000 worth of assets that are just hitting the market as we speak. There's one portfolio that I think is out there already, which contains I think 5 or 6 Walmart anchored shopping centers in with long term leases in the smaller markets and we have basically our entire London portfolio on the market. And based on the all I can base it on right now is the demand for how many people have signed confidentiality agreements, easy for me to say.
And you know what, a surprisingly large number in both cases to me. So right now, I think the demand is pretty good. These are great properties we're selling. They're just slower growth than what we want to have in RioCan. So I expect the demand is pretty good.
I think the only impediment, Sam, that again, interesting enough that we're running into is not one of demand or even not one of cap rate. It's the ability of buyers to secure the financing in the amount that they want. And that's again, it's part of this retail apocalypse story. Bank risk committees read the same media that we all do. So I think there's some small reluctance on the part of banks and insurance companies to finance the acquisitions for our buyers at the levels that they wish.
So other than that impediment, and we're certainly it hasn't killed any deals, but it may slow down some purchases. Other than that, it's pretty good. Great. There really hasn't been much movement in cap rates beyond what we've shown that. We're still confident that our disposition program will not be negative to our IFRS.
Great. Thanks and good progress so far. I'll turn it back.
Thank you.
Thank you.
Our next question comes from the line of Michael Smith with RBC Capital Markets. Your line is now open.
Thank you and good morning.
Good morning.
So you must be pretty happy with the 3.3% same property NOI growth in major markets. Do you think it'll stay north of 3% for the balance of 2018?
You know what, that's hard to say. It obviously varies quarter to quarter. It'll pick up a little bit. We'll get some pickup from the Sears spaces, the ones that are in the major markets, Calgary, the one in Oakville, as those tenants start to move in. On the other hand, we'll pass the target pickups.
So that may be a variable, but look, our long term goal, which I know a lot of people were cynical about was that as we reduce our portfolio to primarily major markets better than 90% to have a 3% same property growth rate. We're quite confident in that and I think this quarter was just the first indicator that that is an achievable number for us. What it will be quarter to quarter over 2018, I don't even want to hazard a guess and I don't quite frankly think it matters that much. It'll be 3% for the year in the major markets, if not a little bit better. And that's one that we think will continue for quite some time.
Great. And just picking up on the last series of questions, any are you still committed to stretching out your disposition program over the next couple of years? Or is there any thought of given the dynamics of speeding it up a bit?
Well, you know what, listen, our timing in the repeating them all. Having said that, we right now, I would say that if we continue to enjoy the success that we're having and I see no reason that we wouldn't, we'll have the bulk of it done. And when I say the bulk 80%, 90% done, but within a year from now. So is that a speed up? I mean, considering we announced in October of 2017, I guess, and we really got going then to have this kind of thing that the bulk of $2,000,000,000 sold or under contract in a year and a half.
I think that's pretty good execution. And I think it'll be a little bit faster than we may have. Listen, the original estimates are always done on the with the end of caution in the mix. And right now, while still being cautious and predicting, I'm feeling pretty good about it going a little bit faster.
Great. Thank you. And lastly, last question. I wonder if you could just give us some color what it's like to deal with the local planning appeal tribunals versus the compared to the OMB?
Well, we haven't had the situation yet. Most of our properties because we were so well advanced quite frankly, even the ones that are in the zoning process, quite honestly, like I guess many other developers, we've already filed before the changeover, we have sort of outstanding appeals to the OMB. We don't expect to actually go to the OMB on any of those because we're quite confident in our ability to work out a mutually agreeable solution to each property with the planning staff and the political masters of that particular area. Having said that, we've adopted a policy as far as going forward on new properties. We try to be very sensitive to what the residents want in an area, which is not always what we want, but we try to reach an accommodation.
And the big advantage we have, Michael, which not a lot of people do is keep in mind the province has made areas that are in the neighborhood of a transit hub and a transit stop, areas of special consideration when it comes to intensification. And almost without exception, all of the properties that we're looking at rezoning are in that those kind of specialty designated areas. So, I expect if we do run into issues and we've got to deal with some of those local planning authorities, we'll be fine. But having said that, municipal councils by and large are pretty responsible. They understand the demand for housing.
They understand and quite frankly, as people who are walking in looking to build primarily rental housing of which there is such a huge shortage in our major markets right now. We're finding that everybody is pretty reasonable. So I'm hoping we've got a big pack of the zoning already completed and with the ones that are in process and to be started, I mean, I'll give you an example of how excited and how big the opportunities are for us. The more difficult it is for everybody else, quite frankly, the better it is for us. Shoppers Old Brampton, which is one of the properties we talked about.
I sat in a meeting yesterday and we're already designated under the OP for 4,500,000 square feet of density on that 60 odd acre property. And the city, I think would quite frankly be open to even more if we could figure out how to fit it all in because we're the effectively the transportation hub for South Brampton or quite frankly for Brampton and much of the region of Beale because the terminus of the LRT that's going right from the lake to Brampton happens to be guess where, right at our property. It's also the main station for the bus transportation system and the rest of Peel. So, and that's just one example. I just happened to be sitting in a meeting looking at that.
So, I don't expect the changes in the OMB to cause us any difficulties is a very long winded answer to your question.
That's great. Thank you. That's it for me.
Our next question comes from the line of Pammi Bir with Scotia Capital. Your line is now open.
Thanks. Good morning.
Hi, Barmen.
Hey, Ed. Just maybe going back to your comments and again the discussion around zoning. If you look at the 12,000,000 square feet that is zoned today, and if you compare the value of that versus say 2 to 3 years ago versus where it is today, how would that compare? And do you have a sense of what that value could be on a per buildable square foot basis?
Yes. Look, I'm not going to give you a value for each square foot because we haven't really calculated that way. We look at it, First of all, every site is very, very different. And but there's no doubt that value of zoned land even over the last year, particularly in Toronto and the GTA where the bulk of ours quite frankly is, has probably doubled. I mean, to me and I was quite almost shocked by it, but if you look at our RioCan Hall property, which is not one that people look at too often, it's a great property.
It probably can handle. We're just in the process of getting a zoning application ready. So it's not in that 12,000,000 square feet and it hasn't even been applied for yet nor do we even take into account in our valuations what can be done there. And yet we know that depending on how it all works out, 750,000 to 1,000,000 square feet are possible on that site, while still retaining much of the retail that we have there, obviously in a different format and there'll be some major work needs to be done. And it's a long term project, but directly to the west of that property on the other side of a tiny little side street called Widmer.
Somebody got the zoning for, I don't know, I guess, 1 tower and I can't tell you exactly how many square feet. And instead of building it, they sold the property to Concord. I think Concord Ajax bought it, in fact, immediately started construction. And my information, which I think is accurate, was they paid $2.40 a foot for that property, which a year or 2 ago, it would have been half that for the available density. And the price, the more difficult zoning is, the more valuable our existing zoning is.
And I think we've said before, and I know I'm throwing around big numbers now. Right now, we think it's in the neighborhood of $1,000,000,000 of really accounted for value at least as far as you analysts are concerned.
Great. That's helpful. Maybe just given where the unit price is relative to NAV, can you comment on whether any initiatives or any other initiatives have been considered in terms of trying to demonstrate the embedded value in the portfolio, be it bringing in some new partners on projects or even something more transformational than that?
Yes. Listen, we're constantly thinking about things. We don't sit on our laurels. The price of our units and the rewards to our unit holders or what job number 1 is for us. So we're constantly looking at different ways of doing things.
And I'm not going to tell you what they are, because for every four things we look at, 3 of them end up not making any sense and we got to find the one that does and we are constantly looking at different alternatives and we've got some pretty inventive brains around here.
Okay. Just last one for me.
I think in the meantime, Tommy, I think what people are missing is while we're doing all these wondrous things and there's a lot of wondrous things that are going on here, including a year from now, there'll be people living in our first residential buildings, including at spots like Yonge and Eglinton at rents that I think will achieve well above our own performance is that our retail portfolio, which today is still obviously the vast majority of our income is doing extremely well. And I'm not sure we get the credit for that either, but be that as it may.
Yes. That's pretty fair. Just I guess last one with respect to the joint venture with HPC, any updates there on the properties that are in the JV and perhaps the sale process on the Vancouver property?
No. No updates. The media seem to be running ahead of anything I want to say. So I'm not going to say anything. Other than, stay tuned.
There's a lot of interesting stuff going on.
Okay. Thanks very much. I'll turn it back.
Our next question comes from the line of Matt Kornack with National Bank Financial. Your line is now open.
Good morning, guys. Good morning. You touched on residential rents beating your pro formas. Just interested if you're seeing the same type of outperformance on some of the retail space that you're leasing. Obviously, the wells early days, but in your property tour earlier this year, It was interesting to hear some of those rents and where they're coming in.
I'm wondering if that's similar across the board from a retail standpoint in urban areas.
I wouldn't say it's across the board, but I do think in our best locations, we're outperforming. The increases we're getting from tenants in places like the building we're sitting in here in Yonge Eglington. The rents we're going to be achieving at our other new developments in the downtown area are probably going to exceed our performance when we build.
Okay.
That's why I threw around that number of 6% on new money going in on our developments. We're actually quite pleased.
And in pursuing these type projects, have you had to expand the type of tenants that you typically would have spoken to historically or would you be looking to put these tenants into some of your existing non development assets as well?
Yes, it's a mix. I mean, Jeff Ross and his really skillful team, I mean, we there as Rags mentioned, there's a lot of our what I'll call our existing stable of tenants in the value field, in the food field. And then there's new ones. We've done an interesting deal with Farm Boy on the ground floor of our building on DuPont. Farm Boy wasn't on our radar screen 2 years ago.
We did a fantastic deal both for the property and for us and for the tenant with Nations. I mean whoever heard of Nations 3 years ago And then of course restaurants, restaurants continue to expand both in the quick service and the sit down service. We took milestones out of Bikan Hall and we've replaced it with a Brazilian steakhouse whose name escapes me at the moment. I think they should be opening this year and at pretty good numbers and it's not their first location. I don't want you to think we're doing startups, although we're open to doing startups too if we believe in the concept.
So, yes, I'm pretty optimistic. I mean, I know they this is contrary to the media story and even some of the analysts story. I think some of the early analysts views I saw and I'm not focusing on your good self, Matt, was almost surprise in not just our results and because I haven't seen much on our results yet, but some of our peers. And you know what, business is pretty good if you got properties in the right places and that is the key. And RioCan I think is really already well positioned, but it's going to be even better positioned as we complete our disposition program and our development program, both of which we got going on simultaneously.
Fair enough. So a little bit counter to that point, but you've been successful in selling probably fully maximized assets in core locations at some pretty attractive cap rates. Is that going to be a meaningful source of capital going forward? Or is the idea to keep those assets within RioCan and focus on redeveloping them longer term?
It really depends on the asset. I mean, clearly, I used the word iconic in my little prepared remarks. We're not going to sell a Yonge Eglinton center. When Yonge Sheppard is finished, we're not going to sell that. When the well is done in a few years from now, we're not going to sell that.
We're not going to sell at King and Courtland. But when you have one off properties that we don't see over a 5 to 10 year period, significant growth that's in line with the kind of targets and goals we set for ourselves nor do we see any redevelopment potential and we can use the money for something else. Yes, we're not married to anything except for the few that I mentioned.
Makes sense. Thank you.
Our next question comes from the line of Jenny Ma with BMO Capital Markets. Your line is now open.
Thanks. Good morning, everyone.
Good morning, Jenny.
Ed, when you were talking when we had the earlier discussion about rising costs and rents, I'm just wondering because you are doing high quality premium rental apartments from a zoning, legal, sales or just a physical configuration standpoint, how easy it is? Is it to swap between condos and apartments further down the line if there is a change in market conditions that would favor one over
the other? It's pretty easy.
I mean, I think we showed that in our Kingly development at King and Portland where we just decided to move back the qualitative difference from what we build for rental and what we build what we would build for condos is almost non existent. I mean, quite frankly, in some ways the rental buildings are built to a higher standard than the condos for obvious reasons. You're going to own it for the 25, 50 years and you have to release them on a pretty constant basis. So you want a building that's not only going to show well on day 1, which is again, the big difference is condo buyers tend to buy it looking at a piece of paper. Renters actually walk into the apartment and look at it.
So you've got to be better. So it's pretty easy to shift back and forth quite frankly between the 2 formats.
Okay. That's helpful to know. And then my last question is with regards to looking at your debt maturity schedule. So with the weighted average interest rate of 3.4% and a relatively short term of about 4 years, given where rates are going, is your preference to sort of stay shorter and manage the interest expense costs or just given that rates are rising, would you prefer to sort of term it out longer and pay a higher cost to lock in more preferred rates?
We're doing I'm not sure we've chosen one strategy over the other. We're doing a little approach. We are where we're looking at our property is going to be sitting there for the long term. We were quite prepared to go 7 or 10 years and in fact are doing that. But we're right now, I just don't see a problem and ourselves, I think rates are just returning to, I won't even say historic levels because they're still about the lowest If you take the last 25 years, these are low rates.
So they don't have much impact on our business. Chi, do you want to add anything to that?
Sure. Thanks, Ed. And Jenny, we also manage our exposure on variable rate very carefully. We have very limited variable rate, so that kind of allow us to manage the rising interest environment better. And as said, we really evaluate on sort of property by property.
On the secured debt side, we tend to go longer. On the unsecured side, because of the spread difference, we may stay relatively on the shorter end, under the 7 year, but you never know. We kind of manage closely and we basically limit our variable rate debt. Right.
Thank you, Tim. Okay.
And then just a quick follow-up. On your unsecured your unencumbered assets, it's sitting just under about 60% or so. Yes. The conditions dictate it, would you be willing to bring that down to take advantage of lower cost unsecured debt?
Yes, we I mean by getting it up to 60 percent, we've committed to the rating agencies quite frankly that we want to keep it over 50%. But the difference in 5060 is quite material and gives us I think a lot of flexibility and we're not married to any one type of debt or another. So yes, flexibility is our middle name when it comes to that.
Okay, great. Thank you very much.
Thank you, Jenny. Lindsay, are there any other questions? I think we have time for one more.
We do have one final question in queue from Sam Damiani with TD Securities. Your line is open.
Thanks. Just one last one. Actually, I have a couple. I'll pick this one. As you look at the sort of rollout of e commerce expanding into the grocery field, blah blah announced pretty major expansion of its e commerce strategy last week with I think planning to add I think 500 locations.
Are you monitoring your properties for changes in traffic or anything like that to sort of see how the impact of e commerce is, I guess, playing out at this early stage?
Yes, I wouldn't say we're actually monitoring our properties for traffic in that sense. What we do is stay very close to the food retailers and meet with them at quite frankly at multiple levels, where all try to spend time with the very senior officers of the companies and others here, Jeff and Rags will spend time with the actual guys who run the place on a day to day basis on the operating side. And at the end of the day, everybody is making moves to address e commerce because of Amazon. Nobody's really figured out how to make money at it. And in fact, I had a CEO of one of our major grocery chain say to me, look, we're investing a lot of money in grocery pickup, order through e commerce and come pick it up because it's really expensive to deliver the stuff.
But you know what, once most people actually come to the supermarket, they prefer to come in and pick their own food is what we're finding. So, I think in the food business where e commerce represents, I don't know, somewhere between 1% 2% of the market, I think you're going to see a very long drawn out change, if any, in any material way. All we see is that while there's much media talk and much company talk about e commerce, I think that's almost defensive talk. They're all expanding their physical footprints.
Okay. Thank you very much.
Thank you, Sam. Okay. Lindsay, thank you very much and I want to thank everybody for dialing in and listening to us. And with that, I will bid you all a fond of you until the next quarterly call. Bye bye.