Good day, and welcome to the SmartCentres REIT Q1 2019 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Peter Forde. Please go ahead, sir.
Thank you. Good evening, and welcome to the SmartCentres Q1 2019 conference call. I'm Peter Forde, President and CEO of SmartCentres REIT. Joining me on the call today are Mitchell Goldhar, Executive Chairman, Peter Sweeney, Chief Financial Officer, Mauro Pambianchi , Chief Development Officer, Rudy Gobin, EVP Portfolio Management and Investments, and Stephen Champion, EVP Development. The agenda for the call will be a few overall comments by me, followed by Peter Sweeney, who will talk about our results for the quarter and our financing activities. Followed by Mitch speaking about our exciting project developments, then we will take your questions. At your suggestion, we will try and shorten our opening comments to allow more time for questions.
Our comments will mostly refer to the first 10 pages and pages 24 and 25 of our supplemental information package and the outlook section of our MD&A, which are posted on our website. I refer you specifically to the cautionary language at the front of the supplemental material, which also applies to any comments any of the speakers make this evening. First, some overall comments. SmartCentres REIT is a stable portfolio of well-located, value-oriented shopping centers with tremendous mixed-use intensification opportunities. As we've said before, real estate development takes time, and it would take a couple of years before the many new mixed-use initiatives commence yielding positive results. When it starts, which it is about to next year, it is expected to continue for the years to come. We accomplished many things in the last quarter that sets us up nicely for the future.
For Vaughan Metropolitan Centre, VMC, we announced execution of partnership agreements for the 2019 launch of Transit City four and five condo towers, and that we are moving forward with an adjoining purpose-built residential rental tower. Like the first two towers, these two towers sold out in approximately two weeks. More about this great accomplishment later. We executed an overall agreement with Revera to build and operate many retirement living residences together on SmartCentres-owned land, including the first three projects, two in Vaughan, and one in Oakville. We are close to a final agreement with another retirement residence operator for two towers on our site at Clyde and Baseline in Ottawa. We have executed agreements with SmartStop for two more self-storage facilities, bringing the total so far to six, all in the GTA.
Last, and certainly not least, a very successful opening of the new 144,000 square foot expansion of the Toronto Premium Outlets in November of 2018, which continues to outperform our expectations. As you will hear from Peter Sweeney, all in all, a strong and stable quarter performance from our existing retail portfolio as we wait for the development pipeline to fill and deliver even more. With notable mention going to a full year's results from the Toronto Premium Outlets expansion, which opened only in November at the end of last year. The completion of the VMC PwC tower, and the full occupancy of the remaining office space in the KPMG tower. In 2020 and 2021, as the profits from the first of many recurring residential developments are completed.
On a go-forward basis from the variety of new business initiatives and developments, some of which are described this evening and in our quarterly report. Our core retail portfolio remains strong, and with its value-oriented, nationally focused tenant base, is well-suited to the changes taking place in the retail marketplace. On executed leases, our shopping centers are 98% leased. We continue to hear from tenants that Walmart's strategy for selecting and being in locations where the community can come to a larger center with convenient and easy access and find everything it needs, works for most other retailers as well. With continuing expansion of Walmart's food offering and the resulting store customer traffic increase, our portfolio remains strong and uniquely positioned. Our shopping centers are often the only significant value-oriented center in many markets across the country, and therefore dominate those markets.
This includes the 28% of our portfolio, which is in large and medium secondary markets, where virtually all of these centers have a Walmart anchor or shadow anchor and a better than average occupancy at 99%. Bombay & Co. and Bowring Canada closed all their locations before March 12th. We had 12 term leases with Bombay & Co. and Bowring in our portfolio, along with a few temp deals, representing less than one-third of 1% of our portfolio. All locations are in shopping centers anchored by a Walmart Supercenter. Payless ShoeSource closed all locations in Canada, including its 46 locations with us after the end of the quarter through a CCAA process. All but one of these locations are in a center anchored by a Walmart store. Accordingly, we anticipate executing new deals for all of these locations within the next 12-18 months, and we are well along the way in doing so.
The Toronto Premium Outlets expansion of 144,000 square feet opened in November, was virtually fully leased at the time, and is exceeding expectations. The expansion and high-caliber tenant mix makes this center one of the top-performing premium outlet centers in the world. Our strong and stable retail portfolio provides a solid base upon which we can grow income and NAV through mixed-use intensification. Again, we just need to be a bit patient until next year when these new initiatives start to produce FFO. A few general reminders about our development pipeline and capabilities. Virtually all of the development initiatives we are planning are on land we already own, unlocking value and not requiring us to buy very expensive land to develop this density.
With 34.5 million sq ft built on approximately 3,500 acres of land with less than 24% utilization and primarily all at ground level, we have over 100 million sq ft of land to accommodate mixed-use growth throughout the country. We are developing a diverse selection of new real estate types. Not just one or two, taking advantage of the opportunity while dispersing the risk and driving customer traffic to our shopping centers. More about the developments from Mitch in a couple of minutes, first, I'm going to turn it over to Peter Sweeney.
Thank you very much, Peter. Good evening, everyone. It is important to remember that the development initiatives that SmartCentres is embarking upon are heavily dependent upon having a strong and stable cash flow-generating operating platform. In this regard, our financial results for the first quarter of 2019 reflect the continued strength, stability, and security of our 34-million-sq-ft predominantly Walmart-anchored shopping center portfolio. During the first quarter, this portfolio generated the following improved results. Number one, rental revenue from investment properties was CAD 206.4 million, representing a 4% increase over the comparable quarter in 2018. Number two, NOI as a percentage of net base rent was 98.9%, representing a 1.2% increase over the comparable quarter in 2018. Number three, FFO with one-time adjustment and before transactional FFO increased by CAD 2.5 million to CAD 91.8 million, representing a 2.8% increase over the comparable quarter.
FFO per unit decreased by CAD 0.01 to CAD 0.55 per unit. This decrease was predominantly caused by the dilutive impact of our CAD 230 million equity issuance in January of 2019. Number four, ACFO with one-time adjustment increased by CAD 2.1 million or 2.6% to CAD 83.9 million as compared to the same period in 2018. Number five, ACFO exceeded both distributions declared and distributions paid by CAD 7.2 million and CAD 24.2 million, respectively. Number six, same property NOI growth declined by 0.2%, which was principally caused by the closure of Bombay and Bowring at the beginning of the year. However, excluding the impact of the closure of Bombay and Bowring, same property NOI growth would have been 0.4% for the quarter.
Finally, number seven, we renewed or are near completion of renewing over 2.7 million sq ft of tenancies, which represents 76% of our 2019 lease maturities at average rental increases of 4.2%, and after excluding anchor tenants, this metric increases to 5.2%. For the first quarter, these improved results can be attributed to the following primary factors. Number one, the incremental NOI now being generated from both the 144,000 sq ft of virtually fully leased expansion space at TPO and recent earnouts and developments. Number two, the incremental NOI now being generated from new tenants at the KPMG Tower in Transit City and Vaughan. Number three, our portfolio of maturing mortgages and unsecured debt continues to provide unsecured fixed-rate refinancing opportunities at lower rates than the outgoing maturing rates. Number four, additional percentage rents, lease termination fees, and other miscellaneous revenue.
These results, however, were impacted by both the dilutive impact arising from the issuance of the CAD 230 million of equity that was issued in January of 2019, and also from the bankruptcy of Bowring and Bombay, which resulted in 103,000 sq ft of additional vacancy during the quarter. From a financing perspective, with the assistance of our syndicate of banking partners, it was a very busy quarter that started in January with the very successful issuance of the CAD 230 million of equity. These proceeds were applied against some of our credit facilities to reduce our overall debt levels and related debt metrics to appropriately and conservatively accommodate future levels of expected development financing.
The equity issue was followed in February with the early redemption of CAD 150 million of Series H debentures and their replacement with a CAD 150 million, seven-year fixed rate bank loan, and concluded in March with the issuance of CAD 350 million in new Series T, 2.3-year debentures, the proceeds from which were used to repay outstanding variable rate mortgage and construction facility debt. As compared to the comparable quarter last year, these capital initiatives have now resulted in the following improved credit metrics. Number one, our adjusted debt to adjusted aggregate assets ratio has improved to 41.7% from 45%. Number two, our debt to adjusted EBITDA ratio has been reduced to 8.0 times from 8.5 times. Number three, our interest coverage ratio has improved to 3.3 times from 3.1 times. Number four, our unencumbered pool of high-quality assets has now increased by CAD 1 billion to CAD 4.5 billion.
Lastly, our secured to unsecured debt ratio has now improved to 48% to 52%, from 53% to 47%, marking the first time that SmartCentres has more unsecured debt than secured debt. This is a key strategic initiative that we've been working on for over the last two years, and you will recall that when we embarked upon this initiative, two-thirds of our debt was sourced from secured lenders. For our payout ratio and distributions, in addition to the dilutive impact of the CAD 230 million equity issuance, we saw higher sustaining maintenance CapEx during the quarter, a large portion of which is recoverable from our tenants. Because of the seasonality of the quarter, higher prepaid property taxes. When applied against our distributions, our ACFO payout ratio increased to 91.4%, which we expect to return to lower levels over the course of the year.
Our surplus of ACFO over distributions declared of CAD 7.2 million shows a continued very healthy level of cash generation, reflecting the unique strength and core stability of our business model. When factoring in our highly successful DRIP program, the surplus of ACFO over distributions actually paid during the quarter totaled CAD 24.2 million. Our financial and operating results for the first quarter reflect our strong and stable business model that we believe positions us well to continue to provide our unit holders with stable and growing distributions while concurrently supporting our existing business, funding our growing development pipeline of retail and mixed-use initiatives, and lastly, permitting us to consider appropriate acquisition opportunities as they become available.
As we have previously noted, the successful bought deal that was completed in January will dilute our growth expectations in 2019 by approximately 3%, thus resulting in expected FFO per unit growth for 2019 of 1%-1.5%. This improvement in growth will be principally driven by expected acquisitions, new leasing, and further financing benefits in Q3 and Q4. Additionally, we are looking forward to 2020 when Transit City one and two begin to come on stream and we expect growth in FFO per unit to exceed 10%. We look forward to your attendance at our upcoming AGM, which will be held on May 31st at 9:00 A.M. at the Vantage Venues Conference Centre. Mitch has been very active as our Executive Chairman in all aspects of the REIT's business, but in particular, our new development initiatives.
I will now turn things over to Mitch for him to tell you more about some of these. Mitch?
Thanks, Peter. In our seniors' residence partnerships with Revera and our self-storage partnership with SmartStop, SmartCentres will be developing and constructing the buildings, and our 50/50 partners will operate the facilities once complete. We expect each of these relationships to produce five new projects per year. For seniors' residence, we recently announced three specific projects on REIT-owned sites, two in Vaughan and one in Oakville, with an additional five in the planning stages for 2019 in the GTA. For self-storage, we are under construction in Leaside, and soon to be approved and under construction in Brampton, Oshawa, and Vaughan. We recently announced two additional projects, Scarborough and a second location in Brampton. We are in the planning stages for several additional REIT-owned sites in Ontario and the Greater Montreal area, as well as in cities in Western Canada with SmartStop.
A quick update on the Vaughan Metropolitan Centre project, the jewel in the crown of our portfolio. Things are advancing quickly. With the vast ranging subway commuters and the more than 1,300 employees already working out of the KPMG building, the project is quickly becoming a metropolitan area. This will only increase in intensity as we have now completed the office leasing of the KPMG tower. Second, completed the mixed-use tower in which the PwC will open for business in the fall of this year, and the YMCA in the first half of 2020. An additional 500 PwC employees and an estimated 1,200 daily visitors to the YMCA. We are in final negotiations with a significant name tenant for the one unleased floor in this building.
This additional floor was built for the potential future expansion of PwC. This significant name tenant have a relocation provision in the case of PwC's expansion. Third, we previously sold out three 55-story Transit City condo towers for delivery in 2020, now just around the corner. 1,750 units. All three towers are under construction and are on schedule and ahead of budget. It is expected that we will top off each of these three towers by the end of this year. Fourthly, the execution of yet another new partnership with CentreCourt for two additional residential condo towers, 1,015 units in total in a 45 and 50-story condo towers. We are thrilled to report that these two towers sold out in essentially two weeks.
The 45-story tower at an average of CAD 835 per square foot, and the 50-story tower at CAD 865 per square foot, well above the CAD 710 average of the first three towers. Lastly, we also announced a 35-story rental residential tower and podium rental units under the condo towers totaling 550 apartment units. We expect this will be built concurrently with the two new condo towers. A rendering of these three towers is in the supplemental information package. We are already designing the next phase of the VMC to include a 600,000 sq ft office tower and additional residential towers. Overall, we now see 9 to 11 million sq ft being developed on the approximately 50 acres of VMC lands that REIT owns with my company as partner. We are reviewing and planning for residential, rental, condo, and/or townhouses on all our sites over time.
Master planning and active participation with the various municipalities are well underway on most of these sites. Redevelopment plans for the following shopping centers are well underway. A retail site of 20 acres on the west side of the 400 in Vaughan, directly across from our VMC project, is slated for intensification with approximately 2.5 million sq ft of redevelopment, including residential, office, and retail. The site is a primary site under the Vaughan Official Plan and is just east of two new 35-story sold-out and occupied condo towers at Weston Road and Highway 7. Pointe-Claire, Quebec, on the island of Montreal. We have obtained zoning for up to 2 million sq ft of density. Detailed planning is underway for the first residential rental tower, expected to be completed in 2022. South Oakville Centre. This infill center in South Oakville was anchored by a Target store.
We have now initiated discussions with the municipality, with tenants, and with potential partners. As we continue to execute our plan, this site will become a reconfigured 180 sq ft shopping center anchored by a Metro food store, Shoppers Drug Mart, LCBO, and GoodLife Fitness, Winners, and other strong retailers with an adjoining Revera seniors residence building and a townhouse development. A sketch of the plan for this project is included in the supplemental package. Westside Mall in Toronto. Our 12-acre property on Eglinton Avenue West will benefit from the LRT station being built on our lands and a pedestrian bridge connection to the new GO Transit train stop adjacent to our site. This site is now designated in the official plan for just over 2 million sq ft of mixed-use development, primarily residential. Laval Centre. This 43-acre site is anchored by 160,000 sq ft Walmart.
Construction of our first two apartment towers that we own on site with our partner Jadco are underway. We expect to develop the remaining lands with primarily residential rental apartments, condominiums, and retail. Weston Road and 401, 167,000 square feet, which is SmartCentres share. A retail center is under review for a major reconfiguration and re-tenanting of the retail on site and long-term for residential rental. This site has great visibility and access from the 401, one of the busiest intersections in Canada, if not North America. Other sites for which residential plans are evolving include Oakville North at Trafalgar and Dundas, Vaughan Northwest at Major Mackenzie and Weston Road, Pickering, Hamilton Stone Creek, Hamilton Mountain Plaza, Mississauga locations, Markham at Highway 7 and Woodbine, Mirabel, next to our outlet center, Laval, East Vaudreuil, Mascouche in Quebec, and Langley, Maple Ridge, Chilliwack, and New Westminster in British Columbia.
We have been in discussions with potential residential partners for many of our sites and will likely be developing some on our own. We are also in discussions with hotel operators about partnering on various sites. More news to come on these in future quarters. The potential intensification development program continues to grow as we further review our portfolio for opportunities. The number of potential projects and towers to commence construction, in addition to our retail development pipeline within the next five years, is currently estimated at 82. This mixed use and retail development will have an estimated value of CAD 9 billion on completion, with SmartCentres REIT's estimated share being somewhat over CAD 3 billion. In addition, another 86 projects or towers have been identified on which we will commence rezoning, design, and site plan approvals, and marketing during the same five years, with construction commencing after that.
The review continues. We estimate that 10 years from now, we will be generating recurring NOI from these new rental businesses, seniors homes, apartments, offices, and self-storage, in excess of 20% of our total rental NOI, plus significant profits in the tens of millions every year starting in 2020 from the sale of condominiums and townhouses. With that, I will turn it back to the operator to coordinate us in addressing your questions. Thank you.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. I do see we have our first question from Dean Wilkinson with CIBC. Please go ahead, Dean.
Thanks. Afternoon, everybody.
Afternoon, Dean.
Mitch, on Transit City 4 and 5, I think the only thing more impressive than selling it out in two weeks is the 20% bump in the average selling cost or average selling price over the first 3 phases. How does that increase compare to any cost inflation that you may have seen sort of creeping up between 1, 2, 3, and 4 and 5?
Yeah. We're feeling pretty good on the cost side. We haven't fully tendered the building yet, but our early prognosis is that there'll be some increase in cost, but not anywhere close to the bump in the sale price per square foot. Not even close. We're feeling pretty good about that part. Yeah.
Awesome. I'm assuming that the funding mechanism for the rental is rolling the equity profit coming out of phases 1, 2, and 3. Would that be correct?
Well, you could say that theoretically. The timing is quite good with 1, 2, and 3.
Yeah.
The start of the rental building. We are now just finalizing the design of the rental building. The outline of it and the superstructure is designed. We're still into some details of suite mixes and suite designs and amenity spaces. The pricing of that will be commenced shortly, and the timing would be, you could say that the profits from 1, 2 and 3 could be used to fund the equity portion, it's all coming into the same place.
Right.
We're partners together.
Right
in both, so it does have a lot of eloquence. In the REIT's case, it's all coming into the same place.
Yeah. The point is, it's effectively self-funding at that point. In terms of what you're building on the rental, would you intend it to be sort of the same quality and mix as the condos, or is there going to be a bit of a bifurcation of the different kind of buildings, or are they intended to all sort of be similar? If I wanted to rent one of your units, it would look just like as if I was going to buy one of the condos?
No. The rental will be different. The rental will be a little bit high street, a little bit higher end. It's not to say the condos are not high-end, it's just that the rental is going to be high street. That doesn't mean it's not downtown rents. In terms of the standard, it'll be a notch, let's say, noticeably higher than the condo in terms of certain amenities and certain finishes, which is a statement because the condos are highly finished and very well equipped with amenities. The units may be, on average, a little bit bigger and a little bit more services. It'll be differentiated. That's in the service of separating the market as well as we think that is where we want to be lined up for that rental building, and it's in the service of the development, the balance of the land.
For our development, we have separated ourselves from the rest of what's going on up here, and there's a lot going on up here. We're not the only ones doing things up here. We have a strong position with the subway and a strong position in terms of our master planning and our architecture and urban design. That building will also be in the service of all the future phases of our developments here as well.
Right. No, it totally makes sense. What do you think that the ultimate rental density is that you can get onto that site?
Rental density? You mean rental rates?
No, just in terms of the mix of how much you would build for a purpose-built.
Oh, on the whole site? On the overall? Well, we certainly anticipate doing quite a bit more rental over the future phases. We will do potentially other types of rental here. We may do some student rental up here. We're two stops away from York University.
Okay.
Just for your information, York University does not have certain modern facilities. We are, I think, seen by York, and we, vice versa, think there's some synergies there. We will do all kinds of I think we'll have many different forms of rental up here over the years. We certainly anticipate doing a regular program of rental residential up here. We also see storage. We also see seniors. We also see hotel. There's lots of forms of rental to come, along with retail, and urban retail as well, by the way, and more office. There'll be a lot of various forms of rental opportunities here.
Great. That's it for me. I'll hand it back. Thanks, everyone.
Thank you.
Once again, I'll remind the audience, if you'd like to ask a question, please go ahead and press star one to ask a question. I can see we have our next question ready here. We'll take a question from Pammi Bir with Scotia Capital. Please go ahead, Pammi.
Thanks. Good evening. Just on condos four and five again, at the VMC. Any sense of what the buyer mix was between end users versus investors?
Percentage, hard to say, I will say this much. I would say significantly, materially higher end user percentage than you would see downtown. Still, the most significant percentage is investors.
I'm just curious if that data, is that tracked at all during the sales process?
Not officially, I'd say we have an okay sense of it. Most of the deals, most of the sales are transacted through a broker. We know a lot of the brokers, we sort of have a sense of who their clientele is. There's lots of brokers that are focused on selling to investors, we also are able to sort of understand which ones are buying on behalf of end users. By the way, a lot of the end users come in with their brokers in all of them, and particularly, four and five, but even one, two and three. You sort of can tell, we don't announce or officially necessarily insist on them disclosing exactly that particular stat.
Okay, that's helpful. Just maybe switching gears and looking at the retail. Given the downtime from Payless and Bombay & Co., what are your updated thoughts on 2019 same property NOI growth for the year? Looks like, I think you maybe stripped out sort of commentary around the outlook for that particular item in your supplement. Just curious how you're feeling about that.
We started the year without the knowledge of Payless, and again, in the range of somewhere between half and one and a half percent on the same property basis. With the Payless, we're anticipating leasing up. The Payless has been going very well with more than half the space now already in very advanced stages with specific interested tenants. That will lease up over the course of the year. It will be muted from that range, or the lower end of that range, I would say.
Okay. If we think about maybe a little further ahead to 2020, assuming both of those spaces with those retailers are backfilled and then again, maybe perhaps no material hiccups into 2020, is it fair to assume that next year's growth would be above your typical, call it, 1% range? Are there other things to consider that maybe, or other potential closures that you see on the horizon?
Yeah. We'll have a few things happening. One is, with the interest in that space and some of that space we're subdividing into smaller spaces, and there's a lot of interest from service tenants and a number of tenants who we're looking at in terms of adding services to the site. In addition to that, you'd have another year of the Toronto Premium Outlets full build-out in total. It would be same property for the entire center, and Montreal happening at the same time. We expect that it would be on the higher end of that range when we get into 2020.
Great. I'll turn it back. Thank you.
Thanks very much. I want to remind our audience one last time, if you'd like to ask a question, press star one to ask a question. We'll take our next question from Tal Woolley from National Bank Financial. Please go ahead.
Hi, good evening. When you're looking at adding residential seniors and storage to your original Walmart anchored retail sites outside of VMC, is the goal here with those additional asset classes similar to Walmart to provide the real value in the market? I'm just trying to understand how you're thinking about positioning those properties relative to what else is out there in the market.
Well, we do philosophically see Canada as a place to provide value. We believe that is the right positioning in this country. However, when it comes to rental residential, each market is different. It really will depend. We're going to customize our development strategy within each market. On the storage side, though, for sure, we want to be competitive, and it's very much aligned with Walmart and our sites. Each market will dictate. The residential side will be dictated by each individual market.
I might also add that there is alignment even between those different uses on the site that you mentioned. In terms of people moving into apartments or self-storage, or a senior's home and downsizing and having a self-storage facility nearby. There's a number of things. And having an apartment building that people, as they get older, can then move into a senior's home on the same site. There is some thinking going into that on a number of our sites.
Okay, that's great. Thank you very much.
Thank you. I see we have our next question. Sam Damiani with TD Securities. Please go ahead.
Thank you. Just a couple little follow-ups because most of my questions have been answered. I did notice there was a lease termination fee income in the quarter, I think of around CAD 1.4 million. Is there any color you can provide around that in terms of what tenant?
It wasn't a single tenant, Sam. There were at least three, maybe four tenants that contributed to that number.
Okay. Just on the occupancy and the same-property and wide growth going forward between the Bombay and Payless. What are you looking at in terms of Home Outfitters, in terms of their plans to hand space back to landlords?
Interestingly, we chatted with them very recently about that. Home Outfitters, as you know, is operating and continues to operate until probably the third quarter across the country. What they're doing is while they're closing the operations, they're continuing to pay rent. In all of the locations with us, they're going to continue paying rent for the foreseeable future till the end of their term, which runs into 2021, 2022, and 2023. They've come to us and said, "Hey," they're flexible about that. We're going to look at that and look at what we can do with the space. To the extent we can utilize the space for a higher value use, we will go to them and talk to them about that. Financially, it's not going to be an impact on us.
Now we have a lot more time to prepare for the utilization of that space.
There are a number of Sorry.
Go ahead.
Yeah, sorry. I was going to say, there are a number of retailers coming into the market and a number of retailers expanding more than there have been in the last number of years. Some retailers in the last few years have been sitting back but are now a little bit more active. Actually the timing in that case and some of the other spaces is good. For some of the things you were asking about.
Who would be maybe the top number one or two U.S. retailers that are looking at coming into Canada? There was a press a couple of weeks ago about Ulta Beauty coming up to Canada.
They're looking all over the market. There are a few that are looking around the market, and they're looking around confidentially into the market. There are not only the health and beauty, there is sports, there are health and fitness that's also looking at it. For the big space that we're looking at, there are those big guys, and then there's always the smaller guys who come in and do both the open-air and the enclosed format. We're talking to all of them, including very, what I'm going to call, boutique fitness that are looking at adding services to our site, and so on. Lots of new uses being added to the centers.
Interesting. Thank you. Just to clarify regarding Bombay and Bowring, I think you said the spaces were vacated in March. Does that mean the REIT collected one or two months of rent from them before they closed up shop?
Yes. They paid rent early in the year. What they did was they stopped paying for a week or two, and then when they filed, they were compelled to pay rent under their proceedings. During that proceedings, they are required to pay rent, until they stopped, which was the end of the quarter.
That was for Payless. Sam, just for clarity, that was the Payless situation. Bombay and Bowring essentially closed up shop early on in January.
There's no revenue from Bombay in Q1?
Yes, there were, because they were going through their CCAA during the quarter in January. We did receive for approximately two of the three months, and we didn't for one of those, which is the two weeks or three weeks just before they filed. Once they filed, they're obligated under proceedings to pay.
The impact on same-property NOI growth would be continued, maybe even a little bigger in Q2 versus Q1 as a result of the Bombay filing.
That notwithstanding what we would lease up in both that and the Payless, yes.
Okay. Thank you.
Thank you. We have our next question from Jenny Ma with BMO Capital Markets. Please go ahead, Jenny.
Hi, good evening. I just had a question with regards to the seniors housing developments that you're doing with Revera. Just wanted to get some color on how you target the locations where you want to be building, how you think about that versus building conventional residential, and then also, in terms of, we're hearing a lot of new supply coming up in a number of markets. How do you think about that when picking your locations?
I'll start and then Peter will add. Most of the time, Jenny, we actually have room to do both, so we don't really have to choose. It's just that, we have a program now with Revera, who are a seniors home specialty, seniors home operator across the country. There's very few, maybe there's one, I don't think there's really only more than one. That's not even a REIT property, I don't think. That it does not preclude doing a seniors home, is not precluding. We're not choosing between doing a seniors home and a rental home, or rental housing.
Like the two locations in Vaughan Northwest, where we're doing two seniors tower, seniors apartment, and then seniors home with more care, that are joined together. We're also, in that same corner piece of six acres, is going to have two or three other residential buildings or towers on it, as well. In Oakville, which is the other location, that we've announced. There again, which is the old Target space that will be coming down. There, we're going to do a seniors home, and we're going to do two, let's call it two to five-story, residential on the rest of that portion of the site adjoining what will become a neighborhood shopping center with the food store and the Shoppers Drug Mart and fitness and so on. There, again, room for both.
Okay, when you're putting up the seniors housing, is it going to essentially look very much like the residential, so more of a low-rise build?
Not necessarily. They can get up there. They can get up to 15 stories. Yeah, they can also be, depends on the market and what's justified. A lot of times it's driven by, obviously, the number of units. It's driven by the parking situation. They can get up there to as high as 15 stories.
Okay.
Looks-wise, yeah, they could look the same. Seniors housing today, newly built, can look very attractive. It's not the seniors housing developments of my parents' era. Our-Grandparents. They're very modern, thoughtful. This is the way it's done today, so they're really meant to look like something you really want to live in. It's not something that you have to live in.
Yeah, they're really quite attractive and will blend in quite nicely.
Okay. Putting aside that there's lots of opportunity to put up the seniors housing, the second part of my question was, when you think about sort of the fundamentals and the supply situation in a number of markets, how much input do you have in choosing where to build this, or is it really driven by Revera? Just trying to think through how you target the specific markets.
Well, first of all, they are currently in the market operating. Not unlike a retailer, when we do a new Walmart or a new food store or whatever it may be, we kind of all understand the country. We sort of slice and dice the country, if you will, by the markets that are being served well. Some that are being underserved. We sort of start by understanding where there's opportunities, and they already have that intelligence. That's their core business. Yeah, along with them, we also have good intelligence in each market. They do actually appreciate our insight into the various markets that we're in. Their information is extremely valuable, in terms of them understanding where the best opportunities are.
By the time we announce that we're doing something like that, we've probably together looked at dozens and dozens of others that we've decided are not interesting enough. That's kind of the process of how we ultimately determine where the most viable locations for seniors housing are. Believe me, there's many that are not. There's many that we're not interested in. The ones we're announcing are very interesting.
Mm-hmm. Have you just really focused on the local market so far, or have you actually looked across the portfolio and whether or not there might be some opportunities in other provinces and further out?
It has been focused mostly on Ontario thus far, but they have worked with us on a couple of West situations as well. In the case of Quebec, Revera has a relationship, which are well-known, I think, with another operator in Quebec. Quebec with Revera is not likely something we would be doing. We are talking or looking at Quebec and talking with others about potential opportunities on our sites in that province. It has been with Revera, very Ontario focused so far.
Okay. Does Revera have an exclusivity with that partner?
I don't actually know.
Oh, in Quebec?
In Quebec. I'm not.
Quebec
sure about the [widget that I got.
Yeah, we're not sure. That particular operator is actually coming into Ontario now. It's hard to say what they do, but they really do respect each other. They've been partners for a long time, and they really do respect each other because we're actually dealing with both. I guess it should be said that we are not just exclusively dealing with Revera. We do fully intend, if this in any way helps answer the question, doing seniors housing across the country. At the moment, we have very good and the most going with Revera. Their partners in Quebec are people we are dealing with as well, both in Quebec and outside of Quebec, for that matter, and others as well.
Okay, great. That's great color. Thanks a lot.
Thank you very much. We have our next question from Brendon Abrams, Canaccord Genuity. Please go ahead, Mr. Abrams.
Hi, good evening. Turning to your other, I guess, 407 property just west of VMC on the other side of the highway. I see you mentioned here it's one of the highest densities in Vaughan, second only to VMC. Just wondering if you could provide any color or update with respect to that project or that property, and kind of what type of potential do you see longer term there. Could it potentially be a VMC number two, for example?
Yes, very much so. This is a super property. You just have to go and see it. If we only had that property, we would be kind of over the moon. Honestly, I think it's kind of lucky that we have that property because it's absolutely a continuation of VMC. If you look at the area from the point of view of Highway 7 and the mass transit. Yes, there are mass transit infrastructure being built right in front of our site there. The corner of the old Paladini site is now three towers and fully built and for all intents and purposes, fully occupied. That's adjoining. That abuts our property. We share an access. We share two accesses with that development. It's an abundance of transportation infrastructure right next to VMC.
Just for what it's worth, just west of that property, we own a site called Westridge. We call it Westridge, which is also another retail development that is low density that ties very nicely into the same transportation infrastructure. Don't be surprised if there's a day where we start talking about how we're going to be continuing the urbanization of this area onto our Westridge site, which by the way, I should mention we own with Choice, and they have been fantastic partners there. That goes back to CREIT. It's a large property. If you were to go and look at those properties now, having had this discussion, you would understand and be able to imagine how those two properties, the one you asked about and Westridge, will tie very much into VMC.
The site you asked about is every bit as good as virtually all, most of our VMC property. We're very excited about it. It's kind of a thing which is in the shadow in the sense of VMC, but it is an absolutely superb opportunity. Stay tuned. Yeah.
Just in terms of timing on that, I'm not sure how the process works, but do you have to maybe substantially complete VMC before you can really proceed
No.
With that?
Absolutely not. We will be developing on those lands long before we complete VMC. We are going in for an application. We've been in discussions with the municipality in the last few years. I don't want to get into all the whatnot. It's a rezoning, but it is not in any way, shape, or form a stretch. The municipality's already initiated their own review of that property. All the infrastructure is there, not to mention the investment in mass transit. The neighbor has already built. We're all outside the technical planning district called VMC, but just effectively, it's in the VMC area, and he was approved for those densities on a one-off application basis. We are being included in the review of the area. We are also very in touch and involved with Vaughan, as you can imagine.
We chose not to make this application a couple of years ago, for just our own reasons, election years and things like that going on. We waited, but now we are going full steam ahead. The timing is absolutely great. I am very excited about that particular development. I think we were looking at about 2.5 million square feet of density there. It's all over the highway, all over Highway 7, and all the improvements are just being finished now. We will not be waiting there. We will be pedal to the metal on that one. I see a lot of rental there as well because it's just hard to explain over the phone, but it's really conducive to varying types of rental there.
Right. Okay, that's very helpful. Just turning back to the diversification strategy. As your organization gains more experience and expertise with these various asset classes, over the longer term, I guess, could you foresee a time where you perhaps internalize some of these functions or, I know the JVs are very new, take a go-it-alone strategy over the long term?
Yeah, I think it would be safe to say that we do imagine ourselves having those things internalized. That's not to say that we won't continue to do things in partnerships, because we see value in those partnerships beyond just the interest that we give up when we do it. Yes, I think we can imagine the day and not too distant future where some of those things will be. Well, I could go out on a limb and say that it's certainly our goal to have those things internalized, and so we'll have a choice whether we want to execute on our own or we want to execute with a partner. Our partners bring a lot to the table. We also want to be able to do it ourselves. Now, that will not be the case with operating, for example, seniors housing.
We do not have any aspirations to operate seniors housing. With that exception, we see the other areas internalized eventually, yes.
Okay, that's helpful. Thank you.
It appears there are no further questions at this time. Mr. Forde, I'd like to turn the conference back to you for any additional or closing remarks.
Okay. Again, thank you all for being part of our first quarter call, and thank you for your interest in investing in our REIT. Good evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.