Good day, ladies and gentlemen. Welcome to the SmartCentres REIT Q2 2024 conference call. I would like to introduce Mr. Peter Slan. Please go ahead.
Good morning, and welcome to our second quarter 2024 results call. I'm Peter Slan, Chief Financial Officer, and I'm joined on today's call by Mitch Goldhar, SmartCentres Executive Chair and CEO, and by Rudy Gobin, our Executive Vice President of Portfolio Management and Investments. We will begin today's call with some comments from Mitch. Rudy will then provide some operational highlights, and I will review our financial results. We will then be pleased to take your questions. Just before I turn the call over to Mitch, I would like to refer you specifically to the cautionary language about forward-looking information, which can be found at the front of our MD&A materials. This also applies to comments of any of the speakers this morning. Mitch, over to you.
Thank you, Peter. Good morning, and welcome everyone. The second quarter delivered strong results, building on the momentum we spoke of last quarter. With over 272,000 sq ft of new lease deals executed in the quarter, committed occupancy in our portfolio improved to 92, so rather 98.2%. From the largest retailer in the world, Walmart, and many of our great Canadian brands, our tenant partner relationships continue to deepen with same-store expansions and new stores. New locations are either underway or will begin construction shortly, with names such as Canadian Tire, Winners, HomeSense, LCBO, some full-line grocery, Dollarama, Golf Town, banks, QSRs, and more.
You may have already noticed the higher traffic or selection and wider array of tenants in our SmartCentres locations as we enhance the experience beyond the everyday essentials with health and beauty, recreation, fitness, education, clinics, pet stores, daycares, and specialty foods. As we work closely with our tenants, no detail is too small in ensuring SmartCentres is a good option for the growth plans of the country's strongest retailers and a desirable location to continue operating profitable stores, which, not surprisingly, has culminated in us already extending over 86% of our over 5 million sq ft maturing this year. Also positive is the 8.5% rental rate lifts achieved on these extensions, exclusive of anchor tenants. This rental rate lift is pure. It's a pure lift, not buoyed up by tenant inducements, or other costly consideration, which can sometimes be offered.
This rental rate increase is a direct reflection of the value of SmartCentres real estate and the amount of business being done on our properties. Rudy will provide some further details in a minute, but here are a few more operational highlights. Same Property NOI for the six months ending in June is up 3%, excluding anchors. Our industrial vacant space was quickly re-leased in the quarter, along with the additional new build adjacent space, and at higher rents than previous, than the previous tenant. Our payout ratio, while still high from my perspective, and while it is working its way down, in the meantime, is not a concern because of the quality of our income. Cash collections at over 99% reflects the quality of that income. And we expect leasing, renewals, renewal rate momentum to carry on through year-end.
While enjoying a strong foundation of stable rental income, we continue to build significant mixed-use permissions, with nearly 57 million sq ft already zoned. This, of course, on lands we already own and have for many years. We will, of course, be prudent and strategic in executing any development project, that is, when market conditions permit, with appropriate financing in place. Here are some specific highlights. Site works are continuing for our 36-story ArtWalk project here in the VMC, comprising 320 sold-out condominium units. Through our SmartLiving brand, The Millway, our 458-unit apartment rental project, which was completed late last year, was 88% leased at quarter-end, above planned rental rates, and now stands at 90%. We expect to be 95% leased by year-end.
Construction of our Vaughan Northwest Townhomes with our partner is progressing well, with 25 closings taking place this quarter and nearly all pre-sold units expected to close on schedule by year-end. In Leaside, construction is well on its way for a 224,000 sq ft retail center, comprised of a 200,000 sq ft Canadian Tire store. Adding to our self-storage portfolio, our Markham facility opened in May, bringing the operational portfolio to 10 projects, and four remain under construction. This portfolio continues to excel, and we intend to continue the expansion as we are doing with two new locations, one in Laval East and the other in Victoria, British Columbia, just off the downtown core.
Our development teams continue to work diligently on obtaining residential and other permissions, and just recently, we were successful in our Eglinton West Centre, called Westside Mall, in obtaining entitlements for 2.7 million sq ft of density and a 327,000 sq ft Phase I residential building with at-grade retail. Note that this mixed-use development is immediately adjacent to the soon-to-be-open Caledonia LRT station, which will also be integrated with a soon-to-be-constructed Barrie GO Line station. Overall, we continue to be strategic with our development and expect to execute on some capital recycling this year where market appetite exists. We expect that with further interest rate reductions and reduced inflation in late 2024 and 2025, market conditions may be more conducive for more meaningful capital recycling.
Finally, we are pleased to announce that our annual Environmental, Social, and Governance report will be released shortly, reflecting the significant progress we have made in all areas of our business. As I've said previously, ESG is woven into the fabric of our organization. It is a part of how we oversee our business, interact with our tenants, and engage with our employees and communities. Look out for this in the next week or so. As you can see, we are quite active in enhancing value in our core retail operations, prudent in our governance, and strategic with our development pipeline.
We also take great care in maintaining a conservative balance sheet and improving liquidity, which we did when increasing our operating line by CAD 250 million to CAD 750 million, increasing our unencumbered asset pool to CAD 9.3 billion and raising CAD 350 million subsequent to the quarter, which Peter will speak to in a few minutes. But before that, let me pass the call over to Rudy for some operational highlights.
Thanks, Mitch, and good morning, everyone. As Mitch mentioned, strong momentum in tenant demand has increased our occupancy now at 98.2%, a reflection of the quality tenants responding to the need for value and convenience within each community. SmartCentres has a long history of providing value-oriented, essential goods and services to communities across Canada, with access to the best value brand names. As Mitch mentioned, at the core of our shopping centers and income are Walmart, Canadian Tire, TJX, Loblaws, Sobeys, Metro, Dollarama, Lowe's, LCBO, and Shoppers, to name a few. There is increasing activity from these core tenants, further strengthening the income and covenant of the portfolio. In response to the needs of each community, we are also adding family medical, dental, daycares, recreational, education, health and beauty, and more, providing that convenient one place- one-stop place to shop that is SmartCentres.
Demand for existing and new build space continues to escalate from Chilliwack, BC, to Lachenaie, Quebec. We have also executed over 272,000 sq ft of deals in the quarter for small and large units, and we have extended over 86% of leases maturing in 2024, with rental lifts at 8.5%. As Mitch mentioned, this increase is a pure rental increase and does not involve financial inducements or landlord work. We also re-leased our vacant industrial space above, above the prior rent, a reflection of the demand for such quality building and highway location. Same property NOI increased by 2.3% in the quarter and 3% for the first half of the year, excluding anchors, and we expect this to be higher in the next several quarters.
Our Premium Outlets continue to excel in driving traffic and improving sales, leading to meaningful increases in EBITDA and value to the REIT. Tenant sales places our Toronto Premium Outlets in the top three highest performers in Canada and ranks amongst the top performers in the Simon Properties portfolio. Our Toronto and Montreal locations remain fully leased, with rental lifts and EBITDA coming in above budget. These affordable luxury centers and world-class brands augments the SmartCentres portfolio well, and our relationship with our partner continues to be strong and collaborative as we discuss possible expansion. Overall, a great first half of 2024, with strong rental lifts, NOI growth, cash collection, and tenant retention, while delivering a broader array of tenants to meet the changing needs of each community.
We anticipate a continuation of strong interest from our core tenants, our tenant base, as we strengthen and grow SmartCentres. With that, I will turn it over to Peter.
Thank you, Rudy. The financial results for the second quarter once again reflect the strong performance in our core retail business, with improved occupancy and a continued contribution from our mixed-use development portfolio. For the three months ended June 30th, 2024, net operating income decreased by CAD 8 million, or 5.5% from the same quarter last year, largely due to the decrease in condo closings, which were only partially offset by new townhome closings. NOI was partially impacted by a decrease in net recoveries, primarily due to the timing of certain operating costs, which we expect to normalize over the remainder of the year. Same property NOI, including equity accounted investments, but excluding anchor tenants, increased by 2.2% compared to the same period in 2023, and by 3% for the first six months of the year.
FFO per fully diluted unit was CAD 0.50, compared to CAD 0.55 from the comparable quarter last year. The decline is primarily due to the condo closings that occurred in the prior year, which did not repeat this quarter, as well as an increase in net interest expense due to higher interest rates and lower interest capitalization from completed development projects that are currently in lease up. During Q2, we also delivered and closed on 25 units of our Vaughan Northwest townhome project for net profit of CAD 2.5 million at the REIT's share. FFO with adjustments, which excludes both the townhome and condo profits and the total return swap, was CAD 0.51 per unit for the second quarter.
The decrease of CAD 0.03 from the comparable quarter last year was primarily due to an increase in net interest expense due to higher interest rates and lower interest capitalization. In terms of distributions, we maintained our distributions during the quarter at an annualized rate of CAD 1.85 per unit. The payout ratio to AFFO with adjustments for the three months ended June 30th was 96.9%. Adjusted debt to adjusted EBITDA was 9.9x for the rolling 12-month period ending in Q2, which is unchanged from the prior year, but a slight increase from 9.8x last quarter due to additional development spending and fewer condo closings. Our debt to aggregate assets ratio was 43.7% at the end of the quarter, a 50 basis point increase compared to the same period a year earlier.
Our unencumbered asset pool increased by CAD 100 million to CAD 9.3 billion in Q2 compared to last year. Unsecured debt, including our share of equity accounted investments, was CAD 4.4 billion, virtually unchanged from the prior quarter, and represents approximately 82% of our total debt of CAD 5.4 billion. From a liquidity perspective, we remain comfortable with our current liquidity position. During Q2, as Mitch noted, we upsized our main revolving operating credit facility by CAD 250 million to CAD 750 million, with strong support from our banking syndicate. As a result, as at June 30th, 2024, we have approximately CAD 652 million of undrawn liquidity, including our share of equity accounted investments and cash on hand, but excluding any accordion features.
As Mitch noted, subsequent to the quarter-end, we increased our liquidity further through the issuance of CAD 350 million of senior unsecured debentures at a rate of 5.162% for a term of six years. The proceeds from this offering will be used to repay the upcoming maturity of our Series O debentures and higher interest floating rate debt on our operating lines. The weighted average term to maturity of our debt, including debt on equity accounted investments, is 3.1 years or 3.3 years pro forma the recent debenture offering. Our weighted average interest rate was 4.25%, an increase of 8 basis points from the prior quarter. Our debt ladder remains conservatively structured, where the most significant aggregate maturities are in 2025 and 2027.
Approximately 80% of our debt is at fixed interest rates. Just before we open the call up to questions, I want to touch briefly on our development projects that are underway. Once again, we have updated our MD&A disclosure, focusing on those development projects that are currently under construction. As you will see on page 17, there are currently nine projects under construction, down from 10 last quarter. The one project that was completed during the quarter was a self-storage project in Markham. The REIT's share of total capital costs of these nine development projects is approximately CAD 499 million, with the estimated cost to complete standing at CAD 307 million. Subsequent to the quarter-end, all of the debt drawn to fund Phase I of the Vaughan Northwest Townhomes has been repaid.
In addition, all of the construction debt related to funding the development of three SmartStop projects has been replaced with permanent financing from an external lender. With that, we would be pleased to take your questions. Operator, can we have the first question on the line, please?
Certainly. As a reminder for people, if you'd like to queue up to ask a question, please dial star one on your phone keypad. The first question is from Mario Saric from Scotiabank. Please go ahead, Mario.
Hi, good morning, and thank you for taking my questions. Maybe, starting off with, Rudy. Both occupancy and blended lease spreads were up quite nicely, sequentially. I'm curious about the, whether there's a direct connection between the two. So I, as I'm trying to understand how returning back to, peak occupancy or on your way back to peak occupancy may impact your ability, to continue expanding that lease spread going forward.
No, I think as we obviously as we lease up the portfolio, there's going to be. And we are at market, we expect that lease spread to, I'm going to call even out during the, by the end of the year. So quarter by quarter, you'll see a little bit of change, but we do expect that to continue to maintain that current spread year to date.
Okay. Sorry, to maintain the spread, or do you see the possibility to increase it further?
This for the balance of this year, we are budgeting that will increase. Like you see first quarter, second quarter, and then we expect that sort of blended rate will increase. But that does not include the lease-up of space, so we will have it increased as we lease-up space, but on the existing portfolio to maintain that alignment with the first half of the year.
Got it. Okay. If the genesis of the question, I'm trying to understand kind of the relationship between pricing power and occupancy within your portfolio. If there's a very direct relationship between the two. It sounds like there is.
Absolut- absolutely.
Okay. And then just a follow-up for you, Rudy. What percentage, roughly, would you estimate of your non-anchor tenancies would have fixed price renewal options in place?
I don't know that off the cuff. I'll have to get back to you on that, Mario. Yeah, I just don't have that at my fingertips.
No problem. Okay, and then maybe shifting over to Peter. I think the variable rate debt was roughly about 20%, this quarter. That may become a tailwind in the coming months with potential central bank easing, as Mitch alluded to in his prepared remarks. Just curious what your kind of target variable rate exposure would be, you know, by the end of this year, by the end of next year, and what, what's a good stabilized figure to use?
Yeah, that's right, Mario. It's been about 20%. There's been two rate cuts, I would note, since the last time we hosted a quarterly call. So, that benefited us slightly, only slightly in this quarter because it was late in Q2, and it'll benefit us again in Q3 with the most recent rate cut. And, you know, your guess is as good as mine about future rate cuts, but I do agree with you, it could certainly become a tailwind. I expect we're going to maintain roughly the same proportion. It's not going to move all that meaningfully. But with the most recent raise, debenture issue, of course, we did repay mostly floating rate debt.
Right. Okay. And then, can you give us a sense of how much of the variable rate debt in place today is, the interest thereupon is currently being capitalized? I'm just trying to get a sense of what the potential benefit could be if it-
Yeah. So most of it is being capitalized. Certainly all of our construction facilities are floating rate debt, Mario.
Okay. And then, maybe just lastly for Mitch. In terms of capital recycling, you kind of highlighted, a potentially more favorable interest rate environment as being a possible catalyst, for increased activity or for some activity. Are you at the stage where you might be able to quantify the magnitude of, of potential dispositions, whether it be development, intensification, or IPP, and what the catalyst outside of interest rates, might be for that?
I think, order of magnitude, we look at trying to achieve something in the CAD 250 million-CAD 300 million range, or more. And I mean, you know, we're okay hanging out until market conditions improve a bit. So it's likely to be, most likely to be dispositions of lands with permissions that we've talked about. And that, that market, you know, really didn't exist even a year ago or a year and a half ago. It does exist now. It's not quite, where we want it to be yet, but, it's, moving in the right direction.
... Okay, and, so you, you have so many attractive options across the portfolio geographically. So it's, it's hard to generalize, but what's, you know, what's your guess in terms of, how much the value of those types of properties or that type of land has come off from peak?
You know, maybe I won't be specific, but you know, an example of a property we have in the east side of the GTA, let's say, by example, at the peak, it was probably worth, you know, some would say between CAD 90-CAD 95 a sq ft of buildable, you know. Let's say the Phase I would have been 1 million sq ft. Phase I meaning a couple of towers that are approved. As I said, there wasn't much of a market a year or year and a half ago, but you know, maybe, maybe the market now is, goodness... I don't know. I mean, I would like to think it's better than half that, but maybe it is, you know, as bad as half that.
It's still, you know, highly accretive to us, even, even at half that, because it's just... You know, it's basically vacant land that we have on an operating shopping center. You know, these high-rise, mid-rise, high-rise buildings don't take up much land. So, you know, we'll just be watching closely. We certainly aren't gonna wait for, you know, the, what was the peak of the market, you know, a few years ago. But, you know, we're monitoring it closely, and, you know, that's an example of something when the time is right, we would probably, you know, sell properties like that, Phase Is. You know, that's a property that is zoned for, say, goodness, 6 or 6.5 million sq ft. So, you know, we've got lots and lots more there to do, in-house, if we want to.
But Phase I being 1 million sq ft, you know, we've got a lot of that around the GTA and other major cities, when the market, you know, recovers a little bit more.
Got it. That's really helpful, Goldhar. And, is it, in your opinion, when you're talking to potential buyers, is it simply a function of interest rates coming down, or is there an element of a desire for better economic visibility, going forward? So I'm just curious, what the catalyst could be, in your view, that could revive demand?
Yeah, I mean, most of the buyers of what I was just describing, it's not the only thing, you know, the only lever we have for capital recycling. But in that particular area, it's usually private developers, you know, and private developers are really on the sidelines until they're, you know, suddenly hot to trot. So when they're not hot to trot, they're very careful buyers. So right now, they're very careful buyers. So there's this, you know, theoretical value, and then there's just, you know, what does the deal actually look like? You know, private developers are super, you know, careful when, you know, there isn't a clear path. You know, right now, there's not a clear path. There's a... You know, the fog is lifting.
Private developers, there's a lot of them with a lot of money, are still not ready to, you know, to buy straight up. They wanna buy on terms, they wanna buy conditional, they wanna buy with all kinds of, you know, potential adjustments. So but, you know, when the fog lifts a little bit more and there's a real clear path to, to the other, you know, the other, you know, to an exit, you know, development, you know, the market warms up, probably a little bit of, a little bit of momentum in the condo market, you know, the end user or the investor, then you'll see the developers start to come off the sidelines. And that can go quickly from being what I speculate is the market today to something better and in less conservative, you know, structured buying terms.
So, yeah, we'll, we'll wait and see. There's other levers we have that would be dealing with more institutional types, but, you know, that type of buyer, I think that's a fair, you know, profile.
You know, that's really a really interesting color. Thanks much. Okay.
Great. Thank you, Mario. The next question is from Mike Markidis, from BMO Capital Markets. Please go ahead, Mike.
Thank you, operator. Good morning, everybody. Out of consideration for all participants, I'll limit my questions to two. Just first off, on the... Peter, on the drag that you mentioned, with the decapitalization of interest, I guess Millway is probably a big component of that, maybe self-storage. Do you have a sense of what the quantum of that drag was this quarter from an FFO per unit perspective? Just trying to get a sense of the reversal as you lease up.
Yeah. Good morning, Mike. Yeah, Millway was certainly the largest by far. Millway would have accounted for more than half of that drag. And you're right, self-storage as well. I did mention that a couple of quarters ago, we had put some permanent takeout financing on a portfolio of completed self-storage SmartStop projects. And so that obviously ceased capitalizing interest on those projects.
Okay, great. Thanks. And then, Mitch, in your comments earlier, you made a comment that you weren't concerned about the payout ratio, but that you did think it was too high for—maybe too high, I'm not sure, for your liking or the markets. Just wanted to get a sense of what your ideal payout ratio would be in your mind for the long term.
You know, below 90, you know? 85 to, you know, you're talking ideal, and we're talking in the foreseeable future. I'd like to see it down below 90. It's fine if it's low 90s. We sort of use 88-92, I think, right now, you know, sort of short, medium term, our goal. But yeah, we're very motivated to get that down, but we're also very comfortable with where it is because, you know, we can maintain everything that we've got going on and plan to do with our tenant profile and everything that's going on here on the, you know, on the leasing side and so on. So we'll... You know, we, we've got our eye on it.
We hope that there'll be moments not in the too distant future to make the moves to bring that down.
Got it. Thanks very much. Have a great weekend, everyone.
Thank you.
All right. Thank you, Mike. The next question is from Matt Kornack, from National Bank Financial. Please go ahead, Matt.
Good morning, guys. Just quickly going back to capital recycling. By the time, I guess, interest rates have come down and developers are coming back to look at some of these projects, it may actually be attractive for you guys to participate in development. And again, just your thought process around, like, where the destination for some of that potential capital coming in would be. Would it be exclusively for de-leveraging, or would it be to kind of re-participate or ramp up the development pipeline again at that point?
Yeah, I mean, it's a good question. So, I mean, I think what will likely happen, will-- the market will come back to a point where we're, we're able to, you know, we're happy with the deals, and, we'll probably sell those properties, most likely, outright. You know, we've severed these properties in a lot of cases. They're zoned, some cases, they're even site plan approved. I mean, it's like building permit applications is the next step. So it'll be very appealing. It's-- when it becomes appealing, it becomes very appealing. You know, right now, it's not appealing. But, that'll probably be what happens first, and we'll bring in as much, from that as we think we need, you know, to get where we wanna be. And then we'll maybe start considering some joint ventures.
Maybe we'll do a couple ourselves, but, you know, obviously, we'll just be, you know, assessing you know, the conditions and the weather in the overall marketplace, whether we'll do any of those ourselves or whether we'll just continue to sell them. I'd say the first bunch of capital that we bring in will not be directed to, necessarily be directed to new development. I'd say at this moment in time, my hunch is that, you know, we just continue to finish the developments that we have and lower our leverage.
And then, yeah, if the market continues to be strong enough, we'll keep doing that until we get to a point where we're comfortable to, you know, use that capital to, you know, to do some of our own developments, whether in joint ventures or ourselves. I don't wanna commit to it, but, you know, I, I, I mentioned CAD 250 million-CAD 300 million. Probably wanna pass through that, first. And then, you know, it's just a, just a theory, just a hunch, that that's when we might start looking at, you know, directing some of those funds to some of the developments that we might wanna do ourselves.
Yeah, that makes sense, and I guess it's all in the context of where cost of capital goes, and that's anybody's guess, so, so we'll see. But, just on the quarter itself, Peter, you mentioned, recoveries had an impact and that we'll see a normalization into the second half of this year. Can you quantify, what that dollar value impact would have been in the quarter, in terms of just the NOI and, and where we should kind of think of that addition being in each of the subsequent two quarters and maybe run right into next year as well?
It's actually quite modest, Matt. So no, I'm not gonna, I'm not gonna throw out a number, but I can tell you, you know, it's quite modest. Our recovery levels remain very high, and we expect them to continue at the, you know, for the balance of the year, to remain very high. In terms of specific dollars, though, it's, you know, it's pretty small. It's less than CAD 1 million.
But it could be up to CAD 1 million, which... Anyway. Okay, that's fair. And then last one, sorry to get into the minutiae, but, for your secured debt, it looked like the 2024 maturity, the weighted average interest rate was up, a fair bit sequentially, but presumably then you can just pay that. Was that just a variable rate debt component, or was there something else?
... out in there. And will it be repaid in Q3 or is it a Q4 maturity?
I don't have the full schedule of each of the mortgaged mortgages in front of me, Matt, but, I can tell you that the plans are that some will be repaid and some will be refinanced. So I-
Okay. No, fair enough. I don't think it's gonna make a material difference to our model anyway.
It's not. The smaller ones we tend to just pay off. The ones where we have JV partners, we may refinance.
Okay, fair enough. Thanks, Matt.
All right, thank you, Matt. The next question is from Sam Damiani from TD Cowen. Please go ahead, Sam.
Thank you, and good morning, everyone. Just wanted to touch on the development of retail. We talked about last year, I think around 300,000 sq ft pipeline of discussions, which then translated into 200,000 sq ft of active development projects, as I recall from last quarter. Just wondering if you'd give us an update on that. And also, Mitch, you, I think you mentioned that there was, you know, talks with Simon with respect to TPO and maybe an expansion. Does that mean a third project in the country or, you know, yet another expansion to TPO?
Sam, I'll answer, I'll start. Go in reverse order. It's pretty good for you to pick up on that TPO question or the Simon question. We're looking at everything. Yeah, so it's too early to say anything about what that may look like. So clearly, TPO could be much bigger from a demand point of view, so we're just looking at it. But we just finished expanding it. So to expand it again is just something we're looking at. And with respect to the sort of magnitude of new deals, net new space retail, it's quite a bit, actually. We've got a lot cooking in terms of new deals.
A lot of the large, large, cap and large, floor plate, retail chains in the country did not expand a lot in the last 10 years. So, you know, they're looking at it now, and, and we're one of the go-tos for sure, for, for that. So, you know, we're in discussions, but, you know, deals take a long time to do, and, and, then, you know, you gotta get it approved. I mean, we're zoned for it, but we still gotta get its site plan approved and building permits and build them, so takes time. But I would say, the interest is not superficial or flippant. I mean, we're well along, and I would rank the likelihood of doing quite a bit of new retail space, you know, starting next year, to be very high and, to go in...
To continue for the next few years, unless there's some, you know, major catastrophic event. Their interest is based on population growth, you know, you know, actual, you know, sales trends and strategic, you know, their strategic plans, large corporate strategic changes in their, in their plans. So we're one of the go-tos, I think, for sure, for a lot of the companies. You might forget how many of them there are, including Walmart, you know, who, who haven't done a lot of expanding on the retail side. They've done a lot of expanding on the warehouse and distribution fulfillment side. So, you know, we've got a lot of things cooking with, with, a lot of the, you know, core retailers in this country.
Okay, great. Thank you. That's, that's helpful. Second and last question is just on, on the disclosure of same property, which was, broken out, you know, between, with and without the anchors. I think this was the first quarter. Just wondering, what the rationale for doing that, does it indicate a new way you're thinking about the business? I'm just wondering, I guess why, why, why, why separate out that disclosure?
Hey, Sam. No, we've in fact disclosed that in many prior quarters. We just wanted to make sure that everyone knew, given that we have a predominance of larger tenants in our portfolio, that everyone would understand the rental lists and, for our, what I'm gonna call our CRU, which includes our mid-box size, so, Mitch, Mitch, you wanna?
Yeah, I mean, Sam, obviously, we know that a bulk of a lot of renewals this year were Walmart, and Walmart, for the most part, don't have bumps in their rents. It's not a reflection of the market. And so the non-anchor, particularly the non-Walmart number, gives some... you know, got some value in just understanding what, you know, what the market is for our properties. It's more of a reflection of market value.
Perfect. Thank you very much, and I'll turn it back.
All right, thank you, Sam. The next question is from Pammi Bir from RBC Capital Markets. Please go ahead, Pammi, Pammi?
... Thanks. Just maybe, on that last comment, regarding the Walmart renewals, and maybe coming back to the overall commentary around same property and NOI growth, and the recoveries, et cetera, you know, should we then expect, maybe same property NOI to pick up through the back half, I guess, given the leasing that was done as well? Or is it sort of, you know, you expect it to kind of continue to track at, you know, in that 2% range for the year?
Pick up. You know, yeah, pick up. Yep, we'll leave it at that.
Okay. All right. I wanted to maybe just come back to the commentary around capital recycling and the CAD 250 to CAD 300. Mitch, you know, just given where we sit today, you mentioned, you know, developers obviously being careful, but if you were to transact on any of that, would you be providing or would you consider providing any VTBs, or are you looking to get that cash back and, you know, take leverage down?
Yeah, I mean, that's what I was trying to say there. You know, right now, I think they just want too much of a VTB. I mean, they weren't there a year and a bit ago, but now they're there, but they. I guess they want VTBs, and so I guess just it's not really helpful to us, you know, to you know, it's just not. It doesn't move the needle enough to do the kind of deals that developers wanna do today, private developers.
So, if in the future, you know, the price goes up and the percentage of the price as a VTB goes down, you know, we would give a VTB if, if it was, you know, enough cash and it was, not, you know, too long a VTB and decent, you know, decent interest rate, you know, we'll consider it all. But right now, it's sort of not none of it's quite there yet. So, I can see to kick things off, you know, there might be a small or some kind of a VTB at the right price.
And then I guess, yeah, that. No, that's helpful. And I, I guess, you know, as you think about, you put all this together, it sounds like, you know, hitting that type of level from a disposition sort of target standpoint, you know, it's really unlikely this year. This is, you know, if anything, maybe a more 2025 event or maybe. I'm just curious if you have any sense of timing.
Yeah, I don't know. Maybe we're. Yeah, I would say you're, yeah, most likely, but actually there is a chance it could happen this year. As I was saying, you know, when the market's where it is, I mean, it just seems like that, and it seems like it's gonna be forever. You know, but then suddenly, you know, some things happen, and, you know, they get, you know, pretty anxious, and things can change very quickly. So I would say you're, you know, if I was a betting man, I would agree with you, but there's still. I'd say there's still a small chance that there could be, you know, a transaction this year and close this year.
Yeah, I would say for conservative estimates, I'd say the bulk, or I would say I would bet on 2025 at this point.
Okay. Last one for me. Just, Peter, maybe you can remind us, you know, when you factor... Sorry, just from a leverage standpoint, where, where you wanna get to on a debt-to-EBITDA basis on, on a longer term basis?
Well, so I have indicated on prior calls, Pammi, that, you know, we are gonna see it tick up slightly, not because we're adding debt, but because the EBITDA from the 1,000 Transit City 4 and Transit City 5 condo units that closed in 2023 will roll off. And so that's exactly what we saw this quarter. But, you know, we would like to see it, you know, remain in the single digits, certainly. And so, I don't think we've articulated a particular target, but, we would like to see it, trend down, of course.
Okay. I will, I'll turn it back. Thank you.
All right. Thank you, Pammi. The next question is from Lorne Kalmar, from Desjardins Capital Markets. Please go ahead.
Thanks. Good morning. I think most of the questions have been answered, but I just had one quick follow-up on the discussion around the retail developments. What type of yields would you need to see before you move forward, and how realistic is it, you know, you think you can achieve those if you start developing kind of next year-ish?
Yeah, I mean, it varies. It depends. The retailers recognize the cost of construction, and they recognize, you know, the value of land, so they don't, they don't... And I think we're, all the development community are experiencing the same thing. So retailers appreciate that, you know, they gotta pay more rent. So yeah, for the most part, they're, you know, reasonably accretive day one with bumps, you know, decent-sized spaces.
In our case, we're doing multiple deals, so with most of these retailers, well, say almost all of these retailers. So, they're, you know, they're, they're, for the most part, day one accretive. Everything's moving all the time, so when it actually kicks in and when we, you know, actually spend the money and borrow the money, you know, we'll, we'll see. But based on our, you know, our establishing rents, fixing rents, you know, each one of these deals is, calculated on an accretive basis with bumps, with long-term leases.
Okay, great. Thank you, Mitch. I will turn it back.
All right. Thank you, Lorne. There are no further questions in the queue.
Okay. Well, thank you for participating in our Q2 analyst call. Please feel free to reach out to any of us if you have any further questions, and have a great, great rest of your day and weekend. Thank you very much.
Ladies and gentlemen, this concludes the SmartCentres REIT Q2 2024 conference call. Thank you for your participation, and have a nice day.