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Operator: Good day, ladies and gentlemen. Welcome to the SmartCentres REIT Q4 2025 Conference Call. I would like to introduce Mr. Peter Slan. Please go ahead.
Peter Slan: Good afternoon, and welcome to SmartCentres' Fourth Quarter and Full Year 2025 Results Call. I'm Peter Slan, Chief Financial Officer, and I'm joined on today's call by Mitch Goldhar, Executive Chair and CEO, and by Rudy Gobin, our Executive Vice President, Portfolio Management and Investments. We will begin today's call with 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 want -- I would also like to refer you specifically to the cautionary language about forward-looking information, which can be found at the front of our MD&A. This also applies to comments that any of the speakers make today. Mitch, over to you.
Mitchell Goldhar: Thank you, Peter. Good afternoon, and welcome, everyone. Our comments this afternoon will be succinct to allow more time for your questions. SmartCentres continued its strong performance in Q4, closing out 2025 strong, same property NOI growth, high occupancy levels, competitive rental lifts, higher FFO, developments on schedule while maintaining a conservative balance sheet. At the property level, performance across all sectors throughout the country, retail, industrial, residential, storage and office are all experiencing healthy short- and long-term growth with high tenant retention. And in the area of retail specifically, very healthy growth. Among other things, this is translating into upgrading and expansion of our existing retail sites with stronger covenants as well as the development and build-out of newly acquired retail sites across the country. And while the business continues to grow organically and through new income-producing developments, we will continue to carefully manage our debt and debt-related metrics. In that regard, we have improved our financial flexibility with over $1 billion in liquidity, 90% of debt being fixed rate and for the first time, attaining an unencumbered asset pool of $10 billion, which Peter will speak to in a moment. But before that, let me turn it over to Rudy for some more operational highlights. Rudy?
Rudy Gobin: Thanks, Mitch, and good afternoon, everyone. The fourth quarter was once again a standout and delivered on the momentum of the prior quarters. Tenant demand for space remained strong, delivering high-quality income across the portfolio, maintaining a leading 98.6% occupancy at year-end, unchanged from the prior quarter. Same-property NOI continued its strong momentum with 3.7% growth for the year and 5.6%, excluding anchors, and well within the range we outlined at the beginning of the year. We extended 88% of the 5.3 million square feet of space maturing during the year with rental spreads of 8.4% excluding anchors and 6.3% all-in. Cash collections remained strong at near 99% in the quarter. Strong retail demand for our high-traffic centers have allowed us to expand into complementary uses with medical, daycare, entertainment, racket and sports facilities. Our premium outlets continue to excel in driving traffic with improving tenant sales and a resulting percentage rents, which we convert to base rent at maturities. At Toronto Premium Outlets, the increasing demand for space has developed into an expansion opportunity of 85,000 to 90,000 square feet, with top end tenants already signing leases. This expansion will be accompanied by a new parking deck, and all of this is already underway with the construction start expected this summer. As you know, after the year-end, Toys filed for credit protection, but prior to that, the REIT had already terminated its 6 leases and taking control of the space based on the advanced lease negotiations to backfill with grocers and TJX banners. We expect to re-lease at least half of these locations very soon and at higher rents. On ESG, we continue advancing several initiatives across the organization as part of our multiyear plan, including materiality assessments, decarbonization planning, physical preparedness and response to the climate change, cyber security improvements and enhancing our disclosures. Overall, the business remains strong. Rents continue to grow on the foundation of an improving retail environment, greater cash flow stability, improving covenants and an expanding footprint. We expect the portfolio to continue this momentum throughout 2026. Thank you, and I will now turn it over to Peter.
Peter Slan: Thank you, Rudy. As you have seen in our release, same-property NOI growth remained solid, increasing 2.9% for the quarter or 5.1% excluding anchor tenants, mainly due to lease up and renewal activities, partially offset by the impact of an expected credit loss provision, primarily associated with one retail tenant. Excluding the credit provision, same-property NOI grew at 4.5% in the fourth quarter. The change in FFO this quarter was primarily due to NOI growth and the fair value adjustments on our total return swap. During Q4, we also closed on 7 townhomes in our Vaughan Northwest project. This has resulted in a cumulative margin of approximately 23% for the project to date, bringing Phase 1 of the project to virtual completion with 118 of the 120 homes now closed. We again maintained our distributions during the quarter at an annualized rate of $1.85 per unit. The payout ratio to AFFO continues to show improvements at 89.2% for the full year ended December 31, 2025. Adjusted debt to adjusted EBITDA was 9.7x in Q4, up slightly from last quarter. The weighted average term to maturity of our debt, including debt on equity accounted investments, is 3.4 years, a significant improvement from 2.9 years at Q3, largely as a result of debentures we issued during the quarter and the maturities that were refinanced. As in previous quarters, we have updated our MD&A disclosure, focusing on those development projects that are currently under construction. As you can see on Page 18, there were 8 projects under construction at the end of Q4 unchanged from the prior quarter. And with that, we would be pleased to take your questions. So operator, can we have the first question on the line, please?
Operator: Mario Saric from Scotiabank.
Mario Saric: Just maybe to start on the capital recycling/allocation side. Mitch last quarter you talked about some potential dispositions of some vacant buildings. Could you just give us an update in terms of what your dispositions targets are like in 2026 and the timing thereof?
Mitchell Goldhar: Mario, we have something going on one of the -- I think maybe exactly how it was framed last time, but there were a couple of sales that were still not done that we were anticipating. One of them is -- seems very much alive. The other one -- I think the other one it's actually a vacancy that we thought we had sold, but it fell through that we're now negotiating a lease on. So that's in terms of sort of the 2 that were outstanding from last call. And then in general, the market conditions seem to be improving for capital recycling, for dispositions. So we are hoping to see some dispositions of -- first and foremost, potentially some non-IPP, some land which we are currently starting to focus on.
Mario Saric: And Mitch, what would you attribute the improved kind of sentiment in terms of the buyer pool?
Mitchell Goldhar: Probably, I think it's partly to do with there's -- I mean not that the world is so great, but it does feel like there's a little more visibility or a sense of visibility whereas, a year ago, there was a lot more uncertainty. People were actually sort of nervous a year ago. I don't -- I think that there's a little bit more confidence. So I think it's a big one. I guess, construction prices are softening, little bit more motivation in the sub-trade marketplace so for certain types of construction. I think that's helping. And I'm not saying it's red hot or anything. But I think in terms of people making some moves and opening their wallets a bit, it does feel like they're -- it's better than it was.
Mario Saric: Got it. Okay. And speaking of construction costs, I may have missed it, but in terms of the expected expansion, the Toronto Premium Outlets. Can you share with us any kind of range in terms of the cost and types of returns that you think you can achieve?
Mitchell Goldhar: I'll not going to really jump in there, too, but the returns are quite solid in excess of -- we anticipate in excess of 8%. And probably we're still -- you know what, we're still negotiating on the construction. So I'd rather not speak to the cost, our contractors could be listening in. We are in negotiations right now. But it looks like a pretty healthy 8-plus percent return.
Mario Saric: My last question on the operational side. You have industry-leading occupancy every time we think it can't go up any higher, it does. When you look at '26, what is your projection in terms of at least maintaining the occupancy like we've seen a couple of tenants face a bit of pressure, a colleague of yours highlighted, a couple of beer stores, for example, that were given back. So I'm not sure what your exposure there would be, but how do you see the occupancy both kind of in place and committed evolving as '26.
Mitchell Goldhar: Well, of course, you had to say couldn't get any higher. And then, of course, we have the rest. So -- but this is something that's actually, frankly, the least what's the right way to say it. We were not surprised by the Toys"R"Us situation. As you know, we already dealt with a couple of them before they declared. So if you ex them out, I think you're looking at very, very very strong occupancy levels. And we have a lot of interest in the Toys spaces at better rents and better covenants and better draw and long-term leases et cetera, et cetera. But I'll let Rudy further illuminate on that.
Rudy Gobin: Mitch said it well. The only thing I'd add is we terminated those leases before the filing, so we have control of the space because we had parties we were talking to grocers, TJX banners requesting those spaces, they're perfect sizes for food for the likes of TJX banner. So we have control of all the spaces, and we are exchanging paper on 4 of the 6 of them already, which is fantastic. So we -- excluding that, we are expecting another strong occupancy year.
Operator: The next question is from Giuliano Thornhill from National Bank Financial.
Giuliano Thornhill: Just kind of one question on deleveraging. I missed the tail end of the question actually that was asked earlier. Just with your kind of payout ratio at the mid-90s, like net debt at the high 9. Has the REIT given thought to more aggressively selling some of the noncore IPP and if not, why?
Mitchell Goldhar: Well, first of all, I don't think we really have any noncore IPP. So -- and it takes an enormous effort to create the shopping centers, most of these shopping centers or some of the other forms to create in the first place. And we put a lot of thought -- upfront thought into developing them. Most of them, as you probably know, we developed probably 85% to 90% of the portfolio. We developed it. So at the end of the day, we do all the upfront strategic thinking. And so we don't really have -- we didn't buy varieties of forms of retail and/or whatever we can get our hands on to arbitrage IPP for debt and so on and so forth. So we don't have sort of fringe assets that are undesirable. So we don't -- and it's tough to move the needle, even if we did want to part with IPP. I mean, it would be tough to move the needle in terms of cap rates and giving up that income. It's very, very good income and we collect 99% or over 99% of our IPP. So we forge on, with our IPP. We do have a lot of potential PUD for disposition. So we can afford "to sell PUD" and that would be our first -- that's our overwhelming preference in terms of capital raise and capital recycling. It really does move the needle. The market just hasn't been there. It seems like there is a bit of a market there now. I don't want to overstate it. We're going to test it, but that's where we're going to focus on.
Giuliano Thornhill: Yes. And I guess I was going to my follow-up here more so where are you kind of starting to see the land values bottom or possibly increase, at all, in your portfolios?
Mitchell Goldhar: Yes. I mean, wherever we have retail land, if we haven't developed it, we could sell that. But we're obviously not going to sell that. But the mid-rise, the lower rise, mid-rise residential, there's a feeling that there's some potential. There are seniors housing seems to have life in terms of potential dispositions. We're getting approached. We have excellent sites for both mid-rise, high rise for that matter, and seniors homes. So yes, there is a market for storage, but we're in the storage business. So we're not really sort of inclined to dispose that. So those are the main categories that we think there's a little bit of life.
Giuliano Thornhill: And so how large is that opportunity the seniors and kind of low to mid-rise within your portfolio? Is it 20%, 30% or less than that?
Mitchell Goldhar: I mean I'll come back to the -- I'm not sure if you meant what percentage or what we have, I mean -- but no, we're -- I'm talking about we could sell -- I mean, we have somewhere in the 60 -- plus or minus 60 million, 70 million square feet of permitted density across the portfolio on our owned properties. So what I was referring to was selling some of that some of that density carving those out.
Giuliano Thornhill: I'm just trying to get to like a number that is reasonably realizable in the next couple of years for those 2 uses is kind of where I was going with the question.
Mitchell Goldhar: Yes, in the next couple of years, and that's a lot easier than saying the next year, but the next couple of years, I mean, we could see -- I mean, we'd like to sell $200 million to $300 million worth of that over the next couple of years. And more if there's a market for it.
Operator: The next question is from Lorne Kalmar from Desjardins.
Lorne Kalmar: Just 2 quick ones for me, and I'm really sorry if I missed it. I was just wondering, did you guys mention a same-property NOI outlook for 2026?
Peter Slan: As you know, we had a 7%. And if you excluded Toys from this mess we would be in a similar range for 2026. Toys is going to put a little damper on things at the beginning of the year. So we might be a little bit lighter than we were last year because of that. But we're expecting something in that range, ex the Toys. So -- and we -- and because we have good backfill for the Toys, which won't take occupancy right away because we'll execute some of these leases very soon. But by the time they take possession, it's probably into Q2. So you won't see it until you get closer to the end of the year where it catches up.
Lorne Kalmar: And then I was just wondering, any updates in relation to building out new stores for Walmart. I know you guys just opened the one in, I think it was in Oakville or just west of the GTA here. I was just wondering if there are any updates on that front.
Mitchell Goldhar: First of all, I guess, the new retail program here is really picking up, in general. So I would say that is something worth noting. We are anticipating quite a bit of growth over the next, let's just say, 5 years in the areas of -- I mean, grocery, Loblaws, Sobeys, potentially Metro, Costco, TJX. Those are large space users. And of course, we do have a long-standing relationship with Walmart. And so we anticipate that we will be also seeing some growth in the new Walmart category as well.
Lorne Kalmar: As of now, I guess, so nothing really to report on this as it relates to Walmart.
Mitchell Goldhar: Well, I think at this moment, we will leave it at that. We hope we'll be able to expound on that. But I guess, there's a lot going on in general across the board, in all of the areas that I just mentioned, not just garden variety kind of growth in the new retail, new sites category of growth. So we will start to shed more light on the details of that. But I guess, in the meantime, I would think of it as it's quite robust.
Lorne Kalmar: Okay. Just maybe going back to you mentioned the new sites for growth. Obviously, Premium Outlets. Any other retail developments in the immediate future for you?
Mitchell Goldhar: Yes. Yes, quite a few. I would -- sort of what I mean -- what I'm saying is we're anticipating quite a few new acquisitions of new sites across the country.
Operator: The next question is from Dean Wilkinson from CIBC World Markets.
Dean Wilkinson: Mitch, you get a lot of questions about what you're going to sell. I'd like to talk a little bit about more what you're going to keep. When you look out, call it, 5-plus years. Do you think that there is going to be a shift in the mix between retail, self-storage and multifamily and some of the other verticals? And secondarily to that, do you think any one of those verticals could hit a size where they're potentially able to just stand on their own.
Mitchell Goldhar: Well, listen, based -- just on the retail and what's going on because what we're doing now is going to come out of the ground in the next 2, 3, 4, 5, 6, 7, 8, 9, 10 years, okay? And it's been -- it's nothing driven per se by us. It's actually being driven by the consumer. And the ones who have the closest relationship with the consumer are the retailers like I was naming like Loblaws and like Costco, Walmart, et cetera. And they're saying through their interest in new locations is that there's going to be -- there's a huge investment, a huge commitment, a huge belief in physical retail shopping. And you put a lot of those different retailers and ones that I haven't named that aren't as large space users together and you've got a shopping center in a country that's seen very little physical retail construction in the last 12, 13 years, but a lot of population growth. So I mean, in the eyes of these retailers, there's a lot of catch-up. So we're one of the go-tos. We're one of the go-tos for that. So we're super busy buying new sites and processing approvals for the development of new shopping centers across the country. And that's going to kick in, really kick in like start to kick in action and really kick in the year after and the year after and the year after, really kick in. Those are quick. Those take us anywhere from -- take a year basically to go from commencement of construction, to lease commencement, to rent commencement. So those are really going to affect things over the next 5 years plus, plus and drive growth here. As far as storage seems like storage is -- I think the honeymoon is over, but I think everyone's sober about it, which is good. I don't think anybody is doing anything irrational. So I see that continuing and holding value. We were doing very well with storage. They do go on their own. We don't always put them in shopping centers, but we do stick them into our shopping centers where it makes sense. And the res is still very desirable as a use, but very skinny in terms of returns. I mean multi-res and condos basically don't exist. So we'll be standing by and waiting for the planners to line up again to start to recommence that program.
Dean Wilkinson: So just think of that as ancillary and opportunistic, but it wouldn't be something that becomes a little more core.
Mitchell Goldhar: Yes, I would say we wanted it to become more core. It will be more core ultimately because we do have a lot of permissions, but that's in a sense 5 to 10 years from now, it will start to become more and more core. But yes, correct. Our next 5 years, as it looks now, is going to be retail, be a nice little augmentation with the storage and some opportunistic, to use your word, I think it's right word for some mid-rise, low-rise residential where we can kick it, where we can knock it out at surface parking, wood construction and very low, no offsites, very little on sites accretive. We will do some of that, but it won't be core.
Operator: The next question is from Gaurav Mathur from Green Street.
Gaurav Mathur: Just one quick question on the renewal statistics. When you're looking at the renewal summary, we are noticing a few metrics moving down a bit year-on-year when you look at renewal rate both including the anchors or excluding the anchors as well as tenant renewal rate. Could you provide some color on why that's happening, just given the underlying strength in the retail strip center sector.
Peter Slan: Gaurav, it's Peter. I wouldn't read too much into that. The biggest single driver is just the timing of when we have lease expirations during any given quarter. So that can move around a little bit. But as Mitch and Rudy both noted earlier, we continue to see very robust demand for space in our centers and -- but it does ebb and flow from quarter-to-quarter depending on the term of each lease.
Rudy Gobin: If you look at the near 90% extension, that is consistent with the last few years as well.
Operator: [Operator Instructions] The next question is from Sam Damiani from TD Securities.
Sam Damiani: Just on the Toys"R"Us, how much of the 6 sites were paying rent for the full quarter in Q4? And how much rent do you expect to receive in Q1.
Rudy Gobin: Sam, it's Rudy. I don't have that in front of me, but some of them are co-management partners. So we have some of them paying rent and some of them weren't paying rent in that quarter or part rent in nature. So I think we disclosed a higher provision in the quarter to reflect that nonpayment of rent. So that's what that was. And then early in the year, we had so much good interest from these other retailers I mentioned that we took advantage of terminating those leases in advance of the filing that Toys did. So it's to minimize the impact on the REIT.
Sam Damiani: Okay. And then just on the 6 sites now vacant, that alone and nothing else happening, what would that do to your occupancy rate in Q1 versus Q4?
Rudy Gobin: Yes. Well, again, there's the in-place occupancy and there's the occupancy, including executed deals. So half of those, like I mentioned, is going to be -- expected to be released before the end of the quarter. So it leaves another $0.3 billion. So the 98.6% may be 98.3% on an apples-to-apples basis.
Sam Damiani: And just -- I noticed there was an acquisition of some land in Bolton. Is that for retail? Is that adjacent to the existing SmartCentres shopping center there?
Mitchell Goldhar: Yes. It is for retail. We will announce the details of that at some point soon. But it is, I would say, part of everything that I was describing earlier about the retail growth program. So we do have interest from strong retailers. And we anticipate starting construction there sometime, hopefully, this year.
Sam Damiani: And then in total, with all the push on retail development, you've obviously leased a lot of space last year for new build retail. Like how much -- I guess, you got TPO, potentially the site in Bolton, how much square footage do you think commences construction in 2026 on the retail site.
Mitchell Goldhar: Maybe this year starting 200,000 to 300,000 but it's going to climb a lot after that. That just -- it takes a little bit of time to get all the permits and whatnot to go. But in terms of technically, in this calendar year, yes, maybe 200,000 to 300,000.
Sam Damiani: And I did miss the part of the call at the start regarding TPO, I think I heard an 8-plus percent guesstimate on the yield that's looking at the cost, including the parkade.
Mitchell Goldhar: Yes. Yes. The whole expansion, including the additional parking. Yes. 8-plus percent, yes.
Sam Damiani: And rents would commence -- I didn't hear that if it was said 2028 is a reasonable visible timeline or?
Mitchell Goldhar: Yes. We're hoping we can maybe pull it off in late '27. But yes, by 2028.
Operator: We have one more question, Pammi Bir from RBC Capital Markets.
Pammi Bir: Just coming back to leverage. Most of your peers have really worked to drive debt-to-EBITDA levels down lower. And investors certainly seem supportive of that. I'm just curious, what do you see as the right level for the business? And where does reducing leverage fit in terms of the priorities?
Mitchell Goldhar: Yes, everything is a priority. So it's a question of balancing. I mean, the market likes growth, too. Market likes long average lease terms. Market likes strong covenants. Market likes refreshing of existing shopping centers. So we, of course, balance that because we also very much value our credit rating. So we look at all of these things. We have a lot of demand for new space. The good news is that the demand for new space is mostly single-story retail with that great parking, which means that within a year or so of commencement of construction, we're usually collecting rent. So to the extent, like always, that we -- everybody's debt-to-EBITDA rise and fall with various activities we're in an enviable position to be able to basically balance both. But this is not a one-trick pony. We are minded to grow and strengthen our network and strengthen our portfolio and our earnings. And of course, we're not going to commit any fall as it relates to important important metrics.
Pammi Bir: Okay. Maybe one follow-up, and I don't know if you can answer this one, but in terms of the agreements with Penguin, the release indicated that the voting top right has expired. But I just wanted to clarify, is that part of the discussions in the new 5-year agreements. And then the second part of that is, do you expect to have the new agreements in place or at least announced by the end of the month?
Mitchell Goldhar: Well, actually, everything expired at the end of last year. And we extended the parts of it that we were able to extend and one of them that we are not able to extend is the voting top-up, that needs unitholder approval. So that has expired and has not -- can't have been extended. So -- but the negotiations for a new contract are going on, going very well. And in terms of what form and whatnot that takes, that will be released, I guess, when it's absolutely finalized. But we're getting near the end and it's looking positive.
Operator: Thank you. There are no further questions in the queue.
Mitchell Goldhar: Thank you. Thank you for participating in our Q4 call. Of course, as always, please feel free to reach out to any of us if you have any further questions. Have a great rest of your day.
Operator: Ladies and gentlemen, this concludes the SmartCentres REIT's Q4 2025 Conference Call. Thank you for your participation. And have a nice day.