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Edited Transcript of MRT.UN.TO earnings conference call or presentation 2-May-19 8:00pm GMT

Q1 2019 Morguard Real Estate Investment Trust Earnings Call

Mississauga May 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Morguard Real Estate Investment Trust earnings conference call or presentation Thursday, May 2, 2019 at 8:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Tamlin

Morguard Real Estate Investment Trust - CFO

* Arjun Chowdhury

Morguard Real Estate Investment Trust - Director of Asset Management

* John Ginis

Morguard Real Estate Investment Trust - Director of Asset Management - Retail

* Kuldip Rai Sahi

Morguard Real Estate Investment Trust - Chairman, President & CEO

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Conference Call Participants

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* Daniel Alden Zeff

Zeff Holding Company, LLC - General Partner and Chief Compliance Officer

* Jenny Ma

BMO Capital Markets Equity Research - Analyst

* Lorne Kalmar

TD Securities Equity Research - Associate

* Matt Logan

RBC Capital Markets, LLC, Research Division - Senior Associate

* Pammi Bir

Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Morguard Real Estate Investment Trust's First Quarter Results Conference Call. (Operator Instructions) This call is being recorded on Thursday, May 2, 2019.

I would now like to turn the conference over to Mr. Rai Sahi. Please go ahead.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [2]

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Thank you. I have with me Andrew Tamlin, Chief Financial Officer of the REIT; Arjun Chowdhury, Vice President; Paul Miatello, Chief Financial Officer of Morguard Corp.; John Ginis, our Vice President; and Beverly Flynn is not here, and myself, obviously. So I'll hand over to Andrew Tamlin.

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [3]

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Thank you, Rai, and thank you all for taking the time to join the call.

Before we jump into the call, I'd like to point out that our comments will mostly refer to the first quarter MD&A and financial statements, which have been posted to our website. I refer you specifically to the cautionary language at the front of the MD&A, which would also apply to any comments that we would make on this call. Thank you.

Morguard REIT is a diversified commercial REIT and has a portfolio of 49 retail office and industrial properties consisting of approximately 8.7 million square feet of gross leasable area in 6 provinces. The trust asset management team is focused on continuingly improving the returns from the assets currently owned and making quality investments that are accretive in the long term.

The first quarter of 2019 was a relative quiet quarter with results consistent with last year and within expectations. Occupancy rates have decreased slightly year-over-year, but this decrease is primarily due to some new retail CRUs from development projects that have come on stream in the last 6 months, part of which have already have future commitments attached to it.

Also, when a committed Industrial tenant which started April 1 is taken into account, the Industrial occupancy decreases -- increases from 88.5% to 95%.

There have been some well-publicized retail failures in the last 4 months, this list includes Payless Shoes, which has 5 locations in the REIT. This is not expected to have a significant impact on the trust as this has been estimated to be less than 1% of the trust's NOI. Most of these units are in good locations and are being remarketed to desirable tenants.

Net operating income for the first quarter increased slightly year-over-year to $37.860 million from $37.646 million due to enhanced income from the redevelopments that have come on stream over the last 12 months. Same asset net operating income is down slightly 1.5%, primarily due to continued softness in the 3 enclosed regional malls that previously had Sears. The trust is actively working on plans to demise these facilities and to retenant them and will be sharing plans when they are finalized.

Interest expense has increased 5% or $695,000 from a -- due to a small increase in borrowings and higher short-term rates in our variable borrowings on a year-over-year basis.

Basic FFO per unit has decreased slightly to $0.38 from $0.39, and basic AFFO remains unchanged at $0.28 per unit over 2018. The debt-to-asset ratio remains relatively unchanged at 44.8% as compared to 44.2% from a year ago, and down from 45.1% at year-end.

Since January 1, 2019, the trust has delivered 50,400 square feet of new or remerchandised area. Included in this area is 6,800 square feet of new leasable area at Pine Centre in Prince George, British Columbia. This is currently 100% leased and is based around a restaurant called Browns Socialhouse. Also, another 43,600 square feet of remerchandised former Safeway space at Parkland Mall in Red Deer, Alberta was brought onstream. This space is 54% leased and is focused around new Winners.

The trust continues to be active from a redevelopment standpoint, recycling our capital into projects at our existing properties that are accretive. The trust also has other active retail development projects on the go, all at The Centre Mall in Saskatoon, Saskatchewan. The first one that is expected to be completed is 30,000 in gross leasable area for a new freestanding pad for Cineplex, which is expected to be completed in the third quarter of 2019. The trust is also working on a major redevelopment of the mall with modernization of both the interior and exterior, including the food court. This is going well and is expected to be completed later in 2020.

The trust revalues its properties every quarter in accordance with IFRS. Fair value adjustments for the first quarter of 2019 was a loss of $5.7 million compared to a loss of $6 million in the first quarter of 2018. Since the beginning of 2019, real estate property balances have increased $13.9 million, which includes $8.8 million spent on capital very comparable to the first quarter of 2018. There is 1 new financing completed in the quarter, relatively small financing in the amount of $11 million completed at 3.9%.

It is the trust's primary financing objective to ensure we have ready access to funding for our redevelopment projects and to maintain flexibility with our capital needs. With this in mind, the trust increased one of our bank lines of credit by $10 million post quarter end without any added security posted.

The trust continues to use a sustainable reserve for maintenance capital and leasing. This amounts to $25 million for the year or $6.25 million for the quarter. This is based on a review of our 3-year forecasted leasing and maintenance capital needs.

Actual expenditures were $3 million for the quarter.

Wrapping up, we continue to be positive about our business and the objective of building value for our unitholders. Our strong pipeline of redevelopments in recent years have been very well received and we're looking forward to similar projects in the future.

We will now open the floor to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from Matt Logan from RBC.

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [2]

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With a number of your recent retail redevelopments, can you talk a little bit about the impact it's having on traffic at your centers?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [3]

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Sure Matt, John Ginis here. So we've spoken in the past about the impact of redeveloping our target stores and the tremendous impact it's had in terms of driving cotenancy and mall traffic back to the sites. We feel like we've improved the shopping centers with the deals that we've done, and so we're relatively pleased with the performance thus far on those redevelopments.

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [4]

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And would you consider recycling any capital now that you've created value with the developments?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [5]

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Recycling capital on what perspective?

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [6]

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Maybe selling some of the recently completed developments and putting those proceeds into other asset classes outside of retail?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [7]

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No. Not so much so. Most of these were pretty small in the context of big shopping center. There is no present plan to actually -- to put any one of our asset for sale or anything like that so -- at this stage.

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [8]

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In terms of your upcoming lease renewals, would you be able to talk a little bit about your thoughts on the enclosed mall space, and the impact of some of the lease renewals in Q1?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [9]

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So are you referring to all forms, size and formats of space or small base space in enclosed malls?

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [10]

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Either or, I think, I'm just trying to get a sense of where the upcoming lease maturities are trending and how you guys are making in terms of your committed lease maturities?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [11]

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Sure. So I'll start with the community strips. Community strips, we've been very relatively pleased with our ability to grow NOI. Renewals there are being done at accretive rates. On the enclosed mall format it all depends on the mall, depends on the location across the country. So in some cases, again, referencing back to centers where we have actively redeveloped our anchor stores and improved the merchandising mix, we are seeing some good leasing momentum on maturities and renewals, ones where we're still working, it still remains work-in-progress. It depends on the shopping center, it depends on the market. But there could -- there are some situations where there is a little bit of stress that remains, because we haven't finalized a redevelopment.

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Matt Logan, RBC Capital Markets, LLC, Research Division - Senior Associate [12]

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So really the rent roll downs in the enclosed mall space are principally related to ongoing repositioning projects?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [13]

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While we do have 3 Sears that we are actively working, there still remains 1 Target store where they still have some remnant space that we're still trying to recycle.

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Operator [14]

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Your next question is from Lorne Kalmar from TD.

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Lorne Kalmar, TD Securities Equity Research - Associate [15]

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Just kind of following on Matt's line of questioning. I saw that the renewal rates on enclosed originally were down about 45%. There is a little note that it's a little bit to do with the temporary occupancies. Is there anything else at play there? And sort of how do you see that playing out over the remainder of the year?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [16]

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Well, again, so Q1 relative to Q4 when you do that comparison, there's always going to be the seasonal variation impacts and that's more profound when you're comparing Q1 and Q4. I wouldn't say that we're going to see as the standard phenomenon as we continue through the balance of calendar 2019. I think -- and I go back to the comment on, it's not universal across the mall space. Some malls where you're seeing renewals and where we've spent considerable dollars on repositioning the mall via redevelopment, we're seeing some good positive leasing spreads and very discriminating tenants entering and becoming members of the shopping center. Other shopping centers, it's not so clear-cut and we're still dealing with certain stresses on renewals. So again, it all depends on where you're talking about across the country.

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Lorne Kalmar, TD Securities Equity Research - Associate [17]

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Fair enough. And then, just on the fair value losses, most of was it in office. Could you just give a little more color, was Calgary mostly related?

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Arjun Chowdhury, Morguard Real Estate Investment Trust - Director of Asset Management [18]

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Sure. I'll talk a bit about what's happening in Calgary. So generally we are seeing a stabilized market in terms of vacancy levels. As a matter of fact, in Q1, the market did see positive absorption. Our exposure in Calgary from a lease turnover perspective is quite limited for 2019. We have less than 1% of our entire portfolio expiring in 2019. And we're also seeing improved traction with our lead tenant there Obsidian Energy in terms of their subleasing efforts.

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Lorne Kalmar, TD Securities Equity Research - Associate [19]

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Okay. And then, I guess, just lastly, do you guys have kind of a target for enclosed mall occupancy for year-end? Or is kind of 92% where you're hoping to -- it plays out?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [20]

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So, excluding large format spaces that would be anchors and anyone that's north of 10,000 square feet should always focus on the small base stuff. Historically, we've tried to target around 95% that's kind of been the metric that hovered around. So it shouldn't be any different on a going forward basis.

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Operator [21]

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Your next question is from Jenny Ma from BMO Capital Markets.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [22]

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Just wanted to ask about some of the development projects that you have underway. Could you speak a little bit about what kind of returns you're looking from these?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [23]

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Is there any particular one?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [24]

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Like, is there -- I mean, it's scattered right because if we are talking about -- are we talking about enclosed mall anchor repositioning? Pad developments because it varies depending on the type of project we speak about.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [25]

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So I guess, let's start with the enclosed mall then, just given that they're the largest ones. I'm just trying to get a sense of how accretive that activity has been.

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [26]

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So again, every project is different. And how we look at metrics depends on what we are doing for the shopping center. Some pro forma’s and the tenants that we bring into the mall are -- we compromise on yield expectations in order for the benefit of the overall mall. In other situations, we're very accretive on our developments based on the lease deals that we are negotiating.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [27]

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Okay. All right, that's fine. We'll move on. With respect to the Pine Centre Mall, it says that it was fully leased as of April 3. Is it just the timing issue when you reconcile that against the 59% in the MD&A? Is that just March 31 versus April 3?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [28]

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Sorry, fully leased?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [29]

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Pine Centre?

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [30]

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The pad at Pine Centre Mall you said was taken up by the restaurant and is that leased?

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [31]

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Yes. That is the timing difference. Yes. There's a couple of leases that came into play in April.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [32]

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Okay. So it's just one tenant then, it's a few tenants?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [33]

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Yes. As of today, it is 100% committed.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [34]

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Okay. So was the first tenant contributing rent in Q1? Or is it de minimis at this point and the contribution really kicks in Q2?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [35]

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No. The first.

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [36]

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It was de minimis.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [37]

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Okay. So it was going to be Q2 when it contributes meaningfully on that property?

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [38]

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Correct.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [39]

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Okay. And then, with respect to that 1 retail asset in B.C. that you have carried as land, I'm not sure if you spoke about it in the past, but I'm just wondering if you are willing to provide any color as far as whether or not you yourselves have any future plans for that property? Or is it really just being operated as is?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [40]

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I can handle that. This is (inaudible).

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [41]

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Yes.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [42]

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We are just assessing the potential development of that away from the retail, in the meantime it's a small retail. It's not material enough to kind of worry about it. We're just going through a process of figuring out what kind of tenants that we're going acquire and mostly be multi res. And it's a longer-term process. So we can't really predict how long it will take and what will be the combination of condos versus rentals. It's very premature at this stage.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [43]

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Okay. That's fair. Is it zoned for multifamily at this point?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [44]

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No, no. We got to go through a process, but it is zoned in both, so it's in within that, there won't be any controversy. The question is, how many units we want to get it zoned for. So we still not have that number yet.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [45]

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But it would be for high-rise, correct?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [46]

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Yes. Maybe some retail on the ground floor as well.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [47]

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Right, right. Like typical podium level retail.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [48]

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Like dominant amount would be all residential.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [49]

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Okay. Could you, on the same line of discussion, could you comment on sort of the process out in the Vancouver area as far as getting zoning? Is it getting more difficult or is it a little bit more of the same, we're just kind of looking at the experience we see in Toronto, I'm just wondering if this is a mere image of that or if there is a more friendly environment for getting these potential developments zoned?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [50]

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It is more friendly actually, particularly compared to Oakwell, I'm just kidding. But I actually find them pretty friendly in context of the development. So I don't think there will be any controversies once we decide what we want to build and how we want to build, so I don't think that will be the issue. It's a long-term process. Yes. So it's not going to be happening in the next -- you won't see any income in the next few years.

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Jenny Ma, BMO Capital Markets Equity Research - Analyst [51]

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Next few years, okay. And lastly, I guess, it's fair to say this is a property you'd probably want to hang on to or is there more value by putting it to market for the REIT?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [52]

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I think, it's already been reflected, the value of this as a development has been reflected in the financials. It will change with what happens to the market, it will all depend on what we build. But the land value is now - - is reflected in our financials.

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Operator [53]

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(Operator Instructions) Your next question is from Pammi Bir from Scotia Capital.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [54]

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Just maybe coming back to Sears for a minute. What can you share with us in terms of what stage you're at? Or when you may have some better visibility on the redevelopment plans for those 3 sites?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [55]

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So again, we have 3 Sears boxes we got back via disclaimer early part of 2018. We are actively working on all 3. The 1 project in British Columbia we're about to commence development of that box. We have some deals in process that we won't speak to now until we have binding transactions but our anticipation is that some point in the next month we will commence construction to target a completion of some point in 2020. The other 2 projects in Ottawa and in Cambridge, Ontario remain works-in-progress and we're trying to identify all sorts of uses in terms of redevelopment of [residential].

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [56]

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And just on the B.C. project, what sort of cost do you envision on that?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [57]

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Between $15 million and $20 million.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [58]

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Okay. And fully leased by the end of 2020 and income producing or is that more of a 2021 event?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [59]

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Like all developments, these things are phased. Like you hope you'd get it all leased prior to development completion. But income, you'd start to generate income in 2020, but the whole pad would be fully leased, but no expectation by the end of 2020.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [60]

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Okay. That's helpful. Just on the Same Property NOI growth, again, it did slow down in the quarter, and I realize Q4 was a bit of a -- didn't always catch up, so maybe it's not a great comparison Q4 to Q1. But how are you feeling about the direction for the rest of 2019 based on what you're seeing from a leasing standpoint? For Same Property NOI growth.

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [61]

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Are you talking retail or are you talking in general?

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [62]

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For the whole portfolio, I mean, if you can provide color by segment that would be great.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [63]

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Well, it's tough to give the whole portfolio as we done the 3 Sears thing and they're all done in different timings. And I think we can predict that we're not going to see any income at least for a year or more, I mean, I guess, just to -- once we agree to a lease, then there's a construction period and all that. So I wouldn't hang my head on at this stage in the next 18 months to see any meaningful income coming.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [64]

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I guess, with Sears though, if I'm not mistaken, I believe you removed it from your Same Property NOI in last year or so-ish, right?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [65]

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So I mean, again, just speaking generally, stripping out all that noise when you look at Same Property NOI growth, again, it all depends on where we're talking across the country. Some properties are seeing good Same Property NOI growth based on the reinvestment we've made in the assets. Other assets in our portfolio, it's still a work-in-progress. But on balance, we don't expect any major variation or relative to what's been trending over the first quarter. We've been relatively flat for the first quarter at a portfolio basis. We don't expect that to be material in the course to come.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [66]

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Okay. That's very helpful. Just on the Payless impact, you gave us a bit of color there, any chance you can quantify what the impact was in Q1 in your Q1 Same Property NOI?

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [67]

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What was the question?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [68]

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Payless impact on Same Property NOI.

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [69]

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I think, they were -- I don't think there was any impact in Q1, right?

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John Ginis, Morguard Real Estate Investment Trust - Director of Asset Management - Retail [70]

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No. Not yet because notwithstanding that they filed for CCAA most stores were kept open and operating through Q1. So it's subsequent quarters where you're going to start seeing the impact. But Andrew already spoke to that in his commentary at the outset, the impact on it.

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [71]

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Right.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [72]

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Okay. Just last one from me. On IFRS 16, I think you booked $175,000 of lease liability interest in your interest expense. Just want to clarify is that an imputed interest or is that actually cash?

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [73]

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Well, it's -- the way to look at it is that we -- last year, we had lease payments that were expensed as they were paid. And this year, that expense is showing up in kind of 2 different forms, interest expense and then also a little bit of amortization expense. So the new rules require us to set up each of the lease as a -- as its own debt, if you would. So yes, that's how that works.

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Pammi Bir, Scotiabank Global Banking and Markets, Research Division - Analyst [74]

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Yes. And there was no adjustment in your FFO for the, I guess, the lease liability interest, just the payment and the amortization.

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Andrew Tamlin, Morguard Real Estate Investment Trust - CFO [75]

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Correct. Effectively, the FFO and the AFFO was being put back to, so it's an apples-to-apples basis. So there was a couple of adjustments that you'll see in the numbers to ensure that, everything kind of in apples-to-apples basis.

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Operator [76]

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Your next question is from Daniel Zeff from Zeff Capital.

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Daniel Alden Zeff, Zeff Holding Company, LLC - General Partner and Chief Compliance Officer [77]

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I have a much broader question, which is, what plans, nonoperationally speaking and possibly strategically does the company have to bridge the gap between price and NAV or does the company believe this to be a fair discount given the risks in the markets you're involved in?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [78]

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Well, it's challenging for us, I mean, we're focused on trying to maximize whatever we can. And can't really do any material thing to effect so called bridge the gap between IFRS value. So there's really nothing we could do it at this stage, trying to figure out how to bridge the gap. And that is up to the unitholder to decide whether they view that as an opportunity or not. That's not us. I mean, it doesn't trade very much to begin with. So I can't really help you to figure out how we improve the or bridge the gap between IFRS value and where we are trading at.

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Daniel Alden Zeff, Zeff Holding Company, LLC - General Partner and Chief Compliance Officer [79]

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Are you considering raising or increasing the distribution? And are we comfortable with the current distribution levels?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [80]

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I can't really -- we've discussed that at every Board meeting. And there is nothing talked about yet either way. It's in the conversation piece at every Board meeting whether we should consider. I think I can say that there is no plan to increase the distribution so, that I can confirm it to you.

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Daniel Alden Zeff, Zeff Holding Company, LLC - General Partner and Chief Compliance Officer [81]

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Are there M&A opportunities in your arena at this point in time?

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [82]

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M&A, in the sense of acquiring?

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Daniel Alden Zeff, Zeff Holding Company, LLC - General Partner and Chief Compliance Officer [83]

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Acquiring or selling or acquiring parts or anything like that.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [84]

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I don't think we are looking at any acquiring because that brings a challenge of raising equity at -- and IFRS value would raise that. So it's not -- I think, these days we are more focused on trying to deal with the issues of Sears and actually what we are focused on. In the short run, you're not seeing anything material either way.

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Operator [85]

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Thank you. There are no further questions at this time. Please proceed.

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Kuldip Rai Sahi, Morguard Real Estate Investment Trust - Chairman, President & CEO [86]

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Okay. Thank you very much. We'll talk to you next quarter.

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Operator [87]

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Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.