Good day, and thank you for standing by. Welcome to the Choice Properties Real Estate Investment Trust Q2 2021 earnings conference call. I would now like to hand the conference over to your speaker today, Doris Baughan, Senior Vice President, General Counsel, and Secretary. Please go ahead. Thank you. Good morning and welcome to Choice Properties Q2 2021 conference call. I'm joined here this morning by Rael Diamond, President and Chief Executive Officer, Mario Barrafato, Chief Financial Officer, and Ana Radic, Executive Vice President, Leasing and Operations. Before we begin today's call, I would like to remind you that while discussing our financial and operating performance, and in responding to your questions, we may make forward-looking statements, including statements regarding Choice Properties objectives, strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook, and similar statements concerning anticipated future events, results, circumstances, performance, or exceptions that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward-looking statements. Additional information on the material risks that can impact our financial results and estimates and the assumptions that were made in applying and making these statements can be found in the recently filed Q2 2021 financial statement and management discussion and analysis, which are available on our website and on SEDAR. I will now turn the call over to Rael. Thank you, Doris. Good morning, everyone. Thank you for taking the time to join our Q2 conference call. We are pleased to report another strong quarter with stable financial and operating results. Our business model and disciplined approach to financial management has positioned us well throughout the pandemic. In addition to our strong results, we're advancing our development program, driving meaningful net asset value appreciation to our existing portfolio and improving our balance sheet. I'll provide an update on our development program shortly, but first, Mario will provide you with an update on our financial results for the Q2. Mario. Thank you, Rael. Good morning, everyone. As Rael mentioned, we're pleased with our Q2 results. I'd like to begin with a brief overview of our rent collections and then speak to our financial results and balance sheet activity. Rent collections for the Q2 were stable at 98%, and we reported a bad debt expense of CAD 1.8 million. Our 98% collection rate is consistent with the prior three quarters and reflects the combination of our stable portfolio and the overall health of our tenant base. As these tenants are beginning to reopen across the country, we're optimistic that we'll further improve our cash collections for the balance of the year. Our reported funds from operations for the Q2 was CAD 172 million. This was a relatively clean quarter apart from the CAD 1.8 million bad debt expense I referred to earlier, being offset by approximately CAD 1.2 million of non-recurring revenue related to lease surrender income. When compared to the Q2 of 2020, FFO increased by CAD 31 million due primarily to a decline in bad debt expense of CAD 12.7 million and CAD 14.6 million of non-recurring items incurred in Q2 2020 related to a credit loss on a specific mortgage receivable and the early redemption of unsecured debentures that were set to mature in 2021. On a per unit diluted basis, our Q2 FFO was CAD 0.238 per unit compared to CAD 0.201 in the Q2 of 2020. Despite the challenging operating environment with a third wave of pandemic-related closures, occupancy has held up, declining by only 10 basis points sequentially from Q1 to 96.9%. We actually did see positive absorption for the quarter of approximately 12,000 sq ft, highlighted by leasing in our Ontario industrial portfolio. This was offset by the transfer of some vacant units in our development properties completed in the quarter, which will soon be leased. Same asset cash NOI increased by 6.1% compared with the Q2 in 2020, primarily due to a decline in bad debt expense. When excluding these bad debts, total same asset cash NOI was relatively flat, increasing by 0.1%. By asset class, retail same asset cash NOI increased by 0.3% while industrial increased by 2.2%. These increases reflect a combination of higher renewal rates and contractual rent steps. Office same asset cash NOI decreased by 6.1%, primarily due to a reduction in occupancy and lower parking revenues. We're pleased we've been able to maintain stable occupancy and consistent same asset results over the last Q4. Turning to the balance sheet. For the fourth consecutive quarter, we reported an increase to our net asset value. We reported a total increase to NAV of CAD 323 million, including an increase to the fair value of our investment properties of CAD 278 million. Of this, CAD 238 million relates to our industrial portfolio. The increase in value in our industrial segment is in line with market sentiment. Recent market transactions and robust demand in logistics and distribution space, especially in the GTA industrial market, have contributed to further cap rate compression and improving valuation fundamentals. We had very little new financing activity in the quarter, though we did improve both our leverage ratios and our liquidity profile with two key transactions. First, we early redeemed our CAD 200 million Series nine Unsecured Debenture that was maturing in September of 2021 with no penalty or fee. This was repaid primarily using our cash on hand, resulting in further improvements to our debt metrics. In the quarter, our leverage ratio improved from 42.3% - 41%, and our debt to EBITDA improved from 7.6 x - 7.3 x The second transaction was the extension of the maturity date of our CAD 1.5 billion credit facility to June of 2026. As part of this extension, we paid a CAD 1.8 million of debt placement costs. Our credit facility is a critical component of our financial strategy, and taken collectively with our CAD 12.6 billion of unencumbered assets, we have ample liquidity and significant financial flexibility. Overall, with our ability to drive meaningful net asset value growth through many avenues, our low debt levels and high liquidity levels, we believe we are well-positioned. I'll now turn the call back to Rael to address our development and investment activities. Rael. Thank you, Mario. On the development front, we continue to deliver exceptional assets to our portfolio and are making steady progress on the rezoning of our longer-term pipeline. For the quarter, we completed and transferred four development projects, approximately 149,000 sq ft of GLA at our share and a total development cost of CAD 63 million. Included in the assets transfer this quarter was a new 48,000 sq ft Loblaws superstore at our Harvest Hills retail development in Southeast Edmonton. The final phase of the retail component of our West Block development at Bathurst and Lakeshore in downtown Toronto, and the first building of our rental residential development, The Brixton, located in the West Queen West neighborhood of Toronto. The first building includes 72 rental residential units at our ownership share. The leasing program is progressing well, with approximately 50% of the building leased and a considerable pickup in activity in recent weeks as COVID restrictions have continued to lift. We expect that the construction of the remaining two buildings at Brixton will be complete in the coming months. Tenants will begin taking occupancy towards the end of the year. Construction is also well underway at Liberty House in Liberty Village, with an expected completion in the Q4. We're about to commence pre-leasing and expect that tenants will begin taking occupancy early next year. In addition to our active residential projects, we kicked off several new commercial developments in the quarter, including a greenfield industrial project in Surrey, B.C. The 17-acre site is vacant land owned by Choice that is directly adjacent to our existing Loblaws distribution facility in the Campbell Heights industrial node. We are planning a 350,000 sq ft new generation logistics facility with 40-foot clear height. We're designing the building with sustainability in mind and will be pursuing a LEED Silver certification on completion of the project. We are well underway with detailed designs and engineering and are actively working through the municipal approval process. We expect to break ground on the project next year. This is an exceptional opportunity for us to add new product to one of the best industrial markets in the country. This project will drive significant value and highlight our ability to continue growing our existing industrial platform. Looking forward, we are busy working on our longer-term planning projects to advance the next phase of development. In the quarter, we submitted applications on two large-scale residential and mixed-use projects here in Toronto. The first application is for large mixed-use development on a 6.5 acre parcel of vacant land located south of the intersection of St. Clair Avenue and Warden Avenue in Toronto. The land is exceptionally well located from a transit perspective, approximately 500 meters from the Warden TTC subway station. The site was originally acquired in Q2 2020. We've made significant progress on envisioning its future potential. The application includes over 1,500 residential units, 1 million square feet of GFA, and a proposal for a new public park. The second application is for mixed-use redevelopment at an existing retail site at 25 Centennial Tree Drive in Toronto. The approximately eight-acre site is located southwest corner of Eglinton Avenue West and Black Creek Drive, across from the Mount Pleasant, sorry, Mount Dennis transit hub, which is set to open in 2022. The transit hub will connect the GO line, the Union Pearson Express, and the Eglinton Crosstown LRT, making the site an exceptional location from a transit perspective. The current redevelopment plan proposes a vibrant mixed-use, inclusive community where people can live and access amenities, services, transit, and a grocery store all within walking distance. The project will include seven mixed-use buildings, including 2,400 residential units and over 2.1 million sq ft of GLA. Both projects are in early stages. Expect that things will continue to evolve as we refine our plans. With our ongoing planning projects, we have over 11,000 units and nearly 10 million sq ft of GFA, either zoning approved or with zoning applications underway. With more projects ongoing and more submissions expected, we believe we have one of the best development pipelines that will provide significant opportunity for us to deliver long-term net asset value appreciation. With that, I would like to turn the call back to the operator for questions. Your first question is from the line of Mark Rothschild with Canaccord Genuity. Thanks. Good morning, guys. Morning. Maybe just picking up, Rael, what you're talking about with the development, some new projects. Do you have a range of a budget, how much you expect to spend in developments maybe over the remainder of this year and looking into next year as well? Some of the larger projects still don't appear to be at the point where you're going to be investing significant capital. Yeah, you're correct, Mark. We would expect about CAD 150 million-CAD 200 million over the next couple of years. The only thing that could flex that a little bit is some of these industrial developments as we get zoning, particularly on our Tullamore industrial lands. It's pretty quick to ramp up development as there's strong leasing demand. Right now, we would foresee CAD 150 million-CAD 200 million. Okay, thanks. Moving to the balance sheet, leverage has obviously come down a decent amount over the past year. To what extent is reducing that further a priority, or are you in the range now where you're comfortable? Hey, Mark. Yeah, we were in the range, even before. Our goal was to get it down to 7.5 x, We thought that would give us a lot of flexibility. We happened to sell assets and had some cash on hand, When the opportunity came to repay the debenture coming due without a penalty, we decided to take it rather than force an acquisition that didn't meet our criteria. It was just a good use of proceeds. We're really comfortable where we are right now and really don't have any intention to lower it. Again, if opportunities come up, it gives us flexibility, If we can repay more, we will, but it's not in our plans right now. Okay, great. Thanks. Maybe just lastly, parking revenue was down in the quarter. Last year, this quarter also was pretty quiet. I am just curious what happened. Was it memberships that people canceled, parking memberships people canceled through the quarter last year? I would expect that it has already been pretty low last year. It is, yeah, a function of actually. We did have a drop in vacancy in one of our buildings, so that had a small impact. As people have not been coming into the office, and that also resulted in lower parking revenue. Mark, just so you remember, people last year in Q2, no one expected it to last this long, so people were slow to cancel their spots. Yeah, no, that's what I thought it might be. Okay. Thank you so much. Your next question is from the line of Michael Markidis with Desjardins Capital Markets. Hi, good morning. Two questions on my end. Number one, I was just wondering if you could comment on the leasing environment, any step changes that you've seen since the restrictions have been lifted. I realize it's only been a short period of time. Your expectation for occupancy, particularly in the retail and office segments over the next 12 months. Hi. We've had strong retail demand from a leasing perspective throughout the pandemic, interestingly enough. Our occupancy stayed stable. We are seeing more tour activity as restrictions are being lifted. That's picking up across all areas of retail with certain tenants being really active and wanting to grow their footprint, like in the pet sector, discount department stores and so forth. Dollarama is another discount. A lot of activity. QSRs really weren't as impacted during the pandemic because they had heavy off-premises sort of takeout business and so forth. That's another sector that's growing. We hope occupancy will increase over the next 12 months. I think on office, the tour activity has been very much correlated with the lockdowns. As lockdowns are lifted, we've seen tour activity pick up. That's just happened in Ontario, where it's starting in Alberta. We've definitely seen a pickup in tour activity, which we're optimistic about. I think office occupancy will take longer to improve before relative to retail. Okay, that's helpful. Thank you. My second question would just be with respect to the industrial segment, and it would appear that liquidity in secondary and tertiary markets is improving. There's several types of portfolios that have recently been listed, and you guys happen to own some industrial in Canada. I was just wondering what your thoughts were with respect to those legacy assets as a potential disposition candidate. You're good. Thank you. Yeah, look, we did sell a few assets, I think it was about two years ago. The assets that we own are really well located. It's a strong industrial market right now. Low vacancy. We're getting good rent lifts. Right now we quite happy and comfortable owning them, just given the lack of supply in the market. Thank you. Your next question is from the line of Sam Damiani with TD Securities. Thanks. Good morning. Just to follow on the leasing discussion, maybe just to give us an update on what you're seeing in the Alberta market? Seems to be a bit of a rebound happening in the latest quarter. Do you mean office or- Sorry, I meant industrial. Yeah. Yeah. I think the retail, definitely logistics demand is very strong in Alberta as well. Amazon's one of the tenants that's definitely been very active, and we've even seen a little bit of a pickup in Edmonton, which is great. We just did a 40,000 sq ft logistics deal there. That's a future lease deal. It doesn't commence in the quarter. It is improving. That's great. On the retail side, it sounds like you're increasingly optimistic about a near-term sort of rebound for occupancy to go back toward where it was in pre-pandemic. Do you have any stats on the percentage of your tenants that are open now versus, let's say, Q1 or expected to be opened in August, anything like that to sort of give us an indication on those kinds of trends? Well, right now, actually, Mark, most of our tenants are open because we have open air retail, so we're not restricted the way the malls are restricted. I would say the majority of our retail is open. The tenants that were closed for us were some of the personal services and gyms and restaurants, as Ana mentioned, and the majority of those are now open. Absolutely. I drove by Orangeville and saw a long line outside GoodLife. They are definitely open. Great. What would be the next sort of major redevelopment to take place? What's the backup plan for the Loblaws store that would be impacted there in terms of temporarily relocating or just temporarily closing the location in that trade area? I'll say the next major redevelopment is Golden Mile. We have enough land that we can accommodate building a new store before we ever have to take down the old store, or the existing store. The other one would be Woodbine and Danforth. We actively working with Loblaw. The store is very tight. We're going to time it and do what makes sense for Loblaw. That's great. That's all for me. Thank you. Your next question is from the line of Jenny Ma with BMO Capital Markets. Thanks, Ana. Good morning, everyone. I'm following the MD&A that you mentioned in the retail discussion that there were some leases that were transitioned from net to growth. I'm just wondering if that was something that was material, the reasoning behind those changes and whether it related to any Loblaws leases. No, it didn't relate to any Loblaws leases. I think we did have a few SAQ, which is the Quebec liquor store in, well, Quebec that did move to a gross lease, but that's the material. Is that just a discussion that was had at the time of renewal, or what was the thinking behind that? Is that something we could see more of down the line? No, definitely not. I think it's just the SAQ has been moving to this model. They're run by the provincial government of Quebec, and so they prefer to have a gross lease, and we set that at a sort of at a higher number to give us cushion so that we do have full recovery. Jenny, it's not material on its own, but given the lower level of growth, it was more magnified this quarter, but really it's part of our business. It's not a big issue right now. Okay, great. Could you give us an update on what you're seeing in the acquisition or disposition pipeline? I think last quarter you had talked about potentially selling some assets sort of in the second half. Is that still something you're looking to do? I'm not sure if that was sort of driven by looking at the asset itself or a desire to reduce leverage. How should we think about transaction activity in the second half of this year? Yeah. Jenny, we've been very active on capital recycling, as you know. On the acquisition side, there are some vendors that we're working with Loblaw on. Nothing that significant. In the dispositions, it's just the normal capital recycling. It's going to settle down. We've just listed a small portfolio in Edmonton. Sorry, Calgary industrial. Look, it's just a few assets, but nothing significant. We won't be as active as we were last year. Okay, great. Now that you mention that small industrial portfolio in Calgary, are these some of the smaller assets that you would consider to be non-core? Yes. It's just normal capital recycling. Okay. Thank you very much. I'll turn it back. Our next question is from the line of Sumayya Syed with CIBC. Thanks. Morning, everybody. Just wanted to touch on the fair value changes in industrial. I'm just wondering if the cap rate changes were sort of level across the board, or could you speak to any differences by market? Thanks, Sumayya. Definitely GTA Large Bay Industrial had the larger gains. Small Bay had some gains, probably half the cap rate compression as Large Bay did. Also we had a bit of growth in value in Vancouver as well. Spread across, but really GTA Large Bay was the driver. As Rael said in his opening, you're seeing strength in the property markets. You're seeing strength in the capital markets. The industrial REITs are performing well, and they're doing well in the credit markets. There's really value in industrial, and it's reflected in these numbers. All right. The way you guys are seeing in the transaction market for grocery-anchored centers and any cap rate indications on them on a more recent time period? Sumayya Syed, we don't have much to update further to what we spoke about last quarter. Still lots of liquidity. Cap rates have held and continue to be strong for grocery-anchored centers, and have really differentiated themselves since the start of the pandemic. We continue to have inbound calls, but I'd say no major changes on the cap rates. Okay. Lastly from me on the office side, just curious what you're hearing from your tenants in terms of the plans for returning to the office and how that's playing out in leasing conversations? Hi. Yeah, the plans are varied. We do have actually quite a few smaller tenants who have remained in their offices other than when they were in forced shutdown. Some of our smaller 5,000 square feet and less tenants plan to return sooner or are already there. Some of our larger ones have indicated sort of phased in returns in September, and a few and then other ones are waiting to make some decisions to see how the summer progresses now that restrictions have been lifted. Those are kind of the themes we are hearing from our tenants. No single theme. Okay. That's helpful. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question is from the line of Tal Woolley with National Bank Financial. Hi. Good morning. Morning. Just for Brixton and Liberty House, now that you're sort of into the leasing process, can you give a sense of what the sort of gross per square foot rents you're asking? Around CAD 4 a foot. Okay. Are you at this time going to be offering any incentives on top of that? We have been offering incentives, and we are probably likely start peeling them back on The Brixton just given the activity. We've been offering two months free rent, and then for I think the first 100 leases, we offered a gift card program as well of about CAD 1,000. Okay. Just my last question. I can sort of see how the kind of target asset mix or, sorry, how the asset mix is going to evolve over time. You're obviously going to see the resi portion increase, the industrial portion increase. I guess longer term, I'm thinking further out, is there kind of a target asset mix you ultimately want Choice to be at? We are not targeting a specific asset mix. Our real focus is on quality and durability of cash flows. You are right. We're always going to be a necessity-based REIT. Naturally, just given the land holdings we own, we're going to be investing more and more capital into residential. Just again, given some of the industrial development land grab, we're going to be investing more and more into industrial. We will obviously continue to buy grocery-anchored sites in particular where we can facilitate an opportunity for Loblaw, although a small opportunity set in the first two we just spoke about. Office will really be a function of some mixed-use development. The portfolio will naturally reshape, as you just discussed. Just lastly, the West Block site. Do you have an early read on how the performance of the retail portion is and how Loblaw is looking at it right now? Yeah. The store itself is performing incredibly well, obviously. Our other two tenants, our anchors are open, Shoppers Drug Mart. Joe Fresh was just able to open with the latest restriction being lifted. That's fully occupied. Our office building is leased. We expect our other ancillary retail. We have a big deal with the LCBO, and they're open. Now we just have small pockets of retail that will open hopefully later in the year, an interest from a bank and some good tenants. Yeah, the productivity there early on is sort of hitting the mark for what your tenants are looking for. Yes, absolutely. Traffic has been very strong. Yeah. Much needed in the neighborhood. Okay, perfect. Thanks very much, everybody. Thanks. Our final question comes from the line of Pammi Bir with RBC Capital Markets. Thanks. Good morning. Just maybe coming back to the office environment, can you maybe just comment on how rents are holding up in your portfolio, and maybe the mark-to-market spread, and your thoughts on the outlook for leasing costs? Pammi, Anne will speak to it in a moment, but you have to remember, there's been very little activity. It's not really indicative of our conviction in the sector. We think things are going to start improving. We're even seeing improvements in our own offices. What I mean by that is just we've opened the offices recently. We haven't asked staff to come back, and today we've hit essentially the capacity that we've internally set, which is roughly 30%. We're starting to see employees wanting to come back, and we think it'll translate to the office leasing environment. Now Anne can maybe give you a little bit of specifics. We have a very small volume that we're using to give you these stats. Yeah. As Rael said, we had 8,000 sq ft of renewals in the quarter. One being in Alberta, which was a tenant that was rolling from a lease done pre-2017. Most of our tenants in Alberta, we've rolled those rents down. We had a decline of about 20%. Again, a very small segment, none of that was in Ontario. Where Ontario, I think rents are going to hold up. There may be a little bit more inducements offered, generally, we're optimistic. Right. Yeah. The Alberta is not indicative of the market as a whole. Got it. Maybe just sticking to the discussion earlier on the portfolio mix, maybe thinking about it long term. Frankly, look, the office portfolio is not a significant piece of the overall business at this point in any case. What are your thoughts on perhaps reducing the exposure further over the long term possibly through dispositions, or will it just naturally happen through growth in the other segments of the business? Look, we think it will naturally happen through growth in the other segments. Just as normal capital recycling, then maybe one or two of the assets that we sell over time. Great. Thanks very much. I will turn it back. Thank you, ladies and gentlemen. That concludes our Q&A session. I would now like to turn the call back over to Rael Diamond. Thank you so much. I want to thank everyone for joining us on today's call. Please do all that you can to stay healthy and be safe. Thank you. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.