Good afternoon, ladies and gentlemen, welcome to the Morguard Real Estate Investment Trust Q2 conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 27th, 2023, and I would now like to turn the conference over to Mr. Andrew Tamlin. Thank you. Please go ahead. Thank you, and good afternoon, everyone. My name is Andrew Tamlin, Chief Financial Officer of Morguard REIT. Welcome to the Morguard REIT Q2 2023 earnings conference call. I am joined this afternoon by John Ginis, Assistant Vice President of Retail Asset Management; Tom Johnston, Senior Vice President of Western Asset Management; Rick Clermont, Assistant Vice President, Office Asset Management, along with Rai Sahi, CEO and Chairman of the Board. Thank you all for taking the time to join the call. Before we jump into the call, I would like to point out that our comments will mostly refer to the Q2 2023 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 make on this call. Overall, we are again pleased with the Q2 results, which showed continued improvements in same asset metrics on a year-over-year basis. In fact, Net Operating Income for the quarter increased 3% to CAD 30.5 million in 2023, due to improved same-store NOI growth in the retail asset class. Net Operating Income for the six months ended June 30th increased 6.5%, due both to the increase in same asset income, plus a one-time property tax refund for one of the Trust-enclosed regional centers in the amount of CAD 2.8 million. That was recorded in the Q1. FFO for the quarter decreased 8% to CAD 15 million in 2023, as compared to a year ago, due to higher costs on the Trust's short-term or variable rate debt. Same asset net operating income for the Q2 improved 2.4% from a year ago, buoyed by an 8% increase in same asset results for our enclosed mall portfolio. This represents the ninth quarter in a row where we've achieved improved same asset results on a year-over-year basis. Interest expense increased 14% to CAD 14.9 million for the quarter on a year-over-year basis. The impact of lower debt on a year-over-year basis has been offset by higher short-term borrowing costs due to the higher interest rate environment that we find ourselves in. Higher interest costs on renewal costs of mortgages have also been a factor. Consistent with year-end, the trust is approximately 19% of its debt is variable. The trust will continue to monitor this and would expect to see it somewhat elevated in the future. As mentioned previously, our enclosed mall results continue to rebound from the downturn we saw under COVID. In particular, our malls in Western Canada, including Pine Centre and Prince George, are exceeding expectations. These have translated into increases in rental growth, percentage rent, and specialty leasing opportunities. We are also pleased to add opportunities of discriminating tenants such as H&M, Lululemon, and Sephora at a variety of our locations across the country. These additions are solid endorsements to both our tenant and customer base. Sales at our malls, for the most part, have either bounced back or have exceeded the pre-COVID results. This speaks to the trend of folks going back to the mall to do in-person shopping. During the quarter, we had a CAD 15 million fair value loss in our real estate properties, which was all attributable to more conservative leasing assumptions in our office portfolio. This compares to a CAD 12 million fair value gain recorded a year ago. The REIT's PCME, or operating and leasing capital reserve, was established to be CAD 25 million for the year. The trust has spent CAD 14 million, as compared to a reserve of CAD 12.5 million for the 6 months. We are expecting elevated capital needs in future quarters into 2024 above the reserve amounts. This is due to both contractor delays from last year, some catch-up spending, as well as some elevated leasing capital for upcoming renewals. Our overall occupancy level of 90% at June 30th is relatively unchanged from last quarter and down slightly from a year ago. This compares to the occupancy from the start of the pandemic, which was 93%. We are seeing continued softness in the office leasing market. However, there are pockets of increased activity, including Calgary and certain suburban office assets. This speaks to the fact in most cases, we've been able to keep tenancy at our quality assets. Now for an update on our leasing efforts. In 2023, there is approximately 237,000 sq ft retail GLA coming due. We do expect that every retail tenant larger than 5,000 sq ft to renew their space. There's also approximately 294,000 sq ft in office space still coming due in 2023. We also feel good about the vast majority of this space as well. I do note that there is 13,000 sq ft in Ottawa that will be vacated. We see no issue with the 28,000 sq ft of industrial space renewing in 2023, which all should be done with a good uplift in rates. Leasing discussions for retail opportunities have definitely picked up in the last year, as both current and prospective tenants now have a better handle on what to expect going forward. This has led to numerous conversations about various opportunities at our properties across the country. Management has had continued ongoing discussions with the provincial government tenant at Petroleum Plaza in Edmonton, which came up for renewal on December 31, 2020, and is now in overhold. While they have verbally told us that they expect to renew, they have unfortunately still been focused on their response to the pandemic and other initiatives which have taken priority. Our experience is similar to other land- Alberta landlords who have the provincial government as tenants. I do note that this space has remained occupied over this entire time frame. Turning to financing and liquidity, the trust has CAD 102 million in liquidity at the end of the Q2, and CAD 323 million in unencumbered assets. These numbers are comparable from year-end and Q1. This quarter was a quiet quarter for mortgage renewals, with just one renewal, resulting in approximately CAD 3 million in up financing proceeds. The trust does have elevated mortgage renewals for the rest of 2023 and 2024, which management is working on. We do expect that there will be limited opportunities of up financing available during this time. We are especially pleased with the results from Pine Centre in Prince George, British Columbia. This mall will have a new Save-On-Foods grocery store opening shortly, which has also led to leasing opportunities with discriminating tenants such as Lululemon, Sephora, and others. While the construction efforts with Save-On-Foods has seen delays, which is not uncommon these days, the marketplace is excited about all the new tenants. The construction is now complete, we expect the tenant to be open near the end of the Q3. The addition of grocery further complements the strong anchor tenant profile at this mall. The trust has also announced a refresh of the lobby and frontage of Rice Howard Place, located in Edmonton, which will cost approximately $5 million. The trust owns 20% of this asset. The trust has also announced a remerchandising development project at Saint Laurent. This is intended to strengthen the tenant mix and promote long-term growth through targeted investment in discriminatory retailers. This cost is expected to be approximately thirteen and a half million dollars and is expected to take 24 to 36 months to complete. Wrapping up, we are pleased at the resiliency of our assets and the improved results and activity levels from our closed mall and retail segment. While there is still room to grow to get back to pre-COVID results, we have seen positive results in the last year or 2. We are looking forward to continued positive leasing conversations for our assets. Most of our enclosed malls remain dominant in their geographical area, and our strip malls, which are largely grocery anchored, have performed well. Beyond our retail assets, we have high-quality office buildings in Canada's largest markets, with a high degree of government office tenants. We continue to be positive about our business and the objective of building value for our unitholders. We look forward to continuing to execute our strategy. Thank you for your continued support. We will now open the floor to questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your telephone keypad. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. One moment, please, for your first question. Your first question comes from the line of Jonathan Kelcher from TD Cowen. Please go ahead. Hi, good afternoon. First question, just on the retail portfolio. Obviously doing very well. What sort of uplifts do you expect for maturing leases over the balance of this year? Hey, Jonathan, John here. When you say maturing leases, do you mean large format guys, or do you mean just in general? I mean, more in general. I wouldn't the large format guys, probably not a ton, but more. Yeah. In-line guys. Yeah, exactly. Those large format guys typically have flat and/or nominal growth in built-in and/or part of options. It differs depending on where the asset is located across the country. When it comes to our strip assets, again, it's pretty much steady state throughout the last 3 years. As Andrew noted during his commentary, it's pretty stable there, so not tremendous NOI growth profile. When it comes to enclosed malls, some of them have done exceptionally well. Andrew just noted Prince George, BC, as one case in point, where Pine Centre has done with all the investment the REIT has made in that property over the course of the last 18 months. As leases roll there, with all the new anchors we've added, Winners, HomeSense, obviously, Save-On-Foods, that Andrew referenced, the in-line CRU, we should see some noticeable uplift on renewal and new opportunities. In general, what we've also seen in the last, call it, 12 months, is a lot of retailers are starting to come back and demand more in-line space. People are returning to the mall, it's made of the opportunity for us to roll up rents on renewal for stabilized tenants, tenants who have been there for a long time, are more productive. I can't really put a number to it, all in all, on an overall level, we see still some uplift on renewal rents going forward. Okay. It sounds like demand's pretty good right now, so would it be fair to expect occupancy to sort of climb through the back half of this year? Occupancy in retail has been pretty good, even dating back to 2020, when we saw the carnage that ensued in the, you know, first wave of COVID. We've been pretty good in terms of retaining, you know, low 90% to mid 90% occupancy, depending on which asset class we're talking about, strips versus the enclosed malls. It's always gets more elevated during the latter part of the year because people are looking for opportunities during the holiday season. There's always going to be an uplift in occupancy as we get closer to the Christmas season, notwithstanding. Okay. Just switching to office, I think it's in the MD&A that 136,000 sq ft was renewed by the federal government. What's what does the new rent look like on that space? Do you mind taking that one, Rick? Yeah, no problem. Hi, it's Rick Clermont. In Ottawa, for the new deals we've done with them, they're renewals. They'd be in the around the $ 18-$ 20 range as a face rate or base rate, basic rate. With the government, you don't tend to provide any incentives. It's truly just fitting up a bit of their space. Okay. I think your total renewals are at CAD 33.50. Is that like a step down from what it was? The CAD 33, I'd have to see what, where you're getting that one from. As far as the basic rent for those ones, there's a bit of a step down, but not to the extent of the CAD 33 in terms of a face rate from the government. The problem with the government is that some of the deals that were in the past had, they were base year, so they were basically semi-gross deals. What I'm quoting you right now are the basically net deals, the rent. There was a mix in this property or these properties, that it's a blend of gross and net. If you do net them all out, you'd be basically down, I would say, on average, about CAD 2-CAD 3 on the square foot, on the renewals from the deals that were done about, you know, between more or less 10 years ago. Okay. It looks like they gave back 9,000 sq ft of space. Is that a government type thing, or is that something you're seeing with other tenants? How is basically general leasing going? Like, I could touch on the government first. The government in Ottawa, they're a bit unpredictable still, if they have large sizes, we're kind of talking to other landlords. Anybody that, any space that's, let's say, less than 30,000 sq ft, are more at risk of them, potentially not renewing. As far as larger ones, they tend to have been renewing. In that one, they renewed the rest of the complex and gave back 2 floors only. They renewed basically, 2 towers of 18 stories, basically in both buildings, and gave back 2 floors only. Okay. Tom, Yeah, go on. Tom, Why don't you just comment on what you're seeing out west? Just maybe some general comments. Yep, happy to do that. Hi, Jonathan. Tom Johnston. Generally, in the West, I would, Calgary is definitely being a very resilient market that we're seeing right now. When I say resilient, that's basically saying that there is not a big give back of space anymore, and there's not a lot of sublease coming to the market. We're seeing the larger oil and gas companies now committing to space, maybe growing a little bit, but not a lot, but definitely not giving back and then starting to enter into some extensions. Good activity in the Calgary suburbs as well. I would argue Edmonton is the, probably the most challenged market. Some, you know, again, we're not seeing a lot of space come back to the market, but we're also seeing some tenants move to some suburban locations with some of the struggles that's happening in the core in Edmonton. Vancouver is, I would argue, is sort of peaked on the sublease space that's come back to the market. I would say it's peaked and should flatten out. I don't think you're going to see a lot of demand, but I would say the bad news and the sublease and all that space that's hitting the market has peaked. Okay. That's, that is helpful. I will, I'll turn it back. Thanks. Thank you. Once again, should you have a question, please press Star and 1 on your telephone keypad. Your next question comes from the line of Tom Callaghan from RBC Capital Markets. Please go ahead. Thanks. Good afternoon there, guys. Just a quick one for me on the along the lines of the Saint Laurent re-merchandising development project there, you noted. Just I think it's fair to say that the balance sheet will remain the priority here, but are there any sort of other targeted redevelopments or projects like this one that you guys are considering here over the near to medium term? No. No, I think this is really it, Tom. You know, we, we've gone through a bit of a process in assessing the needs for Saint Laurent. We've come up with this plan. We're targeting some discriminating tenants and, you know, probably take a year or two to kind of work through that plan. You know, there might be some other one-offs, smaller type things that we do, but certainly not anything else that's on the drawing board. Got it. Got it. That's, that's helpful. Thanks. No problem. Thank you. Once again, should you have a question, please press Star 5 by the 1 on your telephone keypad. There are no further question at this time. Please continue. Okay, thanks, everyone, for joining the call, and look forward to speaking to everybody next time. Have a good night. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.