Crombie Real Estate Investment Trust

TSX:CRR.UN

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to Crombie REIT's Second Quarter 2020 Earnings Call. [Operator Instructions] Note that the call is being recorded on Thursday, August 6, 2020.And I would like to turn the conference over to Ruth Martin. Please go ahead.

[Ruth Martin, Director of Financial Analysis]

Thank you, Sylvie. Good day, everyone, and welcome to Crombie REIT's second quarter conference call and webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombiereit.com. Slides to accompany today's call are available on the Investors section of our website under Presentations & Events.On the call today are Don Clow, President and Chief Executive Officer; Clinton Keay, Chief Financial Officer and Secretary; and Glenn Hynes, Executive Vice President and Chief Operating Officer.Today's discussions include forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our annual information form, for a discussion of these risk factors.I will now turn the call over to Don, who will begin our discussion with comments on Crombie's overall strategy and outlook. Glenn will follow with a development update and a review of Crombie's operating fundamentals and results. Clinton will discuss our financial results, capital allocation and approach to funding. And Don will conclude with a few final remarks.Over to you, Don.

[Donald E. Clow, President, CEO & Trustee]

Thank you, Ruth, and good day, everyone. The economic and social disruption experienced over the last few months has been truly unprecedented. When the global pandemic was declared in March, none of us knew the duration or kind of impact it will have on our country. We've said numerous times over the last 10 years, Crombie has not only grown and optimized the quality of our grocery-anchored real estate portfolio, but at the same time, we strengthened our financial condition and created an experienced and talented team such that we are ready for the proverbial black swan; in this case, the global pandemic. Our team mobilized quickly, with office staff moving to work from home and operations staff preparing our properties to ensure the health, safety and well-being for all visitors. I want to personally thank our team and especially our frontline team for their resilience and extraordinary work ethic in the face of the elevated risk of COVID-19 to keep our customers safe and properties operating. Fortunately for Crombie, most of the space within our portfolio was occupied by tenants deemed essential services, and they remained open during the national shutdown.With the economy beginning to stabilize and most businesses reopening across the country, we are pleased that our July rent collection was 93%, an increase from the 90% achieved during the second quarter. As restrictions lift, we are happy to say that 97% of our tenants are open for business. Significant strides have been made in recent weeks as Canadians adapt to the new normal. And while we are cautiously optimistic amidst the worldwide pandemic, we hope the current trend of stabilization continues.Not all tenants have been able to weather the recession caused by the pandemic. Our leasing and operation teams have worked very closely with our tenants to maintain strong relationships and provide financial assistance through our Crombie Values Small Business program or the federal and provincial government's Canada Emergency Commercial Rent Assistance programs. Additionally, case-by-case evaluations have been ongoing with select tenants who do not qualify for either of the two programs to determine appropriate levels of support for their business.Our strategic partnership with Empire provides a sustainable competitive advantage for Crombie that enables us to expand and diversify our defensive grocery-anchored real estate portfolio with strong risk-adjusted returns, especially in the major urban markets in Canada, where we are unable -- sorry, where we are able to unlock the significant underlying land value and to major mixed-use residential developments. We are working closely to align Crombie's strategy with Empire's strategy, with an expectation that we collectively drive high quality, yet defensive growth consistently and at scale. This alignment includes a 3-year plan to invest in the modernization and expansion of grocery stores, a number of store conversions, including the FreshCo discount format in Western Canada and Farm Boy in Ontario; accelerating Sobeys' build-out of Voilà, their online grocery home delivery service, land use intensifications and the unlocking of major developments. I want to commend the Empire team for their resilience and dedication as they worked relentlessly to put food on the tables of Canadians and keep customers safe over the last 6 months. The recent launch of their online grocery home delivery service, Voilà by Sobeys in the Greater Toronto area, and their announcement of a new 3-year growth strategy, Project Horizon, indicates Crombie is fortunate to have a strong partner that has not only emerged as a leader during the COVID-19 crisis, but will also be a leader of the grocery industry in Canada for years to come.Our first 6 major development projects play a key role in our long-term strategy to accelerate per unit NAV and AFFO growth. Despite being well-managed by our teams and our JV partners, Westbank and Prince Developments, the impacts of COVID-19 on our major developments caused some minor increases in costs and slightly delayed expected completion dates. Though some work stoppages were experienced in Québec, our development and entitlement work continued to forge ahead. We were thrilled to see the Safeway store at Davie Street in Vancouver open in May and look forward to the completion of this large mixed-use development, Crombie's first, later this year in 2020. Quality and diversification of our developments and the economic returns, including the significant NAV creation and solid AFFO growth remain of utmost importance to our strategy as we complete $600 million of major developments over the next 16 months.As we have said numerous times, based on current circumstances and valuation measures, we expect these first 6 developments to be worth a fair value of approximately $750 million to $900 million upon completion, thus creating approximately $1 to $2 per unit of net asset value. Importantly, we continue to work with Empire in Canada's major cities on the zoning and density entitlements of 7 additional projects to unlock and realize the significant land value embedded in our major urban market grocery stores and generate opportunities to continue our development program into the future.Lastly, I want to encourage investors to use caution in using short-term KPIs to judge long-term real estate assets, backed by a strong financial position and an expert management team. Short-term measures are important, but please recognize real estate portfolios and platforms like Crombie's are built for stability and growth over the long term, including their ability to withstand short-term shocks as we are seeing today.With that, I'll now turn the call over to Glenn, who will provide an update on our developments and operational highlights.

[Glenn R. Hynes, COO & Executive VP]

Thank you, Don, and good day, everyone. Crombie remains committed to the health, safety and well-being of our employees, tenants, customers and communities. With the reopening of all our properties, our enhanced cleaning activities and operational physical distancing protocols continue to be of critical importance as a protective measure against the spread of the COVID-19 virus. Understanding the value of open lines of communication, we have been sharing updates with our tenants on a weekly basis and will continue to do so. Many tenants are faced with substantial changes to the way they serve their customers, so we have assisted with implementing what is required tenant by tenant, property by property. Our portfolio is well-positioned with respect to the defensiveness of our annual minimum rent, with 76% of minimum rent generated from grocery and pharmacy-anchored properties, 68% of rent from essential services tenants like grocery stores and only 8% of rent from small business. Our largest tenants are investment-grade grocery stores, pharmacies, banks and government offices. Over the last few years, we've improved the quality of our portfolio by acquiring assets in Canada's top markets as well as recycling approximately $800 million of properties, mostly in secondary and tertiary markets to reinvest in Crombie's major urban developments. The portfolio we have today is strong and improves our positioning for future periods of uncertainty, such as what we're experiencing today with COVID 19.As Don mentioned, during the month of July, 93% of gross rent was collected, an improvement from the 90% collected for the second quarter, which Clinton will detail shortly. We received full rent collection from our retail-related industrial segment, 96% of our office rents and 92% of our retail and commercial segment. We believe collections will continue to improve, with approximately 97% of tenants already open, and we anticipate virtually all our tenants will be open and operational by the end of this quarter. Our tailored approach to rent relief further strengthened our relationships with tenants. To date, we have approximately 260 tenants at 70 properties in the application process for the CECRA program. Even with the additional support, inevitably, there are still tenants at risk. Since the onset of the pandemic, there have been numerous declarations of store closures, CCAA applications or bankruptcies in the broader market. Our defensive and Internet-resilient portfolio has minimal exposure to these announced closures, with only 17 leases potentially impacted, representing approximately 61,000 square feet or approximately 0.7% of annual minimum rent. To date, only 2 of these 17 leases have been disclaimed, representing approximately 6,000 square feet or approximately 0 annual minimum rent impact, which is an indication of the strength of our properties.Avalon Mall is feeling the impact of the pandemic the hardest. Avalon Mall was effectively closed from the end of March to early June due to provincial government restriction. The reopening has been extremely positive, with 93% of tenants open for business and a significant improvement in rent collection at 60% for July compared to 42% in the second quarter.Strong fundamentals are critical in these unprecedented times. Crombie experienced a small decrease in committed occupancy to 95.6% compared to our record high occupancy of 96.2% at Q1. New leases and expansions year-to-date increased our occupancy by 92,000 square feet at an average first year rate of $18.95 per square foot, while we experienced 125 -- 124,000 square feet of year-to-date net lease expiries, vacancies, terminations and space adjustments. We ended the quarter with 88,000 square feet of committed space at an average first year rent of $21.18 per square foot, which will boost future NOI growth. During the quarter, 230,000 square feet of renewals were completed at a 3.6% increase over expiring rental rates. Year-to-date, our renewal program is on schedule as we have renewed 386,000 square feet at an increase of 4% over expiring rent. During the first 6 months, our retail renewals were solid with 302,000 square feet of retail renewed at rental increases of 4.9%. As we continue to maneuver our necessity-based portfolio through these uncertain times, our team is dedicated to ensuring our underlying business fundamentals and core portfolio remain resilient and strong.The impact of COVID-19 on our major development program, as Don noted, caused some minor cost increases and slight adjustments to completion dates. These changes are discussed in the MD&A, and I will note them here. We are pleased to report that construction at our Montreal Le Duke mixed-use development and our Montreal Voilà par IGA customer fulfillment center, or CFC, resumed in May after the 6-week government required shutdown. Construction in Vancouver, the GTA, Victoria and St. John's, the homes of our other 4 major projects, were deemed essential and work continued, albeit at a slower pace through the quarter, with new protocols to ensure the safety of all individuals on site. We continue to expect to reach substantial completion in 2020 of our first 3 major developments, including Davie Street in Vancouver, Belmont Market on Vancouver Island and Avalon Mall in Newfoundland and Labrador, with slightly delayed schedules. Investment continues in Bronte in Oakville, Le Duke in Montreal and the Voilà par IGA CFC in Montreal with substantial completion expected in 2021. We have another 7 projects in preplanning, where we continue our work to improve and deliver value-enhancing entitlements for each development.In Davie Street, Vancouver, the new Safeway store opened on May 21, with Scotiabank and a government liquor store scheduled to open in Q4 of this year. Total project costs for the retail component increased by $600,000, reducing our expected yield range slightly to 6.2% to 6.5%. The residential portion is well advanced with construction complete and interior finishing well underway for both towers. Despite construction continuing throughout the pandemic, the estimated substantial completion date of the 330 residential rental units has been extended slightly, but will still be completed in Q4 2020, as previously communicated, with an estimated increase in total project cost of $1.8 million, reducing our expected yield on cost range slightly to 5% to 5.5%, which is still a very strong risk-adjusted return on a high-quality residential development in Vancouver.Belmont Market on Vancouver Island will reach substantial completion in 2020, with the final phase of the development consisting of 3 small buildings totaling 23,000 square feet, which will come online in 2021. Construction commenced on the first of these 3 buildings during the second quarter, with the remaining 2 buildings slated for 2021 construction.Avalon Mall is the only regional mall in all of Newfoundland and Labrador, and we are cautiously optimistic that as the economy continues to reopen, it will reemerge and continue its dominance, as evidenced by sales of approximately $700 per square foot pre-pandemic. Construction of our expansion area will be substantially complete in Q3, with the grand opening delayed until spring of 2021 due to COVID-19. 92.6% of Avalon Mall, excluding the expansion area, is leased. But due to an expected near-term slowdown of activity, we have adjusted our NOI yield on cost range projections from 10.3% to 11%, downward in Q1, to an updated 9.2%, 10.1% range in Q2.In Montreal, at our Le Duke project, we've experienced some pandemic-related completion delay, but still anticipate substantial completion in Q3 of 2021, as previously communicated. This 25-story mixed-use tower with 26,000 square feet of IGA-anchored commercial grocery and 390 residential rental units as the structure completes to the 25th floor and the project is 89% tendered. Crombie maintains its 2021 substantial completion date for the Montreal CFC, the Empire launch of Voilà par IGA, the online grocery home delivery service to be made available in Québec and the Ottawa area, is now expected in early 2022, delayed slightly due to the temporary shutdown of nonessential construction in Québec during the pandemic. Construction commenced in May, foundations are in place and steel superstructure is now underway.The Bronte Village construction site in GTA remains open and has been only marginally delayed due to the impact of a reduced workforce arising from COVID. We still anticipate the 54,000 square feet of commercial and 480 residential rental units will be substantially completed in Q4 of 2021, as previously communicated. Bronte is 96% tendered. Upon completion, we expect these properties to create significant AFFO growth per unit. And based on current circumstances and valuation measures, as Don noted, aggregate NAV creation of approximately $1 to $2 per Crombie unit and increase our presence in the country's top urban markets, while diversifying and improving our overall portfolio quality and income stream.And lastly and most importantly, we're not aware of a single COVID-19 infection to date on these 6 project construction sites. We are proud of the work that our partners, our contractors and our team have done in focusing on health and safety.And with that, I will now turn the call over to Clinton, who will highlight our second quarter financial results and discuss our capital and development program funding approach. Clinton?

[Clinton David Keay, CFO & Secretary]

Thank you, Glenn, and good afternoon, everyone. During these challenging times, Crombie remains in good financial health, with a strong and flexible balance sheet, ample liquidity and an ability to prudently allocate and creatively source capital. While we are pleased with our 90% collection rate in Q2, which improved to 93% in July and 97% tenant opening statistics, like everyone else, we are unable to predict the future duration and financial impact of the pandemic with complete certainty. The pandemic created increased risk, particularly around the collection of tenant receivables. Our bad debt expense for the quarter was $8.7 million. This includes $1.1 million expense for the 25% rent abatement for tenants under the CECRA program, $2.6 million expense for other rental abatements and $5.1 million in the general provision for bad debts. Bad debt expense for the quarter is 8% of quarterly gross rent, consisting of 1% for CECRA, 2% for other abatements and 5% general provision against the 7% of deferred and unpaid rents. Judgment is required in estimating bad debt expense exposure. And where doubt on collection existed, we included those amounts in our Q2 provision, negatively impacting short-term NOI by increasing bad debt expense.On a cash basis, same-asset NOI decreased by 4.6% compared to the second quarter of 2019. Excluding COVID-19-related adjustments, such as bad debt expense and a decline in parking revenue, same-asset NOI increased by 3.6% quarter-over-quarter. AFFO per unit was $0.18, decreasing from $0.25 for the same quarter last year. Our AFFO payout ratio was 125.2% versus the same quarter last year at 89.9%. FFO for the quarter decreased to $0.22 per unit from $0.29 for Q2 2019, and our FFO payout ratio was 101.8% versus 75.7% in the same quarter last year. The decline in AFFO and FFO is primarily due to the significant increase in bad debt expense and parking revenue impact, as previously noted. Adjusting for the impact of COVID-19 on Crombie's operating performance, AFFO per unit would be $0.26 and FFO per unit would be $0.30. Additionally, we are feeling the effects of approximately $500 million in dispositions executed in 2019, with the primary reinvestment of proceeds to major developments with no initial return, while we await the completion of major developments over the next 16 months.G&A as a percentage of property revenue for Q2 was 7.2% or $7 million, up from Q2 '19 of $6 million. During the quarter, in the face of the uncertainty of COVID-19, we chose to reduce operating expenses with an organizational realignment resulting in elimination of certain positions, including two at the Vice President level. Severance costs of $1.5 million were incurred, resulting in the increase in G&A expense, partially offset by lower travel and office expenses. Excluding severance costs, G&A in the quarter would have been $5.5 million versus $6 million last year.In the first 6 months of 2020, when fair valuing our investment properties, we made assumptions as to the potential short and long-term impacts caused by COVID-19. Net property income has been lowered and capitalization rates increased in certain cases. In the first quarter of 2020, Crombie reduced its fair value of enclosed malls by approximately 15%, which was the primary driver behind a Q1 fair value reduction of investment properties of $86 million. In the second quarter, expectations were again updated as to the impact of COVID-19 and values were in line with our Q1 estimates. Additionally, fair value was positively impacted in Q2 by non-COVID-related adjustments for capital investments in Sobeys properties causing increased NOI and appraiser-provided reductions in capitalization rates for some of our properties in British Columbia, resulting in an increase in fair value over Q1 of $85 million.Crombie remains committed to increasing weighted average term to maturity of our debt, reducing leverage over the medium-term and increasing our unencumbered asset pool. In the second quarter, a 3.88%, 16-year mortgage loan for $118 million on our VON Ontario Distribution Center was secured and funded. We repaid approximately $10 million of mortgages, leaving $48 million of mortgages maturing primarily in Q4 of 2020. Our unencumbered asset pool remained consistent at approximately $1.5 billion, and our balance sheet remains flexible with approximately $400 million of available liquidity. Our debt-to-gross-book value on a fair value basis was 49.2% at the end of Q2 compared to 50% for Q1 2020 or 48.9% adjusted for cash on hand in Q1. We ended the quarter with debt to trailing 12-month EBITDA at 9.12x versus 8.86x at Q1 '20. Adjusting for bad debts recorded in the quarter, debt-to-EBITDA would have been 8.73x.Subsequent to the quarter end, Crombie put in place a $1 billion base shelf prospectus for 25 months to allow the issuance of units, debt and other related securities on an accelerated basis. This is a proactive ordinary core step, and we do not see an immediate need to access the capital markets. As we continue to navigate through this difficult time, Crombie grocery and pharmacy-anchored portfolio of essential service tenants will support our communities, businesses, tenants and employees, while never losing sight of our long-term strategy to effectively allocate capital to accelerate NAV and AFFO growth, delivering value.I will now turn the call over to Don for a few closing comments.

[Donald E. Clow, President, CEO & Trustee]

Thank you, Clinton. Before we conclude for questions, I'd like to take a moment to reflect on current events and their impact on Crombie. As Crombie continues to grow and evolve, so too does our focus on ESG priorities. Developing a comprehensive ESG program, we have identified key areas in which we can improve our business and our impact. In recent months, the world has watched social protests, led by Black Lives Matter and other organizations have mobilized our communities to commit to eliminating racial injustices. Diversity and inclusion is a critically important element of our social impact commitment and is essential to the success of every organization. We can and must do a better job of ensuring this work is ingrained in our hiring and employment practices, and we are committed to doing just that. Like many CEOs across Canada, I recently signed the BlackNorth CEO Pledge, which was initiated by the Canadian Council of Leaders and Anti-Black Systemic (sic) [ Canadian Council of Business Leaders Against Anti-Black Systemic Racism ]. Signing the pledge, I've committed myself and Crombie to work diligently to uphold its underlying promise.Working diligently is the unspoken mantra of the Crombie team. I've often said that one of my priorities as CEO is to ensure Crombie is well-prepared if "the world falls off a cliff." While we envision different potential scenarios that might play out, a global pandemic wasn't at the top of the list. As we saw the virus take hold across China and Italy, our business continuity team met daily to plan our response in case Canada faced a similar crisis. I knew we had a strong team at Crombie, and they proved me correct. People who are the backbone of our business are smart, focused and committed to excellence. What we have seen over the past months is that our team is also incredibly resilient and nimble in the face of a fast-changing and unprecedented environment. Every week, our team successfully faces a new challenge, whether it is supporting tenants through rent relief, adapting our operation to evolving health and safety protocols, maintaining strong relationships or preparing comprehensive quarterly reports from home. We continue to work diligently to ensure our commitment to all of our stakeholders remains steadfast. I want to again thank each and every member of the Crombie team for their perseverance and excellence over the last 6 months.Lastly, as I've said many times, we believe in and are deeply committed to our long-term strategy of creating value with our strategic partner Empire, together with a strong real estate development program in Canada's major urban markets that is layered on top of one of the best grocery-anchored real estate portfolios in Canada. We believe this strategy, when combined with our solid financial condition, our access to capital and our entrepreneurial talent, will generate solid total unitholder returns for our stakeholders for years to come.That concludes our prepared remarks, and we're now happy to answer your questions.

[Operator]

[Operator Instructions] And your first question will be from Mike Markidis at Desjardins.

[Michael Markidis, Real Estate Analyst]

Thank you very much for providing the breakdown of the bad debt expense on Page 18 of the investor presentation, the call deck. Just wanted to clarify a few things, if you don't mind. So first off, Glenn, do you, off the top of your head, just have the -- I mean, I'm sure we could back it out, what the total gross rent build for the quarter was?

[Glenn R. Hynes, COO & Executive VP]

Yes, Michael, the gross month -- the gross rent bill for the quarter would be around $103 million.

[Michael Markidis, Real Estate Analyst]

$103 million. Perfect. Okay.

[Glenn R. Hynes, COO & Executive VP]

It's a bit higher than the revenue per the financials, but yes, $103 million.

[Michael Markidis, Real Estate Analyst]

Right. We've been learning that you got to include the tax on some of the stuff as you go forward, so -- which I don't think is reflected in your P&L. So with the collected amount, just to confirm, it's consistent with everybody else, so the government receivable on CECRA, which I guess would be about 2%, would be included in the $90 million, correct?

[Glenn R. Hynes, COO & Executive VP]

Correct.

[Michael Markidis, Real Estate Analyst]

Okay. Good. And then just curious on the abatement expense, sort of how you're looking at that versus the deferrals. Is there -- I guess, a 2-part question. Is some of that a permanent reduction, i.e., you abated 2% for the quarter, and therefore, there's a rent reduction going forward of maybe 25%? I'm just trying to get a sense of how much of that is just an ongoing reduction versus free rent.

[Glenn R. Hynes, COO & Executive VP]

No. I would say, Mike, it's essentially -- I never use the word onetime, but it's not an ongoing rent abatement. It's a cost that's recognized in the quarter. And one of the other matters, I would say, is that part of the consideration in exchange for the rent abatement is some other things that are valuable to Crombie, whether it's term extensions or whether it's some restrictions of development rights, et cetera. So -- and Donnie may speak to this a little bit later as well. But the abatement piece, we would think, what's covered in the quarter should be the vast majority of any abatement cost, assuming things continue on the current trajectory that we're currently feeling.

[Michael Markidis, Real Estate Analyst]

You read my mind with that one, Glenn, so thank you very much for providing that. And then just lastly, I guess you guys have the 5% of anticipated uncollectibles that are grouped together with the deferrals and the unpaid. So that -- is that to say that basically, the provision is solely -- yes, I guess that would be the case because you don't have an abatement, and as an abatement, there's no receivable. Okay. I think I just answered my question, but...

[Glenn R. Hynes, COO & Executive VP]

No, but you asked the question there, it's a good question, which is exactly right. I think us and others, what we've really said is we have the bad debt cost for the quarter of 8%. You can earmark 1% specifically for CECRA. The 25% piece, that's straightforward. The abatement piece is straightforward. So the remaining 5% is a provision against what's in the deferral category. We're confident and optimistic that the deferrals will be collected as we're confident and optimistic that a chunk of the unpaid will be. But we were, I would say, Mike, a bit prudent or even conservative in that piece, the 5% provision against that remaining 7%. And I think the biggest piece of why, as we look at it today, why we feel it was very conservative is that Avalon has really turned the corner nicely, with 93% of tenants now open and moving from a 42% rent collection in the quarter up to 60% in July and feeling really good about foot traffic. And the mood at Avalon, we're feeling much better. But your interpretation of those numbers is correct.

[Michael Markidis, Real Estate Analyst]

Okay. And appreciate all those clarifications just because everyone is presenting things a little bit differently, and we're just trying to make sure it's all comparable. And your guys' collection rents -- collection rates obviously stand up very well versus peers. Just last one for me, with respect to your office portfolio. Just curious if you have a sense of how much of the tenant base is actually back in force in the office portfolio?

[Glenn R. Hynes, COO & Executive VP]

Yes. The office space is interesting, and ours is primarily in Halifax. So we have about 97% of the tenants are operational, but only about half of them have workforce that's back on site. And I think with work from home going well for many of these companies, we're not expecting to see a big resurgence in that office return until the fall. We're seeing -- like if you look at our parking piece, which is very much tied to office, that's really slowed down. The food court at Scotia Square has slowed down. So our guess is we're going to start to see a doubling of our office population by mid-September. And then I think from there, it's just going to be a gradual confidence piece as vaccine's in place, et cetera. I think the fact that work from home seems to be going relatively famously for many has reduced the urgency. And I would also say, and this is a cultural thing maybe in Atlantic Canada, but the 2 markets where we have a lot of office, which is principally Halifax, but a bit Moncton, there seems to be a -- not an urgent rush to get back, but we're expecting to see significant ramp-up in the fall. Hopefully, that helps. But the good news is that 97% of the tenants are operational. Rent collection has been strong. I think you noted or you may have noted that our same-asset NOI drop in office for the quarter was principally on the parking side. That's where most of our parking disaffection was, or at least a good portion was. But beyond that, we're still feeling good about office fundamentals. But it's going to take a bit of time with elevator concern and other concern to get all the traffic back.

[Operator]

[Operator Instructions] And your next question will be from Tal Woolley at National Bank Financial.

[Tal Woolley, Research Analyst]

Do you guys -- your geographic concentration is a little bit different than your peers, skewed a little bit more to the maritimes in Western Canada and just the pandemic sort of spread has been obviously very different across the country. I'm just wondering if you can talk maybe a little bit to what leasing demand looks like across some of the regions. Just to see it like -- just trying to understand like some of the regional trends that might be out there.

[Glenn R. Hynes, COO & Executive VP]

It's interesting. We're not seeing anything dramatically different. The beauty of our portfolio for example, in Alberta, where you might be worried more so, we just have a very strong grocery-anchored portfolio there and the ancillary, the lease-up is very strong. So we're very -- 99% occupied in Western Canada. As we look at our renewal spreads over expiry, it's actually pretty balanced. That's a 4% year-to-date, 3.6% for the quarter and 4.9% on our retail renewals, Tal. If I look across the country, and it's not a huge canvas because with our long lease terms, we don't have a ton of renewal activity, but for the first half year, it's been very consistently positive in terms of the renewal spread. There's not pockets of market that are negative and other pockets that are more positive, it's pretty well balanced. And then secondly, as we look at the renewals for the balance of the year, we're feeling pretty good. I think we have another 0.5 million square feet. We have a couple of big deals. We had one, about 100,000 square foot renewal that actually got renewed in just early Q3. That was a Q4 renewal. So we're feeling good about the renewal piece. I think last call, we would have expressed caution about maintaining positive renewal spreads on expiries, but that's been very pleasing so far. So I can't tell you that there's a whole lot of anomalies. Maybe Don or Clinton can or have a different perspective. But at this point, the leasing side has been fine. We're expecting it to be a bit slower post pandemic or during the pandemic for new leasing. But thankfully so far, the renewal side and not losing many tenants, those stats on the CCAA piece that we shared in the script, those are pretty good. We've had 17 leases that are, call it, part and parcel of a CCA process. Only 2 of those are being disclaimed and that speaks to the fact that the other 15 are just great locations and great properties that even through CCAA, the tenant doesn't want to give them up. And so I think that bodes well, but nothing specifically geographically that would be of interest.

[Tal Woolley, Research Analyst]

Okay. And as we get sort of closer to completion on Davie Street on the residential piece, can you just talk a bit about marketing plan, how you sort of might adjust how you approach going to market given everything that's going on, too?

[Donald E. Clow, President, CEO & Trustee]

Yes, Tal, it's Donnie. So number one, we've been delayed, call it, by a quarter, which pushes us into early 2021 in terms of lease up. We've been saying for the last year or so, us and our partner, Westbank, have been saying that we'll be taking our time to ensure we get the rents that we want to get out of the gate because, as you know, there's limits on what can be done after the fact. And so that will continue to be what we expect to happen. There has been some softening in the market to some degree, and we're concerned about what impacts of Airbnb and other factors have in the market. But we still have very solid confidence. Our partner has projects in the community that have leased throughout the COVID-19 pandemic and shutdown, and they're quite confident that we will also lease up as we get into 2021 over time. So -- and our -- honestly, our pro forma rents are still well above what we initially would have forecasted them that are in our MD&A. So again, we have some margin of safety there in terms of hitting the numbers. So -- and the project has been very well managed. They've been very resilient through the construction uncertainties, whether it be supply chain or just the labor forces and managing a number of scares that we thought may have been COVID, but were not confirmed and ultimately proved not to be COVID. So there's lots of things that happened on that site, and we're very thankful to have a great partner and -- who's done a great job. And we've also -- our teams have done, I think, an immense amount of work in bringing this project to completion. We're really excited. It's going to drive a lot of NAV creation for this company and AFFO growth over time. And it's centerized in Vancouver, so it's, for us, it's a great asset in a great location. That's probably the best one in the country, so we're quite pleased with that. So anyway, it's -- some of the stuff is short term in my mind, but I think in the long term, we'll be very, very thankful that we have that asset moving forward.

[Tal Woolley, Research Analyst]

And any early word on the performance, the reopened store?

[Donald E. Clow, President, CEO & Trustee]

Sorry, the what?

[Tal Woolley, Research Analyst]

Any early word on the performance of the reopened Safeway there?

[Clinton David Keay, CFO & Secretary]

Nothing but anecdotal so far, Tal. But we're hearing Sobeys is very happy with the store. I think they opened a little softer than normal because of the pandemic timing. But it's a beautiful store, we're hearing good comments, they seem quite satisfied. But we're not privy to sales numbers. And if we were, I don't think we'd be sharing them. But -- no. But so far, so good is what we're hearing. It's a beautiful store. And it's going to be a great centerpiece to the 330 units above. And the good news, too, the Scotiabank and the liquor store will commence paying rent in Q3. They'll be taking occupancy in Q4, so we'll have almost a full complement of retail. They're operational as we gear up to rent up the apartments.

[Tal Woolley, Research Analyst]

Okay. And then just lastly, you completed a couple transactions selling some of your grocery-anchored retail to private investors last year. Have you -- subsequent to all of this economic tumult, have you received any more inbound interest on that type of product?

[Donald E. Clow, President, CEO & Trustee]

Yes. The -- Tal, we have, call it, a constant flow of inbound. And I would say, at scale, in a variety of forms. So whether it be the 100% non-core, what we call non-core, that could be -- whether it'd be tertiary, secondary markets, it could be some of our drug stores that we're interested in, potentially selling. And it could be partial interests like the Northam deal we did 1.5 years ago for 50% of the Oak Street deal, where it was at 89/11 more unconventional deal. All of those types of inquiries are, I'll call them consistently inbound. So -- and we, I would say, with our stock price where it is, we would be looking again at dispositions. Again, it's a form of equity. We proved we could do it at or above IFRS through '18 and '19. And so we'll be starting to look at that program and working on it over the next number of months until the markets sort of settle out and rebound to something that's closer to our NAV. And then we don't need equity, as we've said a number of times, as Clinton said earlier. Really the end of right now, end of 2021 and 2022. We don't really need equity. So we're at a place where we're in a pretty good space with a lot of different sources of capital and the inbounds are an important part of that. People that are interested in being our partner on good assets.

[Operator]

[Operator Instructions] And right now, we have no further questions registered. Please proceed.

[Ruth Martin, Director of Financial Analysis]

Thank you for your time today, and we look forward to updating you on our progress on our Q3 call in November. Stay safe and healthy.

[Donald E. Clow, President, CEO & Trustee]

Thanks, everyone.

[Clinton David Keay, CFO & Secretary]

Thank you, everybody.

[Glenn R. Hynes, COO & Executive VP]

Thanks, everybody.

[Operator]

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.