Crombie Real Estate Investment Trust

TSX:CRR.UN

Earnings Call Analysis

Company Displays Steady Performance & Growth

The company reported a 4% increase in same-asset property cash NOI, driven by leasing activities and lease terminations, with projections of 2-3% growth in the future. AFFO per unit rose to $0.26 and FFO per unit reached $0.30, reflecting an upward trajectory. Payout ratios stood at 87.3% for AFFO and 73.7% for FFO, indicating an improvement. Liquidity remained robust at $584 million, alongside a leverage ratio of 8.03x debt to EBITDA. There's a focus on expansion, with management services expected to become a steadier business component, mirroring successes anticipated in 2024 similar to 2023.

Crombie Real Estate Investment Trust Demonstrates Resilience and Strategic Growth in 2023

Crombie REIT has navigated the challenges of 2023 with agility, leveraging its broad portfolio of grocery-anchored properties to achieve solid growth and create value. Despite industry-wide obstacles such as inflation and interest rate volatility, Crombie's necessity-based retail focus has paid dividends, benefitting from strong population growth and limited new retail construction. This strategic positioning hints at sustained performance into 2024, with a portfolio spanning prominent locations across Canada, foundational to its stability and expansion.

Optimizing Assets and Forging Strategic Partnerships

Crombie's growth is propelled by two core strategies: portfolio optimization and strategic partnerships. The company has actively pursued development projects and rezoning, with eight sites potentially adding 4.6 million square feet of commercial and residential space. Crucially, Crombie adeptly exercises asset sale opportunities to catalyze value and reinvest in other initiatives, as seen with the sale of Opel Ridge's land parcels. Moreover, Crombie's teamwork with partner Empire catalyzes portfolio enhancement and introduces new revenue streams through management and development services. This synergy, combined with targeted acquisitions and purpose-built projects, including securing 24 fuel site subleases, fortifies Crombie's asset base for future growth.

Financial Fortitude Amidst Interest Rate Fluctuations

The maturity of Crombie's financial management shone through a 4% increase in same-asset property cash NOI compared to Q4 of the previous year, driven by robust leasing activities and a calculated tenancy approach. Notably, new leases have been inked at rates substantially higher than the portfolio average, promising future NOI growth. AFFO and FFO per unit grew by 4% and 3.4% respectively in the quarter, supporting manageable payout ratios. Crombie maintains a disciplined balance sheet with significant liquidity and stable leverage ratios, intending to progress towards a BBB credit rating. Furthermore, refinancing initiatives at favorable interest rates underline Crombie's vigilance in navigating the financial landscape.

A Consistent Revenue Stream and Future Outlook

Crombie aims to transform its management and development services into a consistent revenue contributor, signaling a long-term strategic focus beyond 2023. Completion of new GLA projects and a steadfast 2-3% guidance on same-asset property cash NOI growth suggests a proactive and prudent revenue strategy, consistent with the solid performance delivered in the past year.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, everyone, and welcome to Crombie REIT Q4 Earnings Conference Call. [Operator Instructions] This call is being recorded on February 22, 2024. I would now like to turn the conference over to Ruth Martin. Please go ahead.

[Ruth Martin, executive]

Thank you. Good day, everyone, and welcome to Crombie REIT's Fourth Quarter 2023 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.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations and Events. On the call today are Mark Holly, President and Chief Executive Officer; Clinton Keay, Chief Financial Officer and Secretary; and Kara Cameron, Vice President, Accounting and Financial Reporting and Incoming Interim Chief Financial Officer. Today's discussion includes 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 management's discussion and analysis and annual information form for a discussion of these risk factors. Our discussion will also include expected yield on cost for capital expenditures. Please refer to the development section of our Management's Discussion and Analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Clinton will review Crombie's operating fundamentals, discuss our financial results, capital allocation and approach to funding and Mark will conclude with a few final remarks. Over to you, Mark.

[Mark Holly, executive]

Thank you, Ruth. Good afternoon, everyone, and thanks for joining us for our fourth quarter and year-end call. In the fourth quarter and throughout the year, Crombie continued to demonstrate its ability to drive growth and create value by consistently delivering solid operating and financial results and advancing key strategic initiatives. 2023 did, however, present our industry with several obstacles, most notable being inflation, construction cost variability, interest rate volatility and a growing housing crisis. That said, 2023 was also a very strong year for necessity-based retailers due to the population growth and a low supply of new retail construction, a trend we believe will continue in 2024, and Crombie's portfolio is well positioned to thrive in this changing landscape, both now and well into the future. Our portfolio of grocery-anchored retail related industrial and residential spans coast-to-coast with assets in most cities, towns and metro centers of Canada. In fact, approximately 20 million Canadians reside within a 10-K radius of our 250 grocery-anchored properties. It is this coast-to-coast curated portfolio that provides resilience, stability and growth. Today, I'm going to focus my remarks on two of our three value creation drivers that are key components of our growth strategy. Those drivers are optimization of our properties and strategic partnerships. Clinton will touch on our third value driver being operational excellence in his remarks. So first, portfolio optimization. Entitlement, development and reinvestment in our properties remains an important component of our long-term strategy to accelerate AFFO and NAV growth. We classify development into two categories: major development and non-major development. In 2023, we commenced construction of our next major residential development, the Marlstone and Halifax, advanced lease-up of our Bronte residential property added three additional sites to our entitlement process and completed 24 non-major developments. The Marlstone will add 291 residential rental units to our growing residential portfolio and will be a great addition to the city of Halifax, which is currently one of Canada's fastest-growing cities. This project has an estimated total cost of about $134 million and has an expected yield on cost between 4.5% and 5.5%. Project completion is scheduled for the first half of 2026. Leasing momentum grew quarter-over-quarter at our mixed-use residential property, the Village at Bronte Harbor with committed residential occupancy reaching 91.9%, increasing from 50% at the beginning of 2023. Full occupancy and stabilization of NOI for this property is expected in the first half of 2024. I'm also very pleased to announce that subsequent to the quarter, we secured CMHC financing at the site, which Clinton will speak to shortly. To support the next wave of major development growth, our team continues to be active in advancing projects through the entitlement process. Titlement create a low cost of capital for properties, which already own and provide optionality within our pipeline and capital. During the year, we submitted applications for rezoning on three projects with the most recent being Toronto East during the fourth quarter. We currently have eight locations with zoning in place or rezoning applications submitted, and these sites have the potential to contribute approximately 4.6 million square feet of commercial and residential GLA, comprising of approximately 5,300 residential units. As I've mentioned, entitlements and unencumbered sites create optionality for Crombie, and from time to time, we may elect to sell an asset in our pipeline to crystallize the value and recycle the proceeds into other growth initiatives. In 2023, we sold the remaining land parcels at our joint venture, Opel Ridge in Dartmouth, Nova Scotia, contributing $7 million to FFO, of which $1.3 million was recognized in the fourth quarter. Also in the quarter, we removed our Broadview site in Toronto from our development pipeline as we are no longer planning to develop the site and are seeking to monetize the entitled value through a sale in 2024. We also focus on non-major development activity in 2023. These projects have shorter durations, typically 12 months or less and include modernization, land-use intensification, repurposing of existing space and smaller new developments such as related industrial. These projects carry lower overall risk given the relatively short time lines, lower capital requirements and are currently delivering yields between 5.3% and 7%. These projects are a great way to strengthen our portfolio in order over the course of 2023, we expanded our portfolio by 83,000 square feet of necessity-based retailers, such as grocery, dollar stores, pet and QSR. Our second value driver is partnerships. We recognize the power of leveraging partnerships to drive growth while protecting our top quality balance sheet. Our strategic partner, Empire, enables us to plan and deliver on programs that enhance the quality of our portfolio, including acquisitions, modernizations, banner conversions, development management services and construction of purpose-built projects. During the year, Crombie provided Empire with development and construction management expertise, unlocking a new stream of revenue. Revenue from management and development services contributed $3.4 million in 2023, and we plan on continuing this synergistic service to create a consistent source of revenue. In the second half of 2023, we paid approximately $16 million in connection with the assignment of 24 subleases to Crombie for Shell fuel sites in Western Canada, providing same-asset property cash NOI growth and additional NAV creation. We also signed two right to development agreements for our Lynn Valley and Kings Lane Time sights in Vancouver, investing approximately $34 million to unencumber these very strategic assets. We will continue to receive rental income at these sites as well as additional revenue for development services during the entitlement phase. These arrangements provide Crombie with the necessary flexibility as we move through the entitlement process to secure the highest and best use possible. It also provides Crombie with the greatest optionality for the development and selecting of partners and from time to time, selling the asset and monetizing the embedded value. Before I hand it over to Clinton, I want to highlight the advancements we made throughout 2023 to our ESG program. In the second quarter, we announced our climate action plan, including our commitments to reach net 0 by 2050 for Scopes 1, 2 and 3 and set a 2030 near-term commitment of reducing Scope 1 and 2 emissions by a minimum of 50% from a 2019 base year. Our reduction targets were validated and improved by the science-based target initiatives. An example of our commitment to our Climate Action Plan was a modernization funded by Crombie of the Aberdeen Sobeys in New Glasgow, Nova Scotia in the fourth quarter. This modernization included industry-leading efficiencies in carbon reduction features, highlighting the ways Crombie and Empire can work together to achieve each of our sustainability, climate action objectives while also improving the quality of our portfolio, enhancing our retail assets. I will now hand the call over to Clinton, who will highlight our operational excellence, our financial results and the strength of our balance sheet.

[Clinton Keay, executive]

Thank you, Mark, and good day, everyone. Our intentionally curated grocery anchor portfolio continues to demonstrate its strength. There is strong demand in all market classes supported by population growth and necessity-based tenants looking to expand, as Mark noted. Retailers have aggressive plans to expand their physical store footprint during 2024, particularly QSR, pet and discount categories, aligning well with our desired asset mix. Our 2023 operational results reflect this sentiment as occupancy remained stable, ending the year with committed occupancy of 96.5% and economic occupancy at 96%. We view our leasing program in 3 streams: new leases, committed leases and renewals. Team is required to attract tenants as new leasing increased occupancy by 477,000 square feet at an average first year rate of $22.71 per square foot. At the end of the year, 97,000 square feet of GLA was committed at an average first year rate of $23.07 per square foot, significantly above our in-place portfolio average rate of $17.58 per square foot. This will boost future NOI growth as tenants take procession throughout 2024.Lease renewal activity in the fourth quarter consisted of 246,000 square feet of renewals at an 8.4% increase for year 1 compared to expiring rental rates or an 8.9% increase when comparing expiring rental rates to the weighted average rental rate for the renewal term, further contributing to our long-term NOI growth. Lease termination income primarily relates to one tenant and totaled $1.7 million for the year, of which $500,000 was included in the fourth quarter. In 2023, an arrangement was negotiated with the tenant and Crombie will recognize lease termination income until early 2025. We are currently reviewing various options for this space and are focused on securing high-quality tenancy that fits well into our necessity-based offering. Same-asset property cash NOI increased 4% compared to the fourth quarter of 2022. The leasing-related activity, including renewals and new leasing are the primary drivers of this growth as well as the lease termination income previously mentioned. Retail, office and retail-related industrial assets all contributed to our same-asset property cash NOI growth in the quarter and the year. Looking ahead, we still expect to achieve same-asset property cash NOI growth in the range of 2% to 3% as we have previously communicated. For the quarter, AFFO per unit was $0.26, increasing 4% from the same quarter last year, and FFO per unit was $0.30, an increase of 3.4% from Q4 2022. AFFO and FFO payout ratios were 87.3% and 73.7%, respectively. The improvement in AFFO and FFO for the quarter was driven by higher property revenue from developments, leasing activity and revenue from management and development services. This was partially offset by an increase in interest expense.Pitching to our balance sheet and overall financial condition, we remain committed to upholding a strong balance sheet and disciplined approach to capital allocation, amidst a challenging macroeconomic environment, we maintained ample liquidity of $584 million and healthy leverage ratios with a debt to trailing 12-month adjusted EBITDA at 8.03x and debt to gross fair value at 43%, further supported by approximately $2.6 billion of unencumbered investment properties. We continuously monitor our debt maturity ladder with particular attention on our upcoming maturities as well as near-term capital requirements. We remain committed to achieving an upgrade to BBB from our current BBB low stable trend for Monistar-DBRS. In the fourth quarter, spreads between secured and unsecured debt widened significantly to 80 to 100 bps from a historical norm of 40 to 50 bps. Crombie opportunistically closed on a 7-year mortgage for a retail-related industrial property and completed 15 more renewals on retail assets. Together, these mortgages represent $187 million and have a weighted average interest rate of 5.07%. Currently, spreads [indiscernible] secured and unsecured debt have reverted to more normal levels. As Mark mentioned, subsequent to the quarter at our joint venture property, the Village at Bronte Harbor, we closed on a $243 million mortgage loan equivalent to $121.5 million at Crombie share. The mortgage has an interest rate of 4.35%, harvesting significant interest savings through an approximately 275 basis points improvement over the floating construction loan debt that was previously in place. With access to multiple sources of capital and plenty of liquidity, we will continue to have flexibility to be in our financing needs throughout 2024. With that, I will now turn the call over to Mark for a few closing comments.

[Ruth Martin, executive]

Thanks, Clinton. Our team is firing on all cylinders against each pillar of our strategy. We will continue to build this business with consistent and measured focus on our objectives remaining nimble and adaptable when economic conditions change to deliver stable and consistent results. Before we open to questions, I want to acknowledge and thank Clinton as tomorrow will be his last day with us at Crombie. Clinton has been with Crombie for over 5 years and over this time has been a driving force in making our financial position amongst the strongest in the industry and has built a great team. We're fortunate to have a deep bench on the accounting and finance team and Kara Cameron, who is with us today will be stepping in as interim CFO. And with that, we are pleased to answer any questions you may have.

[Operator]

[Operator Instructions] Your first question comes from Mike Markidis from BMO Capital Markets.

[Michael Markidis, analyst]

Clinton. Sorry to see you go, but good luck in your new role with Empire -- just a couple of questions from me. I guess just starting off with Broadview, Mark, could you just remind us sort of -- I mean, I know where the property is, but sort of what that development entailed and maybe what the driver decision was to not include that anymore in the major development pipeline?

[Mark Holly, executive]

Mike, yes, that property, you're familiar with that, Broadview. We made the application for the entitlement in Q2 of 2023. And when we kind of look at the stock on our ladder was a property that management felt would have better use proceeds to look to monetize and crystallize the value that we are already able to create on that application. And we're focused in on, as you could see in 2023, advancing our one major project, the Marlstone and more focused in on the non-major developments, what we call small D. We were very active in that space, and we want to be active in that space again in 2024. We think the macro conditions, while we're very hopeful for where it's trending, it's still volatile. And for us, minor development is really quick in and out. It's a good use of capital. The yields have good returns between 5.5% and 7% and that's sort of where our focus was in '23. It's likely where we want to be in '24. And so we think the time is right to look to crystallize some value in our pipeline, and that one there made sense for where it stood in that pipeline.

[Michael Markidis, analyst]

Okay. Great. So small being has been the focus, will continue to be the focus outside of the milestone this year it sounds. I think the exception there is maybe Broadview and in Victoria, Belmont. What are the chances that either of those get going this year, the latter two?

[Mark Holly, executive]

So you're referring to sort of our near-term projects. So we have the Marlstone, which we greenlit, as you know, in 2023. Belmont is already zoned and it's one that we're watching. We haven't decided which direction we want to go with that asset. And there are other two other projects that are zoned as well out in Halifax, they're Brunswick and Barrington, which is right in close proximity to the milestone. And out of the three, we greenlit the Marlstone. So for now, we're very comfortable on sort of those zones projects and when conditions are right or if we need to look to monetize one, we can do so.

[Michael Markidis, analyst]

Okay. And I guess just with -- it's been a while since I back on the Crombie name, but I did have a period of hiatus there. So I guess with respect to your view on condo development, is that something that you're open to in the future? Or is that sort of something that doesn't have a place with Condo -- I guess, condo or for [indiscernible]

[Mark Holly, executive]

Yes. So condo development, yes, we're open to it. In fact, the Broadway commercial project at one point had on condo tower to residential rental towers. We did convert to three rental towers. We think the conditions in that market are more akin to rental at this point in time. But yes, we're not shying away from condo. We think they are opportunistic for us to kind of go in and out quickly, but it's not our primary focus.

[Michael Markidis, analyst]

Got that. Last one before I hand it back. You guys had a strong end of the year. On a full year basis, your SPNOI growth of 3%. Just wondering if that's your base case for next year? Or do you see that moderating at all in 2024?

[Mark Holly, executive]

Yes. The team did an excellent job, Mike. 4% in the fourth quarter was on the upper end of our range. We've consistently given guidance that we're saying asset NOI should be in the 2% to 3% range. If you look at the full year, we are at 3%. We're sticking to our guidance, as Clinton mentioned in his prepared remarks, of the 2% to 3% range, but the fourth quarter was a great quarter by the team.

[Operator]

Your next question comes from Lorne Kalmar from Darden.

[Lorne Kalmar, analyst]

Echoing Mike's comments at the Quintin also congrats to Kara. On the development side, I think you mentioned a couple of times considering monetization. Would you say you're more open to monetizing density than you had been previously?

[Mark Holly, executive]

No, Lauren. So if you sort of look back on the history of the organization. We monetized Sure. I guess that was about 2 years ago and got tremendous value out of that monetizing, crystallizing the entitled value. We did a 50% sale of the industrial asset in Montreal and taking out some value. So for us, we look at our sources and uses, and we use the development ladder as an opportunity to kind of look at what is the near-term requirements and what are the long-term requirements. We're always long term in mind, but we also appreciate and realize the market conditions in the near term. So from time to time, we will crystallize. And so this year, we looked at the latter and Broadview sort of is one that we looked at and thought it's an opportunity to crystallize the value or in for the application. If you recall in 2023, we sold our 50% interest in Opel Ridge. So it's a part of the makeup of how we look at the pipeline.

[Lorne Kalmar, analyst]

Okay. And then on Broadview, can you just remind me what the application was for in terms of zone density.

[Mark Holly, executive]

Good question. I have to go into the development ladder is about 600 units that we were moving forward on. I can get you have that density.

[Lorne Kalmar, analyst]

No, no, that's more than fine. And I guess, maybe just staying on that, would the idea be to -- like are you still going to move it through the zoning process and then sell? Or is there the applications in and let somebody else shepherd that through, but you can still get still create value by having started the application process.

[Mark Holly, executive]

It could be either one, but definitely the fact that we were able to get an application and get good support for the application by the municipality is helping in the value that we're creating there. So did we don't see a reason to pause. We're going to continue to push it through the process while we seek to monetize it.

[Lorne Kalmar, analyst]

Okay. And then just on the non-major developments. You kind of mentioned yield targets. What are sort of the scope of the program for 2024?

[Mark Holly, executive]

A lot more of the same, Lauren. So modernization, -- is in its LUI with the necessity-based retailers. We're seeing a lot of activity and where we can make them penciled, we're proceeding. A lot of the work has been with Empire and modernizations. We've actually built new stores for Empire, the one that we called out was in Mount Forest. So it's very much more of the same when you sort of look at the breadth of what we invested in. We talked about 24%. We're probably somewhere in that range again in this year.

[Lorne Kalmar, analyst]

Okay. Perfect. And then I'm not letting Clinton get away that easy. Maybe just on the lease term income that you expect to continue realizing, how much do you expect that to kind of be per quarter? And how far into '25 does that go?

[Clinton Keay, executive]

Early 2025, so first half of 2021.

[Lorne Kalmar, analyst]

And what would the amount be per quarter? Would it be similar to what you guys did this quarter?

[Clinton Keay, executive]

Correct. Yes, that would be a good assumption.

[Operator]

Thanks, Laura. Your next question comes from Matt Kornack from National Bank Financial.

[Matt Kornack, analyst]

Just a few modeling-related questions. On the Duke LP, is there anything onetime in the property operating expenses this quarter? I saw that they spiked up and you had negative NOI from?

[Mark Holly, executive]

Yes. The property had a onetime. It was an assessment -- reassessment of property taxes in the quarter, but it's a $2.5 million of proxy for 100%. Our share being 1.25%. So if you take that, just to assume that it was for 2 years approximately. So on a run rate go forward, think of about half of that being an annual run rate go forward.

[Matt Kornack, analyst]

That's perfect. That's very helpful. And then with regards to just straight-line rent versus [indiscernible] incentives, it's been a little bit volatile this year. Should we think of it as kind of the average of the total year is a good run rate for those items or.

[Clinton Keay, executive]

Yes. The shale transaction certainly caused a blip in that. But I think if you look in the quarter, what we have this quarter, I'd use that as your run rate go forward.

[Matt Kornack, analyst]

Okay. And then we also noticed for the variable rate interest expense in the quarter, I think it was up substantially, but we didn't see any change in the amount outstanding on the line and you've hedged most of your variable rate exposure. So I don't know what would have driven that something one time in that as well?

[Mark Holly, executive]

Let me look at that. I'll get back to you. But I know we had some adjustments in the quarter that might be contribute to that, but I'll get back to offline.

[Matt Kornack, analyst]

Okay. Fair enough. And then the last one for me is just on the fee income. Is this quarter a good kind of proxy for what we should expect on an ongoing basis? Again, there's development and other fees in there, so I assume there's some lumpiness, but any color on that stream of income going forward would be helpful.

[Mark Holly, executive]

So Matt, as we've talked about, it's early innings for management services, but it is one that we're looking to make more of a consistent part of our business. I would look at the full year of 2023 as a good proxy for what we think the full year of 2024 and beyond could be.

[Matt Kornack, analyst]

Okay. That's very helpful. I appreciate the color.

[Operator]

Your next question comes from Sam Damiani from TD.

[Sam Damiani, analyst]

Congratulations. Clinton and Kara. First question, just on the small developments, completed 83,000 square feet last year, got 28,000 square feet currently under construction. Is that a pipeline, an active pipeline that could build throughout the year, such that the completions sort of match what you completed last year around the 80,000 square foot mark?

[Mark Holly, executive]

Yes. I don't vary from year to year, Sam, but it is definitely a focus for us. I talked a lot about small de development, especially in this market, and it is one of the advantages that we're able to take with our partnership with Empire. And so as we look at where we're investing our money, if you kind of look at how we invested capital in 2023 about $50 million of it came into Small D development, 24 projects. It was a mix between LUI intensifications with necessity-based tenants. It was building out modernizations on grocery stores. It was actually building out some new stores, which you don't hear a whole lot of, but we're able to do that because of our partnership with Empire. So yes, we are very active in this space, and we're continuing to push on Small D development.

[Sam Damiani, analyst]

And sorry, that 83,000 feet last year and the 28,000 feet under construction, is that -- sorry, is that all new space? Or is some of that, I guess, just upgrading existing spaces. I'm just curious to get a sense of how material this is? And what what's the tenant activity that's driving it?

[Mark Holly, executive]

Yes, the 83,000 is all new space. And so what is driving that? It's Dollarama at approximately 10,000 feet, it's QSR between McDonald's and A&W. You've got some pet in there. And then you've got Empire. And we were able to build out a new store for Empire and Mount Forest, and then we built out an industrial asset for them of 20,000 square feet. So that is all new GLA to the Crombie.

[Sam Damiani, analyst]

And do you have a sense as to how much capacity is on all of the land that the REIT owns to build out more of these types of single-level retail intensifications?

[Mark Holly, executive]

We do. We just don't disclose it. So our development and construction team in concert with our ops and leasing teams have looked at all 300 properties that we have and where we think we can fit in a pad or where we think we can do a bolt-on. If you even look at the partnerships we have with Empire as they look at their portfolio and where they want to maybe expand or contract, we're able to take advantage of that. So we do have a sense of what's out there and what's available. The challenge in 2023 and probably into 2024, maybe a bit beyond is making some of the brand-new pads pencil. And so working with the retailers, it's just taking longer. But because there's still pent-up demand for more retail, the intensification we were able to deliver 83,000 square feet, which we're really pleased with. That's something that we want to try and push again in '24. But it's not as easy as it once was.

[Sam Damiani, analyst]

That's great color and I appreciate it. I guess just on the Duke with the property tax reassessment. I mean, it sounds like a pretty significant amount. Was this anticipated? Did it impact your fair value of the asset? Just want to get a sense as to what was behind it and we expected.

[Clinton Keay, executive]

It was anticipated. So yes, it would not impact the fair value, in my opinion.

[Mark Holly, executive]

Yes. So 2022 assessment and in 2023. And so yes, it was anticipated. We were expecting it. We just didn't know what quarter it was going to show up in.

[Operator]

Next question comes from Sumayya Syed from CIBC.

[Sumayya Hussain, analyst]

Just firstly, to touch on maybe get your outlook for leasing spreads that were pretty strong in the quarter. And do you see this level continuing?

[Mark Holly, executive]

Yes, there's been a lot of talk around leasing spreads to Sumayya -- good question. The team led by Ariana leasing an office did a tremendous job in 2023, and you could see quarter-over-quarter good buildup. We've always given guidance to be sort of in the mid-single-digit range. We definitely outsized it. And I think the conditions allowed us to outsize it. The team is focused on it for 2024. While we're not changing our guidance, the team is working with the retailers and appreciate the merchant mix that we have and where the occupancy rate allows us to make some changes, we're going to make those changes, and we're going to look at getting mark-to-market changes, as Clinton mentioned in his prepared remarks.

[Sumayya Hussain, analyst]

Okay. And then moving to the financing side of things. You did the mortgage on the industrial at 53 and you have about $180 million of mortgages rolling this year. So would you expect the financing terms be similar when you renew your grocery anchored retail staff?

[Clinton Keay, executive]

When you say renew in terms of the rates. I just want to get on the question. So obviously, the margins that are coming due. Our intent in the short term would be we have a non-revolving facility that allows us to basically put into a floating bank loan that we have. And then we'll pick the time that's right and be opportunistic on when to go to the market and obviously preference being in the unsecured market. So when that comes, I guess, we'll know whether or not what the delta is between the mortgage maturing. But our short-term plan, we need to put it into our floating rate bank loan and then subsequently have long-term financing put in place.

[Sumayya Hussain, analyst]

Okay. And then lastly, I just wanted to confirm that the lease termination income you have, it does show up in your same property NOI numbers?

[Clinton Keay, executive]

Yes, it does. Yes.

[Sumayya Hussain, analyst]

Okay. That was all from me. And congrats to Kara and Clinton.

[Operator]

Your next question comes from Pammi Bir from RBC.

[Pammi Bir, analyst]

Just coming back to the same-property NOI outlook, what are some of the assumptions that you've baked in from an occupancy standpoint?

[Mark Holly, executive]

That's why we [indiscernible] them to be flat.

[Pammi Bir, analyst]

Any tenants at all on the watch list or any known vacancies larger ones that might be coming up at all or?

[Mark Holly, executive]

Nothing that is material. We're hopeful that there is a little bit more than what we have on the watch list. But at this point, it's very stable.

[Pammi Bir, analyst]

Okay. And then just last one for me. Just with respect to Opel Ridge, as all of that -- all of the gains that were anticipated on that site, have they been effectively realized now? I think you mentioned $1.3 million, [indiscernible], in Q4. Is that correct?

[Clinton Keay, executive]

That's in In Q3 -- Q4, correct. And that's the last of what we'd anticipate that property.

[Operator]

There are no further questions at this time. Ma'am Ruth, please continue.

[Ruth Martin, executive]

Thank you for your time today, and we look forward to updating you on our first quarter call in May.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.