SmartCentres Real Estate Investment Trust

TSX:SRU.UN

Earnings Call Transcript 2019-Q1

[Operator]

Good day and welcome to the SmartCentres' REIT Q1 2019 Conference Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Mr. Peter Forde. Please go ahead, sir.

[Peter Forde, President, CEO & Trustee]

Thank you. Good evening, and welcome to the SmartCentres Q1 2019 Conference Call. I'm Peter Forde, President and CEO of SmartCentres REIT. Joining me on the call today are Mitchell Goldhar, Executive Chairman; Peter Sweeney, Chief Financial Officer; Mauro Pambianchi, Chief Development Officer; Rudy Gobin, EVP Portfolio of Management and Investments; and Stephen Champion, EVP Development.The agenda for the call will be a few overall comments by me, followed by Peter Sweeney who will talk about our results for the quarter and our financing activities, followed by Mitch speaking about our exciting project developments, and then we will take your questions.At your suggestion, we will try and shorten our opening comments to allow more time for questions. Our comments will mostly refer to the first 10 pages and pages 24 and 25 of our supplemental information package and the outlook section of our MD&A, which are posted on our website.I refer you specifically, to the cautionary language at the front of the supplemental material, which also applies to any comments any of the speakers make this evening.First, some overall comments. SmartCentres REIT is a stable portfolio of well-located, value-oriented shopping centers with tremendous mixed-use intensification opportunities. As we've said before, real estate development takes time and it would take a couple of years before the many new mixed-use initiatives commence yielding positive results. But when it starts, which is about to next year, it is expected to continue for the years to come.We accomplished many things in the last quarter that sets us up nicely for the future. For Vaughan Metropolitan Centre, VMC, we announced execution of partnership agreements for the 2019 launch of Transit City 4 and 5 Condo towers, and that we are moving forward with an adjoining purpose-built residential rental tower. Like the first 2 towers, these 2 towers sold out in approximately 2 weeks. More about this great accomplishment later.We executed an overall agreement with Revera to build and operate many retirement-living residences together on SmartCentres owned land, including the first 3 projects, 2 in Vaughan and 1 in Oakville. We are close to a final agreement with another retirement residence operator for 2 towers on our site in -- at Clyde and Baseline in Ottawa. And we have executed agreements with SmartStop for 2 more self-storage facilities, bringing the total so far to six, all in the GTA. And last and certainly not least, a very successful opening of the new 144,000 square foot expansion of the Toronto Premium Outlet Center in November of 2018, which continues to outperform our expectation.As you will hear from Peter Sweeney, all-in-all, a strong and stable quarter performance from our existing retail portfolio as we wait for the development pipeline to fill and deliver even more, with notable mention going to a full year's results from the Toronto Premium Outlet expansion, which opened only in November at the end of last year, the completion of the VMC PwC tower, and the full occupancy of the remaining office space in the KPMG Tower.In 2020 and '21, the profits from first of many recurring residential developments are completed and on a go-forward basis, from the variety of new business initiatives and developments, some of which are described this evening and in our quarterly report.Our core retail portfolio remained strong and with its value-oriented, nationally-focused tenant base is well suited to the changes taking place in the retail marketplace. On executed leases, our shopping centers are 98% leased. We continue to hear from tenants that Walmart strategy for selecting the locations where the community can come to a larger center with convenient and easy access and find everything it needs, works for most other retailers as well. With continuing expansion of Walmart's food offering and the resulting store customer traffic increase, our portfolio remained strong and uniquely positioned.Our shopping centers are often the only significant value-oriented center in many markets across the country, and therefore, dominate those markets. This includes the 28% of our portfolio, which is in large and medium secondary markets where virtually all of these centers have a Walmart anchor or shadow anchor and a better than average occupancy at 99%.Bombay and Bowring Canada closed all their locations before March 12. We had 12 term leases with Bombay and Bowring in our portfolio, along with a few temp deals, representing less than one-third of 1% of our portfolio. All locations are in shopping centers anchored by a Walmart Supercenter. Payless Shoes closed all locations in Canada, including its 46 locations with us after the end of the quarter through a CCAA process. All one of these locations are in the center anchored by a Walmart store. Accordingly, we anticipate executing new deals for all of these locations within the next 12 months to 18 months and we are well along the way in doing so.And the Toronto Premium Outlet expansion of 144,000 square feet opened in November was virtually fully leased at that time and is exceeding expectations. The expansion and high-caliber tenant mix makes the center one of the top-performing premium outlet centers in the world.Our strong and stable retail portfolio provides a solid base upon which we can grow income and NAV through mixed-use intensification. Again, we just need to be a bit patient until next year when these new initiatives start to produce FFO.A few general reminders about our development pipeline and capabilities. Virtually all of the development initiatives we are planning are on land we already own, unlocking value and not requiring us to buy very expensive land to develop this density. With 34.5 million square feet built on approximately 3,500 acres of land with less than 24% utilization and primarily all at ground level, we have over a 100 million square feet of land to accommodate [ mixed-use ] growth throughout the country. We are developing a diverse selection of new real estate types, not just 1 or 2, but taking advantage of the opportunity, while dispersing the risk and driving customer traffic to our shopping centers.More about the developments from Mitch in a couple of minutes, but first, I'm going to turn it over to Peter Sweeney.

[Peter E. Sweeney, Chief Financial Officer]

Thank you very much, Peter. Good evening, everyone. It is important to remember that the development initiatives that SmartCentres is embarking upon are heavily dependent upon having a strong and stable cash flow generating operating platform. In this regard, our financial results for the first quarter of 2019 reflect the continued strength, stability and security of our 34 million square foot predominantly Walmart-anchored shopping center portfolio.During the first quarter, this portfolio generated the following improved results; number 1, rental revenue from investment properties was CAD206.4 million, representing a 4% increase over the comparable quarter in 2018. Number 2, NOI as a percentage of net base rent was 98.9%, representing a 1.2% increase over the comparable quarter in 2018. Number 3, FFO with one-time adjustment and before transactional FFO increased by CAD2.5 million to CAD91.8 million, representing a 2.8% increase over the comparable quarter. However, FFO per unit decreased by [ CAD0.01 ] to CAD0.55 per unit. This decrease was predominantly caused by the dilutive impact of our CAD230 million equity issuance in January of 2019. Number 4, ACFO with one-time adjustment increased by CAD2.1 million or 2.6% to CAD83.9 million as compared to the same period in 2018. Number 5, ACFO exceeded both distributions declared and distribution paid by CAD7.2 million and CAD24.2 million, respectively.Number 6, same-property NOI growth declined by 0.2%, which was principally caused by the closure of Bombay and Bowring at the beginning of the year. And however, excluding the impact of the closure of Bombay and Bowring, same property NOI growth would have been 0.4% for the quarter.And finally number 7, we renewed or are near completion of renewing over 2.7 million square feet of tenancies, which represent 76% of our 2019 lease maturity at average rental increases of 4.2% and after excluding anchor tenants this metric increases to 5.2%.For the first quarter, these improved results can be attributed to the following primary factors; number 1, the incremental NOI now being generated from both the 144,000 square feet of virtually fully leased expansion space at [ TPO ] and recent earnouts and developments. Number 2, the incremental NOI now being generated from new tenants at the KPMG Tower in Transit City and Vaughan. Number 3, our portfolio of maturing mortgages and unsecured debt continues to provide unsecured fixed rate refinancing opportunities at lower rates than the outgoing maturing rates.And number 4, additional percentage rent, lease termination fees and other miscellaneous revenue. These results however, were impacted by both the dilutive impact arising from the issuance of the CAD230 million of equity that was issued in January of '19, and also from the bankruptcy of Bowring and Bombay, which resulted in a 103,000 square feet of additional vacancy during the quarter.From a financing perspective, with the assistance of our syndicated banking partners, it was a very busy quarter that started in January with the very successful issuance of the CAD230 million of equity. These proceeds were applied against some of our credit facilities to reduce our overall debt levels and related debt metrics to appropriately and conservatively accommodate future levels of expected development financing. The equity issue was followed in February with the early redemption of CAD150 million of Series H Debentures and the replacement with a CAD150 million seven-year fixed-rate bank loan and concluded in March with the issuance of CAD350 million in new series T, 2.3 year debentures, the proceeds from which we used to repay outstanding variable-rate mortgage and construction facility debt.As compared to the comparable quarter last year, these capital initiatives have now resulted in the following improved credit metrics; number 1, our adjusted debt to adjusted aggregate assets ratio has improved to 41.7% from 45%; number 2, our debt to adjusted EBITDA ratio has been reduced to 8.0x from 8.5x; number 3, our interest coverage ratio has improved to 3.3x from 3.1x; number four, our unencumbered pool of high-quality assets has now increased by CAD1 billion to CAD4.5 billion; and lastly, our secured to unsecured debt ratio has now improved to 48% to 52% from 53% to 47%, marking the first time that SmartCentres has more unsecured debt than secured debt. This is a key strategic initiative that we've been working on for over the last 2 years and you will recall that when we embarked upon this initiative, two-thirds of our debt was sourced from secured lenders.For our payout ratio and distributions, in addition to the dilutive impact of the CAD230 million equity issuance, we saw higher sustaining maintenance CapEx during the quarter, a large portion of which is recoverable from our tenants. And because of the seasonality of the quarter, higher prepaid property tax, when applied against our distributions, our ACFO payout ratio increased to 91.4%, which we expect to return to lower levels over the course of the year.Our surplus of ACFO over distributions declared of CAD7.2 million shows a continued very healthy level of cash generation, reflecting the unique strength and core stability of our business model. And when factoring in our highly successful DRIP program, the surplus of ACFO over distributions actually paid during the quarter totaled CAD24.2 million.Our financial and operating results for the first quarter reflect our strong and stable business model that we believe positions us well to continue to provide our unitholders with stable and growing distributions, while concurrently supporting our existing business, funding our growing development pipeline of retail and mixed-use initiatives, and lastly, permitting us to consider appropriate acquisition opportunities as they become available.As we have previously noted, the successful bought deal that was completed in January will dilute our growth expectations in 2019 by approximately 3%, thus resulting in expected FFO per unit growth for 2019 of 1% to 1.5%. This improvement in growth will be principally driven by expected acquisitions, new leasing and further financing benefits in Q3 and Q4. Additionally, we are looking forward to 2020 when Transit City 1 and 2 begin to come onstream and we expect growth in FFO per unit to exceed 10%. We look forward to your attendance at our upcoming AGM, which will be held on May 31 at 9:00 AM at the Vantage Venue Conference Center.And Mitch has been very active as our Executive Chairman in all aspects of the REIT's business, but in particular, our new development initiatives. I will now turn things over to Mitch for him to tell you more about some of these. Mitch?

[Mitchell Goldhar, Executive Chairman]

Thanks, Peter. For our seniors residence partnerships with Revera and our self-storage partnership with SmartStop, SmartCentres will be developing and constructing the buildings and our 50-50 partners will operate the facilities once complete. We expect each of these relationships to produce 5 new projects per year.For seniors residence, we recently announced 3 specific projects on REIT-owned sites, 2 in Vaughan and 1 in Oakville, with an additional 5 in the planning stages for 2019 in the GTA. For self-storage, we are under construction in Leaside and soon to be approved and under construction in Brampton, Oshawa and Vaughan. And we recently announced 2 additional projects Scarborough and a second location in Brampton. We are in the planning stages for several additional REIT-owned sites in Ontario and the greater Montreal area, as well as in cities in Western Canada with SmartStop.Now, a quick update on the Vaughan Metropolitan Centre project, the jewel and the crown of our portfolio. Things are advancing quickly. With the vast ranging subway commuters and the more than 1,300 employees already working out of the KPMG building, the project is quickly becoming a metropolitan area. This will only increase in intensity as we have now completed the office-leasing of the KPMG Tower. Second, completed the mixed-use tower in which the PwC will open for business in the fall of this year. And the YMCA in the first half of 2020. An additional 500 PwC employees and an estimated 1,200 daily visitors to the YMCA.We are in final negotiations with a significant main tenant for the 1 unleased floor in this building. This additional floor was built for the potential future expansion of PwC and the significant main tenant have a relocation provision in the case of PwC's expansion. Third, we previously sold our 3 55-story Transit City Condo towers for delivery in 2020.Now just around the corner. 1,750 units, all 3 towers are under construction and are on schedule and ahead of budget. It is expected that we will top off each of these 3 towers by the end of this year. And fourthly, the execution of yet another new partnership with CentreCourt for 2 additional residential condo towers. 1,015 units in total in a 45 and 50 story condo tower -- in a 45, 50-story condo towers. And we are thrilled to report that these 2 towers sold out intervention in essentially 2 weeks. 45 story tower at an average of CAD835 per square foot and the 50 story tower at CAD865 per square foot. Well above the CAD710 average of the first 3 towers.Lastly, we also announced the 35 story rental residential tower and podium rental units under the condo towers totaling 550 apartment units. We expect this will be built concurrently with the 2 new condo towers. A rendering of these 3 towers is in the supplemental information package. We are already designing the next phase of the VMC to include a 600,000 square foot office tower in additional residential towers.Overall, we now see 9 million to 11 million square feet being developed on the approximately 50 acres of VMC lands that REIT owns with my company as partner. We are reviewing and planning for residential, rental, condos and/or townhouses on all our sites over time.Master planning and active participation with the various municipalities are well underway on most of these sites. Redevelopment plans for the following shopping centers are well underway. Our retail site of 20 acres on the Westside of the 400 in Vaughan directly across from our VMC project is slated for intensification with approximately 2.5 million square feet of redevelopment including residential, office and retail. The site is a primary site under the Vaughan official plan and is just east of 2 new 35 stories sold out and occupied condo towers at Western Road at Highway 7.Pointe-Claire, Quebec on the Island of Montreal, we have obtained zoning for up to 2 million square feet of density. Detailed planning is underway for the first residential rental tower expected to be complete in 2022. South Oakville Center. This infill center in South Oakville was anchored by a Target store. We have now initiated discussions with the municipality, with tenants and with potential partners. As we continue to execute our plan, this site will become a reconfigured 180 square foot shopping center anchored by a Metro food store, Shoppers Drug Mart, LCBO and GoodLife Fitness, Winners and other strong retailers within an adjoining Revera seniors' residence building and a townhouse development. A sketch of the plan for this project is included in the supplemental package.Westside Mall in Toronto, our 12-acre property on Eglinton Avenue West, will benefit from the LRT station being built on our lands and a pedestrian bridge connection to the new Go Train stop adjacent to our site. This site is now designated in the official plan for just over 2 million square feet of mixed-use development primarily residential.Laval Centre. This 43-acre site is anchored by a 160,000 square foot Walmart. Construction of our first 2 apartment towers that we own on the site with our partner Jadco are underway. We expect to develop the remaining lands with primarily residential rental apartments, condominiums and retail.Western Road and 401, 167,000 square feet, which is SmartCentres' share, retail center is under review for a major reconfiguration and re-tenanting of the retail onsite and long-term for residential rental. This site has great visibility and access from the 401, one of the busiest intersections in Canada, if not North America.Other sites for which residential plans are evolving include Oakville North at Trafalgar and Dundas, Vaughan Northwest at Major Mack and Weston Road, Pickering, Hamilton Stoney Creek, Hamilton Mountain Plaza, Mississauga locations, Markham at Highway 7 and Woodbine, Mirabel next to our Outlet Centre, Laval East, Muldroy, [indiscernible] in Quebec and Langley, Maple Ridge, Chilliwack and New Westminster in British Columbia.We have been in discussions with potential residential partners for many of our sites and will likely be developing some on our own. We are also in discussions with hotel operators about partnering on various sites, more news to come on these in future quarters. The potential intensification development program continues to grow as we further review our portfolio for opportunities. The number of potential projects in towers to commence construction, in addition to our retail development pipeline within the next 5 years, is currently estimated at 82. This mixed-use and retail development will have an estimated value of CAD9 billion on completion, with SmartCentres REIT's estimated share being somewhat over CAD3 billion. In addition, another 86 projects or towers have been identified on which we will commence rezoning, design, and site plan approvals and marketing during the same 5 years with construction commencing after that.And the review continues. We estimate that 10 years from now, we will be generating recurring NOI from these new rental businesses, seniors homes, apartments, offices and self-storage in excess of 20% of our total rental NOI, plus significant profits in the tens of millions every year starting in 2020 from the sale of condominiums and Town House.With that, I will turn it back to the operator to coordinate us in addressing your question. Thank you.

[Operator]

[Operator Instructions] Dean Wilkinson, CIBC.

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Mitch, on Transit City 4 and 5, I think the only thing more impressive in selling it out in 2 weeks is the 20% bump in the average selling cost, our average selling price over the first 3 phases. How does that increase compare to any cost inflation that you may have seen sort of creeping up between 1, 2, 3 and 4 and 5?

[Mitchell Goldhar, Executive Chairman]

Yes, I mean we're feeling pretty good on the cost side. We haven't fully tendered the building yet, but our early sort of prognosis is that there will be -- there will be some increase in costs, but not anywhere close to the bump in the sale price per square foot, not even close. So we're feeling -- yeah, we're feeling pretty good about that part. Yeah.

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Awesome. I'm assuming that the funding mechanism for the rental is rolling the equity profit coming out of Phases 1, 2 and 3, would that be correct?

[Mitchell Goldhar, Executive Chairman]

Well, I mean you could say that theoretically -- yeah, you can say that theoretically. I mean the timing is quite good with 1, 2 and 3 and the start of the rental buildings. So we are now just finalizing the design of the rental building, the outline of it and the super structures designed. We're still into some details of suite mixes and suite designs and amenity spaces, but the pricing of that will be commenced shortly and the timing would be, you could say that the profits from 1, 2 and 3 could be used to fund the equity portion. But it's all coming into the same place.

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Right.

[Mitchell Goldhar, Executive Chairman]

We're partners together in both. So it does have a lot of eloquence but we're not -- it's all -- in REIT's case, it's all coming into the same place.

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Yes. The point is, it's effectively self-funding at that point. In terms of what you're building on the rental, would it -- would you intend it to be sort of the same quality and mix as the condos or is there going to be a bit of a sort of a bifurcation of the different kind of buildings or are they intended to all sort of be similar? So if I wanted to rent 1 of your units, it would look just like as if I was going to buy 1 of the condos.

[Mitchell Goldhar, Executive Chairman]

No, no, the rental will be different. Rental will be a little bit high street, a little bit higher end. It's not to say the condos are not high end, it's just that the rental is going to be going to be high street. And that doesn't mean it's not downtown rents, but in terms of the standard, it'll be a notch, let's say, did noticeably higher than the condo in terms of certain amenities and certain finishes, which is a statement because the condos are highly finished and very well equipped with amenities. The units, maybe on average a little bit bigger and a little bit more services. So, it'd be differentiated. So -- and that's in the service of separating the market as well as we think that is where we want to be lined up for that rental building and it's in the service of the development, the balance of the land for this -- our development. We have separated ourselves from the rest of the, what's going on up here and there's a lot going on up here, we're not the only ones doing things up here. But we have a strong position with the subway and a strong position in terms of our master planning, our architecture and urban design. So, that building will also be in the service of all future phases of our developments here as well.

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Right. No, it totally makes sense. What do you think that the ultimate rental density is that you can get on to that site?

[Mitchell Goldhar, Executive Chairman]

Rental density, you mean rental rates?

[Dean Mark Wilkinson, Director of Institutional Equity Research]

No, just in terms of the mix of how much you would build for a purpose build?

[Mitchell Goldhar, Executive Chairman]

On the whole site? On the overall -- well, we certainly anticipate doing quite a bit more rental over the year and over the future phases. I mean, we will do other types of -- potentially other types of rental here. We may do some student rental up here where 1 or 2 -- maybe 2 stops away form York University. You know just for your information there, York University does not have certain modern -- certain facilities. We are, I think seen by York and we vice versa think there's some synergies there.Yeah. We will do all kinds of -- I think we'll have many different forms of rental appear over the years. We certainly anticipate doing a regular program of rental residential up here. We also see storage. We also see seniors. We also see hotel. So there's lots of forms of rental to come along with retail and, urban retail as well by the way and more office. So yeah, there will be a lot of various forms of rental opportunities here.

[Operator]

[Operator Instructions] I can see we have our next question ready here. Pammi Bir, Scotia Capital.

[Pammi Bir, Analyst]

Just on Condos 4 and 5 again, at VMC, any sense of what the buyer mix was between end users versus investors?

[Mitchell Goldhar, Executive Chairman]

At present, it's hard to say, but I will say this much. I would say significantly, materially higher-end user percentage than you would see downtown. So -- but still the most significant percentage is investors.

[Pammi Bir, Analyst]

I'm just curious if that data -- is that tracked at all during the sales process?

[Dean Mark Wilkinson, Director of Institutional Equity Research]

Not officially, but you know, I'd say we have an okay sense of it in all. Most of the deals, most of the sales are transacted through a broker. So, you don't necessarily, but we know the majority -- we know a lot of the brokers, so we sort of have a sense of who their clientele is and then there is lots of -- so there's lots of brokers that are focused on selling to investors. But we also are able to sort of understand which ones are buying on behalf of end users. By the way, a lot of the end users come in with their brokers and all of them, and particularly 4 and 5, but even 1, 2 and 3. So, then you sort of can tell, but we don't announce officially, necessarily insist on them disclosing exactly that particular stat.

[Pammi Bir, Analyst]

Okay, that's helpful. And just maybe switching gears and looking at the retail. Given the downtime from Payless and Bombay and Bowring, what are your updated thoughts on 2019 same-property NOI growth for the year. It looks like, I think you could be stripped out sort of commentary around the outlook for that particular item in your supplementals. So I'm just curious what -- how you're feeling about that.

[Peter E. Sweeney, Chief Financial Officer]

We started the year without the knowledge of Payless and again in the range of somewhere between 0.5% and 1.5% on the same-property basis. And with the Payless, we're just bidding leasing up and the Payless has been going very, very well with more than half the space now, already in very advanced stages with specific interest tenant -- interested tenant. So, that will lease-up over the course of the year, so it will be muted from that range, but still are at the lower end of that range and we would say.

[Pammi Bir, Analyst]

Okay. And then if we think about maybe a little further ahead to 2020 and assuming both of those spaces with those retailers are backfilled and then again, maybe perhaps no material hiccups in 2020, is it fair to assume that next year's growth would be above your typical, call it, 1% range or are there other, I guess, things to consider that may be -- or other potential closures that you see on the horizon?

[Peter E. Sweeney, Chief Financial Officer]

Yes, I mean we will have few things happening. One is with the interest in that space and some of that space we're sub dividing into smaller spaces and there's a lot of interest from service tenants and a number of tenants who are -- we are looking at in terms of adding services to the site. And in addition to that you'd have another year of the Toronto Premium Outlets full build out, until so it would be same property for the entire center and Montreal happening at the same time. So yeah, we expect that it would be on the higher end of that range when we get into 2020.

[Operator]

[Operator Instructions] Tal Woolley, National Bank Financial.

[Tal Woolley, Research Analyst]

When you are looking at adding residential seniors and storage to your original Walmart anchored retail sites outside of VMC, is the goal here with those additional asset classes similar to Walmart to provide like the real value in the market? Look, I'm just trying to understand how you're thinking about positioning those properties relative to what else is out there in the market.

[Mitchell Goldhar, Executive Chairman]

Well, we are -- we do philosophically see Canada as a place to provide value. So what -- we believe that is the right positioning in this country. However, when it comes to rental, residential, I mean, each market is different, so it really will depend. We're going to customize our development strategy within each market. On the storage side though, I mean, for sure, we want to be competitive and it's very much in line with Walmart and our sites. So -- but each market will dictate -- the residential side will be dictated by each individual market.

[Peter E. Sweeney, Chief Financial Officer]

I might also add that there is alignment even between those different uses on the site that you mentioned, in terms of people moving into apartments or self-storage -- sorry, our seniors home and downsizing and having a self-storage facility nearby. There is a number of things and having an apartment building that people as they get older, can then move into a seniors' home or on the same site. There is some thinking going into that on a number of our sites.

[Operator]

Sam Damiani, TD Securities.

[Sam Damiani, Analyst]

Just a couple of little follow-ups because most of my questions have been answered. I did notice there was a lease termination fee income in the quarter, I think of around CAD1.4 million. Is there any color you can provide around that in terms of 1 tenant?

[Peter Forde, President, CEO & Trustee]

It wasn't a single tenant, Sam, there were at least three, maybe 4 tenants that contributed to that number.

[Sam Damiani, Analyst]

Okay. Just talk on the occupancy in the same-property NOI growth going forward between Bombay and Payless, what are you looking at in terms of Home Outfitters in terms of their plans to hand space back to landlords?

[Peter E. Sweeney, Chief Financial Officer]

Interestingly, we chatted with them very, very recently about that. I mean Home Outfitters is just -- is operating and continues to operate until probably the third quarter across the country. And what they're doing is, while they closing the operations, they are continuing to pay rent. So in all other locations with us, they're going to continue paying rent for the foreseeable future till the end of their term, which runs into '21, '22 and '23. So we'll -- they've come to us and said, hey, they're flexible about that. So we are going to look at that, look at what we can do with the space and to the extent we can utilize a space for a higher value use. We will go to them and talk to them about that, but financially, it's not going to be an impact on us, because we -- as -- and now we have a lot more time to prepare for the utilization of that space.

[Mitchell Goldhar, Executive Chairman]

There are number of -- sorry.

[Sam Damiani, Analyst]

Go ahead.

[Mitchell Goldhar, Executive Chairman]

Yes, so I was going to say, there are a number of retailers coming into the market and a number of retailers expanding more than there have been in the last number of years. So some retailers of last few years have been sitting back, but are now little bit more active. So actually the timing at [indiscernible] and some of the other spaces is good for some of the things you're asking about.

[Sam Damiani, Analyst]

And who would be, maybe the top #1 or #2, sort of US retailers that are looking at coming into Canada? They were suppressive a couple weeks ago about Ulta Beauty coming up to Canada.

[Peter Forde, President, CEO & Trustee]

Yes, I mean they are looking all over the market. There is a -- there are few that are looking around the market and they are looking around confidentially into the market. So there are not only the health and beauty, there is sports, there are health and fitness, that's also looking at it. So the big space that we're looking at, there are -- those big guys. And then there's is always the smaller guys who come in and do both the open-air and the enclosed format. So, we're talking to all of them, including very, what I'm going to call, boutique fitness that are looking at -- we're looking at adding services to our site and so on. So, lots of new uses being added to the centers.

[Sam Damiani, Analyst]

Interesting. And just to clarify, regarding Bombay and Bowring, I think you said the spaces were vacated in March. Does that mean the REIT collected 1 or 2 months of rent from them before they closed their shop?

[Peter E. Sweeney, Chief Financial Officer]

Yes. They paid rent early in the year. Then what they did was, they stopped paying for a week or two, and then when they filed they were compelled to pay rent under their proceedings. And during that proceeding, they are required to pay rent until they stop, which was the end of the quarter.

[Sam Damiani, Analyst]

So, what's for Payless?

[Peter E. Sweeney, Chief Financial Officer]

That was the -- Sam just for clarity, that was the Payless situation. Bombay and Bowring essentially closed up shop early on in January. No [indiscernible]

[Sam Damiani, Analyst]

Okay, so there was no revenue in Bombay in Q1?

[Peter E. Sweeney, Chief Financial Officer]

Yes, there were, because they were going through there CTAA during the month -- during the quarter in January. So, we did receive for approximately 2 of the 3 months and we didn't for one of those, which is the 2 weeks or 3 weeks just before they filed. But once they filed, they are obligated under proceedings to pay.

[Sam Damiani, Analyst]

So, the impact on same property NOI growth would be continued maybe even a little bigger in Q2 versus Q1 as a result of the Bombay filing?

[Peter E. Sweeney, Chief Financial Officer]

That not notwithstanding what we would lease up in both that and the Payless, yes.

[Operator]

Jenny Ma, BMO Capital Markets.

[Jenny Ma, Analyst]

I just had a question with regards to the seniors housing developments that you're doing with Revera. Just wanted to get some color on sort of how you target the locations where you want to be building, how you think about that versus building conventional residential? And then also in terms of -- we're hearing a lot of new supply coming up in a number of markets. How you think about that when picking your location?

[Mitchell Goldhar, Executive Chairman]

I'll start and then Peter will add. Most of the time Jenny, we actually have room to do both. So we don't really have to choose. It's just that we are doing -- we have a program now with Revera, a senior's home, specialty senior's home operator across the country. So -- but there is very few -- like maybe there is one. I don't think there's really only more than one. It's not even a REIT property, I don't think that we can do -- that it does not preclude doing the seniors home is not preclude -- is not precluding. We're not choosing between doing a seniors home and a rental home -- a rental housing.

[Peter E. Sweeney, Chief Financial Officer]

Like the 2 locations in Vaughan and Vaughan Northwest where we're doing 2 seniors towers, seniors apartment and then seniors home with more care, that are going together, we're also in that same corner, a piece of 6-acres is going to have 2 or 3 other residential buildings or towers on it as well. And then in Oakville, which is the other location that we've announced, there again, which is -- it's the old Target, the old Target space that will be coming down. There, we're going to do a seniors home and we're going to do to -- let's call it 2 to 5-story residential on the rest of that portion of the site adjoining [ today ] what will become a neighborhood shopping center with the food store in Shoppers Drug Mart and Fitness and so on. So again, room for both.

[Jenny Ma, Analyst]

Okay. So when you're putting up the seniors housing, is it going to essentially look very much like the residential, so more of a low-rise build?

[Mitchell Goldhar, Executive Chairman]

Not necessarily. I mean they can get up there. It can be -- get up to 15 stories. But yeah, they can also be, it depends on the market and that's just -- for a long time is driven by obviously the number of units, it's driven by the parking situation, but they can get up to sort of the -- yeah, they can get up to as high as 15 stories. But looks wise, yeah, they could look the same, I mean seniors housing today, newly built can look very, very attractive. I mean it's not the seniors housing developments of my parents or grandparents here. They're very modern, thoughtful. This is the way it's done today. So they're really meant to look like something you really want to live in, it's not something that you have to live in. So, yeah, they are really quite attractive and we're blending quite nicely.

[Jenny Ma, Analyst]

Okay. So putting aside that there's a -- lots of opportunity to put up the seniors housing, the second part of my question was, when you think about sort of the fundamentals in the supply situation and number of markets, how much input do you have in choosing where to build this or is it really driven by Revera, just trying to think through how you target the specific markets?

[Peter E. Sweeney, Chief Financial Officer]

Well, first of all, they are currently in the market operating. So, not unlike any retailer. You know, when we do a new Walmart or a new food store or whatever it may be, I mean we, kind of all understand the country we sort of slice and dice the country, if you will, by the markets that are being served, well, some that are -- by being underserved. So, we sort of start by understanding where there's opportunities and they already have that intelligence, that's their core business.So yeah, I mean, along with them, we also have good intelligence in each market. So, they do actually appreciate our insight into the various markets that we're in. So -- but their information is extremely valuable in terms of them understanding where they are, where the best where the best opportunities are. We're not -- we're not putting these. I mean we're -- by the time we announce that we are doing something like that, we probably together looked at dozens and dozens of others that we've decided are not interesting enough. So that's kind of the process of how we ultimately determine where the most viable locations for seniors housing are. And believe me, there's many that are not -- there's many that we are not interested in, the ones we're announcing are very, very interesting.

[Jenny Ma, Analyst]

Now, have you just really focused on the local market so far or have you actually looked across the portfolio and whether there might be some opportunities in other provinces and then further out?

[Mitchell Goldhar, Executive Chairman]

It is, has been focused mostly on Ontario thus far, but they have worked with us on a couple of West situations as well. And then in the case of Quebec, Revera has a relationship that's well known, I think with another operator in Quebec. So Quebec with Revera is not likely something we would be doing. But we are talking or looking at Quebec and talking with others about potential opportunities on our sites in that province. So -0 but it has been with Revera Ontario focus.

[Peter E. Sweeney, Chief Financial Officer]

So far.

[Mitchell Goldhar, Executive Chairman]

So far.

[Jenny Ma, Analyst]

Okay. So does Revera have an exclusivity with a partner?

[Peter E. Sweeney, Chief Financial Officer]

I don't actually know...

[Mitchell Goldhar, Executive Chairman]

In Quebec?

[Jenny Ma, Analyst]

In Quebec.

[Mitchell Goldhar, Executive Chairman]

[indiscernible] they do that.

[Peter E. Sweeney, Chief Financial Officer]

Yes, we're not sure, because that particular operator is actually coming into Ontario now. So it's hard to say what they do, but they really do respect each other like they've been partners for a long time, and they really do respect each other, because we are actually dealing with both. I guess it should be said that we are not just exclusively dealing with Revera, and we do fully intend, if this in any way, helps answer the question doing seniors housing across the country. But at the moment, we have very good and the most going with Revera. But their partner is in Quebec, there are people we are dealing with as well both in Quebec and outside of Quebec for that matter, and others as well.

[Operator]

Brendon Abrams, Canaccord Genuity.

[Brendon Abrams, Analyst of Real Estate]

Just turning to your other, I guess 407 property just West of VMC, on the other side of the highway, I see you mentioned here it's one of the highest entities in Vaughan, second only to VMC. Just wondering if you could provide any color or update with respect to that project or that property and kind of what type of potential do you see longer term there? Could it potentially be a VMC number 2 for example.

[Peter E. Sweeney, Chief Financial Officer]

Yes, very much so. This is a super property. You just have to go and see it. If we only had that property, I mean we would be, kind of over the moon. It's just -- honestly, I think it's kind of lucky that we have that property because it's absolutely a continuation of VMC, like if you look at the area from the point of view of Highway 7 in the mass transit. So yes, there are mass transit infrastructure being built right in front of our site there. The corner of the old [indiscernible] site is now 3 towers and fully built in for all intense purposes, fully occupied. That's adjoining, that abuts our property, we share and access. We share 2 accesses with that development.So it's an abundance of transportation infrastructure right next to VMC and just for what it's worth, just West of that property, we own a site called Westridge, we call it Westridge, which is also another retail development that is low-density, that ties very nicely into the same transportation infrastructure. And if -- don't be surprised if there is a day where we start talking about how we're going to be continuing the urbanization of this area on to our Westridge site, which by the way, I should mention, we own with that choice and they have been, yeah they have been fantastic partners there that goes back to [ create ], there's a large property. And if you were to go and look at those properties now having -- had this discussion, you would understand and be able to imagine how those 2 properties, the one you asked about and Westridge type very much into VMC.And our -- the site you asked about is every bit as good as virtually all -- most of the VMC property. So very excited about it. It's kind of a thing that is in the shadow in the sense of VMC. But it is an absolutely superb opportunity. So stay tuned, yeah.

[Brendon Abrams, Analyst of Real Estate]

And just in terms of timing on that, I'm not sure how the process works, but do you have to maybe substantially complete VMC before you can really [indiscernible] ?

[Peter E. Sweeney, Chief Financial Officer]

No, no, no. Absolutely no. We will be developing on those lands long before we complete VMC. We are going in for an application, we've been in discussions with the municipality over the last few years. I don't want to get into all of the whatnot. It was -- it's a rezoning, but it is not in any way shape or form a stretch. The municipality has already initiated their own review of that property, all of the infrastructure is there, not to mention the investment in mass transit. The neighbor is already built. he is outside. We are all outside the technical planning district called VMC, but just -- just effectively, it's in the VMC area. And he was approved for those densities on a one-off application basis. We are being included in the review of the area, we are also very in touch and involved with Vaughan as you can imagine. We chose not to make this application a couple years ago for our own -- just our own reasons, election years and things like that going on. We waited, but now we are going full steam ahead. And the timing is absolutely great. I happen to be very excited about that particular development. I think we were looking at about 2.5 million square feet of density there. It's all over the highway, all over Highway 7 and all the improvements are just being finished now. So we will not be waiting there. We will be pedal to the metal on that one. And I see a lot of rental there as well, because it's just hard to explain over the phone. But it's really conducive to varying types of rental there.

[Brendon Abrams, Analyst of Real Estate]

Right. Okay, that's very helpful. And just turning back to the diversification strategy, as your organization gains more experience and expertise with these various asset classes, over the longer term, I guess, could you foresee a time where you perhaps internalized some of these functions, or -- I know the JVs are very new, but they could go around strategy over the long term?

[Mitchell Goldhar, Executive Chairman]

Yes, I mean, I think you would be safe to say that we do imagine ourselves having those things internalized. That's not to say that we won't continue to do things in partnerships because we see value in those partnerships beyond just the interest that we give up when we do it. So but, yes, I think we can imagine the day and not too distant future where some of those things will be. Well, I could go out a limb and say that it's certainly our goal to have those things internalized. And so will have a choice whether we want to execute on our own or we want to execute with a partner. Our partners bring a lot to the table, but we also want to be able to do something. That means, will that will not be the case with operating, for example, seniors housing. We do not have any aspirations to operate seniors housing, but with that exception, we see the other areas internalize eventually, yes.

[Operator]

It appears there are no further questions at this time. Mr. Forde, I'd like to turn the conference back to you for any additional or closing remarks.

[Peter Forde, President, CEO & Trustee]

Okay. Again, thank you all for being part of our first quarter call and thank you for your interest in investing in our REIT. Good evening.

[Operator]

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