Choice Properties Real Estate Investment Trust

TSX:CHP.UN

Q3-2025 Earnings Call

[Operator]

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust Third Quarter 2025 Earnings Call. [Operator Instructions]

I'd now like to hand the call over to Simone Cole, General Counsel and Secretary. Please go ahead.

[Simone Cole, executive]

Thank you. Good morning, and welcome to Choice Properties Q3 2025 Conference Call. I am joined this morning by Rael Diamond, President and Chief Executive Officer; Niall Collins, Chief Operating Officer; and Erin Johnston, Chief Financial Officer. Rael will start the call today by providing a brief recap on our third quarter performance, and provide an update on our transaction activity. Niall will discuss our operational results and our development pipeline, and Erin will conclude the call with a review of our financial results before we open the line for Q&A.

Before we begin today's call, I would like to remind you that by discussing our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements regarding Choice Properties' objectives, strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook and similar statements concerning anticipated future events, results, circumstances, performance and exceptions that are not historical facts.

These statements are based on current estimates and assumptions and are subject to the risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward-looking statements. Additional information on the material risks that can impact our financial results and estimates and assumptions that were made in applying and making these statements can be found in the recently filed Q3 2025 financial statements and management discussion and analysis, which are available on our website and on SEDAR+.

Finally, new to this quarter, our call will feature presentation slides. If you've joined by webcast, you will see these slides presented on screen. If you have dialed into the call by phone, these slides will be available on our website following the call.

And with that, I turn the call over to Rael.

[Rael Diamond, executive]

Thank you, Simone, and good morning, everyone. Welcome to our Q3 conference call. We delivered another strong quarter, driven by strong tenant demand in our national grocery-anchored retail portfolio and new leasing activity across our well-located industrial assets. We maintained near full occupancy of 98%, up 20 basis points from last quarter. We achieved healthy overall rent spreads of 10.8% during the quarter, which included a significant amount of Loblaw renewals that we'll speak more about shortly.

Our Loblaw leases continue to be a stable source of cash flow growth, and we're equally encouraged with the robust leasing activity from our third-party tenants in the quarter. Excluding the Loblaw renewals, our average rent spread was approximately 23%. This leasing activity underscores the strength of our overall portfolio and our team's ability to manage through uncertainty.

We delivered FFO per unit growth of 7.8% this quarter, supported in part by lease surrender revenue from our ongoing Loblaw rightsizing initiative. These initiatives remain a part of our active asset management strategy as we support Loblaw in evaluating its space requirements nationwide while creating opportunities to introduce other high-quality, strong covenant tenants that enhance the overall quality of our sites. Excluding lease surrender revenues and other nonrecurring items in both comparative periods, FFO per unit growth was a very strong 3.5%. Erin will provide more detail on our financial results and an update on our 2025 outlook later in the call.

Our strong performance this quarter comes amidst a backdrop of ongoing macroeconomic uncertainty driven by trade-related risks in Canada and abroad. Despite this, our portfolio continues to demonstrate its resilience and our commitment to prudent financial management has enabled our teams to execute on our growth initiatives.

Turning to our portfolio. We continue to see a tight retail market nationwide, fueling strong demand for our grocery-anchored neighborhood centers. We're also seeing particular strength among necessity-based and discount retail tenants. Our national portfolio is well positioned to continue capturing this momentum and benefit from these favorable market dynamics.

Our team remains active in new leasing initiatives at our existing assets, while our industry-leading balance sheet and strategic partnership with Loblaw enables us to continue delivering new retail space through intensifications and greenfield development. With a strategic focus on expanding our high-quality retail portfolio and a proven track record of execution, we are well equipped to deliver sustained growth and maximize value.

In the quarter, we delivered 7 new retail intensification projects at attractive yields, further intensifying our neighborhood centers, something Niall will expand on shortly. In addition to intensifying our existing sites, we also continue to leverage our balance sheet and relationship with Loblaw to pursue new greenfield opportunities.

During the quarter, we completed a $9 million acquisition of a 50% interest in a greenfield site in Ottawa. This 13-acre site will feature a new shopping center totaling approximately 120,000 square feet anchored by No Frills and a Shoppers Drug Mart, which we will develop and manage on behalf of our partner.

Our industrial portfolio remains in excellent shape, and our team delivered another strong quarter of leasing activity as occupancy increased 30 basis points to 98.3%. Leasing spreads were robust at nearly 38%, driven by third-party tenant renewals. While the overall industrial market continues to normalize, our portfolio remains well positioned to drive further growth given the meaningful gap between in-place and market rents.

We also maintained a significant industrial development pipeline, including approximately 220 acres of developable land remaining at Choice Caledon Business Park. In the quarter, we announced our intention to begin the next phase of our Caledon project on a speculative basis. This decision was supported by our conviction in the GTA industrial market, the location of our site, the competitive advantage provided by low land cost basis and the increased RFP activity we're experiencing on the site.

Lastly, in our mixed-use and residential portfolio, we saw a quarter of solid momentum. Our office portfolio is primarily leased to affiliate entities and occupancy in the quarter was largely stable. On the residential side, we continue to experience some pressure from new supply at certain assets. However, looking ahead, we continue to have a strong conviction in the quality of our residential product and are optimistic about the long-term residential fundamentals in major urban markets in Canada.

Turning to our transaction activity in the quarter. We remain focused on maintaining our portfolio quality through capital recycling, completing approximately $118 million in total real estate transactions during and subsequent to the quarter. This included the $9 million retail land acquisition in Ottawa that I mentioned previously and $109 million of noncore asset dispositions.

On the disposition front, we sold our 50% interest in a non-grocery-anchored shopping center in Edmonton for approximately $9 million. And subsequent to quarter end, we completed 3 additional dispositions, including a retail portfolio of 4 assets in Ontario for $67 million, a 50% interest in a retail asset in Camrose, Alberta for $23 million and a Canadian Tire land lease and COU at a retail site in Fort Saskatchewan, Alberta for approximately $10 million. All transactions were completed at or above IFRS values.

We expect to remain roughly balanced for the rest of the year, positioning us as net acquirers this year in line with our transaction activity to date. Our industry-leading balance sheet supports -- continues to support us being net acquirers in the future, complementing our existing cash flow growth and development growth pillars, and we will continue to maximize value for unitholders.

With that, I'll turn the call over to Niall to discuss our operational results in more detail. Niall?

[Niall Collins, executive]

Thank you, Rael. Good morning, everyone. As Rael mentioned, our portfolio delivered another solid quarter of operational results, and we continue to see strong tenant demand and leasing spreads across each of our portfolio types. Overall portfolio occupancy remained strong, ending the quarter at 98%. This was a 20 basis point increase to the prior quarter.

During the quarter, we had over 3.7 million square feet of lease expiries and renewed approximately 3.6 million square feet, resulting in a retention rate of 96%. Overall, the portfolio renewals were completed at an average rental spread of 10.8%. Excluding the Loblaw renewals, our renewal spread was a very healthy 23.1%. We also completed 291,000 square feet of new leasing, resulting in positive absorption of 135,000 square feet, largely driven by our Ontario industrial portfolio, Quebec retail portfolio.

Turning to each of our asset classes. In our necessity-based retail portfolio, occupancy was unchanged at 97.8%. During the quarter, approximately 3.2 million square feet of leases expired, including 2.8 million of Loblaw maturities. We renewed approximately 3.1 million square feet, including 2.7 million square feet from the Loblaw tranche for a retention of 97%. Given the lack of new retail supply, vacating tenants or early terminations have provided opportunities to backfill space at elevated rental rates with stronger covenants.

Lease renewal spreads averaged 9% above expiring rents and 12.9%, excluding the Loblaw tranche, with broad-based strength across all of our regions and categories led by value retailers.

We also completed 148,000 square feet of new leasing. Average rents over the lease term are 42% higher than our average in-place rents. This largely offsets the 95,000 square feet of expiries that did not renew in the quarter. Our team has already backfilled a portion of the space at rents 49% above previous rates and remain confident in the leasing activity on the remaining space.

Turning to our industrial portfolio. Occupancy increased 30 basis points from our last quarter to 98.3%. This quarter, 491,000 square feet expired, primarily in our Alberta and Atlantic portfolios, and we renewed 430,000 square feet for a healthy 87.6% retention rate. We had 2 vacancies in the quarter, one of which has already been backfilled for Q4 and negotiations are underway for the other property.

Lease renewal spreads remained strong, averaging 38.3% above prior rents, driven by the Alberta and Ontario portfolios. In the Ontario portfolio, we completed 1 renewal for 57,000 square feet at a rent spread of 183%. Excluding the 189,000 square feet of Loblaw renewal, the average renewal spread for the portfolio was approximately 62%. We also completed 142,000 square feet of new leasing against 61,000 square feet of vacates, resulting in positive absorption of 81,000 square feet. New leasing rents averaged over the lease term are 32% higher than our average in-place rents. Lastly, our mixed-use and residential portfolio continues to perform well with occupancy at 95.5%, which is up 10 basis points from the last quarter and has increased 140 basis points year-to-date, primarily from strong performance within our mixed-use assets.

Turning to our developments in the quarter. Our team continues to advance our development pipeline across each of our strategic asset classes with near-term focus on commercial development. This quarter, our team delivered 7 retail intensification projects totaling 107,000 square feet at a blended yield of 6.3%. Project deliveries included 2 Shoppers Drug Marts in Ontario and Alberta, totaling 34,000 square feet at yields in the mid-6s and 7s, and we have another 7 Shoppers Drug Marts currently in active development.

At T&T and CRU in Mississauga totaling 44,000 square feet, 2 CRU units in Alberta with an international cosmetic retailer, totaling 7,000 square feet at yields in the high 8% range. And finally, 2 ground leases at a property in Ontario and Alberta totaling 22,000 square feet at an average weighted yield of approximately 11%. One of the ground leases with Nautical with whom we have a deep relationship and the other ground leases with a tenant in the automotive sector.

As Rael mentioned earlier, this quarter highlights our team's ability to unlock incremental value from existing retail portfolio and land bank through intensifications and new development. These type of retail initiatives remain a cornerstone of our broader development strategy, and we will continue to actively pursue opportunities to deliver high-quality retail projects.

Looking ahead for the balance of the year, our major active development project continues to be our industrial pipeline at Choice Caledon Business Park. The NLS building totaling approximately 624,000 square feet, of which we own 85% was transferred to IPP on November 1 and rent commencement is on track for April 2026. With this delivery, our team is now focused on the next phase of our industrial development in Caledon.

This quarter, we announced our intention to begin construction of a 1 million square foot building on spec before the end of the year. Permits are submitted and delivery is scheduled for Q2 2027. Overall, our active development pipeline totals 12 projects of approximately 1 million square feet at an average forecasted yield of approximately 6.9%. Our development pipeline continues to be a reliable source of long-term cash flow and NAV growth for our portfolio.

I will now pass it over to Erin to discuss our financial performance.

[Erin Johnston, executive]

Thank you, Niall, and good morning, everyone. We are very pleased to report another quarter of strong financial performance. Our reported funds from operations for the second quarter was $201.4 million or $0.278 on a per unit diluted basis, reflecting an increase of 7.8% compared to the third quarter of 2024. Included in our results this quarter, we had approximately $10 million of lease surrender revenue. Last year, we had approximately $5 million of lease surrender revenue and $3.3 million of nonrecurring G&A expenses related to outsourcing.

As Rael mentioned, our lease surrender revenue is mainly due to our rightsizing activities with Loblaw, where we are able to add high-quality third-party tenants to our sites and Loblaw is able to rightsize their store to a smaller footprint. These initiatives demonstrate the benefits of our strategic partnership with Loblaw and do not occur consistently throughout the year. Excluding these items, FFO per unit growth remained strong at 3.5%. FFO growth was primarily due to strong operational results and contributions from net acquisitions and development transfers over the last 12 months, partially offset by higher net interest expense.

AFFO this quarter was $0.192 per unit, which was impacted by the earlier timing of executing on our maintenance capital projects. On a full year basis, we expect our 2025 maintenance capital and AFFO payout ratio to be relatively consistent with the prior year.

Turning to our operational results. Same-asset cash NOI increased by $7 million or 2.8% compared to the third quarter of 2024, driven by higher base rents from rent steps and strong leasing activity. By asset class, retail same asset cash NOI increased by $5.8 million or 3.1%. The increase was primarily driven by leasing activity, which included the impact of our Loblaw lease renewals in the quarter and higher base rent on contractual rent steps. Retail growth was also favorably impacted by higher capital recovery revenue.

Industrial same-asset cash NOI increased by approximately $0.8 million or 1.6%. The increase was primarily due to higher base rent from contractual rent steps and leasing activity. Growth in the quarter was tempered by prior year property tax recoveries and other income items. Including prior year items, same-asset cash NOI growth would have been approximately 3.3%. Mixed-use and residential same-asset cash NOI increased by approximately $0.4 million or 4%.

Moving to our balance sheet. Our IFRS net asset value or NAV for the quarter was $14.53 per unit, an increase of $111 million or approximately 1% compared to the second quarter of 2025. NAV growth was driven by a net contribution from operations of $56 million, a net fair value gain on our investment properties of $13 million and a fair value gain on our investment in the units of Allied Properties. As a reminder, we are required under IFRS to mark-to-market the investment in Allied to its trading price at each period end.

Our fair value gain on investment properties in the quarter was primarily driven by cash flow growth, favorable leasing and backfill initiatives in our retail segment. This more than offset a fair value decrease related to certain asset-specific leasing adjustments in our industrial portfolio.

This quarter, we also completed several successful financings, most notably our $500 million dual tranche unsecured debenture offering in August. The transaction included a $350 million Series W unsecured debenture at a 4.628% coupon with a 10-year term and $150 million Series X debenture at a 5.369% coupon with a 30-year term. The dual tranche offering carried a weighted average coupon of approximately 4.85% and a 16-year average term, extending our debt maturity profile to 6.8 years.

Our team capitalized on a very strong credit environment with the issuances representing both the tightest ever 10- and 30-year spreads for Choice. We saw exceptional demand for these issuance with the combined offering being over 9x oversubscribed. This transaction continues to demonstrate our strong position in the market and our ability to source low-cost capital while also accessing the long end of the curve, providing the flexibility needed to prudently manage our balance sheet and maintain a well-structured debt ladder.

Proceeds from the offering were primarily used to repay maturing debt, including the redemption at par of our $200 million Series F unsecured debenture in September and approximately $100 million of mortgages that matured in the quarter. The remaining proceeds were used for general purposes and to pay the rebalances on our revolving credit facility.

Looking ahead to the remainder of the year, our team has largely addressed the few remaining maturities with our next significant debt maturity not occurring until our unsecured debenture due in November 2026. We ended the quarter in solid financial position with strong debt metrics, ample liquidity, including approximately $1.5 billion of available liquidity, including credit on our corporate facility and available cash and $13.7 billion of unencumbered properties.

Our debt-to-EBITDA ratio was 7.1x, which was down 0.1x from last quarter as we capture earnings related to our acquisition activity earlier in the year. Supported by our strong year-to-date operating performance, including our team's ability to execute on a transaction strategy and deliver on our rightsizing initiatives with Loblaw, we have increased our guidance for 2025 FFO per unit to approximately $1.06 to $1.07, representing year-over-year growth of approximately 3% to 4%.

With that, Rael, Niall and I would be glad to answer your questions.

[Operator]

[Operator Instructions] And our first question today comes from the line of Mark Rothschild from Canaccord.

[Mark Rothschild, analyst]

It sounds like you're comfortable progressing with industrial development now. And I'm just curious your thoughts on undertaking new developments on larger mixed-use projects at a time when general residential development, especially in the condo market is stopped or slowing, projects take quite some time. Are you looking at advancing any of these projects now? Or still do the numbers maybe just not work right now?

[Rael Diamond, executive]

Mark, it's Rael. Hope you well. Look, I think the way we think about it is we're a long-term owner of real estate. And if you start one of these projects now, you're only going to deliver it in 3 or 4 years, and you're going to be leasing it up in a very different environment than we are today. So given we take that long view, our balance sheet is strong. And there are quite a few available incentives at the moment our team is working on trying to capture. So we actually think we're going to be in a position to launch one of these in 2026 because we believe it's the right long-term investment. I don't know, Niall, if you want to add anything else.

[Niall Collins, executive]

Yes. Just to add to that, Mark, there's been a progressive decline in costs that come down approximately 15% over the last couple of years. So it's really improving the dynamics of how we're evaluating some of these performance. There is a lot of appetite in the market for new projects. So we think schedules will improve as well. So overall, we're seeing a change in dynamics that I think could be accretive very quickly.

[Mark Rothschild, analyst]

But I guess, Rael, we should wait a little bit to hear your announcement on which project it is and what the plan is?

[Rael Diamond, executive]

Yes. So we hope to have something in the early part of 2026.

[Operator]

Your next question comes from the line of Himanshu Gupta from Scotiabank.

[Himanshu Gupta, analyst]

So your retail occupancy continues to be strong. Should we expect occupancies to be stable from here? Or do you expect any uptick in the near term? And at the same time, any pockets of like softer leasing demand within the retail side?

[Niall Collins, executive]

Himanshu, it's Niall. Just to respond to that. On our retail going into Q4, we're expecting a little bit of growth in occupancy improving. And in our industrial portfolio, we see occupancy improving as well.

[Himanshu Gupta, analyst]

Okay. That's fantastic. And on the retail, I mean in the context of this population growth has slowed down and GDP growth also slowed down. So it sounds like no pocket of weakness you guys are seeing.

[Niall Collins, executive]

I'd say, look, there's a lot of catch-up from the immigration that has happened over the last number of years and retail and residential and industrial are still trying to catch up with that, particularly in retail.

[Himanshu Gupta, analyst]

Okay. Okay. That's fair enough. And maybe my next question is on that Caledon industrial property. I mean, it sounds like you're making progress on that 1 million square feet of development on spec. Do you have a sense of what kind of tenant demand will be there for that kind of product?

[Niall Collins, executive]

Yes. We're very encouraged by the responses we've been getting to RFPs. It's a mix of logistics, electronics. There's a lot of growth there. We're seeing build-to-suit as well as interest in our spec as well. So there's a good variety there for us.

[Himanshu Gupta, analyst]

And what kind of yields will you be underwriting on that project?

[Niall Collins, executive]

Similar yields that we've been achieving to date on our IPP portfolio. And our NLS project is transferring in the next quarter. We expect to see yields similar to that.

[Himanshu Gupta, analyst]

Got it. Okay. Maybe just last question. I mean, on your Allied holdings, and I know it's a small part of the NAV. Any thoughts if there's a distribution cut, what could be the impact on your FFO...

[Rael Diamond, executive]

Look, Himanshu, I think just go back to what we've always said. We've always said that our view that the underlying real estate is great long-term real estate. We also recognize that office fundamentals are starting to improve. And then we don't need the capital right now. Look, we don't know exactly what the distribution cut is going to be until they officially announce it. But it's not going to have a material impact on our business. Our business is strong, and we'll provide an update when we know the magnitude of the cut.

[Operator]

Your next question comes from the line of Sam Damiani from TD Cowen.

[Sam Damiani, analyst]

Certainly interested to see the retail shopping center development kickoff in Nepean. I'm just wondering if, Niall, perhaps you could share a little bit of sort of thoughts about how you underwrote the opportunity and expected rents versus cost kind of yields. Like is this an opportunity that has opened up just in the recent year, let's say, with the rise in market rents? Is this an opportunity that could really expand more so in a bigger way across the country?

[Niall Collins, executive]

So, Sam, what I'd say, look, we have a number of opportunities for locations across Canada that we're working on for grocery stores and CRU. We are seeing rents improve to underwrite. But they're where they need to be for underwriting, so they're in the 50s. But we'll give you more input when we talk to you in Q4.

[Sam Damiani, analyst]

Okay. That's helpful. And maybe, Rael, I mean, since you guys have been acquiring these industrial outside storage assets over the last few years, the asset class has become more popular. Are you still seeing opportunities in that space to acquire going forward?

[Rael Diamond, executive]

Sam, we haven't seen any real interesting new opportunities since we acquired the portfolio. I can tell you that numerous people have reached out to us to acquire portions of that portfolio at significantly higher values than we paid, which I think leads to your comment on the significant investor interest in the asset class.

[Sam Damiani, analyst]

Okay. That's helpful. And just lastly, Mark asked about, I guess, residential construction. So I look forward to, I guess, seeing some details when that's announced. But do you have any initial thoughts on the federal budget announced a couple of days ago and how that sort of impacts the way you look at building new rental residential in Canada?

[Niall Collins, executive]

Look, we've been digesting it as it's been coming out over the last couple of days. You can see that there's a lot of emphasis towards infrastructure, which we feel is very important for some of our very large master plan projects. We're not quite sure how the impact on DCs is going to be trickling down to the provinces and the municipalities. So I think we're waiting for more information to come out. And Build Canada Homes, we're waiting to see how that's going to work as well. So I think there's more information to come out as the budget gets discussed over the next couple of weeks.

[Operator]

Your next question comes from the line of Tal Woolley from CIBC Capital Markets.

[Tal Woolley, analyst]

I was just wondering on the retail business, where Loblaw is -- where you're sort of terminating some of these leases or looking to downsize, are they switching banners while they're doing it?

[Erin Johnston, executive]

Tal, it's not necessarily them switching banners. I mean, they could. It's more they'll look at a store and say we have a store that's 150,000 to 160,000 square feet. Could we make the same amount or service -- do the same sales on a smaller footprint of, say, 120,000 square feet, 125,000 square feet. So it's more of that. And then what happens is Choice will go out to the market and see if we can find a third-party tenant. And only when we do, we'll tell Loblaw, we're okay for them to reduce the space. But if we don't have a good third-party tenant, we would never let them reduce the store footprint.

[Tal Woolley, analyst]

Sorry, go ahead. Pardon me, Rael. Go ahead.

[Rael Diamond, executive]

I will tell you that the interesting thing, and maybe Niall can also comment is that our leasing team is saying that on the size that we're backfilling on the downsizing, there's really a lack of available space in the market. So we've had really strong tenant interest in that space, which has been a positive to offer that space to tenants.

[Niall Collins, executive]

Yes. And maybe add that I see, we had a lot of interest in our land bank and our opportunities and trying to find large space is difficult for our tenants that are looking to grow in a number of sectors. So rightsizing is definitely a solution and also some of our new developments for greenfield as well are providing opportunities for them, too.

[Tal Woolley, analyst]

And is there a theme on any of these? Like is it a certain region or a certain size store that sort of predominates this group?

[Rael Diamond, executive]

No, I wouldn't call it on a theme. I think it's -- we've done ones in Toronto, in Montreal and in Alberta. But I don't think it's a regional theme. That's opportunity as well, refreshing the interior of their store, we work with them, too.

[Operator]

Your next question comes from the line of Giuliano Thornhill from National Bank Financial.

[Giuliano Thornhill, analyst]

Just wondering on the 8.6% renewals with Loblaws. I'm just wondering what would be required to see this kind of reach the maximum and looking out like further out to 2027, kind of where is that trending?

[Rael Diamond, executive]

It's Rael. Look, I think you have to understand there's 40, call it, 45-ish leases rolling a year. And the nature of our leases are that they can be no less than the expiry of -- the expiry rent and no more than 10% growth. So we actually think 8.5% is a really healthy lift given the nature of all the leases. And look, we don't have yet visibility on '27, and we're happy to share it when we have it. But I think it would be very difficult to get to the maximum 10% because it would imply that every single lease is at least 10% below market when it's rolling. And remember, these leases were set in 2013 at market rents.

[Niall Collins, executive]

Giuliano, just one thing to add is the geographic spread on these locations as well. It's across Canada and various markets.

[Giuliano Thornhill, analyst]

Right. And then just going back to kind of Tal's line of questioning. Just how many more kind of opportunities do you think are for these larger developments? And where has kind of been the lack of grocery under construction in the country over the last little bit?

[Rael Diamond, executive]

Look, I think one of our big competitive advantages is that we're working with Loblaw to say, where are you trying to expand and how can we help you find land. For example, just on the grocery side, we had announced, I think, 1 or 2 quarters ago that we were building, call it, 6 new grocery stores. And I think in pretty much most cases, we're building additional CRU as well. Like I don't want to lean too much into where the locations are. I can tell you where the 6 are, but I don't want to lean too much into where the locations of the future opportunities we're looking at with Loblaw. But Niall can maybe just comment on where the, call it, the 5 remaining are.

[Niall Collins, executive]

Look, currently, they're typically out West and in Ontario. And as we go through and look at our pipeline, we think we're going to see more coming in from Quebec as well. So it's a national -- we're seeing a national opportunity in Ontario, out west, Edmonton and Calgary and some opportunities in Quebec that we're evaluating at the moment.

[Giuliano Thornhill, analyst]

Right. And then just lastly, there's a conservatory group was kind of put up for sale recently. I'm wondering if any of the assets there kind of catch your interest within the portfolio.

[Rael Diamond, executive]

Look, I think we've just signed the NDA to get access to the data room. And hopefully, there will be something that fits our criteria, but nothing to share yet.

[Operator]

Your next question comes from the line of Pammi Bir from RBC Capital Markets.

[Pammi Bir, analyst]

Just on the lease termination income from Loblaw, just how many properties did that relate to? And then secondly, just to clarify, has all of that, I guess, terminated space been re-leased?

[Erin Johnston, executive]

So Pammi -- sorry, this is Erin. It related to 3 properties, and we actually put in 5 different CRU tenants across those properties, it would be like Dollarama, Goodlife, LCBO, and it's all been re-leased. When we do these, they are re-leased before we go ahead and do them.

[Pammi Bir, analyst]

Okay. All right. And then should we -- as we think about just looking ahead for 2026 and maybe even beyond, is this process likely to continue maybe at the similar sort of volume annually? Or is this a bit of a unique period in terms of their rightsizing?

[Erin Johnston, executive]

Yes. So I'd say we've had this for the last couple of years. I think there'll be a few in 2026 and maybe '27. I wouldn't expect large volumes to continue. It will all depend on tenant demand market and Loblaw looking at their stores and where they're renovating, but we do have some in '26.

[Pammi Bir, analyst]

Okay. And then just lastly, on the $100 million of dispositions, I guess, after the quarter, what was sort of the range or the cap rate range on those asset sales? And maybe just if you could comment on the likelihood of further capital recycling next year.

[Rael Diamond, executive]

Yes. I think the average cap rate or the range, it was all close to a 7. So a 7% cap. And as we said on the call, look, our balance sheet is in great shape. And this year, we were unbalanced from a capital recycling point of view, i.e., purchasing more than we sold, and we've done a significant number of transactions. And I think we're in a position to continue to do that in future years as well.

[Pammi Bir, analyst]

And maybe as an extension to that, would that include perhaps monetizing some of the residential density as it gets owned? Or is that not really on the table at this stage?

[Rael Diamond, executive]

I think in this environment, it's tough at the moment. It's something we may consider in the future, but not really something we're considering at the moment.

[Operator]

Your next question comes from the line of Gaurav Mathur from Green Street.

[Gaurav Mathur, analyst]

Just one question on the disposition activity so far. Is there -- is it fair to say that there's a lack of liquidity now in the market when compared to probably 9 to 12 months ago as you were looking through your capital recycling plans?

[Rael Diamond, executive]

No. Look, I think from our standpoint, we wouldn't agree with that statement. We actually think for the product that we've been selling, there's been lots of liquidity. So used even the portfolio, there was roughly $100 million. The average asset size was each $25 million. And the pool of buyers, it's deep, it's institutions, it's advisers, sometimes even it's a private individual. So we actually -- for the product we've been selling, we haven't seen a lack of liquidity.

[Gaurav Mathur, analyst]

And by extension, would that also be applicable to the industrial market?

[Rael Diamond, executive]

Again, if you look at this -- again, there hasn't been a lot of trading on the industrial market. There's been -- I think in -- I think this past quarter, there were 2 significant trades. And again, they were large assets with, from our point, seem to have good liquidity on it, too. And I will share with you as well on -- I'll also share with you when we sold the small bay portfolio earlier in the year, there was strong investor interest and appetite for more of that as well if we would be willing to sell more assets.

[Operator]

Your next question comes from the line of Sam Damiani from TD Cowen.

[Sam Damiani, analyst]

Just a quick follow-up on the Loblaw space that was given back and generated the lease surrender fees. That is all in respect of store downsizing. There were no stores completely closed. Is that correct?

[Erin Johnston, executive]

That's correct, Sam.

[Operator]

And I will now turn the call back over to Rael Diamond, CEO, for some final closing remarks.

[Rael Diamond, executive]

Thank you, Rob. As I mentioned at the start of our call, our portfolio and balance sheet are in excellent shape, and our team remains focused on achieving our growth objectives. Thank you all for your interest in Choice and for joining us this morning. We look forward to providing you another update on the business in the new year.

[Operator]

This concludes today's conference call. You may now disconnect.