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Good morning, ladies and gentlemen, and welcome to the Crombie REIT Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Also note that the call is being recorded on Friday, November 13, 2020. And I would like to turn the conference over to Ruth Martin. Please go ahead.
Thank you. Good day, everyone, and welcome to Crombie REIT's third quarter conference call and webcast. Thank you for joining us. This call is being recorded in live audio, and is available on our website at www.crombiereit.com. Slides to accompany today's call are available on the Investors section of our website under Presentations and Events. On the call today are Don Clow, President and Chief Executive Officer; Clinton Keay, Chief Financial Officer and Secretary; and Glenn Hynes, Executive Vice President and Chief Operating Officer. Today's 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 annual information form for a discussion of these risk factors. I will now turn the call over to Don who will begin our discussion with comments on Crombie's overall strategy and outlook. Glenn will follow with a development update and a review of Crombie's operating fundamentals and results. Clinton will discuss our financial results, capital allocation and approach to funding, and Don will conclude with a few final remarks. Over to you, Don.
Thank you, Ruth, and good day, everyone. During the last few years, the world has experienced extraordinary economic, geopolitical and technological disruptions as a result of the COVID-19 pandemic, the recent U.S. election, and accelerating -- the accelerating pace of technological change, including e-commerce. Throughout these turbulent times, Crombie, as a retailer-related REIT, has continued a strategy that has delivered stability and growth for the benefit of all of our stakeholders. Over the last decade, Crombie's strategy has strengthened our financial condition, grown and optimized the quality of our grocery-anchored real estate portfolio and enhanced our relationship with Empire. We have become a significant developer of major mixed-use real estate in major urban markets in Canada, and we've built an entrepreneurial and talented team across the country. We have significantly derisked our business by materially increasing liquidity and the weighted average turn to maturity of our debt, increasing our multiple source of capital as well as taking advantage of low interest rates. We have demonstrated innovative capital recycling at favorable pricing over the last few years, which provided important organic funding for our investments in Empire-related initiatives and, importantly, our development pipeline. As we continue to focus on improving our financial strength during these uncertain times, we're nevertheless also focused on prudently growing Crombie by generating solid risk-adjusted returns from our investments in Empire-related expansions, conversions and industrial properties as well as executing on our development commitments and unlocking significant value by entitling major urban market land for future development. To optimize our relationship with Empire, we have aligned our strategies over the next few years and capitalized on a wide range of opportunities, initiatives and accretive transactions. We are building exciting new properties across Canada, including our first 3 VECTOM mixed-use developments, which are poised to create significant AFFO growth and NAV growth of approximately $1 to $2 per unit in the near term. Grocery-anchored retail continues to be one of the best forms of real estate in Canada, and our Sobeys-anchored core portfolio has proven to be very resilient during the challenges of 2020. Crombie benefits from both the strong and improving covenant of Empire and the lengthy weighted average lease term of approximately 10 years, influenced by Empire's remaining lease term of approximately 13 years. Covenant and term have historically been discounted during times of growth, but during times of crisis, like the last 9 months, they are highly coveted by all stakeholders. Crombie's occupancy is stable with solid growth on lease renewals and active pandemic support for impacted tenants, thanks to the hard work and diligence of our committed team. Empire has been achieving great momentum with improved operating and financial performance and market share. They've recently announced their new 3-year strategy, Project Horizon, which focuses on core business expansion and acceleration of their e-commerce network. Supporting this momentum is the recent launch of Voilà by Sobeys in the Greater Toronto area. Aligning our strategy with Empire enables Crombie to expand and diversify our real estate portfolio with solid risk-adjusted returns. We work closely with Empire with the expectation that we collectively drive high quality yet defensive growth through strategic and accretive transactions, such as the modernization and expansion of grocery stores, store conversions, including the FreshCo discount format in Western Canada and Farm Boy in Ontario, accelerating Sobeys build-out of their Voilà online grocery home delivery service through investments in the hub-and-spoke network, land use intensifications and the unlocking of major urban developments. Our value-enhancing major development pipeline consists of 34 properties, including 2 substantially completed developments and 5 active developments. Many of these sites are strategically located conveniently within walking distance of existing and future transit corridors. These major development projects play a key role in our long-term strategy of accelerating per unit NAV and AFFO growth. Belmont Market and the retail portion of Davie Street having reached substantial completion, Crombie only has approximately $126 million remaining to invest, or 21% of the total estimated cost of the approximately $612 million to complete our first active mixed-use major developments. These active projects will have an estimated NOI yield on cost of 6% to 6.5% for Crombie share. Upon completion, these 5 active major -- these 5 active development projects will total 545,000 square feet of gross commercial leasable area and 961,000 square feet of residential rental GLA or 1,200 residential units in Vancouver, the GTA, Montreal and St. John's. In addition to creating significant NAV and AFFO growth, as the developments reach substantial completion over the next year, they will increase our presence in Canada's top urban markets and diversify and improve our overall portfolio quality. Lastly and most importantly, we remain focused on the health and safety of our tenants, our employees and our communities, and are committed to delivering value through the execution of our long-term strategy. We are incredibly proud of our passionate team and the work they do. The vast majority of our office employees continue to work productively from home, while our on-site teams work very hard to maintain properties that are fully operational, clean and, most importantly, safe. Thank you to all of you. With that, I'll now turn the call over to Glenn, who will provide an update on our developments and our operational highlights.
Thank you, Don, and good day, everyone. We've improved the quality of our portfolio by developing and acquiring assets in Canada's top markets as well as recycling approximately $800 million from sale of properties, mostly in secondary and tertiary markets to reinvest in Empire-related investments in Crombie's major urban developments. Our defensive grocery-anchored portfolio is positioned well as 75% of minimum rent is generated from grocery and pharmacy-anchored properties, 68% of minimum rent comes from essential services tenants, and only 8% of minimum rent comes from small business. The portfolio we have today is strong, resilient and improves our positioning for future periods of uncertainty, such as what we are experiencing today with COVID-19. We are happy to say that close to 99% of our properties are open for business, and our October rent collection is 96%, with steady improvement from prior months. Our tailored approach to rent relief further strengthened our relationships with tenants. Of our 286 property portfolio, 72 properties, representing 286 tenant applications, were filed for the CECRA program. Our defensive and Internet-resilient portfolio continues to have minimal exposure to the numerous declarations of store closures, CCAA applications and/or bankruptcies since the onset of the pandemic. Avalon Mall in St. John's, Newfoundland and Labrador was initially impacted negatively by the pandemic. Since the reopening of the mall in June when provincial government restrictions were lifted, performance has improved with 94% of tenants open for business. 75% of rent was collected in October, an increase from the 60% collected in July. And traffic counts are running at or ahead of pre-COVID levels with sales quickly recovering. Our office portfolio is primarily located in Halifax Nova Scotia with a small portion in Moncton, New Brunswick, both inside the Atlantic bubble. We are very pleased with our 100% rent collection for this segment in the month of October. We've experienced a decline in parking revenue due to COVID-19 restrictions and reduced traffic. And approximately 30% of our office population has returned to the office at our Scotia Square complex in Halifax, which compares very favorably to other major urban markets in Canada. Crombie's occupancy is stable and experienced only a slight decrease in Q3 at 95.3% compared to 95.6% at Q2 due to lease terminations and GLA additions for development spaces, which are proactively being leased. New leases and expansions year-to-date increased occupancy by 142,000 square feet at an average first year rate of $17.32 per square foot, while we experienced 174,000 square feet of year-to-date net lease expiries, vacancies, terminations and space adjustments. We ended the quarter with 105,000 square feet of committed space at an average first year rent of $23.81 per square foot, which will boost future NOI growth. During the quarter, 172,000 square feet of renewals were completed at a 3.9% increase over expiring rental rates. Year-to-date, our renewal program is on schedule as we have renewed 558,000 square feet at an increase of 4% over expiring rent. Retail renewals were solid with 400,000 square feet renewed at rental increases of 4.6%. As we navigate through these uncharted times, our team is dedicated to ensuring our underlying business fundamentals and core portfolio remain resilient and strong. Property development is a strategic priority for Crombie as it improves net asset value, cash flow growth and unitholder value. We are excited to see continuing progress on our active developments and have reached substantial completion of the retail component at Davie Street in Vancouver and Belmont Market in Langford, near Victoria, B.C. Prior to the end of 2020, we expect to reach substantial completion on Davie Street residential, our first joint venture and residential development, and Avalon Mall phase 2. We continue to invest in our remaining 3 projects: La Duke in Montreal; and the Voilà par IGA CFC, also in Montreal; and Bronte Village in the GTA, with substantial completion expected for all 3 in 2021. This is truly a transformational time for Crombie as a material amount of development projects reach completion over the next year. At Davie Street in Vancouver, the commercial portion, as mentioned, of the development has reached substantial completion as the new Safeway store opened in Q2 with Scotiabank now open and the government liquor stores scheduled to open this quarter. Subsequent to the quarter, the final CRU space was leased, bringing the retail portion to 100% occupancy. Pre-leasing is underway on the 330 residential rental units, totaling approximately 254,000 square feet in 2 towers with initial tenant move-ins starting next week. Our 160,000 square foot Belmont market on Vancouver Island recently reached substantial completion, with the final phase of the development consisting of 3 small buildings, totaling 23,000 square feet, coming online in 2021. Construction commenced on the first of these 3 buildings during the second quarter and is expected to be complete in Q1 2021. The remaining 2 buildings are slated to begin construction in 2021, subject to pre-leasing success. Avalon Mall is the only regional mall in all of Newfoundland and Labrador. And if the economy continues to stabilize, we are pleased to see signs of its dominant performance reemerge with increased traffic counts and climbing sales. Newfoundland and Labrador is also in the Atlantic bubble, and thus, has had a low number of COVID-19 cases relative to the rest of Canada and a relatively strong return to normal economic and social conditions. Construction of our expansion area will be completed in Q4 with the grand reopening scheduled for spring 2021. Numerous tenants are in possession of their space, preparing to open, with some tenants opening prior to Christmas. Leasing activity continues with a total leasable square footage in this redevelopment space being 90% leased. In Montreal, at our Le Duke project, the residential structure is complete with interior framing up to the 15th floor and drywall up to the fifth floor. Le Duke will include a 25-story mixed-use tower with 387 residential rental units. On ground level, there is a 25,000 square foot IGA grocery store and 1,000 square feet of additional retail space with 200 underground parking stalls. The project is 89% tendered with an estimated substantial completion in Q3 2021 with initial leasing commencing in Q2 2021. Crombie remains on track with the Montreal CFC and is expected to be substantially complete with rent commencement in 2021. Foundations, the steel superstructure and the precast building panels are all in place, and interior flooring and mezzanines are underway. Voilà par IGA, Empire's online grocery home delivery service, to be made available in Québec and the Ottawa area, is expected to launch in early 2022. Finally, Bronte Village in the GTA is 96% tendered with the structure and precast complete on both buildings. Glazing installation is up to Level 14 on building A and Level 9 on building B, with interior finishing work progressing well on the lower residential levels. The Sobeys grocery store has remained operational throughout the development, but closed on October 21 as it converts to a Farm Boy, the first such Farm Boy conversion in our portfolio. These projects increased our presence in the country's top urban markets, while diversifying and improving our overall portfolio quality and income stream. As our active developments approach completion, we continue our work to entitle an additional 7 projects across Canada. 3 of these developments are in Vancouver, 3 in Halifax and 1 in Victoria. We continue to make progress to unlock significant land value embedded in our major urban market grocery stores and generate opportunities to continue our development program. To date, 2 projects have zoning approval, 2 projects have zoning applications submitted and 3 projects are in various stages of design and consultation. And with that, I will now turn the call over to Clinton, who will highlight our third quarter financial results and discuss our capital and development program funding approach. Clinton?
Thank you, Glenn, and good day, everyone. During these challenging times, Crombie remains in good financial health with a strong and flexible balance sheet, ample liquidity and an ability to prudently allocate and creatively source capital. We are very pleased with our 95% collection rate in Q3, which improved to 96% in October, a steady improvement from our 90% collection rate in the second quarter. It is no doubt that the pandemic created increased risk, particularly around the collection of tenant receivables. Bad debt expense and rent abatements of approximately $1.7 million were recorded in the quarter, inclusive of amounts relating to the CECRA program. On a cash basis, same-asset NOI decreased by 3.4% compared to the third quarter of 2019. Excluding COVID-19-related adjustments such as bad debt expense, rent abatements and the decline in parking revenue, Q3 same-asset NOI would have increased by 2.2%. The AFFO per unit was $0.22, decreasing from $0.24 for the same quarter last year. Our AFFO payout ratio was 99.2% versus the same quarter last year at 92.7%. FFO for the quarter decreased to $0.27 per unit from $0.29 for Q3 2019. And our FFO payout ratio was 81.2% versus 77.8% in the same quarter last year. The decline in AFO, AFFO and FFO is primarily due to the significant increase in bad debt expense, rent abatements and parking revenue impact, as previously noted. Adjusting for the impact of COVID-19 on Crombie's operating performance, FFO per unit would be $0.25 and FFO per unit would be $0.29 on par with Q3 2019. Additionally, we continue to feel the dilutive effects of approximately $500 million in property dispositions executed in 2019, with the primary reinvestment of these proceeds to major developments with no initial return until completion of developments this year and in 2021. G&A as a percentage of property revenue for Q3 was 5.4%, or $5 million, a decrease of $1 million compared to the same quarter in 2019. The decrease from Q3 2019 is primarily driven by reduced salaries from the organizational realignment completed in Q2 2020 as well as decreased travel and office expenses as a result of COVID-19. Subsequent to the quarter end, Crombie had successful issuances of 2 $150 million unsecured notes. Proceeds were used to partially redeem $100 million of unsecured notes due June 1, 2021, and the remainder applied against short-term bank debt, leaving our liquidity at approximately $500 million. The issuance and partial redemption aligned with Crombie's focus on increasing the weighted average turn to maturity of its debt with an inaugural 10-year offering and harvesting interest rate savings for the lowest coupon rate to date on a 7.5-year Crombie bond offering 2.69%. Crombie remains focused on continuous improvement of the balance sheet while also retaining the flexibility to pursue strategic growth initiatives. Approximately $34 million of mortgages will mature in the fourth quarter of 2020, and approximately 80% of 2021 mortgages will mature in December 2021. Our unencumbered asset pool remained consistent at approximately $1.5 billion of Crombie's total assets of $4.8 billion. Our debt to gross book value on a fair value basis was 49.8% at the end of Q3 compared to 49.2% for Q2 2020. We ended the quarter with debt to trailing 12-month EBITDA at 9.34x versus 9.12x at Q2 '20. This increase is primarily impacted by COVID-19 and spending on development with no income until project completion. Crombie remains committed to its long-term strategy to effectively allocate capital to accelerate NAV and AFFO growth per unit, delivering value while supporting our tenants, employees and communities during these difficult times. I will now turn the call over to Don for a few closing comments.
Thank you, Clinton. In conclusion, our strategy has evolved significantly over the last 10 years, as our relationship Empire evolved strategically and we develop large-scale urban developments at scale. We're very excited at the prospect of completing over $600 million of major mixed-use developments in the next year, which we believe will generate approximately $1 to $2 of NAV per unit as well as significant AFFO growth in time. We believe this real estate strategy, when combined with our strong financial condition, our access to capital and our entrepreneurial talent, will generate solid total unitholder returns for our stakeholders for years to come. That concludes our prepared remarks, and we're now happy to answer your questions.
[Operator Instructions] And your first question will be from Pammi Bir at RBC Capital.
Just with respect to Davie Street, can you provide an update on pre-leasing there? And what are your thoughts on reaching stabilized levels from an occupancy standpoint, just obviously with the ongoing pandemic?
We're actually very pleased with our beginning stages of the lease-up. Obviously, Westbank has a lot of experience in the Vancouver market. And they have what I consider to be their A Team at Davie Street. So leasing the property -- and importantly, this A Team recently leased a property down the street that Westbank owns on their own and did so very successfully. That said, it's early stages at Davie Street. And we have expected it will take some time without COVID and with COVID and the current shutdowns that exist in Vancouver. Obviously, the fewer people are out in the markets on a daily basis. But nevertheless, we believe we're progressing well. So it's too early to really give you a detailed comment, Pammi. I'd rather we report out in February and May as we progress along the track of lease-up.
Sure. Understood. I guess maybe just looking at it another way then, what were you initially -- like what was your, I guess, underwriting in terms of the time line for -- to reach stabilized?
Historically, we would have said it would have been 6 to 12 months. And importantly, we're -- I will make sure everyone is clear. We're leasing, in our view, at above our pro forma number, which we would have said a number of years ago. And so we're very comfortable with the pro forma the way it stands, but it typically would take 6 to 12 months. It may take longer with COVID. But at this point, we're -- again, it's too early to tell. We opened our door and the first tenant moves in on Monday. It's really also important to note.
Good news. Just maybe switching gears and looking at...
I can't hear. Pammi?
Yes. We lost you, Pammi.
Mr. Bir, it looks like your line -- I'm sorry, your line -- his line disconnected. While we wait for him to reconnect, we will go to the next question, which is from Sam Damiani at TD.
It's great to see the development pipeline progress along the way in recent years with that -- with costs largely intact in that $1 to $2 of NAV guidance, 100% intact along the way. So just great to see, and well done, everybody.
Thank you.
So as these projects do reach completion, as you say, as meaningful amount over the next year or so, do you expect to have another 1 or 2 meaningful major projects in that active bucket within the next 12 months? And to feed that sort of continual sort of staggering of completions in the future years? And which projects might those be?
Sam, we have always said, the goal of the company is to get to consistency at scale in our development program, and we continue to work hard on that. Clearly, and most importantly, is working with Sobeys to unlock these development sites that are really tied up with long-term leases on grocery stores that occupy large land parcels in the middle of major cities. So it's a unique advantage. Development takes time. So we're working on 7 developments at this point in time and on the entitlement of those land parcels at this time. Organically, we don't have, I'll call it, an approval of the next one until probably early to mid-2021. And then even with that approval, we really won't be fully committed to it until probably late '21. So we have our spending to complete, as I think we said in our prepared remarks, which is about another $125 million in 2021. But I don't expect much more in terms of spending next year on development. Although in 2022 what we will be hopefully approving will start setting the stage for additional spending in 2022. It is important that we want to preserve our balance sheet and preserve our liquidity during this second wave of COVID. So we're cautious when we look at those commitments. But -- so at this stage, we don't have any we are working hard on them. And importantly, we plan to continue to do more. It's just that we don't have any at this time. So in addition to that, I will say that the entitlement process by unlocking the land also creates capital sources. So with stock prices trading off the way they have, in addition to offering us opportunities for significant growth, they also offer us opportunities to fund future development. And so we'll be considering both as we move forward. And part of it will be dependent on the nature of each project and in those local micro markets, and it will also depend on the capital market situation and where we are in terms of fund availability. So we're being very cautious on all fronts at this point.
That's great. And you've touched on my next question, which is dispositions. We've seen the market open up for shopping center transactions, particularly for the most stable product out there, of which Crombie owns. Is there a desire and an expectation of pursuing that avenue to, as you say, keep the liquidity and leverage within your target range in the near term?
Yes. We've got -- for grocery-anchored strips or grocery stores, there is a big market. As we said I think on our last call, we've had incoming inquiries about purchasing either 100% or partial interest shares in grocery stores or grocery-anchored strips of over $1 billion. So lots of interest. We've chosen not to do that. We don't need the capital. We did a good equity raise in January. We did a good bond offering in October. So we're quite comfortable with where we are in terms of liquidity. But I think over time, if the share prices stay in this significant discount to NAV, then we will, I'll call it, dabble with some dispositions and to a small amount, but just continuously funding. I don't think we'll do large transactions in the near term because we just don't need the capital. And we don't -- it's very hard to grow our business by selling assets. So we like to continue the growth of Crombie. And we're about to start recognizing, don't forget, getting a lot of cash flow coming in from our developments. So the completions are a big deal over the next 12 months. So we're quite enthusiastic about that. That's starting to pay off.
Absolutely. And that makes sense. So my last question, and then I'll turn it back, is just on the new government rent subsidy program, CERS. How do you contrast it or compare it to CECRA? Do you expect it to result in meaningfully higher overall rent collections for the REIT going forward?
Sam, it's a great question. It's Glenn. It's early days. The first reading of the legislation has taken place. There's been some information circulated on sort of the bands for support based on how much disaffection businesses have had in terms of lost revenue. We're cautiously optimistic, and especially with potentially for a fairly substantial second wave. On the one hand, we've been maybe critical of the delay in getting CERS in place because CECRA did expire at the end of September. Here we are 6 weeks later. But our view is the program will be quite helpful. It's still unclear whether it might be a bit broader in its application than CECRA was. So there may be some tenants that weren't eligible for CECRA that may be eligible for this. And as you know, from a landlord point of view, it doesn't appear that there's a 25% cost. In fact, there's not a 25% cost to the landlord as there was with CECRA. So all things considered, we're very optimistic for the program. Still don't have full visibility into its application, but I think anything that supports tenants through this difficult time can only do good for our ongoing rent collection, which, as we said in our comments, we're quite satisfied to be at 96% for October. And we believe we're on a steady trajectory back to normal, assuming we don't have any major second wave. And the CERS program will only help that.
We now return to Pammi Bir.
Sorry about that.
Welcome back.
I think my phone has been infected. Just maybe looking at occupancy, it's holding up fairly well and I guess all things considered. But at the other properties in the rest of Canada segment, it did slip a bit more than, I guess, the VECTOM or other markets. Is that really maybe Avalon Mall or other areas? Or can you maybe just speak to what's driving that?
Sure. Yes, absolutely, Pammi. It would be Avalon, would be impacting that in the rest of Canada segment. But just to give you a bit of extra data, if you look at our occupancy, it slipped by -- depending on committed versus economic, 30 to 40 bps. 10 bps of that which is bringing some additional GLA on actually at Avalon, that's currently vacant. So that's the development space. We're 90% occupied -- or 90% leased, I should say, for the expansion wing. So we brought on some additional square footage into GLA. So that was 10 bps of impact on vacancy because that's not currently leased. Also another 10 bps, we have 1 lease that we just executed in New Brunswick first space that went vacant in Q2. And that's 10 bps. So in Q4, that space will be leased. So we've been very successful in looking at that 30 to 40 bp change in occupancy. 10 bps is just all kinds of leasing, and we're bullish on getting Avalon leased and that other deal being done. And the other data point that I'm pleased about is we've had only 22 leases across our entire portfolio, only 22 leases have been disaffected by CCAA. And of those 22 leases, only 4 were disclaimed, i.e. only 4 locations were closed. The other 18 remained. In other words, the tenant, obviously, with difficulties but wanting to be in our centers as they come through CCAA, 18 of those 22 will remain. So we're quite confident with our occupancy. We're pleased to have 105,000 square feet in the committed category. One of those deals, actually, The Brick opens next week in St. John's, Newfoundland and Labrador, a 46,500 square foot store. First Brick store in Newfoundland, really excited about that. Leon's came out with results the other day. Fantastic results. So that's great. And announced today actually in Newfoundland, Five Guys Burgers, small deal, but Five Guys is coming to Avalon Mall, and it's a big buzz over there. That tenancy is coming to Newfoundland and Labrador. So occupancy, overall, is quite solid.
Yes, I know. That's great to hear. Thanks for the color, Glenn. Just, I guess, along the same lines, what can you say with respect to rents for -- leasing in terms of new space? The renewal spreads are -- seem to be holding in fairly steady. But do you sense that tenants, with respect to new space, are looking for maybe some form of larger inducements? Or any color you can provide there as well.
Sure. We don't have a huge data set to provide because our occupancy is quite strong, but a couple of points. One thing we are seeing, which is interesting, is the tenants that are more aggressive now in growing their business are the strong covenant tenants. So the leasing that we're doing, for example, this New Brunswick deal I mentioned, that was 10 bps of our occupancy, is a strong investment-grade covenant taking the place of a weaker covenant that vacated. So on the rental side, I think we're going to be fine. I do think it's a market that might be, generally speaking, sort of a buyer's market or a tenant's market. But then our grocery-anchored center is not the case. I think it's very clear that grocery-anchored centers have only emerged as a stronger retail vehicle through the pandemic. And the attraction and traffic draw that they provide to the CRU tenants continues to be very positive. So I don't see any risk of rates going anywhere, but same or higher. But I think in some places, some markets, there could be more of a tenant's market for getting better rent. But our data points so far are quite encouraging. And as you mentioned, the 4% bump in renewal rates, overall, is pretty good in a tough year. I think few would have predicted through the pandemic that renewal rents would have stayed positive, but they have. On the retail side, they're 4.6%. For our overall portfolio, they're plus 4% year-to-date. And we're very satisfied with that.
[Operator Instructions] And your next question will be from Eric Kim at National Bank.
I'd just want to follow up on Pammi's questions on the Zephyr project in Vancouver. It's good to hear that it sounds like it's kind of going on track. Looking at the leasing, I see you guys are offering 6 months of grocery credits, which is something new. Could you provide some color about just how that works and sort of the traction you're seeing with potential tenants and how it's being received?
It's, again, early days. It's an innovative program at Westbank and obviously, Crombie and Sobeys have worked together on. There's clearly a strategic benefit on the leasing of the residential to having a grocery store downstairs, and vice versa, as we've all known for a very long time. And so this is a -- it's a small thing, but it's an important thing, hopefully, for residential lease-up in time. And it's a program that we're having a look at, and we'll see what the outcomes are as to whether it's something that we then unfold into future projects, which almost all of our major mixed-use projects have a grocery store at the ground floor and residential above. So hopefully it works, and we have good take-up. But at this stage, again, it's too early.
Okay. No, that makes a lot of sense for future projects. And I know this is early given that residents haven't moved in yet. But do you have any insight into how the Safeway entering that -- the Zephyr project has been performing? Is it going kind of -- is it going well? Is Empire happy with that? And do you have any metrics that you could share in terms of performance?
No. We're -- it's certainly not something we're going to share on a detailed store-by-store basis. They have a very competitive market there. Our understanding, nevertheless, is that it's opened strong and opened, I'll call it, ahead of pro forma. But it's something that we're -- it's, again, early stages. They've only opened a short while ago. But it's so far, so good. And it's a great piece of dirt. And the grocery store there for a long time, the store is a prototypical store for that type of market. And so obviously, it's going to meet the market a lot better than the older store was there for a long time. And so we're quite optimistic about it being very successful. And so far, Sobeys has indicated, they're very pleased with it. So that's really all I can tell you. I can't give you data, unfortunately.
Yes, no, I understand. And then just my last question is, has there been any further discussions with Empire in terms of where and when the Western Canada CFC will be started?
We're in constant discussion. Again, we're working on a 3-year plan with Sobeys and Empire to develop over time across the country and really looking and picking our spots. Importantly, Sobeys and Empire announced Project Horizon a couple of months ago. And part of that was, I'll call it, an acceleration of their e-commerce home delivery platform, Ocado and Voilà par IGA, Voilà par Sobeys platform, including 2 distribution centers in Western Canada. And we're actively working with them and hopeful that we'll be part of 1 or hopefully both of those DCs or CFCs. And so -- but at this point, we don't have any -- anything to offer the market, and we'll certainly let them make announcements in due course on their own time frame. And we're very excited. We continue to work not only on the CFCs but it's a hub-and-spoke network, importantly, which as we've said before, includes not only these 300,000 or 400,000 square foot CFCs, of which we think there'll be 4 across the country. There are also these spokes, which are 15,000 to 30,000 square foot small distribution centers where they break down the large trucks into cube vans and deliver it to people's homes. And so as an example, our center in Montreal has the hub, and it has spokes that we're looking at in Ottawa and Québec City, as an example, which would be indicative of what they would do around Toronto and then around either of the -- or any of the major centers that they choose in Western Canada. So -- and we'll participate in those, and they can take the form of being a small industrial facility or they could be a portion of an existing store. That's going to be cut down inside, let's say, 60,000 square feet reduced by 20,000 for a spoke and then maintaining a 40,000 square foot store, which will be optimized for the market. So all of those types of scenarios, I think, are very exciting for us and allow us to build out that retail-related industrial part of our portfolio very well over time.
Next question will be from Howard Leung at Veritas.
I want to discuss the bad debt write-offs. This quarter, it looks like it moderated significantly from Q2. I think you only took about $1 million. Can you say whether that's -- whether most of that or all of that is CECRA? Or is it abatements outside of CECRA? Or is it additional expected credit losses? Because I saw you break that down for the year-to-date, but I just want to know for the quarter.
Howard, it's Clinton. I think I can give the color. It's primarily CECRA.
Okay. Okay, right. Because I think CECRA expired within Q3. So you had some spillover. Okay. No, that makes sense. And of the bad debt that you took in Q2 for those negotiated rent abatements and expected credit losses, how much of that actually were you able to collect? Or you can't reverse it, I guess, but how much were you able to collect from that $8 million that you took in the write-off?
Yes. I think you're looking at bad debt differently, Howard. It's really an estimate at a point in time. Last June, we made our estimate of what we felt was a provision for the allowance for doubtful accounts, and we did the same thing in the quarter. So I don't want to get into the details of that, other than to say we're comfortable with our provision at the end of the quarter.
Okay. No, that's fine. And then just on the 4% renewal bump, can you maybe give some color about if the renewals -- if you noticed stronger renewals maybe with your larger tenants or smaller ones? Or what's it kind of all across the board?
Howard, it was pretty balanced. We continue to have great balance by geography and by size of renewal. We have a reasonable number of renewals that are flat. We keep sort of anecdotal stats of how many renewals are flat, how many renewals are at a lower rent, how many renewals are positive. It's a good indication of sort of the general health of the marketplace. And while there were a number of renewals that were done at flat rents, there were other renewals done that 10% lifts or higher. So I would say it's a good healthy balance. The beauty of Crombie, of course, is with such long-lease term, we don't have a huge candidate each year of renewal risk or renewal turnover. But across the country, I would say, it's been just a good healthy balance, whether it's a grocery store renewal or whether it's a CRU or even office. Like office has been extraordinary for us, and we'll be excited to even improve our occupancy in the office side, but we've had a lot of renewals. Our weighted average lease term in our office product right now is probably the longest it's been in a long time, and we had some really good renewal work there. As you know, our overall 4.6% for retail, our office renewal rate is slightly lower to average out at 4%, but we've done a lot of renewals in the office space which are typically either government deals or private sector deals. But -- and we just actually, in the last short while, have done a lease that will improve our occupancy in Halifax by approximately 40,000 square feet early next year. That lease is just being consummated. So both renewals and new leasing activity, very well balanced, and we're very satisfied.
Okay. No, that's great. And with -- on the topic of renewals and leases, I guess, the lease terms, remaining lease terms for more discretionary tenants like the theaters and the gyms, based on the disclosures, they look pretty long. So is there not much coming up due for the rest of this year or next year for those tenants?
No, I don't believe so. In fact, as part of our discussions with some of those specific tenants, some of those 4F tenants, particularly fitness and film, part of our discussions have been to get term extensions in certain locations as part of being a good citizen, a good landlord to help them through the pandemic. So we don't have any specific significant renewal risk in the coming short term, at least the next couple of years. And -- but through the process of supporting those specific types of tenants, we have been able to get an extension of our weighted average lease term.
Okay. No, that's great. And my last question just -- is about the credit rating. Obviously, you're very too much tied to Empire. But any recent discussions with DBRS and any potential movement there?
It's Clinton again. We have constant conversations with the rating agencies, and we're very happy with the relationship we have today, and I'll just leave at that.
[Operator Instructions] And currently we have no other questions registered, so I would like to turn the call back over to Ms. Martin. Please go ahead.
Thank you for your time today, and we look forward to updating you on our progress on our Q4 call in the new year.
Thanks, everybody.
Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.