Crombie Real Estate Investment Trust

TSX:CRR.UN

Good morning, everyone, and welcome to Crombie REIT's First Quarter Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 8, 2025.

I would now like to turn the conference over to Kara Cameron, Chief Financial Officer of Crombie. Please go ahead.

Thank you. Good day, everyone, and welcome to Crombie REIT's First Quarter 2025 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca.

Slides to accompany today's call are available on the Investors section of our website under Presentations & Events. Joining me on the call today are Mark Holly, President and Chief Executive Officer; and Arie Bitton, Executive Vice President, Leasing and Operations.

Today's discussion includes forward-looking statements. And as always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these risk factors.

Our discussion will also include expected yield on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks.

I will now turn the call over to Mark to discuss Crombie's strategy and outlook.

Thank you, Kara, and thanks to everyone for joining us today for our first quarter call.

Crombie's first quarter results demonstrate the effectiveness of our strategy as the essential REIT. In a quarter marked by continued economic uncertainty, our portfolio has performed exceptionally well, delivering consistent results that validate our focused approach. At the heart of the performance is our grocery-anchored retail portfolio. With 82% of our annual minimum rent coming from necessity-based retail tenants and a weighted average lease term of over 8 years, we've established a foundation for stability. Our properties situated at the heart of vibrant communities coast-to-coast attract steady traffic and repeat visits. This consistent engagement makes them highly sought after by top retailers, driving sustained tenant demand and reinforcing the long-term strength of our [indiscernible] across economic cycles.

As we progress through 2025, we remain committed to the disciplined advancements of our strategy, owning and operating vital hubs where Canadians live, work, shop and connect while delivering consistent results for our unitholders. Our quarterly performance is best viewed through the lens of our 3 value creation pillars within our strategy: own and operate, optimize and partners. These pillars drive our day-to-day execution, identifying our highest return opportunities and strengthen key relationships that support sustained growth.

Our first value driver, own and operate, continues to be the cornerstone of our success. In the first quarter, our necessity-based retail portfolio demonstrated its resilience with committed occupancy reaching 97.1%, a historic high for Crombie. We delivered same-asset property cash NOI of 3.2% and renewed 167,000 square feet, achieving rental rate growth of 10% over expiring rates. These results translate directly to our financial performance with AFFO per unit growth of 3.8% over Q1 2024. Our team achieved these results while maintaining a solid and flexible financial position. Our AFFO payout ratio stands at 84% with a debt-to-EBITDA ratio of 7.95x.

Portfolio management is central to our ownership strategy. We take a disciplined approach to capital allocation, focusing on assets where we can create the most value and divesting from those that are noncore or facing long-term challenges. Building on our successful capital recycling program in 2024, we completed the sale of Loch Lomond Place in the first quarter, a 188,000 square foot noncore retail property in Saint John, New Brunswick, generating $3.3 million in proceeds.

Today, I'll address our second and third value drivers together, optimize and partner as our recent activities highlight the fundamental connection between how we invest and how we grow through collaboration. Optimize focuses on unlocking embedded value across our portfolio through targeted investments, entitlement activities and strategic development. A key example is our ongoing modernization program with Empire, part of our focused nonmajor development strategy. These targeted investments, each under $50 million are designed to enhance property performance and the customer experience while delivering solid returns on capital. In the first quarter, we invested $2.2 million through this program.

Our approach to major developments remains deliberate and disciplined. We continue to advance entitlements to create value while maintaining flexibility around timing, scale and capital deployment, an approach that is particularly important in today's market. The Marlstone, our sole active major development is progressing well and remains on track for completion in the first half of 2026. Designed to achieve LEED Gold standard and Rick Hansen Foundation certification, it will be a high-quality addition to the Halifax market.

In the past month, we announced new strategic partnerships in Halifax and Vancouver, 2 markets we view compelling long-term opportunities. In Halifax, we partnered with Montez to advance key projects across our Halifax development portfolio. This includes the sale of a 50% interest in the Marlstone and agreements to advance the Barrington Street and Brunswick Place properties through the entitlement process. These efforts show how optimizing partners work hand-in-hand, deploying capital thoughtfully, creating long-term value and strengthening our platform through strategic collaboration.

And last night, with our first quarter results, we announced another partnership with Wesgroup Properties, a well-established Vancouver real estate owner, operator and developer. As part of this transaction, Wesgroup acquired Empire's limited partnership interest in Lynn Valley and Kingsway & Tyne, while Crombie and Wesgroup formed new entitlement partnerships for East Hastings and West Broadway properties. These programmatic partnerships deliver immediate stabilized cash flow through management and development fees, drive accretion to AFFO and unlock value from high potential assets, all while preserving balance sheet flexibility to reinvest in our core retail platform.

Looking ahead to the rest of the year, we remain committed to delivering consistent performance while positioning Crombie for long-term value creation. Our first quarter results demonstrate the effectiveness of our strategy, owning essential real estate at the heart of thriving communities, managing for resilience and investing with discipline.

And with that, I'll turn the call over to Kara.

Thank you, Mark.

Our Q1 financial results reinforce the fundamental strength of our platform and validate our disciplined approach to capital allocation. The numbers tell a clear story, our strategy is working. Operationally, we're seeing the direct impacts of our focused execution. Our leasing team delivered renewal growth at nearly double our historical average, demonstrating the continued demand for our necessity-based retail properties across all markets.

Let me walk you through the specifics. During the quarter, we completed 167,000 square feet of renewals at a 10% increase over expiring rental rates. We achieved growth of 12.2% when comparing expiring rates to the weighted average spread over the entire renewal term. This strength was consistent across our assets in VECTOM, major markets and rest of Canada, achieving spreads of 11.7%, 9.5% and 9%, respectively. Our ongoing renewal activity, combined with contractual rent step-ups and new leases drove our same-asset property cash NOI growth of 3.2% for the quarter.

G&A expenses represented 5.7% of property revenue and revenue from management and development services in the quarter, up from 4% in Q1 of 2024. This increase reflects higher salaries and benefits as we backfilled roles that were vacant during 2024 and includes employee transition costs and unit-based compensation tied to our strong unit price performance. Excluding employee transition costs and unit-based compensation, general and administrative expenses was 3.8% of property revenue and revenue from management and development services compared to 3.3% in quarter 1 of 2024. We expect full year G&A expenses, excluding unit-based comp to reflect the effect of the backfilled roles, as I mentioned.

FFO per unit for Q1 2025 was $0.30, unchanged from Q1 2024, while AFFO per unit was $0.27, growing 3.8% year-over-year. These results include higher interest expense of $1.8 million from our Series L and Series M senior unsecured notes issued in 2024 as well as employee transition costs and unit-based compensation expenses. Adjusting for employee transition costs, FFO per unit was $0.31, an increase of 3.3% compared to the first quarter of 2024, while AFFO per unit was unchanged at $0.27 per unit. We ended the quarter with FFO and AFFO payout ratios of 73.9% and 84%, respectively.

Moving to our balance sheet. At quarter end, our available liquidity stood at $696 million with an unencumbered asset pool of $3.7 billion. Debt to gross fair value was 43.6%, while debt to trailing 12-month adjusted EBITDA remained at 7.95x. We've carefully structured our debt maturity ladder to minimize refinancing risk and maintain flexibility through market volatility. Our weighted average term to maturity is 4.5 years with a weighted average interest rate of 4.1%. Over 98% of our debt carries fixed rates, further insulating us from interest rate fluctuations. We currently stand at 60% unsecured to 40% secured debt. As we progress through 2025, we are well positioned with minimal near-term debt maturities and access to diverse capital sources, providing us the flexibility to meet financing needs and advance our strategic initiatives.

A few items regarding our Halifax and Vancouver partnerships. As part of the Montez transaction, Crombie sold a 50% interest in the Marlstone for $32.2 million. In our MD&A, you'll see that our share of the estimated total cost to completion has been revised to $71 million. This updated figure now reflects the inclusion of land value and is presented at Crombie share. We continue to expect a yield on cost in the range of 4.5% to 5.5%.

Moving to the Wesgroup partnership. Crombie will retain 100% ownership of all 4 Vancouver assets and will continue to receive the associated rental income in relation to these properties. Crombie will act as co-development manager and will receive management and development fees from the joint venture. All costs will be shared equally between Crombie and Wesgroup.

And with that, I'll hand it back to Mark.

Thank you, Kara.

So as we conclude today's call, I want to emphasize Crombie's consistency, the quality and strength of our properties and our people. The first quarter of 2025 demonstrates the resilience of our strategic framework as the essential REIT, designed to perform through changing market conditions while maintaining a focus on the long-term value creation. Our necessity-based retail portfolio continues to deliver dependable performance with high occupancy and strong renewal spreads supporting steady cash flow growth.

Our approach to partnerships remains a key differentiator, whether with Empire, where our aligned priorities continue to generate mutual value or through the recently announced Halifax and Vancouver partnerships, we're creating opportunities that enhance our platform while preserving financial flexibility. Looking ahead, we remain deliberate in our approach, investing in grocery-anchored retail supported by complementary retail-related industrial and mixed-use residential properties advancing our entitlement pipeline to unlock embedded value while maintaining the financial strength to move decisively when opportunities arise.

I'm incredibly proud of the team's delivery and commitment. Their focus on operational excellence and community impact drive our performance every day, and I'm pleased to share that those efforts have once again been recognized with Crombie being named one of Nova Scotia's Top Employers, Atlantic Canada's Top Employers, Canada's Top Small & Medium Employers and Canada's greenest employer. At Crombie, we're building with purpose, delivering steady performance today while creating a stronger, more flexible platform for tomorrow. Our assets are essential. Our partners are aligned and our strategy is built to endure.

With that, we will now open the line for questions.

[Operator Instructions] Your first question comes from the line of Frank Liu from BMO Capital Markets.

Just quickly touch on the G&A that ticked up this quarter. I think you provided some color in your opening remarks. Could you just kind of clarify how much of this is attributed to the onetime item as you called it like employee transition costs? This is just for our modeling purpose.

Sure. Thanks for your question. So we're -- there's 2 line items that were affected by those onetime costs. So there is a portion in employee transition as well as a portion in UBC and guidance is between the $700,000 and $800,000 for that adjustment.

Your next question comes from the line of Lorne Kalmar from Desjardins.

I can't promise I'll be speedy Frank, but I'll try and keep it tight. I just wanted to focus in on the announcement of the 2 JV partnerships. The first question I had was related to kind of the pace of payments. Is it expected to be relatively steady kind of quarter-over-quarter from both of these? And will there be any additional kind of episodic payments related to certain milestones being hit?

Sure. Firstly, I do want to reiterate just how proud we are of these partnerships. So they are multiyear entitlement partnerships and will generate additional development management fees, particularly by adding Hastings and West Broadway. And so they will be equal over the portion of this entitlement project. They will be accretive to AFFO starting in 2025. And so we're expecting our fees to be a bit higher than what we saw in 2024, which was $5.3. That being said, they are not incremental to our overall plan. So it's worth thinking about balancing that uplift that we're talking about with a more normalized G&A run rate per the previous question as well. So we have a number of positions vacant that have now been filled, and we will have a very few roles continue to be filled in Q2 and Q3. And so what we're really saying is we would expect removing the total of UBC that was in Q1, so -- and looking at it as G&A as a percent of total revenue. And that's really where we would see a reasonable approximation for the remainder of the year. And so that was about 4.3% in Q1.

Okay. So with the G&A uplift, it won't have a material impact. The increased development fees won't have a material impact on the per unit earnings, but we will be higher on the development fee income than we were last year or you guys will be than you were last year?

Correct. You got it.

Okay. That's very helpful. And then this was maybe a misunderstanding on my part, but am I understand it's the JV that's paying both Crombie and the respective development partner? And then if so, could you maybe help me understand how the JV is funded?

Sure. So yes, the joint venture, we are co-managing the project. So there will be development management fees that come out of the joint venture for both Crombie and Wesgroup, and there will be line of credits within the joint ventures.

Okay. That's helpful. And then just last one quickly. Just wondering if there's any update on Broadway and commercial, the zoning process there.

Lorne, it's Mark. Still advancing through the entitlement process, working closely with our partner. We're hoping to have further clarity and updates in the probably quarter or 2 to come. But the 2 teams are working closely together to get that through the entitlement.

Is your development partner in any way motivated to sell this or to at least monetize their interest?

We're both motivated to get it entitled. That's definitely step one, and we are actively working together to get that first accomplished.

Your next question comes from the line of Brad Sturges from Raymond James.

My question is related to thinking about growth capital and levels of investment going forward. Like has that changed much at all in terms of maybe the total dollar amount you're looking to allocate to growth capital? And then with the weightings between your various growth buckets, whether it's nonmajor or major development, acquisitions, entitlements, would those have shifted at all in light of some of the recent new partnerships you have in place?

So when you kind of step back and think about total capital allocation, the way that we've been talking about it for a number of years now is we will spend up to $250 million. Over the last couple of years, we've been total capital in the $180-ish million range. You're thinking about them in the right buckets, nonmajor and major and acquisitions. So nonmajors are typically running at about 50% of the capital that we allocate. And that ebbs and flows a little bit because we had the Marlstone and we also did buy Davie Street. And so that acquisition would have crept up. It would come at the expense of the percentage of nonmajors going down.

But if you just think about it, generally speaking, nonmajors usually running around the 40% to 50%, majors run in the 30% and the rest goes to acquisitions. That's sort of how we look at the allocation of capital. And where we like that is the flexibility it has in those 3 categories because, as you know, nonmajors are $50 million or less. They're usually done in 12 months or less, and they have a really good yield on cost. And majors do have a bit longer of a runway on them, but they're excellent assets for the long term where we're optimizing the real estate that we have. So that's a longer answer for you, but it gives you the backdrop strategically how we think about capital allocation, how we allocate it, how we decide between major, nonmajors and acquisitions.

I guess acquisitions are going to be opportunity driven, but I guess how would that pipeline look today, whether it's third party or from Empire?

We are actively in the market trying to continue to add more grocery anchored to our portfolio, and we have a lot of discussions with third parties. As we've talked in the past, we've had a great relationship and continue to have an amazing relationship with Empire. We have purchased assets from them over time. They do have assets with -- in their balance sheet. We do have dialogues with them. It's a matter of when they're prepared to look at selling, we are absolutely prepared to look at acquiring. But at this point, we're looking at both and third party is sort of the focus right now.

Okay. Last question, just for clarification. On the office segment, I think there was like a onetime adjustment. I'm just curious of what that was related to?

Brad, it's Arie. So that was related to a recovery adjustment, just a onetime piece on that. Beyond that, we don't expect any more of those impacts moving forward after this was adjusted in Q1.

How much was the adjustment?

Approximately 3.60 to 4.

Your next question comes from the line of Mario Saric from Scotiabank.

Just maybe coming back to the Wesgroup JV, just so it's clear. In terms of like debits and credits, if you will, or cash coming in, cash coming out from an FFO standpoint, it sounds like the incremental fee income coming from the partnership will generally be offset by higher G&A. So it's kind of a net wash this year and then the expectation going forward is for it to be a net positive? Is that the right way to think about it?

Yes, that definitely is, as Kara was talking about, we were capitalizing some labor in there. That will now become expense as we now have the partnership. So that will be a bit of an offset in 2025, but it definitely will be a net positive as you think about the multiyears that this will take to get these through. These are long-term, medium-term projects that we've identified in our MD&A. So you are thinking about it correctly, Mario.

Anything else to add, Kara, on that?

No. I think you've got it.

Okay. And then also, I guess, kind of sticking to the cash in and out in terms of potentially selling partial stakes in the existing buildings, is that something that is being contemplated this year and next year? Or is this simply more of an entitlement partnership?

No, it's more of an entitlement partnership, Mario. So no anticipated partial sales in the near term.

Okay. Maybe shifting gears just to Bronte. I noted the FFO this quarter came down quite a bit from Q4. It was almost 0, and that included about an 8% drop in revenue. I know expense accruals can be volatile quarter-over-quarter, i.e., Q4 versus Q1. But maybe can you talk about what you're seeing on the top line revenue side there? Any onetime items during the quarter in the numbers and kind of what you expect, i.e., the stabilization of the asset going forward?

Sure. Mario, it's Arie. I think you break down the components on the revenue side, we're actually holding rents at a steady rate per square foot. What we did see in the quarter was just given a high amount of turnover due to the leasing that we've done in prior years and some of those leases rolling over, we did see some early quarter turnover. I'm happy to report that we were able to backfill virtually all of it. We're ending the quarter. We don't give specific guidance on property specific, but we did on this one, finish at a higher committed occupancy than we started the quarter. So that's on the revenue side.

On the expense side, we were also hit with some seasonal maintenance items that we don't anticipate to see moving into spring and summer. So overall, our outlook on Bronte remains positive. We're seeing some great tenant interest coming in through this early spring season. So beyond that, I would say it's a quarter 1 issue.

The only thing I'll add to that, Mario, is that we did put a mortgage on our commercial there. So we had about $100,000 in extra interest expense.

Okay. And then maybe shifting to the core retail portfolio, I think the occupancy was 96.6%. If we strip out any potential future dispositions that could bump it up like we saw last quarter and based on your leasing pipeline and the current macro environment, do you foresee potentially the occupancy moving even higher from where it is today?

Mario, we hit an all-time high this quarter in committed occupancy at 97.1%. The team is pretty proud of achieving that milestone. It was -- we hit the milestone last quarter. We hit another milestone this quarter. We had always talked about a range between 95% and 97%, and now we're at the top end of the 97%. So at this point, we're pretty comfortable where we're sitting. Arie's team works, as you know, each day, working with our tenants and committed occupancy and economic occupancy and making sure we've got the right merch mix. Can it go higher? Maybe a little bit. Will go down a little bit? Maybe, but we're in a really good range is, I think, the way to think about it.

Okay. So the overall environment is such that you do think that the economic occupancy can come up to where the committed occupancy is today?

It's ebbs and flows within the portfolio, but I'd say that there potentially could be some small improvement within our economic, but we're not talking about a lot here.

Okay. And it's a really small part of your portfolio, but the office occupancy at 86%, how do you kind of see that evolving through '25 and '26?

Mario, it is a small component of our portfolio. It's only about 5% of our GLA. Our -- it's broken down really between 2 segments. So our downtown Halifax office portfolio has performed exceptionally well relative to the rest of the market, and we're very happy to have some exciting tenants that will be joining us at some point later on in 2025 on the office side. So that interest remains strong. The challenges that we've been having in Moncton office portfolio, those -- the leasing team is actively working on backfilling some of the departed tenants. It is a more challenging asset for us to lease up, but we're continuing to work through that. But that said, it's only about 140,000 square feet. So it's a much smaller component of the office portfolio exposure that we have. But we're seeing some traction.

Your next question comes from the line of Sumayya Syed from CIBC.

Just following up on the Wesgroup partnership and of the interest that we bought from Empire. Can you just talk through the strategic advantage with somebody like a Wesgroup being a partner as opposed to working through the entitlement process with Empire? And are there other Empire co-owned sites that could see the same kind of outcome?

Sumayya, it's Mark. So we have historically been talking about the 2 parts of the country that we really see a good opportunity to optimize with entitlements, and it's in the Halifax market and the Vancouver market. They're very different in terms of planning and approvals. Vancouver is a very complex market and partnering with somebody like Wesgroup that is well over 60 years old and family-based, Western Canada focused, built over 7,000 homes, over 100 communities, like partnering with somebody like that, co-partnering with them through this is a great positive.

And so we see a lot of tremendous value in that, whereas in Atlantic Canada, partnering with somebody like Montez, which is more institutional capital focused that has a background in real estate where we're really leading all aspects of that day-to-day. So we kind of look at it in the 2 sides of the country, and we took on different partners for different reasons. At this point, we're really happy with the partnership programs that we have in place and not looking to expand beyond what we have at this point in time.

Okay. And then in terms of post entitlement objectives in the long term, it sounds like Crombie wants to maintain residential ownership. Would that be outright full ownership or keep the partners on? Do you have a sense of how that pans out down the line?

Yes. At this point, it's about getting them entitled. And then ultimately, once you have that entitlement to between the partnerships, collectively make the decision on where is the market at? Are we prepared to move forward and put the shovel in the ground at this point, they're all on 50-50 partnerships. So we'll work at that part. There's flexibility on both partners' behalf. But once we get through entitlements, then we'll hit that next phase of decision of go/no-go and the value.

Great. And then just switching to the retail side of things, obviously, doing very well there. And just given the ongoing shortage of retail supply and retailers still have growth mandates, do you expect that to be a positive to your non-major development pipeline? And do you see that growing on the back of that unabated demand?

Certainly, a lot more demand than there is supply, and we're getting a lot of the incomings for tenants that want to be located on our grocery-anchored shopping centers. The pad opportunities certainly are there. Some of the challenges now are just trying to make the numbers work with respect to construction costs. But on our existing GLA, like I said, demand is certainly outstripping supply. And I think the fortunate part of us having a tenant watch list is that we're constantly looking at tenants that might have some existing challenges so that we can replace them once -- should they decide to leave. So I'd say that the incomings are a lot more than the outgoings, and we're seeing a lot of very, very strong demand.

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

So yes, I think the leasing discussions have been brought up a number of times. But I guess if you had to answer the question of what's been the biggest change in the impact or the impact on leasing discussions from the tariff dispute in the last month or 2, what would it be? What would be the sort of single biggest impact that you've seen?

Sam, I'm sorry. I wouldn't say that there's been much change in the body language of our tenants quarter-over-quarter. Certainly, as I said earlier, the demand is there. Have we seen any trepidation from tenants or any slowdown? The leasing team is not really hearing that. I think that that's likely due to the fact that our portfolio is mostly essential and not discretionary. But like I said in previous answer, tariffs do not seem to be playing a factor into the essential retailer decision-making at this point.

And what reason, Arie, would you say that's the case?

Tough to say. I think that these -- the property types are generating the traffic that these tenants need to come on to the shopping center with. There's really not a lot of feedback that we're hearing right now that their supply chains are affected. That might be coming later on. But like I said, I think the nature of these tenant types is not one that's going to be severely impacted by these tariffs. And if they are, I think the fact that they're essential and nondiscretionary means that they'll be able to pass that on to the consumer.

That's helpful. And last one for me is just on capital recycling. And again, this has been touched on a bit already, but it just seems like Crombie's sort of opportunity set is crystallizing, coming into better focus. And perhaps over time, there might be some bigger investment opportunities than we've seen in the last couple of years. And as a result, what would be will be some opportunities within the portfolio for noncore dispositions in a more meaningful way to help fund that potential acceleration of growth in the future?

Sam, it's Mark. Look, when we step back and look at the portfolio of 304 properties, coast-to-coast, focused on grocery-anchored. We have disposed of a few assets over the last couple of quarters. We're actively -- as we've answered one of the other analyst questions around growth, we are actively looking to add more grocery-anchored. And where we're able to find grocery-anchored that sort of meets the criteria that we have in our underwriting, while it protects the balance sheet, it's accretive to AFFO, we're going to take advantage of them. So at this point, we continue to uncover opportunities and try to add them to the portfolio. The balance sheet, as you've been calling out, is in tremendous health and Kara and her team have done a phenomenal job getting it debt-to-EBITDA with liquidity at somewhat near all-time highs and unencumbered asset pool. So if the opportunity presents themselves, we're ready to action against it. So I hope that helps answer and give you a bit more clarity.

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

We noticed the disposition this quarter. And just looking ahead, how should we think through the disposition pipeline? And is there a quantum of assets that you're looking to dispose for 2025?

There's no quantum of assets that we're looking to dispose in 2025. As I just mentioned with Sam, the balance sheet is in terrific health. So we're not actively working on a disposition program. What we are actively working on is how do you continue to own and operate high-performing assets that stick to the core of what we're focused in on, which is necessity-based grocery-anchored. So the last 3 assets that we have disposed of don't fit the profile of what we ultimately want to invest our money in or our time and effort. And so as we continue to look at the portfolio, there are probably a couple of other ones in there that if the right opportunity present itself, we would might action. But the portfolio, by and large, as we've talked about, is necessity-based. We're always looking to grow from it. So there is no set specific disposition action plan.

And then just switching gears to the partnerships that you've announced. The one with Montez, how did the thought process come around for the sale of 50% in the Marlstone along with the other 2 sort of medium-term projects in Halifax? And what was the catalyst for that?

When you take a step back and think strategically, as we've been talking about, it's being an essential REIT, it's owning grocery-anchored necessity-based and then looking at the opportunities to optimize them through major and nonmajor developments. We took advantage of optimizing and greenlit the Marlstone about 18 months ago and started construction. We were doing that self-developed. But when you reflect back on partnerships, we've always talked about partnerships, and we talk about them in the way of major developments. So the game plan around the Marlstone was to highlight the proof of concept that Crombie can be a development manager. It can push these projects through the system in that market.

And once we establish that, we went to market to find a 50% partner to take some proceeds off the table, put management fees throughout the duration of the development and then ultimately get to a stable asset with a partnership. At the same time, we looked at it more broad holistically around finding a programmatic partner that can also participate in other opportunities that are in and around the same area with Barrington and Brunswick. So it is a long-term view. It's a long-term approach. And so that was sort of the catalyst of sort of how we were thinking through back to our strategy of what do you own, how do you operate it, how can you optimize it? And how do you leverage partnerships to make sure your balance sheet is flexible to be opportunistic for what you are truly investing in, which is grocery-anchored core retail.

Okay. And then just last question on the Marlstone. What would that -- what would the cap rate be or a range of cap rate be for that transaction?

We actually don't disclose cap rates on individual assets, but we are at 4.5% to 5.5% on a yield on cost. So that is disclosed.

[Operator Instructions] Your next question comes from the line of Pammi Bir from RBC Capital Markets.

Just maybe one question for me. Coming back to the development fees. You mentioned, I think, over $5 million for this year. What is the cadence of that sort of revenue growth potentially look like over the next couple of years with the new JVs? And I suspect there's obviously some lumpiness as well as you kind of hit the milestones. But just curious if there's any sort of recurring baseline aspect to them.

Yes. So we're not disclosing all the financial details of the deal. But what I can give you is that it is a fairly straight-lined approach to development management fees. So not a whole lot of lumpiness associated with that.

Okay. So would it be unrealistic to think that the growth profile would be in that -- like 5%-ish range? Or is it better than that?

We're really not giving guidance right now on the development management fee growth.

There are no further questions at this time. I will now turn the call over to Kara Cameron. Please continue.

Thank you, everyone, for joining, and we look forward to hosting you again on our Q2 call.

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