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Good morning, and welcome to the PROREIT fiscal 2020 Fourth Quarter Results Conference Call. [Operator Instructions] Mr. James Beckerleg, President and Chief Executive Officer; and Mr. Gordon Lawlor, Executive Vice President, Chief Financial Officer and Secretary, will make a short presentation, which will be followed by a question-and-answer period, open exclusively to financial analysts. [Operator Instructions] For your convenience, the press release along with the fourth quarter financial statements and management's discussion and analysis are available at proreit.com in the Investors section and on SEDAR. Before we start, I have been asked by PROREIT to read the following message regarding forward-looking statements and non-IFRS measures. PROREIT's remarks today may contain forward-looking statements about its current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements or other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, levels of activity, performance, achievements, future events or developments to differ materially from those expressed or implied by the forward-looking statements. As a result, a PROREIT cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking statements contained in PROREIT's MD&A and dated March 24, 2021, available at www.sedar.com. Forward-looking statements represent management's expectations as of March 24, 2021. And except as may be required by law, PROREIT has no intention and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.The discussion today will include non-IFRS financial measures. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from REIT's IFRS results. For a description of these non-IFRS financial measures, please see the 2020 fiscal year and fourth quarter earnings release and MD&A. A reconciliation of non-IFRS to IFRS results as applicable may be found in the earnings release and MD&A for the 2020 fiscal year and fourth quarter. Please refer to the non-IFRS and operational key performance indicators section in the MD&A for the fourth quarter for additional information. I would now like to turn the conference over to Mr. James Beckerleg, Please go ahead.
Thank you, Colin, and good morning, everyone, and welcome to our year-end review call. As everybody knows, we're just ending a truly unprecedented year in the context of the global pandemic which is also, of course, continuing to have far-reaching repercussions in the business world. Like most businesses, PROREIT was tested on many fronts during 2020. However, as President and CEO, I can report that I'm very proud of all that we achieved during the past turbulent year. From the outset -- from the onset of the pandemic, we took proactive steps to protect our employees, our tenants and the communities where we own properties. And I believe we adapted with agility in a shifting environment, and we came together as a strong and unified team working for all of our unitholders on a consistent basis. Our performance reflects a significant value of a strong defensive portfolio, well diversified by asset class and also by geography and tenancies. We believe our solid foundations and the soundness of our business strategy have enabled us to succeed in these very challenging circumstances. They also allowed us to quickly return to growth mode in early 2021 as the economy reopens. In this context, we were very pleased to announce 2 major transactions last week subsequent to the fiscal year-end. The first is the proposed accretive acquisition of 12 institutional quality industrial assets were just under $87 million. 3 of those properties -- 3 of the properties that we're purchasing on this transaction are located in Ottawa, and the balance of the buildings are in Winnipeg. The transaction is already supported by just under $54 million and arranged new mortgage financing. With these additions to our portfolio, we will be expanding our footprint in the industrial sector, which is a key current strategic objective for us. On a pro forma basis, it's great to see that our exposure in this sector will increase to 70% of our gross leasable area, GLA. It will also further diversify our geographic footprint by bringing our exposure to the Ontario market to approximately 31% of our GLA. The second major transaction we announced last week is a $50 million private placement with the Bragg Group of Companies. The Bragg Group is a major Canadian private investor, and I believe that all should be thrilled to have him on board as major investors in our region. They'll be holding at closing just under 20% of the equity [indiscernible]. Their substantive investment will provide equity for the 12 acquisitions that we just talked about as well as enhance our liquidity position in order to capture additional growth opportunities in our acquisition pipeline. We, in fact, were already in discussions regarding the acquisition of 6 additional institutional quality industrial assets, these located in Atlantic Canada, a price range of approximately $47 million. So needless to say, it's been a very busy first quarter for us. But let me just return here to our major topic today, which is fiscal 2020 review. Despite the pandemic, we achieved solid results, highlighting the resiliency of our focused portfolio. We consistently maintain strong rent collection rates, one of the best we believe among our peer group. In fact, our overall collection rate remained above 90%, even in the worst months of the closures. By July 2020, we are at 98.5%. And then from November through to the present day, it has consistently stood at more or less 100%. These robust results truly highlight, we believe, the stability of our well-diversified tenant base. As I previously mentioned, I am particularly proud of the strength of our retail segment. Our retail portfolio has always been by strategy, almost exclusively comprised of community strip centers, providing essential services anchored by grocery stores and pharmacies. Despite various restrictions imposed throughout the year, impacting their operation, they held up exceptionally well. And you will see in our results that only a very small number required our or government program support. We also believe the quality of our long-standing relationships was a key contributor to our successful collection rate in the challenging period we were working in. We work closely with our tenants and supported select tenants through both rent deferrals that we arranged and under the Canada Emergency Commercial Rent Assistance program, which we all call CECRA. At December 31, branded net deferrals remaining amount to just $300,000 to repaid by the tenants who are benefiting from those deferrals within the balance of this year. To date, all of our agreed deferred amounts have been successfully collected on schedule. For the full fiscal year, $800,000 of COVID-19 provisions were recorded in our financial statements, including $100,000 of the CECRA participation costs that I referenced before. Now just turning to our leases. We had a fairly large portion of the maturing in 2020, and I was very pleased to report in our results that over 97% were successfully renewed when adjusted for the small sale nonstrategic property which closed in January. These renewals were secured at positive spreads to existing tenants -- existing leases them, sorry, so they will generate increased income as we go forward. Just as an aside here, as for leases maturing in 2021, I believe 78% are already renewed, and again, a positive average spreads to the maturing lease rates. With respect to occupancy, in 2020, remained firm at 98% at the end of the year. We closed 2020 with 91 properties in our portfolio compared to 92 the same period later, so basically flat. Total assets amounted to $634.5 million. As part of our year-end review, we also updated our independent external appraisals for 71 of our 91 properties. And after going through the pluses and minuses, we recorded a fair market value gain of approximately $4 million in the portfolio as a whole. With respect to acquisitions or diversifications, we spent a pretty prudent and quiet year. We purchased 1 light industrial property and sold 2 nonstrategic buildings, including a small office building in Q4 for $5 million. In February of this year, subsequent to the year-end, we also sold another nonstrategic light industrial building for $8 million. Let me now just review our financial performance for the year. We delivered solid results despite the many headwinds. Property revenue grew to $69.8 million, a little over 21% increase compared to 2019. Net operating income, NOI, reached $40.5 million, up 14.2% year-over-year. Excluding COVID-19-related impacts, NOI was $41.3 million, which would have been up 16.6%. With respect to AFFO, it grew to $22.4 million, which was up just under 10% year-over-year. The solid growth across key indicators was mainly driven by the net acquisition activity that we had concluded in the previous 2 years prior to the pandemic. As you know, another step taken during the year among our prudent measures was in April 2020 when we responded to the economic volatility flowing from the onset of the disease. And our Board of Trustees revised our distribution policy at that time to the current very sustainable level, allowing for a reduction in debt and increased flexibility in allocating capital to the benefit of our unit holdings. At that time, we also suspended our distribution reinvestment plan, and that's subject to review on a go-forward basis. I'll now turn it over here to Gordy who will go through our Q4 financial results.
Thank you, Jim, and good morning, everyone. We had good momentum in Q4 and achieved a solid performance. Property revenues stood at $17.6 million, up by 1.6% compared to the same prior year period. This was mainly driven by contractual rent increases and higher rental rates on lease renewals. Net operating income amounted to $10 million comparable to the same period in 2019. Excluding COVID-19-related impacts, net operating income amounted to $10.2 million for the quarter. Same-property net operating income reached $9.7 million, a slight increase of $100,000, mainly driven by the higher rental rates on lease renewals, offset by a slight decrease in average occupancy. AFFO dipped by $300,000 to $5.4 million as a result of an increase in maintenance capital expenditures and leasing commissions in the quarter. Our AFFO payout ratio stood at 83.9% compared to 110.5% for the same period last year. This improvement relates to the revision of the monthly distribution that Jim mentioned. Liquidity remained top of mind during the year. The prudent management of our operations and stable cash flows served us well, and we further strengthened our balance sheet. In November of 2020, we secured a new $13.3 million term loan at the current lender. Subsequent to year-end, February 2021, we received $46.6 million in the mortgage financing with an extended term repayment -- an extended 10-year term repayment at a rate of 3.21%. Following this mortgage refinancing and our 2 nonstrategic asset sales, we increased our operating liquidity to $35 million of availability through cash on hand and undrawn operating facilities. This is expected to improve for debt to gross book value ratio, which was 57.8% on December 31, 2020. We are also working on some additional refinancing for 2022 mortgage maturities. We will advise when that is completed. As for our weighted average interest rate on mortgage debt, it stood at 3.73% at December 31, 2020, compared to 3.74% at the same time prior year. Our weighted average cap rate for the portfolio is approximately 6.5% or $136 per square foot. Now turning to distributions to unitholders, $0.0275 per unit were declared monthly through the fourth quarter of 2020. I'll now turn the call back to Jim for closing remarks.
Thanks, Gordy. So we have the last turn the page in 2020, and a year that, I think, guess that all of our tested all of us and all of our resilience. And then also for PROREIT, I think, highlighted the engineering strength of our business strategies. And with 2021 well underway, we actually now see pivotal opportunities on a go-forward basis. The restart of the economy has allowed us to return to our growth plans with the major acquisitions amount in the industrial sector and provides significant opportunities that are already in our pipeline. Our successful private placement will significantly enhance our liquidity position for these future growth opportunities, and we're pleased to have that flexibility. While continuing to adapt to the ongoing pandemic, we've had great conviction in our strategic direction and look to the future with the optimism that I've spoken in. So in closing, I just want to recognize the outstanding contributions of our employees during this last year, and a special thanks goes to my fellow Board members for their continued support and wise counsel. I can pledge to you all that we will continue to consistently raise the bar with discipline as we move forward on our growth plan, and I hope that benefits all of our unitholders. So that wraps up the remarks Gord and I this morning, the formal part of our remarks, and we're glad to answer any questions that might be put forward to us now by the analysts.
[Operator Instructions] Your first question comes from Lean Chen from AI Capital Markets.
A couple of quick ones from me. Just regarding your acquisitions that you've mentioned located in Ottawa, Winnipeg and also in Atlantic Canada, I was wondering if you can rate the transactions are expected to close?
Sure. I -- yes. So the Ottawa Winnipeg portfolios, I would expect towards the end of April, first 2 weeks in May. The other $47 million that we have there, that's a little further behind, those deals. So you'd see towards the end of May, beginning of June, I think.
And can you give us a range for the cap rates? I don't know if you mentioned it because it briefly cut for me.
So. Yes. So cap rate, just to touch about 6% actually for 6.1%, if you look at the numbers that we -- on the acquisitions that we've noted in our press releases and including the management profitability of managing those properties.
Okay. Great. And just last one for me. Just in terms of -- though strong pipeline. But in terms of future acquisitions, can you share if there's anything else that we can expect for the rest of the year?
Well, it's Jim. We've -- I mean we're seeing a lot of opportunities right now flowing into the market. So I think that there is -- there are many potential vendors or people who are active in the real estate market who are sort of taking the pause last year and they're returning. So we're seeing a reasonably steady deal flow. And I think there's the opportunity that, that may even pick up as the year goes forward because I know that there are some potential vendors or properties who are waiting for more physical openings so that a wider range of potential purchasers can actually visit properties this on before making good determination. So we're pretty optimistic that the economy unless something unforeseen happens with respect to COVID as the economy starts to continue -- continues the growth pattern it's on now. We'll see good opportunities [indiscernible].
Your next question comes from Jenny Ma from BMO Capital Markets.
Just clarify for the 6.1 cap rate, that is for the Ottawa, Winnipeg and Atlantic Canada transactions.
Yes. That's really for Ottawa and Winnipeg.
Oh, Winnipeg. Okay. Would it be fair to say that the Atlantic One is probably a bit higher than..
Yes. Yes, exactly. A little bit higher than the Atlantic ones.
Perfect. And to the extent you can, can you tell us a little bit about the vendors of these portfolio? Are they related or are they 3 separate portfolios? And what do you think the motivation to sell was? I'm trying to get at whether or not there's going to be future opportunity coming from these vendors or other vendors of this profile.
We're still subject to confidentiality. So we have to be a little careful how we answer that question. There's 3 transactions involved. Actually, 2 of them are institutional vendors. One is private. We have done business with some of the vendors before. I think that the reasons for selling are probably the nature of just institutions refocusing or maturing funds or in case some of the others repositioning your portfolio and perhaps larger properties or things of that nature?
Okay, great. And maybe just for Gordy, what is the rate on the mortgage debt associated with the Ottawa, Winnipeg transaction?
Not set yet, but the way we underwrote it in that and where we are in the market here, it'd just be a touch below 3%.
Okay, great. And then on to the other -- the new mortgages that you secured, the $46 million, the yield maintenance fee of $1.3 million, that's expected to be charged in Q1, correct?
Yes, that's correct.
Okay, great. And then my next question is you're buying more industrial properties and weighting towards a highly favored asset class. But when you look at the very strong rent collection that you have the entire portfolio, but most meaningfully in the retail portfolio, I guess it speaks strongly to the portfolio you have and presumably your ability to spot high-performing properties. Given that and the expected availability of retail coming to market, especially in some of the secondary markets, does that give you sort of more confidence to pursue retail properties? Or is the view still towards staying put on retail and growing at the industrial base?
I think that we're focused right now on the industrial side of things because we're actually, despite the cap compression that's going on, see accretive opportunities coming forward, and we'd like to feel a little higher weighting in that sector. We're not turning away from retail. As a matter of fact, the type of retail that we're invested in and could seek in the future is still seeing very aggressive pricing in most cases. And so we haven't seen significant accretive opportunities in larger transactions. And honestly, Jenny, we've become big enough that we can't just put together an agglomeration of $4 million deals. It takes too long.
Your next question comes from Colin Healey from Haywood Securities.
You might have mentioned, but it looks to me like you could manage to close the 6 acquisitions in the pipeline without tapping additional equity, given your liquidity position. Would you say that's the plan would you look to do another race to support that potential transaction?
We have...
It's Gordy -- go ahead.
Go ahead. Sorry.
Yes. No. I mean, if you do the math on the $50 million, we have enough there to close those basically 18 properties there. On a debt rent basis, we short a couple of million maybe, but yes, we have enough to close those properties. And then we had some -- with all the refinancings you see and a couple of asset sales, and there's a couple of small ones in the future as well, there's some more net equity coming back to us as well. So we don't need to tap the market for those 18 assets.
Okay. Great. And just for the tenants in the Ottawa and Winnipeg acquisitions, can you characterize them the way that you have for your existing portfolio? Is it a mix of government for the Ottawa and national? Or is it too soon for you to do that?
You want to go?
Well, I can -- it's too soon to give a lot of deals, but it's not -- it's private sector dominated. It's a type of industrial properties that we are -- the ones that are under contract now, we've already announced are type of industrial properties that were already in our portfolio tending to be smaller bay. And we see great opportunity to increasing rents in that type of portfolio. Some of what's in our pipeline now or larger logistics styles [indiscernible], but it's too early to go into more detail.
Okay. Yes, I thought it might be that's not closed yet. For mortgage renewals in 2022, how are you approaching -- is there any strategy you can take to kind of lock in lower rates early? Or with potentially rates creeping up, is there anything you can do there? And maybe just talk about the size of the renewals?
Yes. Well, we have almost at the end of the year, if you look, we had about $71 million coming due in 2022, about $6 million '21. So of that $70 million, we're going to probably pay out about $14 million of it. We've refinanced with industrial $23 million of it with another $16 million in excess proceeds. And then we're in the market right now with another $21 million of debt there on retail -- on some of the retail assets. So leaving basically $13 million of that, which is likely just a pure renewal with the current lender. So we think we'll have mostly all of that straight way push or 7 to 10 years. And this next portfolio that is going out with the penalties would be a lot less than the first group. So yes, we'll have -- putting 2022 straight away, hopefully, in the next couple of months.
The 10-year -- I don't know, Gordy mentioned the industrial portfolio was just renewed as 10-year money. I might just say if Jenny is still listening, that's one of the other things that's driving our -- the attractiveness of the industrial portfolio as we're finding that there's better lending spreads in that area than there is in retail. Right now from the major banks as well. So that's just another point I might have mentioned.
[Operator Instructions] Your next question comes from Yash Sankpal from Laurentian Bank.
Jim, just want to talk a little bit broadly. You mentioned that you want to increase your weighting to the industrial segment. Given what you have seen over the last 1 year, how are you planning to adjust your portfolio ratings going forward?
We haven't set specific roles. Our Board hasn't got specific percentage targets. So it's a little bit more opportunistically driven. We actually are focusing right now and increasing some of the weighting in the industrial portfolio because we see better growth opportunities in the rents in that sector. We're able to buy buildings that are significantly below replacement costs despite the increases that's happened in many of the secondary markets. And we see, as I just said, significant room for vacancy decrease and pressure on the upward side on rents. That's while on the retail sector, the performance has been good. As was pointed out by Jenny and by ourselves a little earlier. We're not seeing quite the same growth opportunities in those rents in the markets that we're in. So we'd like to see a little more direction there. And at office, again, office, we just -- for at least these quarters we're now, we need to see a little more direction in the market and just how the office market is -- are to react to the changes in the economy before making significant new investments. But we're not announcing we're becoming exclusively an industrial [indiscernible].
That's what you're right. Given the increase in e-commerce activity and the work-from-home phenomena, are you inclined to reduce your exposure to, say, the office segment? Given what -- like what you already own?
The office segment that we have right now is performing well on the whole. And but -- so we sold 1 small building, but we're not looking right now to aggressively sell out of that sector. It's performing. It's mostly in Ottawa. It's performing satisfactory.
And you're not worried about the long-term trends?
Well, I guess, like everybody, we're looking to get some further clarity in the office sector, yes. But I mean we have some leases maturing in the office sector in Ottawa this year. In 1 or 2 cases we know towards the end of the year, tenants are leaving. We're having them -- they're in the suburban market that we're in. They're being actively visited by potential tenants. So there's all these submarkets. And the office buildings that we're in, unfortunately, aren't located on the whole and like the downtown corners of the building that have been sort of hollowed out, you know I mean? So we're not -- we're just not focusing on building our exposure in that sector because we don't see the rent increases, but we haven't taken a decision to sell any of the handful of properties we have. And our -- we also break out unlike some of the REITs sector called commercial mixed-use, which most REITs that haven't lumped in the industrial sector, but we have some sort of semi-office exposure in that category, depending on how you view the use, and that's performing -- that type of property is performing very well and we see rent increase opportunities.
Okay. Now just moving to the recent acquisitions and the institutional investors, does the Bragg Group, do they own any real estate in any...
The Bragg affiliates or well, yes, the brake group is private. So I'm not going to tell you that I know all of the Bragg family's holdings. I don't -- they're not -- they've indicated that they're not active in the real estate market and an operational sense or -- but I mean, I think that the Bragg Group owns lots of real estate in the operating businesses that they're in. I mean through East Link through the Oxford Frozen Foods business through -- so I just -- but their investment right now is not geared toward real estate investments that they're currently holding, that they're looking to. I don't know how the relationship will on a go-forward basis. But this is an inbound investment because they like the kind of operation that we're running, the kind of investments we have, the kind of cities we're involved in. So it's inbound money. It's not opportunistic with respect to some other part of your business.
Right. And would it be fair to assume that they wouldn't be influencing your decisions in terms of your strategic focus or your -- it's in a particular sector.
We look for counsel and advice in discussion with anybody that owns like 20% of the company. But the private placement agreement that we've entered into them does not provide rights or obligations not side. It's a straight inbound investment.
There are no further questions at this time. Please proceed. There are no further questions at this time. Please proceed.
Oh, I see. Okay. Well, I think that wraps it up from our point of view. Gordy and I are always around for any questions with the analysts or other investors in our company may have, and we're pleased to take them. So thanks, everybody, for being here this morning, and look forward to talking to you after the next quarter. That's it, operator. Thank you very much.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.