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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by. My name is Cheryl. And I will be your conference operator today. At this time I would like to welcome everyone to the Summit Industrial Income REIT Fourth Quarter 2021 Results Conference. [Operator Instructions] Mr. Dykeman, President and CEO. You may begin your conference.
Great. Thank you, operator. Good morning everyone. Before we begin, let me remind everyone that during this call we may make statements that contain forward-looking information, which is based on a number of assumptions that is subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. We direct you to our earnings release, MD&A, other security filings for additional information about those assumptions, risks and uncertainties.Joining me as usual on this call this morning is Ross Drake, our Chief Financial Officer; and Dayna Gibbs, our Chief Operating Officer.Let me start by saying we're very pleased with our performance in 2021. It was another record year for Summit. Our results were driven by the same strategies that have generated our growth from success in the past, our disciplined approach to growing the portfolio through acquisitions and development, combined with the significant organic growth through our strategic leasing programs in achieving significant rental rate increases. We have consistently delivered -- so we have consistently delivered significant annual portfolio growth since the REIT's inception.As you can see on Slide 4, our growth has accelerated over the last few years to where we now own 156 properties totaling just over 20 million square feet of GLA with a fair value close to $4.5 billion. You can also see that occupancy has remained at or near full level since inception. We closed 2021 with occupancy just shy of 100%. Our strong tenant relationships ensure that we keep vacancies and associated turnover costs very low.As shown on Slide 5, rental rate increases have also been a key driver of our growth. Through 2021 we've completed 2.1 million square feet of lease renewals and new leases. Most importantly, these leasing transactions generated a 28% increase in monthly rent, with a significant 67% increase in Ontario and 30% in Quebec. And then I exclude some contractual renewals we had.With the record-low availability and high demand, we are confident rent rates will continue to grow, especially in Ontario and Montreal where 72% of our portfolio GLA is located. With our portfolio growth, our high stable occupancies and strong rental uplifts, revenue from our income-producing properties has risen significantly again since inception, as you can see on Slide 6. And all of these strengths have driven a very positive trend in funds from operation as detailed on Slide 7. And we look forward to this growth to continue for a number of years ahead.Another key advantage for Summit is our sole focus on Canadian industrial market. Our growing presence in our three target markets, the greater Montreal area, the GTA in Alberta is a key contributor to our success. We know and understand these markets. We have confidence that there's still ample room to grow the portfolio in those 4 cities. This geographic focus also generates significant operating synergies and economies of scale. And with total revenue of almost $217 million in 2021, our cross-country team encompasses 5 property management locations.Now returning to our results for the 3 months and the year ending December 31, 2021. The fourth quarter was another strong quarter for summit. As you can see on Slide 10, revenue rose 11%, with net rental income up almost 12%. Organic growth continued. With the same property NOI rising 4.1% in the quarter. Funds from operation rose 23%, another solid quarter [indiscernible]. And our FFO per unit was up 12%.As you can see on Slide 11, 2021 was another record year for Summit. Revenues were up almost 14%. The same property NOI increasing close to 5%. Our organic growth was particularly strong in our key target markets with same property NOI up 6.5% Ontario, and 3.4% for both Alberta and Quebec. During 2021 we paid, secured mortgages with funds from our unsecured debt offerings. And this will result in an annual interest cost saving going forward of 4.5 million annually. Not including debt financing, prepayment costs our FFO was 27% to 2021. But most importantly, FFO per unit was up 8.3%. Our payout ratio, not including these prepayment costs or the benefit of the DRIP program was 79%. I will now turn things over to Ross.
Thanks, Paul. Turning to Slide 13. 2021 was a very active financing year for the REIT, including our activity in the unsecured venture market where we accessed an attractively priced debt while extending our maturities. We were pleased to expand our participation in green financing with the structuring of a new $75 million green unsecured development credit facilities on the heels of our green bond IPO. As Paul mentioned earlier, proceeds from our unsecured debentures were used in part to strategically address early repayments of $330 million of high higher interest rate secured mortgage debt, generating annual interest savings of approximately $4.5 million.During the third quarter, we were success -- we successfully completed $127 million bought-deal equity offering and accessed the market through our ATM equity program. Slide 14 details the continuing strengthening of our financial position. Our strategic debt restructuring program has resulted it in our unencumbered properties growing to $3 billion, representing 66% of total assets. Our proportion of unsecured debt rose to 72% of total debt, up from 39% this time last year. We also decreased both our overall average interest rate and leverage ratios over the course of the year. Our strategic balance sheet repositioning will generate considerable savings going forward and provide us with the financial resources and flexibility to continue our growth trajectory.Liquidity and financial flexibility is always top of mind. And as you can see on Slide 15, we continue to build on our available financial resources in Q4. At year end, we had approximately $1.1 billion available liquidity, including cash, available credit facilities and potential financing on our unencumbered asset pool. Hypothetically, if we were to use all of our available liquidity, our leverage ratio would still remain a conservative 42%. In summary, our financing achievements have supported a strong capital structure and balance sheet as shown on Slide 16. The REIT's overall leverage was reduced to a very conservative 28.5% at year end, with a weighted average interest rate of 2.5%.As seen on Slide 17, our portfolio experienced significant fair market value gains over the course of 2021. The result of ongoing demand for industrial space and underlying strong market fundamentals with the most significant increase seen across our Ontario and Quebec portfolios, which represent 77% of our total portfolio value. The fair value increase represents an increase in our NAV per unit of 49%. I will now turn things over to Dayna.
Thanks, Ross. And good morning, everyone. The [indiscernible] industrial market remains strong. National availability dips below 2% for the first time on record. And for the third consecutive quarter, every major market in Canada saw availability rate contraction in Q4. As Ross mentioned, we saw significant fair market value gains in our portfolio during the year, the result of strong demand for industrial space in our target markets driven by record low availability, limited new supply, significant rental rate growth and rapidly increasing replacement costs. The GTA, Canada's largest and most robust industrial market and the largest proportion of our portfolio continues to see strong fundamentals as shown on Slide 19.Demand has exceeded new supply consistently over the course of the year, resulting in overall availability below 1%. This market tightness has continued to fuel pricing power for both rental rate increases as well as increases in annual lease escalators in our portfolio. As detailed on Slide 20, Montreal is experiencing the same imbalance between supply and demand, pushing the availability rate below 1% for the first time and putting this market on par with Toronto and Vancouver. As a result, net rents have shown strong increases over the last few quarters with the largest increase in asking rents seen in Q4 and rental rates having followed an upward trend now for 13 consecutive quarters. This market shows no sign of slowing down in 2022.Turning to Slide 21. Calgary's growing position as the logistics hub for Western Canada is driving strong demand for larger industrial space. 2021 was a landmark year for Calgary, having posted a record of over 7 million square feet of net positive absorption. Availability is now sitting at just over 5%, down from over 9% at the height of the pandemic. Absorption continues to outpace new supply, resulting in significant rental rate increases through each quarter of 2021. And we continue to be optimistic about this market.Slide 22 details the positive impact that strong market fundamentals are having on our GTA portfolio. Availability in Canada's strongest industrial markets saw net rent rise to $11.58 per square foot, marking another record of 19 consecutive quarters of rental rate growth. Over the last 5 years, rental rates have almost doubled. Given these extremely tight market conditions, we saw a 6.8% same property NOI increase in our GTA properties for 2021. And our net rents in the GTA stood at $7.50 per square foot at year end. And as such, we have considerable upside as we renew term leases. Montreal, Canada's second largest industrial market is also generating strong growth as you can see on Slide 23. With the availability rate sitting at an all-time low, combined with a 16% increase in asking rents, Montreal is now ranked fourth in net average asking rates nationally. During 2021, the REIT achieved same-property NOI growth of 3.4%. And we are fully occupied.The industrial markets in Western Canada, and specifically in Calgary, have picked up meaningfully over the course of 2021, as you can see on slide 24. We are pleased to have seen a 3.4% increase in same property NOI in our Alberta portfolio, including a 2.8% increase in Calgary and 4% increase in Edmonton. Edmonton reported an impressive 2.1 million square feet of positive absorption during the fourth quarter, reducing the availability rate to 7% and narrowing the gap to the Calgary market.Looking ahead, we continue to -- tend to continue to focus on the same growth strategies that have generated positive unit holder returns to date in an extremely strong year for the REIT in 2021. Our growth and performance continues to be based on our 3-part strategy, expanding the size and scale of our portfolio through selective accretive acquisitions, proactive development and expansion, and capitalizing on strong market fundamentals to achieve organic growth within our existing portfolio, all while striving to achieve our ESG initiative.As shown on Slide 27, despite the highly competitive acquisition market in 2021, the REIT's acquisition program continued to be active, completing close to 400 million or almost 2 million square feet of high quality income-producing property acquisitions at very attractive cap rates. We also completed several strategic dispositions of noncore properties as we continue to actively manage our portfolio. Our sightlines for 2022 are good, and we're confident that we'll be able to meet our acquisition targets again in 2022. Given the potential for attractive relative returns, the REIT continues to grow on that platform. [Indiscernible] at year end we had over 1.4 million square feet under development in various stages of planning or construction. During the year, we closed on close to 30 acres or just under 33 million of new interests in development properties with two other announcements subsequent year end. Our development pipeline continues to align with our ESG initiatives and green financing framework as we strive to achieve maximum efficiencies and minimize our environmental impacts to our newly built properties. And we were pleased to also announce the addition of our green unsecured development line in 2021 to support our development projects.Another area of growth for the REIT is the embedded opportunity to add GLA through our expansion and intensification programs within our existing portfolio. As you can see on Slide 29, we have the potential to add up to 5 million square feet over time by expanding current buildings based on tenant demand and the development of new buildings of properties where we have lower site coverage. We continue to work with our tenants to anticipate expansion requirements in order to generate attractive incremental returns for the REIT on land that we already own.The third pillar of our growth strategy is to continue our track record of maximizing organic growth through our existing properties. As you can see on Slide 30, over the next 5 years we have over 10 million square feet of below-market lease renewals coming due with meaningful mark-to-market upside potential. As we discussed earlier, Ontario and Quebec in particular continue to be a landlord's market which will provide the REIT with further flexibility in our lease negotiation. I'll now turn things back over to Paul to wrap up.
Thanks, Dayne. So in closing, we continue to be very optimistic about the fundamentals of the key Canadian markets that we're operating in. We expect to continue to be able to execute our disciplined and selective acquisition program. And while acquisitions remain one element of our growth strategy, we are definitely expanding the development pipeline which will contribute a very attractive yield to cost returns and get brand new environmentally efficient real estate to our portfolio. Organic growth will continue and is actually accelerating as we renew leases at the new market rents which are currently considerably higher than our in-place rents and continue to move higher as well. And finally, our strong liquidity position and access to capital will allow us to execute on this growth strategy going forward.I'd like to thank you for your time this morning. And we're now pleased to take any questions. I just want to remind people that we're trying to limit everyone to 2 questions, 1 question and 1 follow up, to let everyone have a turn. Operator?
[Operator Instructions] The first question comes from Sam Damiani of TD Securities.
Maybe just to start off, maybe just on the cap rates that have fallen so much in the -- in certainly in central Canada. How are you thinking about income property acquisition opportunities for 2022, maybe in Quebec versus Alberta?
Yes, sorry, I'll take that, Sam. We were just -- we're working remotely here, just trying to keep coordinated. So I think what we've seen is obviously Toronto is what we call our center. There's been significant core flow transactions and what's happening there starting with the [indiscernible] REIT. That portfolio was [indiscernible] around 3 cap. There was a GTA West portfolio with a 2.5 cap. And more recently, there's another one that, I don't think it's public yet, but Everlast portfolio it's down 2.3 cap. And price per square foot on those are all up into the 350 and above/down per square foot. So I think people are saying that's very rich, that's based on a lot of assumptions that you're going to have to move rents to get a reasonable return, then that capital moves over to Montreal, which is the second largest industrial market. And we're seeing that same kind of cap rate compression there. The differential rate growth hasn't picked up as much in Montreal but I think it's coming very soon. So Alberta looks pretty good when you compare it to those 2 markets. And we're just being very selective. We're aware of our allocation to GTA and GMA, roughly with 78%. But selective acquisitions like we did on Crosspointe were -- which are immediately accretive for branded real estate, good quality tenants. It will be a [indiscernible]. Dayna, I think you had some.
Yes. No, I think also the balancing act is the attractiveness of going in cap rates in Alberta versus the upside on rental rates in Eastern Canada. So just to trade off that balance in terms of our portfolio allocation, we've had a stated allocation of 20% for Alberta, and we're happy to tick up over that on a temporary basis. And some sort of interesting anecdotes in terms of just affordability of Eastern Canada. And then we're also seeing it with Vancouver where we now for the first time are actually seeing some commentary in the market about certain tenants looking to Alberta versus the GTA for affordability. We've seen a lot of it recently of the overspill from Vancouver into places like Calgary because you have the rail lines accessing the ports quite easily, but we're now hearing for the first time some overspill from the affordability of GTA to Alberta. So as Paul said, we'll be selective, but are mindful that you don't have the same supply constraints in Alberta as you would have in Eastern Canada.
That's great color. Very interesting. And same property NOI growth you guys reported including bad debt. But if I back out the changes in bad debt, I get about a 3% organic growth rate for the fourth quarter and for 2021, and that's down from over 5% in the previous couple of years. I guess we saw the big Alberta portfolio acquisition from a couple of years ago rolled in the same property last year, which certainly would have brought it down, but I guess I'm a little bit surprised you brought it down that much. What's your view on, I guess, your 2021's performance in terms of same property with your portfolio? And how does it make you think about growth in 2022?
Well, from the Alberta portfolio, had some vacancies in 2021. And Calgary is, as of the first quarter of 2022 be fully occupied. So you saw a stronger same property NOI growth in the Alberta markets in the second half of the year. So that was helping the overall. And it was muting it earlier in the year. So we're very comfortable with -- we're seeing an accelerated leasing spreads in the GTA and Montreal market. So expect to see continued growth there. And then in comparison to -- for Alberta, we're starting to see rental rate growth on renewals and new deals there, and as well improved occupancy in the -- in those -- both those markets. So very comfortable that our same property NOI growth will continue to improve.
Your next question comes from Sumayya Syed of CIBC.
Just to touch on your leverage, now it's down to -- up 29%. Just wondering what that implies for acquisition capacity? And what's the ideal leverage range you would like to be in?
So I'll touch on it to start, I guess, and then, Ross, you can chat a little bit about some of the specifics. But we've attributed and have had commentary in the past about switching a little bit more from sort of the target leverage number to sort of the more broader metrics that we would think about in particular with some of our debt stakeholders. So thinking about things more on a debt-to-EBITDA metric, more cash thinking, particularly because of some of the movements in our underlying IFRS valuations on our real estate portfolio. So we don't have a stated leverage target. We've been gradually migrating leverage down. We're happy where we are right now with again more of the focus being on debt-to-EBITDA, which clearly is impacted by our leverage, but these are gradual movements. And given what's been happening in the bond market, we always had our seatbelt on here watching the government of Canada curve. But I think we'd be comfortable having some temporary upticks in our debt metrics, if we think that it makes sense strategically to lock in some pricing in an inflationary environment where things are only going one way. So we potentially be comfortable with some short-term uptick. But over the long period, we're happy where we are and we gradually continue to migrate that down with a view of improving our debt-to-EBITDA multiple in particular.
And then I guess you guys look out at your acquisition activity and pipeline for the year, is that going to be weighted more towards income-producing or more spending on the development side?
So I think it will look similar to what we did in 2021. [Indiscernible] we're always sitting [indiscernible] how are we going to get to our targets, especially in an environment where there's more and more competition and cap rates are only going one way. But we were very successful in 2021. We're happy with what we're calling our selective and patient approach to acquisitions on the income-producing property side. So we've got some good sightlines to 2022. I appreciate we're on our quarterly calls here, but are comfortable that our stated acquisition targets should be met. And again, we're going to be quite picky and selective of what we're doing. We don't feel that we have the need to go out and just be the most aggressive bidder necessarily. We've gotten used to being #2 or later down in the bidding process over the course of 2021. But obviously, by virtue of the more attractive returns, hope to continue to be active on the development side, both on balance sheet and with existing and/or potential new JV partners. So more of a focus on the development side. And expansion with some of our existing properties, that is a little bit trickier because we're lining up timing of lease securities and things and tenant requirements, particularly in an environment where timing can be difficult to predict with approval processes and availability of hard materials. But we're trying to focus on that as well because it's existing owned land. So you'll see more of a focus in that area, but we do feel comfortable that we can achieve our acquisition target.
Yes, I think, just want to add -- sorry, just want to add a couple of little points there. One of the other things we're looking for acquisitions, half -- last year, half of them were off market. So we're continuing to talk to the same people that we did last year to try to grab deals before they get to broader marketing. And we're also [indiscernible] success, whether it's in sale leasebacks or properties that are undergoing transformation. So [indiscernible] it can be expanded. So it's not just your straight-forward acquisition [indiscernible] straight-forward acquisition.
I think actually that's a competitive advantage that we have as well, that is -- you know, where you have -- you may have these acquisition situations that are not completely middle of the fairway, whether it could be a development piece and a stabilized piece, we can come in and are comfortable on sort of both sides of that situation where it perhaps, that might eliminate some of the other bidders.
The only other thing I'd add is in 2022 we'll see a few more developments coming into income-producing properties at a fairly accretive yield and so there is -- we saw the first one in January, a 440,000 square foot development come into income-producing. And that -- there's more in the pipeline there in Q2 and Q3 that will kind of be income-producing and start generating income.
Your next question comes from Joanne Chen of BMO.
[Indiscernible] you could provide some color right now as of right now, kind of what you're seeing spread between where market rents are and in-place rents that you have in place by market.
I'm not going to talk about all the markets, but I'm going to talk about one. So here, right, get your pen ready. So there's one number in our update, there is 150,000 square feet. We bumped it by 65%. And that's the third bump [indiscernible] in 5 years. But they're only doing [indiscernible] U.S. player, but then it gets better. So there's another one -- these are already in our MD&A [indiscernible] but 117% increase on 140,000 square feet, 123% increase on 120,000 square feet and 147% increase on 58,000 square feet. So -- and these are rents that are now into the $13 to $14 rent. So there's been a material movement in where rents are. So I don't -- Ross never likes to talk about same-store NOI and give guidance. But earlier in that discussion, we expect all of this. And it happens throughout the year when these leases, the new rents kick in. So it will happen gradually. But the momentum is increasing. Montreal, we don't have as much turnover. So we are getting some decent rental bumps. We have one tenant, unfortunately, had a 2-year fixed rental who is going to exercise that. But we'll have -- we have some space coming back in Montreal about 100,000 square feet, so we'll be able to test market. But some of the newer stuff in Montreal are allocated $10 or $11 is now [indiscernible] see that accelerate. And for the first time, there's a couple of leases that we're returning over [indiscernible] and we're starting to ask over like 7. So I think [indiscernible] pretty much the only market that's flat right now [indiscernible] as high as we can in both Calgary and [indiscernible].
Got it. That's great to hear. And maybe just switching gears, I guess, on the acquisition pipeline [indiscernible] the market focus continue to be -- I mean, both for [ IPPs ] as well as development land or potential -- would it be on your existing markets? I mean, would you consider any expansion into new markets, just given some of the transactions that happened in the Atlantic region as well. Just kind of wanted to see what the market the focus would be.
Yes, that question [indiscernible] discussions with our Board, and we had about it quite a bit and [indiscernible] and seeing sort of what the geographic competition was like with Summit I. The way we look at it right now is so long as we think there's enough to do in our key markets, that we're going to stick to those areas. What we would say is that perhaps the definition or the boundaries of those markets expand a little bit. So you see what we're calling the GTA will broaden out a little bit more. But really not thinking of entering any other markets in Eastern Canada [indiscernible]. So that really sort of wouldn't fit strategically with the types of assets that we would be looking at. The one area that we would potentially consider would be Vancouver and that would sort of round out our portfolio in terms of our exposure to sort of the 2 high-growth markets. But what we've found is the valuations have really just been prohibitive and for us to go into a new market like that, we would launch a meaningful presence in economies of scale. So we wouldn't just be looking to differ to an area like that. So right now, we're quite comfortable with the areas we're in. No desire to go to the U.S. right now.
Yes. Okay. No, I mean, I think staying truly Canadian I think is definitely an advantage for you guys. That's for sure…
Despite the very attractive cost of capital in Europe right now.
Your next question comes from Matt Kornack of National Bank Financial.
I guess it's a bit of a follow-up to that prior question as to how far the boundaries of the GTA and Montreal can extend. I mean at this point are we talking Windsor to Quebec City? Or how targeted do you think you have to be? And what are the risks of going kind of further outside of the GTA or Montreal?
Sure. Let's start with GTA because that's where we're buying more land. And you can really -- it's 2 sections, it's pretty easy to divide, inside the green belt and outside the greenbelt. So inside the greenbelt land prices are just going up at a crazy, crazy price. And we're seeing number in the $3.5 million, $4 million an acre. I think Amazon bought something for $5 million an acre. So [indiscernible] and that's still [indiscernible] what we're hearing about in Vancouver as well. So selectively, we'll do that in most of our target [indiscernible] is I call it ready-to-go, and ready-to-go in today's world of 2 to 3 years. So we're trying to line up so that every year we have 700 to 1 million square feet. That should be coming from development and income-producing. So we're kind of building up the pipeline [indiscernible] 3 to 4 years. So when we look out, we're really, really happy with what happened in growth, which [indiscernible] greenbelt. We're looking at land in and around that area. And then we're going further down. Just call it the 401 down in the [indiscernible]. Now that's not to say there's some significant developers on the public REIT that are down more in the Branford and Hamilton area. I won't say it's pioneering. I'm sure everything is going to get leased, it's just a matter of what the rental rate is. But what we're seeing is there's lot of tenants that would prefer to be inside the greenbelt because that's where their customers, their employees, but they're just not space available for them. So they're going to be as close as they can. So that's why we like to develop and then picturing, just kind of following that, the thinking, East [indiscernible] we'll buy everything there. So I'm sure -- it's a little harder there to pick but absolutely [indiscernible] continue to go north. But there's just not as much land on the market right now in Montreal. So I think there's more -- Montreal will see a bit more of a [indiscernible] redevelopment opportunity like we're doing with our property down by the port. We're knocking down a building, building another -- or branding 140,000 square feet. So we're looking at sites like that where you would either knock down or significantly improve the existing real estate rather than just going about and finding undeveloped land. Just to give one interesting number on land. We bid on something in the last couple of weeks. We think we're closer to the front-runner. There was 24 bids. That's how crazy things are. So when is the last --- that's more bidders than you would have for income-producing. So clearly there's a scarcity. I think across Canada [indiscernible] 36 million square feet under construction, about 2/3 of that's already pre-leased. So it's really not going to make anything -- any big dent in the availability. So this tight market, which is essentially full [indiscernible] Montreal and Vancouver, we think it's likely to continue.
And then I guess it's a bit of a counter-question to some of the prior ones. But I mean there was some talk about balance sheet capacity. But given where your cost of equity is and where bond yields have gone, is it not tempting to kind of overequitize at this point and maybe move to even lower leverage? Just your thoughts around that.
Sure. I can start, and Dayna can jump in. But -- and again [indiscernible] some of our American investors [indiscernible] REIR down there typically have a little bit lower leverage [indiscernible] I think when we started the year, Ross and I were kind of leaning that way. I think through internal discussion we kind of [indiscernible] such a significant mark-to-market, if we can put in 7 to 10-year bonds in that [indiscernible] 3.5%, 3.5% to 4% range. You're still not diluting the returns to your equity, so. But I thinking, we don't want to just [indiscernible] even though we could, it would be accretive. We think just because we such a significant mark-to-market, we don't want to issue too much equity and [indiscernible].
Yes. Yes, the other thing I'd say too is the benefit of our ATM program. We can have a little bit of the best of both worlds, whereas in, a couple of years ago or a year ago you'd have to come with the larger chunkier [indiscernible] follow-on offering. So with the use of the ATM, we can kind of -- at least right now, market conditions are open and available for us to use that. We're able to keep that leverage a little bit smoother. And for us, it's really trying to have sort of that smooth consistent level to the extent that we can keep it there as opposed to dropping up and down too much.
Your next question is from Alex Leon of Desjardins Capital Markets.
I just have a couple of questions on some of the leasing. Can you remind us the lease maturity schedule that's disclosed, is that net of commitments? Or are they gross maturities?
It's net of commitments. So that lease has been renewed, the lease maturity profile in the MD&A will push it out to the new maturity once the lease is signed. So any leasing spreads that we've talked about in the MD&A, those -- the new maturity date is reflected in the lease maturity schedule.
All the stuff that I just mentioned, obviously it's still in the lease maturity schedule. So these are the ones that we're talking to now and will happen sometime between now and the end of the year [indiscernible].
Would you have the spread handy on some of those commitments for Ontario and Quebec that have -- for 2022?
Ross -- so I [indiscernible] them off earlier, so. Yes, so in Ontario rent going from 12 -- sorry, going from $5.75 to $12.50, that's 117%, that was on 142,000 square feet. We had a 123% increase on 121,000 square feet on to $13.50. And the important thing with these rents in the GTA, we're not only getting a bump of over 100%, we're also pushing up the annual step. So it's a 5-year deal, we're getting anywhere from a 3% to 3.5% annual steps. And that's why you're seeing the overall contractual rental bumps moving up to like 1.9% for the entire portfolio. And then a smaller space [indiscernible] 58,000 square feet in [indiscernible] which is 147 [indiscernible]. So these are significant [indiscernible] adding $900,000, $500,000, $750,000 to the bottom line [indiscernible] we apply whatever kind of cap rates you think that is. These are significant [indiscernible]. There's another deal that -- Ross, can't remember if it's on the [indiscernible] 60,000 square foot expansion, which is a great case study because we've been able to [indiscernible] 40% on the new tenant that's just signing up there. And they're going to do an expansion where we're going to earn almost an 8% yield on the [indiscernible] expansion there. So that's going to end up taking on a property that we bought at about a 4.1% cap up to about a 5.6% cap. So almost 200 basis points lift in that one property loan, which I think translates into like over $30 million of value creation with each one of these new leases that gets put in place. So those are some highlights. And then seeing the same momentum on our development leasing, again we're not in a rush to lease our developments, but we've had a number in -- north of $14 on one of our on-balance-sheet development. Most of our JV developments that are under construction are either preleased or mostly preleased, and we're -- the rest of the [indiscernible] the decision we've made is we're not actually entertaining or taking offers to lease until we have government approval, which takes a while, but then it's 8 to 12 months to order steel and precast. So until you are ready to start building the building or you know we have a start date for building a building, we're not in a hurry to start the leasing program on those new developments because rental rates are just moving back quickly.
That's great color. Maybe last one for me, sticking with the leasing. Is there anything in the 2022 or '23 remaining maturities that are maybe fixed contractual steps that might…
Yes, there is one in Montreal [indiscernible]. And it's a big one, it's 240,000 square feet. You can look at it as a bad thing or a good thing. So it's only going up, I think, $0.10 or $0.15 a square foot. So again, we don't do that in our standard lease. And a lot of times we won't put even us [indiscernible] renewing our leases unless the tenants pay for it. But when we buy properties, we inherit some of these fixed price, which is not a lot, but there are just few in the Montreal portfolio. When I look at that, I go, that's not a bad thing even though you're not getting the rental bump for the 2 years because I believe the rental rate will be about 25% higher in 2 years. So when they do have to go to market. And we had that discussion with the tenant. We know the tenant is actually looking for more space. We have them in multiple locations in our portfolio. We're going, "We think you should do a year -- a 5-year deal, but it would have to be at market." And so they kind of said, "No, no, we like our fixed price, so we'll take our chances in 2 years." So [indiscernible] that's the only one, Ross, that I'm aware of, in this year that have the [indiscernible]
Yes, that's…
[indiscernible] yes, we looked at both -- the balance of the portfolio. I think there's -- there is like 6 to 7 of those [indiscernible] in the portfolio [indiscernible] in the Montreal portfolio, just one in Ontario. So they're mostly gone by now, but…
Your next question comes from Brad Sturges of Raymond James.
Wondering if you could give an update on capital recycling program or initiatives. Obviously, you've been a little bit active there in Edmonton and some small asset sales. Just wanted to get a little bit of color of how you're thinking about asset sales and capital cycling for this year.
Yes, I think it's a similar approach to what we've done last year. We've got our disposition watchlist. We don't have any sort of real sense of urgency in terms of what we have on that list. It's really going to be opportunistic. And obviously, as you said, capital recycling, what do we do with those proceeds being a public reach or generally net acquirers and by virtue of the pricing availability of capital in the market, again there's no real sense of urgency. But we do have sort of a soft circled list of sort of between $25 million and $40 million that we kind of keep an eye on. And depending on the circumstance and pricing, would potentially think about some [indiscernible] selective pruning just in terms of upgrading our portfolio this year.
Yes. I think, Dayna, most of that list, if I'm not mistaken, is in Alberta -- between [indiscernible].
Yes.
So it's just some of those smaller shop buildings or some that are a little bit quasi [indiscernible].
Okay. And you noted some of the positive trends, particularly in Calgary, in terms of some of the increased leasing activity and demand there. And you do have a pretty decent land bank. Can you just remind me how that land bank splits between Calgary and Edmonton? And given some of the positive trends, is there some of that longer-term intensification opportunity, is that getting pulled forward a bit? Or how do you think about that?
Yes. I mean it's certainly -- sorry; I mean I'd say certainly the market is more of a development market now in terms of our portfolio. We're focused much more on maximizing our market rent and keeping our occupancy stable right now. We do have a lot of low site coverage there. So it's something that, as we move forward, we could selectively think about the potential for expansion, but it's not something absolutely, absolutely pressing in terms of our development project.
Yes, Brad. It would be more of a build-to-suit offering. So we're definitely scoping out where building expand [indiscernible] is less than 4. And the cost of doing that is pretty much [indiscernible] to everything else that we're looking at in Montreal and Toronto. So we've got -- we're in discussions with 4 tenants [indiscernible] square feet and really attractive yield on cost. So we'll keep pushing those opportunities first.
Yes, the only thing I'd say though about the Alberta market is it's a more development-friendly market compared to some of the sort of submarkets, I'll say, that we're dealing with in the GTA. So things can get done a little bit easier and a little more quickly. So that's attractive. But again, it's going to be very specific in terms of demand for space.
Your next question comes from Himanshu Gupta of Scotiabank.
So just -- just focus on the development side here. I mean looking at the Burlington site 12 acre land which you acquired in January this year. How much will be the cost to build on a dollar-per-foot basis? And what range are you expecting? I mean I'm just trying to gauge with replacement cost here and economic rents to build.
Perfect, because we were in some investor things a couple of weeks ago, and that was probably a month ago now, and I've thrown out a new replacement cost number for GTA. So that's exactly a good question to ask. So that property is going to take somewhere between 2 to 3 years to develop. The site plan and approval process in Burlington is tedious and slow. But we paid about $2.3 million an acre for land. You have your development charges. So this is going to be the first time we're building a building north of $300 a square foot. The final number will be impacted by a few things that the city will impose on us, but we're anticipating probably a minimum of $325 a square foot and possibly as high as $350 a square foot. As I mentioned today, we're already achieving rents of, I guess [indiscernible] roughly. We just got a rent of $14.50. So we think the leasing for this is not going to take place until another 2 years, so you're going to be somewhere significantly north of that. But if you pro forma in that $15 to $16 range, just kind of where you think your yield on cost is going to be. If you apply appropriate development spread, we think you can look at yields, development yields, I'd like to do it on a price per square foot. So there's somewhere between in our entire development pipeline a minimum of $50, as high a $100. Let's just say it's averaging $75 a square foot development profit, you very quickly get to $400 a square foot, which is the new replacement cost number in GTA. And it was only 1.5 years ago I was going. We're going to surpass $300 a square feet. So absolutely, when you look at all these acquisitions that are happening in pretty significant [indiscernible] $300, $350, $360 a square foot for a 25-year-old property [indiscernible] building [indiscernible] $400 a square foot is around the corner if it's not already here. [Indiscernible] $3.5 million or more, they're going to be at $400 a square foot for sure. So you're going to need [indiscernible] to start to make those things. Make sense?
Yes. I'd just add too, so in terms of our development leasing strategy is in light of the rapidly increasing rental market rental rates in the GTA whereas you are balancing sort of the security of preleasing with waiting as long as possible to try to really squeeze out all that upside in market rents. And with some of the uncertainty around the actual development of these properties, sometimes timing isn't as certain as you would have seen in years past. So to balance sort of the deliverable timing and maximizing that, the increases in market rents is sort of where our thinking is at.
Well, and I think the perfect example is our property in Oakville and [indiscernible] are, it's just under 100,000 square feet. The [indiscernible] is going up, we've been dealing with offers for over [indiscernible] for over 12 months, and we just recently did out -- a deal that's in the mid-14s, but where we own the land before, the yield on cost is going to be somewhere around 7%. So that's -- I'd love to be able to say we could do that every time, but just shows by waiting there our yield to cost went up significantly.
Got it. Very helpful. And then looking at the GTA transactions, I think Paul, you mentioned you're seeing transactions 2.51 cap rate, 2.3 cap rate. I mean, obviously I imagine that [indiscernible] below market rents. But are asset with 5-year lease terms remaining these also trading at similar levels? I mean -- so the point is the assets which are trading at sub-3 cap rate, is the lease term shorter than the others.
Yes, so -- yes, I think most of them are going to be under 5 years, but I think kind of 5 years is that magic number. Anything that's under 5 years [indiscernible] taking whatever that ingoing yield of 2.2% and moving rents and pushing that yield up to 4% or 4.5% is probably the strategy. And I think that they think they could do that in less than 5 years, that's our feeling. In out test on those, it's not that could we do that or not. We look at the price per square foot. We say if that translates into $360 a square foot we're going, why would we buy 25-year-old real estate with [indiscernible] going up to 4.5% cap 4, we can build brand new on our Burlington land at $325 to $340 square foot get branded real estate and get a yield on cost that's going to exceed or be at least [indiscernible] 4.5% to 5% yield on top, so that's kind of the -- that's the math that we do that drives more towards development than acquisition.
Got it. That makes sense. And maybe the last question is on same-store NOI growth. I mean, do you think Alberta is likely to be flat this year? I mean given that not much occupancy is being expected? And then [indiscernible] in Ontario and Quebec could be slightly higher than the last year, I mean given the acceleration in rent?
So I'll answer that…
The…
Before getting to the third one. Absolutely, the -- Ontario is going to be, yes, much higher. Ross can give you the…
Alberta because we had lower occupancy in 2021. And when I say lower, it's in the 90% to 93%, now it's close to full occupancy. You're going to see improved same-property NOI there. And then we are seeing rental rate increase on renewals now, whereas last year the deals we were doing were flat or slightly negative because we were trying to maintain occupancy. We'll start being a little more aggressive on rental rate. So while I don't believe it will be flat in Alberta and I -- GTA, I see continuing the improvement, if not an acceleration on the same-property NOI growth just based on those rental rates that Paul is quoting in that. And the deals that we -- leasing spreads we've shown in the MD&A, they didn't fully take effect in 2021, so you're going to see the full impact of those net increases in 2022. And the contracted retro steps are continuing to grow. So I still see a very positive trend in same-property NOI, and it's been around 5% the last 2 to 3 quarters, and that's 4% to 5%, so I'm very comfortable that it will continue that way with the growth in rents. And we're not seeing any decrease in occupancy in GTA in Montreal, and we have enough visibility for Alberta to say that they stay around that near full occupancy. So very positive same-property NOI for 2022.
Got it, Ross. So you're saying something around 4% to 5%. Is that what you're saying…
I didn't say a number. He didn't say a number [indiscernible].
I can see maintaining and improving on the 5%, yes.
There are no further questions at this time. I will now turn the call over to Mr. Dykeman for closing remarks.
All right. So thank you again. That was a good call. And we look forward to talking to you next quarter end. But 2021, our reflection was an amazing year for [indiscernible] I think all industrial owners, and we're seeing lots of runway for 2022. So I think it's going to be another exciting and fun year to have these calls because I think we're going to have lots of nice and [indiscernible]. All right. Thank you. See you next time.
Thank you, guys.
This concludes today's conference call. Thank you for your participation. You may now disconnect.