First Capital Real Estate Investment Trust

Thank you, Jim, and good afternoon, everyone. In discussing our financial and operating performance and in responding to your questions during today's call, we may make forward-looking statements.

These statements are based on our current estimates and assumptions, many of which are beyond our control and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. A summary of these underlying assumptions, risks and uncertainties is contained in our securities filings, including our Q3 MD&A, our MD&A for the year ended December 31, 2024, and our current AIF, which are available on SEDAR+ and our website.

These forward-looking statements are made as of today's date, and except as required by securities law, we undertake no obligation to publicly update or revise any such statements. During today's call, we will also be referencing certain non-IFRS financial measures.

These do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS. Management provides these as a complement to IFRS measures and to aid in assessing the REIT's performance.

These non-IFRS measures are further defined and discussed in our MD&A, which should be read in conjunction with this conference call. And with that, I will now turn the call to Adam.

Okay. Thank you very much, Neil.

Good afternoon, everyone, and thank you for joining us today for our Q3 conference call. We're very pleased to deliver another strong quarter of operating and financial results.

It has been a great start thus far in 2025 for FCR. In the third quarter, same-property cash NOI grew by a healthy 6.4%.

This excludes lease termination fees and bad debt expense. In round numbers, a little over 2% of the NOI growth was from increased occupancy and new tenants paying cash rent at One Bloor East.

All other factors, which are primarily higher rents across the balance of the portfolio, contributed a little over 4% of same-property NOI growth. On a year-to-date basis, same property cash NOI, excluding lease termination fees and bad debt expense, has increased by 6%.

This is a very healthy growth rate for our business. And as you've heard from Neil on prior calls, it has exceeded the expectation we had at the beginning of the year.

The primary driver of this outperformance has been better-than-expected leasing. With demand continuing to exceed supply for FCR-type retail space, we expect our properties will continue to perform well.

Following a record high occupancy level of 97.2% in Q2, occupancy remained solid at 97.1% in the third quarter. Our average in-place net rental rate in Q3 stood at just over $24.50 per square foot, which is an all-time high.

During Q3, we renewed approximately 550,000 square feet across 146 spaces. Net rental rates in year 1 of the renewal terms averaged $27.41 per square foot representing a year 1 renewal rent increase of over 13%.

Approximately 3/4 of our renewed leases in the third quarter included contractual rent escalations throughout the renewal terms. This resulted in a renewal lift of over 18% when comparing net rents in the last year of the expiring terms to the average net rent during the renewal terms.

In addition to renewal leasing, we also completed approximately 150,000 square feet of new leasing at FCR share across 55 spaces. Leasing continues to be very strong.

We own great assets and our leasing team's deep understanding of the strong fundamentals for our product type which I discussed in detail last quarter, positions them well to capitalize on countless opportunities for rent growth. We continue to have confidence that these market dynamics provide a very long runway for accelerated and sustained rent growth for our portfolio.

We're now just over halfway through our 3-year strategic plan that we presented to our investors at the beginning of last year. At its heart, the plan is focused on delivering on 3 primary investor objectives: stability and consistent growth in FFO per unit, growth in NAV per unit and absolutely stable, reliable monthly cash distributions to our investors and growth in those distributions over time.

The business continues to perform exceptionally well. So we remain on track to achieve the operating FFO per unit growth and debt-to-EBITDA metrics that are the core premise of our 3-year plan.

Through the first 21 months of the plan, our operating FFO per unit CAGR, excluding several positive but nonrecurring items, is approximately 5%. We're tracking ahead on OFFO.

Our debt to EBITDA has improved to the low 9s and is on track to improve further throughout 2026. We're very pleased with our results to date.

And with that, I will now pass things over to Neil to expand on them.

Thanks, Adam. Consistent with our usual practice, we also have a slide deck available on our website at www.fcr.ca.

And in my remarks, I'll make a number of references to that presentation. So let's start with Slide 6.

FCR generated operating FFO of approximately $72 million during the third quarter. This compared to $73 million in Q2 2025, and it was down from $77 million in the third quarter of 2024.

The prior year results were elevated by the recognition of an $11 million density bonus, which was included in interest and other income. On a per unit basis, Q3 2025 OFFO was $0.33.

This was down very slightly from Q2, and it was 7% lower than the $0.36 earned in the third quarter of 2024. Excluding the 2024 density bonus income of $0.053 per unit, the FFO growth rate was 9% during the quarter on a per unit basis.

So once again, we characterize the Q3 results as being very strong, with same-property NOI growth as the key driver. Now turning to net operating income specifically.

Same-property NOI, excluding bad debt expense and lease termination fees was $111 million in Q3. This represents 95% of total NOI.

The year-over-year growth was 6.4% or $6.7 million relative to approximately $105 million in Q3 2024. Results for the quarter also included $900,000 of lease termination income.

We currently expect upwards of $1 million of additional lease termination income in the fourth quarter of this year. On a year-over-year basis, the NOI loss from dispositions was approximately $1.6 million.

This relates to property sales totaling $174 million from Q4 of last year through to the end of the third quarter of this year. And finally, within other non-same-property NOI, there's a $1.3 million year-over-year decrease.

$1.2 million of this amount relates to lower straight-line rent. Further down the FFO statement, interest and other income of $5.4 million was $2.5 million lower year-over-year.

This is due to lower interest income on cash balances. And it's really a function of timing in the prior period.

FCR carried more than $400 million of cash in the early part of the third quarter of 2024. This was in preparation for funding a $300 million debt maturity.

Moving on to general and administrative expenses, which were $10.2 million. This was a 4% decline year-over-year.

We've carried a handful of vacant positions this year, and we've been very focused on containing discretionary expenses. Turning to Slide 9.

It summarizes the 9 months results. And here, we generated same-property NOI growth of 6%, excluding lease termination fees and bad debt expense.

We expect a solid finish to the year, and as such, we believe FCR can deliver 2025 same-property NOI growth of at least 5%, which is ahead of prior expectations. Slides 8 and 9 cover key operating metrics, most of which Adam has already touched upon.

And really, the theme remains quite consistent through the third quarter with continued and broad strength across our key occupancy, leasing velocity, leasing spread and rental rate metrics. Slides 10 and 11 look at various distribution payout ratio metrics.

During Q3 and on a year-to-date basis, FCR's FFO and AFFO payout ratios are running in the high 60% range and the mid-80% range, respectively. Advancing to Slide 12.

The REIT's September 30 net asset value per unit was $22.29. This is an increase of $0.09 from midyear and it's a year-over-year increase of $0.37 or about 2% from $21.92 at September 30, 2024.

The NAV change during the quarter included a very small net fair value increase of $1 million. Now for a bit more context, beneath the surface of this net number, FCR recorded total fair value increases of $68 million related to higher NOI and cash flow assumptions.

These principally related to our core multi-tenant grocery-anchored shopping center portfolio. There was also a fair value increase of approximately $8 million in the quarter related to the mark to sale price of our Anjou development site, which was sold during the quarter and 1 small other asset.

These fair value increases were largely offset by $75 million of fair value losses. And really behind the losses were 2 themes: these included lower valuations for residential development properties in the Greater Toronto area and lower values for certain operating multi-res properties where market rental rates continue to be a bit soft.

Turning to capital investments as outlined on Slide 13. In the third quarter, $57 million of capital was invested into the business, bringing the 9-month to-date number to $160 million.

Q3 capital investments included $43 million of development-related expenditures and $14 million of leasing costs and CapEx into the operating portfolio. The most significant development expenditures during the quarter related to our Yonge and Roselawn development, the Humbertown Shopping Center redevelopment where Phases II and III are advancing nicely and our 1071 King project.

It was a fairly quiet quarter on the financing front, as summarized by Slide 14. On July 31, we repaid the maturing Series S debenture, which has a principal amount of $300 million and an effective interest rate of 4.2%.

The cash resources for this repayment had been raised in mid-June through the issuance of a $300 million Series E debenture. We and our partner also financed the Whitby property with a new 5-year $38 million mortgage having an effective rate of 4.7%.

This financing provided cash to First Capital of $19 million. Slides 15 through 17 summarize some of the key credit metrics and the REIT's debt maturity profile.

FCR is in a strong financial position. The business ended Q3 with more than $650 million of liquidity in the form of cash and availability on the 3 revolvers.

The unencumbered asset pool had a total value of $6.4 billion, equating to nearly 70% of total assets and the secured debt to total asset ratio was a low 16%. FCR has only 1 debt instrument maturing in Q4 which is at the $11 million share of a mortgage on Amberlee Shopping Center located in Pickering, the maturing debt has an interest rate of 6.2%.

And this Friday, we'll be up-financing the property with a new $30 million 7-year mortgage of which FCR's share is 50%. The interest rate roll-down will be approximately 200 basis points and even though there will be only a small savings in our total interest expense, FCR will generate $4 million of cash proceeds from the up-financing.

Now before wrapping up my prepared remarks today, I'll make a few comments related to the upcoming special meeting of unitholders. The meeting relates to a planned internal reorganization that will simplify First Capital's structure.

During the quarter, we recorded approximately $2 million of restructuring and advisory costs. And in the fourth quarter, we currently expect to incur roughly $3 million of additional costs related to the planned internal reorganization.

These costs have and will be grouped with other gains, losses and expenses, and as such, they're excluded from operating FFO. In terms of time line, on October 1, the REIT Board of Trustees unanimously approved the proposed reorganization.

Last week, on October 27, we announced the special meeting date which is Monday, November 24, and the meeting materials were also mailed to unitholders last week with those on record as of October 20 being entitled to vote. This is a reorganization that FCR's tax team and advisers have been working on for many months.

It will be completed by way of a plan of arrangement under the Business Corporations Act Ontario with an effective date of November 30. So what does this all mean.

Well, in layman's terms, the effect of the arrangement will be to flatten and simplify First Capital's organizational structure. The reorganization will be accomplished through a series of steps that ultimately see the elimination of First Capital Realty Inc.

as the REIT's wholly owned subsidiary that owns directly and indirectly all of the FCR property portfolio. First Capital has received an advanced income tax ruling from the Canada Revenue Agency in connection with the steps of the arrangement.

The arrangement will not result in a change to FCR's overall strategy, portfolio or operations, and there's no change to FCR's outstanding units. They continue to trade on the TSX, same ticker symbol, same CUSIP number, current FCR unitholders continue to own the same number of trust units they held before the arrangement, and there will be no direct tax consequences at the time of the reorg.

Having said this, there are several key benefits from the arrangements, including, number one, simplification. The arrangement is expected to simplify First Capital's operating structure and reduce the significant complexity of legal and accounting and reporting as well as income tax compliance inherent in the existing structure.

Part of the simplification will include the alignment of tax years across the REIT's subsidiary LPs, trusts and corporations. Secondly, tax efficiency.

Post reorg, FCR will become a full -- fully flow-through entity holding its interest in the underlying trusts and LPs directly. This will allow income to pass to unitholders in a tax-efficient manner into perpetuity.

And in this regard, the elimination of FCRI as the principal corporate subsidiary, means that substantially all of FCR's $740 million deferred tax liability will be credited to unitholders' equity through a deferred tax recovery in the fourth quarter of this year. And the third benefit relates to unitholder taxation.

Beginning in 2026, cash distributions to unitholders will mirror the income profile of FCR's underlying real estate business. Since converting to a REIT in 2019, distributions to date have been effectively 100% taxable.

Future distributions, however, will include taxable income but we also expect there will be some periodic capital gains distributions, which are only 50% taxable as well as a tax deferred return of capital component within the regular distribution. Any return of capital, of course, is not taxable upon receipt by unitholders.

Instead, it reduces the investors' adjusted cost base in the units and therefore, defers the taxation until the future sale of those units. We, the REIT's executive leadership team, have a meaningful amount of our investable net worth in FCR units.

We're financially aligned with investors, and we're very enthusiastic about the benefits of the reorganization. So this concludes my prepared remarks.

I'm now pleased to turn the session to Jordi to elaborate further on FCR's recent investing and related activities.

Thank you, Neil, and good afternoon. Today, I will update you on our investment, development and entitlement activities.

Starting with dispositions. During the third quarter, we closed or entered into binding agreements on 3 properties with gross proceeds of $39 million.

The most notable of these sales was Place Anjou, a 4.7-acre site in Montreal's East End with 2 freestanding retail buildings totaling 52,000 square feet of GLA. The $33 million sale of this future residential development, which closed in July represented a 30% premium over our IFRS value and equated to a mid-2% yield based upon income in place.

During the third quarter, we also entered into a binding agreement to sell a property we own, located on [indiscernible] in Montreal. This is an IPP site tendered by an Avis car rent location.

At $4.5 million, it's a small transaction of a nonstrategic FCR asset, but at a 3.4% yield on its income in place, it's a logical and an accretive sale. Closing is scheduled for December 2025.

We are active on several other dispositions, and we will update you on these files as they advance. On the acquisition front, we completed the purchase of a 50% interest in an 18-acre vacant and unimproved development site located in the Ottawa suburb of Canada.

Capitalizing on the property's 2 existing signalized access points and its strategic location within a major retail node, we plan to develop a large retail shopping center site. Turning to development.

Phases 2 and 3 of our modernization and expansion of Humbertown Shopping Center continues. On September 30, Loblaws, whose store sits in Phase 2 of our redevelopment took possession of their renovated and enlarged 34,000 square foot premises.

They anticipate opening in Q2 2026. Phase 3, which includes a newly created 20,000 square foot Shoppers Drug Mart and the Scotiabank along with a number of other to-be-announced tenants are on target for completion in the second half of 2026.

On completion of the redevelopment, we will have added a total of 23,000 square feet removed all of its enclosed common area and Humbertown will look and feel like a brand-new grocery and pharmacy-anchored shopping center with anchors in ideal formats paying market rents. Looking at the associated financial returns, we will have invested approximately $45 million on this redevelopment and will generate an unlevered return that exceeds 7%.

We are also redeveloping a small property that we own in Calgary, The property is located in Bridgeland, a very desirable and gentrifying neighborhood close to Downtown Calgary. The new building will be entirely occupied by Shoppers Drug Mart with a turnover scheduled in Q4 of 2025 and their opening is slated for Q2 2026.

We currently have other opportunities in the planning stages, including the redevelopment of several other shopping centers. We look forward to providing in detail on this redevelopment work in future quarters.

Our active mixed-use developments continue to advance as well. At Yonge and Roselawn, we remain on schedule and on budget.

We own 50% of the 636-unit residential rental building with 65,000 square feet of prime retail space and serve as its development manager. The second floor slab will be completed this month and formwork is progressing to the third floor.

82% of the project costs are now awarded. Construction of our 1071 King Street West development project in Liberty Village also remains on schedule and on budget.

Formwork for the 11th floor slab is underway and precast and window installation is also underway. You'll recall, we own 25% of this 298-unit, 17 story, 225,000 square foot purpose-built residential rental project, including 6,000 square feet of at-grade retail space.

During this past quarter, residential occupancy commenced at our Edenbridge condominium development, which forms part of our residential inventory. Possessions have gone very well.

To date, 124 owners of the 187 units sold have been given possession with 1 purchaser in the fall. Turning to entitlements.

In 2025, we anticipate that we will receive approvals for 2.9 million square feet of incremental density at share. This year, we also expect to submit rezoning applications for a further 1.6 million square feet of incremental density.

To date, netting out the density we've already sold, we've submitted for entitlements on approximately 18 million square feet of incremental density. This represents 77% of our 23 million square foot pipeline.

As the entitlements are secured and encumbrances removed, we plan to monetize its value through the sale of 100% interest like we did in Montgomery and Anjou or a partial sale to a strategic partner like Yonge and Roselawn. We look forward to sharing further details with you as we advance.

Thank you for your time today and your continued support of FCR. And with that, operator, we can now open it up to questions.

On the disposition side of things, there was obviously a little bit of progress made this quarter. But there's still a decent amount of wood to chop in 2026.

As we sit here in November, I guess, is achieving the $750 million target, and I guess, more importantly, the low 8x leverage target by the end of '26 still feel realistic?

Lorne, it's Adam. Well, short answer is yes.

Agreed some wood to chop, always some wood to chop. Just for your reference, one of the things we do, do every quarter is review all of the key metrics outlined in the 3-year plan.

And as you saw, I think it was a couple of quarters ago, we had a couple of changes versus what we presented initially and so we updated it. So what you should expect is that if we do expect changes to occur regardless of what they are in terms of the key metrics that we've outlined, we will be updating that on a quarterly basis.

So where we sit today we're a little over halfway through the 3-year plan, metrics like same-property NOI, operating FFO tracking ahead of plan. .

Our view is debt-to-EBITDA is tracking on track relative to where we thought we'd be, dispositions based on the $750 million, again, a little over halfway through time-wise. Similarly a little over halfway through of the $750 million.

We're about $400 million of what's closed or been announced as firm. So yes, the disclosure that we've got out is very current and at this point, we believe we will meet the objectives that we played in.

Okay. Fair enough.

And then maybe just sticking with this. I think you guys listed a couple of Yorkville assets not too long ago.

Just wondering if there was any update on how investor appetite and how that is progressing.

Yes. So normally, Jordi would answer this, but he's in the middle of a process, like right in the middle of the process.

So the only thing we're going to say today about it is exceptionally high-quality assets. We require a significant premium to sell them.

Otherwise, we're happy to keep them and grow their NOI and their value but we don't have anything further to report today on those assets.

Okay. Fair enough.

And then just lastly on the, I guess, slightly revised same-property NOI target I mean, I guess, 2% next quarter gets you to 5%. Is there anything you're seeing out there that would indicate 4Q would be meaningfully below what you guys been able to do year-to-date?

Or are you just erring on the side of being conservative?

Well, Lorne, to be precise, I said at least 5%. So it doesn't have to square up to your 2% interpolation, that's for sure.

The bottom line is we perceive very solid results around the fourth quarter. I can't tell you that they'll match the 6% that we've been able to lay down for the first 9 months of the year.

But I think you'll -- they'll stack up quite well versus our peers.

And looking at the same property NOI growth, which is clearly strengthened, looking out longer term, I'm not asking for guidance or anything, but how does the slowing population growth impact the type of rent growth you can get at your properties or with the location of your properties? Does it really impact the ability of the retailers to drive sales growth and pay higher rents?

Mark, thanks for the question. Short answer is no.

The main reason is that from our lens, the fundamentals that we have today are underpinned by 7 to 8 years of activity. And over those 7 to 8 years, we have seen a significant increase in the population within the trade areas of FCR properties and we have seen almost no supply of our product type during those 7 or 8 years to service those -- that growth in customer base for our tenants.

And we've gone through a period now where sales across our tenant base have grown at a higher rate as a result of inflation and just as importantly, across our tenant base, the general norm is that profit margins have been protected. And so that means that every store we have is making more profit than it used to meaning they can afford to pay more rent than they used to.

So we believe that what's going on now with respect to store expansion is a catch-up phase over the last number of years. And so I can tell you discussions, live discussions with tenants today are very robust.

And just as optimistic and aggressive as they have been over the last several quarters. So we see a lot of future runway for sustained growth.

notwithstanding the change in the federal government's integration policy and what the impact will be on population, and we're looking forward to capturing the benefit of that opportunity.

Just on the renewal spreads in Q3, a little bit moderated from the record piece in Q2. Was there anything different or anything that was unexpected, surprising in Q3 that led to that result?

And I guess a similar question in terms of how you're thinking about Q4 and 2026 leasing spreads. Is there anything idiosyncratic that might impact the average in any given quarter or next year?

Yes. Thanks, Sam.

So look, posting up 13.5% year 1 renewal spreads north 18% blended. We're thrilled with that.

That works very well for our business. So we wouldn't view it as moderated.

As you know, our long-term average is lower than that. So I feel like we've kept pace with the trend that's been established over the last several quarters.

So very happy with those results. And yes, generally, we expect above average -- certainly above our long-term average, continued growth.

Touching on 2026 expiries, so there's nothing out of the norm with the exception that in most years, we have a small amount but an impactful amount of very low rent space that's maturing, call it, single-digit net rent space, most notably occupied by Walmart. And so if you look at our 2026 expiries, well, I guess if you look at our 2025 expiries and where they were heading into the year, what you saw was an average rent expiring at about $22 a square foot.

If you exclude that low rent space, I'm talking about like the Walmarts, it averaged about $27 a square foot. And so that's kind of the -- that's the baseline for where we're delivering these low double-digit renewal spreads.

If you look at 2026, our average expiring rent is about $27. We view that as a very normal year.

And the reason it's normal is that we don't have any Walmarts expiring in 2026. So other than that nuance, which I know last quarter, 1 of your peers asked a question about it.

And so we wanted to take the opportunity to more directly answer it. But other than that, we expect a very normal expiry year next year.

Okay. Great.

That's helpful. And last 1 for me, just on Deidsbury Road in Ottawa.

I meanJordan, if you can provide little bit of color about what you're planning to build there, what kind of leasing interest you have already and zoning and credit line approvals in place are expected to be so...

Sam, thanks. In terms of what we're planning to build, I touched on it a bit in my formal remarks.

It's, call it, a conventional unenclosed shopping center at this stage with respect to tenancy, very preliminary. We've had interest based on a very small period of time for which we've owned the asset.

We've got some planning work to do and in that regard, we'll keep you posted as advances, but we like the site a lot and we like where it's located.

Yes. The only thing I'd add is a $10 million for 18 acres, we've got a lot of optionality.

I wanted to stick to the leasing discussion, commented, we just talked about 26. 'And if I may, I know '27 is quite far out there, but you do have 14.5% of your total GLA expiring in '27.

I was curious if there was anything within those maturities. So that may be a bit anomalous with respect to kind of low rent renewals, any known vacancies, anything kind of any idiosyncratic that may drive a blended lease spread that might be different than what you've been doing over the past 12 months.

Yes. Thanks for the question, Mario.

So short answer is no. Nothing different as we look ahead other than what I mentioned.

We don't have any really low rent, but Walmart spaces expiring next year, which when you park that aside, we look at it as a normal expiry year, no major tenants that we believe are going vacant. Strong, strong leasing environment.

So happy to lease space. Certainly hope there is a little bit of turnover, the rate turnover, which is what we expect.

Wouldn't read too much into 14.5% expiring in 2027. That's not abnormal looking out this far.

I can assure you that in a year's time, we will not be having 14.5% of our space maturing in 2027. Some of that is already under negotiation.

But we typically have between 10% and 15% maturing in any given year. And certainly from our perspective, when we look 2026, 2027, we don't see anything out of the norm, and we expect to continue to benefit from a very strong leasing environment.

.

Got it. Okay.

And then, Adam, I think you mentioned 75% of leasing completed this quarter included contractual annual escalators. If we sit back and look at the entire portfolio today, and that number has been increasing over the past couple of years for your entire portfolio today, if we were to exclude NOI growth on blended lease extensions or lease spreads, just the contractual rent growth in the portfolio today, what would that amount to from a same-store NOI perspective?

So I'll have Neil address that one. But just for clarity, what I said in my prepared remarks is 75% or 3/4 of the renewed leases have embedded contractual rent steps throughout the renewal term that does not necessarily mean every single one of them has an annual step.

Neil?

Yes. So Mario, you can look at the business as having a contractual growth rate between 1% and 1.5% of the NOI line.

And that's generally been the historic range. And I would say today, we're gradually gravitating towards the higher end of that bound.

Okay. Great.

And my last question, just with respect to the 3-year plan that you announced that you're executing on, at what stage can we expect a 3-year plan to be rolled forward to include 2027?

Well, we're in year 2 too, yes. Yes, no, you're not the first person that's asked us that.

So we're -- and we appreciate people are eager to look that far ahead. From our perspective, from what we're prepared to talk about right now is the fact that we're in -- we're still in our second year of the 3-year plan.

And we very much look forward to addressing the investment community and the analyst community with where we're heading beyond 2026. It will be -- we will do that during the final year of the 3-year plan and likely during the first half of that year.

So sometime in the early to mid part of next year.

Just with respect to -- from a development standpoint, can you remind us how you see development spending through 2026?

Yes. So the way you should look at it is that we are on track for roughly $160 million, give or take, this year.

And we have laid out in our 3-year plan, the total number that we expected for the 3 years. So I think from that, you can do a pretty simple rough plug, if you will, for 2026.

And more specifically when we come out with our fourth quarter results in February. At that point, we'll be in a position to give you, I'll say, more targeted views on our expectations for the calendar year.

Okay. That kind of leads into my next question, which is around capitalized interest as some of these developments are delivered as part of that 3-year plan, including the condos, not sure if you're prepared to provide any sort of visibility on what the capitalized interest should trend down to in 2026.

Well, candidly, I don't have those numbers at my fingertips, which I hope that doesn't surprise you. But I would say in very generic modeling terms, you could probably decapitalize interest through a -- proportionate to the value space that's delivered.

So I think that's a simple way to think of it. And that's rather -- that's agnostic to whether it's residential inventory being delivered or its investment properties being delivered.

Okay. And then just lastly, on Edenbridge, it sounds like the closings are going quite well.

I think you mentioned only 1 default if I heard correctly. But are you anticipating sort of that pace to pick up over, I guess, from what we've seen in the last, I guess, through or what we'll see through Q4 and into 2026?

When you say pace to pick up, you're referring to the default?

Yes. I think you said -- I can't remember the exact number in terms of closing.

It was one. Yes, it was one.

Yes, only one default.

I would say, Pammi, this is Important to point out like this is an entirely owner-occupied building. The majority of the buyers have to live in the neighborhood today.

They love the neighborhood, they want to stay in the neighborhood. We've sold, as I think I mentioned, 90% of the 209 units to date.

And we expect that no major deviation from the pace that we've experienced certainly based on the first 124 deliveries.

Right. So those suites will continue to be delivered through year-end and into early Q1.

And at that point, we'll have a closeout process where we turn ownership or time over to the owners and we effectively book the sales. So that's the way to think about the 90% that's sold, Pammi.

Got it. And then just lastly, on 400 King West, I think some of those closings should start next year as well.

Is the assumption there that based on what you see today, I guess it might be early, but that the default rate would be similarly low there? Or is that less owner occupied?

Ami, it's Jordi again. Yes, I would say that building is, in fact, less owner occupied, I would say it's more, call itconventional.

That being said, we've sold 97% of the units there, we have sold the majority of those units before really pricing peak. So we feel pretty good about its prospects going forward.

I would suggest the default rate there will likely be higher, but it's not something that we're especially concerned about .

Well, it can't be lower.

Just wanted to quickly turn back because presumably in the '25 remaining lease amount, there is either a Walmart or a similar type tenancy in that figure. Is that subject to a fixed renewal rate?

Or would that go to market in the remainder of the year? Or is it going to [indiscernible].

You're talking remaining 2025 lease expiries?

Yes.

Yes, there's no major fixed rate flat option, if that's what you're asking.

Okay. So that you could have a pretty sizable spread then if you're getting 20% -- high 20s versus the 18% that's maturing?

Correct. Yes.

I mean, Matt, the only thing I would say is, as you get into the final quarter or any individual quarter, of course, the sample size is smaller. So a 40,000 square foot space is more impactful than 100,000 square foot space on a 12 month of inventory roll.

Fair enough. And then I guess, just in terms of the building blocks, we understand lease renewal spreads, your retention rate is very high.

You're getting more of these annual rent escalators in the blend. But is there anything that you're gaining on kind of efficiencies, recoveries or anything tangential to that, that would boost the NOI growth a little bit again on the margins probably not that much, but..

Yes. Well, it's something that our leasing team has been very focused on for quite some time, and they've done a great job over the last couple of years of anywhere between 50 and 100 leases where the recovery methodology has been less than proportionate share, and they've taken it generally to proportionate share which did not come through our lease renewal rates, that's strictly on net rent.

So One of the things that is now cumulatively starting to augment the NOI growth is just better tenant recoveries on operating costs. I don't have the numbers to quantify specifically where you would put it to the building block, but it's starting to chip away and make a contribution.

Okay. Interesting.

Last 1 for me. I mean we've heard kind of land values in Toronto, Vancouver, under some stress, given the condo market.

When you look at transactions today or other people look at assets, how are they thinking about the value of density at the end of the day versus obviously, at an implied cap rate where you are, that's probably the value of the retail, but does it make sense to sell if in the future density is going to be worth a lot more.

Well, if we had a strong view on that, the answer is no. We wait to sell when it was worth a lot more.

Jordi and his team have done a great job in a really tough market. to sell density in Montreal and Toronto at prices that we're very comfortable with and obviously don't feel like we're leaving a lot on the table.

This has never been a fire sale. And if you look at our premium to net asset value on the stuff we've sold, it's been remarkable.

It's been much better than we expected. And so we'll continue to take that disciplined methodical, tactical approach.

And we own great real estate, even though we're selling it, we still understand the quality, and we will make sure we sell it at the appropriate time for the appropriate price.

Quick question for me, technical in nature. Apologies.

Just on Eden Bridge, I guess you're starting to residents are in occupancy, but you're not looking any inventory gains that might be in contrast to what we've seen elsewhere. Just to confirm, I guess, 2 questions on me, you won't book inventory gains until you register the units as condos [indiscernible] and number two, is with respect to Pammi's question on the decapitalization.

Is there construction lines tied to that project and has, of course, effectively pay that down and therefore comes in the point.

Okay. Well, the short answer is yes and yes.

So we will look at as closings, and therefore, the residential profit, if you will, will occur at the time of closing in Q1. And there's a significant cash repatriation from those sales processes, of course, but a lot of that goes directly to pay the construction loan.

Now as you know well, Mike, the market doesn't do a particularly good job of differentiating debt within our capital stack. In other words, it treats a construction loan on a condominium project the same way it treats an unsecured debenture that's been used to finance the income portfolio.

So if we pay down the construction loan, our net debt balance decreases.

Right. Okay.

No, I got that. And then can you just remind me from a -- just from a time to how you're going to report for consensus and all that fun stuff.

Are you going to book the condo gains in OFFO? Or are you going to exclude it from OFFO?

A good question. So it will be included in OFFO.

But importantly, we benchmarked ourselves in terms of our 3-year plan to OFFO prior to any condominium profit. So that was the baseline on which we gave that 3-year guidance of average annual -- or growth averaging at least 3% in FFO per unit was excluding any condo profits.

Sorry for having to get back in here. I just had 1 quick follow-up on Toys "R" Us.

There's been a lot of chatter about a potential bankruptcy there. Just wondering if you've taken any provisions related to them and if you have plan if you do, in fact, get the space back.

So we really -- it's Jordi by the way, Lorne. We don't have anything to add, but what's really in the pump of domain.

Our exposure to toys is really small, represents just under 0.4% of our rent. We had previously sold Anjou, which had toys in it.

They recently closed another space that we own half of. So we have 2 remaining Toys locations, and they're current in their rent at both.

Toys really in both these cases, pays below market rents, and they're located in very high demand centers, 1 in Toronto, 1 on Island in Montreal. We feel, to the extent we get them back, very confident about our ability to backfill them.

And really, in the case of the Montreal property, it lends quite favorably to a grocery store, and we expect we'd be focused on that opportunity in particular to the extent this space does come back.