Cominar Real Estate Investment Trust (CMLEF) CEO Sylvain Cossette on Q4 2020 Results - Earnings Call Transcript

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Cominar Real Estate Investment Trust (OTCPK:CMLEF)

Q4 2020 Earnings Conference Call

March 3, 2021 11:00 ET

Company Participants

Sylvain Cossette - President & Chief Executive Officer

Antoine Tronquoy - Executive Vice President & Chief Financial Officer

Marie-Andrée Boutin - Executive Vice President of Retail and Chief Development Officer

Bernard Poliquin - Executive Vice President of Office & Industrial and Chief Real Estate Operations Officer

Conference Call Participants

Jonathan Kelcher - TD Securities

Michael Markidis - Desjardins Securities

Pammi Bir - RBC Capital Markets

Operator

Good morning, ladies and gentlemen and welcome to the Cominar Fonds de Placement Immobilier Fourth Quarter 2020 earnings conference call. At this time all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]

I would now like to turn the conference over to Mr. Sylvain Cossette. Please, go ahead.

Sylvain Cossette

Thank you, Arnaud [ph]. Good morning and welcome to today's conference call, where we will be discussing our financial results and highlights for the fourth quarter of 2020. The presentation for this call is posted in both English and French in the Conference Call section of our website. In-line with our disclosure principles, access to this call is open to financial analysts, investors, the public and the media. The question period will be open to financial analysts.

Before I begin, I would like to draw everyone's attention to the notice concerning forward-looking statements on page two of the presentation. With me today is our CFO, Antoine Tronquoy; members of our executive management team, Marie-Andrée Boutin, EVP Retail and Chief Development Officer; Bernard Poliquin, EVP Office and Industrial and Chief Real Estate Operations Officer; and Nathalie Rousseau, EVP Asset Management and Transactions are also here with us.

COVID-19 had an ongoing negative impact on the operations and results of the REIT. After a summer of steady improvements, the fall brought back an important resurgence of COVID-19 cases and along with it, in the beginning of October, our provincial government imposed closures of restaurants, gyms and entertainment venues while reiterating an emphasis on work from home. As the situation continued to worsen, in mid-December, work from home became mandatory and one week thereafter the closure of nonessential retail stores in all regions of our province was declared.

In early January, a curfew was introduced -- curfew which remains in place. On February 8, nonessential retail reopened throughout our province except for restaurants, gyms and entertainment venues and red zones. Cinemas are now open with limitations. The construction industry and manufacturing which was much less impacted as they essentially remained open with limitations. All of these measures were significant and more importantly helpful as today COVID-19 cases are down significantly. In addition to favoring this downward trend, governmental focus is on accelerating vaccination and detection and monitoring of variants.

Overall, Quebec is trending favorably. Many and improving communities are seeking easing of restrictions. But our provincial government is on record that it wishes to proceed cautiously as vaccination campaigns increased while monitoring variants. The Montreal Center Business district is a major contributor to our provincial GDP and this is not lost on our government and Quebec-based captains of industry. As we progress, there is more and more discussion and planning around our return in due course to ways which are more in-line with our prior life [ph].

On Page 3, before diving into the results for the quarter, I will briefly comment on our formal strategic review process initiated on September 15. The efforts of this special committee are ongoing. The special committee continues to work closely with the management team and to reach financial advisers, National Bank financial and BMO capital markets. Our objective to identify, review and evaluate a broad range of potential strategic alternatives with a view of closing the gap between what we believe to be our intrinsic value and the current trading price is unchanged. We will communicate in deep curves [ph] with unit holders when required or appropriate.

Now, let's turn to our Q4 2020 results. On Page 4, during the quarter impacted by COVID-19 we experienced a slight organic decrease of 0.8% in same property NOI. Notwithstanding this environment, for the year we recorded 7.4% growth in the average net rent of renewed leases, driven by an increase of 18% in industrial and 7.6% in office. In retail, we recorded a decrease of 4.3%. Our leverage now stands at 55.3%, up 54.4% at the end of Q3, essentially due to write downs for the quarter totaling $152 million on our portfolio. At year-end, available liquidity stood at $339 million.

On Page 5, we received to-date 95.8% of total invoiced rent for Q4. Further to agreement signed with tenants, 96.6% is contractually expected to be received for Q4. For the full 2020 year, 97.2% of total invoiced rent has been received. Again, further to agreements with signed tenants 98.1% is contractually expected to be received.

On Page 6, our Q4 SPNOI decrease of 0.8% is the sum of opposite strings. On the one hand, SPINOI for retail declined by 14.7%, which came from a combination of reduced revenues of 8.4% and a decrease in expenses of 2%. On the other hand, office SPNOI increased by 8.5% as a result of a 1.2% increase in revenues and a 5.8% decrease in expenses. Industrial SPINOI increased by 4.9% during the quarter, further to a 2.9% increase in revenues combined with 0.5% decline in expenses. Year-to-date, the adverse impact of COVID-19 contributed to a 5.1% decrease of our overall SPNOI, with retail at negative 21.5%. While our office and industrial segments recorded positive SPNOI growth of 4.6% and 3.3%, respectively.

Moving on to Page 7, our year-end committed occupancy and in-place occupancy rates remained above our historical averages at 94% and 91.7% respectively. The recent decline in committed occupancy was driven by the retail segment which declined by 3.3% since Q4 2019, while the office segment increased by 0.2% and the industrial segment decreased by 0.4% over the same period. In the latter segment, the increase being driven in part by our leasing strategy of driving rents upwards.

On Page 8, we continue to experience positive momentum in our leasing activities overall. Renewed leases over the year averaged a net 7.4% increase compared to rents in-place prior to renewals. Two of our three segments had positive leasing spreads led by our industrial segment at 18%, evidencing the strong momentum of the industrial rental market in Montreal and in Quebec City, followed by office at 7.6% while we recorded a 4.3% decrease in retail.

The office segment performed well and multiple points. Firstly, office SPNOI was up by 8.5% for the quarter, well ahead of budget and 4.6% for the year. Interesting to note, office SPNOI was up by 5.1% for the quarter for the Montreal suburban market, 8.4% year-over-year, once again for the Montreal suburban market. In addition the Montreal in place occupancy rate grew by 4.7% since Q4 2019 and more particularly by 5.2% in the Montreal suburban market over the same period.

Over 120% of the leasable area maturing the Montreal office segment since the beginning of the year was renewed, or is subject to a new lease. In addition, approximately 783,000 square feet or 83% of the leasable area maturing in 2021 with federal or provincial government has already been renewed or is near completion.

In the quarter, we signed new deals with SNC Lavalin a for 26,500 square feet and Taiwan semiconductors for 17,000 square feet. And we do see a pipeline although new leasing activity is slower in the context of the pandemic. Interesting to note, an increase in activity around the suburban market. For the year, there are 610,000 square feet of new deals in-line with what we budgeted. On the renewal front, 73% of expirees were renewed with spreads averaging 7.6% in both cases above budget. In this renewal window, we are however seeing tenants renewing for shorter terms as they navigate the unknown.

On the retail front, we added 38 new leases for a total of 415,000 square feet in place in 2020. We saw the opening of a 67,000 square foot Decathlon Sporting Goods store at Samplazam [ph] in December. A 22,000 square foot Hart Store also opened in November in the former Sears location at [indiscernible]. Moreover as 339,000 square feet were signed during the year, which includes 268,000 square feet since the beginning of COVID-19.

In Q1 of this year, we also signed Tesla for an additional 30,000 square feet in Quebec City. These openings are in-line with our leasing strategy to move away from more vulnerable retail segments such as fashion other than value fashion. In the retail segment, restaurants represent approximately 13% of retail operating revenues and are in most parts supported by the federal program, Canada emergency rent subsidies service. Cinemas and gyms represent respectively approximately 2% and less than 1% of retail operating revenues. Tennis [ph] player Cineplex is our most important cinema and they are current on rent as of March 1.

On the industrial segment, we recorded a 4.9% growth in SPNOI for Q4 and 3.3% for the year. In-place occupancy experienced a slight decrease of 90 basis points to 95.3% while our committed occupancy also experienced a very slight decline of 40 basis points to 96.7%. That was more than offset by an 18% growth in net rent or renewed leases for the year. During the year 108% of the leasable area maturing in 2020 was covered by renewals and new leases.

On Page 9, we are pleased to announce that we concluded our first partnership with top tier local developers Cogir and Divco for the development of 500 residential units at Centropolis. We expect the first phase of this two-phase project to be launched in Q3 2021 and be built by 2023. The first phase is approximately 364 doors split between condos and multi residential. We rolled in land as part of our initial equity contribution. This marks the first milestone of our previously announced intensification strategy.

In terms of other developments in the industrial segment, we are in pre-leasing and are seeking to launch at 200,000 square foot building at our [indiscernible] in Laval. The Laval market is tight and we very, very much like this site. We expect to have greater visibility for you in future quarters.

Antoine will now discuss our financial results.

Antoine Tronquoy

Thank you, Sylvain. Good morning, everyone. On Page 10. If we look at our expected credit losses, we recorded for this quarter 30% less than the amount which we recorded for the previous quarter. Our total expected credit losses amounted to $5.6 million or 3.4% of operating revenues compared to $8 million, or 4.9% of booking revenues in the previous quarter.

On Page 11, on a per unit basis, FFO adjusted for the quarter was $0.27, a decrease of 10% from Q4 2019 and up $0.02 from Q3 2020. We believe that we are well above our estimates of overall streak consensus of $0.24. AFFO adjusted for the quarter was $0.23, an increase of $0.01 from Q4 2019 and $0.05 from Q3 2020. Our AFFO payout ratio decreased to 37.5% for the quarter and to 80.3% for 2020.

I would like to add a few words about this CUs [ph] program from which we benefited and the way we took it into account in our financial statements. So we received a total of $4.8 million that was taken into account in Q4, of which $1.2 million is passed on to our tenants and $3.6 million is a net positive for coming on [ph]. This $3.6 million breaks down as $1.3 million taken into account in our G&A and a bit more than $2.2 million in our SPNOI. The $3.6 million net positive for Cominar is for the entire year and breaks down in terms of timeline as $0.2 million for Q4 and $3.4 million for Q2 and Q3 combined. This is why our FFO adjusted calculation on page 78 of our annual report presents an adjustment of $3.4 million for the fourth quarter and none for the year. So to sum it up, our FFO for the quarter takes into account the $3.6 million, while our FFO adjusted only takes into account $0.2 million from the CUs [ph]. Our FFO and our FFO adjusted for the year both include $3.6 million from the CUs [ph]. For the quarter, this $3.6 million adjustment is partially offset by non-recurring expenses of $1.4 million related to the strategic review.

Moving on to Page 12. We estimate that COVID-19 had a negative impact on our FFO of approximately $6 million during Q4 and of approximately $36 million for the year. In 2020, we lost a minimum of $24 million in revenues due to the pandemic and additional expenses of $12 million further impacted our performance. The latter were mostly composed of estimated credit losses related to COVID-19 of $31 million offset by $19 million of maintenance, energy and other savings related to cost efficiency and to the integration [ph] of our properties due to the pandemic. Ultimately, our NOI and FFO experienced an approximate $36 million or $0.20 cents per unit decrease year-over-year due to the pandemic.

Moving on to Page 13. During the year, the REIT has written down $481 million of the value of these assets due to new prevailing operating and market assumptions impacting value, which amounts to 7% of the Q4 2019 value. Our retail effects [ph] were most affected with a $415 million write-down or 17.4% of the Q4 2019 value. Of these assets were written down by $189 million, while industrial assets so their value increased by $123 million.

On Page 14, we highlight the two thirds of the overall write-down of $307 million, came from our Enclosed Malls portfolio, representing a 20% decrease with respect to their year-end 2019 value. The rest of our retail portfolio experienced a value decrease of $108 million or 13%.

Moving on to Page 15. The 10% decline of Q4 FFO adjusted compared to Q 2019 was mostly driven by the retail segment, which experienced an 18% decrease in FFO. Office FFO was 4.6% lower in Q4 2020, compared to the same quarter last year. Industrial FFO on the other hand, came in 22% higher than Q4 2019. Variations in our corporate segment, which is essentially composed of G&A and interest expenses is explained by a decrease of the indebtedness at the corporate level due to dispositions in 2019 and a decrease in the average interest rate.

Year-over-year, our blended interest rates decreased by 30 bips to 3.76%. Year-over-year, the 10.6% total FFO adjusted decline was mostly explained by a sharp decrease in FFO for our retail segment of 34%. Office and industrial FFO were more stable. The industrial increasing by 3.5% and the office decreasing by 1.6% when compared to 2019. The residual estimated corporate segments evolved favorably compared to last year, due to the same reasons explained earlier on a larger scale.

Moving on to Page 16. This page illustrates how debenture and mortgage debt maturities as of December 31. As of today, our liquidity stands at $339 million.

Moving on to Page 17. During Q4 2020, our debt ratio increased slightly to 55.3%, compared to 54.4% for Q3. Our leverage remains higher than at the end of 2019 as a consequence of the material negative fair value adjustment on our investment properties taken this year. Our debt to EBITDA ratio remains stable at 11.3x. Our unencumbered asset pool to $2 billion representing one point 1.76x our unsecured net debt stable from last quarter.

As shown on Page 18, our pool of unencumbered assets is diversified within the three segments, almost in the same proportions as the entire Cominara portfolio.

Moving on to Page 19. Investments in Q4 2020 in capital expenditures, leasing costs and leasehold improvements totaled $40 million at 3% from the same period last year. For the year, CapEx expends at $129 million, down 4% from last year. Including investments in development activities, capital expenditures in Q4 2020 total $42 million, stable when compared to Q4 last year, total CapEx stood at $144 million, down to 8% from last year, slightly below our target for the year of approximately $160 million.

I will now pass it back to Sylvain for the concluding remarks.

Sylvain Cossette

Thank you, Antoine. On behalf of the Management, I would like to take this opportunity to thank all of our employees as well as our trustees for their contribution in the backdrop of these extraordinary times. On a personal note, my renewed thoughts go to families which has been personally affected by this cruel pandemic. During this time when personal and corporate behaviors have a major impact on the overall well-being, I am proud of the way we at Cominar responded to the COVID-19 crisis since inception. We took care of our employees and of our clients by ensuring the safest sanitary protocols and being proactive in exercising leadership. We also supported numerous clients by granting financial assistance when we considered it to be in the highest mutual interest. I look at this as an investment in our most important assets, together with our human capital. I also wish to thank our governments for their continued open dialogue and solution-oriented support in an environment where matters and needs were far from static.

I will now turn the mic over to Arnaud [ph], for the question period open to financial analysts.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we now begin the question-and-answer session. [Operator Instructions] Your first question comes from Jonathan Kelcher with TD Securities. Jonathan, please go ahead.

Jonathan Kelcher

Thank you. Good morning.

Sylvain Cossette

Good morning, John.

Jonathan Kelcher

First question. I noticed you removed some assets from the held for sale category. How should we think about acquisitions, dispositions for 2021 and how that impacts your leverage targets?

Sylvain Cossette

Okay. Yes, we did remove, we did bring back that one more chunky asset into our asset base. That opportunity may come back as we emerge from COVID and people re-enter the downtown core. So we'll see how we progress with that and that's an asset on the other hand that we very much like also and is a very good value in proximity to a ramp [ph]. So that will be an evolving situation over further quarters. In terms of other initiatives we have out there, we are currently on the street with one 110 O'Connor, so we are working with a broker there. So we'll see how that progresses over the next quarter or so. I think our dispositions, we continue to look at outside of Sark [ph]. We are continuously looking at the portfolio to see which assets we can or should be moving off of. So that's a fluid situation, but we are looking, John, at the next further asset sales to deliver.

Jonathan Kelcher

Okay. Is there is there any sort of target for the 2021?

Sylvain Cossette

Well, just because of that one asset is very chunky. So, it can go either way. So, I'd rather not on this call, not give you a target. Maybe on our next Q1 call, we'll have a target and greater visibility and a target for you. All I have to say is that we are looking at further assets sales to deal here.

Jonathan Kelcher

Okay, fair enough. And then just switching gears to the operation side. The office had very good results. I think you said in your prepared remarks that it was due to decreases in expenses. Was there anything one-time in there that you have been able or has there been changes made that keep the expenses lower going forward?

Sylvain Cossette

Bernard?

Bernard Poliquin

There is -- you know, essentially, we've reduced expenses based on the actual occupancy of the premises. So, we will readjust as people reintegrate; so we're being very diligent, careful and in sync with the actual occupancy and the needs of our tenants.

Jonathan Kelcher

Okay. Are there any CUs [ph] in that?

Sylvain Cossette

Yes, there is a little bit of CUs [ph] and -- I mean, broadly speaking, if we look at the portfolio, I mean, the three segments, the reported SPNOI was minus 0.8%. Actually, this concludes the CUs [ph] for the entire year; so if we -- if we took into account the CUs [ph] for the quarter, we would have been broadly at minus 3.2%. So, you can assume that the CUs [ph] had an impact of a bit more than 2% positively on the SPNOI this quarter. But it also means on the flip side, that -- the SPNOI we published in the previous quarters was -- were sort of artificially down because no CUs [ph] was computed into that.

Jonathan Kelcher

Okay, fair enough. And would the CUs [ph] we sort of equal in the three segments or more heavily rated for the retail?

Sylvain Cossette

There is a stronger foundation for retail though.

Jonathan Kelcher

Okay, thanks. That's helpful. I'll turn it back.

Operator

Thank you. We have a following question from Mario Saric [ph] with Scotiabank. Mario, please go ahead.

Unidentified Analyst

Hi, good morning. I just wanted to touch on the disclosed credit losses for the quarter; so two part question on that. First off, it looks like the credit loss reserve for industrial increased from 0.4% of revenue in Q3 to 3.6% in Q4. Can you walk us through kind of what happened there? A bit of color in terms of how that compared to relative internal expectations?

Sylvain Cossette

Yes. Well, actually, those -- for those tenants we didn't grant the same type of relief as we granted for retail tenants as a week or a weaker tenant in industrial segments, if it's on a property where the rent is quite low, is we -- n it's weakness is actually an opportunity in the longer run. So that's the way -- firstly, we looked at it. And if we look at those tenants for which we recorded -- expected credit losses for the quarter, so for the quarter it's $1.4 million for the industrial segments. You have 65% coming from tenants occupying premises higher to 25,000 square feet, 76 tenants with clear heights [indiscernible] are equal to 24 feet, and 87% of the students from multi-tenant properties. The reason I'm mentioning those matrix is because in all cases, it's not the ideal tenants that we want to have, it's not where we want to put the industrial segments going forward. So we'd rather see this as an opportunity to have less exposure to such tenants.

Unidentified Analyst

Understood. And then how close would you say are you to your optimal industrial portfolio mix [ph] today?

Antoine Tronquoy

Well, it terms of demand just in Montreal; we had basically just under our general discussion pipeline, we have about 1.5 million square feet under discussion, and Montreal market remains very tight. So what I've wanted to describe is really -- it underpins our leasing strategy of upgrading the tenant base and driving rental rates and credit covenants. We -- going through COVID we also looked at which segments of the -- our industrial client base were peripherally more exposed to or didn't react as -- with great resiliency during the crisis; so it's a combination of factors. And we've been -- going back to prior quarters, we've been pretty successful in backfilling space pretty quickly. So I'd say a couple of months of breakage and there is a -- I guess, the only way you look at it, there is a greater demand for greater surface area; so that's one area where there is a shortage in Montreal right now. Maybe I'm not pointing out color, Bernard?

Bernard Poliquin

Yes, sure. So, what Antoine and Sylvain have said obviously, is spot on with regards to the industrial market. As you know, the market is extremely tight, and to Antoine's point, those tenants that are in the sectors of the economy that went through more difficulties during the pandemic are those that typically are having a hard time meeting the market demands for the current market -- so asking rates in this market. So we are -- as you know, you may have seen in the documents that we circulated for new transactions on spaces that become vacant, the spread is actually in the 38% to 40% range compared to 18% to 20%, for renewals. So those tenants that are having more difficulty, as Antoine said, is actually an opportunity for us to increase our revenues and NOI as we move forward.

Unidentified Analyst

Got it. And just -- that 3.4% this quarter or 3.6% this quarter; how do you see that playing out in the first half of this year and onwards? Just -- again, I'm just trying to understand what the repositioning opportunity in terms of the change in tenant mix might look like relative to where you are today?

Bernard Poliquin

To 3.6%.

Sylvain Cossette

How do you say Q1, Q2 playing out in terms of…

Bernard Poliquin

Oh, in terms of -- I mean, that -- we can't -- we can't hold to vacant spaces, really the answer to your question as far as the market goes; as soon as space becomes available it is leased before it becomes vacant, the demand is so high. And the vacancy is -- it's just hovering, around 2% in the GMA, I'm talking about Montreal, it's even tighter in Quebec City. We have an opportunity to release quite fast; Sylvain mentioned two months, sometimes that's really the time that it takes to reinstall a new tenant because it's leased before it becomes vacant.

Unidentified Analyst

Okay, sounds good. Yes, those numbers definitely sound impressive. Just maybe switching to retail, the reserve fell from 11.8% in Q3 to 5.4% in Q4. I guess despite the secondary lockdown emerging, and I know Q4 tends to be a seasonally strong quarter, typically speaking. Were there any adjustments to the Q4 number for previous quarter retail reserves, probably packed [ph] in the figure? And how do you seen that 5.4% kind of trending in 2021?

Sylvain Cossette

Okay. Yes, in terms of -- for the expected credit losses, what we took -- I had the adjustment actually throughout the portfolio, not necessarily -- not necessarily through the retail segments specifically but I know that most of it comes from the retail. But I would say that when we published $8.1 million this quarter -- no sorry, when we published $5.6 million of expected credit losses for the quarter, that include a reversion of $2.5 million for the previous quarter. So in other words, if we look at the expected credit losses for the three quarters, we published $18 million for Q2, $8 million for Q3, $5.6 million for Q4. But after taking into account the reversions that we took on provisions; they should have looked at it that way, Q2 is $16.4 million, Q3 $7.3 million, and Q4 $8.1 million. So there is the difference between the $5.6 million we published and the $8.1 million I mentioned is -- comes from overprovisioning in Q3.

And I would just comment also on the gap between the $7.3 million for adjusted expected credit losses for Q3 and $8.1 million for Q4; it increased by $800,000 and it's notably accounted for by the fact that the secret [ph] program ended and we entered into the service program which in Quebec at least is less favorable than in other provinces. So, there was a kind of a negative impact for us on that.

Bernard Poliquin

And on your question -- your second part of your question, Mario; I think what's important to look at is, retail essentially was shut down at end of December, around December 24, which is far from idea going into a Christmas sales season. It reopened on February 8, so there -- if you look at Q1, there will be some impact as through the retail segment, just not our portfolio which is generally speaking in Quebec because of that. When we look at where retail is trending; now what's important for me is, we are executing on our strategies. We brought down our -- you know, in prior calls and in our Investor Day we said we're reducing our fashion exposure other than value fashion. We brought that down by 5% this year, so that's pretty impressive. And when I look out, I'll be very, very careful and give you sort of like a pipeline number of what we're looking at, and this is under discussion and it may go either way, but it's -- I think it's healthy just to comment on it with a cautionary principle. We have -- we have about 260,000 square feet of retail under discussion as we speak. And what's impressive is about 45% of that is in the grocery segment; so -- and that's the type of fashion -- you know, moving on fashion that type of segment we want to be in our grocer. Medical, we have another close to 20,000 square feet, so we are really executing on that strategy. We also have another 50,000 square feet under discussion, under -- in the expansion category with very, very good credit clients, and that's on two locations. So we're seeing -- at Q1, we'll have a bit of a bite concerning the performance just because of the shutdown, but we look at the backdrop of what -- what we're seeing in our discussions with our clients, we're seeing healthy movement going forward.

I don't know, Marie [ph], if you'd like to maybe talk about foot traffic conversions since February 8?

Marie-Andrée Boutin

Yes. Sylvain described the strategy really, really well. The reopening on February 8 was very busy for the first week. And we're seeing a very similar pattern than the aftermath of the first week; so yes, a decrease in traffic which will be in the vicinity of 18% to 20%, which was the same after the first week. But our retailers in general are experiencing good sales because the conversion rates are very high, people go into shop; so we expect that Q1 will be similar to the aftermath of Q2 -- so negative traffic by 17% to 20% but negative sales in the 2% to 3% range with wide variation between categories. And if all goes well with the vaccination, pandemic and all that, Q2 should be satisfying [ph].

Sylvain Cossette

What we saw also, Marie, Quebec at least is a very concerted effort on our part as mall owners and leading retailers to -- with an open dialogue with the government around where retail is at. And the importance of keeping retail open as we move forward, notwithstanding what happens with variants and so on. So I think there -- the dialogue has been very, very good; and the government gets that retail has to stay open. And we're making a huge effort to keep sanitary measures in place, so it's really a collective effort here.

Unidentified Analyst

Got it. And I guess there is maybe -- when it comes to the outlook for retail, and maybe discretionary retail, in particular, I think you mentioned 30% of your revenue on the retail side coming from restaurants. You know, there is two school-of-thought there; there is one school-of-thought that says, if the tenants survive thus far during the crisis, they're very likely to survive going forward. And then the other school-of-thought would be that the service program is in place until June of 2021, that's really helped out the tenants. And so we'll see after 2021 in terms of what the health attendance look like; where do you fall within that spectrum?

Sylvain Cossette

Well, I think when we look at that question, see you got to come back to our strategy; we've been moving off the tenants who are more dependent on financial assistance, and the tenants who we were concentrating on, these are very resilient and vibrant tenants. So, I think when you look at our portfolio going forward where the stress pain of COVID in the first wave should not be as present as we migrate new types of tenants and quality tenants in our base; so that's how we look at it.

Marie-Andrée Boutin

We'd be a lot more resilient.

Sylvain Cossette

Yes. And in terms of -- you know, I go back to the first wave when we -- we assessed our tenants, we categorized into different risk categories. And right now, we're -- I think, in Quebec, we're left with a good, good pocket of very strong retailers. But you can still have a strong retailer and if that retailer shut down, that retail is going to have real problem. I go back to my comment that as mall owners, we as owners and leading retailers have an open dialogue with the government, they're into new retails, that chunky part of our GDP in Quebec after construction; the government gets it, we have to keep retail open going forward. And there -- the college [ph] people have become very, very vocal. So all things being said, we should be in a good spot going forward.

Unidentified Analyst

Got it. Okay. My last question just on the operational side; last year, you provide guidance, it seemed certainly like 2% to 3%. Now given the world today, it's completely understandable why guidance has been withdrawn and I guess remains uncertain over things like parking rather than anything like that. But notwithstanding the strategic review that's going on, I was just hoping you might be able to provide some broader base color on expected occupancy changes in the lease renewal spreads in 2021 by asset class for the portfolio; how you stand today?

Sylvain Cossette

Yes. I think we will be able to give you -- not going to come back to guidance in the pure sense of the term, but in the next quarter we should give you more visibility coming out of Q1 on that because we are -- we are reassessing everything in terms of what happened on closures, especially in retail; so, we'll be a lot crisper on that issue and trends going forward. And we should have somehow some -- you know, hopefully some greater visibility on the start; so we'll -- it'll be I think it's more of a next quarter issue.

Unidentified Analyst

Okay, that's it for me. Thank you, everyone.

Operator

Thank you. Your next question comes from Pammi Bir with RBC Capital Markets. Pammi, your line is now open.

Pammi Bir

Thanks. And hi, everyone. And just with respect to the Sue's [ph], can you just maybe clarify what was the amount that you recorded -- that you receive in Q4 that related to Q4, meaning not Q2 and Q3? And then, is the expectation that you will continue to receive additional amounts, perhaps through the first half of this year?

Sylvain Cossette

Okay. Hi, Pammi. So we received $0.2 million -- we are to receive $0.2 million for Q4 because those amounts -- I mean, the $4.8 million in total for the year, by the way, has not been received yet; it's part of our receivables but we didn't receive it yet in cash. So the $0.2 million is just attributable to the fourth quarter. And with regards to 2021, well, we are we are doing the calculation on our side. And that we expect it to be more in line with Q4 than Q2 and Q3 because the way it was computed, it was not -- it was not the same calculation, it was kind of a complicated calculation methodology to determine what amounts we were eligible to that -- I don't expect much actually in 2021.

Pammi Bir

Got it. That's helpful, thanks. Antoine, just -- you know, maybe switching gears; can you talk a little bit about the office leasing environment and how it differs between your downtown portfolio and your suburban -- the suburban markets that you're in?

Antoine Tronquoy

And, and in terms of -- and maybe I'll have to maybe talk to one or two questions that Mario had, maybe I can tie-in with that on how we trend. But we look at Montreal office, we have about 1.1 million square feet under discussions, and discussions can be preliminary to more advanced; that is just general enquiry types. And that's split now, basically 600,000 central business district and 500,000 suburban. The central business district number; I think well, you got to read into it because it's -- you can see it as being bizarre from your perspective, given the fact that the Montreal downtown core [ph] is closed. But what's happening is, people coming off leases have an opportunity in this market to upgrade their premises. So it's -- that's the -- I think what's underpinning the central business district interest. And suburban has performed pretty well, the numbers we gave you so far under the pandemic. So, I think now in terms of trends going in the office segment, look at SPNOI, we -- the other variable we have in there is, we have our parking revenue, we have a very substantial revenue base under parking. And the quicker we get back into the downtown core, the more helpful that parking contribution will be.

The reason I go back to an earlier comment I made during the script; there is more and more talk by government and by leaders of industry of the importance of repopulating our downtown core to the Montreal and Quebec economy. So it's -- it's really a moving target, that's why there is a lot of pressure right now in vaccination and keeping a lid on variants. In Quebec, to go back same time last year, this is where all hell broke loose for us because we had our spring break; so there is a very prudent and cautious perspective to spring break this year. So the quicker we get back to the downtown core, I think you'll see some adjustments in the revenues, especially around party [ph].

Pammi Bir

Got it, thank you. So then, just -- I guess thinking about 2021 as we reopened, CapEx and leasing costs were down last year. But as we reopen, what are your thoughts on how that will trend in 2021? And then, as well, if you could just provide any color on the overall development spending outlook?

Antoine Tronquoy

Yes. Well, the development spending outlook, I'll let Marie-Andrée give some color. But we -- we're in the market on [indiscernible]; so we are in discussions with a potential tenant. So we're trying to tie that up at a good price point for us. So, I think that can be a sort of a Boxton [ph] development number which we -- hopefully, if we tie this up we can give you the real detailed -- matrix on the next call, because we're in that type of discussion. In terms of general CapEx on plan, we'd be pretty much in line with what we have this year, and that's what we're trying to maintain.

Sylvain Cossette

Yes. As we have approximately $150 million excluding developments projected for CapEx this year. With a small portion of that for industrial, about $25 million, about $16 million for office, and the difference of $66 million for retail.

Pammi Bir

Got it. Just one last one for me. I guess, if you could maybe just provide an update, and I'm not sure if it's in the materials yet but your overall exposure to some of the bankruptcies in retail that have been announced thus far, in terms of the revenue exposure. And then, I just want to clarify that has all of that probably hit your net operating income? Meaning have all those closures, and I guess bad debt that's already been taken for 2020? Meaning, there is going to be anything further in 2021?

Sylvain Cossette

Okay. Well, for the closures; in Q4 the bankruptcies in retail amounted to $2.7 million in our statements. Throughout the year for 2020, the impact of bankruptcies was $9.3 million from a retail standpoint; all that's taken into account in our expected credit losses, so no surprise further down the road on that. And if we look at the amount on the run rate basis that we're losing in terms of revenue when compared to the beginning of last year due to all these bankruptcies, the rental rate loss amounts to $13 million approximately for the retail.

Pammi Bir

Thanks very much. I will turn it back.

Operator

Thank you. We have a following question from Mike Markidis with Desjardins Securities. Mike, please go ahead.

Michael Markidis

Hi, thank you and good morning, everybody. So then, you seem to have good visibility on your leasing program in terms of renewals for the office segment in 2021, I think a large portion of that is government related. What can we expect for based on what you've seen so far with the spreads on renewal in the office be similar to what you were able to achieve in 2020; higher/lower?

Sylvain Cossette

I'll let Bernard give you the trend, but on -- we're talking renewals here; so over the spread what we are seeing is, tenants protecting space, I can use that as an expression, to see how things play out in the world. So if you had a tenant who had an option for five years, that tenant would be coming back and saying, well, I want to renew for three years. So there is a bit of pressure on the law but that helps the spread. So I'll let Bernard answer.

Bernard Poliquin

Yes. And thank you, Sylvain. We're doing well on the spreads for very simple reason that, typically an office lease as you know would be 5 to 10 years; so those leases that are expiring were negotiated 5 to 10 years ago, so there is an opportunity to obviously readjust the rent to market. So far this year the transactions that we've completed, the spread is at 9.5%, and based on our projections on the deals that we're working on, we are looking at 7% for the year in 2021.

Michael Markidis

Okay, so very similar to what you did last year; that's good news. Okay. And I think most other questions have been answered. Just quickly, I don't know if I missed this, but on the JV that you've done now at Thrompopolis [ph]; what's your equity interest in that project?

Marie-Andrée Boutin

It's 50%, Mike.

Michael Markidis

50%. Okay, that's it for me. Thanks very much.

Operator

Thank you. [Operator Instructions] There are no further questions at this time. Mr. Cossette, you may proceed.

Sylvain Cossette

Thank you. And once again, thank you for taking part in this conference call, and I wish all of you a very nice day, and we'll talk to you for Q1. Thank you.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we'd ask that you disconnect your lines.

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