Q3 2019 Earnings Call

November 6, 2019

Good morning, ladies and gentlemen, and welcome to the conference call for Granite Ridge.

Operator 2: Good morning, ladies and gentlemen, and welcome to the conference call for Granite REIT. Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer. Before we begin today's call, I'd like to remind you that today's statements and information made in today's discussion may constitute forward-looking statements and forward-looking information, and that actual results could differ materially from any conclusion, forecast, or projection. These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties. These risks and uncertainties are discussed in Granite's material filed with the Canadian Securities Administrators and the US Securities and Exchange Commission from time to time, including the Risk Factors section of its Annual Information Form for 2019, filed on 6 March 2019.

Operator: Good morning, ladies and gentlemen, and welcome to the conference call for Granite REIT. Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer. Before we begin today's call, I'd like to remind you that today's statements and information made in today's discussion may constitute forward-looking statements and forward-looking information, and that actual results could differ materially from any conclusion, forecast, or projection.

Speaking to you on the call. This morning is kind of inquiry, President and Chief Executive Officer add to recent <unk> Chief Financial Officer.

Before we begin today's call I'd like to remind you that these statements and information made in today's discussion may constitute forward looking statements and forward looking information and the actual results could differ materially from any conclusion forecast or projection.

Operator: These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties. These risks and uncertainties are discussed in Granite's material filed with the Canadian Securities Administrators and the US Securities and Exchange Commission from time to time, including the Risk Factors section of its Annual Information Form for 2019, filed on 6 March 2019.

These statements that information are based on certain material tracks or assumptions reflect management's current expectations and are subject to known and unknown risks and uncertainties.

These risks and uncertainties are discussed in granites material filed with the Canadian Securities administrators.

The U.S. Securities and Exchange Commission from time to time, including the risk factor section of its annual information form for 2019 filed on March six 2019.

Operator 2: Readers are cautioned not to place any undue reliance on any of these forward-looking statements and forward-looking information. Granite undertakes no intention or obligation to update or revise any of these forward-looking statements or forward-looking information, whether as a result of new information, future events, or otherwise, except required by law. In addition, the remarks this morning may include financial terms and measures that do not have a standardized meaning under International Financial Reporting Standards. Please refer to the Q3 2019 condensed combined audited financial results and management's discussion and analysis of Granite Real Estate Investment Trust, Granite REIT Inc., and other materials filed with the Canadian Securities Administrators and U.S. Securities and Exchange Commission from time to time for additional relevant information. I would now turn the call to Kevan Gorrie. Please go ahead.

Operator: Readers are cautioned not to place any undue reliance on any of these forward-looking statements and forward-looking information. Granite undertakes no intention or obligation to update or revise any of these forward-looking statements or forward-looking information, whether as a result of new information, future events, or otherwise, except required by law. In addition, the remarks this morning may include financial terms and measures that do not have a standardized meaning under International Financial Reporting Standards.

Readers are cautioned not to place any undue reliance on any of these forward looking statements and forward looking information.

Granite undertakes no intention or obligation to update or revise any of these forward looking statements or forward looking information, whether as a result of new information future events or otherwise except required by law.

In addition, the remarks. This morning May include financial terms and measures that do not have a standardized meeting under international financial reporting standards.

Operator: Please refer to the Q3 2019 condensed combined audited financial results and management's discussion and analysis of Granite Real Estate Investment Trust, Granite REIT Inc., and other materials filed with the Canadian Securities Administrators and U.S. Securities and Exchange Commission from time to time for additional relevant information. I would now turn the call to Kevan Gorrie. Please go ahead.

Please refer to the Q3 2019 condensed combined audited.

Financial results and management's discussion and Oh credit real estate investment Trust and granite REIT incorporated and other materials filed with the Canadian Securities administrators, and U.S. Securities and Exchange Commission from time to time for additional relevant information.

I'd now turn the call to Kevin Glory. Please go ahead.

Kevan Gorrie: Thank you, operator. Thank you everyone for taking the time to join us for our Q3 earnings call. I'm pleased to be joined this afternoon by Teresa and Lorne Kumer, our Executive Vice President of Real Estate, and Michael Ramparas, our Senior Vice President of Investments and Global Real Estate. Teresa will begin a discussion with the review of the financial highlights. I will then follow with comments on acquisitions, operations, development, and strategy, and then open up the call to any questions that you may have.

Kevan Gorrie: Thank you, Operator. Thank you everyone for taking the time to join us for our Q3 earnings call. I'm pleased to be joined this afternoon by Teresa and Lorne Kumer, our Executive Vice President of Real Estate, and Michael Ramparas, our Senior Vice President of Investments and Global Real Estate. Teresa will begin a discussion with the review of the financial highlights. I will then follow with comments on acquisitions, operations, development, and strategy, and then open up the call to any questions that you may have.

Thank you operator.

Thank you everyone for taking the time to join is for Q3 earnings call.

I'm pleased to be joined this afternoon by Theresa.

And Lorne Kumer, our executive Vice President of real estate and Michael rent peers are senior Vice president of investments and global real estate.

Teresa will begin a discussion with a review of the financial highlights I will then follow with comments on acquisitions operations development and strategy.

Then open up the call Tony questions that you may have.

Teresa Neto: All right. Thanks, Kevan, and good afternoon, everyone. Thanks for making the time to join this call. The third quarter was one of Granite's strongest quarters ever posted, and we posted robust same-property NOI and FFO growth and a continuation of investment activity with Granite executing acquisitions of three investment properties totaling approximately CAD 84 million, followed by an additional CAD 102 million of new investments announced post-quarter. FFO per unit for Q3 was CAD 0.93, an 8% increase relative to Q3 of 2018 and up 4% relative to Q2 of this year. Included in this quarter's FFO is CAD 0.4 million of additional G&A expense pertaining to final costs relating to the departure of the trust's former CFO. Normalizing for this item, FFO per unit would be CAD 0.94.

Alright, Thanks, Kevin and good afternoon, everyone.

Thanks for taking the time to join this call. The third quarter was one of Grand its strongest quarters ever posted a and we posted robust same property in Hawaii, and so growth in a continuation of investment activity with granite executing acquisitions of three investment properties totaling approximately 84 million followed by an additional 110 million.

I'm wondering to millions of new investments announced post quarter.

Teresa Neto: FFO per unit for Q3 was CAD 0.93, an 8% increase relative to Q3 of 2018 and up 4% relative to Q2 of this year. Included in this quarter's FFO is CAD 0.4 million of additional G&A expense pertaining to final costs relating to the departure of the trust's former CFO. Normalizing for this item, FFO per unit would be CAD 0.94. The comparative FFO of Q3 2018 was also impacted by employee termination costs of CAD 1 million, whereby if adjusting for that item, FFO per unit would have been CAD 0.88.

And so per unit for Q3 was 93 cents, an 8% increase relative to Q3, 2018 and up 4% relative to Q2. This year included in this quarter. So its weight 4 million of additional genie expense pertaining to final costs relating to the departure of the trust former CFO .

Normalizing for this item advocate for you and it would be 94 cents.

Teresa Neto: The comparative FFO of Q3 2018 was also impacted by employee termination costs of CAD 1 million, whereby if adjusting for that item, FFO per unit would have been CAD 0.88. Incremental FFO from new acquisitions, net of dispositions, lower current income tax expense, as well as a net small positive foreign exchange impact driven by our weaker Canadian dollar relative to the US dollar and offsetting the effect of a strengthened Canadian dollar relative to the euro, all more than offset the temporary dilutive effect of the CAD 231 million April equity offering, where proceeds have not yet been fully deployed in the quarter. Granite's AFFO on a per unit basis in Q3 was CAD 0.90, which is CAD 0.08 higher than Q3 2018 and CAD 0.02 higher than Q2 of this year.

Comparative at both Q3 2018 was also impacted by employee termination cost of $1 million, whereby if adjusting for that item <unk> per unit would have been 88 cents.

Teresa Neto: Incremental FFO from new acquisitions, net of dispositions, lower current income tax expense, as well as a net small positive foreign exchange impact driven by our weaker Canadian dollar relative to the US dollar and offsetting the effect of a strengthened Canadian dollar relative to the euro, all more than offset the temporary dilutive effect of the CAD 231 million April equity offering, where proceeds have not yet been fully deployed in the quarter. Granite's AFFO on a per unit basis in Q3 was CAD 0.90, which is CAD 0.08 higher than Q3 2018 and CAD 0.02 higher than Q2 of this year.

Incremental flow from new acquisitions net of dispositions lower current income tax expense as well as a net small positive foreign exchange impact driven by are weaker Canadian dollar relative to the U.S. dollar an offsetting the effect of the strength in Canadian dollar relative to the euro all more than offset the temporary dilutive effect.

The 231 million dollar April equity offering where proceeds have not yet been fully deployed in the <unk> in the quarter.

Granted they had been so on a per unit basis. In Q3 was 90 cents, which is eight cents higher than Q3, 2018, and two cents higher than Q2 this year.

Teresa Neto: AFFO per unit was favorably impacted by the higher FFO per unit and lower AFFO related capital expenditures incurred in the quarter of CAD 1.4 million compared to CAD 2.1 million in the same period last year. For fiscal year 2019, we are expecting total maintenance, capital expenditures, leasing, and commissions to reach approximately CAD 7.5 million for the year. In Q4 specifically, AFFO related CapEx is expected to be approximately CAD 3.8 to 4 million. As a result of a relatively low CapEx quarter and strong FFO performance, the AFFO payout ratio for this quarter came in at 78%. Operating metrics continue to demonstrate positive momentum.

If it FFO per unit was favorably impacted by the higher AFFO per unit and lower if AFFO related capital expenditures incurred in the quarter, a 1.4 million compared to 2.1 million in the same period last year.

For fiscal year 2019, we are expecting total maintenance capital expenditures leasing commissions to reach approximately 7.5 million for the year.

In Q4, specifically asked before related Capex is expected to be approximately $3.84 million.

As a result of are relatively low capex corridor and strongest performance the Apple pay out ratio for this quarter came in at 70%.

Operating metrics continue to demonstrate positive momentum and Hawaiian a cash basis for the quarter increased by 3.9 million worth 69% from the same quarter last year and by 2 million or 3.4% from the second quarter 2019.

Teresa Neto: NOI on a cash basis for the quarter increased by CAD 3.9 million or 6.9% from the same quarter of last year, and by CAD 2 million or 3.4% from Q2 2019. Same property NOI for Q3 2019 was very strong relative to last year, increasing 4.3% and on a constant currency basis, increasing by 5.8%, driven mostly by occupancy gains in Canada, the US, and the Netherlands, and contractual rent or CPI increases in the US, Austria, and Netherlands. On a year-to-date basis, same property NOI is up CAD 3.7 million or 2.8% relative to last year, and on a constant currency basis, 3.9%.

Same property anyway for Q3, 2019 was very strong relative to last year, increasing 4.3% and <unk> and on a constant currency basis, increasing by 5.8% driven mostly by occupancy gains in Canada, the U.S. and another lens and contractual rent or <unk> increases in the U.S. aastra another one.

Yeah.

On a year to date basis same property I know why is that 3.7 million or 2.8% relative to Q2, two last year and on a constant currency basis, 3.9%.

Teresa Neto: G&A for the quarter was CAD 0.6 million lower than the same quarter last year, and CAD 1.7 million lower than the second quarter of 2019, which if you recall, was impacted by CAD 2.1 million of termination costs related to the CFO's departure. Included in the current quarter's G&A is CAD 0.3 million of expense related to the fair value loss associated with the increase in non-cash compensation liabilities due to the increase in Granite's unit price. On a year-to-date basis, these fair valued losses amount to 1 million dollars. Assuming no further fair value variances from the remeasurement of unit-based compensation liabilities, G&A for fiscal 2019 is estimated to be approximately CAD 30 million for the year. For Q4, G&A is expected to remain flat with Q3 at approximately CAD 7 million for the quarter.

Do you need for the quarter was point 6 million lower than the same quarter last year and $1.7 million lower than the second quarter of 2019, which if you recall was impacted by 2.1 million of termination costs related to the CFO departure.

Included in the current quarter's DNA is point threemillion of expense related to the fair value loss associated with the increase in noncash compensation liabilities due to the increase in granite unit price on a year to date basis. These fair valued losses amounted to a $1 million.

Teresa Neto: On a year-to-date basis, these fair valued losses amount to 1 million dollars. Assuming no further fair value variances from the remeasurement of unit-based compensation liabilities, G&A for fiscal 2019 is estimated to be approximately CAD 30 million for the year. For Q4, G&A is expected to remain flat with Q3 at approximately CAD 7 million for the quarter.

Assuming no further fair value variances from the Remeasurement of unit based compensation liabilities do you need for fiscal 2019 is estimated to be approximately $30 million for the year and for Q4 DNA is expected to remain flat with Q3 at approximately 7 million for the quarter.

Teresa Neto: Note that the forecasted G&A for 2019 fiscal year would be CAD 27.8 million if CFO termination costs totaling CAD 2.5 million are excluded. In Q4, the trust completed a reorganization of its Austrian entities, whereby the ownership of the trust's Austrian entities is now controlled by the REIT's Netherlands structure. This reorganization will result in future savings relating to withholding tax on Austrian dividends and will facilitate a future share sale efficiently. This reorganization will, however, result in a recognition of a real estate transfer tax expense of approximately EUR 1.8 million or CAD 2.7 million in Q4.

Note that the forecasted you name for 2019 fiscal year would be 27.8 million CFO termination costs totaling two and a half million or excluded.

In the fourth quarter. The trust completed a reorganization of its Austrian entities, whereby the ownership of the trust and Austrian entities is now controlled by the reads Netherlands structure. This reorganization will result in future savings relating to withholding tax on Austrian dividends and will facilitate future share sale efficient.

Right.

This reorganization will however will result in a recognition of a real estate transfer tax expense of approximately 1.8 million euros or 2.7 million Canadian into fourth quarter.

Teresa Neto: Although this will be a significant expense incurred in the current year, we expect to realize savings of the same EUR 1.8 million in 2020, when we anticipate distributing approximately EUR 36 million from Austria to Canada. We'll continue to realize withholding tax savings every year thereafter on Austrian distributions of approximately EUR 0.7 million or CAD 1 million based on current distribution forecasts. The trust balance sheet remains very strong, comprising total assets of approximately CAD 4.5 billion at the end of Q3, an increase of CAD 70 million since the end of Q2 of this year, driven by $78 million of fair value gains recognized on the trust investment property portfolio. Over 80% of this fair value gain is attributable to the trust properties located in the GTA and US.

Although this will be a significant expense incurred into green here, we expect to realize savings at the same when we might 1.8 million euros in 2020, when we anticipate distributing approximately 36 million euros from Australia, Canada, and we'll continue to realize withholding tax savings every year thereafter on Austrian distribution.

Approximately point 7 million or 1 million Canadian based on current distribution forecast.

The trust balance sheet, the trusts balance sheet remains very strong comprising total assets of approximately 4.5 billion at the end of Q3, an increase of 70 million since the end of second quarter of this year are driven by $78 million a fair value gains recognized on the trust investment.

Teresa Neto: The trust balance sheet remains very strong, comprising total assets of approximately CAD 4.5 billion at the end of Q3, an increase of CAD 70 million since the end of Q2 of this year, driven by $78 million of fair value gains recognized on the trust investment property portfolio. Over 80% of this fair value gain is attributable to the trust properties located in the GTA and US.

Property portfolio.

Over 80% of distributor again is attributable to the trust properties located in the DTA and USA.

Teresa Neto: The increase in total assets was partially offset by a decrease of about CAD 45 million on the trust European investment property portfolio due to the strengthening of the Canadian dollar against the euro, but positively impacted by an increase of approximately CAD 17 million on the trust's US assets due to a weaker Canadian dollar against the US dollar. The trust's overall weighted average cap rate decreased 10 basis points to 6.2% at the end of Q3. As disclosed, the REIT refinanced and extended its US term loan in the quarter, which will result in interest expense savings of CAD 0.03 per unit going forward. The REIT continues to evaluate refinancing opportunities that can leverage its unique access to significantly lower European debt. Total net leverage at the end of the quarter was 20%, essentially flat with Q2.

The increase in total assets was partially offset by a decrease of about 45 million on the trust European investment property portfolio do you have the strengthening of the Canadian dollar against the euro but positively impacted by an increase of approximately 17 million on the trust U.S. assets do you have a weaker Canadian dollar against the U.S. dollar but.

Overall weighted average cap rate decreased 10 basis points to 6.2% at the end of the third quarter.

Teresa Neto: As disclosed, the REIT refinanced and extended its US term loan in the quarter, which will result in interest expense savings of CAD 0.03 per unit going forward. The REIT continues to evaluate refinancing opportunities that can leverage its unique access to significantly lower European debt. Total net leverage at the end of the quarter was 20%, essentially flat with Q2.

As disclosed the read refinance it extended its U.S. term loan in the quarter, which will will result in interest expense savings of three cents per unit going forward. The re continues to evaluate refinancing opportunities that can leverage its unique access to significantly lower European debt.

Total net leverage at the ended the quarter with 20% essentially flat with the second quarter. The trust current liquidity is approximately 1.1 billion representing cash on hand of approximately 650 million and the Undrawn operating line of 500 million.

Teresa Neto: The trust's current liquidity is approximately CAD 1.1 billion, representing cash on hand of approximately CAD 650 million, and the undrawn operating line of CAD 500 million. Net leverage and liquidity, pro forma for the 31 October equity offering, acquisitions and investments announced on 21 October, and the completion of the disposition of the remaining five assets held for sale, is estimated to be 20% and approximately CAD 850 million liquidity. The recent equity offering is expected to have a dilutive impact to Q4. I'll now turn over the call to Kevin.

Net leverage and liquidity pro forma the October 31 equity offering acquisitions and investments announced on October 21st and the completion of the disposition of the remaining five assets held for sale is that the estimated to be 20% and approximately 850 million liquidity.

The recent equity offering is expected to have I dilutive impact to the fourth quarter I'll now turn over the call to Kevin.

Kevan Gorrie: Thanks, Teresa. As always, I will keep my comments brief as I trust you've had the opportunity to review our MD&A and press release. As in Q2, I would characterize Q3, albeit very strong, as being in line with our expectations and slightly ahead of schedule in terms of progress against our strategic plan. During the quarter, we acquired a 260,000 sq ft distribution center in the Netherlands and a newly constructed 300,000 sq ft distribution center in Horn Lake, Mississippi, a suburb of Memphis with close proximity to Memphis International Airport and FedEx's main global air hub.

Thanks, Teresa as always I'll keep my comments brief as I Trust, you've had the opportunity to review, our Mdna and press release.

As in the second quarter I would characterize the third quarter, albeit very strong as being in line with our expectations and slightly ahead of schedule in terms of progress against our strategic plan.

During the quarter, we acquired a 260000 square foot distribution center in the Netherlands, and the newly constructed 300000 square foot distribution center in or like Mississippi, a suburb of Netflix Memphis, we close proximity to Memphis International Airport and Fedexs main global era.

Kevan Gorrie: These assets were acquired at an average going in NOI yield of 5.9% and represent growth in two of our target markets in Europe and the US, respectively. Also in the quarter, we acquired, in partnership with NorthPoint Development, a 191-acre infill site fronting US Highway 90 in Northeast Houston. This site will accommodate approximately 2.5 million sq ft in total development, and we have launched phase one, comprising two buildings totaling roughly 650,000 sq ft, which we expect to complete early in Q3 2020. I will discuss the status of our other development projects shortly. During the quarter, we also closed on the disposition of our Finchdene asset in Scarborough and expect to close on the sale of the five Michigan assets in Q4.

These assets were acquired and an adverse going in Hawaii yield of 5.9% represent growth in two of our target markets in the you're in Europe in the U.S. respectively.

Also during the quarter, we acquired in partnership with nor point development, a 191 acre infill site fronting U.S. Highway 90 in northeast Houston.

Kevan Gorrie: This site will accommodate approximately 2.5 million sq ft in total development, and we have launched phase one, comprising two buildings totaling roughly 650,000 sq ft, which we expect to complete early in Q3 2020. I will discuss the status of our other development projects shortly. During the quarter, we also closed on the disposition of our Finchdene asset in Scarborough and expect to close on the sale of the five Michigan assets in Q4.

The site will accommodate approximately 2.5 million square feet and total development.

And we have launched phase one comprising two buildings totaling roughly 650000 square feet, which we expect to complete early in the third quarter of 2020.

We'll discuss the status of our other development projects shortly.

During the quarter. We also closed on the disposition of our finished in asset in Scarborough and expect to close on the sale of the five Michigan assets in the fourth quarter.

Kevan Gorrie: Our dispositions are expected to total just over CAD 105 million by the end of the year, which is at the low end of our guidance for 2019. Execution of the lease extension documents and preparations for the sale of Sorry, I should say, our assets planned for sale in Austria, Spain, and Windsor required more time than expected, and those transactions will now be pushed into 2020. We have decided for now to retain our asset in Redditch, England, pending clarity around Brexit and market conditions in Britain.

Or dispositions are expected to totaled just over 105 million by the end of the year, which which is at the low end of our guidance for 2019.

Execution of the lease extension documents and preparations for the sale or assets held for sale and sorry, I should say or assets planned for sale in Austria, Spain, and Windsor required more time than expected and those transactions will now be pushed into 2020.

We have decided for now to retain interested in rather chamberlain pending clarity around Brexit and market conditions in Britain.

Kevan Gorrie: Following the acquisitions and dispositions which occurred on or before 30 September, our Magna tenant concentration by revenue and GLA has decreased to 47% and 40% respectively, putting us ahead of schedule on our previously announced target of reducing our Magna concentration to below 50% on a revenue basis by the end of 2019. Pro forma the sale of the Michigan portfolio and the announced acquisitions, including the Dallas, Texas development, which is expected to close later this month, our concentration is expected to decrease further to 41% and 35% of revenue and GLA respectively on a run rate basis. Operationally, we have now negotiated extensions on roughly 1.4 million or 65% of lease expiries in 2020 on an average rental rate increase of over 5%.

Following the acquisitions and dispositions, which occurred on or before September thirtyth, our magnet tenant concentration by revenue NGL, a has decreased to 47 and 40% respectively.

Putting us ahead of schedule on or previously announced target of reducing or better concentration to below 50% on a revenue basis by the end of 2019.

Kevan Gorrie: Pro forma the sale of the Michigan portfolio and the announced acquisitions, including the Dallas, Texas development, which is expected to close later this month, our concentration is expected to decrease further to 41% and 35% of revenue and GLA respectively on a run rate basis. Operationally, we have now negotiated extensions on roughly 1.4 million or 65% of lease expiries in 2020 on an average rental rate increase of over 5%.

Pro forma the sale of the Michigan portfolio, and the announced acquisitions, including the Dallas, Texas development.

Which is expected to close later this month.

Our concentration is expected to decrease further to 41% and 35% of revenue NGL, a respectively on a run rate basis.

Operationally, we have now negotiated extensions.

On roughly 1.4 million or 65% of lease expires in 2020 at an average rental rate increase in rental rate of over 5%.

Kevan Gorrie: The remaining 750,000 sq ft of expiries in 2020, which occur in H2, we anticipate an average rental rate increase of 7% to 8% on renewal or re-leasing. At our current occupancy rate of 99.7%, we now only have 90,000 sq ft of vacant space related to the Novi asset in Michigan. In the quarter, we executed a 10-year lease at our 600 Tesma property in Vaughan with a leading global e-commerce provider. As Teresa mentioned earlier, and as disclosed in our MD&A, same-property NOI is up 3.9% year to date on a constant currency basis.

The remaining 750000 feet of expires in 2020, which occur in the second half of the year, we anticipate an average rental rate increase of 7% to 8% on renewal or releasing.

At our current occupancy rate of 99.7%, we know that we have 90000 square feet, a vacant space related to the nobody else it in Michigan.

In a quarter, we executed a tenure lease at EUR 600, Tessmer property involved.

With a leading global ecommerce provider.

As Teresa mentioned earlier and as disclosed in our Mdna same property NOI was up 3.9% year to date on a constant currency basis.

Kevan Gorrie: Movement quarter-over-quarter from 2018 was relatively broad-based and positive across all geographic segments on a constant currency basis, ranging from 1.8% in Austria to over 70% in the Netherlands, led, as Teresa mentioned, by leasing activity and occupancy gains from 2018. We expect same-property NOI growth to moderate in Q4 from 5.8% this quarter and finish the year above our 2019 guidance of 2% to 3%. We also reiterate our same-property NOI growth guidance of 3% to 4% for 2020, 3% roughly excluding intensification, and 4% including intensification.

Movement quarter over quarter from 2018 was relatively broad based at positive across all geographic segments on a constant currency basis, ranging from 1.8% in Austria to over 70% in the Netherlands.

Let us Teresa mentioned by leasing activity in occupancy gains from 2018.

We expect same property NOI growth to moderate in Q4 from 5.8% this quarter.

And finished the year above or 2019 guidance of 2% to 3%.

We also reiterate our same property NOI growth guidance of 3% to 4% for 2020.

3%, roughly excluding intensification and 4% including intensification.

Kevan Gorrie: As an update on our development program, we are continuing with the tendering phase on our Altbach development project in Stuttgart, Germany, and hope to commence construction in early Q1 2020 for completion in late 2020. We remain in discussions with active prospects for the entire space. Our development project in AllPoints at Anson in Indianapolis continues to progress on schedule with substantial completion expected in early Q2 2020. As disclosed in our press release in MD&A, our development site in Dallas is now substantially complete, and the tenant has waived the right under the lease to purchase the building. Subject to normal closing conditions, we expect the transaction to close later this month. The proposed expansion of the Conagra food distribution facility on Logistics Drive in Mississauga is currently in permitting and tendering.

As an update on our development program, we are continuing with the tendering phase in our all back development project in Stuttgart, Germany, and hope to commence construction in early.

Q1, 2020 for completion in late 2020.

We remain in discussions with active prospects for the entire space.

Our development project in all points Indianapolis continues to progress on schedule with substantial completion expected in early Q2 2020.

Kevan Gorrie: As disclosed in our press release in MD&A, our development site in Dallas is now substantially complete, and the tenant has waived the right under the lease to purchase the building. Subject to normal closing conditions, we expect the transaction to close later this month. The proposed expansion of the Conagra food distribution facility on Logistics Drive in Mississauga is currently in permitting and tendering.

As disclosed in our press release, and then DNA or development site in Dallas is now substantially complete and the tenant has with the right on the lease to purchase the building.

Subject to normal closing conditions, we expect the transaction to close later this month.

The proposed expansion of the contract food distribution facility, our logistics dry the Mississauga is currently in for permit and tendering, we anticipate commencing construction in the first quarter with completion scheduled for late Q2.

Kevan Gorrie: We anticipate commencing construction in Q1, with completion scheduled for late Q2. As an update on the proposed development project in Calgary announced earlier this year, we were unable to economically resolve certain planning and zoning issues related to the acquisition of the land and will not be moving forward with the transaction. As previously discussed, we anticipate that these development projects will further enhance the quality of our portfolio, generate superior long-term returns, and create significant NAV growth for our unitholders upon stabilization, all a major component of our corporate strategy and philosophy. As Teresa mentioned, the combination of the Austrian restructuring charge and additional units from the October 31 equity offering will negatively impact our results for Q4.

As an update on the proposed development project in Calgary announced earlier. This year, we were unable to economically resolve certain planning and zoning issues related to the acquisition of the land and will not be moving forward with the transaction.

As previously discussed we anticipate the these development projects will further enhance the quality of our portfolio.

Kevan Gorrie: As previously discussed, we anticipate that these development projects will further enhance the quality of our portfolio, generate superior long-term returns, and create significant NAV growth for our unitholders upon stabilization, all a major component of our corporate strategy and philosophy. As Teresa mentioned, the combination of the Austrian restructuring charge and additional units from the October 31 equity offering will negatively impact our results for Q4.

Generate superior long term returns and creates significant and Avi growth for Arden for our unitholders upon stabilization.

All a major component of our corporate strategy a philosophy.

As Teresa mentioned, the combination of the Austrian restructuring charge and additional units from the October 30, Onest equity offering will negatively impact our results for Q4.

Kevan Gorrie: The restructuring charge will improve our cash flow in 2020 and beyond, and the equity raise will enable us to execute on our growth plans for 2020 in conjunction with planned refinancing and potential financing initiatives. As an important part of our organizational and growth strategy, Jon Sorg joined our team in October and will lead our platform and portfolio strategy in the US. The addition of Jon and Witsard further improves our platform strength and capabilities in the US and Europe respectively. In closing, we are very pleased to announce our eighth consecutive annual distribution increase. It is a product of a conservative capital structure and stable and sustainable cash flow growth that enables us to increase the distribution in 2019 and maintain conservative capital ratios for future potential increases. On that, I will now open up the floor for any questions.

Well the restructuring charge will improve our cash flow in 2020 and beyond.

Equity raise will enable us to execute on our growth plans for 2020 in conjunction with plan refinancing your potential financing initiatives.

As an important part of our organizational and growth strategy, John sore joined our team in October and will lead our platform portfolio strategy in the U.S.

Kevan Gorrie: The addition of Jon and Witsard further improves our platform strength and capabilities in the US and Europe respectively. In closing, we are very pleased to announce our eighth consecutive annual distribution increase. It is a product of a conservative capital structure and stable and sustainable cash flow growth that enables us to increase the distribution in 2019 and maintain conservative capital ratios for future potential increases. On that, I will now open up the floor for any questions.

The addition of John answered further approves our platform strengths and capabilities in the U.S. and Europe , respectively.

In closing, we're very pleased to announce our eighth consecutive annual distribution increase.

It is a product of a conservative capital structure and stable and sustainable cash flow growth that enables us to increase the distribution in 2019, and maintaining conservative capital ratios for future potential increases.

On that I will now open up before for any questions.

Ladies and gentlemen, if you would like to register for a question at this time. Please press star one it followed by the four on your telephone.

Operator 2: Ladies and gentlemen, if you would like to register for a question at this time, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and would like to withdraw your registration, please press the one followed by the three. If you're using a speakerphone, please lift your handset before entering your request. One moment please for the first question. Our first question is from the line of Sam Damiani with TD Securities. Please go ahead.

Operator: Ladies and gentlemen, if you would like to register for a question at this time, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and would like to withdraw your registration, please press the one followed by the three. If you're using a speakerphone, please lift your handset before entering your request. One moment please for the first question. Our first question is from the line of Sam Damiani with TD Securities. Please go ahead.

You will hear with recon prompt knowledge or request.

If your question has been answered and would like to withdraw your registration. Please press the one followed by the Threeg.

If you're using a speakerphone please lift your handset before entering a request.

One moment please for the first question.

And our first question is from the line upside to your money with TD Securities. Please go ahead.

Thanks, Good afternoon, everybody congratulations great quarter.

Sam Damiani: Thanks, and good afternoon, everybody, and congratulations on a great quarter. Kevan, can you just clarify what you said about dispositions in, I think it was 3 markets that were being deferred, I think you said until 2020. I didn't quite catch the details of what you were saying there.

Jim can you just clarify the what you said about dispositions and I think it was three markets that were being deferred I think you said till 2020 added quick catch the details of what you are what you were you were saying.

Kevan Gorrie: Yeah, the three markets involved, Sam, are Austria, Spain, and the Patillo asset in Windsor.

Yes, the three markets involved Sam or Austria, Spain, and the patillo asset and Windsor.

The total Julie of those those assets.

Sam Damiani: What's the total sort of GLA of those assets? Roughly.

Ralph I think the total values roughly $60 million I don't have the JLL of hand, okay. So they're not they're not huge assets.

Kevan Gorrie: I think the total value is roughly CAD 60 million. I don't have the GLA offhand.

Sam Damiani: Okay. They're not huge assets.

Kevan Gorrie: No.

No.

Sam Damiani: Okay. It was sort of pending, sort of lease finalizations with the tenants?

Okay, and that was sort of pending sort of lease at least finalizations, what's the tenants.

Yes leases like getting the lease extensions papered, and then just preparing the assets for sale, including property condition reports and so forth.

Kevan Gorrie: Yes, lease, like getting the lease extensions papered and then just preparing the assets for sale, including property condition reports and so forth.

Sam Damiani: Okay.

Kevan Gorrie: Those are now expected to commence in 2020.

Okay. So those are now expected to commence in 2020 some transaction.

Sam Damiani: Okay.

Kevan Gorrie: Those transactions.

Sam Damiani: As we look forward to 2020 in terms of acquisitions with you know more people on the ground, obviously in Europe earlier this year and most recently in Dallas, you know, how should we expect the mix of growth investments for Granite in 2020?

And then as we look forward to 2020 in terms of acquisitions with.

More people on the ground, obviously, a in Europe earlier this year and most recently.

Yes.

How should we expect the mix of of growth investments for for granted in 2020.

Well it looks like I think year to date, including land for development, we've acquired roughly 650 million.

Kevan Gorrie: Well, it looks like, I think year to date, including land for development, we've acquired roughly CAD 650 million of assets. We hope to finish the year a little north of CAD 700 million. Realistically, I think we'll do something similar to that in 2020, probably somewhat better, but in that range, Sam.

Assets will probably we hope to finish the year little north of 700.

Ian.

Realistically I think we'll do something similar to that in 2020.

Probably somewhat better, but but in the range then.

And.

Sam Damiani: Are you biasing, you know, US over Europe? Are you looking seriously at more in Canada?

Biasing.

So for Europe are you looking seriously up more in Canada.

Well, we're looking in Canada.

Kevan Gorrie: Well, we're looking in Canada, but I think rightly so, we're being very selective about what we're doing in Canada. We still are seeing superior returns in the US and Europe. I would say the bulk of our acquisitions, including development sites that we would look to acquire, would occur in Europe and the US.

I think rightly so we're being very selective with what we're doing in Canada. We still are seeing superior returns in the U.S. in Europe . So I would say the bulk of our acquisitions, including development sites that we would look to acquire would occur in Europe in the U.S.

Okay, and just you mentioned the lease I think it was 600 Tesla.

Sam Damiani: Okay. Just, you mentioned the lease at, I think it was 600 Tesma. When does the rent commence there? I don't know, are you able to name the tenant?

Does that lease, but what is the right that's there and.

Are you able to the tenant.

I'm not able to name the tenant.

Kevan Gorrie: I'm not able to name the tenant, under the conditions of the lease. The rent commenced 1 September.

Under the conditions of lease the rent commenced September onest.

Thanks, I'll turn it back.

Sam Damiani: Thanks. I'll turn it back.

Our next question is from the line of Mark Rothschild with Canaccord Genuity. Please go ahead.

Operator 2: Our next question is from the line of Mark Rothschild with Canaccord Genuity. Please go ahead.

Operator: Our next question is from the line of Mark Rothschild with Canaccord Genuity. Please go ahead.

Mark Rothschild: Thanks, and good afternoon, everyone. In regard to the new development project that you bought in Dallas, can you talk about the market for finding those type of deals, final product, newly developed? Then maybe in that context, how would the cap rate going in on this deal compare to buying an asset that maybe the tenant was already paying rent? If you buy it later on in the process, did it matter at all, considering there was a lease in place? I'm not sure if that played into this deal.

Thanks, Good afternoon, everyone.

In regard to the new development project that you bought and.

In Dallas.

Can you can you talk about the market finding those type of deal refined product.

Developed and maybe in that context.

How would the cap rate.

Going on this deal compared to buying an asset that maybe the tenant with already paying rent and if you buy it later on in the process to the matter at all.

There was a lease in place I'm not sure if that played into this deal.

Well I think it did mark I would say with assets like like this because of their scale in the value of them I think you have to be very selective.

Kevan Gorrie: Well, I think it did, Mark. I would say with assets like this, because of their scale and the value of them, I think you have to be very selective. We had looked at a few opportunities, frankly, globally, for assets like this. We felt like it was a very good fit strategically. I think we are quite selective on the markets and the locations within the markets that we are looking for. This one fit our investment criteria. In terms of the cap rate consideration, it is our belief that there was cap rate consideration for a forward purchase. I wouldn't speculate today on what that is, but I would offer that buying that asset on a stabilized basis would be at a higher price than what we agreed to purchase it for.

So we had looked at a few opportunities frankly globally.

For assets like this we felt like it was a very good fit strategically, but I think we're quite selective on the markets and the locations within the markets that we're looking for this one fit our investment criteria in terms of the cap reconsideration. It is our belief that there was calgary consideration for a forward purchase.

Kevan Gorrie: This one fit our investment criteria. In terms of the cap rate consideration, it is our belief that there was cap rate consideration for a forward purchase. I wouldn't speculate today on what that is, but I would offer that buying that asset on a stabilized basis would be at a higher price than what we agreed to purchase it for.

Yes.

I wouldn't speculate today of what that is but I would offer that point that asset on a stabilized basis would be at a higher price than what we agreed to purchase before.

Mark Rothschild: Okay, great. Just maybe in regards to Calgary, the asset that you're not going forward on, is there any significance related to your view on the market, or is that completely separate? Maybe just your view in general on the Alberta industrial market.

Okay, Great and just maybe on parts to Calgary that asset that you're not going forward on.

Is there any is that any significance related to review on the market or is that completely separate and maybe your view in general on the Alberta industrial market.

I would say it this way I think it was more related to costs associated with.

Kevan Gorrie: I would say it this way. I think it was more related to costs associated with infrastructure and servicing of the site, and there were some question marks about what we could eventually build there. The other layer that I would put on top of that, though, is we felt like our flexibility in terms of pricing and what we can achieve was quite tight. So this was a site where we weren't willing to push in terms of our pro forma and what we thought we could achieve on a rental rate basis and a timing basis. So I think that's kind of the best way I would put that.

Infrastructure and servicing of the site in there were some question marks but what we could.

Eventually build there the other layer that I would put on top of that though is we felt like.

Our flexibility in terms of pricing what we can achieve was quite tight. So this was a site where we weren't willing to push.

In terms of our pro forma and what we thought we could achieve on a rental rate basis and the timing basis.

I think thats kind of the best way it would put that.

Okay, great. Thank you.

Mark Rothschild: Okay, great. Thank you.

Our next question is from the line of Chris Cooper re with RBC. Please.

Operator 2: Our next question is from the line of Chris Couprie with CIBC. Please go ahead.

Operator: Our next question is from the line of Chris Couprie with CIBC. Please go ahead.

Please go ahead.

Chris Couprie: Good afternoon. Just two quick ones for me. Just in terms of the organic growth outlook, would you be able to give any color in terms of the different geographies, what your growth outlook expectations are by geography? Secondly, Kevin, you mentioned earlier financing and refinancing initiatives for 2020. Just any color on that? Thanks.

Good afternoon, I'm, just two quick ones for me.

Just trying to the organic growth outlook.

Would you be able to give any color in terms of the different geographies, what your growth expectations or by geography, and then secondly, Kevin you mentioned earlier.

Financing and refinancing initiatives for 2020, I'm, just any any color on that thanks.

Okay.

Kevan Gorrie: I'll let Theresa talk about the refinancing opportunities, but on the same property NOI, I think you're talking about probably we did provide some color in 2019. There was a lot of leasing activity that drove our same property NOI growth this year, particularly in Europe. 2020, there was a segment done in Canada, and the US and Europe. I think 2020, the expiries were more broad-based. Obviously, we're seeing better rental rate growth on our expiries and renewals and re-leasing in Canada, but we do expect them to be positive across all the geographic segments with Canada obviously leading the way in 2020 in terms of growth.

I'll, let teresa talked about the refinancing opportunities, but on the same property NOI I think you're talking about probably we did provide some color in 2019 that was there was a lot of leasing activity that drove.

Our same property NOI growth this year, particularly in Europe .

2020.

There was a segment on in Canada.

And the U.S. and Europe . So I think 2020, the Expirees were more broad based obviously, we're seeing better rental rate growth on our expirees.

Kevan Gorrie: I think 2020, the expiries were more broad-based. Obviously, we're seeing better rental rate growth on our expiries and renewals and re-leasing in Canada, but we do expect them to be positive across all the geographic segments with Canada obviously leading the way in 2020 in terms of growth.

And renewals and releasing in Canada, but.

But we do expect them to be positive across all the geographic segments with Canada, obviously, leading the way in 2020 in terms of growth.

And Chris on the financing side of it so were always looking at kind of like opportunities. So for instance, you know we have the maturity of 250 million in 2021.

Teresa Neto: Chris, on the financing side of it. We're always looking at kind of like opportunities. For instance, you know, we have a maturity of CAD 250 million in 2021. Right now, it's still not worthwhile to refinance that due to the prepayment penalties on the debentures. That's something we're gonna park for a little while. You know, we're looking at the term loans, and does it make sense to do something similar to what we did with the US dollar term loan? We have another Canadian term loan. Again, looking at the cost, you know, we have a mark-to-market that's negative in a liability position on that particular term loan, the swap related to that. We're looking at, you know, does it make sense to refinance, repay that and economically?

Right now, it's still not worthwhile to refinance that due to the prepayment penalties on the debentures. So that's something we're going to park for little while.

Teresa Neto: We're looking at the term loans, and does it make sense to do something similar to what we did with the US dollar term loan? We have another Canadian term loan. Again, looking at the cost, you know, we have a mark-to-market that's negative in a liability position on that particular term loan, the swap related to that. We're looking at, you know, does it make sense to refinance, repay that and economically?

You know, we're looking at the term loans and doesn't make sense to do something similar to what we did with U.S.U.S. dollar term loan we have another Canadian term loan.

Again looking at the cost we have a mark to market that's negative.

Liability position on that particular term loan swap related to that so we're looking at you know doesn't make sense to refinance we pay that and economically so thats. Another option and then we're keeping an eye on the debenture market and right now at very favorable and lot of recent successfully raised money in the market but.

Teresa Neto: That's another option. Then, you know, we're keeping an eye on the debenture market. Right now, it's very favorable, and a lot of REITs have successfully raised money in the market. For us, with the recent equity offering, we have to time this appropriately. Also, it depends largely, too. We would favor and lean towards financing, for instance, our European acquisition pipeline with financing and swapping into euro debt. The timing of that will depend on the acquisition pipeline in Europe.

For us with the recent equity offering we have to time this appropriately and also it depends largely to we would favor in lean toward a financing for instance, our European acquisition pipeline with financing and swapping into euro debt. So the timing of that will depend on the acquisition pipeline in Europe .

Thank you.

Chris Couprie: Thank you.

Our next question is from the line up Howard Weil with advertising investments research. Please go ahead.

Operator 2: Our next question is from the line of Howard Leung with Veritas Investment Research. Please go ahead.

Operator: Our next question is from the line of Howard Leung with Veritas Investment Research. Please go ahead.

Howard Leung: Thank you. Just wanna touch on the comments, Kevin, you had about next year same property NOI growth being about 3% or 4%, if you include intensifications. I guess you guys are pretty well fully leased. Would most of that 3% growth come from the rental lifts that you're seeing? If so, where, which geographies or which kind of assets are you seeing the most potential for the rental lifts?

Thank you.

Just wanted to touch on the comments, Kevin you had about next year same property NOI growth being about.

3% or 4% if you include kinds occasion.

I guess you guys are pretty well fully leased so would most of that 3% growth come from the rental that.

Are you seeing and if so where which which geographies or which kind of assets are you seeing the most potential for the rentals.

No you're right Howard would be mostly related to rental rate growth.

Kevan Gorrie: No, you're right, Howard. It would be mostly related to rental rate growth. I would point out that Novi, that 90,000 sq ft, that's actually really a suburban office asset. So re-leasing on that tends to move the needle on a portfolio, on our portfolio more than any other asset. In terms of the geography, I think as I mentioned, we have a number of expiries in the GTA area, which we think are gonna lead that growth. We do expect rental rate growth on renewals and re-leasing generally across all of our markets in 2020.

But I would point out that know why that 90000 feet, that's actually really a suburban office assets. So releasing on that tends to move the needle on a portfolio on our portfolio more than more than any other assets.

And then in terms of the geography, I think as I mentioned, we have a number of expire is in the GCA area, which we think are going to lead the growth, but we do expect rental rate growth.

On renewals are releasing generally across all of our all of our markets in 2020.

Howard Leung: Okay. No, that's good. Just one for Theresa. The European debt capacity there, you have about, I guess, CAD 1.1 billion to 1.2 billion in terms of fair value of European properties. How much more euro debt can you think you can get against those properties?

Okay. That's good and then just one for Theresa.

The European debt capacity. There you have about I guess the billion 1 billion too because a fair value of European properties, how much how much more euro debt can you think you can get again those those properties.

Teresa Neto: Actually right now, Howard, we're pretty well fully hedged on our net investment in Europe. We probably have very little room, maybe CAD 25 million, I think right now is a good estimate. I mean, it's really looking at total net equity there, and we're fully hedged at the moment.

She rate now Howard, we're pretty well fully hedged on our net investment in Europe , we probably have very little ground, maybe 25 million I think right now it's a good estimate so any is really looking at total net equity there and we're fully hedged at the moment.

Howard Leung: Okay. No, that makes sense. Then just a last one on maybe the Finchdene disposition. Just wondering if you could give a little bit of color on that one and why that one was sold. Did someone approach you, or was it on the market?

Okay that makes sense and then just last one on maybe the the finished in disposition.

Wondering if you give a little bit of color on that one and why now and with that was sold was it.

Someone approach you are going in the market.

Kevan Gorrie: We actually had it on the market both for sale and lease, and we went back and forth. In the end, we felt like it was probably best just to let go of this asset at this time. We made the decision to execute a sale of the asset versus re-leasing.

We actually had on the market for for sale and lease and we went back and forth in EMEA and we felt that it was probably best just to let go this asset.

This time, so we made the decision to execute a sale the asset versus versus releasing.

Howard Leung: Okay, great. Thanks. I'll turn it back.

Okay, great. Thanks.

It back.

And there are no further questions on the phone lines at this time.

Operator 2: There are no further questions on the phone lines at this time.

Operator: There are no further questions on the phone lines at this time.

Well, thank you operator and on behalf of the trustees and the management team here granite. Thank you all again for participating on our call today and into our unit holders. Thank you for your continued trust and support have a good to.

Kevan Gorrie: All right. Well, thank you, operator. On behalf of the trustees and the management team here at Granite, thank you all again for participating on our call today. To our unitholders, thank you for your continued trust and support. Have a good day.

That does conclude the conference call for today, we thank you for your participation enough that you. Please disconnect your lines.

Operator 2: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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