Q1 2021 Granite Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to the conference call for granite REIT speakers to you.
To you on the call. This morning is Kevin Gordon, President and Chief Executive Officer, and Theresa and I told Chief Financial Officer.
Before we begin today's call I would like to remind you that statements and information made and today's discussion may constitute forward looking statements and forward looking information, including but not limited to expectations regarding future earnings and capital ex the teachers as well as.
And impact of COVID-19, 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 material filed with the Canadian Securities administrators, and the U S Securities.
And exchange Commission from time to time, including the risk factors section of its annual information form for 'twenty 'twenty. One filed on March 30, <unk> 'twenty 'twenty. One readers are cautioned not to place 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 as 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 Q1 2021.
Condensed combined unaudited financial results and management's discussion and analysis Oscar net real estate investment Trust and 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 during the presentation, all participants will be in a listen only mode. After what we will conduct a question and answer session. If at any time during the conference you need to reach and operator. Please press Star Zero. As a reminder, this conference is being recorded Thursday may 6th 2021, I will now turn the call over to.
Kevin Gordon. Please go ahead.
Thank you operator, and thanks, everyone for taking the time to join US for our Q1 2021 earnings call I Hope, you're all doing well on and taking yet another call from my House and.
And I am pleased to be joined this morning by true said Neto, our CFO Warren Coomer R. E V P and global head of real estate, and microwave and Paris, our EVP of global real estate and head of investments.
For our call. This morning, Theresa will begin our discussion with the review other financial highlights.
I'll, then provide an update on our operations acquisitions developments and ESG and.
And then as usual open up the call to any questions that you may have.
And so all of them.
Thanks, Kevin and good morning, everyone.
Granite first quarter results are in line with expectations with other Boe and <unk> for units come in flat to Q4, 2020 and light of negative foreign currency effects from the recently strengthening Canadian dollar and the impact of a few nonrecurring items pertaining to financing costs current income tax and G&A.
And if a per unit in Q4 was 93% but included in this quarter and Oh, it's for millions of redemption premium incurred on the early redemption of the 2020, one debentures and January and half a million.
The accelerated amortization of financing costs relating to the amendment and our plays and brand and its credit facility.
And the impact of these financing costs episode for you and it would be a dollar representing a five cent.
Or for eight per cent decrease relative to prior year and flat to Q4 and.
It was negatively impacted by foreign exchange translation losses of our foreign based income as a U S dollar euro weakened by 3% and 2% respectively, resulting in a two cent decline and ethical relative to Q4.
Partially offsetting the vs translation losses are a net point 7 million net foreign currency gains being realized from the first quarter, mostly as a result of granite ethical FX hedging program.
Relative to Q1 last year, however, foreign currency gains or $2 million lower the Canadian dollar had weakened significantly at the end of March 2020, resulting in a large $2 8 million foreign currency gain on foreign cash held at that time.
That's it for this quarter was also positively affected by the recognition of tax assets, reducing current income tax expense.
And the first quarter, we realized tax assets of 23 million. However, this amount is lower than the point 8 million of tax assets realized one year ago, resulting in a negative variance of half a million dollars relative to prior year.
Lastly, ethical was impacted by higher G&A relative to prior year, mostly driven by incremental compensation costs pertaining to the 2020 fiscal year recognized and the current quarter and fair value gains realized in Q1 last year on deferred compensation liability when granite unit price decline sharply at the end of March.
2020.
Granite they have to throw on a per unit basis. In Q4 was 89 cents, but adjusting for the financing costs. Previously mentioned episode would be 96 cents, which is nice and or 8% lower than prior year and flat to Q4.
And football related capital expenditures leasing costs and tenant allowances incurred in the quarter worst point 6 million, which was lower than the $1 1 million incurred and the same quarter last year and also lower than the $2 3 million and Cree in Q4.
We expect maintenance Capex and leasing costs for ramp up in Q2, and Q3 and this year and continue to estimate expenditures of approximately $15 million for the year.
In addition to the impact of foreign currency tax provision adjustments and G&A impacting overall.
And on ethical also continued to be impacted by the temporary dilutive impact of the Q4, 2020 equity and bond offerings for net proceeds have yet not been fully deployed.
Granted if a boat payout ratio came in at a conservative 79 per cent for the quarter. After adjusting for the previously mentioned and financing costs.
NOI on a cash basis for the quarter increased $12 million or 17, one seven per cent from the same quarter in 'twenty, and 'twenty and by three and a half million or for 6% from Q4.
Same property NOI for the first quarter was solid relative to Q1 last year, increasing two 6% on a constant currency basis, and increasing one two per cent of and FX impacts are included.
Same property NOI growth was driven primarily by positive leasing leasing spreads and Canada contractual rent and CPI increases across the portfolio as well as incremental rent earned from and excess land other GTA Magna property.
G&A for the quarter was $3 1 million higher than the same quarter last year.
And point 9 million higher than Q4.
And negative variance relative to Q4 is primarily due to an additional compensation expense of <unk> 9 million relating to the 2020 fiscal year, and therefore nonrecurring recognized this quarter and compare.
And comparison to the first quarter of 2020 $3 1 million variance is mostly related to point 9 billion of additional compensation expense just mentioned a negative change and the fair value gain on non compensation liabilities, a 1.4 million granite unit price decline sharply at the end of March 'twenty, and 'twenty and no similar.
<unk> and Q1, 2021 no Kurt.
And higher comp and higher cash non cash compensation expense of <unk> 7 million as a result, and the increased director fees and higher amortization expense on outstanding El Pip grants.
Excluding the point and $9 million of 2020 related compensation expense recognized this quarter G&A would be $8 million, which is consistent to Q4 and in line with an expected run rate for the remaining quarters of 2020.
Our estimated G&A expenses of $8 million per quarter assumes about 1.6 million of noncash compensation expense, but assumes no fair value losses or gains associated with the increase or decrease and non cash compensation liabilities, which cannot be predicted.
With respect to current income tax for Q1 income taxes, 2 million, which was higher than our.
Q4 by $23 million and higher than Q1, but $5.7 million.
This quarter as I mentioned granite and granite recognized 3 million net of tax assets and Germany relating to tax years that have now gone statute barred.
Similarly tax assets a point 8 million were recognized in Q1 of last year and also 1.7 million of tax assets recognized in Q4.
On a run rate basis current taxes of approximately $2 3 million per quarter with respect to the potential recognition of tax assets. As mentioned previously granted has a further potential 2 million of tax assets that may be recognized in Q4. This year relating to tax positions taken on taxation years, which will go statute.
Art.
But we cannot assess whether these tax assets can be realized at this time.
The trust balance sheet, comprising total assets of approximately $6 6 billion at the end of the quarter was positively impacted by approximately $210 million and fair value gains to granite investment property portfolio and the first quarter offset by approximately 140 million of translation losses on granite foreign based investment properties.
Particularly impacted by the decline and the Euro a five 3% as well as the decline and the U S. Dollar one four per cent relative to the end of Q4.
The fair value gains on Brent its investment property portfolio portfolio is mostly attributable to fair value gains and the trust and G T a and U S properties as well as the trust modern distribution warehouses assets in Germany, and the Netherlands, due to increases and fair market rent assumptions and declines and capitalization rates.
The trust overall weighted average cap rate of $5 four per cent and decreased 20 basis points from the end of Q4.
Total net leverage at March 31 was 25% unchanged from Q4 as announced in March granite credit rating was upgraded by D. B R. E. B R. S Morningstar to triple behind and as a result granite borrowing costs on its term loan and credit facility have declined by 25 basis points, resulting in.
Annualized interest expense savings of approximately $1 8 million.
However, this was mostly offset by higher financing fees relating to granite upsized credit facility of approximately one and a half million dollars per year.
The trust current liquidity is approximately $1 5 billion, representing cash on hand of a.
Around $500 million and the Undrawn operating line of 999 million.
I will now turn the call over to Kevin. Thank you.
Thanks, Teresa as always go cheap I call them and its Bruce and I Trust, you've had the opportunity to review, our MD&A and press release.
First of all all Echo Chris's comments on the quarter normalizing for the impact of early redemption calls and negative FX impacts our ethical and they are for BOE per units were in line with expectations for the quarter.
Rent collection and continues to be strong across our portfolio.
Although the timing on this call. We have now collected 100 per cent of rent for the quarter and there were no deferrals being contemplated at this time.
As disclosed in the MD&A and press release.
And we completed the sale of our single outside sorry, we completed the sale, yes, well for a single asset and the U K and.
Close on her final remaining announced acquisition and Atlanta for roughly 86 million Canadian.
For 1 million square foot newly constructed properties and 75% leased to radio.
And omni channel logistics provider for May.
Anyway from a roughly seven and a half years.
The remaining 250000 square feet of availability is currently listed for ones.
Our pipeline of acquisition and development opportunities remains very active across our target markets and the G. T. Early.
Germany, the Netherlands, and the U S.
S, including land sites for development.
On the development funds or project and all but Germany has commenced construction and is expected to be completed by the end of the year.
Construction on our development projects and Dallas.
Houston, and Texas, comprising three buildings totaling rough totaling roughly one 3 million square feet.
Scheduled came on late in the second quarter for early third quarter and anticipated completion date and the second quarter of 2022.
In addition, the expansion of our call and your bad Cold storage facility and Mississauga has now commenced and we expect completion to occur and the second quarter 2020 two.
As mentioned above and on previous calls development will continue to play a critical role and our growth plans, particularly given current pricing levels.
Modern stabilized assets across our target markets.
Other note all of our developments will meet with the Green building requirements outlined and a green bond framework.
And we continue to make progress on her inaugural corporate responsibility report.
But and published in the second quarter for sure.
Outline or ESG objectives, and targets for 2020, one and beyond.
For an update on our operations $2 3 million square feet and since our expiries occur in 2020 one.
The day, we have completed roughly 2.2 million square feet of renewals or new leases on those expire is on and.
The average increase in rental rate of approximately 30%.
The remaining 120000 square feet of space in Germany, and set to expire at the end of June and is currently being marketed for lease.
Of the $5 4 million square feet and leased and scheduled to expire and 2020. Two we have renewed 345000 square for you to date and our cash.
Charlie and discussions on over 1 billion square feet on further remaining expires.
Our streets and mentioned earlier and as disclosed in our MD&A same property NOI increased by two 6% on a constant currency basis.
Same property NOI growth for the quarter was muted by lower CPI increases, which came in below 1% for 2020 and vacancy and Austria.
And closing with roughly 480 million and cash and one for one 5 billion and liquidity is true some engine.
We're very well positioned financially to execute on our planned development projects and on the current pipeline of acquisition opportunities.
Also as Teresa mentioned credit recognized over 200 million and Sep and net fair value gains on our investment properties and the quarter.
Reflecting the continued favorable movement of cap rates and in place and market rents. We are observing both on our portfolio and across our target markets and.
Investment demand for modern logistics real estate continues to intensify and we expect that demand and leasing fundamentals to remain strong over the next few years.
Accordingly, we will continue to deploy capital on select acquisitions, and a disciplined manner and.
We will leverage our platform to incorporate additional development and value add activities and our growth strategy in order to drive NAV growth and higher total return for shareholders over the long term.
On that note operator, please open up the floor for any questions.
Certainly thank you ladies and gentlemen, if you would like to register for a question. Please press. The one followed by the for on your telephone and you will hear at speed on problem technology request.
For your question has been answered and you would like to withdraw your registration. Please press the one followed by the three on.
Thank you and ladies and gentlemen, it is one for to ask a question.
And our first question is from the line of Mike from a cadence with digital day capital markets. Please go ahead. Your line is now open.
Hi, Thank you good morning, Kevin and Theresa.
Kevin just with respect to the 6%.
Leasing spreads that you mentioned for 2021, just to confirm is that a cash expiring exit.
Right versus the initial rate.
Great.
Hum.
And I understand the question and yes, yes.
No I just some people say over the average of the terms and I just wanted to make sure that we were comparing off I see no cash.
So it would be exactly like.
Okay great.
And with 6% you know a little more modest than perhaps on some of the stats and we've seen coming out of others and just looking at your.
Profile for this year it looks fairly balanced geographically so is that skewed down by anything specific but just trying to get a sense of the six percentage strike down by one or two properties or if it's just globally reflective of the 2020 one pool.
Yeah, I think the one point I would make there Mike is there and there's quite a bit that was rolling and Europe. This U R E versus Canada, and maybe previous years of the other thing too is there is a renewal and the G T. A.
And with Magna and we're expecting strong rents on renewals, but there was an amortization and the rent.
So any growth there as is muted by the amortization. So this also includes a renewal in the GTA and.
Where it would be in place rents because of amortized previous amortization were already quite high. So that's the guidance that is muted by that and also you know part of the rollover being in Europe.
Okay. So just shifting that into 2020 two you've actually got a lot coming in the U S. I think it's three 8 million square feet, how how do you see that shaping up.
Relatively.
Yeah, I think the U S right now for 'twenty, and 2020, two we're projecting somewhere around 6% on average rental rate spreads and the U S and that's where we sit today.
And I think we have over a million roughly the same.
And then the smaller component, we have and the GTA.
And quite strong rental spreads over 25 per cent.
25 per cent, Okay, and then last one for me before I turn it back I'm, just I think and Austria, you've got the Atlantic property coming in 2022 eight O two.
On square feet.
Can you remind me is that is that a special purpose or would that be more considered and your light industrial and slash warehouse bucket.
Oh no.
Special purpose.
And I believe it okay Yep, correct and then.
Is that one.
Too early to comment on discussions of discussions commenced or do they have an option to exercise and they were just getting a sense of.
Maybe it's a tier one and 2022 I'm not sure no I mean it is.
On the renewal terms are set there and so there's no point to having discussion on it.
And it will come out I believe it's at the end of 2020 two and.
And so it's already said, we we just have to wait until you know we received the day notice of renewal.
Okay I have a couple more of it and the interest of other being traditional turn it back. Thank you.
For.
Thank you. Our next question is from the line of some of them Jani TD Securities. Please go ahead. Your line is now open.
Thanks, and good morning, everyone.
So just on the acquisition side, Kevin We've got a lot of liquidity with the credit facility increase.
Increased by $500 million for last month.
What what's the prospect of using up.
Some of the cash on the balance sheet and the near term for the acquisitions and the pipeline that could close on the next quarter or two.
Well, there certainly is I mean I would characterize it.
I would say the R active development pipeline right now remains.
And a 400 to 500 million range.
And again it is.
It could go either it could go on a number of ways just because we're pricing where we have seen pricing go recently I mean, theres a high probability we won't be successful on a number of those and there's only there's only so much we will press on pricing and I think we've I think we've shown that particularly at the beginning of this year.
But that being said it would not surprise me.
And we wouldn't close on it by the end of the second quarter for.
It would not surprise me at all that we would be under exclusive under contract or exclusive negotiations on roughly a 100 per $150 million.
And acquisitions before the end of the second quarter.
And that could and I think we would expect that to clue to include land sites for development.
Okay. That's helpful and I actually wanted to ask about land sites and I know you mentioned a number of markets you are looking at but what would be your sort of priority market true for acquiring land at the moment.
Well I would say it's more.
More so going to be we expect and we are looking for development opportunities in Europe as well.
But just because of the nature of the geography, it's more likely that will be done and and partnerships, but we will continue to look at opportunities there I think for a day.
At granite development program, a lot of it will take place in North America, and we continue to look at opportunities and the GTA, obviously land costs, although we know on.
And the story around the growth in and land costs here on the GTA and we're on.
Actively looking and our target markets and the U S. So I would hope in the next 12 to 24 months, we will have for.
For development opportunities and the GTA and and the U S.
Okay last one for me just on on the Locus Grove asset.
For Tommy.
But for now.
But by the end of day.
Okay.
Great perfect. Thank you.
Thank you ladies and gentlemen.
Maybe one for Josh.
Two questions.
Question is from.
That's correct.
Okay.
Your line is open.
Thanks.
With regard for development pipeline with all of those project debt.
B.
For three months for us.
They would.
And then just with regards to FX.
And I think about it.
<unk>.
For us.
Kidney indications for use.
Does that.
And the way you look good for you.
Was it on it.
And.
On the hedging front and again.
Okay.
So for debt.
And Ed.
Okay.
Thank you Sir.
Sorry.
Thoughts on site.
You bet.
Yes.
And I'll I'll start and then.
I'll turn over to Bruce.
Talking about are pushing for.
And it.
Future of that but just in terms of.
Thanks, Bob.
But anyway.
Thank you.
Players from speculators and.
No.
We don't look to purchase.
And then.
And you wanted to.
And with three three.
<unk>.
That debt position.
Positioned and the mall.
And that's one of them.
Financing for perspectives.
I wouldn't say that it really changes.
Our.
Our approach to acquisitions and various Jonathan but it does.
Okay.
And that's why we turned away from it.
Yeah.
Slightly more attractive today.
That's what we have.
And where it would have been 612 months ago.
And so I'll just turn it over to you on common and.
Correct Yeah.
So for the hedging program.
David.
Management and flexibility.
E Commerce and.
There are transactions, our cash flow and.
And so from time to time, we do take a accident.
Hedging and approach it, but first and foremost secondary and.
With foreign cash.
And as you know we view on it.
And working directly for.
And our cost of debt and that market.
But for their opinion cash flow most simply by art work.
And for all of them there and.
And then and the U S and you have a small balance our hedge funds.
For and when he like debt.
And that's over and above.
Here is you know coming out of the at the beginning of it.
And then we took it.
The U S dollar because he wasn't going to decline and we.
That's a number of other callers.
Caller please.
And until the end of day and together two.
2021.
So that's just for some degree on the downside on the U S dollar and did the same.
Same with the euro and protected this year on the euro.
So we've hedged about 50% of our people and the U S from 40% in Europe, and our average hedged rate on the downside for about 131 so.
So we have realized gains on our U S. Dollar please realize that for one 1 million.
And for square.
And on helix and <unk>.
One for.
And for the client.
So we are putting in place.
And I'm heading but we have and extended the program out to 'twenty two because we take a view that the deal and it's always probably seen is that low point and it's probably on the rise.
And they are coming from quarter.
So we're going to keep it open and not.
Hedge and whether at this point and time.
And we're trying to do so.
So for the active but primary our primary hedging is for debt.
Yes.
Okay.
And that's a lot of color and I appreciate it.
And last one for me.
And you guys have.
A bit of a hybrid cost of capital to some extent it for legacy special purpose assets, which are obviously higher and blood.
Got it for it.
And depending upon our leasing and that goes on there.
And then you are extremely inexpensive for us.
To debt financing and I'm wondering how as you look okay, and youre seeing on liquidity and the form of balance sheet flexibility.
How you think though.
Hurdle return thresholds.
Dressed and in a context for what it is.
Heavily bid on it.
And.
And again, what market to make sense in that context.
Yes.
Well I'd say it is a hard question to answer everything.
I Kid exaggerated for effect.
If we can borrow in euro debt sub one per cent.
As it makes sense for PE.
Two caps on assets in Europe, and and the answer is no I think one of the advantage we have as we're sitting here being able to look at and evaluate opportunities across various geographies and what gives us the best.
Risk adjusted return.
But we also have to underwrite is very important for us to try and understand what the market fundamentals are and where we think rents or go on growing our ongoing and I know that sounds obvious but.
She was what's compelling again about Europe.
Is where we see the rent potential and rent growth has been good but not obviously, a strong and North America, but we look at it and fundamentals there and a number of factors that point to very strong rent growth over the next five to 10 years, so that gives us comfort to be aggressive.
I'm going in yields with the expectation that we're going to see rent growth and the backend.
But we have seen our transactions were.
We are interested and the three and a half day for going in yield range that are going for three and going for high twos and.
And that gives us pause because.
Despite your cost of capital and your ability to utilize your balance sheet and very low cost and deploy it still doesn't make sense to overpay for assets.
And we know that and I think it's one of our strategies.
And to grow and Europe for the comments I've just made around leasing fundamentals, but also on a cash on cash basis. It gives us an advantage, we know that but we have to remain disciplined and.
And what we think we're going to pay and we're still and IRR driven company very much so.
So.
It is.
We haven't done any deals yet and Germany, despite having what we feel to be the cost of the capital to do so because we think that pricing is yes.
Hi.
But we are willing to get aggressive in Europe, more so because of where we see fundamentals rather than the cost of capital and that jurisdiction.
I think that answers the question that I noted on that.
That's perfect I appreciate it thank you.
Okay.
Yeah.
Thank you.
Once again, ladies and gentlemen, as a reminder, it is one for if you have a question. Our next question is from Joanne Chen with.
BMO capital markets. Please go ahead your line is open.
Hi, good morning, Kevin and Theresa.
And maybe just a quick one for me on the I think they.
That's quite a lot of other on the acquisitions front and maybe just on the other side and how much more.
In terms of any capital recycling opportunities you see for the remainder of this year and is there a particular market and their focus on with respect to the capital recycling.
Well I think Joanne we have said that we expect to be pretty light in terms of dispositions. This year and I've talked about this many times I think for a number of our assets in Europe.
There are lease extension opportunities here that we definitely want to execute on before we evaluate that portfolio and frankly, we're happy to hang onto it a number of these assets. If it's the best thing for granite and for the unit holders. So I think we were projecting around $50 million this year and just and dispositions.
We don't see.
Any reason at this point to change that so relatively light for this year.
We have pointed to I think a couple in Austria, and the one and Redditch and the U K was one that we had identified for disposition were now completely other the U K and at least for now.
Relative to the U K.
And.
And and I think a couple of and Austria and potentially one and the.
So I'm not sure, but I think overall around $50 million. This year, so a relatively light year for dispositions.
Okay and.
And maybe just shifting I guess to the development side you know we're hearing a lot about obviously some other cost inflation, but maybe if you could comment on what you're seeing and each of your target markets in terms of.
Well you guys are seeing on the cost side of things for development and has that shifted mm.
And your thinking and the near term with respect to some degree and development activities.
Well it makes me regret we didnt move sooner.
And the module.
Cost of steel has gone and just and and and concrete. It's frustrating. It has moved and it has impacted.
Our cost, but it certainly has done nothing to deter our focus on development and frankly.
It made sense to was our development projects when you when we evaluate them today and we look at where cap rates are for stabilized asset and makes more sense, so even though.
And the cost of construction may have gone up 5% overall, because we bought the land.
It's gone up price and to 10%.
Cap rates are probably dropped 25 to 50 basis points right. So the spread.
And maybe the development yield on cost has gone down and maybe it was six 5% before and now it's 6% to six 2%, but that spread over stabilized yield has gotten even larger.
So our profit remains the same or has gotten better.
But in a way I feel it's fortunate and so.
So we're definitely dealing with cost increases and the U S and when we're underwriting new land opportunities and development opportunities across any of our markets. It literally we have to rewrite our pro forma every two months. It feels like every two to three months and make sure we're on top of.
And what market costs are what market cap rates are.
And it does not feel that the spreads have.
I would say and to be fair and the GTA spreads.
Compressed.
But again looking at deals that are transacting and right now on the market were probably wrong, because we're probably off on our cap rates by another 25 basis points right.
So I would just say long long winded answer to a short question, but.
Development spreads remain where they were when we first on the road for deals we're working on or better.
Okay.
That's great color and maybe just on the acquisition this quarter.
And look at growth there is some excess land.
For an expansion.
And you have like and timing in terms of where you would like to proceed and with that and.
Expansion I mean, you have quite a bit on the hopper already but just wondering is that something that would proceed relatively soon.
Yeah like like Lucas growth it is controlled by the tenants.
For for this one so so for for Rosa and you'll you'll notice there is kind of a powder here when we look to acquire assets and this happens more in the U S and other jurisdictions, just because of the supply of land.
When we look at.
Opportunities acquisition opportunities in the U S a stabilized asset.
Having and expansion potential is attractive for us so a lot of deals that we do have expansion potential.
To be fair on the deal like low cost and others.
He can't expand its really an expansion for the user for the tenants and our hope is that they exercise their expansion option on coal.
And we in many cases can't do it until the tenant agreed stew ward the lease expires and we can decide if theyre not going to renew.
And if they are going to renew does is it worth renewing them and existing space or is it worth not renewing them expanding and building and looking for a newer larger tenants.
Great.
Okay, well just one last quick one for me you don't give them a lot of you you mentioned on other developments would be a green and certified and.
And you see and and opportunities for more.
Green bond financing and are you noticing now is given that you know and that's kind of led the way there but in terms of any pricing differential on that right now because I know other beginning there probably was not that much but and given the growing focus.
And you see that yeah, I'll start and and happy to defer to Theresa on the green bond and pricing, but just to say that.
We're very confident we'll be able to deploy the capital to fulfill the green bond.
500 million commitment.
Before the end of the before the term expires and so we're very positive on that particularly based on her active development program or our current development pipeline today, so the prospects of future Green bonds very high for US I think over the next.
Number of years and turning to pricing it certainly didn't feel that way when we issued the bond and not that we were unhappy with the rate that we received and I think it was very strong and the REIT contacts and it didn't feel like the green bond provided any favorable pricing. It did feel like we did see higher demand.
Cause of the green bonds, and so Teresa any and any comments on what Youre seeing and what you think today.
Yeah, I definitely agree with your comment on when we did our bond I don't think it you know there was any pricing.
On advantage other than we probably had more investors at the table.
I'm not sure and seeing it at this point too, but however, I think in the European market and I think you're you are seeing two to three basis points advantage on a green on a green bond. So I feel that may translate into Canada, and but at this point and time not sure I I am not sure I see it right now but.
And potentially could be there I assume.
And Canada is always one step later.
Yeah Yeah.
And there you go [laughter] yeah, okay.
That's a I will leave it there and that's great color thanks very much.
Got it back.
Thank you.
Thank you.
Our next question is a follow up question from Mike <unk> with.
Capital markets. Please go ahead your line is open.
Hi, again, just two more for me.
And just from your Investor presentation.
And for the purpose or growth.
On the seventh and then for Canada, it's much slower than it is in Europe.
It's a much shorter duration of remaining term and Europe or is there anything specific to the.
Assets.
That would cause that wide differential.
You know like I think it's it is more and maybe we the assets and in Europe, particularly in Australia, we have them appraised and so it is open to what the you know.
It is and it is more influenced by appraised values and I find just the data in Europe is is lagging compared to North America and compare it to the GTA. So when we look at Milton.
And the GTA, we have a much better idea of what land values are we have a better idea of what prevailing market rents would be and if we were to get the site back and redevelop it.
And in Australia, and Europe, and Germany, It's it's different and so we take anymore and we certainly take a more conservative tone.
And in Europe, I don't think it's really to do with the well I think part of it you're right is due to the remaining lease term.
So the term gets extended there should be.
And certainly expect there to be a positive movement and the value is.
That happens, but at the same time, we do struggled more in Europe with lack of data around those types of facilities and what the prevailing market rents would be your cap rates would be certainly just based on what we've seen there.
There is more interest for long.
Long term cash flow assets with good covenants.
But but again there isn't enough data for us to point to to have.
On the idea of exactly what the cap rate or the prevailing market rate would be for those assets and Europe versus the GTA.
Okay. Thank you and then three so just on the straight line rent and I think it came in at around $3 1 million. This quarter. We had had is actually coming down and our model. So I'm not sure. If that was based on last quarter's commentary on another chance to check back, but maybe if you could just give.
And your outlook for that and claims for.
Right.
Sure Yeah and.
It was also impacted by the recent acquisition, there's a real.
Little bit of free rent with radio that will burn off in July and.
And we had some free rent with the December acquisition and trade Port. So it will burn off Q2, and looking at about $1 7 million of straight line rent and then leveling off to one and a half a million for Q3 and Q4.
And that's before any adjustments that can come with new acquisition.
Yes.
That's clear.
Operating income, we lost a and Michael.
Oh I'm, good and I don't know if its okay. Okay.
Yeah.
Maybe I'll ask the operator.
Operator, operator any other questions. It is.
The line is connected do we move on.
Yes for yet.
Okay. Perfect. So question is another follow up from Sam Damiani TD Securities. Please go ahead. Your line is open.
Thanks, Justin.
No.
Just confirm are good and update on your outlook for same property NOI growth for the balance of the year I think on the last call you were seeing and the sort of low to mid twos for the first half and then the low to mid threes for the second half of the year.
That still your outlook for for 2021.
Yeah, I can't exactly.
Put it this way I can't exactly remember what I said on the last call, but there is no change to our outlook for same property on like for the year.
Great. Thank you I'll turn it back.
Thank you and there are no further questions.
Okay. Thank you operator so.
On behalf of the trustees and the management team here at granite. Thank you for being on the call with us today and to our unit holders. Thank you again for your continued trust and support.
Have a great day.
Thank you everyone that does conclude today's call. Thank you for your participation and ask that you. Please disconnect your lines have a great day everyone.
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