Q4 2021 Granite Real Estate Investment Trust Earnings Call
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Good morning, and welcome to granite REIT fourth quarter and year end results for 2021 conference call.
As a reminder, today's call is being recorded Thursday March 10 to 2020 to speaking to you on the call. This morning is Kevin Gordon President and Chief Executive Officer, and Theresa Nadeau, Chief Financial Officer, I will now turn the call over to Teresa Neto to go over a certain advisory followed by an introduction from Kevin Corey. Please go ahead.
Good morning, before we begin today's call I would like to remind you that the statements and information made in today's discussion may constitute forward looking statements and forward looking information, including but not limited to expectations regarding future earnings and capital expenditures and that actual results could differ materially.
From any conclusion forecast or projection. These statements and information are based on certain material factors or assumptions reflect management's current expectations, they're subject to known and unknown risks and uncertainties. These risks and uncertainties are discussed in granites materials filed with the Canadian Securities administrators, and the U S Securities and Exchange Commission from <unk>.
To time, including the risk factors section of its annual information form for 2021 filed on March nine 2022.
Readers are cautioned not to place undue reliance on any of these forward looking statements and forward looking information. The REIT reviewed its key assumptions regularly and may change its outlook on a going forward basis, if necessary granite undertakes no intention or obligation to update or revise its key assumptions any of forward looking statements are forward looking information.
<unk>, 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 audited combined financial results and management's discussion and analysis for the year ended December 31, 2021 for granite REIT at Reed and granite REIT, Inc, and other.
<unk> filed with the Canadian Securities administrators, and U S Securities and Exchange Commission from time to time for additional relevant information.
Now I'll get started on our operational results and then followed by Kevin.
Granted posted a strong fourth quarter, driven by strong NOI growth into <unk>.
Despite continuing foreign currency headwinds.
<unk> per unit in Q4 was $1, two representing a 3% or 3% increase from Q3, a 2% relative to the same quarter last year.
NOI and same property NOI growth was partially muted by unfavorable foreign exchange translation translation losses, as both the Euro and U S dollar weaker by 7% and 3% respectively relative to the same quarter last year, resulting in a <unk>.
<unk> decline in <unk> per unit. This was partially offset by foreign exchange gains of <unk> 7 million realized on Brent its derivative hedges, which have now fully expired at the end of 2021.
Granted <unk> on a per unit basis in Q4, with 90 cents, which is <unk> enforced since lower respectively relative to Q3 in the fourth quarter of 2020.
<unk> related capital expenditures leasing costs and tenant allowances incurred in the quarter were higher than past quarters totaled totaling $7 million as maintenance projects delayed from this summer were finalized at the end of the year.
Total <unk> related capital expenditures for the year came in at $12 4 million.
With respect to 2022, and an increased level of lease turnover for the year, we are estimating <unk> related maintenance capital expenditures and leasing costs coming in slightly higher at approximately $15 million for the year.
Same property NOI for Q4 was strong relative to the same quarter last year, increasing 4% on a constant currency basis, but effectively flat when foreign currency effects are included same property NOI growth was driven primarily by positive leasing leasing spreads contractual rent in CPI increases across all of great its regions as well as the.
Expiry of free rent periods that were realized in the prior years, a great it's Indianapolis asset until break Netherlands asset.
G&A for the quarter was $12 4 million, which was $4 5 million higher than the same quarter last year is three and a half a million higher than Q3. The main variance relative to Q3 or the recognition of $3 6 million in unit based compensation expense as a result of fair value losses recognized a noncash compensation line.
Abilities due to a 17% increase in credits unit price during the quarter and also some higher salaries and benefits expense.
One 3 million of these fair value losses related to our D. S used directly impacts SFO and does not get added back.
Given the pullback of granites unit price so far in 2022, we will expect to see a reversal of these losses and will likely recognize a gain in G&A related to these noncash compensation liabilities.
On a run rate basis, we expect G&A expenses to continue at approximately eight and a half to $9 million per quarter or roughly 8% of revenues, excluding any amounts for fair value adjustments related to non cash compensation liabilities.
For income tax Q4 current income tax was just point 1 million when you exclude the $2 8 million of current taxes recognized in the quarter relating to the sale of an Austrian property <unk>.
Similar to last year granite recognized the reversal of tax tax provisions totaling $1 8 million for the quarter favorably impacting the quarter as did the weaker euro.
On a run rate basis, we estimate current tax at approximately $2 $2 million per quarter.
With respect to potential recognition of reversals of tax provisions for 2022 granite has a further potential 2 million of tax liability reversals that maybe recognized mostly in Q4 of this year, but as always we can't make a call on the reversal at this time.
Granted continues to leverage its net investment in Europe , and access to lower cost debt. The recent partial financing completed early February of its 2028 cross currency interest rate swaps from U S based payments to Euro based interest payments will result in annual interest expense savings of $5 5 million or <unk> <unk> per unit annual.
<unk>.
Therefore on a run rate basis interest expense will run approximately $10 7 million per quarter before factoring in any new debt.
Looking out to 'twenty two given the numerous variables of same property NOI foreign currency and growth expectations. We would like to provide some initial 2022 estimates with respect to <unk> unit and <unk> per unit.
For 2022 granted is forecasting <unk> per unit of approximately $4 39, or a 10% increase from 2021.
And within a range of $4 31 to $4 43 for.
<unk> per unit, we are forecasting $4 <unk> and.
An 8% increase from last year and within our range of $3 96 to four Oh wait.
This forecast is based on the closing foreign currency rate of the Canadian dollar relative to the Euro and U S. Dollar as at December 31, 2021.
The high end of our range provides for an approximate 1% increase in both the euro and U S dollar relative to the Canadian dollar the low end of the range provides for a three 5% decrease in the euro which is reflective of where it is today and a 1% decline in the U S. Dollar. Please.
Please note that we estimate that a once and movement in the U S dollar relative to the Canadian dollar impacts of <unk> <unk> per unit by <unk> and a <unk> movement in the euro relative to the Canadian dollar results in a one cent impact to <unk> <unk> per unit.
The <unk> balance sheet is comprised of total assets of $8 6 billion at the end of the quarter. It was positive positively impacted by $349 million in fair value gains on O'brien, the investment property portfolio and.
And that was offset partially by $45 million of translation losses on various foreign based investment properties, but particularly the one 8% decrease in the euro exchange rate relative to Q3.
Fair value gains on grade its investment property portfolio are attributable to fair value gains across all of our regions, but particularly the trust assets in the GTA and the U S. Due to increases in fair market rent assumptions and declines in cap rates.
The trust overall weighted cap rate of four 5% decrease a further 24 basis points from the end of Q3 and it has declined a total of 188 basis points in 2021.
Our net leverage at December 31 was 25% and net debt to EBITDA remains healthy at six seven times. Our current liquidity is sitting at about $1 3 billion and that represents cash of about $260 million and our undrawn off the operating line of $998 million.
Since placing our ATM in place in November of 2021 granted has not sold any units through the ATM to date.
I'll now turn over the call to Kevin.
Thanks Teresa.
And thank you everyone for joining us on the Q4 call as always I will keep my comments brief and happy to take questions at the end.
I'll start by repeating two themes from my opening comments on our past few calls once again, we posted an in line quarter.
It is worth highlighting <unk> per unit for the quarter increased year over year as Teresa mentioned, despite a corresponding negative move in FX, roughly four and a <unk> <unk> impact on our G&A from the appreciation in our unit price in the quarter, which often gets overlooked.
Also worth highlighting I think is another increase in the fair market value of our portfolio in the quarter led primarily by fair market value increases in the U S and GTA due to further increases in market rental rates and declines in capitalization rates for modern logistics assets across our markets in those jurisdictions.
<unk>.
We continue to execute well on our strategic plan in the fourth quarter.
Acquiring six core and value add properties in our target markets in the U S. The Netherlands in the GTA in the quarter for approximately $330 million Canadian.
We followed up 2021 with the acquisition of three properties in Germany for $140 million.
And in all we acquired 16 income producing properties and three development sites for a total investment of one of $923 million in 2021.
Further we committed an additional $216 million on three new development projects in our existing markets of Indianapolis and Tilburg, Netherlands, we expect it to be completed sometime in the third quarter of 2022.
We also disposed of a small non core asset in Austria for $13 million at the end of November .
And our sole asset in Poland for $36 2 million in February .
And we expect the sale oversoul asset in the Czech Republic to close sometime in the second quarter.
Our development programme made significant strides in 2021 and our active pipeline comprises six sites in nine buildings currently under construction in the U S, Germany, and the Netherlands, plus expansions in Mississauga, and Indianapolis as disclosed totaling roughly $5 million.
Square feet and $450 million in commitments.
Construction of these properties is expected to be completed in the second quarter through the fourth quarter of this year.
To date two of the buildings are fully leased and activity is strong on the remaining buildings under construction.
We have seen an increase in costs associated with most of our projects.
But it has been absorbed mostly within established budget contingencies to date and offset by higher rents versus pro forma.
And I would estimate further the project completion on average has been delayed by two to three months from initial schedule due to supply chain and COVID-19 related issues.
As I've mentioned before development is core to our growth strategy and these projects are expected to improve the quality and functionality of our portfolio and drive significant growth in cash flow and then asset value upon stabilization.
It is also worth repeating that all of the above mentioned developments are expected to receive green building certification and will satisfy the criteria outlined in our green bond framework.
Staying on ESG for the year and as disclosed in our MD&A. We are proud to report the granted achieved a global ESG benchmark for aggressive score of 65 out of 100 for 2021 versus the average for our peer group with 52 of which <unk> was the only Canadian reporting.
<unk>.
We also achieved the highest score in the category of public disclosure.
We are currently developing our 2021 ESG report, which will outline the progress we made in 2021 against our objectives.
Detailed and likely more ambitious targets and objectives for 2022 and beyond.
The report is expected to be published early in the third quarter of this year.
Operationally stated on our Q3 call all $2 3 million square feet over 2021 lease Expiries were renewed or released and the team leased approximately 300000 feet of vacancy in Atlanta, and our recently acquired property in Utrecht, the Netherlands in the fourth quarter.
For 2022, we have now exercise renewals on $4 million over five 9 million square feet of Expiries.
On average increase in rental rate of just over 10% and.
And we anticipate achieving an increase of between 15% to 20% on the remaining maturities for 2022.
As Teresa mentioned earlier and as disclosed in our MD&A same property NOI increased by 4% on a constant currency basis, driven by strong re leasing spreads contractual rent increases and the expiry of rent free periods on a few of our newer assets in the U S and the Netherlands offset partially by.
Contractual free rent periods and short term vacancy of two of our properties in Germany.
We expect same property NOI to be similar to 2021 and average between three five and four 5% in 2022.
As the impact of strong releasing spreads could be partially offset in the short term by vacancy from turnover of two properties in the U S.
At this time, we also expect same property NOI growth to accelerate in 2023, but we will have more information on 2023 and later quarters.
We have all seen the devastation in the Ukraine and I think like all of you were hoping for a peaceful resolution to this conflict as soon as possible.
Notwithstanding the resulting disruption to supply chains in that region.
All of our tenants in Europe continue to operate in their space and we are not aware of major disruption so far to their operations involving our properties, but we will of course, we will of course continue to monitor the situation for any major developments.
In closing I think the quarter and the year were characterized by fair value gains.
Operational stability.
<unk> on the ESG front and significant investment in acquisitions and specifically development.
We expect 2022 to be a busy and productive year for granted and we remain very well positioned to continue to execute on our strategic plan and deliver strong results for unit holders.
I would like to take this opportunity to thank all of our employees for contributing to another strong year in 2021.
On that note I will open up the floor for any questions.
Thank you if you would like to register a question or comment. Please press. The one followed by the four on your telephone.
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Our first question comes from Sam Damiani of TD Securities. Please go ahead.
Thank you and good morning, everyone.
Good morning, Tim.
Just on the conflict in Ukraine, and thank you for your comments Kevin.
Have you seen any impact on just sort of general levels of business activity.
And also more specifically with with people, making decisions to lease space.
To acquire dispose or finance property has any impact on the investment market.
No and I think we all agree that it's early days, we've been talking about this internally with our team in Europe , and so far we have not seen.
A major shift or a major disruption to normal operations or two acquisitions or development. So.
I would characterize maybe this is unfair I would just characterize it as we've seen in North America, we seem to have more.
I guess concerns and what we're seeing from on the ground in Europe now that may change, but that's what we're seeing so far.
Okay, that's great.
Just on your 2022 renewal guidance for bigger lifts on the remaining renewals.
Are there particular markets or projects that are driving that and I wonder if you could update us on your views on market rents generally in Germany.
Excuse me in the Netherlands.
Yes.
The bulk of our remaining maturities in 2022 are in the U S. So you can you can see from our estimates.
There is very strong rent growth to the U S. We're seeing very healthy spreads, they're north of 10% almost across the board and sometimes approaching 20.
The Netherlands, and Germany, we're also seeing strong rent growth as well but of course, we don't have a lot of roll in.
In 2022.
We see more of it in 2023, you have a bigger role in Europe and of course in 2024.
With <unk>, we are expecting good results there.
Austria, and then continued.
Strong growth in the U S as well.
And one more if I could just before we turn it back.
On the Magna leases in Austria.
What typical.
What are the terms I guess in terms of getting a rent to rent bump on the renewals there this lease fleets.
Basically it's happening in <unk> and also the other properties too to expire.
Well, one I think Ron specifically have CPI look backs, but I think we talked about this a bit on the Q3 call monarch is.
A bit different because it has multiple cash streams or rent streams. So that CPI look back is spread out over three years I believe the best way to look at lawn. It is every five years, if it renews it would be 10% that would be spread out over five years with 2% contractual rent growth a year.
<unk> is a bit different but it has the same CPI look back mechanism that would kick in on the date of maturity.
Thank you I'll turn it back.
Thank you. The next question comes from Joanne Chen BMO. Please go ahead.
Hey, good morning.
Congrats.
Great end to the year I just had a quick question I apologize if I missed this earlier, but.
On the renewals that you've done for 2022 did you.
What kind of rent lift were you able to achieve on those or did you say 10% 15%.
Yes, Joanne I said, what we've achieved so far is just over 10% as it gets closer to the center.
10, and a half and on the remaining I think 2 million square feet, roughly we are anticipating between 15% and 20% on average.
Oh Wow, Okay, that's a loss that's a.
A big pick up from what you said for the last quarter. So it's great to see that momentum.
Luke sorry, just.
Just to clarify I think what I said for 2022, as we would be around 11% to 12%.
So the 10 and a half.
15 to 20 on the remaining should get us pretty close to that number maybe a bit above 12, but I think it's consistent with what we saw in Q3, but but I do I do appreciate you pointing out that it is moving in the right direction.
Oh for sure and I guess, just going back. Unfortunately, you know obviously, what's going on.
Geopolitically and in Europe , right now, but do you think that pressure with rising oil prices and.
Upward pressure on the transportation costs that will only.
Higher demand for athletes like logistics like located in European logistics hub, just given how.
Expensive transportation costs could get.
Yes, that's I think we've always kind of bought into that thesis that the higher oil prices go the more storage space, you're going to need you really need to shorten drive times and youre going to need to have more storage you can have.
Just on time delivery.
And I would say I, just think overall with what's happening in the Ukraine, and Russia that I think it just shows how mission critical the existing facilities, we have with our tenants in Western Europe are and I think a lot of these tenants not only magna are rethinking their supply chains and the vulnerable the vulnerability of their supply.
So I think that that bodes well for assets in western Europe and locations in Western Europe .
I'm not quite sure of that.
That's helpful and I guess, just one last one for me.
With respect to hear kind of your growth.
Rogers for 2022 should we.
And I expect more developments.
Planned acquisitions in Canada.
Kind of a more even split between the volatile.
And income producing properties in the U S I guess.
More income producing properties in Europe , sorry, I don't know its a long winded question.
I know I think.
Certainly it was a major pivot to development in 2022, what I would say as we.
We continue to look at the right opportunities I'm not sure how comfortable we would be adding a lot of development right at the moment I think we have some leasing to work through which we expect to do through 2022.
On a normalized basis, we want development to be to play a major role in our growth at some point is going to be more than 50% of our growth on an annual basis I think we've kind of always pointed in that direction.
In 2022, we accelerated the program.
Significantly so we've been focusing as you can tell I think Q4 and into Q1, we are focused on some IPP acquisitions.
Into 2022, and so we've got to work through these developments in 2020 to maybe add some IPP continued about IPP in our target markets.
But at some point youre going to see development continue to outpace acquisitions.
Got it.
That's very helpful. Thank you very much I will turn it back.
Thank you.
Next question comes from Matt <unk> of National Bank. Please go ahead.
Hi, good morning, guys.
On the vacancy that you expect in the U S is the thinking around.
Around that but it's still going to be pretty short term in nature and the property is in pretty high demand.
Yes, I'm just pointing out that I think we're pretty bullish on on the U S and where the leasing is going and where.
These tenants, they're not leaving because of the weakness of location. They just need twice as much space as those.
Assets, Ken can provide so theyre moving on.
We're just thinking at some point when we re leased to a new tenant there could be some downtime associated volume. So it's really moving in right direction, but there may be noise in a quarter, maybe two quarters and I think as we've mentioned our tenant in Pennsylvania 750000 seat. They triggered a six month extension. So now they're there until <unk>.
Timber 30, and we wouldn't be surprised to say overhauled until the end of the year. So the same property NOI could be stronger for 2022, just pointing out if we put a new tenant in there there is a pretty good chance, we're going to incur a month or two months of vacancy maybe three months, but we're not anticipating a prolonged vacancy.
See associated with those assets with the re leasing.
No that makes sense and then the three five to four and a half dozen.
Same property NOI growth that anticipates at least some.
Downtime on that property, even if it.
Greg It overhauled until the end of the year.
Yes, absolutely.
Absolutely.
And then rule of thumb wise and I know that's not so you can't really have rule of thumb.
In terms of the geographic split on Mark to market potential in the portfolio.
And maybe not for 2022, but thinking of 2023.
Has this year of.
10% to 15% is that moving up to the sort of 15 to 17 in the U S.
Canada is a kind of a strong Europe is well im not sure exactly where that would fall.
We definitely think is closer to 15, its moving towards 15 in the U S. I think Europe , we felt was 10% for the 2020 threes.
And obviously, we don't have that much rolling in the GTA, but thats closer to 60%.
Perfect.
And then last one for me just in terms of the FX move and I guess this is for Teresa on on the hedging front.
I know you did that favorable hedge in the quarter, sorry post quarter.
Has the how has the market dynamics shifted on the ability to do that let's say if you did another.
Bond and wanted to swap it has the right moves at this point given this volatility or is it more favorable less favorable and I'm just not entirely sure on that.
So I think it's moved up a little bit as far as and that's really where the euro rates are relative to Canada and I think it's just inched up a little bit. So if we were if we had additional investment in Europe , and we could again hedge further with euro.
Zero debt.
I don't think it would be a favorable five six though we experienced let's say closer to like the 1% range.
Okay.
At.
And is there.
I guess with the existing asset base or even with your forward purchases of European assets and the ones that closed subsequently what do you anticipate there being a couple of hundred million more capacity on that front in euros.
Yes, I mean, we have a forward purchase coming in in the midyear.
With that we have.
We are a little bit of room left there may be a couple of hundred million dollars in there but.
I would probably wait for it to bulk up a little bit more.
Before we look at that again.
Okay perfect. Thanks, guys.
Thank you.
The next question comes from Himanshu Gupta of Scotiabank. Please go ahead.
Thank you and good morning.
So just wanted to magna lease.
On the mill side it was renewed.
Was there any negotiation or any incentive given for this extension.
And also is it fair to say that no big Bang that lease is coming due until 2024.
Yes. So the question on 2024, correct, there's very few manual leases rolling before then.
And.
<unk> no there were no incentives or commissions associated with that renewal just the street.
Okay.
Until then you don't know that you don't really match has one with you.
Would you look to monetize this asset.
And bigger picture you know by now overall exposure was reduced to 29% now.
Happy with that and that is would you look to further reduce our exposure to that.
Well no I think we said on previous calls.
There are a large single tenant exposure and and I get that.
It's not so much reducing the exposure to magna, but as we've said at the end of the day. These arent the facilities.
Meet our investment criteria, so theyre, probably at some point held better in someone else's hands, but there is still some value to be added to those assets and we want to see that we want to see that through and execute on our strategy and then we'll look at it I think at 29%, we don't feel any urgency to do anything to.
We want to make the best decision, but the conditions for potential monetization are still continuing to improve and we'll review it over the next few years, but we still believe that there is value in these assets to on Earth.
Before we look at when we look at doing something on a on a major scale.
Got it and you look specifically for them that I'm Gonna given now do you think the value would have announced now just by their definition of you know you get into the malls.
Yeah, I think I think the question if I'm correct. I think the question was was there a value bump in monarch because of the renewal and the answer is yes. It was not as much as you might think because we always knew there was going to be renewal or from our value perspective.
We were not concerned.
All of them moving out but of course, yet there was.
Rather automatic sort of bump in volume due to the.
Due to the renewal.
Got it okay. Thank you.
And then just shifting to yard extra football unit guidance for 2022.
Acquisition activity or what leverage are you assuming in this 10% unit growth.
Yes, not to provide too much detail, but I think we would see it as kind of the similar year, although I would point out quite strongly actually that as we look at this market, we do expect to.
Execute on more rebalancing and.
And more dispositions and I'm not even sure I would use the word noncore I would just say we are looking at the.
If the right opportunities to trim our portfolio.
As we always have but we do expect to be a little more active on that front in 2022.
Okay. Okay. Thank you and I'll turn it back.
Thank you as a reminder, via the phone lines you May press. The one followed by the four if you'd like to register a question.
One moment please for our next question.
The next question is from Howard Leung of Veritas investment. Please go ahead.
Thank you.
I just wanted to ask about the mark to market.
Follow up on that you know they seem really favorable and Theresa I know you talked about the higher Capex in 2022 are you seeing.
Existing tenants.
When it comes to expiry is maybe that.
A lot of them are.
Are opting to move out, but you are being able to find new tenants that are willing to pay that higher mark to market or.
Any kind of pressure on that front.
I think we I think the question is are we seeing well.
Not sure where the question is hard, but I would say definitely we feel like we're in strong markets.
And our assets are.
For the most part very modern so we're not concern per se if tenants.
For whatever reason need to move out so the release ability of these us whenever we're looking at acquiring an asset or developing an asset.
The lease ability is always paramount in our consideration so we do.
Approach a lot of leasing recently with the attitude.
If the tenant moves out.
Then we feel confident we will be able to replace them with.
With a similar comparable tenant at a higher rent.
So that's kind of the attitude or approach. We take is we're looking at these renewals, but at the end of the day.
Tenants arent going to particularly in a market like this.
They're not going to move for <unk>.
They're going to move because there are there were differences in their needs and like I mentioned before the tenant.
We'll move the probably by the end of the year or at the end of the year in Pennsylvania is moving into a facility that I think is 60% to 70% bigger than our facility and we do have on the site some capacity too to expand the building, but not that size so their needs have changed.
And then moving on and the there is a lot of interest.
In that building in the market right now so we are very comfortable and confident with our ability to re lease at a rent that's much higher than than the done a tenant was paying on expiring.
I hope that answers your question.
Okay.
Yes. It was that I was trying to find just kind of ask on the market dynamic and it of course, there is a lot of demand for your assets. If there is even if there is turnover.
I guess on the on that same topic.
The inflation rate.
Rates are pretty strong now is there given kind of the it's more of a landlord's market are there any thoughts to building in more CPI escalators in your non magna lease.
Leases to kind of capture that that inflation.
Yes, certainly we're approaching it from that way as long as people you did one recently it was three 5% I think we're working on a deal right now where it's approaching three and three quarter percent to year. So you can get it I mean.
The majority of tenants we deal with are very sophisticated time. So we don't have a lot of small base tenants. We have major tenants that are very sophisticated.
Pushback that they will have is we're not expecting shows where inflation is going to be three 5% to 4% for the next 10 years, So that's where.
Most leases that we see in the market today are still in the 2% to 3% range, but I would say this.
Theyre not closer to two anymore, they're closer to three so we are seeing contractual escalations average closer to three the past couple of years than 2%.
That's a pretty recent move in a pretty significant move when someone's going to commit to space for the long term.
Great.
That over time.
Thanks for those are all my questions. Thanks for answering that I will turn it back.
Thank you.
The next question comes from Mark Rothschild with Canaccord Genuity. Please go ahead.
Thanks, Good morning, everyone.
Kevin just want to make sure I understand your comments regarding development, maybe you could expand on it you said that alright. Thank you said that you expect to be even more active in development going forward and do that even more than acquisitions.
You've obviously assembled a large pipeline but.
With land cost going up.
Restaurant yields.
Do you still expect to be able to find a large number of new development opportunities and how do you think about that now in the context of acquisitions.
No. That's a great question, Mark and it is based on opportunity and what we think is the best thing to do.
I think what we've been most focused on is just really optimizing.
Optimizing our development capabilities and I feel really good about where we are and I think I'm talking about say 2025 2020. It would not surprise me at all if were.
Spending $500 million a year on development and we're acquiring $300 million a year in new properties, all I'm, saying, it's a bit of a shift there and those numbers can change from year to year, just based on where the market is and where the opportunities are absolutely an eye on.
Always we've always been interested in redevelopment plans and those have been as you can tell I mean, almost look at the deals in the GTA. Some of them you could the two that we just closed on in December those are redevelopment players or I would say refurbishment plants.
But the redevelopment players are highly interesting to us as well those have been hard to come by and quite expensive. So we watch for fluctuation and dislocations in the market as well and we're built to be flexible and pursue what's going to <unk>.
Generally the best long term returns for our unit holders.
Okay, Great and maybe just.
I'm curious I'm not sure. If you said that youre going to have this Friday and probably to you about for the guidance, where you talked about <unk> for 2022, what G&A was built into that.
It's about I'm going to say $34 million, that's about $8 million a quarter, you said eight to $8 eight.
The $9 million a quarter is what's built in.
Perfect. Thank you so much.
Thank you.
The next question comes from <unk> <unk> of RBC capital markets. Please go ahead.
Hi, everyone. Good morning.
Kevin can you maybe just I was interested in your comments on monarch.
And the additional perhaps value creation opportunity. There can you just maybe expand on that I'm just.
Interesting and sort of what your thoughts are there.
Well I think the question was was there a bump in value when the when the renewal was was triggered.
And I said, yes. It was it wasn't sure exactly what the bump was but there was.
The other comment I made is probably not as high as you might think because it's not it's not a binary there was a very strong expectation that the tenant would renew Atlantic.
Although there was a bump when it was crystallize it probably wasn't as much as most people would think.
No yes.
I understood that part, but with respect to possibly I guess looking to monetize or sell that asset at some point down. The road you mentioned that maybe it's not necessarily the right time, because you think there is still more value that can be created there.
Just curious more about that aspect.
To your comment on the additional value that can be created down the road yet.
Because what I meant by a palm who is and I don't want to go into go into too much detail, but we've.
We've set up.
We set up our properties in Europe in a tax efficient way and so.
We have to think about how we approach that and that may involve more than one asset.
At a time, so that's what I meant by them.
So there are other assets there are other assets in Austria in Europe that could impact.
That as well and the timing of the extensions on those.
Okay got it.
And then just maybe just rounding out the discussion on like can you what was the renewal term and then secondly, you spoke about the 10% renewal spreads that you've accomplished so far in the 2022 maturities to date so.
So just curious points.
That 10% include <unk> in that in that figure.
Yeah, so its five years.
There are five year extensions.
And I mentioned that there there are different cash flows and the largest cash flow that has the when it triggers as in 2024.
So what I was saying is the best way to look at it probably as you say, it's going to increase by 10% over that five year term. So really it's going to average 2% a year, probably the best way to look at it but the big bump in Lanai kits in 2020 for early 2024.
Our June .
Got it.
Yes.
The cash on the books you put some of that can work in February and you talked about some additional income producing acquisitions.
It may be even some perhaps developments I guess, we'll see.
What can you share with us in terms of what the acquisition pipeline looks like today and does your guidance assume that you'll be carrying some excess cash.
A good portion of the year.
Yeah, I'll start and then.
Teresa can can jump in any time first of all I think the acquisition pipeline is in the $250 million range. These are deals that are actively under.
Negotiation and we're obviously always looking at opportunities.
And then we have balance sheet capacity to add to that when the time is right.
And then I mentioned on the disposition side, we are looking at.
Trimming parts of our portfolio some of the U S. Some in Europe .
That we think will also be a pretty active way to raise capital for redeployment. So was that the question or.
Yeah, Yeah, and then just on the I guess the general.
Wouldn't you be carrying some excess cash at the guidance it sooner.
Excess cash being carried over the course of care.
I don't think we're going to see a lot of excess cash being carried outside of Q1, we're sitting around 215 million, but we do have commitments, obviously, we have $480 million of development and forward purchase commitment.
So I think we're getting to a point, where we're just going to be holding cash more at an operational level and it will be accepted as as we've seen in the last couple of years.
It will be managed to a lower level.
Sure.
Right. Okay, and then just last one for me and same property NOI growth you're talking about.
Throughout the four 5%.
You also talked about I guess, some transitional vacancy, possibly I guess, maybe towards the end of the year, but fair to assume that the bulk of this growth is really just.
Mostly coming from from rents from higher rents the contractual steps, maybe some renewal leasing.
Rather than occupancy.
Im assuming that the growth that you've guided to assume some lower occupancy that recently.
Okay.
Yes, I think it's.
Just pure rental rental rate growth.
Thanks, very much I'll turn it back.
Thank you.
The final question comes from Brad Sturges from Raymond James. Please go ahead.
Hi, there just to go back to the <unk>.
<unk> thrown up in April again, just to clarify that does assume that there will be some rebalancing within the portfolio.
Yes, yes, yes, it does yes it does.
Would it be.
Any.
I guess would that be a negative impact just from a transactional timing of transactions to redeploy on the buy side or is there expectation to see a little bit of a roll down on a going in yield.
I don't think were going to see necessarily an impact.
On a per unit basis, Brad I think I think it would be a redeployment into into new new IPP.
Got it.
And just to understand.
The strategy there.
Not necessarily not noncore assets more of a rebalancing is it are you making.
Ah rebalancing just based on the market specifically within the U S and Europe or how should we think about what that rebalancing.
Strategy could look like.
It could yes it could include.
Assets, where we feel like we have enough exposure in a certain market it could be assets, where we feel we've added and there are a number where we've added a lot of value.
And maybe the growth in the <unk>.
Continued appreciation in values not going to be there versus what we're acquiring today. So those are the things you had the growth profile to look at.
And maybe market concentration. So those are two things that are constantly on our mind is looking at and I think we have some <unk>.
Tract of opportunities to mine the portfolio.
This year.
Okay that makes sense I'll turn it back.
Thank you that was our final question I'll turn the call back over for any closing remarks.
Okay. Thank you operator.
So again on behalf of the trustees and the team here at granite. Thank you all again for participating on our call and to our unit holders. Thank you for your continued trust and support.
Thank you. This does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a good day.
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