Q4 2023 Granite Real Estate Investment Trust Earnings Call

Unknown Executive: www.graniterealestate.com Good morning and welcome to Granite REIT's fourth quarter and year-end results for 2023 conference call. Speaking to you on this call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer. I will now turn the call over to Ms. Teresa Neto to go over certain advisories. Thank you, operator. Good morning, everyone.

Yeah.

Good morning, and welcome to D granite REIT fourth quarter and year end results for 2023 conference call.

Speaking to you on this call. This morning is Kevin Gori, President and Chief Executive Officer, and Theresa Neto, Chief Financial Officer, I will now turn the call over to MS. Teresa Neto to go over certain advisories.

Thank you operator, good morning, everyone before we begin today's call I would like to remind you that 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 <unk>.

Teresa Neto: Before we begin today's call, I would like to remind you that 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 facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainty. These risks and uncertainties are discussed in Granite's materials 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 2023, filed on February 28, 2024. Readers are cautioned not to place undue reliance on any of these forward-looking statements or forward-looking information.

<unk> forecast or projection. These statements and information are based on certain material factors or assumptions reflect management's current expectations and are subject to known and unknown risks and uncertainties.

These risks and uncertainties are discussed in grant 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 2023 filed on February 28, 2020 for readers are cautioned not to place undue reliance on any of these forward looking statements and forward.

Looking information the read reviews, its key assumptions regularly and may change its outlook on an on going 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, whether as a result of new information future events or otherwise except as required.

Teresa Neto: The REIT reviews its key assumptions regularly and may change its outlook on an ongoing basis if necessary. Granite undertakes no intention or obligation to update or revise its key assumptions, any 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.

By law in.

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

Teresa Neto: Please refer to the condensed combined, audited financial results and management discussion and analysis for the year ended December 31, 2023 for Granite Real Estate Investment Trust and Granite RE 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. Now I'll start with the financial highlights as usual, and Kevan will follow with his operational update. Granite posted Q4 2023 results ahead of Q3 and in line with expectations supported by strong NOI growth, lower current tax expense, and a positive impact from foreign exchange primarily as a result of the strengthening of the U.S. dollar partially offset by higher interest costs. FFO per unit in Q4 was $127, representing a $0.03 or 2.4% increase over Q3, and a 5.8% increase relative to the same quarter in the prior year.

Please refer to the condensed combined.

Our audited financial results and management discussion and analysis for the three for the year ended December 31, 2023 for granite 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.

Now I will start with the financial highlights as usual and Kevin will follow with his operational update.

Granted posted Q4 2023 results ahead of Q3 and in line with expectations supported by strong NOI growth lower current tax expense and positive impact from foreign exchange, primarily as a result of the strengthening of the U S dollar, partially offset by higher interest costs.

<unk> per unit in Q4 was 127 represented representing three center two 4% increase over Q3, and a five 8% increase relative to the same quarter in the prior year.

Teresa Neto: The growth in NOI is derived from developments and expansions that came online since the fourth quarter of 2022, and strong same-property NOI growth enhanced by leasing spreads in excess of 100% in Canada, double digits in the U.S., and inflationary increases in Europe, offset by the disposition of two properties during the first and third quarters of 2023, and some new vacancies in North America. NOI growth was enhanced by foreign exchange as the US dollar was 1.6% stronger in comparison to Q3, while the euro was flat.

Growth in NOI is derived from developments and expansions that came online since the fourth quarter of 'twenty, two and strong same property NOI growth enhanced by leasing spreads in excess of 100% in Canada double digits in the U S and inflationary increases in Europe, partially offset by the disposition disposition of two properties during the first and third quarters of 'twenty three.

And some new vacancies in North America.

NOI growth was enhanced by foreign exchange as the U S. Dollar was one 6% stronger in comparison to Q3, while the euro was flat.

Teresa Neto: In comparison to the prior year, the euro was 6% stronger and the US dollar was flat, resulting in a 2 cent positive impact on FFO per unit. In Q4'23, we recognized a net favorable $1.8 million reversal of tax reserves related to a prior year, which resulted in a current tax expense being $2 million lower as compared to Q3 and $1.4 million lower relative to the prior year. Negatively impacting Q4-23 relative to Q3 and the prior year quarter is higher interest costs, net of interest income of 0.9 million and 0.7 million, respectively, which is primarily related to the full quarter effect of interest costs on our 70 million euro term loan that closed in early September and higher interest rates on the 400 million 2029 debenture post the repayment of our 23 debenture on November 30th.

In comparison to the prior year the U S. The euro at 6% stronger in the U S. Dollar was flat, resulting in a <unk> <unk> positive impact to <unk> per unit.

In Q4, 'twenty three we recognized a net favorable $1 $8 million reversal of tax reserves related to a prior year, which resulted in a current tax expense being $2 million lower as compared to Q3, and $1 4 million lower relative to the prior year.

Negative negatively impacting Q4, 'twenty three relative to Q3 and the prior year quarter is higher interest costs net of interest income of $9 million and $7 million, respectively, which is primarily related to the full quarter effect of interest cost on our $70 million Euro term loan and that closed in early September.

And higher interest rate on the $400 million 2029, debenture post the repayment of our 23 debenture on November 30th.

Teresa Neto: Granite's AFFO per unit on a per unit basis in Q4 was $1.15, which is $0.06 higher relative to Q3 and $0.10 higher relative to the same quarter last year, with the variances mostly tied to FFO growth and lower capital expenditures, leasing costs, and tenant allowances incurred due to the timing of leasing turnover and seasonality. AFFO-related capital expenditures, leasing costs, and tenant allowances incurred in the quarter totaled $6 million, with a decrease of $0.7 million and $1.4 million over Q3 and the prior year, respectively.

Granted <unk> per unit on a per unit basis in Q4, with 115, $1 50, which is <unk> <unk> higher relative to Q3, and 10 cents higher relative to the same quarter last year with the variance is mostly tied to <unk> growth and lower capital expenditures leasing costs and tenant allowances incurred.

Due to the timing of leasing to turnover and seasonality.

<unk> related capital expenditures leasing costs and tenant allowances incurred in the quarter totaled $6 million with a decrease of <unk> 7 million and $1 4 million over Q3 in the prior year respectively.

Teresa Neto: For 2023, total AFFO related capital expenditures, leasing costs, and tenant allowances incurred were $18.3 million, which is below prior estimates provided due to timing as certain leasing activity did not occur as forecast. For 2024, we expect maintenance capex, leasing costs, and tenant allowances to come in at approximately $25 million, with the increase relative to the past couple of years being a direct result of anticipated leasing activity for the remaining 2024 and 2025 maturities, as well as the leasing up of existing vacancy. Same property NOI for Q4'23 was strong relative to the same quarter last year, increasing 4.7% on a constant currency basis and up 6.8% when foreign currency effects are included.

For 2023, total <unk> related capital expenditures leasing costs and tenant allowances incurred were $18 3 million, which was below prior estimates provided do it due to timing of certain leasing activity did not occur as forecasted.

For 2024, we expect maintenance capex leasing costs and tenant allowances to come in at approximately $25 million with the increase relative to the past couple of years being a direct result of anticipated leasing activity for the remaining 24, and 25 maturities as well as the leasing up of existing vacancies.

Same property NOI for Q4, 23 was strong relative to the same quarter last year, increasing four 7% on a constant currency basis and up six 8% with foreign currency effects are included.

Teresa Neto: Same property NOI growth was driven primarily by higher than previous year's CPI adjustments, positive leasing spreads, contractual rent increases across all of Granite's regions, lease renewals in the US, Canada, and Netherlands, the lease up of a prior vacancy in Novi, and includes the impact of completed expansion in Indiana and completed developments in Fort Worth, Texas, and Albecq, Germany, which had free rent periods in the prior year. Partially offset by the vacancy of certain properties in the US and Canada. DNA for the quarter was $9.4 million, which was $0.8 million higher than the same quarter last year and $1 million higher than Q3.

Same property NOI growth was driven primarily by higher than previous years CPI adjustments positive leasing spreads contractual rent increases across all of granite regions lease renewals in the U S, Canada and Netherlands, the lease up of a prior vacancy in Novi, Michigan and includes the impact of completed expansion in Indiana and complete.

Good developments in Fort worth, Texas, and <unk>, Germany, which had free rent periods in the prior year, partially offset by vacancy at certain properties in the U S and Canada.

G&A for the quarter was $9 4 million, which was <unk> 8 million higher than the same quarter last year, but one and $1 million higher than Q3, the main variance relative to the prior year quarter and Q3 is the change in noncash compensation liabilities, which generated an unfavorable 2 million fair value swing relative to the same.

Teresa Neto: The main variance relative to the prior year quarter in Q3 is the change in non-cash compensation liabilities, which generated an unfavorable $0.2 million fair value swing relative to the same quarter last year and an unfavorable $1.4 million fair value swing relative to Q3. These fair value adjustments do not impact FFO or AFFO. Stripping out the fair value adjustments, as mentioned earlier, G&A expenses that impact FFO and AFFO were approximately $0.4 million lower than Q3, which is mostly related to the timing of professional fees and travel expenses. For 2024, we continue to expect G&A expenses of approximately $9.5 million per quarter, or roughly 7% to 7.5% of revenues, excluding any amounts for fair value adjustments on non-cash compensation liabilities. On income tax, Q4 current income tax was $0.1 million, which is $1.4 million less than the prior year and $2 million lower than Q3.

Sort of last year, and an unfavorable $1 4 million fair value gain relative to Q3.

These fair value adjustments do not impact <unk> metrics stripping out the fair value adjustments as mentioned earlier G&A expenses that impact <unk> and <unk> were approximately <unk> 4 million lower than Q3, which is mostly related to timing of professional fees and travel expenses for.

For 2024, we continue to expect G&A expenses of approximately $9 5 million per quarter or roughly 7% to $7 <unk> center revenues, excluding any amounts were fairly adjustments on noncash compensation liabilities.

Unencumbered hacks Q4 current income tax was <unk> 1 million, which is $1 $4 million in the prior year and $2 million lower than Q3 as.

Teresa Neto: As mentioned earlier, in Q4'23, we recognized the reversal of tax provisions relating to positions taken on taxation years which have gone statute barred in our European region of $1.8 million, in contrast to similar favorable adjustments last year of just $0.7 million. For 2024, we are expecting current income taxes to increase slightly to approximately 2.4 million per quarter, and that's as a result of higher revenues and the burn-off of TMI amortization in Austria related to the Graz lease renewal, which commences on February 1st, 2024, increasing our taxable income in that region. Interest expense was higher in Q4 relative to Q3 by $4.1 million, while interest income also increased by $3.2 million as compared to Q3.

As mentioned earlier in Q4, 'twenty three we recognized the reversal of tax provisions relating to positions taken on taxation years, which have gone statute barred in our European region of $1 8 million in contrast to similar favorable adjustments last year of just $7 million.

For 2024, we are expecting current income taxes to increase slightly to approximately $2 4 million per quarter and Thats as a result of higher revenues and the burn off of TNI and amortization in Austria related to the breath lease renewal, which commences February 124, increasing our taxable income in that region.

Interest expense was higher in Q4 relative to Q3 by $4 1 million. While interest income also increased by $3 2 million as compares to Q3 <unk>.

Teresa Neto: As mentioned previously on the Q3 call, on October 12, Granite completed its $400 million green bond offering, known as the 2029 debentures, and concurrently entered into a cross-currency interest rate swap to exchange the Canadian dollar denominated principal and interest payments for euro denominated payments, resulting in an effective interest rate of approximately 4.93% for the five-and-a-half-year term of the 2029 debentures. The net proceeds from the offering were used to repay Granite's 2023 debentures with the same principal amount outstanding of $400 million upon their maturity on November 30th. For the period from October 12 to November 30, Granite earned interest on its net proceeds from the 29 debentures at approximately 5.4%. Therefore, relative to Q3, net interest costs increased by 0.9 million.

As mentioned previously on the Q3 call on October 12 branded completed its $400 million Green bond offering known as the 22029 debentures and concurrently entered into a cross currency interest rate swap to exchange the Canadian dollar denominated principal and interest payments for euro denominated payments, resulting in an <unk>.

<unk> interest rate of approximately $4, 93% for the five and a half year term of the 29 debentures.

The net proceeds from the offering were used to repay granted 2023 debentures with.

With the same principle amount outstanding of $400 million upon its maturity on November 30.

For the period from October 12 to November 30th granted earn interest on its net proceeds from the 29 debentures at approximately five 4%.

Therefore relative to Q3 net interest costs increased by $1 9 million the increase as a result of the full quarter impact as mentioned earlier of the $70 million Euro 2026 term loan, which has an effective rate of 433% and the one month impact of the repayment of the 23 debentures, which had an effective rate.

Teresa Neto: The increase is a result of the full quarter impact, as mentioned earlier, of the 70 million euro 2026 term loan, which has an effective rate of 4.33 percent, and the one month impact of the repayment of the 23 debentures, which had an effective rate of 2.43 percent in comparison to the higher effective rate on our 29 debentures of 4.93. Granite's weighted average cost of debt is approximately 2.59%. For 2024, given that we have no debt maturing until very late December, our interest expense run rate is estimated to drop to approximately $21 million per quarter, which will be offset by some interest income of approximately $0.5 to $1 million per quarter. Now looking out for 2024 estimates, Granite is forecasting SFO per unit within the range of 530 to 545, representing approximately 7 to 10% increase over 2023. For AFFO per unit, we are forecasting a range of $4.65 to $4.80, representing an increase of 3% to 7%. The high and low ranges are driven by foreign currency rates, where for the high end of the range, we are assuming foreign exchange rates of Canadian dollars to the euro of 1.48 and Canadian dollars to USD of 1.38.

243% in comparison to the higher effective rate on our 2009 debentures of $4 93%.

Grant its weighted average cost of debt is approximately two to five 9% for 2004 and given that we have no debt maturing until very late December or interest.

<unk> run rate is estimated to drop to approximately $21 million per quarter, which will be offset by some interest income of approximately $5 $1 million per quarter.

Now looking out for 'twenty to 'twenty four estimates granite is forecasting <unk> per unit within the range of $5 30 to $5 45.

Representing approximately seven 7% to 10% increase over 2023 for <unk> unit, we are forecasting a range of $4 65 to $4 80, representing an increase of 3% to 7%.

The high and low ranges are driven by foreign currency rates were for the high end of the range. We are assuming foreign exchange rates of Canadian dollar to euro of $1 48, and Canadian to U S. D. A 138 on the low end of the range. We are assuming exchange rates on the Canadian dollar to Euro and Canadian dollars to USD of 143 and <unk>.

132, respectively.

We continue to estimate that <unk> movement in the Canadian dollar relative to the U S dollar impacted <unk> <unk> per unit approximately by <unk>.

Teresa Neto: On the low end of the range, we are assuming exchange rates for the Canadian dollar to the euro and Canadian dollar to USD of 1.43 and 1.32, respectively. We continue to estimate that $0.01 movement in the Canadian dollar relative to the U.S. dollar impacts FFO and AFFO per unit approximately by $0.02, and a $0.01 movement in the Canadian dollar relative to the euro results in a $0.01 annual impact on FFO and AFFO per unit. Granite will provide updates to guidance each quarter as warranted based on leasing activity and other operational events executed to date. The trust balance sheet, comprising total assets of $9.1 billion at the end of the quarter, was negatively impacted by $33 million in fair value losses on Granite's investment property portfolio in the fourth quarter, and was further reduced by $73 million in translation losses on Granite's foreign-based investment properties, primarily due to the 2.5% decrease in the spot USD exchange rate, partially offset by a 1.9% increase in the spot Euro exchange rate relative to Q3.

And once and movement in the Canadian dollar relative to Euro resulted in <unk> <unk> annual impact of <unk> and <unk> per unit granite.

Granite will provide updates to guidance each quarter as warranted based on leasing activity and other operational events executed to date.

The trust balance sheet, comprising a total assets of $9 1 billion at the end of the quarter was negatively impacted by $33 million in fair value losses on Brian its investment property portfolio in the fourth quarter and was further reduced by $73 million of translation losses on Brian its foreign based investment properties, primarily due to the two 5% decrease in the spa.

<unk> USD exchange rate, partially offset by a one 9% increase in the spot Euro exchange rate relative to Q3.

The fair value losses on granted investment property portfolio were attributable to the expansion and the discount in terminal capitalization rates across selective granite markets largely due to market conditions, partially offset by fair market rent increases primarily in selective U S and European markets.

<unk> overall weighted average cap rate of five two.

$5 two 4% on in place NOI increased 10 basis points from the end of Q3 and has increased 37 basis points since the same quarter last year.

Teresa Neto: The fair value losses on Granite's investment property portfolio were attributable to the expansion in the discounted terminal capitalization rates across selective granite markets, largely due to market conditions, partially offset by fair market rent increases primarily in selective US and European markets. The Trust's overall weighted average cap rate of 5.24% on in-place NOI increased 10 basis points from the end of Q3 and has increased 37 basis points since the same quarter last year. Our net leverage at the end of the year was 33%, and net debt to EBITDA was 7.3 times, which is flat relative to Q3, and lower than Q4 2022, as a result of same property NOI growth, as previously mentioned, and the completion and stabilization of the majority of Granite's development properties.

Our net leverage at the end of the year was 33% and net debt to EBITDA was seven 3% seven three times, which is flat relative to Q3 and lower than Q4 2022. As a result of same property NOI growth as previously mentioned and the completion and stabilization of the majority of grants development properties.

Granted continues to expect its net debt to EBITDA to improve in 2024 as the EBITDA from completed developments come online throughout the year.

Our current liquidity is approximately $1 1 billion, representing cash on hand of approximately $120 million and the Undrawn line of $997 million as of today, we have no borrowings outstanding under the credit facility and there are $2 9 million in letters of credit outstanding.

Teresa Neto: Granite continues to expect its net debt to EBITDA to improve in 2024 as the EBITDA from completed developments comes online throughout the year. Our current liquidity is approximately $1.1 billion, representing cash on hand of approximately $120 million and the undrawn line of $997 million. As of today, we have no borrowings outstanding under the credit facility, and there are $2.9 million in letters of credit outstanding. And lastly, on other financing activities, for the three months in the fourth quarter, Granite repurchased approximately 393,000 stapled units under its NCIB at an average price of $68.73 for a total of $27 million. And I'll turn the call over to Kevan. Thanks, Teresa.

And lastly in other financing activities for the three months.

In the fourth quarter granted repurchase approximately 393000 stapled units under its and CIB at an average price of $68 73 for a total proceeds of $27 million I'll now turn it over the call to Kevin.

Thanks Teresa.

Certainly an inline quarter as NOI continued to increase despite a slight decline in occupancy from the previous quarter.

Further as mentioned ethical for 2023 wasn't Wang with guidance of $4 90 to 505, which was provided in March of last year.

And I think it is worth noting at the outset that we generated double digit growth in <unk> per unit for the second consecutive year.

I'll begin with a brief update on our current development pipeline.

As stated in the MD&A, the 19 year lease on our 409000 square foot build to suit project for very tolerable commenced on schedule in mid January.

Kevan S. Gorrie: Certainly an inline quarter as NOI continues to increase despite a slight decline in occupancy from the previous quarter. Further, as mentioned, FFO for 2023 was in line with guidance of 490-505, which was provided in March of last year. And I think it is worth noting at the outset that we generated double-digit growth in FFO per unit for the second consecutive year. I'll begin with a brief update on our current development pipeline. As stated in the MD&A, the 19-year lease on our 409,000-square-foot build-to-suit project for Barrie Calvo commenced on schedule in mid-January, which I think is quite an accomplishment by the team for such a complex development project. Additionally, we have executed a new 10-year, 3,000-square-foot lease on our 50,000-square-foot expansion in Ajax, which will commence in June of this year.

Which I think is quite an accomplishment by the team for such a complex development projects.

Additionally, we have executed a new 10 year 30000 square foot lease on our 50000 square foot expansion and Ajax, which commences in June of this year and finally for development. We have received approvals and executed a lease amending agreement with the tenant for 52000 square foot expansion on our property and work the Netherlands.

The expansion is expected to be completed in the fourth quarter at a cost of approximately $6 million Canadian and generate a return of roughly eight 5% on cost.

As a reminder, all projects are expected to achieve certification in accordance with our published Green Bond framework.

In addition to the projects just discussed we have roughly 160 acres of land remaining for development in Branford, Houston, and Columbus, which could accommodate up to $2 4 million square feet of space once constructed.

Kevan S. Gorrie: And finally, for development, we have received approvals and executed a lease amending agreement with the tenant for a 52,000-square-foot expansion on our property in Waerts, the Netherlands. The expansion is expected to be completed in the fourth quarter at a cost of approximately 6 million Canadian dollars and generate a return of roughly 8.5% on cost. As a reminder, all projects are expected to achieve certification in accordance with our published Green Bond Framework.

As outlined in our press release and MD&A.

The team achieved an average increase in rental rate of 24% on renewals for roughly $3 8 million square feet of leases that expired in the quarter.

With respect to our 2024 maturities, we have now renewed $7 8 million or roughly 79% of our $9 8 million square feet of maturities at an average increase in rental rate of 15%.

Kevan S. Gorrie: In addition to the projects just discussed, we have roughly 160 acres of land remaining for development in Brantford, Houston, and Columbus, which could accommodate up to 2.4 million square feet of space once constructed. As outlined in our press release in MD&A, the team achieved an average increase in rental rates of 24% on renewals for roughly 3.8 million square feet of leases that expired in the quarter.

With the increased ironically muted somewhat by the 10% increase associated with the garage renewal.

As Teresa mentioned same property NOI increased by four 7% in the quarter on a constant currency basis lower than in Q3, but in line with expectations.

In property NOI was positive across all our geographies on a constant currency basis led by the Netherlands, and Canada at nine, 8% and seven 7%, respectively, and despite higher vacancy our U S portfolio posted same property NOI of just under 4%.

Kevan S. Gorrie: With respect to our 2024 maturities, we have now renewed 7.8 million, or roughly 79% of our 9.8 million square feet of maturities, with an average increase in rental rate of 15%, although the increase, ironically, was muted somewhat by the 10% increase associated with the garage renewal. As Teresa mentioned, Saint-Pierre-Pied-en-Hawaii increased by 4.7% in the quarter on a constant currency basis, lower than in Q3, but in line with expectations.

Overall same property NOI growth for the quarter for the year, sorry came in at the lower end of our initial guidance of 6% to 7%.

As you can see we project same property NOI growth within the range of 7% to 8% on a constant currency basis for 2024.

And we expect that growth to continue to be strong through 2025 based on today's expected leasing spreads over that period.

Kevan S. Gorrie: Saint-Prophénie-en-Hawaii was positive across all our geographies on a constant currency basis, led by the Netherlands and Canada at 9.8% and 7.7% respectively. And despite higher vacancy, our U.S. portfolio posted positive growth at just under 4%. Overall, same property, one-eye growth for the quarter for the year, sorry, came in at the lower end of our initial guidance of 6 to 7%. As you can see, we project same property and wide growth within the range of 7% to 8% on a constant currency basis for 2024. And we expect that growth to continue to be strong through 2025 based on today's expected leasing spread over that period. As you can see from our disclosure, we adjusted cap rates and discount rates nominally in the quarter based on relevant transactional data. Excluding FX movements, we have now recognized roughly $175 million in fair value losses on our investment properties in 2023 and just under $900 million in total since Q1 of 2022 as a result of adjustments to capitalization and discount rates.

As you can see from our disclosure, we adjusted cap rates and discount rates normally in the quarter based on relevant transactional.

Excluding FX movement, we have now recognized roughly a $175 million in fair value losses on our investment properties in 2023, and just under $900 million in total since Q1 of 2022 as a result of adjustments of capitalization of discount rates mitigated partially by increases in market rents and.

<unk> stabilization within our portfolio.

Based on recent transactional data and the move lower in overnight rates across our jurisdictions from the fourth quarter.

At this time, we do not anticipate significant further declines in asset values moving forward. However.

We also believe that the prospects for distressed sales is likely to rise for the coming quarters as many owners and developers struggled to cope with got loads and are unable to capitalize recapitalize their investments and while that increase in activity may provide granted with compelling investment opportunities, we recognize that a significant.

Number of such sales could concurrently placed downward pressure on pricing in the short term.

Kevan S. Gorrie: These declines are mitigated partially by increases in market rents and development stabilizations within our portfolio, based on recent transactional data and a move lower in overnight rates across our jurisdictions from the fourth quarter. At this time, we do not anticipate significant further declines in asset values moving forward. However, we also believe that the prospect of distressed sales is likely to rise in the coming quarters as many owners and developers struggle to cope with debt loads and are unable to recapitalize their investments. And while that increase in activity may provide Granite with compelling investment opportunities, we recognize that a significant number of such sales could concurrently place downward pressure on pricing in the short term.

As a general market update leasing activity continued to slow in the fourth quarter as higher interest rates and economic uncertainty continue to impact tenant activity broadly across the sector.

On a comparable on a comparable basis our markets. Once again represented eight of the top nine markets in the U S for net absorption totaling 22 million square feet for the quarter and over 135 million square feet for the year led by Dallas, Chicago and Houston.

As for rates are market saw relatively positive year over year growth from 1% in Columbus to 16% and Dallas, 19% in Indianapolis, and Louisville, 26% in Houston and over 40% in the <unk> 70 881 corridor.

Kevan S. Gorrie: As a general market update, leasing activity continued to slow in the fourth quarter as higher interest rates and economic uncertainty continued to impact tenant activity broadly across the sector. On a comparative basis, our markets once again represented eight of the top nine markets in the U.S. for net absorption, totaling 22 million square feet for the quarter and over 135 million square feet for the year, led by Dallas, Chicago, and Houston. As for rates, our market saw relatively positive year-over-year growth, from 1% in Columbus to 16% in Dallas, 19% in Indianapolis and Louisville, 26% in Houston, and over 40% in the I-78-81 corridor. GTA, the Netherlands, and Germany posted growth rates of 6.3%, 6%, and 12%, respectively, over 2022.

The GTA, Netherlands, and Germany posted growth rates of 636, and 12% respectively over 2022.

As for Q1.

We are definitely seeing an increase in traffic and leasing activity across our markets versus levels that we saw in the fourth quarter.

Now ill discuss specific deals on the call, but the team is currently negotiating leases. We're in advanced discussions on approximately $1 5 million square feet of renewals and new leases, which I think bodes well for leasing momentum into the second quarter.

At this point, we would expect to renew between 85% to 90% of our lease Expiries overall in 2020 for a very strong number in my opinion.

As mentioned in the press release, we have renewed our base shelf prospectus, which which expired in November of last year on effectively the same terms as before.

Kevan S. Gorrie: As for Q1, we are definitely seeing an increase in traffic and leasing activity across our markets versus levels that we saw in the fourth quarter. I cannot discuss specific deals on the call, but the team is currently negotiating leases or in advanced discussions on approximately 1.5 million square feet of renewals and new leases, which I think bodes well for leasing momentum into the second quarter. At this point, we expect to renew between 85% to 90% of our lease expiries overall in 2024, a very strong number in my opinion. As mentioned in the press release, we have renewed our base shelf prospectus, which expired in November of last year, on effectively the same terms as before.

Telegraphed on our Q3 call. This renewal is simply a formality and is being executed a normal course to facilitate any potential actions. We may contemplate over the next 25 months.

Also as Teresa mentioned, we opportunistically utilize available cash on hand to purchase roughly 400000 units at an average price of $68 73.

As you know unit buybacks are not our first choice for capital allocation, but we will not hesitate to capitalize when the unit prices are far below now.

In closing our results were in line with expectations.

NOI and cash NOI increased each quarter in 2023, and our liquidity position remains very strong with roughly $1 1 billion in cash and available credit.

As I've stated on previous calls we utilize the power of our balance sheet and consciously made a sizable investment in development beginning in 2021 with a goal to deliver when combined with attractive same property NOI growth in retained earnings strong cash flow growth for multiple years since.

Kevan S. Gorrie: As I telegraphed on our Q3 call, this renewal is simply a formality and is being executed in the normal course to facilitate any potential actions we may contemplate over the next 25 months. Also, as Teresa mentioned, we opportunistically utilize available cash on hand to purchase roughly 400,000 units at an average price of $68.73. As you know, unit buybacks are not our first choice for capital allocation, but we will not hesitate to allocate capital when the unit price is at horrible lows. In closing, our results were in line with expectations.

Since the beginning of 2022, we have generated <unk> growth of over 26% and per our guidance, we expect to deliver further <unk> growth of 7% to 10% in 2024, depending on applicable exchange rates all of this while continuously improving the quality of our portfolio.

So addressing our current availabilities and remaining 2024 maturities and preserving capital for future strategic opportunities remains our highest priority.

Kevan S. Gorrie: NOI and cash NOI increased each quarter in 2023, and our liquidity position remains very strong at roughly $1.1 billion in cash and available credit. As I have stated on previous calls, we utilize the power of our balance sheet and consciously made a sizable investment in development beginning in 2021, with a goal to deliver, when combined with attractive same property NOI growth and retained earnings, strong cash flow growth for multiple years. Since the beginning of 2022, we have generated FFO growth of over 26%, and per our guidance, we expect to deliver further FFO growth of 7 to 10% in 2024, All of this while continually improving the quality of our portfolio. So, addressing our current availabilities and remaining 2024 maturities and preserving capital for future strategic opportunities remains our highest priority.

And we are very well positioned to deliver NOI <unk> and <unk> growth once again in 2024.

On that I will now open up the floor to questions.

Thank you.

If you would like to register a question. Please press the one four on your telephone you will hear a three ton prompt to acknowledge your request.

Thanks for your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three one moment. Please for the first question.

Our first question comes from Himanshu Gupta with Scotiabank. Please proceed.

Thank you and good morning.

So just wondered losing to the D and the corridor.

It looks like pretty active deal.

So around 2 million square feet of leasing done in the U S.

Maybe can you elaborate on that language market.

What are they in line with your expectations.

I don't want to get into specifics, but are you referring to the $1 5 million.

Unknown Executive: And we are very well positioned to deliver NOI, FFO, and AFFO growth once again in 2024. On that, I will now open up the floor to questions. Thank you. If you would like to register a question, please press the 1-4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3.

Just mentioned.

No Kevin I am talking about the one that you achieved in Q4.

$1 nine windows can it be done leasing done in the U S. In Q4.

Yes.

Okay.

I wouldn't get into specifics on that but I would certainly make the comment that the leasing spreads.

Himanshu Gupta: One moment, please for the first question. www.graniterealestate.com. Our first question comes from Himanshu Gupta with Scotiabank. Thank you and good morning. So just from the leasing activity in the quarter, looks like pretty active there, around 2 million square feet of leasing done in the U.S. Maybe can you elaborate on that, like which market? and the worth of rents in line with your account. I don't want to get into specifics, but are you referring to the 1.5 million I just mentioned?

The rental rates that we achieved were very much in line with expectations or above expectations.

Okay fair enough.

If I look at it there was a vacancy in Q4 I think around 400000 square feet maybe.

Maybe can you provide some color there like which market and.

And then what is the assumption of a DCF on that property.

There were two I think there was one in Memphis close to 300000 square feet and one in Houston, which was I think roughly 150000 feet.

Kevan S. Gorrie: I'm talking about the one which you achieved in Q4, you know, 1.9 million square feet of leasing done in the U.S. in Q4, so anything on that, you can... I wouldn't get into specifics on that, but I would certainly make the comment that the leasing spreads, the rental rates that we achieved were very much in line with expectations or above expectations. Okay, fair enough.

Okay, Okay fair enough.

And then maybe the next question is.

If I look at your U S occupancy is 92%.

And if I look at it.

Kevan S. Gorrie: And then if I look at, you know, there was a vacancy in Q4, I think around 400,000 square feet. Maybe can you provide some color there, like which market and, I mean, what is the assumption of lease upon that? There were two, I think it was one in Memphis, close to 300,000 square feet, and one in Houston, which was, I think roughly 150,000 feet.

The U S market agenda the market.

You can see in your key markets.

And then that Louis Columbus, and Dallas market vacancy is all toward all need percent. So youre pretty much in line did so do you think the overall market occupancy needs to get better before usual occupancy gain.

On your U S occupancy.

No I don't and a couple of things I would point out is is number one we are dealing with.

Very modern products and very well located within our respective markets. So I do think it will outperform the market we have to date.

Kevan S. Gorrie: Okay, okay, fair enough. And then maybe, you know, the next question is, if I look at your US occupancy, it's like 92%. And, you know, if I look at the US market, general market vacancy in your key markets, you know, Indianapolis, Columbus, Memphis, Dallas, you know, market vacancy is also around, So you're pretty much in line there. So do you think, you know, overall market occupancy needs to get better before you show occupancy gains on your US occupancy? No, I don't.

Anyways on the second one I would point out is indeed it is a.

A great example, I think the overall vacancy in Indianapolis is in the eights.

But when you break it down were in the southwest as you know right by the airport all points is literally across the street from Ron Reagan International Airport the vacancy rate in the southwest Submarket is four 3%.

Most of the vacancy in Indianapolis is in the east and the southeast So if youre going east to Greenfield. The vacancy rate is close to 20%. If you are in the southeast Youre talking with Shelby, Phil I think your 17% to 18% so there.

Kevan S. Gorrie: And a couple things I would point out is, number one, we're dealing with very modern products and very well located within our respective market. So I do think it will outperform the market we have to date. www.graniterealestate.com. Most of the vacancy in Indianapolis is in the east and the southeast. So if you're going east to Greenfield, the vacancy rate is close to 20%. If you're in the southeast, you're talking about Shelbyville, I think you're 17 to 18%. So there's clear differentiation depending on where you are within the market. Louisville, for example; we're in Bullitt County right off the highway.

There's clear differentiation, depending on where you are within the market Louisville for example, where and Bulloch County right off the highway. So that's a very well located asset. So I wouldnt I don't think it would be fair or reasonable to compare it to the overall vacancy in the markets. We certainly expect to outperform the market. So I don't think we need to see it sort of.

General major reduction.

In vacancy within our markets for us to have success leasing this year.

Got it.

Good point clearly we have to look at the sub market level.

And maybe the last question is on your.

Kevan S. Gorrie: So that's a very well-located asset. So I don't think it would be fair or reasonable to compare it to the overall vacancy in the markets. We certainly expect to outperform the market. So I don't think we need to see a sort of general major reduction in vacancy within our markets for us to have success leasing this year. What are you expecting in terms of lease-up of the current vacancies? Is it mostly Q2 or Q3? Most of you would be in the latter half of the year, if that helps.

For guidance.

It looks pretty strong here.

Tony So what are you expecting in terms of Liza above the code vacancies is it mostly Q2 or in Q3.

Yes.

Multiple you would be in the latter half of the year.

If that helps.

Okay, No I think thats helpful.

I'll turn it back thank you.

Our next question comes from Amit <unk> with RBC capital markets. Please proceed.

Himanshu Gupta: Okay, no, I think that's all. I'll, I'll turn it over. Our next question comes from Pammi Bir with RBC Capital Markets. Please proceed. Thanks. Good morning.

Thanks, Good morning, just maybe drilling down a little bit further on the lease up of some of the U S assets.

What's your sense of the timing for getting better and drive and some of the Nashville site. So at least up over the course of the year.

Pammi Bir: Just maybe drilling down a little bit further on the lease-up of some of the US assets. What's your sense of the timing for getting Veterans Drive and some of the Nashville sites leased up over the course of the year? I would say, in terms of activity in our markets, Nashville and Houston have been very active. Indianapolis would be second.

I would say in terms of activity.

In our markets Nashville, and Houston have been very active Indianapolis would be second I think that there is there are strong prospects out there, but probably pretty early days for us I would say in Memphis in Louisville would be would be behind that so.

Kevan S. Gorrie: I think that there are strong prospects out there, but it's probably pretty early days for us, I would say. And then Memphis and Louisville would be behind that. So what we're assuming is that all of the current availabilities will be dealt with this year, or the vast majority of them will be dealt with this year and in the second half of the year. Okay, and then coming back to the 7% to 8% same property NOI growth, how do you see that sort of breaking down regionally? And just, I guess, just giving your comments on getting most of, I guess, the US vacancy done before year-end or in the second half. Does that skew, you know, does that 7% to 8% skew more towards the US? Or I'm just curious if you can give us some thoughts on the regional outlook. I think it would be skewed more towards the US.

What we're assuming is that all of the current availabilities will be dealt with this year or the vast majority of them will be dealt with this year and in the second half of the year.

Okay, and then coming back to the 7% to 8% same property NOI growth.

How do you see that sort of breaking down regionally and just I guess just given your comments on getting most if I guess the USDA can see done before year end or in the second half does it skew.

Does that 78% skew more towards the U S or I'm just curious if you can give us some thoughts on the regional outlook.

I think it would be skewed more towards the U S. But one thing that's interesting is it's not it's not.

Pammi Bir: But one thing that's interesting is it's not, it's not impacted significantly by development. So it would be the lease-up of existing space and also the sort of renewal increases we're expecting to achieve or have achieved on the rollover in the U.S. So the U.S. definitely contributes a significant amount to that 7 to 8 percent. Okay, and just to clarify, are the Indianapolis acquisitions that you know you completed early last year included in your 78% or not? We would, but we were always clear about how much was attributable to new development. So they would become same property NOI at some point this year, later this year, and we would be clear. We would be clear about overall same property NOI and same property NOI excluding development.

<unk> significantly by developments.

So it would be lease up of existing space and also the sort of renewal increases were expecting to achieve or have achieved on the rollover in the U S. So the U S definitely contributes a significant amounts of that 7% to 8%.

Okay, and just to clarify.

The Indianapolis acquisition that you completed early last year are you, including those in your 78% or.

We would but we always we were always clear about how much is attributable to new developments. So they would be calm same property NOI at some point. This year later on this year that we would be clear we will be clear about overall same property NOI and same property NOI, excluding development, Brian I think.

That speaks to your your quarterly average same property NOI.

Yes.

Pammi Bir: I think that speaks to your quarterly average same property NOI that you. www.graniterealestate.com. Lastly, just for me, Kevan, you mentioned you expect to see some distressed opportunities surface. It sounds like acquisitions aren't really factored into your guidance outlook, so I'm just curious if you can expand on that, what you're seeing out there, any specific markets that would be of interest for us. Well, I don't want to talk about markets, but we are monitoring the markets very closely, and there are a few that we're pretty laser focused on right now. There are a couple in North America, including the GTA, obviously, and in Europe.

That's right yes.

Just to say, though for 2024, we are not expecting development the new developments the stabilization of <unk> development to contribute significantly to that 17% is a very small amount.

Okay.

Lastly, just for me.

Kevin.

You mentioned, you expect to see some distressed opportunities.

It sounds like the acquisitions aren't really factored into your guidance outlook. So I'm just curious if you can expand on that and what youre seeing out there.

Any specific markets.

That would be of interest for assets.

Well I don't want to talk about markets that we are monitoring the market very closely and there are a few that were pretty laser focused on right. Now there are a couple in North America, including the GTA obviously.

And then in Europe, but just looking at some deals we have seen transactions involving deals that were done a year ago less than a year ago and so we are seeing signs of financial distress. Among owners. We are seeing it now pricing seems to be holding up but I do anticipate that.

Pammi Bir: But just looking at some deals, we have seen transactions involving deals that were done a year ago, less than a year ago, and so we are seeing signs of financial distress among owners. We are seeing it now. Pricing seems to be holding up, but I do anticipate that financial distress... Not so much a contagion, but certainly, I think there will be a number of examples like that over the coming 6 to 12 months. And would you be prepared to push leverage a bit if stuff does come up that is, you know, pretty compelling? If it's compelling, I don't know how much we'd be willing to push leverage. I mean, we have a completely unused billion dollar line of credit. But if we had it, and Teresa was sitting across me nodding her head, we would have to have confidence and comfort that interest rates were moving in the right direction as well. So it has to be a combination of both of those things.

Financial distress.

Not so much a contagion, but certainly I think there'll be a number of examples like that over the coming six to 12 months.

And would you be prepared to push leverage a bit.

If that does come up that is pretty compelling.

If its compelling I don't know how much we'd be willing to push leverage I mean, we have a completely unused $1 billion line of credit.

But if we had in <unk>.

<unk> sitting across me nodding her head.

But we would have to have confidence and comfort that interest rates are moving in the right direction as well. So it has to be a combination of both of those things I think that has to be a compelling opportunity for us in the right market and we have to have comfort on the direction trajectory of interest rates.

Pammi Bir: I think it has to be a compelling opportunity for us in the right market, and we have to have comfort on the direction of the trajectory of interest rates. Got it. Thanks very much.

Got it thanks, very much I will turn it back.

Michael Markidis: I will turn it back. Our next question comes from Mike Markidis with BMO Capital Markets. Please proceed. Thank you, operator. Good morning, grant team.

Our next question comes from Mike Mark duties with BMO capital markets. Please proceed.

Thank you operator, good morning Grant team.

Just good to hear about the increased traffic you are seeing on the leasing and I think I heard you correctly, you said that you would expect that most of the or substantially all of the existing availabilities.

Michael Markidis: It's good to hear about the increased traffic you're seeing on leasing. And I think I heard you correctly. You said that you expect that most of, or substantially all, the existing availabilities are addressed by the end of this year. So just doing some quick math, and if I use your expected retention ratio, should we be thinking about maybe occupants in the U.S. going from where it is today, 92, to maybe ending the year at 97-ish? Is that kind of the right way to think about it?

Are addressed by the end of this year. So just doing some quick math and per user were expected retention ratio.

Should we be thinking about maybe occupants in the U S going from 90.

<unk> 92 to maybe ending the year at 97, Mexico is that.

The right way to think about it.

Kevan S. Gorrie: I think it would be I think that would be a bit high if you were to say most of the current availabilities will be dealt with this year. But also, we have, you know, 1.3 million are roughly expected to come back to us this year, just through expiries, lease expiries. So we're guiding overall, I should know it offhand what it would be in the US, but we're guiding overall to 96 and a half to 97 and a half percent. Okay. That's great. That's all I have. Thanks so much.

I think it would be I think that would be a bit higher if you were to say most of the current availabilities will be dealt with this year, but also we have we would have $1 3 million roughly you're expected to come back to us this year.

Just through expires lease expiries.

So we are guiding overall I should know it offhand what it would be in the U S. But we are guiding overall to 96 five to 97, 5% occupancy.

Okay.

That's great. That's all I had thanks so much.

Our next question comes from Brad Sturges with Raymond James. Please proceed.

Bradley Sturges: Our next question comes from Brad Sturges with Raymond James. Please proceed. Hey, good morning.

Hey, good morning.

Bradley Sturges: Maybe a general comment on leasing in terms of the commentary around the pickup. Are you seeing incremental activity or interest in bigger boxes at this? I would say yes and no.

Just maybe a general comment on the leasing.

The commentary around the <unk>.

Pick up.

Are you seeing incremental activity or interest in bigger boxes at this point.

I would say I would say, yes, no depending on the market. It does feel like most of the activity. We are seeing is in that sort of $2 50 to five range. We have seen a couple of prospects in the six to 800000 range, but I think it's a fair point so far this year, there's been more activity in the sort of.

Kevan S. Gorrie: Depending on the market, it does feel like most of the activity we are seeing is in that sort of $250,000 to $500,000 range. We have seen a couple of prospects in the $600,000 to $800,000 range, but I think it's a fair point. So far this year, there's been more activity in that sort of mid-pay $250,000 to $500,000 range.

Mid day 250 to 500000 range.

And at this point when Youre looking at your vacancies.

Bradley Sturges: And at this point, when you're looking at your vacancies, is it still the preference to be focused on single-tenant users, or has there been a change in thinking in terms of maybe going to a multi-tenant in certain circumstances? We I don't think I've ever used the word single tenant. It's not our focus. Our focus is modern distribution logistics and e-commerce.

Is still the preference would be focus on single tenant users or has there been a change in thinking in terms of maybe go into a multi tenant in certain circumstances.

I don't think I've ever use the word single tenant it's not our focus our focus is modern distribution logistics and e-commerce, whether it's multi tenant or single tenant is not now depending saying there are some buildings that are better suited to single tenant use and most distribution logistics is better suited for single tenant use so thats real.

Kevan S. Gorrie: Whether it's multi-tenant or single-tenant is now not dependent on saying that there are some buildings that are better suited to single-tenant use, and most distribution logistics is better suited to single-tenant use. So that's really our focus on that. If the question is, are we willing to look at demising the buildings? Absolutely.

Our focus is on that if the question is are we willing to look at.

Devising the buildings absolutely of the bed.

Kevan S. Gorrie: If it was the best thing for the building and the best thing for our returns, certainly we would do that. And just to emphasize all of the buildings we build, all the buildings we develop are designed to be demised if necessary. And all of the ones, including Indianapolis, both of those buildings in Indianapolis, we were assuming they would be demised and let to multiple tenants. So that was by design. So we're not a single tenant focus. It's really what is the best.

Best thing for the building and investing for our returns certainly we would do that and just to emphasize all of the buildings. We built all the buildings. We developed are designed to be demise if necessary.

All of the ones, including Indianapolis both of those buildings in Indianapolis, we were assumed they would be demand and led to multiple tenants. So that was by design.

So we're not single tenant focus thats really what is the best use of our modern distribution facility. That's what we're focused on.

Bradley Sturges: Use of a Modern Distribution Facility. That's what we're focused on. Yeah, okay, that makes sense. I meant more the demising aspect rather than the type of user, in a general sense, but I appreciate that.

Yes, Okay that makes sense I meant more on the devising aspect.

Type of user.

In general.

Bradley Sturges: Particularly, if we can achieve higher rental rates and higher NERs, we wouldn't hesitate to utilize our capital to do that. Okay. Last question, how are you thinking about Brantford in terms of phase two at this point? You know, you're getting close to completing phase one.

I appreciate that concludes really particularly if we can achieve higher rental rates.

And higher <unk>, we wouldn't hesitate to utilize our capital to do that to achieve that.

Yes, okay.

Last question, how are you thinking about brand for in terms of phase two at this point.

Youre getting close to completing phase one.

Kevan S. Gorrie: Would there be a... a large rental deal with overseas investors that bring them to use our own network as support and insurance we've collected through eSharefly. gymtech problems Yeah, there are no plans to move ahead with speculative construction at any of our sites. I think we moved all the land into property-centered development partly because we'll make sure that the land is serviced and ready to go so that we can respond to any build-to-suit opportunities in the short term. But there are no plans for any speculative development at this time on any of our sites. Okay, that makes sense. Thanks a lot.

Would there.

Be it.

Opportunity to start phase two on spec or would you wait.

Wait for pre leasing in ore.

Change in sort of the market conditions.

Given the I guess, a little bit of a slowdown or normalization more specifically.

In recent months.

Curious to get your thoughts on sort of what timing and sort of thought process on phase two could look like.

Yes, there are no plans to move ahead with speculative construction at any of our sites I think we moved all of the land into properties under development, partly because we are we will make sure that land is serviced and ready to go so that we can respond to any build to suit opportunities.

In the short term, but there are no plans for any speculative development at this time on any of our any of our sites.

Bradley Sturges: I'll turn it back. Our next question comes from Mark Rothschild with Canaccord Genuity. Please proceed. Thanks, and good morning.

Okay makes sense, thanks, a lot I'll turn it back.

Our next question comes from Mark Rothschild with Canaccord Genuity. Please proceed.

Thanks.

Morning.

Mark Rothschild: Maybe in regard to the guidance that you guys gave for the same property in Hawaii, it seems like you're optimistic about having a decent amount of occupancy improvement this year. How much of that and maybe some talk, I just couldn't get it clear. How much of that is built in to the guidance for the same property in Hawaii in 2024? I probably couldn't give you an exact number, but obviously there is an assumption in the forecast provided about the lease up of some of the vacant space, the newly developed, and as Kevin has mentioned, and that's very much back half skewed. So it is. It is in there for sure.

In regard to the guidance that you guys gave for same property NOI and it seems like you're optimistic about having decent amount of occupancy improvement. This year, how much of that maybe talks I just couldn't get it clear how much of that is built in to the guidance for same property NOI growth in 2024.

It's probably going to give you an exact number but obviously there is in the forecast provided is an assumption on our lease up of some of the vacant space that newly developed.

As Kevin has mentioned and Thats very much back half.

Skewed so it is it is in there for sure.

Teresa Neto: But remember that same property in Hawaii, it's a four-quarter average, right? So it's taken the averages of the four quarters that we anticipate. So some of the recent developments from last year don't affect all quarters. They will affect the second half of the year more. Okay, I understand.

Remember that same property NOI, it's a four quarter average rate. So it's taken the average is at the forefront of that we anticipate some of the recent developments from last year don't affect our corridors.

They will affect the second half of the year.

Okay, I understand that and I guess that would lead into Kevin really the comments you made about.

Mark Rothschild: And I guess that would lead into, Kevan, the comment you made about, I don't remember exactly, you said about 2025 as well, considering there's more leasing to do then. And some of the opportunities you'll pick up through the year, the growth should continue strongly in 2025 as well. Yeah, I think that's what a lot of people will miss is that you're sort of driving a line of activity through the year, at least into the next year. For us, what's particularly sort of encouraging for 2025 is that we have roughly a million and a half feet of snow rolling in in the GTA. And right now, where we stand, I mentioned releasing spreads. For 2025, I think there are 5.3 million feet rolling.

Exactly you said about 2025 as well considering those more leasing to do that and some of the occupancy pick up through the year. The growth should continue strong in 'twenty five as well.

Yes, I think thats, what a lot of people Miss is as you are sort of driving NOI and re leasing activity through the year at least into the next year for Rosewood's, particularly sort of encouraging for 2025 is remember we have roughly 1 million feet rolling in in.

In the GTA.

And right now, where we stand I mentioned the re leasing spreads for.

For 2025, I think there's five 3 million feet Rolling we are anticipating leasing spreads overall have approximately 40%.

Mark Rothschild: We're anticipating leasing spreads overall of approximately 40%, so we do expect St. Profiano Y to continue to be very strong. I won't use the word accelerate at this point, but we don't know, but we expect it to stay strong through 2025 and into 2026. And another 1.5 million square feet in Toronto. Is that more earlier than 25 later in the year spread throughout the year? I think it's throughout the year, but unfortunately, the big ones in the second half of the year, I think it's at the end of September.

So we do expect same property NOI to continue to be very strong level I won't use the word accelerate at this point, we don't know, but we expect it to stay strong through 2025 and into 2026.

And I've got one 5 million square feet in Toronto is that more earlier and twenty-five weighed into your spread throughout the year.

And I think it is throughout the year. Unfortunately, the big ones in the second half of the year I guess at the end of September.

Okay. So I'll wait to talk about 'twenty six that's fine.

Okay.

On the development.

Kevan S. Gorrie: Okay, so I'll wait to talk about 26. That's fine. On the development, you said you're not looking for speculative development. Is that impacted at all by maybe what was a slower pace of leasing at some of the more recent development projects? Or is that just generally the way you feel with the way the environment is now? Well, yes, it is impacted by it.

Looking for.

Speculative development.

Is that impacted at all by maybe what was a slower pace of leasing at some of the.

More recent development projects or is that just generally the way you feel with the way the environment does now.

Well, yes. It is impacted by it I mean, I think we are only comfortable taking on so much speculative development.

Mark Rothschild: I mean, I think we were only comfortable taking on so much speculative development at a time. And I think right now we want to deal with the availability center in front of us before we, www.graniterealestate.com, I think it would have to be a careful decision on our part when to move ahead on a speculative basis. Okay, great. Thanks so much. That's helpful, www.graniterealestate.com. Our next question comes from Sam Damiani with TD Securities. Please proceed.

At a time and I think right now we want to deal with the availability set in front of us before we.

Move ahead on a speculative basis now saying that.

We also want to monitor the fundamentals in the markets.

For the next little while so even if we were successful in leasing up the available development project I'm not sure we would move ahead speculatively.

Ian Branford or Houston and at this time it would have to be.

I think it would have to be a careful decision on our part one to move ahead on a speculative basis.

Okay, great. Thanks, so much that's helpful.

Our next question comes from Sam Damiani with TD Securities. Please proceed.

Thank you very much and good morning, everyone.

Maybe Kevin in your comment included in the outlook statement last night talking about moderating rent market rent growth is that meant to indicate a change from what you were seeing last quarter.

I guess what are your expectations for market rents in <unk>.

This coming year.

Sure.

I think we thought through 2023, it would be in the low double digits and overall in our markets. It was referred to some of the market rent growth that we saw in Dallas, and Chicago and others I mean, it was rather tremendous.

The GTA came in in the lower one of our lowest rent growth markets was the GTA just over 6% as.

As we look forward to overall market rent growth for our market I would say probably low to mid single digits. At this point, we did see some backup in rates in Q4, but it's only one quarter and it depends on the deals that were done that can be impacted by large deals but.

That also to point out when you look overall year over year.

The two major markets in the U S saw a negative growth was Los Angeles and New Jersey.

So I think we saw relative strength among our markets in the U S. If that's really what you're focusing on and at this point just looking at overall market rent growth.

Single mid.

Sorry, low to single low to mid single digit growth for 2024, which probably makes sense to us.

That's helpful and I guess, we'll see increased traction on leasing activity to address two vacant spaces in the U S.

Is that partly a result of.

The bid ask spread if you will.

Between landlord and tenant.

Coming together in favor of the tenant like how should we think about I guess, what's the reason what's the reason for the re invigorated leasing traction.

Yeah.

I just think 2023 was very difficult for tenants from a financial perspective, and then of course it felt like.

They spent most of 2023 trying to right size their balance sheets trying to right size, our business and now as they're facing 2024. There is a question of how much space that they need and as we've discussed here internally I think the geopolitical tension the issues that we're seeing sort of around the world and the impact on supply chain is getting back to.

Tenants need to have resiliency in their supply chain.

And I think we're just it seems and we're guessing here, but it seems that there is greater confidence on behalf of tenants to now make that decision on where they're going to expand and how they're going to build more resiliency into their supply chains. So thats just the way it feels what we're seeing at this point I think it's early days for the year, but certainly Q1 is a lot better.

Q4 was.

Yes.

That's very helpful and just on the comment you made about some potential distress situations arising.

Just didn't pick it up did you say that was mostly in the U S or that would include the GTA in Europe as well.

No I can't say, we've seen too much of that in the GTA. This would be more of the U S and Europe. So on both sides of the Atlantic.

We've seen pockets of it okay.

Okay.

Last question from me Teresa if you were to do fixed rate debt in the market today is there capacity to swap into euros.

And either way what would that effectively be if you were to do that today.

We don't have a lot of room for incremental euro swap that so we'd have to replace.

Financing. So if you look at it today, we can definitely lower.

Lower than where we were in October so around a low four percentage like $4 two 5% roughly if youre looking at kind of like a five to seven year term.

On a debenture, that's kind of where we would be today.

That's great. Thank you and I'll turn it back.

Our next question comes from Karl Stanley with Desjardin capital markets. Please proceed.

Thanks, Good morning, everyone.

So I think as you Kevin you gave some good color on Sam's question here just on the demand profile.

The common expectation right now is that maybe were either at or nearing peak deliveries in the U S and trending towards peak vacancy.

I guess, the expectation seems to be things improve in the second half of the year under the current demand dynamics.

Is there anything you're seeing that suggest either a positive or potentially negative change in demand that would either expedite the improvement or maybe <unk>. The current softer environment persist for a bit longer today.

First of all I think in terms of the Youre right. I think there is this sort of consensus that the market will rebound.

Strongly and in <unk> in the second half of 2024, I think we're a little more conservative.

We think the market will be much stronger in 2025 that will be in the second half of 2024. So I think it will be sort of slower recovery to this but to your point new starts it completely dried up.

Most of our markets. So there's still some supply to work through to be sure at least through the first half of this year.

But that may soften in terms of like taken Louisville. For example, we were one of only two buildings in that size range in that market and one is a brand new build and so we should be able to compete.

Strongly against that building in terms of rental rate and so I think we don't need a very strong recovery overall in the market I think to perform this year, but for US. The other thing I would say in terms of tenant demand as it seems like we are seeing a return of the E Commerce users center market we.

<unk> seen Amazon returned to a number of our markets looking for space and so there was a catalyst or above.

Above expectation growth that would be sort of the return of e-commerce users to the market.

Okay, that's very helpful.

Next on your assumption of kind of high 80% or 90%.

Renewals for 2020 for what's driving maybe that elevated level of renewal activity in your view.

Yes.

I just think it's good buildings I think its good assets I think are well located.

When we underwrite assets tenant covenant and the quality of the tenants is important to us and I think that plays into.

I think that plays a factor as well in this.

I would just speak to just the quality of the location the quality of the assets more than anything else.

Okay.

I've listened to calls and some of the larger U S Reits and Theyre all in the 70 some of them are in the low <unk> in terms of retention rate. So the be in the mid Eighty's is very strong and I think it's a feather in our cap regarding the quality of the portfolio.

Agreed and exactly the way you asked it.

Questions I know that makes sense.

Thank you.

On your <unk> guidance, what kind of leasing costs have you baked in.

That guidance for the year.

So I think the 20.

25 about 10 is for maintenance Capex and the rest are fair leasing and Ta about $15 million.

Okay perfect. Thank you very much I'll turn it back.

Our next question comes from semi Us Ed with CIB.

CIBC capital markets. Please proceed.

Thanks, Good morning.

Kevin earlier, you mentioned that for.

The U S. Lisa films, all current availability will be dealt with by.

So should we take it that that's based on current active discussions I would have fairly decent visibility to those leases being from Doc.

Yes, I don't want to get into specific deals certainly are specific markets, but were probably I would see it advance discussions and roughly <unk> 5 million feet of space on the on our current availabilities.

And other than that there are prospects in the markets that we expect to at some point, you're dealing with but it would be early days.

Okay.

And then can you just talk a little bit about your contractual rent bumps and what youre, including any of our.

The newer leases youre signing.

I think just generally in North America, both the GTA and.

Got the team here, if I'm wrong, the DTA in the US we've been three.

Three 5% and above has been what we've been achieving.

In the U S in the GTA.

Okay. So that's still holding steady.

Okay.

Yes.

Okay. Thank you.

Our next question comes from Matt <unk> with National Bank Financial Please proceed.

Hi, guys, just a quick broader one.

On the technical stuff, but just with regards to your comments around opportunities potentially given your balance sheet.

If you were looking at the market today and opportunities were to arise is there would you deploy capital into the same geographies look to diversify or how should we think about capital allocation. If you do take a bad share balance sheet strength I don't want to mention specific markets, but I think that there are one or two new markets.

Would say non markets, we havent telegraphed before but markets, where we're not currently in.

Certainly that would be a consideration for us.

But again there has to be a few conditions that have to be met for us for us to do that and I would say we talked about this with our board yesterday I don't it doesn't feel like we have seen any deals that have been that compelling or deals that we've missed certainly we've been surprised by some pricing.

Some asset pricing on deals, but nothing thats been that compelling so not to say that theres anything thats imminent, Matt to be honest with you we've been sort of waiting for distress in the system in the markets and we've been I don't know its somewhat disappointed I guess that we haven't seen that we're not quite sure why not.

But if we're right.

And we do see those deals we do have two or three markets that we are quite focused on right now if opportunities arise.

And even to the extent that there is distress is your view that there is still capital on the sidelines looking to get into industrial longer term.

Maybe not necessarily on pricing adjusts her.

Yes, yes, I mean, I mean all of these.

See the Levered buyers are sort of kind of on the sidelines and I think a number of the private equity players have been quietly selling assets. So is a distress was it planned all along I'm not really sure. So there are fewer of the levered buyers around for sure, but it looks like people step into whether it's pension funds.

Our lower leveraged private equity have stepped in to fill the void for sure there seems to be no shortage of buyers.

Okay.

And then for Teresa.

Teresa just on.

The amortization of tenant incentives I think most of that related to the 2014 renewal and growth so should we assume that.

Amortization of.

It goes to zero or something much lower than the current.

That is right.

Had like one month right because of the grocery algorithm in February and then you can assume zero for the rest of the year.

Okay.

And similarly on straight line rent.

You did convert.

Some some straight line to cash rent it looked like this quarter. There is there more to go I know there were some free rent periods that were wearing off.

Yes, they were wearing off exactly so thats why were about 1 million lower this quarter. So I think you can expect like you wanted to be a little bit similar to Q4, and then it should be more or less similar but then as we lease up some of these <unk>.

<unk> so that they can developments then you'll get a bump up and assuming we have some straight line rent and those lease deals.

Okay.

There may be some free rent in the new leasing so youll probably see internet.

Not necessarily in <unk> for this year and then you would get the.

Conversion into 'twenty five.

And then lastly <unk>.

NOI.

Including expansions.

Do you have a sense as to whether it's expansions were a contributor in Q4, and then maybe a sense as to how much they contribute.

<unk> 2024 as well.

The expansion with very little I think it makes a difference of one 1%. So it's not very much.

Okay. That's it thanks guys.

There are no further questions at this time.

Alright, operator will on behalf of <unk> management team. Thank you for being a part of the Q4 call and look forward to speaking with you again in May.

That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.

Okay.

Okay.

Yeah.

Nicole.

Okay.

Yes.

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Yes.

Yes.

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Okay.

Hum.

Okay.

So.

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So.

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Hum.

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Yes.

Yes.

<unk>.

Okay.

Paul.

Okay.

Okay.