Q2 2024 Granite Real Estate Investment Trust Earnings Call

August 8, 2024

Operator: Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the Granite REIT second quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto. I will now turn the call over to...

Todd: Good morning. My name is Todd and I will be your conference operator today. At this time, I would like to welcome everyone to the Granite REIT Second Quarter 2024 Results Conference Call.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto. Chief Financial Office, I will now turn the call over to Teresa Neto to go over certain advisory...

Speaker Change: If you would like to withdraw your question, please press star 2. Thank you.

Speaker Change: Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer.

Speaker Change: I will now turn the call over to Teresa Neto to go over certain advisories.

Unknown Executive: 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, and that actual results could differ materially from any conclusion, forecast, or projection. These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements or information. These risks and uncertainties and material factors and assumptions applied in making forward-looking statements or information 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 Factor As usual, I'll commence the call and then turn it over to Kevan for his operational update.

Teresa Neto: 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, and that actual results could differ materially from any conclusion, forecast, or projection. These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements or projections.

Teresa Neto: Granite posted Q2 2024 results ahead of Q1 and in line with management's annual forecast and guidance, largely driven by strong NOI growth, partially offset by slightly higher interest costs. FFO per unit in Q2 was $1.32, representing a 2 cent or 1.5% increase from Q1 2024, and an 11 cent or 9.1% increase relative to the same quarter in the prior year. The growth in NOI this quarter is primarily derived from strong same-property NOI growth enhanced by the double-digit leasing spreads in Canada and the U.S., the expiration of the free rent period of the recently completed development property in Brantford, and lease closeout fees earned on a disposed property in Canada, partially offset by a new vacancy in the U.S. NOI growth was further enhanced by foreign exchange as the US Dollar and Euro were 1.4% and 0.6% stronger, respectively, in comparison to Q1.

Speaker Change: These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements or information.

Teresa Neto: AFFO per unit in Q2 was $1.17, which is $0.05 lower relative to Q1 and $0.08 higher relative to the same quarter last year, with the variances mostly tied to FFO growth, partially offset by higher 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 $7.1 million, which is an increase of $5.7 million over Q1 and $2.6 million over the same quarter last year.

Teresa Neto: These risks and uncertainties and material factors and assumptions applied in making forward-looking statements or information are discussed in Granite's 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 and Granite's Management's Discussion and Analysis for the year ended December 31, 2023, filed on February 28, 2024. As usual, I'll commence the call and then turn it over to Kevan for his operational update.

Speaker Change: These risks and uncertainties and material factors and assumptions applied in making forward-looking statements or information are discussed in grants material filed with the Canadian Securities Administrators and the U.S. Securities and Exchange Commission from time to time.

Speaker Change: Including the Risk Factor section of its Annual Information Form for 2023 and Granite's Management's Discussion and Analysis for the year ended December 31, 2023, filed on February 28, 2024. As usual, I'll commence the call and then turn it over to Kevan for his operational update. Thank you for tuning in.

Teresa Neto: For 2024, we continue to expect maintenance CapEx, leasing costs, and tenant allowances to come in at approximately $28 million for the year, unchanged from our estimates last quarter. Same property under Y for Q2'24 was strong relative to the same period last year, increasing 6% on a constant currency basis and up 7.3% when foreign currency effects are included. For 2024, we are updating our forecast for Constant Carrizzi Same Property on Hawaii based on a four-quarter average to be in the range of 6% to 6.5%, a reduction from the previous forecast of 7% to 8% as a result of new vacancy commencing June 1st, and some revised leasing assumptions on certain vacant properties. Kevin will provide some further color on the forecast for the same property on Hawaii later.

Teresa Neto: G&A for the quarter was $7.7 million, which was $1.2 million lower than the same quarter last year and $2 million lower than Q1. The main variance relative to Q1 is the $2.5 million favorable fair value variance in non-cash compensation liabilities, partially offset by $0.9 million of corporate restructuring costs relating to the uncoupling of Granite's stapled unit structure, both of which do not impact Granite's FFO or AFFO metrics. G&A expenses that impact FFO and AFFO were approximately $0.2 million lower than Q1, which is mostly related to an approximate $0.7 million capital tax refund resulting from changes in tax regulation in the state of Tennessee and related to prior tax years, partially offset by costs pertaining to Granite's annual general meeting and other timing differences in expenses.

Speaker Change: Granite posted Q2 2024 results ahead of Q1 and in line with management's annual forecasting guidance, largely driven by strong NOI growth, partially offset by slightly higher interest costs.

Teresa Neto: For 2024, we do continue to expect G&A expenses that impact FFO and AFFO of approximately $10 million per quarter, or roughly 7% of revenue. Interest expense was higher in Q2 relative to Q1 by $0.6 million, while interest income also decreased by $0.2 million as compared to Q1. The increase in interest expense was primarily due to a reduction in capitalized interest as a result of the completion of the majority of development projects, together with the unfavorable impact of foreign exchange rates on foreign-denominated debt.

Teresa Neto: The decrease in interest income was a result of lower uninvested cash balances on hand due to utilizing excess cash to repurchase units under Granite's NCIB program, together with a slight reduction in interest rates in Canada and Europe due to interest rate cuts. However, although interest income earned is lower from lower cash balances, the impact on both FFO and AFFO per unit is more than offset by repurchased units under the NCIB

Teresa Neto: Granite's weighted average cost of debt is currently 2.6%. For 2024, given that there is no debt maturing until late December, Granite's interest expense run rate is expected to remain at current levels of approximately $21.7 million per quarter, which will be offset by some interest income of approximately $1 million per quarter. For income tax, Q2 current income tax was $2.6 million, which is $0.5 million higher than the prior year and $0.1 million higher as compared to Q1.

Speaker Change: FFO per unit in Q2 was $1.32, representing a 2 cent, or 1.5% increase from Q1 2024, and an 11 cent, or 9.1% increase relative to the same quarter in the prior year.

Speaker Change: The growth in NOI this quarter is primarily derived from strong same-property NOI growth enhanced by the double-digit leasing spreads in Canada and the U.S., the expiration of the free rent period of the recently completed development property in Brantford, and lease closeout fees earned on a disposed property in Canada, partially offset by a new vacancy in the U.S.

Speaker Change: NOI growth was further enhanced by foreign exchange as the US Dollar and Euro were 1.4% and 0.6% stronger, respectively, in comparison to Q1.

Speaker Change: asfo unit in q two with one dollar in seventeen cents which is five cents lower relative to q one and eight cent higher relative to the same quarter last year with the various is mostly tied to fthfo growth

Speaker Change: Partially offset by higher capital expenditures, leasing costs, and tenant allowances incurred due to timing of leasing turnover and seasonality.

Speaker Change: AFFO-related capital expenditures, leasing costs, and tenant allowances incurred in the quarter totaled $7.1 million, which is an increase of $5.7 million over Q1 and $2.6 million over the same quarter last year.

Teresa Neto: For 2024, we continue to expect maintenance CapEx, leasing costs, and tenant allowances to come in at approximately $28 million for the year, unchanged from our estimates last quarter. Same property under Y for Q2'24 was strong relative to the same period last year, increasing 6% on a constant currency basis and up 7.3% when foreign currency effects are included. For 2024, we are updating our forecast for Constant Carrizzi Same Property in Hawaii based on a four-quarter average to be in the range of 6% to 6.5%, a reduction from the previous forecast of 7% to 8% as a result of new vacancy commencing June 1st, and some revised leasing assumptions on certain vacant properties. Kevan will provide some further color on the forecast for Same Property in Hawaii later.

Speaker Change: For 2024, we continue to expect maintenance CapEx, leasing costs, and tenant allowances to come in at approximately $28 million for the year, unchanged from our estimates last quarter.

Speaker Change: Same property NOI for Q2'24 was strong relative to the same year last year, increasing 6% on a constant currency basis and up 7.3% when foreign currency effects are included.

Speaker Change: For 2024, we are updating our forecast for Conconcurrency-Same-Property NOI based on a four-quarter average to be in the range of 6% to 6.5%, a reduction from the previous forecast of 7% to 8% as a result of new vacancy commencing June 1, and some revised leasing assumptions on certain vacant properties.

Speaker Change: vacant properties. Kevan will provide some further color on the forecast the same property on Hawaii later.

Teresa Neto: G&A for the quarter was $7.7M, which was $1.2M lower than the same quarter last year and $2M lower than Q1. The main variance relative to Q1 is the $2.5M favourable fair value variance in non-cash compensation liabilities, partially offset by $0.9M of corporate restructuring costs relating to the uncoupling of Granite's stapled unit structure, both of which do not impact Granite's FFO or AFFO metrics. G&A expenses that impact FFO and AFFO were approximately $0.2 million lower than Q1, which is mostly related to an approximate $0.7 million capital tax refund resulting from changes in tax regulation in the state of Tennessee and related to prior tax years, partially offset by costs pertaining to Granite's annual general meeting and other timing differences in expenses.

Kevan Gorrie: G&A for the quarter was $7.7 million, which was $1.2 million lower than the same quarter last year and $2 million lower than Q1.

Kevan Gorrie: The main variance relative to Q1 is the $2.5 million favorable fair value variance in non-cash compensation liabilities, partially offset by $0.9 million of corporate restructuring costs relating to the uncoupling of Granite's stapled unit structure.

Kevan Gorrie: both of which do not impact Granite's FFO or AFFO metrics.

Kevan Gorrie: G&A expenses that impact FFO and AFFO were approximately $0.2 million lower than Q1, which is mostly related to an approximate $0.7 million capital tax refund resulting from changes in tax regulation in the state of Tennessee and related to prior tax years.

Speaker Change: Partially offset by costs pertaining to Granite's Annual General Meeting and other timing differences and expenses.

Speaker Change: For 2024, we do continue to expect G&A expenses that impact FFO and AFFO of approximately $10 million per quarter or roughly 7% of revenues.

Speaker Change: Interest expense was higher in Q2 relative to Q1 by $0.6 million, while interest income also decreased by $0.2 million as compared to Q1.

Speaker Change: The increase in interest expense was primarily due to the reduction in capitalized interest as a result of the completion of the majority of development projects, together with the unfavorable impact of foreign exchange rates on foreign-denominated debt.

Speaker Change: The decrease in interest income was a result of lower uninvested cash balances on hand due to utilizing excess cash to repurchase units under Granite's NCIB program, together with a slight reduction in interest rates in Canada and Europe due to interest rate cuts.

Speaker Change: Although interest income earned is lower from lower cash balances, the impact to both FFO and AFFO per unit is more than offset from repurchased units under the NCIB.

Speaker Change: Granite's weighted average cost of debt is currently 2.6%. For 2024, given that there is no debt maturing until late December , Granite's interest expense run rate is expected to remain at current levels of approximately $21.7 million per quarter.

Speaker Change: which will be offset by some interest income of approximately $1 million per quarter.

Speaker Change: For income tax, Q2 current income tax was $2.6 million, which is $0.5 million higher than the prior year and $0.1 million higher as compared to Q1.

Teresa Neto: The movement in current tax relative to Q2 last year is mostly attributable to increased taxable income in Europe due to rental growth, together with the strengthening of the euro relative to the Canadian dollar, as all of our current income tax is generated from the European region. The increase in current tax relative to Q1 is mostly related to the strengthening of the euro relative to the Canadian dollar. For 2024, we are expecting current income taxes to remain at current levels of approximately $2.6 million per quarter.

Speaker Change: The movement in current tax relative to Q2 last year is mostly attributable to increased taxable income in Europe due to the rental growth together with the strengthening of the euro relative to the Canadian dollar, as all of our current income tax is generated from the European region.

Speaker Change: The increase in current tax relative to Q1 is mostly related to the strengthening of the euro relative to the Canadian dollar.

Speaker Change: For 2024, we are expecting current income taxes to remain at current levels of approximately $2.6 million per quarter.

Teresa Neto: As in prior years, Granite may realize a credit to current income taxes of approximately $1.8 million in Q4 due to the reversal of prior year tax provisions. However, we cannot confirm the certainty of such credit until December 31st, and therefore, our guidance does not factor in any tax provision reversal.

Speaker Change: As in prior years, Granite may realize a credit to current income taxes of approximately $1.8 million in Q4 due to the reversal of prior year tax provisions. However, we cannot confirm the certainty of such credit until December 31st.

Speaker Change: And therefore, our item does not factor in any tax provision reversals.

Teresa Neto: Looking out to the 2024 estimates for FFO per unit, our guidance has been adjusted slightly from last quarter to narrow the range to 530 to 540, representing an increase of 7% to 9% versus 2023. Similarly, for AFFO per unit, we are narrowing our forecast range to 460 to 470, representing an increase of 2% to 4% versus 2023. The $0.05 reduction at the top end of the range is reflective of a slight reduction in NOI due mostly to one new vacancy in the U.S. and some revised leasing assumptions on certain vacant properties, offset by reductions in G&A expenses, most of which have been realized to date.

Speaker Change: Looking out to the 2024 estimates for FFO per unit, our guidance has been adjusted slightly from last quarter to narrow the range to $530,000

Speaker Change: to 540 representing an increase of 7% to 9% versus 2023. Similarly, for AFFO per unit, we are narrowing our forecast range to 460 to 470 representing an increase of 2% to 4% versus 2023.

Speaker Change: The $0.05 reduction at the top end of the range is reflective of a slight reduction in NOI due mostly to one new vacancy in the US and some revised leasing assumptions on certain vacant properties, offset by reductions in G&A expenses, most of which have been realized to date.

Teresa Neto: Granite has not made any changes to FX rate assumptions pertaining to the forecast period that will be July to December of 2024. The high end of the range continues to reflect FX rates of the Canadian dollar to EUR 1.48 and the Canadian dollar to USD 1.38. The low end of the range continues to reflect FX rates of the Canadian dollar to EUR 1.43 and the Canadian dollar to USD of 1.32. As usual, we will continue to provide updates on our guidance each quarter as warranted.

Speaker Change: Granite has not made any changes to FX rate assumptions pertaining to the forecast period that will be July to December of 2024.

Speaker Change: The high end of the range continues to reflect FX rates of the CAD to EUR 1.48 and CAD to USD at 1.38.

Speaker Change: the low end of the range continues to reflect fx rates of the canadian dollar to euro one point four three and canadian dollar to u usd of one point three two

Speaker Change: As usual, we will continue to provide updates on our guidance each quarter as warranted.

Teresa Neto: Granite's balance sheet, comprising total assets of $9.3 billion at the end of the quarter, was positively impacted by $60 million of translation gains on Granite's foreign-based investment properties, primarily due to the 1.2% and 0.3% increases in the spot USD and Euro exchange rates, relative to Q1, partially offset by approximately $0.8 million in fair value losses on Granite's investment property portfolio in the second quarter. The Trust's overall weighted average cap rate of 5.3% on in-place NOI increased 7 basis points from the end of Q1 and has increased 25 basis points since the same quarter last year.

Speaker Change: Granite's balance sheet, comprising of total assets of $9.3 billion at the end of the quarter, was positively impacted by $60 million of translation gains on Granite's foreign-based investment properties, primarily due to the 1.2% and 0.3% increases in the spot USD and Euro exchange rates.

Speaker Change: Relative to Q1, partially offset by approximately $0.8 million in fair value losses on Granite's investment property portfolio in the second quarter.

Speaker Change: The Trust's overall weighted average cap rate of 5.3% on in-place NOI increased 7 basis points from the end of Q1 and has increased 25 basis points since the same quarter last year.

Teresa Neto: Our net leverage at the end of the quarter was 32%, and net debt to EBITDA dropped 7.1 times, which is lower than relative to Q1 and lower than Q2 2023, as a result of the NOI growth, including the completion of stabilization of a good majority of Granite's development property. Our current liquidity remains at $1.1M, representing cash on hand of about $100M and the undrawn operating line of $997M. As of today, we have no borrowings under the credit facility, and there are $2.8M in letters of credit outstanding.

Speaker Change: Our net leverage at the end of the quarter was 32% and net debt to EBITDA dropped 7.1 times which is relative to Q1 and lower than Q2 2023 as a result of the NOI growth including the completion of stabilization of a good majority of the grant's development properties.

Speaker Change: Our current liquidity remains at $1.1 million, representing cash on hand of about $100 million and the undrawn operating line of $997 million.

Teresa Neto: And lastly, during the second quarter, Granite did repurchase 644,300 stapled units under its NCIB at an average price of $6,862 for a total consideration of $44.2M excluding commissions and taxes on the net repurchases of stapled units. Now I'll turn over the call to you.

Speaker Change: As of today we have no borrowings under the credit facility and there are $2.8 million in letters of credit outstanding.

Speaker Change: And lastly, during the second quarter, Granite did repurchase 644,300 stapled units under its NCIB at an average price of $68.62 for a total consideration of $44.2 million excluding commissions and taxes on the net repurchases of stapled units.

Kevan Gorrie: Thanks, Teresa. I'll begin with a few introductory comments on our results. And then I'd like to turn it over to Lauren and Michael to provide an update on our development and leasing activity and provide some perspectives on the investment markets in our jurisdiction. I will then finish with our outlook for the remainder of the year before opening up the floor to any questions. As Teresa mentioned, our results for the quarter were in line with expectations.

Speaker Change: Now I'll turn over the call to Kevan.

Kevan Gorrie: thanksresa i'll begin with a few introductory comments on our results and then i'd like to turn it over to laureren and michael providide an update our development that leasing activity and provide some perspectiveves on the investment markets in our in our jurisdictions

Speaker Change: I will then finish with our outlook for the remainder of the year before opening up the floor to any questions.

Kevan Gorrie: Despite the unplanned vacancy related to one of our tenants, And NOI grew by 2.3 million, or 2%, over the first quarter and represented the 12th consecutive quarter of NOI growth. As Teresa also mentioned, we lower the upper end of our FFO per unit range as it's common to tighten the range approaching the latter half of the year, and we also lower our guidance for St. Croix-Viennois to 6 to 6.5% due primarily to the impact of the tenant insolvency and a period of free rents on a large renewal subsequent to quarter end, as Lorne will discuss somewhat in his comment. With that said, same property and NY growth on a cost and currency basis was strong in the quarter at 6%, led by gains in Canada and the US at 12.5% and 5.1%, respectively.

Kevan Gorrie: Despite the unplanned vacancy related to one of our tenants, NOI grew by 2.3 million, or 2%, over the first quarter and represented the 12th consecutive quarter of NOI growth. As Teresa also mentioned, we lower the upper end of our FFO per unit range as it's common to tighten the range approaching the latter half of the year, and we also lower our guidance for St. Croix B&Y to 6 to 6.5% due primarily to the impact of the tenant and solvent, and a period of free rent on a large renewal subsequent to quarter end, as Lauren will discuss somewhat in this comment. With that said, same property and analyte growth on a cost and currency basis was strong in the quarter at 6%, led by gains in Canada and the US at 12.5% and 5.1%, respectively.

Speaker Change: As Teresa mentioned, our results for the quarter were in line with expectations, despite the unplanned vacancy related to one of our tenants.

Speaker Change: And NOI grew by 2.3 million, or 2%, over the first quarter and represented the 12th consecutive quarter of NOI growth.

Teresa Neto: as three thousand mentioned we lower the upper end of our ethico for unit range as is common the tighten range approaching the lotter half of the year and we also loer a guidance for s rubiian i to six to six point five percent due primarily to the impact of the tenant andinsolvency

Lauren: And a period of free rent on a large renewal subsequent to quarter end, as Lauren will discuss somewhat in his comments.

Speaker Change: With that said, same property and NY growth on a cost and currency basis was strong in the quarter at 6%, led by gains in Canada and the U.S. at 12.5% and 5.1% respectively.

Kevan Gorrie: As outlined in a press release in MD&A, the team achieved an average increase in rents of 25% on our Q2 2024 maturity, led by strong renewal spreads in the US and the GTA. As Teresa discussed, and it feels like deja vu all over again, we opportunistically utilized cash on hand to purchase roughly 644,000 units at an average price of $6,862. As I have stated...

Kevan Gorrie: As outlined in a press release in MD&A, the team achieved an average increase in rent rate of 25% on our Q2 2024 maturity, led by strong renewal spreads in the U.S. and the GTA. As Teresa discussed, and it feels like deja vu all over again, we opportunistically utilized cash on hand to purchase roughly 644,000 units at an average price of $68.62. As I have stated previously, unit buybacks are not our first choice for capital allocation, but we will not hesitate to raise capital when the unit price is that far below net.

Lauren: As outlined in a press release in MD&A, the team achieved an average increase in rent rate of 25% on our Q2 2024 maturity, led by strong renewal spread from the U.S. and the GTA.

Speaker Change: As Teresa discussed, and it feels like deja vu all over again, we opportunistically utilize cash on hand to purchase roughly 644,000 units at an average price of $68.62.

Lauren: Previously, unit buybacks were not our first choice for capital allocation, but we will not hesitate to allocate capital when the unit price is that far below net. It's also worth noting that despite allocating over $44 million for those unit buybacks in a quarter, in addition to funding our ongoing development and CapEx program, we managed to finish the quarter with over $100 million in cash and cash equivalents, which I think speaks to the power of preserving conservative capital ratios and generating free cash flow to drive accretion per unit of cash.

Teresa Neto: As I have stated,

Speaker Change: Previously, unit buybacks are not our first choice for capital allocation, but we will not hesitate to capitalize when the unit price is that far below now.

Kevan Gorrie: It's also worth noting that despite allocating over $44 million for those unit buybacks in a quarter, in addition to funding our ongoing development and CapEx program, we managed to finish the quarter with over $100 million in cash and cash equivalents, which I think speaks to the power of preserving conservative capital ratios and generating free cash flow to drive accretion per unit cash flow. In conjunction with the quarterly results, we are also pleased to announce the release of our annual ESG report for 2023.

Speaker Change: It's also worth noting that despite allocating over $44M on those unit buybacks in a quarter, in addition to funding our ongoing development and CapEx programs, we managed to finish the quarter with over $100M in cash and cash equivalents.

Speaker Change: Which I think speaks to the power of preserving conservative capital ratios and generating free cash flow to drive accretion per unit cash flow.

Lauren: In conjunction with the quarterly results, we are also pleased to announce the release of our annual ESG report for 2023, which I think summarizes well our activities and achievements against a number of our key targets and objectives. There are frankly too many highlights to discuss here, but I invite you all to review the report, which is now available on our website. At this point, I would like to turn the call over to Lauren for an update on our development and leasing programs, followed by Michael's comments on the investment market. Thanks, Kevan, and good morning, everyone.

Speaker Change: In conjunction with our quarterly results, we are also pleased to announce the release of our annual ESG report for 2023, which I think summarizes well our activities and achievements against a number of our key targets and objectives.

Kevan Gorrie: The report, which is now available on our website, summarizes well our activities and achievements against a number of our key targets and objectives. There are frankly too many highlights to discuss here, but I invite you all to review the report, which is now available on our website. At this point, I would like to turn the call over to Lauren for an update on our development and leasing programs, followed by Michael's comments on the investment market. Thanks, Kevan, and good morning, everyone.

Speaker Change: There are frankly too many highlights to discuss here, but I invite you all to review the report, which is now available on our website.

Speaker Change: At this point, I would like to turn the call over to Lauren for an update on our development and leasing programs, followed by Michael's comments on the investment market.

Lauren: I will begin my comments with a short update on our remaining development projects. As mentioned in our past quarter, the lease on our 409,000 square foot building in Brantford, Ontario has commenced. We are completing the finishing touches to the base building, and the exterior landscaping began last week.

Lauren: Thanks, Kevan, and good morning, everyone.

Lauren: i will begin my comments with a short update on our remaining development projects

Michael: As mentioned in our past quarter, the lease on our 409,000 sq. ft. building in Brantford, Ontario has commenced.

Speaker Change: We are completing the finishing touches to the base building and the exterior landscaping commenced last week.

Lauren: The ongoing 50,000 square foot expansion in Ajax, Ontario, is expected to be substantially completed in Q3 2024, with our pre-leased tenant of approximately 30,000 square feet taking possession in the same quarter. Lastly, our 52,000 square foot expansion in Weird remains on schedule for a Q3 2024 delivery. As a reminder, we also have approximately 160 acres of land capable of delivering 2.4 million square feet of space once constructed.

Michael: The ongoing 50,000 square foot expansion in Ajax, Ontario, is expected to be substantially completed in Q3 2024, with our pre-leased tenant of approximately 30,000 square feet taking possession in the same quarter.

Lauren: Lastly, our 52,000 sq. ft. expansion in WEIRD remains on schedule for a Q3 2024 delivery.

Speaker Change: as a reminder we also have approximately one hundred sixty acres of landcapable of delivering two point four millions quare feet of space once constructed

Lauren: While we continue to move some of these developments forward from a permanent perspective to ensure we are as ready as possible to entertain build-to-suit opportunities, we are not contemplating any speculative construction at, On the leasing front, leasing markets in general started off the first half of 2024 with some relatively positive momentum. In the latter half of 2023, we saw users starting to survey the market with limited deals progressing past that stage.

Speaker Change: While we continue to move some of these developments forward from a permanent perspective, to ensure we are as ready as possible to entertain build-to-suit opportunities

Speaker Change: We are not contemplating any speculative construction at this time.

Speaker Change: On the leasing front, leasing markets in general started off the first half of 2024 with some relatively positive momentum.

Speaker Change: In the latter half of 2023, we saw users starting to survey the market with limited deals progressing past that stage.

Lauren: After back-to-back historical net absorption years in 2021-2022, markets entered 2023 with fears of a recession, lender caution, increased construction costs, and softer supply and demand fundamentals. It was not surprising that tenants decided to pause a long-term capital commitment and assess their current and future corporate needs. The impacts of the economic uncertainty were felt mostly in the first half of 2023. By the start of 2024, it started to feel like tenants were back in the market and prepared to make some leasing decisions again, creating a more optimistic outlook for 2024. So far, we are encouraged with the year-to-date U.S. and European...

Speaker Change: after back the back historical net absorption years in two thousand andtwentyone and two thousand and twenty two markets ente two thousand and twenty three with fears of a recession lender caution increased construction costs and softer supplied demand fundamentals

Speaker Change: It was not surprising that tenants decided to pause on long-term capital commitments and assess their current and future corporate needs.

Speaker Change: The impacts of the economic uncertainty were felt mostly in the first half of 2023.

Lauren: By the start of 2024, it starts to feel like tenants are back in the market and prepared to make some leasing decisions again, creating a more optimistic outlook for 2024. So far, we are encouraged by the year-to-date U.S. and European... data, but less so with the GTA figure. The hyper leasing pace we saw in 21 and 22 has not returned, but we think the market is moving to a normalized state. That being said, tenants continue to take their time to evaluate their real estate decisions, much like they did prior to the pandemic.

Speaker Change: By the start of 2024, it starts to feel like tenants were back in the market and prepared to make some leasing decisions again, creating a more optimistic outlook for 2024.

Speaker Change: So far, we are encouraged with the year-to-date U.S. and Europe leasing standards.

Lauren: GRANITE REIT The hyper-leaking pace we saw in 21 and 22 has not returned, but we think the market is moving to a normalized state. That being said, tenants continue to take their time to evaluate their real estate decisions much like they did prior to the pandemic. As you would expect, we are seeing a general flight to quality assets and locations. We are encouraged to see that big box activity is starting to gain traction.

Speaker Change: statistics but less so with the ga figures

Speaker Change: The hyper-leasing pace we saw in 21 and 22 has not returned, but we think the market is moving to a normalized state.

Speaker Change: That being said, tenants continue to take their time to evaluate their real estate decisions, much like they did prior to the pandemic.

Lauren: As you would expect, we are seeing a general flight to quality assets and locations, and we are encouraged to see that big box activity is starting to gain traction. A pick-up in decision-making at the C-suite level, coupled with a significant construction slowdown, should lead to a stronger demand market. The three PL companies continue to have the most dominant share of tenant demand, followed by the General Retailers and the F&B Industry.

Speaker Change: As you would expect, we are seeing a general flight to quality assets and locations, and encouraged to see that big box activity is starting to gain traction again.

Lauren: A pick-up in decision-making at the C-suite level, coupled with a significant construction slowdown, should lead to a stronger demand market. The three PL companies continue to have the most dominant share of tenant demand, followed by the general retailers and the F&B industry.

Speaker Change: a pickup in decision-making at the sea-suiteet level coupled with a significant construction slowdown should lead to a stronger demand market

Speaker Change: The three PL companies continue to have the most dominant share of tenant demand, followed by the general retailers and the F&B industries.

Lauren: Notably, the e-commerce segment has been showing strength again recently with stronger absorption. With the U.S. representing over 50% of our portfolio and where most of our short-term leasing initiatives are occurring, we are further encouraged by the generally improving leasing statistics. However, while the U.S. net absorption numbers increased in Q2 from Q1, again, it's important to understand the numbers are still down from recent highs.

Speaker Change: Notably, e-commerce segment has been showing strength again recently with stronger absorption numbers.

Speaker Change: With the U.S. representing over 50% of our portfolio and where most of our short-term leasing initiatives are occurring, we are further encouraged with the generally improving leasing statistics.

Speaker Change: While the U.S. net absorption numbers increase in Q2 from Q1, again it's important to understand the numbers are still down from recent highs.

Lauren: As a reminder, Granite's markets accounted for seven of the ten highest net absorption locations for the first half of 2024, which represented approximately 72% of the overall net absorption across the entire country. Asking rents within the Granite portfolio remain relatively stable and reiterate a strong mark-to-market opportunity on both the ITP and the development pro forma lease. Vacancy rates have generally been increasing over the past several quarters but seem to be moderating due to the significant slowing of new construction completion.

Lauren: As a reminder, Granite's markets accounted for 7 of the 10 highest net absorption locations for the first half of 2024, which represented approximately 72% of the overall net absorption across the entire country. Asking rents within the Granite portfolio remain relatively stable and reiterate a strong mark-to-market opportunity on both the ITP and the development pro forma lease. Vacancy rates have generally been increasing over the past several quarters but seem to be moderating due to the significant slowing of new construction completion.

Speaker Change: As a reminder, Granite's markets accounted for 7 of the 10 highest net absorption locations for the first half of 2024, which represented approximately 72% of the overall net absorption across the entire country.

Speaker Change: asking renants within that graned portfolio remain relatively stable and reiterate a strong mark to market opportunity on both the itp and development perforly sub

Speaker Change: Vacancy rates have generally been increasing over the past several quarters, but seem to be moderating due to the significance flowing of new construction completions.

Lauren: Coupled with Improved Leasing Activity, If these dynamics continue, we believe we may be approaching peak vacancy rates in most months. During Q2 of 2024, Granite achieved average rental rates best, as previously mentioned, of 25% over expiring rents.

Lauren: Coupled with Improved Leasing Activity, If these dynamics continue, we believe we may be approaching peak vacancy rates in most. During Q2 of 2024, Granite achieved average rental rates best, as previously mentioned, of 25% over expiring rents. Representing approximately 890,000 square feet of new and renewal leasing completed in the quarter, led by renewals in the US and GTA. With respect to the 2024 lease maturities, we have renewed or extended approximately 89% of the 9.8 million square feet of expiring leases and an approximate 16% increase in rental revenue, again, an increase which is muted by the Grants Renewal.

Speaker Change: Coupled with Improved Leasing Activity

Speaker Change: If these dynamics continue, we believe we may be approaching peak vacancy rates in most markets.

Speaker Change: During Q2 of 2024, Granite achieved average rental rates best, as previously mentioned, of 25% over expiring rents.

Lauren: Representing approximately 890,000 square feet of new and renewal leasing completed in the quarter, led by renewals in the U.S. and GTA. With respect to the 2024 lease maturities, we have renewed or extended approximately 89% of the 9.8 million square feet of expiring leases and an approximate 16% increase in rental revenue. Again, an increase which is muted by the Grants Renewal. However, we continue to believe that we will achieve over a 90% retention rate on the overall 2024 expiries, which we believe is a strong outcome.

Speaker Change: Representing approximately 890,000 square feet of new and renewal leasing completed in the quarter, led by renewals in the US and GTA.

Speaker Change: with respect the two thousand and twenty-four lease maturities we have renewed or extended approximately eighty-nine percent of the nnine point eight million square feet expiring at an approximate sixteen percent increase in rental revenue again an increase which is muted by the grad renewal

Speaker Change: We continue to believe that we will achieve over a 90% retention rate on the overall 2024 expiries, which we believe is a strong outcome.

Lauren: We continue to believe that we will achieve over a 90% retention rate on the overall 2024 expiries, which we believe is a strong outcome. With respect to the 2025 maturities, while it is still early days, we have renewed or extended approximately 23% of the 5.5 million square feet and continue to believe that we will achieve greater than 30% renewal spreads on these expiring leases. As it relates to our occupancy, we dipped slightly by 50 basis points from 95% in Q1 due to an unforeseen tenant bankruptcy in the U.S. and no vacancy here in the GTA.

Lauren: With respect to the 2025 maturities, while it is still early days, we have renewed or extended approximately 23% of the 5.5 million square feet and continue to believe that we will achieve greater than 30% renewal spreads on these expiring leases. As it relates to our occupancy, we dipped slightly by 50 basis points from 95% in Q1 due to an unforeseen tenant bankruptcy in the U.S. and no vacancy here in the GTA. Subsequent to quarter end, we completed a blend and extend with a tenant in Indianapolis, whereby we co-terminously extended the lease on 400,000 square feet expiring in 2024 and an additional 197,000 square feet expiring in 2025 to the end of September 2029. This simplified the lease structure and resulted in an immediate overall increase in rent of approximately $8,000.

Speaker Change: With respect to the 2025 maturities, while it is still early days, we have renewed or extended approximately 23% of the 5.5 million square feet and continue to believe that we will achieve greater than 30% renewal spreads on these expiries.

Speaker Change: As it relates to our occupancy, we dipped slightly by 50 basis points from 95% in Q1 due to an unforeseen tenant bankruptcy in the U.S. and a no vacancy here in the GTA.

Lauren: Subsequent to quarter end, we completed a blend and extend with a tenant in Indianapolis, whereby we co-terminously extended the lease on 400,000 square feet expiring in 2024 and an additional 197,000 square feet expiring in 2025 to the end of September 2029. This simplified the lease structure and resulted in an immediate overall increase in rent of approximately $18,000.

Speaker Change: Subsequent to quarter end, we completed a blend and extend with a tenant in Indianapolis.

Speaker Change: whereby we co-terminously extend the lease on 400,000 sq. ft. expiring in 2024 and an additional 197,000 sq. ft. expiring in 2025 to the end of September 2029 now.

Speaker Change: this simplify the lease structure and resulted in an immediate overall increase in rent of approximately eighteen percent

Michael: Currently, we are in advanced discussions on approximately 400,000 square feet of new leasing and 800,000 square feet of renewal. With that said, our leasing teams continue to work very hard and are encouraged by the level of engagement and activity we're experiencing and believe it will lead to stronger occupancy for the upcoming quarters. And with that, I will hand it over to Lawrence. Thank you, Lawrence, and good morning, everyone.

Lauren: Currently, we are in advanced discussions on approximately 400,000 square feet of new leasing and 800,000 square feet of renewal. With that said, our leasing teams continue to work very hard and are encouraged by the level of engagement and activity we're experiencing and believe it will lead to stronger occupancy for the upcoming quarters. And with that, I will hand it over. Thank you, Lauren, and good morning, everyone.

Speaker Change: Currently, we are in advanced discussions on approximately 400,000 sq. ft. of new leasing and 800,000 sq. ft. of renewals.

Mike: With that said, our leasing teams continue to work very hard and are encouraged by the level of engagement and activity we're experiencing and believe it will lead to stronger occupancy in the upcoming quarters. And with that, I will hand it over to Mike.

Michael: Investment markets continue to show relative strength and stability in Q2, based on transaction data, particularly for new and higher quality offerings, in part due to availability relative to vast amounts of opportunistic capital in the market allocated for industrialization. Resulting year-to-date investment volumes, generally speaking, are flat to trail in North America and up in continental Europe when compared to those numbers from the same period. In 2023, but, However, they are significantly off-peak numbers in 2021.

Michael: Investment markets continue to show relative strength and stability in Q2, based on transaction data, particularly for new and higher quality offerings, in part due to availability relative to vast amounts of opportunistic capital in the market allocated for industrial. Resulting year-to-date investment volumes, generally speaking, are flat to trail in North America and up in continental Europe when compared to those numbers from the same period. In 2023, but, however, are significantly off-peak numbers in 2100.

Mike: Thank you Lauren and good morning everyone. Investment markets continue to show relative strength and stability in Q2 based on transaction data particular for new

Mike: and higher quality offerings, in part due to availability relative to vast amounts of opportunistic capital in the market allocated for industrial deployment.

Mike: Resulting year-to-date investment volumes, generally speaking, are flat to trail in North America and up in continental Europe when comparing to those numbers from the same period in 2023, but however are significantly off-peak numbers seen in 2021 and 2022.

Michael: Investors continue to favor high-quality asset deals in prime locations with inherent rental growth opportunities, as evidenced by deep bidding pools and ultimately sharp prices. We are seeing this broadly across our global markets, regardless of any local supply. The buyer profile continues to be largely dominated by private capital, such as closed-end institutional funds, private equity, sovereign, and high-net-worth private equity. As there is significant dry powder and liquidity strengthening, we are starting to see appetite for larger-sized deals and well-located, high-quality core offers.

Michael: Investors continue to favor high-quality asset deals in prime locations with inherent rental growth opportunities, as evidenced by deep bidding pools and ultimately sharp prices. We are seeing this broadly across our global markets, regardless of any local supply demand. The buyer profile continues to be largely dominated by private capital, such as close-end institutional funds, private equity, sovereign, and high-network private equity. As there is significant dry powder and liquidity strengthening, we are starting to see appetite for larger-sized deals and well-located, high-quality core offerings.

Speaker Change: Investors continue to favor high-quality asset deals in prime locations with inherent rental growth opportunities as evidenced by deep bidding pools and ultimately sharp pricing.

Mike: We are seeing this broadly across our global markets, regardless of any local supply-demand differentials.

Mike: The buyer profile continues to be largely dominated by private capital, such as closed-end institutional funds, private equity, sovereigns, and high-net-worth privates.

Mike: As there is significant dry powder and liquidity strengthening, we are starting to see appetite for larger-sized deals and well-located, high-quality core offerings.

Michael: That being said, we do and have been expecting to see select opportunities to acquire miscapitalized projects where developers, for example, need an exit for low-rate leveraged assets that require refinancing. With Canada and the ECB already cutting interest rates, and the U.S. Fed projected to start hiking rates imminently, this benign economic environment should be generally embraced by the real estate sector and viewed as a stimulating and positive period. Deal pricing, investment volumes, and quality publicly traded real estate companies should benefit from meaningfully lower rates.

Mike: That being said, we do and have been expecting to see select opportunities to acquire miscapitalized projects where developers, for example, need an exit for low-rate leveraged assets that require refinancing.

Michael: With Canada and the ECB already cutting interest rates,

Michael: Inc. Inc.

Mike: With Canada and the ECB already cutting interest rates, and the U.S. Fed projected to start imminently,

Michael: This benign economic environment should be generally embraced by the real estate sector and viewed as a stimulating and positive peer. Deal Pricing, Investment Volumes, and Quality Publicly Traded Real Estate Companies Should Benefit from Meaningfully Lower Revenue.

Mike: This forward economic environment should be generally embraced by the real estate sector and viewed as a stimulating and positive period.

Mike: Deal pricing, investment volumes, and quality publicly traded real estate companies should benefit from meaningfully lower rates.

Michael: Steel liquidity continues to improve as spreads tighten and treasuries continue to rise. At this time, both the Canadian and U.S. 10-year bonds have come in at least 50 basis points in the last 90 days, compressing coupon rates for core levels. Also, there are seemingly more active lenders bidding for deals, and while the landscape is still dominated by life codes and debt funds, banks are selectively re-emerging for quality deals and sponsorship With our balance sheet, liquidity, and leverage metrics always top of mind, and as mentioned last quarter, our team continues to underwrite and pursue selective opportunities that feature quality, growth, and value as key focal points.

Mike: Steel liquidity continues to improve as spreads tighten and treasuries continue to recede.

Mike: At this time, both the Canadian and the U.S. 10-year bonds have come in at least 50 basis points in the last 90 days, compressing coupon rates for core loans.

Kevan Gorrie: Also, there are seemingly more active lenders bidding for deals, and while the landscape is still dominated by life codes and debt funds, banks are selectively re-emerging for quality deals and sponsor selection. With our balance sheet, liquidity, and leverage metrics are always top of mind. And as mentioned last quarter, our team continues to underwrite and pursue selective opportunities that feature quality, growth, and value as key focal points. We continue to be disciplined and patient in our deployment, ensuring our next acquisition is meaningful, on strategy, drives accretion, and we are optimistic this is not far in the Thanks, Mike. And thank you, Lauren, for your comments.

Mike: Also, there is seemingly more active lenders bidding for deals and while the landscape is still dominated by life codes and debt funds, banks are selectively re-emerging for quality deals and sponsors alike.

Speaker Change: with our balance sheet liquidity and leverage metrics always top of mind and ias mentioned last quarter our team continues to underwrite and pursue selective opportunities that feature quality growth and value as key focal points

Michael: We continue to be disciplined and patient in our deployment, ensuring our next acquisition is meaningful, on strategy, drives accretion, and we are optimistic this is not far in the... With that, I'll hand it back over to Kevan. Thanks, Mike. And thank you, Lauren, for your comments.

Kevan Gorrie: We continue to be disciplined and patient in our deployment, ensuring our next acquisition is meaningful, on strategy, drives accretion, and we are optimistic this is not far in the future. With that, I'll hand it back over to Kevan.

Kevan Gorrie: So overall, our results, again, are in line with expectations. NWI and cash NWI increased once again this quarter, and our liquidity position remains very strong at over $1.1 billion in cash and available credit at this time. The tenant installation we see was unfortunate news for us and will negatively impact our St. Bartholomew Anomaly growth for at least two quarters.

Kevan Gorrie: So overall, our results, again, are in line with expectations. NAYA Cash NAYA increased once again this quarter. And our liquidity position remains very strong at over $1.1 billion in cash and available credit at this time. The tenant installation we see was unfortunate news for us and will negatively impact our St. Bartholomew, Illinois growth for at least two quarters. The fact that the in-place rent is well below market, combined with the quality of the asset location, should positively impact NOI growth for us in 2025.

Speaker Change: Thanks, Mike, and thank you, Lauren, for your comments. So overall, our results, again, were in line with expectations.

Speaker Change: NWI and cash NWI increased once again this quarter.

Kevan Gorrie: and our liquid liquidity position remain very strong and over one point one billion and cash available credit at this time

Speaker Change: The tenant in Salt Lake City was unfortunate news for us and will negatively impact our St. Bartholomew Anomaly Group for at least two quarters.

Kevan Gorrie: The fact that the in-place rent is well below market combined with the quality of the asset location should positively impact NOI growth for us in 2025. Similarly, the free rent on the large renewal in a quarter that Lawrence spoke about will further mute N&Y growth in Q3, but it will help drive strong N&Y growth in Q4 and subsequent quarters. In closing, I do want to say that at Granite, we've never lost sight of what's important.

Mike: But the fact that the in-place rent is well below market, combined with the quality of the asset location, should positively impact NY growth for us in 2025.

Kevan Gorrie: Similarly, the free rent on the large renewal in a quarter that Lauren spoke about will further mute NNY growth in Q3, but it will help drive strong NNY growth in Q4 and subsequent quarters. In closing, I do want to say that at Granite, we've never lost sight of what's important. And we're frankly comfortable living with the high expectations that are placed on us by others because we hold ourselves to a very high standard, which is to generate actual returns over the long term for our unit holders while maintaining a very strong balance.

Lauren: Similarly, the free rent on the large renewal in a quarter that Lauren spoke about will further mute N&Y growth in Q3, but will help drive strong N&Y growth in Q4 and subsequent quarters.

Lauren: In closing, I do want to say that at Granite, we've never lost sight of what's important.

Kevan Gorrie: And we're frankly comfortable living with the high expectations that are placed on us by others because we hold ourselves to a very high standard, which is to generate actual returns over the long term for our unit holders while maintaining a very strong balance. To that end, we have delivered NOI growth of just over 45% in the past three years since the second quarter of 2021, representing an average increase of over 13% annually. Similarly, we have generated growth in FFO per unit of just over 33% over that same period, or 10% per year on average.

Speaker Change: And we're frankly comfortable living with the high expectations that are placed on us by others because we hold ourselves to a very high standard.

Speaker Change: Which is to generate actual returns over the long term for our unit holders while maintaining a very strong balance sheet.

Kevan Gorrie: To that end, we have delivered NOI growth of just over 45% in the past three years since the second quarter of 2021, representing an average increase of over 13% annual. Similarly, we have generated growth in FFO per unit of just over 33% over that same period, or 10% per year on average, including 9% year-over-year growth of this course. And equally as important, we remain very well positioned to continue to deliver on our growth targets for 2024 and 2020. And on that, I will open up the line for questions. Thank you. The floor.

Speaker Change: is that end we have delivered in y growth of just over forty-five percent in the past three years since the second quarter of two thousand and twentyone

Lauren: Representing an average increase of over 13% annually.

Lauren: Similarly, we have generated growth in FFO per unit of just over 33% over that same period, or 10% per year on average.

Kevan Gorrie: Including 9% year-over-year this quarter. And equally as important, we remain very well positioned to continue to deliver on our growth targets for 2024 and 2020. And on that, I will open up the line for questions. Thank you.

Lauren: Including 9% year-over-year this quarter.

Lauren: And equally as important, we remain very well positioned to continue to deliver on our growth targets for 2024 and 2025.

Speaker Change: And on that, I will open up the line for questions.

Operator: Thank you. The floor is now open for your questions. As a reminder, to ask a question, please press star, then the number 1 on your telephone keypad. We'll pause just a moment to compile the Q&A roster. Again, that's star one to ask a question. Our first question will come from Sam Damiani with TD Cowan. Please go ahead.

Speaker Change: Thank you. The floor is now open for your questions. As a reminder, to ask a question, please press star then the number 1 on your telephone keypad.

Speaker Change: We'll pause just a moment to compile the Q&A roster.

Speaker Change: Again, that's star one to ask a question. Our first question will come from Sam Damiani with TD Cowan. Please go ahead.

Sam Damiani: Thank you. Good morning, everyone.

Sam Damiani: Thank you. Good morning, everyone. And the extensive commentary was very much appreciated, so thank you very much for that.

Kevan Gorrie: And, you know, the extensive commentary was very much appreciated. So thank you. Thank you very much for that. With the quarter and the changing near-term outlook, changing guidance, how are you feeling about 2025 today versus 90 days ago?

Speaker Change: With the quarter and sort of changing near-term outlook, changing guidance, how are you feeling about 2025 today versus 90 days ago?

Kevan Gorrie: I don't think that there's any difference. I think, like I said, I think the insolvency we had was just a bit of a hiccup. It's a minor setback, but you're talking about a rent that's below $4 a square foot in a market that's north of $5 a square foot. So I think, from that aspect, I think there's huge potential to drive growth in NNY in the future. So it has no impact on our view of 2025 at this point.

Kevan Gorrie: I don't think that there's any difference. I think, like I said, I think the insolvency we had was just a bit of a hiccup. It's a minor setback, but you're talking about a rent that's below $4 a square foot in a market that's north of $5 a square foot. So I think, from that aspect, I think there's huge potential to drive growth in Hawaii in the future. So it has no impact on our view of 2025.

Speaker Change: I don't think that there's any difference. I think, like I said, I think the insolvency we had is a bit of a hiccup. It's a minor setback, but...

Speaker Change: If you're talking about a rent, I won't say the specific market, we're talking about a rent that's below $4 a square foot in a market that's north of $5 a square foot. So I think...

Speaker Change: From that aspect, I think there's huge potential to drive growth in NOI in the future. So it has no impact on our view of 2025 at this time.

Sam Damiani: Okay. And then I think last quarter, you know, in the guidance commentary, maybe in the Q&A, I can't remember. There were some occupancy targets set for the year-end. I didn't see that, and I apologize if I missed it in the disclosures. Do you have an updated view as to where committed and in-place occupancy will likely be at the end of 2024?

Speaker Change: Okay.

Speaker Change: And then I think last quarter, you know, in the guidance commentary, maybe in the Q&A, I can't remember.

Speaker Change: There was some occupancy targets set for the year-end. I didn't see that and I apologize if I missed it in the disclosures. Do you have an updated view as to where committed and in-place occupancy will likely be at the end of 2024?

Kevan Gorrie: Yes, Sam, on that, we don't disclose it in the MD&A or the press release. I think it came up on the call last quarter, and I think we said, including commitments, we expect to be between 96% and 97%. That has not changed. I think just based on Lawrence's comments about deals that are active right now and the activity that we're seeing, we're still confident we will finish the year, including commitments, between 96% and 97%.

Kevan Gorrie: Yes, Sam, on that, we don't disclose it in the NDNA or the press release. I think it came up on the call last quarter, and I think we said, including committed, we expect to be between 96 and 97%. That has not changed. I think just based on Lauren's comments about deals that are active right now and the activity that we're seeing, we're still confident we will finish the year, including commitments, between 96 and 97%.

Kevan Gorrie: Yes, I am on.

Speaker Change: Yes, Sam, on that, we don't disclose it in the MD&A or the press release, I think it came up on the call last quarter, and I think we said, including committed, we expect to be between 96% and 97%. That has not changed, I think just based on

Speaker Change: warrrenant comments about dealss that are active rightand in the activity that we're seeing we're so confident we will finish a year including committed between ninety six and ninety seven percent

Sam Damiani: And then last one for me, I guess, you know, Mike, given your comments on the investment market seems to be kind of... Kind of, you know, recovering a bit here, there's more, more, you know, liquidity coming in, interest rates are a tailwind, hopefully going forward. Does Granite look at any opportunities to recycle capital in this environment? In this environment just given, I guess everything is on the table, including a unit price that's still well below NAF?

Sam Damiani: And then last one for me, I guess, you know, Mike, given your comments on the investment market seems to be kind of..., kind of, you know, recovering a bit here, there's more, more, you know, liquidity coming in, interest rates are a tailwind, hopefully going forward. Does Granite look at any opportunities to recycle capital in this environment? In this environment just given, I guess everything is on the table, including a unit price that's still well below now.

Sam: Okay, great.

Speaker Change: And then last one for me, I guess, you know, Mike, giving your comments on the investment market seems to be kind of...

Mike: Recovering a bit here, there's more liquidity coming in, interest rates are a tailwind hopefully going forward.

Speaker Change: Does Granite look at any opportunities to recycle capital in this environment, just given...

Mike: i guess everything on the table including unit price that saw a level and enough

Kevan Gorrie: Yeah, Sam, we're always looking at opportunities to

Kevan Gorrie: Yeah, Sam, we're always looking at opportunities to recycle capital. But again, it's got to be the right opportunity, the right transaction for us. We're not forced to sell anything at the moment, and we have to make sure we get the right transaction.

Mike: Yeah, Sam, we're always looking at opportunities to recycle capital, but again, it's got to be the...

Kevan Gorrie: Recycled capital. But again, it's got to be the right opportunity, the right transaction for us. We're not forced to sell anything at the moment, and we have to make sure that we get the right transaction.

Speaker Change: Right opportunity, the right transaction for us. We're not forced to sell anything at the moment and we have to make sure we get the right transaction.

Sam Damiani: Okay, great. Thank you. And I'll turn it back.

Operator: Thank you. Our next question will come from Brad Sturgis with Raymond James. Please go ahead.

Speaker Change: Thank you. Our next question will come from Brad Sturgis with Raymond James. Please go ahead.

Brad Sturgis: Hey, good morning. Following up on Sam's line of questions and appreciate some of the commentary you've already given to the 25, lease, lease maturities. Would you, at this stage, I know it's probably, you know, in some cases a little early to talk about all these fires, but would you be expecting, generally, a similar retention rate or renewal rate for 25 as what you're expecting for 24?

Brad Sturgis: Hey, good morning. Following up on Sam's line of questions and appreciate some of the commentary you've already given to the 25, lease maturities. Would you, at this stage, I know it's probably, you know, in some cases a little early to talk about all these fires, but would you be expecting, generally, a similar retention rate or renewal rate for 25 as what you're expecting for 24?

Brad Sturgis: Hey, good morning.

Brad Sturgis: Just following up on Sam's line of questions, and appreciate some of the commentary you've already given to the 25 lease maturities.

Brad Sturgis: Would you, at this stage, I know it's probably, you know, in some cases a little early to talk about all the expiries, but would you be expecting generally a similar retention rate or renewal rate for 2025 as what you're expecting for 2024?

Kevan Gorrie: I'll let Lauren chime in on that, but just to say, like Lauren said, anything over 90% is rather exceptional. And I think it is early days, although we seem to be encouraged by the sort of level of discussions we're already having on those. But would you say 80% to 90% is comfortable with? Yeah, I still think it's early days, Brad, but, you know, I think, as Kevin said, we're encouraged by what we've had so far.

Kevan Gorrie: I'll let Lawrence chime in on that, but just to say, like Lawrence said, anything over 90% is rather exceptional. And I think it is early days, although we seem to be encouraged by the sort of level of discussions we're already having on those. But would you say 80% to 90% you'd be comfortable with? Yeah, I still think it's early days, Brad, but, you know, I think, as Kevin said, we're encouraged by what we've had so far.

Speaker Change: I'll let Lauren chime in on that, but just to say, I mean, I think, like Lauren said, anything over 90% is rather exceptional. And I think it is early days, although we seem to be encouraged by the sort of level of discussions we're having already on those.

Speaker Change: Would you say 80 to 90 you'd be comfortable with?

Lauren: I still think it's early days, Brad, but I think, as Kevin said, we're encouraged by what we've had so far. I really don't want to put an exact percentage on it right now. I think maybe in the next quarter or two we'll have a little bit better clarity, but I do think it will be a very strong outcome based on what we've experienced to date.

Kevan Gorrie: I really don't want to put an exact percentage on it right now. I think maybe in the next quarter or two, I'll have a little bit better clarity. But I do think it will be a very strong outcome based on what we've experienced to date.

Kevan Gorrie: I really don't want to put an exact percentage on it right now. I think maybe in the next quarter or two, we'll have a little bit better clarity. But I do think it will be a very strong outcome based on what we've experienced to date.

Brad Sturgis: You know, I guess the releasing that you've already done 23% of those 25 maturities. How do those releasing spreads compare to your overall expectations of maybe over 30% for the lease rollover exposure next year?

Brad Sturgis: You know the, I guess the releasing that you've already done 23% of those 25 maturities. How do those releasing spreads compare to your overall expectations of maybe over 30% for the, for the lease rollover exposure next year?

Brad Sturgis: You know, I guess the releasing that you've already done, the 23% of those 25 maturities, how do those releasing spreads compare to your overall?

Speaker Change: Expectations of maybe over 30% for the

Kevan Gorrie: It's Kevan. I just want to chime in on that, Brad. I think it is consistent, but keep in mind even if it wasn't. Our sort of forecast of 30 to 35% for the year takes it into account. So I'm not even sure what the number really is, but I don't know how consequential that is to the guidance because it would be built in. So I think it's consistent, but all to say 30 to 35% for the year is a guide.

Kevan Gorrie: I just want to, it's Kevan. I just want to chime in on that, Brad. I think it is consistent with keeping in mind, even if it wasn't. Our sort of forecast of 30 to 35% for the year takes it into account. So I'm not even sure what the number really is, but I don't know how consequential that is to the guidance because it would be built in. So I think it's consistent, but all to say 30% to 35% for the year is a guide.

Speaker Change: for the lease rollover exposure next year.

Speaker Change: It's Kevan. I just want to chime in on that, Brad. I think it is consistent, but keep in mind, even if it wasn't,

Kevan Gorrie: our sort of forecast of thirty to thirty-five percent for the year takes it into account

Speaker Change: So I'm not even sure what the number really is, but I don't know how consequential that is to the guidance because it would be built in.

Kevan Gorrie: So I think it's consistent, but all to say 30-35% for the year is the guidance for next year.

Brad Sturgis: Okay, and no, no change to the committed occupancy range that you're expecting by year. And I guess I'm curious.

Speaker Change: Okay. And no change to the committed occupancy range that you're expecting by year. And I guess I'm curious as to...

Brad Sturgis: Okay, and no, no change to the committed occupancy range that you're expecting by year. And I guess I'm curious about digging in a little bit to the Midwest in terms of the availability you have there in terms of leasing velocity or just general, INCLumes per household.

Speaker Change: To dig in a little bit to the Midwest in terms of the availability you have there in terms of leasing velocity or just general

Speaker Change: Market conditions, are you seeing any incremental change from the last quarter in Indianapolis and maybe in Louisville?

Kevan Gorrie: I think, you know, we were

Lauren: I think, you know, we're encouraged in that there is still activity that we're seeing at both locations. I'd say, probably Louisville, is a little bit more encouraging at this time, but we are seeing activity at both locations. I'd say in Indy, probably a little bit more activity on the smaller building than the larger building, but there is activity at both locations. Yeah, which is funny because I think last quarter we felt more activity on the large building. Right now, it seems to be on the smaller side, and it can fluctuate from quarter to quarter, but that's a possibility.

Kevan Gorrie: Thank you.

Speaker Change: I think, you know, we're encouraged in that there still is activity that we're seeing at both locations.

Speaker Change: I'd say probably Louisville. I'd say it's a little bit more encouraging at this time. But we are seeing activity at both locations. I'd say in Indy, probably a little bit more activity on the smaller building than the larger building.

Speaker Change: but there is activity at both locations. Yeah, which is funny because I think last quarter we felt more activity on the large one. Right now it seems to be on the smaller one. And it can move, fluctuate from quarter to quarter, but...

Brad Sturgis: And just remind me, is there any other availability on the larger box side?

Brad Sturgis: And just remind me, is there other availability on the larger box side, or is there fairly limited availability on some of the larger boxes within those two markets right now?

Speaker Change: That's a fair point.

Speaker Change: And just remind me, is there other availability on the larger box side or is it fairly, is there limited availability on some of the larger boxes within those two markets right now?

Lauren: I think in Indy, again, one of the things you got to think about is, yes, there is more availability in big box stores. But we are in a submarket that has a much tighter vacancy than the overall vacancy in Indy. In Louisville, we are one of just over 600,000 feet.

Speaker Change: I think in Indy, again, you know, one of the things you got to think about is yes, there is more availability in big box, we are in a sub market that has a much tighter vacancy than the overall vacancy in Indy.

Speaker Change: In Louisville, we are 1 of 1, over 600,000 feet, so we're in well-positioned and there really is very little supply there, so it's a pretty tight market, so I think we're well-positioned in Louisville for a large user.

Kevan Gorrie: So we're well positioned, and there really is very little supply there. So it's a pretty tight market. So I think we're well positioned in Louisville for a large, a large market. And I think just to add to that, Brad, those are very good points that Lawrence brought up. And just on Indy, the location we're in, which you know, is kind of, I would compare it to Mississauga across the street from the airport.

Lauren: So we're well positioned, and there really is very little supply there. So it's a pretty tight market. So I think we're well positioned in Louisville for a large, large market. And I think just to add to that, Brad, those are very good points that Lawrence brought up. And just on Indy, the location we're in, which you know, is kind of, I would compare it to Mississauga across the street from the airport.

Speaker Change: And I think just to add to that, Brad, those are very good points that Lawrence brought up and just on Indy.

Brad Sturgis: The location we're in, which you know is kind of, I would compare it to Mississauga across the street from the airport, it's never going to be a lowest cost option in that market, nor do we want it to be, so I think it has to be the right deal for us.

Kevan Gorrie: It's never going to be the lowest-cost option in that market, nor do we want it to be. So I think it has to be the right deal for us. Big differences, and not just in Indy, but in any market. There are big differences between some markets, availability rates between some markets, and certainly that's what we're seeing in Indy between our market and markets to the Southeast, for example.

Lauren: It's never going to be the lowest-cost option in that market, nor do we want it to be. So I think it has to be the right deal for us. Big differences, and not just in Indy but in any market, there are big differences between sub-markets, availability rates between sub-markets, and certainly that's what we're seeing in Indy between our market and markets in the Southeast.

Speaker Change: Big differences, and not just in Indy, but in any market, there are big differences between sub-markets, availability rates between sub-markets, and certainly that's what we're seeing in Indy between our market and markets to the southeast, for example.

Brad Sturgis: I can appreciate that, and I appreciate the comments. I'll turn it back.

Speaker Change: I can appreciate that and I appreciate the comments. I'll turn it back.

Operator: Thank you. Our next question will come from Kyle Stanley with Desjardins. Please go ahead.

Speaker Change: Thank you. Our next question will come from Kyle Stanley with Desjardins. Please go ahead.

Kyle Stanley: Thanks. Morning, everyone. In the prepared remarks, you mentioned, you know, seeing maybe a bit more renewed demand for big box space. I know, obviously, what we're just talking about on Indy, maybe seeing that shift a little bit, maybe towards a smaller space, but just generally, can you talk about maybe what's driving some renewed demand for that big box space right now?

Kyle Stanley: Thanks. Morning, everyone.

Kyle Stanley: In the prepared remarks, you mentioned, you know, seeing maybe a bit more renewed demand for big box space. I know, obviously, what we were just talking about on Indy, maybe seeing that shift a little bit, maybe towards a smaller space. But just generally, can you talk about maybe what's driving some renewed demand in that big box space right now?

Lauren: Um, I think, you know, I mean, there's lots of different drivers for it. I think that one of the things that's just happening is that there was probably a takedown of a lot of space over the pandemic. And I think that's rationalized now. E-commerce is still growing. And so there is a renewed interest in those types of larger spaces. And as well, I just think that, you know, when I look at, you know, one quarter, we could be telling you which markets we see the most activity in, and then they're flip-flopping all over the place.

Lauren: Um, I think, you know, I mean, there's lots of different drivers for it. I think that one of the things that's just happening is that there was probably a takedown of a lot of space over the pandemic. And I think that's rationalized now because eCommerce is still growing. And so there is a renewed interest in those types of larger spaces. And as well, I just think that, you know, when I look at, you know, one quarter, we could be telling you which markets we see the most activity in, and then they're flip-flopping all over the place.

Speaker Change: I think, you know, I mean, there's lots of different drivers in it. I think that one of the things that's just happening is that there was probably a takedown of a lot of space over the pandemic, and I think that's rationalized now.

Speaker Change: E-commerce is still growing and so there is a renewed interest in those types of larger spaces and as well I just think that you know when I look at you know

Speaker Change: One quarter we could be telling you which mark do we see the most activity and then they're flip-flopping all over the place but right now Louisville seems to be also Taking advantage of the airport right nearby and there's some renewed interest there as well So I just think it's probably you know, I think some of the companies the c-suite people as I mentioned in my earlier remarks I think people are realizing that it's time to move on

Lauren: But right now, Louisville seems to be taking advantage of the airport right nearby, and there's some renewed interest there as well. So I just think it's probably, you know, I think some of the companies, the C-suite people, as I mentioned in my earlier remarks, I think people are realizing that it's time to move on and they need to start to make commitments based on their business plans. And so that's what we're at least experiencing at the moment.

Speaker Change: And they need to start to make commitments based on their business plans, and so that's what we're at least experiencing at this time.

Lauren: Yeah, definitely, I would say that on top of that, we are seeing consolidation, a fair amount of consolidation. So it is sort of Peter, Robin, Paul, smaller spaces consolidating into larger spaces. I don't think that's a big part of it. I think it's more what Lauren's talking about. But certainly, we've seen a couple of deals involving prospects that are consolidating into larger spaces, which is

Lauren: Yeah, definitely, I would say two on top of that: we are seeing consolidation, a fair amount of consolidation. So it is sort of Peter, Robin, Paul, smaller spaces consolidating into larger spaces. I don't think that's a big part of it. I think it's more what Lauren's talking about. But certainly, we've seen a couple of deals involving prospects that are consolidating into larger spaces, which is

Speaker Change: Yeah, definitely, I would say, too, on top of that, we are seeing consolidation.

Speaker Change: a fair amount of consolidation. Peter and Robin compel, smaller spaces consolidating into larger spaces. I don't think that's a big part of it. I think it's more what Lauren is talking about. But, certainly, we've seen a couple of deals involving prospects that are consolidating into larger spaces.

Kyle Stanley: Okay, okay. So that's very helpful, Culler. Maybe just my last question. I think you guys have mentioned it a few times in recent calls, and it was mentioned a bit earlier today. What is it that you're seeing in the kind of leasing environment in the GTA that does make that market that maybe you're less, you know, less constructive on currently versus some of your other markets?

Lauren: Okay, okay. So that's very helpful, Culler. Maybe just my last question. I think you guys have mentioned it a few times in recent calls, and it was mentioned a bit earlier today. What is it that you're seeing in the kind of leasing environment in the GTA that does make that market that maybe you're less, you know, less constructive on currently versus some of your other markets?

Speaker Change: Which is normal.

Culler: Okay, okay, and that's very helpful, Culler. Maybe just my last question. I mean, I think you guys have mentioned it a few times in recent calls, and it was mentioned a bit earlier today.

Speaker Change: What is it that you're seeing in the leasing environment in the GTA that does make that be the market that maybe you're less constructive on currently versus some of your other markets?

Kevan Gorrie: I'll start with it. I think if you look at the absorption, I mean, we understand as much as anybody supply and demand dynamics in a market. But when you look at Toronto, you have negative, I think, 6 million feet over the past five quarters. I mean, this has been successive quarters of negative, zero to negative absorption.

Speaker Change: I'll start with it. I think if you look at the absorption, I mean, we understand as much as anybody supply, the supply, demand,

Speaker Change: Dynamics in a market. But when you look at Toronto, you have negative, I think, 6 million feet over the past five quarters. I mean, this has been successive quarters of negative, zero to negative absorption. So what that tells me is that, you know, occupied space itself is going down.

Kevan Gorrie: So what that tells me is that, you know, occupied space itself is going down, and demand is going down. When you look at some markets that have high supply, I always use Dallas. Dallas has a lot of supply and makes the market more competitive, to be sure. But it's still generating 7 million square feet of space a quarter or more in that absorption, so that's telling us that businesses and our customers are continuing to move and invest in those markets.

Speaker Change: and Demand is going down. When you look at some markets that have high supply, I always use Dallas, has a lot of supply and makes the market more competitive to be sure, but it's still generating 7 million square feet a quarter or more in that absorption.

Speaker Change: So that's telling us that businesses and our customers are continuing to move and invest in those markets.

Kevan Gorrie: But when you see Toronto, where there's been no growth, Montreal, I think it's had five or six quarters of negative absorption. Now there's a question about where that demand is going to come from and where that level of investment is going to come from. So that's sort of our view of Toronto in the context of our portfolio.

Speaker Change: But when you see Toronto, where there's been no growth, Montreal, I think it's had five or six quarters of negative absorption, now there's a question about where that demand is going to come from and where that level of investment is going to come from. So that's sort of our view of Toronto in the context of our portfolio.

Kyle Stanley: Okay, no, I think that's very helpful. Maybe just adding to that, like, in your opinion, maybe what is the driver of the, you know, the demand retrenchment that we've seen? Obviously, we've seen a bit of a pickup in supply in some nodes. But generally, it seems like what's going on in Canada is a little more on the demand side, as opposed to the US, where the issue has been more on the supply side. So just curious if you have any high level thoughts there.

Speaker Change: Okay, no, I think that's very helpful. Maybe just adding to that, like, in your opinion, maybe what is the driver of

Speaker Change: The first part of my talk is going to be covering the demand retrenchment that we've seen. Obviously, we've seen a bit of a pickup in supply in some nodes, but generally it seems like what's going on in Canada is a little more on the demand side as opposed to the U.S. The issue has been more on the supply side. So just curious if you have a high-level thought there.

Kevan Gorrie: I think in terms of the U.S., which has a much more active market, the things that I would say is we are still continuing to see investment in electrification, if I can call it that. That is, tracking manufacturing, which of course, we don't build manufacturing sites, but they can use our buildings. It's rather generic in that way.

Speaker Change: I think in terms of the, I think everyone looks at the US, I think in terms of the US, which has a much more active market, the thing that I would say is we are still continuing to see investment in

Speaker Change: In electrification, if I can call it that, that is a tracking manufacturing, which of course we don't build manufacturing sites, but they can use our buildings, it's rather generic that way. But also there's a lot of...

Kevan Gorrie: But also, there's a lot of near-shoring from Asia to Mexico, and that is positively impacting a number of our markets. I think that's one thing that we're seeing clearly. It's positively impacting Houston, and it's positively impacting Dallas right through the Midwest. And is that a dynamic that continues? I don't know, but that certainly is a sort of tailwind in terms of absorption and demand for our markets.

Speaker Change: near-shoring from Asia to Mexico, and that is positively impacting a number of our markets, I think that's one thing that we're seeing clearly.

Speaker Change: It's positively impacting Houston. It's positively impacting Dallas right through the Midwest. And is that a dynamic that continues? I don't know. But that certainly is a sort of tailwind in terms of absorption and demand for our markets that we're seeing.

Kyle Stanley: Okay, thank you very much for the color. I will turn it back.

Speaker Change: Okay, thank you very much for the caller. I will turn it back.

Operator: Thank you. Our next question will come from Mike Markidis with BMO. Please go ahead.

Speaker Change: Thank you. Our next question will come from Mike Markidis with BMO. Please go ahead.

Mike Markidis: Thanks, operator. Good morning, everybody.

Mike Markidis: Thanks, Operator. Good morning, everybody.

Mike Markidis: Thanks, operator. Good morning, everybody.

Mike Markidis: I just wanted to focus in again on the committed occupancy target of $96,000, $97,000. So I guess you guys were $94,000, $95,000 committed at the end of the quarter. And I think Lauren spoke about 400,000 square feet of discussions of new leasing currently underway. Were there any other new leases that have been signed subsequent to the quarter that I might have missed? Is there anything that's been

Mike Markidis: Just wanted to just focus in again on the committed occupancy target of 96, 97. So I guess you guys were 94, 5 committed at the end of the quarter.

Mike Markidis: And I think Lauren has spoke to 400,000 square feet of discussions of new leasing currently underway. Were there any other new leases that have been signed post the start of the quarter that I might have missed?

Mike Markidis: Is there anything that's been signed? Yeah. You're talking about new leases, Mike, so not renewals, just new leases? Yes. I'm not sure we had anything subsequent to the quarter. Not subsequent, not subsequent. During the quarter, during the quarter, yeah.

Mike Markidis: Is there anything that's been signed? Investment Trust. Yeah. You're talking about new leases, Mike, so not renewals, just new leases? Yes. I'm not sure we had anything subsequent to the quarter. No, I was asking subsequent to the quarter. Yeah.

Speaker Change: Is there anything that's been signed for the quarter? There is. Some of you may have seen many of those.

Speaker Change: pre mature two hundred and seventy sou mara cur ' going to for the quar us

Speaker Change: You're talking about new leases, Mike, so not renewals, just new leases?

Speaker Change: yes

Speaker Change: I'm not sure we had anything subsequent to the quarter.

Mike Markidis: No, I was asking subsequently to the quarter. Yeah.

Mike: Not subsequent, not subsequent, during the quarter, during the quarter. Sure, yeah. No, I was asking subsequent to the quarter. Oh, sorry, I thought you meant in the quarter. Apologies.

Mike Markidis: Oh, sorry. I thought you meant in the quarter. Apologies.

Mike Markidis: Oh, sorry. I thought you meant in the quarter. Apologies. Nothing. Frederic Blondeau

Mike Markidis: Okay. All right.

Mike: nothing

Speaker Change: actly now

Speaker Change: Okay. All right. So, okay. So, 400,000 square feet. And then from an...

Mike Markidis: So, okay, so 400,000 square feet. And then from an economic point of view, It's just been looking towards the year 2025. Maturities, I guess you said 30 to 35% was the anticipated spread overall, if I'm not mistaken. I think you got a pretty significant, or a bigger contribution or weighting to Canada or the GTA in 2025. So how would we break that out between sort of the GTA and your expectations for the US just given the change in the amount coming through in GTA?

Speaker Change: It's just been looking towards your 2025 maturities. I guess you said 30% to 35% was the anticipated spread overall, if I'm not mistaken. I think you've got a pretty significant

Speaker Change: For a bigger contribution or waiting to Canada or the GTA in 2025 so how would we break that out between sort of the GTA and your expectations for the US receiving the change in the amount coming through in GTA?

Kevan Gorrie: I can't remember where exactly we had the list in the GTA. I think we talked about it on the last call, Mike, and I don't think anything's changed in terms of the splits and what we expect from each one of the geographies.

Speaker Change: I can't remember where exactly we had the list of the GTA. I think we talked about it on the last call, Mike, and I don't think anything's changed in terms of the splits and what we expect from each one of the geographies.

Mike Markidis: Okay. And then last one for me, just on the US. And again, I think we talked about this on the last call, but can you refresh this? I think the cadence of the US expiries we have rolling in 2025 is somewhat back-end loaded. Is that the case? Is it concentrated to a few specific ones at the end of the year, or is it... Enlarged Utilities

Mike Markidis: Okay. And then last one for me, just on the US. And again, I think we talked about this last call, but you were precious.

Speaker Change: Okay, and then last one for me, just on the U.S., and again, I think we talked about this last call, but can you refresh this? I think the cadence of the U.S. expires in 2025.

Mike Markidis: I think the US expires, you have rolling in 2025, are somewhat backend loaded. Is that the case? Is it concentrated to a few specific ones at the end of the year, or is it? REIT

Speaker Change: Granite REITs are somewhat back-end loaded. Is that the case? Is it concentrated to a few specific ones at the end of the year, or is it pretty consistent?

Kevan Gorrie: I think it's more consistent. I think it is the second half and full, not the first half, and that includes the GTA as well. So I think the majority of our leasing is in the second half of 2025, not the first half.

Kevan Gorrie: I think it's more consistent. I think it is the second half and loaded, not the first half. And that includes the GTA as well. So I think the majority of our leasing is in the second half of 2025.

Speaker Change: I think it's more consistent. I think it is second half and loaded, not the first half, and that includes actually the GTA as well. So I think the majority of our leasing is in the second half of 2021.

Speaker Change: Not the first.

Speaker Change: In the U.S.

Mike Markidis: Overall, Okay. Okay. That's it for me. Thanks so much.

Speaker Change: A-Way

Speaker Change: Overall, okay. Both. Okay, that's it for me. Thanks so much.

Operator: Thank you. Our next question will come from Matt Kornack with National Bank Financial.

Speaker Change: okay

Speaker Change: Thank you. Our next question will come from Matt Kornack with National Bank Financial.

Matt Kornack: Hi guys. You seem to have pretty high confidence in the rate for Canada. Are you relatively confident that the tenants, I guess 1.4 million square feet, will renew in that space at that rate?

Kevan Gorrie: I think we're relatively confident. Yeah, no promises at this point, obviously, but I think discussions indicate to us that we should be relatively confident that they would run in. Presumably, their business, and everything is going fine. I don't know if you can provide who it is actually maturing in 2025 in Canada.

Speaker Change: Yeah.

Speaker Change: I think we're relatively confident. Yeah, no promises at this point, obviously, but I think discussions indicate to us that we should be relatively confident that they would run in.

Speaker Change: So presumably their business and everything is going fine. I don't know if you can provide who it is actually that's maturing in 2025 in Canada.

Matt Kornack: And then, broadly speaking, and taking a bit of a step back, obviously, the Canadian consumer has been under more pressure than the US consumer. But this recent move in the markets, there was some talk about maybe the US is seeing a bit of pressure. Do you think that will translate into some demand side issues going forward? Or how should we think about that from a fundamental standpoint? Presumably, lower rates help everybody. But in Canada, I think lower rates are probably going to have maybe a bit more economic clout, hopefully.

Speaker Change: We can't sort of turn it off. Okay, all good.

Speaker Change: Broadly speaking and taking a bit of a step back, obviously the Canadian consumer has been under

Speaker Change: More pressure than the US consumer, but this recent route in the markets, there was some talk about

Speaker Change: maybe the u us is seeing a bit of pressure do you think that will translate into some demand side issues going forward or how should we think about that from a fundamental standpoint

Speaker Change: Presumably lower rates help everybody. But in Canada, I think lower rates are probably gonna have maybe a bit more economic clout, hopefully.

Kevan Gorrie: Yeah, I mean, I think that that's fair. And I mean, to be clear, we don't believe a recession is good for anyone. We believe that it seems to trade more with interest rates and not with GDP and consumer behavior, which we always pay attention to. The one thing I would say is to get back to one of Lauren's points.

Kevan Gorrie: Yeah, I mean, I think that that's fair. And I mean, to be clear, we don't believe a recession is good for anyone. The reason seems to trade more with interest rates and not with GDP and, and consumer behavior, which we always pay attention to. The one thing I would say is to get back to one of Lauren's points.

Speaker Change: Yeah, I mean, I think that that's fair. And I mean, to be clear, we don't we don't believe a recession is good for for anyone. The reason seems to trade more with interest rates and not with GDP and consumer behavior, which

Speaker Change: We always pay attention to. The one thing I would say is, to get back to one of Lauren's points.

Kevan Gorrie: It does feel like we have been in a bit of a goods recession for a while, and I think there's a similar dynamic. Because of the economic pressures and the uncertainty, CFOs and executive teams have been loathe to make financial commitments, and that's understandable. And what we're seeing on the ground is that they have the real estate need. It is there. They're just delaying the decision, and our objective conversations with people in Europe are exactly the same.

Kevan Gorrie: It does feel like we have been in a bit of a goods recession for a while, and I think really the shoe to drop here is more on the service side and on the good side. So from that aspect, we're not, I don't think we should be as discouraged about GDP or recessionary pressures as some other sectors of the economy. But that being said, to Lauren's point, what it feels like, and I had a very long conversation with a leading broker in Europe. And I think there's a similar dynamic.

Lauren: It does feel like we have been in a bit of a goods recession for a while.

Speaker Change: And I think really the shoe to drop here is more on the service side and on the good side. So we, from that aspect, we're not...

Speaker Change: I don't think we should be as discouraged about GDP or recessionary pressures as some other sectors of the economy. That being said, to Lauren's point, what it feels like, and we had a very long conversation with a leading broker in Europe .

Kevan Gorrie: Because of the economic pressures and the uncertainty, CFOs and executive teams have been loathe to make financial commitments, and that's understandable. And what we're seeing on the ground is they have the real estate need. It is there. They're just delaying the decision. And our conversations objectively with people in Europe are exactly the same.

Speaker Change: And I think there's a similar dynamic.

Lauren: Because of the economic pressures and the uncertainty,

Speaker Change: CFOs and executive teams have been loathe to make financial commitments. And that's understandable. And what we're seeing on the ground is they have the real estate need, it is there, they're just delaying the decision.

Lauren: And our conversations objectively with people in Europe are exactly the same. Those needs have come to the forefront.

Kevan Gorrie: Those needs have come to the forefront, and the delays can no longer be tolerated. So companies are, I don't want to use the word reluctantly or begrudgingly, but they're making the decisions they've had to make. They've delayed it long enough, and now they have to make that decision. And so recessionary pressures, for sure, could have an impact on that moving forward. But in real time, what we're seeing is that these tenants are in need of the space. Uh, and, uh, and. We expect over the coming quarters that activity will be better than it is today and certainly better than it has been in the past few quarters.

Kevan Gorrie: Those needs have come to the forefront, and the delays can no longer be tolerated. So companies are, I don't want to use the word reluctantly or begrudgingly, but they're making the decisions they've had to make. They've delayed it long enough, and now they have to make that decision. And so recessionary pressures, for sure, could have an impact on that moving forward. But in real time, what we're seeing is that these tenants are in need of the space, and we expect over the coming quarters that activity will be better than it is today and certainly better than it has been in the past few quarters.

Lauren: and the delays can no longer be tolerated. So companies are, I don't want to use the word reluctantly or begrudgingly, but they're making the decisions they've had to make. They've delayed it long enough and now they have to make that decision.

Lauren: And so recessionary pressures, for sure, could have an impact on that moving forward. But in real time, what we're seeing is that these tenants are in need of the space. And, and

Speaker Change: We expect over the coming quarters that activity will be better than it is today and certainly better than it has been the past few quarters.

Matt Kornack: And I guess... Sorry. We are all done with this. Sorry, I missed that.

Matt Kornack: It's on the end, I guess. Sorry. [inaudible] Sorry, I missed that.

Lauren: And I guess...

Lauren: Sorry

Speaker Change: We have no specifics.

Kevan Gorrie: We've had the benefit of touring some of the assets that you guys own, and there were clearly certain tenants that have invested significantly in their space. Has this, through this, I mean, you've had some occupancy grind, obviously, some of those new developments, but for the tenants that are leaving, would you characterize them as tenants that haven't invested in the space? And maybe you could give us a sense as to the breakdown between those very stable tenants that have invested significantly versus maybe more generic space in the portfolio?

Kevan Gorrie: We've had the benefit of touring some of the assets that you guys own, and there were clearly certain tenants that had invested significantly in their space. Through this, I mean, you've had some occupancy grind, obviously, some of it was new development, but for the tenants that are leaving, would you characterize them as tenants that haven't invested in the space? And maybe you could give us a sense as to the breakdown between those very stable tenants that have invested significantly versus more generic space in the portfolio?

Speaker Change: Sorry, I missed that. We've had the benefit of touring some of the assets that you guys own.

Speaker Change: and there were clearly certain tenants that have invested significantly into their space.

Speaker Change: Granted, you've had some occupancy grind, but for the tenants that are leaving, would you characterize them as tenants that haven't invested in the space?

Speaker Change: The breakdown between those very stable tenants that have invested significantly versus maybe more generic space in the portfolio.

Kevan Gorrie: It just feels more like we're more in a sort of normal state, to Lawrence's point, probably a bit lower than that, but it seems to be getting, hopefully by the end of this year, we're getting back to that level. Spaces, in general, the needs of the tenants and the retailers and wholesalers, in general, can change, and they want to consolidate in one market for whatever reason. It depends on whether it is manufacturing or customer basis as well. So I think these are just normal decisions that are made, but I mean, over a 90 percent renewal rate is crazy.

Matt Kornack: It just feels more like we're more in a sort of normal state, to Lauren's point, probably a bit lower than that, but it seems to be getting, hopefully by the end of this year, we're getting back to that level. The $10,000 Renewal Rate It's crazy. And I think it's going to be positive next year as well. And I think that speaks to, you know, as I've said before, the relative quality of the portfolio and the stability of our tenants.

Speaker Change: It just feels more like we're more in a sort of normal state. The Lawrence point is probably a bit lower than that, but it seems to be getting, hopefully by the end of this year, we're getting back to that level. But remember, a lot of these...

Speaker Change: spaces in general, the needs of the tenants and the retailers and wholesalers in general can change. They may want to consolidate in one market.

Speaker Change: For whatever reason, it depends on whether manufacturing or customer basis as well. So I think these are just normal decisions that are made, but I mean, over 90% renewal rate is crazy.

Kevan Gorrie: It's crazy. And I think it's going to be positive next year as well. And I think that speaks to, you know, as I've said before, the relative quality of the portfolio and the stability of our tenants.

Speaker Change: It's crazy. And I think it's going to be positive next year as well. And I think that speaks to, you know, as I've said before, the relative quality of the portfolio and the stability of our tenants.

Matt Kornack: That makes sense. Thanks for that, Kyle.

Speaker Change: Makes sense. Thanks for that, Kyle.

Operator: Thank you. Our next question will come from Gaurav Mathur on Green Street. Please go ahead.

Speaker Change: Thank you. Our next question will come from Gaurav Mathur with Green Street. Please go ahead.

Gaurav Mathur: Thank you and good morning, everyone. Now, just staying on that line of questioning for a moment, would it be fair to say that the occupancy pressures that are felt in the GTA and the U.S. market are comparatively low?

Gaurav Mathur: Thank you and good morning everyone.

Gaurav Mathur: Now, just staying on that line of questioning for a moment, would it be fair to say that the occupancy pressures that are felt in the GTA and the U.S. market are comparatively higher than what would be felt in Europe at this point in time?

Kevan Gorrie: I think that that would be fair. I think, in general, Europe, for a number of reasons, barriers to entry, etc., is generally lower than what we're seeing. I mean, the availability rate in the GTA is just over 5%. That's where it was in 2012, to be honest with you. So, in Europe, it feels like it would be, depending on the individual market you're in, somewhere between 3% to 5%. So it would be lower, certainly lower than what we're seeing in the US. That's a long historical norm.

Kevan Gorrie: I think that that would be fair. I think, in general, Europe, for a number of reasons, barriers to entry, etc., is generally lower than what we're seeing. I mean, the availability rate in the GTA is just over 5%. That's where it was in 2012, to be honest with you. So, in Europe, it feels like it would be, depending on the individual market you're in, somewhere between 3% to 5%. So, it would be lower, certainly lower than what we're seeing in the U.S., and that's a long-term historical norm.

Speaker Change: I think that that would be fair. I think in general, I mean, Europe , for a number of reasons, barriers to entry, etc., is generally lower than what we're seeing. I mean, the availability rate and

Speaker Change: In the GTA, it's just over 5%, that's where it was in 2012, to be honest with you.

Speaker Change: In Europe , it feels like it would be in the sort of, depending on the individual market you're in, somewhere between 3% to 5%, so it would be lower, certainly lower than what we're seeing in the U.S. And that's a long historical norm for us.

Gaurav Mathur: Okay, and given that there are quite a few macro concerns in Europe itself, you're not Hello everybody.

Kevan Gorrie: Okay, and given that there are quite a few macro concerns in Europe itself, you're not Sumayya Hussain, Grand Hotel, Sam Damiani, Kevan Gorrie, Michael Ramparas, Kelly Marshall, Gaurav Mathur, Sam Damiani, Michael Rothschild, Himanshu Gupta, Teresa Neto, Sumayya Hussain, Lawrence Clarfield, Granite Real Estate Investment Trust Stapled Units

Lauren: in our sector.

Speaker Change: Okay, and given that there are quite a few macro concerns in Europe itself, you're not seeing a pullback, you're not seeing that availability rate rise just yet.

Kevan Gorrie: No, it has gone up, and I think leasing has slowed down. Again, this is sort of a demand thing and not a supply thing. It has slowed down, but rental rates have continued to rise across most of our markets, and we haven't seen a big uptick in availability.

Speaker Change: No, it has gone up, and I think leasing has slowed down. Again, this is sort of a demand thing and not a supply thing. It has slowed down, but...

Speaker Change: Rental rates have continued to rise across most of our markets, and we haven't seen a big uptick in availability.

Gaurav Mathur: Okay. And this last question, I'm going to switch gears here to the acquisitions market, but any opportunities that we could potentially see being executed on in the second half of the year? And how should we think about, you know, balancing that with the NCIP? Hmm, yeah.

Speaker Change: Okay. And this last question, I'm going to switch gears here to the acquisitions market, but any opportunities that we could potentially see being executed on in the second half of the year? And how should we think about, you know, balancing that with the NCIB activity?

Kevan Gorrie: Hmm, yeah, it's, I don't think anything's changed in our outlook. As Mike pointed out, we have pursued select acquisitions, nothing that's too large. And frankly, I think, and I'll and Mike can add to this, I don't think we've seen anything that's that compelling, to us, to be honest, but we would not hesitate, I think, to move forward with a transaction. I'm not saying anything that would be... You know, so transformational, but if it was the right deal, we would move forward, and we would figure out how to copy it without compromising the balance sheet.

Kevan Gorrie: Yeah, it's, I don't think anything's changed in a row. Look, as Mike pointed out, we have pursued select acquisitions; nothing that's too large. And frankly, I think, and I'll and Mike can add to this, I don't think we've seen anything that's that compelling, to us, to be honest, but we would not hesitate, I think, to move forward with a transaction. I'm not saying anything that would be... You know, so transformational, but if it was the right deal, we would move forward, and we would figure out how to cap it without compromising the balance sheet.

Mike Markidis: I don't think anything has changed in our OLEC, as Mike pointed out. We have pursued select acquisitions, nothing that's too large.

Mike Markidis: and frankly i think and and mike to this i don't think we've seen anything that that's that compelling to us to be honest but we would not hesitate i think to move forward with the transaction i'm not say anything that would be

Lauren: so transformational but if there was a right deal wewould move forward move figure out out the capitale

Kevan Gorrie: So in terms of the NCIB, again, this is why we'd love to have the liquidity that we have that we can take advantage of those situations. It doesn't feel good, but we can take advantage of what we do. So no comment really on any future plans for the NCIB. There's nothing set in stone. But I think it would be my personal preference and our preference to do an acquisition or to do a design build, for example, on one of our sites and add value that way. But in the absence of that, if we have cash on hand, then the NCIB at the right prices remains an option for us.

Lauren: without compromising the balance sheet.

Lauren: So in terms of the NCIB again, this is why we love to have the liquidity that we have that we can

Lauren: take advantage of those situations. It doesn't feel good, but we can take advantage of what we do. So no comment really on any future plans for the MCIB. There's nothing set in stone.

Lauren: But I think it would be my personal preference and our preference too.

Lauren: To do an acquisition or to do a design build, for example, one of our sites and add value that way.

Lauren: In the absence of that, if we have cash on hand, the NCIB at the right price remains an option for us, obviously.

Gaurav Mathur: Perfect. Well, thank you for the call, Kevan. I'll turn it back to the operator.

Speaker Change: Perfect. Well, thank you for the call, Kevan. I'll turn it back to the operator.

Operator: Thank you. Our next question will come from Himanshu Gupta with Scotiabank. Please go ahead.

Speaker Change: Thank you. Our next question will come from Himanshu Gupta with Scotiabank. Please go ahead.

Himanshu Gupta: Thank you and good morning. So, there was a new vacancy, I think, starting from 1st June. Which market was that? I mean, it looks like there was a tenant who was insolvency.

Himanshu Gupta: Thank you and good morning.

Himanshu Gupta: So, there was a new vacancy, I think, starting from 1st June . Which market was that? I mean, it looks like there was a tenant insolvency.

Kevan Gorrie: All say it was in Ohio, which is one of our assets in Ohio. We don't want to provide much more comment on that. We're certainly now marketing the space

Speaker Change: All say it was in Ohio.

Himanshu Gupta: Okay, and any other tenant on the watch list, Kevin? Nothing material.

Himanshu Gupta: Okay. And any other tenant on the watch list, Kevin? Nothing material.

Speaker Change: Now marketing the space.

Kevan Gorrie: Okay. And any other tenant on the watch list, Kevan?

Himanshu Gupta: So nothing material at this time. This surprises us in that, through the process, we were under the impression that even though there was going to be a restructuring, they were going to continue to use that space and only found out in May that they would not be continuing their occupancy in the space and would leave it at the end of May. So it was a bit of a surprise for us, but again, we're very comfortable that we will be able to earn a very decent mark to market on that REIT when it's released, and we're very comfortable with the location and the quality of that asset.

Kevan Gorrie: Nothing material, Himanshu. I mean, we always keep a close eye on mostly our smaller tenants. And I mean, like quite small tenants under 50,000 feet.

Kevan Gorrie: Nothing material, Himanshu. I mean, we always keep a close eye on mostly our smaller tenants, and I mean, quite small tenants under 50,000 feet.

Kevan Gorrie: Nothing material, Himanshu. I mean, we always keep a close eye on mostly our smaller tenants. And I mean, like quite small tenants under 50,000 feet. So nothing material at this time. This surprises in that.

Kevan Gorrie: So nothing material at this time. This surprises me in that. Through the process, we were under the impression that even though there was going to be a restructuring, they were going to continue to use that space, and only found out in May that they would not be continuing their occupancy in the space and would leave it at the end of May. So it was a bit of a surprise for us, but again, we're very comfortable that we will be able to earn a very decent mark to market on that REIT when it's released, and we're very comfortable with the location and the quality of that asset.

Speaker Change: Through the process, we...

Speaker Change: We were under the impression that

Speaker Change: Even though there was going to be a restructuring, they're going to continue to use that space.

Kevan Gorrie: and only found out in May that they would not be continuing their occupancy in the space and moved out at the end of May.

Speaker Change: So, it's a bit of a surprise for us, but again, we're very comfortable that we will be able to earn a very decent mark-to-market on that REIT when it's released, and we're very comfortable with the location and the quality of that asset.

Himanshu Gupta: Okay, and then just moving on the leasing side, how's the progress on the Memphis vacancies? I mean, is that the one where you are in advanced discussions on that phone?

Himanshu Gupta: Okay, and then just moving on the leasing side, how's the progress on the Memphis vacancies? I mean, is that the one where you are in advanced discussions on that phone? Yeah, we can.

Speaker Change: Okay, and then just moving on the leasing side, how's the progress on Memphis vacancies? I mean, is that the one where you are in advanced discussions on that 400,000?

Kevan Gorrie: We're not trying to be evasive. We don't want to provide any specific locations in any of these discussions. We're in active discussions, and we don't want to do anything that compromises that. So all I would say is, in terms of Memphis, we see decent activity, and we continue to see decent activity.

Himanshu Gupta: We're not trying to be evasive. We don't want to provide any specific locations in any of these discussions. We're in active discussions, and we don't want to do anything that compromises that. So all I would say is, in terms of Memphis, we see decent activity, and we continue to see decent activity.

Speaker Change: We're not trying to be evasive. We don't want to provide any specific locations in any of these discussions. We're in active discussions and we don't want to do anything that compromises that. So all I would say is in terms of Memphis, we see decent activity and we continue to see decent activity in that market.

Himanshu Gupta: Okay. Okay. Now, maybe in a broader question, what is tougher here, you know, like leasing up the new development?

Himanshu Gupta: What is tougher here? Leasing up the new development in Indianapolis or the older assets in Memphis or Louisville?

Speaker Change: What is tougher here? Leasing up the new development in Indianapolis or like the older assets in Memphis or Louisville, for example?

Kevan Gorrie: That's a great question, and I think, as Lauren pointed out, it changes from quarter to quarter. And it still remains a sort of mystery and interesting to me how real estate decisions can be made so quickly in such large spaces in our sector, but that's what we continue to see. So if I said to you right now, there seems to be more activity on even second generation space in Memphis versus first generation space in Indy, that certainly won't be the case in the next quarter.

Kevan Gorrie: That's a great question, and I think, as Lauren pointed out, it changes from quarter to quarter.

Speaker Change: That's a great question, and I think as Lauren pointed out, it changes from quarter to quarter. And it's still, it remains a sort of mystery and interesting to me how...

Himanshu Gupta: And it still remains a sort of mystery and interesting to me how real estate decisions can be made so quickly in such large spaces in our sector. But that's what we continue to see. So if I said to you, right now, there seems to be more activity in even second-generation space in Memphis versus first-generation space in Indy, that certainly won't be the case in the next quarter. But this is one of the reasons why we embarked on such an ambitious development program the way that we did, because these newer generation spaces are going to be very competitive, and we're going to be okay. And so if you ask me, what would I rather own today? I'd rather own the new generation in Indy. I would prefer the second generation.

Speaker Change: Real estate decisions can be made so quickly in such large spaces.

Speaker Change: in our sector, but that's what we continue to see. So if I said to you,

Kevan Gorrie: Right now, there seems to be more activity on even second-generation space in Memphis versus first-generation space in Indy. That certainly won't be the case in the next quarter.

Kevan Gorrie: But this is one of the reasons why we embarked on such an ambitious development program the way that we did, because these newer generation spaces are going to be very competitive, and we're going to be okay. And so if you ask me, what would I rather own today, I'd rather own the new generation in Indy, and I would take, in general.

Kevan Gorrie: So, but this is one of the reasons why we embarked on such an ambitious development program the way that we did, is the newer generation spaces are going to be very competitive and we're going to be okay.

Kevan Gorrie: And so, if you ask me, what would I rather own today, I'd rather own a new generation in Indy than I would a second generation in Memphis.

Himanshu Gupta: Yeah, thanks. And how would you answer in the context of asking rents? I mean, would you say the asking rents are much higher on the new developments compared to the older ones? And probably that's why, you know, it's taking a bit longer to lease up those assets?

Kevan Gorrie: Yeah, thanks. And how would you answer in the context of asking rents? I mean, would you say the asking rents are much higher on the new developments compared to the older ones? And probably that's why, you know, it's taking a bit longer to lease up those assets?

Speaker Change: Yeah, thanks. And how would you answer in the context of the asking rents?

Speaker Change: I mean, would you say the asking rents are much higher on the new development compared to the older ones? And probably that's why, you know, it's taking a bit more longer to lease up those assets?

Kevan Gorrie: I think that that would be fair. And I think one of the good things for us is that, you know, the way land costs and construction costs have appreciated so much over the last few years, I don't think there's a lot of wiggle room for owners of real estate, particularly newer real estate, to move down in rent rates and asking rates. And that's what we're seeing. We're seeing asking rates, for the most part, across the markets holding up very well, some even went up in the first quarter, so I think there's going to be a lot of continued pressure to keep rents and face rates where they are, at least for the next number of quarters.

Himanshu Gupta: I think that that would be fair. And I think one of the good things for us is that, you know, the way land costs and construction costs have appreciated so much over the last few years, I don't think there's a lot of wiggle room for owners of real estate, particularly newer real estate, to move down in rent rates and asking rates. And that's what we're seeing. We're seeing asking rates, for the most part, across the markets holding up very well, some even went up in the first quarter, so I think there's going to be a lot of continued pressure to keep rents and face rates where they are, at least for the next number of quarters.

Speaker Change: I think that, I think that that would be fair.

Speaker Change: And I think one of the good things for us is that, you know, the way land costs and construction costs have appreciated so much over.

Speaker Change: I don't think there's a lot of wiggle room for owners of real estate, particularly newer real estate, to move down in rent rates and asking rates. And that's what we're seeing. We're seeing asking rates, for the most part, across the markets, holding up very well. Some even went up.

Speaker Change: over over the first quarter. So I think there's going to be a lot of continued pressure to keep

Speaker Change: rents and face rates where they are, at least for the next number of quarters.

Teresa Neto: Okay, thanks for that. And then just turning on the guidance, FFO guidance, Teresa, you know, USD and Euro have moved a bit, you know, compared to Canadian dollars. And just to clarify that you do not consider that in your midpoint. So, you know, there could be an upside to your midpoint, just from an FX pointer.

Himanshu Gupta: Okay, thanks for that. And then just turning on the guidance, FFO guidance, Teresa, you know, USD and Euro have moved a bit compared to Canadian dollars. And just to clarify that you do not consider that in your midpoint. So, you know, there could be an upside to your midpoint, just from an FX point of view.

Speaker Change: Okay, thanks for that.

Teresa Neto: And then just turning on the guidance, FFO guidance, Teresa, you know, USD and Euro has moved a bit, you know, compared to Canadian dollars. And just to clarify that you do not consider that in your midpoint. So, you know, there could be an upside to your midpoint, just from an FX point of view.

Teresa Neto: So we've baked in more favorable effects, certainly in Q2, than we were originally forecasting. But you're right that there could be upside, just given where the euro and USD are trading today. That's fair.

Himanshu Gupta: So we've baked in, you know, more favorable effects, certainly in Q2, than we were originally forecasting. But you're right that there could be upside, just given where the euro and USD are trading today. That's fair.

Teresa Neto: That is true, that is true. So we've baked in, you know, more favorable effects certainly in Q2 than we were originally forecasting, but you're right that there could be upside just given where the euro and USD are trading today. That's fair.

Himanshu Gupta: Okay, thank you. And then, you know, lastly, just talking about the balance sheet, looks like leverage will come down further once these lease-ups are done. So can you qualify for a credit rating upgrade down the line? I mean, I know it's already high, but is that a possibility here?

Teresa Neto: Okay, thank you. And then, you know, lastly, just talking about the balance sheet, looks like leverage will come down further once these lease-ups are done. So can you qualify for a credit rating upgrade down the line? I mean, I know it's already high, but is that a possibility here?

Speaker Change: Okay, thank you. And then, you know, lastly, just talking about the balance sheet, it looks like leverage will...

Speaker Change: come down further, you know, once these lease-ups are done. So, can you qualify for a credit rating upgrade down the line? I mean, I know it's already high, but is that a possibility here?

Teresa Neto: I'd say that's a very low possibility. I think, certainly with DBRS, we would have to sustain debt-to-eBITDA in the five times range, and that's just not going to happen. And certainly with Moody's, just given our size, and it would take a, we would have to be, again, quite low, probably closer to the low five or high four times on debt-to-eBITDA on a sustained basis in order to get an upgrade. So, no, it's not in the cards.

Himanshu Gupta: I'd say that's a very low possibility. I think, certainly with DBRS, we would have to sustain debt-to-eBITDA in the five times range, and that's just not going to happen. And certainly with Moody's, just given our size, and it would take a, we would have to be, again, quite low, probably closer to the low five, high four times on debt-to-eBITDA on a sustained basis in order to sustain the ratings in order to get an upgrade. So, no, it's not in the cards.

Kevan Gorrie: I'd say that's a very low possibility. I think, certainly with DBRS, we would have to sustain

Speaker Change: I think debt to EBITDA is in the five times range.

Kevan Gorrie: And that's just not going to happen. And certainly with Moody's

Speaker Change: Just even given our size and it would take a we would have to be again quite low probably closer to the low five high four times on debt to EBITDA on a sustained basis in order to get an upgrade. So no, it's not in the cards in the future.

Himanshu Gupta: Q. On asset valuation, the cost of debt financing has improved a bit in the last 3-4 months. Is the cap rate expansion cycle almost over? Do you see cap rates moving down from here?

Teresa Neto: Okay, fair enough. Last question, and I know I'm between you and lunch.

Speaker Change: Okay, fair enough. Last question, and I know I'm between, you know, you and lunch. So on...

Himanshu Gupta: So on asset valuation, I mean, the cost of debt financing has improved a bit in the last three, four months, call it that. So Kevan, is the cap rate expansion cycle almost over? Or, you know, it's over? And do you see, you know, cap rates moving down?

Speaker Change: Now, let's talk about asset valuation. Cost of debt financing has improved a bit in the last three or four months. Kevan, is the Cap-It expansion cycle almost over? Do you see Cap-It moving down from here?

Kevan Gorrie: I'm looking at Michael as I'm kind of saying this, but I think I was asked this question on the last call. Just the movement of bond rates and some of the deals that we're seeing in the market suggest that there's more money coming into the market and not less. Transactions are picking up. We're now seeing a return of large portfolios, and transactions taking place. We've seen a couple of high-profile ones in the U.S.

Kevan Gorrie: I'm looking at Michael as I'm kind of saying this, but I think I was asked this question on the last call. Just the movement of the bond rates and some of the deals that we're seeing in the market suggest that there's more money coming into the market and not less. Transactions are picking up. We're now seeing a return of large portfolios, and transactions taking place. We've seen a couple of high-profile ones in the U.S.

Speaker Change: I'm looking at Michael as I'm kind of saying this, but I think I was asked this question on the last call. Just the movement of the bond rates and some of the deals that we're seeing in the market suggest that there's more money coming into the market and not less. Transactions are picking up. We're now seeing a return of large portfolios.

Speaker Change: Transaction taking place. We've seen a couple of high-profile ones.

Kevan Gorrie: So it feels like cap rates have stabilized and are continuing to strengthen, and I do want to point this out too. I think it was mentioned, maybe Teresa did, in terms of the cap rate versus a year ago. Remember that also depends very much on asking rents where rents are and where NOI is. So if you were to look last year, and we've discussed this, if you were to look at an average cap rate last year and say, okay, it's moved 10, 15 basis points to this year, it doesn't seem like that much.

Kevan Gorrie: So, it feels like cap rates have stabilized and are continuing to strengthen. And I do want to point this out too, I think it was mentioned, maybe Teresa did, in terms of the cap rate versus a year ago. Remember that also depends very much on asking rents where rents are and where NOI is. So if you were to look last year, and we've discussed this, if you were to look at an average cap rate last year and say, okay, it's moved 10, 15 basis points to this year, it doesn't seem like that much.

Speaker Change: In the U.S.

Speaker Change: So it feels like cap rates have stabilized and are continuing to strengthen. And I do want to point this out too. I think it was mentioned, maybe Teresa did, in terms of the cap rate versus a year ago. Remember, that also depends very much on asking rents where rents are and where NOI is.

Kevan Gorrie: Keep in mind that also, what impacts that is where rates have gone; rental rates have gone down since that period of time. So you could have a larger movement in cap rates, but it's moderated by the growth in market rent and the growth in NOI. So I just want to make that clear, because I've seen that in certain analyses where that doesn't take into account how rents have moved from year to year. So it certainly feels like there's been a stabilization, like anything not on the cap rates. Yeah. That's fair; I think we have, and we are seeing.

Kevan Gorrie: Keep in mind that also, what impacts that is where rates have gone; rental rates have gone down since that period of time. So you could have a larger movement in cap rates, but it's moderated by the growth in market rent and the growth in NOI. So I just want to make that clear, because I've seen that in certain analyses where that doesn't take into account how rents have moved from year to year. So it certainly feels like there's been a stabilization, like anything on the cap rates now, but that's fair. I think we have. Hussain Dr. Hussain Dr.

Speaker Change: So, if you were to look last year, and we've discussed this, if you were to look at an average cap rate last year.

Speaker Change: and say, okay, it's moved 10, 15 basis points to this year. It doesn't seem like that much. Keep in mind that also, what impacts that is where rates have gone, rental rates have gone since that period of time.

Speaker Change: So you could have a larger movement in cap rates, but it's moderated by the growth in market rent and the growth in NOI. So I just want to make that clear, because I've seen that in certain analyses, where that doesn't take into account how rents have moved from year to year.

Speaker Change: It certainly feels like there's been a stabilization, like anything out on the CalPRIT scale, but that's fair, I think we have, we are seeing sort of the peak.

Kevan Gorrie: We are seeing sort of the peak of the expansion in cap rates, as Himanshu has mentioned, and where the curve goes from here all depends, you know.

Speaker Change: on the expansion on the cap rates, as Simachi has mentioned.

Kevan Gorrie: The current goes from here all the time. Yeah. Yeah. Yeah.

Speaker Change: when curirk goes from here

Himanshu Gupta: Fair enough. Great color. And thank you guys, and I'll turn it off.

Himanshu Gupta: Fair enough, great color, and thank you guys, and I'll turn back.

Speaker Change: times now.

Speaker Change: Yeah.

Operator: No more questions to launch it; that's a lie.

Kevan Gorrie: No more questions for lunch; it was a lot of fun.

Speaker Change: Fair enough. Great color, and thank you guys, and I'll turn it back.

Speaker Change: No more questions on Lunch Hit, that's a lie. Yeah, we can enjoy Lunch Hit.

Pammi Bir: Thank you. The next question will come from Pammi Bir, with RBC Capital Markets.

Operator: Thank you. The next question will come from Pammi Bir, with RBC Capital Markets.

Speaker Change: Thank you. Our next question will come from Pammi Bir with RBC Capital Markets.

Pammi Bir: Wow, sorry. I look like I might be able to squeeze one in here. Kevin, I wanted to come back to your comments on capital deployment. You mentioned, you know, you wouldn't hesitate if the right opportunities surfaced, but I'm curious, where would you want to raise your exposure, either from an acquisition standpoint or if you were prepared to kickstart a development?

Pammi Bir: Wow, sorry, I look like I might be able to squeeze one in here. Kevan, I wanted to come back to your comments on capital deployment. You mentioned, you know, you wouldn't hesitate if the right opportunities surfaced, but I'm curious, where would you want to raise your exposure, either from an acquisition standpoint or if you were prepared to kickstart a development?

Pammi Bir: Wow, sorry, I look like I might be able to squeeze one in here. Kevan, I wanted to come back to your comments on the capital deployment. You mentioned, you know, you wouldn't hesitate if the right opportunities surfaced, but I'm curious, where would you want to raise your exposure, either from an acquisition standpoint or if you were prepared to kickstart a development?

Kevan Gorrie: I wouldn't want to name a specific market, Pommy, but I would point out, as we have discussed in the past certain markets, the GTA continues to be a really important market for us. Now, we have not seen anything at a pricing level that's really compelling for us, but this is a market we will continue and always continue to focus on. There are select markets in Europe and the U.S. that we like and have mentioned as target markets in the past that we're paying attention to if the right deal comes along. They would be new markets for us, we have discussed them in the past, but they would not necessarily be in existing markets right now. I hope that that helps.

Kevan Gorrie: I wouldn't want to name a specific market, Pommy, but I would point out, I think we have discussed in the past certain markets, the GTA continues to be a really important market for us. Now, we have not seen anything at a pricing level that's really compelling for us, but

Speaker Change: This is a market we will continue and always continue to focus on. There are select markets in Europe and the U.S. that we like and have mentioned as target markets in the past that we're paying attention to if the right deal comes along.

Kevan Gorrie: That we're paying attention to. If the right deal comes along, they would be new markets for us. We have discussed them in the past, but they would not necessarily be in existing markets right now. I hope that helps.

Speaker Change: They would be new markets for us. We have discussed them in the past, but they would not be necessarily in existing markets that we're in today.

Pammi Bir: Yes, no, that's helpful. Okay, last one. I just wanted to clarify that 96% to 97% committed occupancy that you mentioned, you expect to get to by year end. Does that assume the release of that bankruptcy in Ohio? And as we think about next year, any larger known vacancies coming back to you?

Pammi Bir: Yep, no, that's helpful. Okay, last one. I just wanted to clarify that 96 to 97% committed occupancy that you mentioned, you expect to get to by year end. Does that assume the release of that bankruptcy in Ohio? And as we think about next year, any larger known vacancies coming back to you?

Speaker Change: I hope that helps.

Speaker Change: Yep. No, that's helpful. Okay, last one. I just wanted to clarify.

Speaker Change: That 96 to 97% committed occupancy that you mentioned, you know, you expect to get to by year-end. Does that assume the releasing of that bankruptcy in Ohio, and as we think about next year, any larger known vacancies coming back to you?

Kevan Gorrie: No, it doesn't. It's not predicated on a lease of the Ohio asset and for, I'm sorry, what was the second part of the question? 2025? Yeah.

Kevan Gorrie: No, it doesn't. It's not predicated on a lease of the Ohio asset and for... I'm sorry, what was the second part of the question? 2025? Yeah.

Speaker Change: No, it doesn't. It's not predicated on a lease up of the Ohio asset and for, I'm sorry, what was the second part of the question? 2025? Yeah, any known vacancies that might be coming back to you next year.

Pammi Bir: Yeah, any known vacancies that might be coming back to you next year? Let me know what I can say.

Kevan Gorrie: Unknown vacancies? No, not at all.

Speaker Change: Let me know what I can say.

Speaker Change: Known vacancies? No, not at this time.

Pammi Bir: Great. Okay, I'll turn it back on.

Speaker Change: Great. Okay, I'll turn it back.

Operator: Thank you. And we do have a follow-up question from Sam Damiani with TD Cowan. Please go ahead.

Speaker Change: Thank you. And we do have a follow-up question from Sam Damiani with TD Cowan. Please go ahead.

Sam Damiani: Thank you very much. I just wanted to maybe tie together some commentary that we've heard over the last hour. We've got pretty good renewal spreads next year. We've got a pretty short watch list of tenants that might give back space. You're talking about higher retention, without putting a number to it, potentially next year. Is there any reason we shouldn't expect same property NOI growth to notably accelerate in 2025 versus 20

Sam Damiani: Thank you very much. I just wanted to maybe tie together some of the commentary that we've heard over the last hour.

Sam Damiani: We've got pretty good renewal spreads next year. We've got a pretty short watch list of tenants that might give back space. You're talking about higher retention without putting a number to it, potentially, next year. Is there any reason we shouldn't expect same property NOI growth to notably accelerate in 2025 versus 2024?

Speaker Change: You're talking about high retention without putting a number to it, potentially next year. Like, is there any reason we shouldn't expect same property NOI growth to notably accelerate in 2025 versus 2024?

Kevan Gorrie: I think the way I would put that, Sam, is I think I was asked this question last year, and I'll just repeat my answer to it, and I don't think anything has changed. At this point, I think last year, 2023, I said that I expected St. Croix P&O I to accelerate through 2025. So 2024 should be higher than 2023, and 2025 should be higher than 2024. I don't think anything has changed in our expectations on that basis.

Kevan Gorrie: I think the way I would put that, Sam, is I think I was asked this question last year, and I'll just repeat my answer to it, and I don't think anything has changed. At this point, I think last year, 2023, I said that I expected Samprop NOI to accelerate through 2025, so 2024 should be higher than 2023, and 2025 should be higher than 2024. I don't think anything has changed in our expectations on that basis.

Sam Damiani: I think the way I would put that, Sam, is I think I was asked this question last year, and I'll just repeat my answer to it, and I don't think anything has changed. At this point, I think last year, 2023,

Sam Damiani: I said that I expected Sandcrop NOI to accelerate through 2025. So 2024 should be higher than 2023 and 2025 should be higher than 2024. I don't think anything has changed in our expectations on that basis.

Sam Damiani: That's perfect. Thank you very much.

Operator: Thank you. At this time, there are no further questions in queue. I will turn the call back to Kevan Gorrie for any additional or closing remarks.

Sam Damiani: Thank you. At this time, there are no further questions in queue. I will turn the call back to Kevan Gorrie for any additional or closing remarks.

Kevan Gorrie: All right. Thank you, moderator. Just on behalf of the management team and trustees here at Granite, thanks again for being part of our Q2 call, and we look forward to touching base with you again in November for our Q3 call. Thank you.

Kevan Gorrie: Thank you, moderator. Just on behalf of the management team and trustees here at Granite, thanks again for being part of our Q2 call, and we look forward to touching base with you again in November for our Q3 call.

Kevan Gorrie: Thank you, moderator. Just on behalf of the management team and trustees here at Granite, thanks again for being part of our Q2 call. And we look forward to touching base with you again in November for our Q3 call. Thank you.

Operator: This does conclude today's conference call. You may now disconnect.

Speaker Change: This is a production of the Center for Contemporary Art in the United States. No part of this recording may be reproduced without the support of the Center for Contemporary Art in the United States.

Speaker Change: thank you for watching

Operator: Thank you for watching, and please Like, Subscribe, & Comment on where we head to next!

Speaker Change: www.graniterealestate.com

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