Q1 2025 Granite Real Estate Investment Trust Earnings Call

Yeah.

[music].

Sylvie: Good morning, my name is Sylvie, and I will be your conference operator today.

Sylvia: Good morning, My name is Sylvia and I will be your conference operator today at this time I would like to welcome everyone to granite REIT first quarter 2025, our results conference call.

Operator: At this time, I would like to welcome everyone to Granite REIT's first quarter 2025 results conference call. Note that all lines have been placed on mute to prevent any background noise.

Sylvia: All lines have been placed on mute to prevent any background noise. After the speakers' 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 one on your telephone keypad. If you would like to withdraw from the question to you. Please press star followed by the number two thank you.

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 one on your telephone keypad. And if you would like to withdraw from the question queue, please press star followed by the number two. Thank you.

Operator: Speaking to you today on the call this morning is Kevin Gorey, President and Chief Executive Officer, and Teresa Netto, Chief Financial Officer.

Kevin Gori: Speaking to you today on the call. This morning is Kevin Gori, President and Chief Executive Officer, and Theresa metal Chief Financial Officer, I will now turn the call over to Teresa to go all of a sudden advisories.

Teresa Netto: I will now turn the call over to Teresa Netto to go over certain advisories.

Teresa Netto: Thank you, Operator.

Theresa: Thank you operator, good morning, everyone before we begin todays call I'd 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 factors.

Teresa Netto: 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 GRANIT's material filed with the Canadian Securities Administrators and the U.S.

Theresa: Functions 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 are material factors and assumptions applied in making forward looking statements or information are discussed in granites materials filed with.

Theresa: 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 2020 for granite managements discussion and analysis for the year ended December 31, 24 filed on February 26, 2025 and for the quarter ended March 31.

Teresa Netto: Securities and Exchange Commission from time to time, including the risk factor section of its annual information form for 2024, GRANIT's management's discussion and analysis for the year ended December 31st, 2024, filed on February 26th, 2025, and for the quarter ended March 31st, 2025, filed on May 7th, 2025. So, Grant have posted Q1 2025 results in line with management's annual forecast and guidance, largely driven by strong NOI, favorable foreign exchange, and positive accretion from NCIB unit repurchases, partially offset by higher net interest expense. FFOA per unit in Q1 was $1.46, representing a 1 cent or 0.78% decrease from Q4 2024, and a 16 cent or 12.3% increase relative to the same quarter in the prior year.

Theresa: 2025 filed on May seven 2025.

Theresa: So granted posted Q1 'twenty 25 results in line with management's annual forecasting guidance, largely driven by strong NOI favorable foreign exchange and positive accretion from NCI B unit repurchases, partially offset by higher net interest expense.

Theresa: And the Soviet Union in Q1 was $1.46 represented representing a one cent or <unk> 70 per cent increase decrease from Q4, 2024, and at 16% or 12, 3% increase relative to the same quarter in the prior year.

Teresa Netto: In Q4 2024, FFO included non-recurring items for the reversal of tax provisions, foreign currency gains on monetary items, capital tax savings, and a negative NCI adjustment, where if excluded, FFO per unit would have been $1.41. Therefore, Q1 2025 FFO per unit is $0.05 higher relative to a normalized Q4 2024. The growth in NOI this quarter is primarily derived from strong same-property NOI growth enhanced by double-digit leasing spreads along with the lease close-out revenue earned on a previously terminated US lease and a terminated lease in Utrecht, Netherlands totaling $0.8 million. In addition, Granite earned holdover rent from one tenant at a property in Indianapolis where the tenant will be vacating in Q2 for $0.2 million.

Theresa: In Q4 2024 episodes included nonrecurring items for the route for the reversal of tax provisions foreign currency gains on monetary items capital tax savings and a negative NCI G. NCI adjustment, where if excluded episodes per unit would have been $1.40 watt there.

Theresa: Therefore, Q1 2025 as I spoke of unit its five cents higher relative to a normalized Q4 'twenty for.

Theresa: The growth in NOI. This quarter is primarily derived from strong same property NOI growth enhanced by double digit leasing spreads along with the least closeout revenue earned on our previously terminated U S lease and a terminated lease in Utrecht, Netherlands totally $1 8 million in.

Theresa: In addition granted earned holdover rent from one tenant at a property in Indianapolis, where the tenant will be vacating in Q2 for <unk> 2 million.

Teresa Netto: NOI growth was further enhanced by foreign exchange as the US dollar and the euro were 2.6% and 1.2% stronger, respectively, in comparison to Q4. As has been previously communicated, in Q2, we have two known vacancies commencing in Atlanta and Indianapolis. These vacancies, in addition to the end of holdover rent previously mentioned and no further closeout fees to be recognized, we are forecasting lower NOI in the second quarter relative to Q1, with NOI recovering through the second half of the year, mostly as a result of releasing spreads on maturing leases. AMFO per unit in Q1 2025 was $1.41, which is 16 cents higher relative to Q4, and 19 cents higher relative to the same quarter last year, with the increase in Q4 mostly tied to lower capital expenditures, leasing costs, and tenant allowances due to timing of leasing turnover and seasonality.

Theresa: <unk> growth was further enhanced by foreign exchange as the U S dollar and the Euro were two 6% at 1.2% stronger respectively in comparison to Q4.

Theresa: It has been previously communicated in Q2, we have two known vacancies commencing in Atlanta and Indianapolis. These.

Theresa: These vacancies in addition to the end of holdover rent previously mentioned and no further closeout fees to be recognized we are forecasting lower NOI in the second quarter relative to Q1 with N O Y recovering through the second half of the year, mostly as a result of re leasing spreads are maturing leases.

Theresa: And so per unit in Q1, 2025 was $1 41, which is <unk> 16 cents higher relative to Q4, and 19 cents higher relative to the same quarter last year with the increase in Q4, mostly tied to lower capital expenditures leasing costs and tenant allowances.

Theresa: Due to timing of leasing turnover and seasonality.

Teresa Netto: AFFO-related capital expenditures incurred in the quarter totaled only $0.7 million, which is a decrease of $10.6 million over Q4 and $0.7 million over the same quarter last year. For 2025, we continue to expect AFFO-related capital expenditures to come in approximately $40 million, unchanged from our previous estimate. Same property NOI for Q1 was strong relative to the same quarter last year, increasing 4.7% on a constant currency basis and 9.3% when foreign currency effects are included. Same property NOI was driven primarily by CPI and contractual rent increases across all Granite's regions, positive leasing spreads, lease renewals primarily in the U.S.

Theresa: <unk> related capital expenditures incurred in the quarter totaled totaled only $7 million, which is a decrease of 10.6 million over Q4 and $7 million over the same quarter last year.

Theresa: For 2025, we continue to expect a ethical related capital expenditures to come in approximately $40 million unchanged from our previous estimates.

Theresa: Same property NOI for Q1 was strong relative to the same quarter last year, increasing four 7% on a constant currency basis and nine 3% when foreign currency effects are included.

Theresa: Same property NOI was driven primarily by CPI and contractual rent increases across all granite regions positive leasing spreads lease renewals, primarily in the U S and Canada, and Austria and the lease commencement of four completed development and expansion projects in Canada. The U S in Netherlands.

Teresa Netto: and Canada and Austria, and the lease commencement of four completed development and expansion projects in Canada, the U.S. and Netherlands. For 2025, we continue to expect constant currency, same property and a Y based on a four quarter average to come in within the range of four and a half to six percent, which excludes any potential impact from disposition activity, which Kevin will elaborate further on. GNA in the quarter was 8.5 million, which is 1.2 million lower than the same quarter last year and 0.2 million higher than Q4. The slight increase relative to Q4 includes 7 million unfavorable fair value adjustment to non-cash compensation liabilities that was fully offset by the reduction in corporate restructuring costs incurred in Q4 related to the unstapling of our stapled unit structure.

Theresa: For 2025, we continue to expect constant currency same property NOI based on a four quarter average to come in within the range of four 5% to 6%, which excludes any potential impact from disposition activity, which Kevin will elaborate further on.

Theresa: G&A in the quarter was $8 5 million, which is $1 2 million lower than the same quarter last year, and <unk> 2 million higher than Q4, the slight increase relative to Q4 includes the $7 million unfavorable fair value adjustment to noncash compensation liabilities that was fully offset by the reduction in corporate restructuring cost in.

Theresa: In Q4 related to the unstable.

Theresa: With unit structure.

Teresa Netto: Both do not affect Granite's FFO and AFFO metrics. G&A expenses that do impact FFO and AFFO were approximately $0.2 million higher than Q4, which is mostly related to the absence of a $0.5 million capital tax refund, which we recorded in Q4. For 2025, we 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 lower in Q1 relative to Q4 by $2.2 million while interest income decreased by $2.4 million as compared to Q4, resulting in an increase to net interest expense. The reduction in interest expense was primarily driven by several refinancing activities previously announced.

Theresa: Both do not affect our granted <unk> and adds a BOE metrics G&A expenses that do impact episodes episodes were approximately <unk> 2 million higher than Q4, which is mostly related to the absence of a <unk> 5 million capital types.

Theresa: Refund, which we recorded in Q4.

Theresa: For 2025, we do we continue to expect G&A expenses that impact <unk>, and <unk> of approximately $10 million per quarter or roughly 7% of revenues.

Theresa: Interest expense was lower in Q1 relative to Q4 by two point million point.

Theresa: Two millions rate, while interest income decreased by $2 4 million as compared to Q4, resulting in an increase to net interest expense. The reduction in interest expense was primarily driven by several refinancing activity as previously announced one was the refinancing of the 2025 term loan with a 2031 debentures.

Teresa Netto: One was the refinancing of the 2025 term loan with the 2031 debentures at a lower rate, which we closed on October 4th, resulting in savings of $0.5 million. The repayment of the 2024 term loan on December 19th, contributing $0.2 million in savings. And the refinancing of the December 2026 term loan with our 2026 debentures at a lower rate in February, yielding net savings of $0.2 million after accounting for accelerated amortization of deferred financing costs of $0.2 million. These savings were partially offset by a $0.7 million net increase in interest expense due to the strengthening of the U.S.

Theresa: At a lower rate, which we closed on October 4th resulting in savings of <unk> 5 million. The repayment of the 2024 term loan on December 19th contributing $2 million in savings and the refinancing of the December 2026 term loan with our 2026 debentures at a lower rate in February are yielding.

Theresa: Yielding net savings of <unk> 2 million after accounting for accelerated accelerated amortization of deferred finding deferred financing costs of <unk> 2 million.

Theresa: These savings were partially offset by <unk> 7 million net increase in interest expense due to the strengthening of the U S dollar and the euro relative to grant its foreign denominated debt.

Teresa Netto: dollar and the euro relative to Granite's foreign-denominated debt. The decrease in interest income was due to interest earned in Q4 from the temporary investment of net proceeds of our October 29 debenture. Granite's weighted average cost of debt is currently 2.67% and the weighted average debt to maturity is 4.1 years. With Granite's next maturity window in September, 2026, we continue to expect interest expense to remain stable over the next approximate 18 months at roughly 23.5 million per quarter, barring any new transactions. For income tax, Q125 current income tax was $2.5 million, remaining relatively flat as compared to the prior year, and $1.6 million higher as compared to Q4.

Theresa: The decrease in interest income was due to interest earned in Q4 from the temporary investment a net proceeds of our October 29 debentures.

Theresa: Granted the weighted average cost of debt is currently 267% and a weighted average debt to maturity is four one years with granted next maturity window. In September 2026, we continue to expect interest expense to remain stable over the next approximate 18 months at roughly $23 5 million per quarter barring any new.

Theresa: New transactions.

Theresa: For income tax Q1, 'twenty five current income taxes, $2 5 million remaining relatively flat as compared to the prior year and $1 $6 million higher as compared to Q4 in Q1 granted did recognize a favorable credit relating to German withholding tax reserve of $2 million pertaining to a prior tax year.

Teresa Netto: In Q1, Granite did recognize a favorable credit relating to German withholding tax reserves of $0.2 million pertaining to a prior tax year. The increase compared to Q4 is primarily due to the $1.6 million credit to current income taxes recorded in Q4, resulting from the reversal of prior year tax provisions. For Q25, we are expecting current income taxes to remain at approximately $2.7 million per quarter. In terms of our 2025 estimates, Granite is keeping guidance unchanged. Granite's current outlook does not significantly change assumptions relating to new leasing of vacant space, which continues to be projected primarily later in the second half of 25, and also reflects our year-to-date financing and NCIB activity.

Theresa: The increase compared to Q4 is primarily due to the $1 6 million credit to current income taxes recorded in Q4.

Theresa: <unk> from the reversal of prior tax prior year tax provisions for 25, we are expecting current income taxes to remain at approximately $2 7 million per quarter in.

Theresa: In terms of our 2025 estimates we granted is keeping guidance unchanged granted current outlook does not significantly change assumptions relating to new leasing of vacant.

Theresa: Vacant space, which continues to be projected primarily later in the second half of 'twenty five and also reflects our year to date financing and NCI activity.

Teresa Netto: We continue to forecast FFO per unit within the range of $5.70 to $5.85, representing an approximate 5% to 8% increase over 24. For AFFO per unit, we are continuing to forecast the range of 4.80 to 4.95, representing a change of minus 1% to 2% over 24 driven by the higher maintenance capital expenditures we communicated in the prior quarter relative to the prior year. Granite's forecast was updated this quarter to assume a range of US dollar to CAD of $137 to $142 and a range of EuroCAD of $152 to $158. Granted, we'll continue to provide updates on our guidance as warranted based on leasing activity and any other changes.

Theresa: We continue to forecast if appropriate unit within the range of $5 70 to $5 85, representing an approximate 5% to 8% increase over 24 four.

Theresa: <unk> per unit, we are continuing to forecast the range of $4 eight zero to $4 95, representing a change of minus 1% to 2% over 24, driven by the higher maintenance capital expenditures, we've communicated in the prior quarter relative to the prior year.

Theresa: Granted forecast was updated this quarter to assume a range of U S. Dollar to CAD 137 to $1 42, and a range of Euro CAD two.

Theresa: Of $1 52 to $1 58.

Theresa: Granite will continue to provide updates on our guidance as warranted based on leasing activity and any other changes.

Teresa Netto: As far as our balance sheet, it's comprised of total assets of $9.6 billion at the end of the quarter. It was positively impacted by approximately $83.5 million of translation gains on our foreign-based investment properties, primarily due to the 4.1 increase in the spot euro exchange rate relative to Q4, partially offset by movement in the fair valuation of Grant's portfolio of a net fair value loss of $48.2 million. Our overall weighted average cap rate is 5.4% on in-place NOI, which increased nine basis points from the end of Q4 and has increased 15 basis points since the same quarter last year.

Theresa: As far as our balance sheet is comprised of total assets of $9 6 billion at the end of the quarter. It was positively impacted by approximately 83 and a half million of translation gains on our foreign based investment properties, primarily due to the $4 one increase in the spot Euro exchange rate relative to Q4, partially offset by.

Theresa: Movement in the fair value valuation of grants portfolio, the net fair value loss of $48 2 million.

Theresa: Our overall weighted average cap rate of five 4% on in place NOI, which increased nine basis points from the end of Q4 and has increased 15 basis points since the same quarter last year.

Teresa Netto: Net leverage at the end of the quarter was 32% and net debt to EBITDA was 6.8 times, which remained consistent relative to Q4 and lower than Q1 2024, primarily as a result of an Our liquidity is approximately $1.1 billion, representing cash on hand of about $120 million and the underwrought operating line of $946 million. As of today, Granite has $52 million drawn on the credit facility and $2.4 million in letters of credit outstanding. We do expect to repay the outstanding balance on the credit facility by the end of 2025 with free cash flow from operations barring any other major transactions.

Theresa: Net leverage at the end of the quarter was 32% and net debt to EBITDA was six eight times, which remained consistent relative to Q4 and lower than Q1 2024, primarily as a result of NOI growth.

Theresa: Our liquidity is approximately $1 1 billion, representing cash on hand of about $120 million and the Undrawn operating line of $946 million as of today granted has $52 million drawn on.

Theresa: Drawn on the credit facility and $2 $4 million in letters of credit outstanding.

Theresa: We do expect to repay the outstanding balance on the credit facility by the end of 2025 with free cash flow from operations barring any other major transactions.

Teresa Netto: We've continued to be very active on our NCIB, and on a year-to-date basis in 2025, we have purchased just over 1.4 million units at an average cost of $66.60 for a total consideration of $95.1 million, and I'll turn the call over to Thanks, Teresa.

Kevin Gori: We continue to be very active honor and CIB and on a year to date basis. In 2025, we have purchased just over one 4 million units at an average cost of $66 60 for a total consideration of $95 1 million ill now turn the call over to Kevin.

Kevin Gori: Thanks Theresa.

Kevin Gorey: As usual, I'll keep my prepared comments brief, preferring, of course, to engage in dialogue during the question period. As mentioned, results for the quarter came in slightly ahead of expectations, driven probably by FX gains and one-time items that Teresa highlighted. I also think it's worthwhile at this point to elaborate on Theresa's comments regarding FFO and NOI moderating in the second quarter. Just to say that the reduction was as expected and is due to the timing of the expected move out at the end of the first quarter or close to it, and the fact that the bulk of our renewal increases, which is a key driver of our same property, same property NOI growth in 2025, occur late in the third quarter, which of course should position as well for continued NOI growth into 2026.

Kevin Gori: As usual I'll keep my prepared comments brief referring of course to engage in dialogue during the question period.

Kevin Gori: As mentioned the results for the quarter came in slightly ahead of expectations driven probably by.

Kevin Gori: FX gains and one time items that <unk> highlighted.

Kevin Gori: I also think it's worthwhile at this point to elaborate on <unk> comments regarding ethical went out NOI moderating in the second quarter.

Kevin Gori: Just to say that the reduction was as expected and is due to the timing of expected move outs at the end of the first quarter or close to it and the fact that the bulk of our renewal increases which is a key driver of our same property same property NOI growth in 2025 occurred late in the third quarter.

Kevin Gori: Which of course should position us well for continued NOI growth into 2026.

Kevin Gorey: As a result, NOI and FFO are expected to recover in a third and fourth quarters, and more importantly, we are maintaining our guidance on all target KPIs, including FFO and AFFO per unit, as Teresa mentioned, same property NOI growth of four and a half to six percent. a renewal rate of 80% to 85% on our 2025 expiries, at a weighted average rate increase of 35% approximately, and committed vacancy of 95.5% to 96% at the end of the year. I should also mention, once again, that one should not pay too much attention to the renewal increase related to expiries in a particular quarter.

Kevin Gori: As a result, the NOI in our portfolio are expected to recover in the third and fourth quarters and more importantly, we are maintaining our guidance on all target kpis, including <unk> <unk> per unit of <unk> mentioned.

Kevin Gori: Same property NOI growth of four 6%.

Kevin Gori: A renewal rate of 80% to 85% on our 2025 expires at a weighted average rate increase of 35% approximately and committed vacancy of 95 and a half the 96% at the end of the year.

I should also mentioned once again.

Kevin Gori: One should not pay too much attention to the renewal increase related to expiries in a particular quarter.

Kevin Gorey: The 10% increase was primarily driven by a contractual renewal increase at one of our US properties that we've actually discussed on previous calls. But as I have said, the increase can fluctuate significantly from quarter to quarter and does not necessarily signal a movement in the spread between market and in-place rents in the portfolio. On that, year-to-date, the team has renewed 78% of our 2025 expiries at a weighted average increase of 48%. And as mentioned, we expect to achieve or exceed our guidance of 30% to 35% for 2020. As an update on the leasing markets, we don't yet have data on our European markets, but I can supply some key statistics in our North American markets.

Kevin Gori: The 10% increase was primarily driven by a contractual renewal increase at one of our U S properties that we've actually discussed on previous calls.

Kevin Gori: But as I have said the increase can fluctuate significantly from quarter to quarter and does not necessarily signal a movement in the spread between market and in place rents in the portfolio.

Kevin Gori: On the year to date the team has renewed 78% over 2025 expires.

Kevin Gori: Weighted average increase of 48% and as mentioned, we expect to achieve or exceed our guidance of 30% to 35% for 2025.

Kevin Gori: As an update on the leasing markets, we don't yet have data on our European markets, but I can supply some key statistics in our North American markets.

Kevin Gorey: Dallas and Savannah led the U.S. in net absorption in the first quarter at four and 3.9 million square feet respectively, and net absorption turned positive in the GTA at just over 2 million square Vacancy rates are up in roughly half of our markets and flat or slightly down in the others. A new supply is now close to historical low. Rental rate growth continued to be strongly positive in a number of our markets, including Nashville at 17%, Houston at 11%, Dallas and Chicago at 7%, and the largest year-over-year declines in market rates occurred in the GTA and Savannah at roughly 5 and 3% per second.

Speaker Change: Allison Savannah led the U S and net absorption in the first quarter at four and $3 9 million square feet, respectively, and net absorption turn positive in the GTA just over 2 million square feet.

Speaker Change: Vacancy rates are up and roughly half of our markets and flat or slightly down and the others.

Speaker Change: New supply is now close to historical lows.

Speaker Change: Rental rate growth continued to be strongly positive in a number of our markets, including Nashville was 17%.

Speaker Change: Houston at 11%, Dallas, and Chicago at 7% and the largest year over year declines in market rates occurred in the GTA in Savannah at roughly 5% and 3% respectively.

Kevin Gorey: Before I speak about strategy, I'm sure there'll be questions on tariffs and the potential impact on our portfolio, which we're happy to answer and engage in a dialogue on the subject. But I did want to preface the discussion with a few comments on our portfolio, perhaps Magnus specifically, and we're really focusing on the Canadian part of our portfolio. We have spoken with several tenants of various sizes. And I think a common theme we are hearing, firstly, is that there is not a firm understanding of the tariffs and their impact on businesses. And so most are continuing to operate their business in normal course.

Speaker Change: Before I speak about strategy I'm sure there'll be questions on tariffs and the potential impact on our portfolio, which we're happy to answer and engage in the dialogue on the subject.

Speaker Change: But I did want to preface the discussion with a few comments on our portfolio of cops Magna, specifically and we're really focusing on the Canadian part of our portfolio.

Speaker Change: We have spoken with several tenants of various sizes.

Speaker Change: And I think a common theme. We're hearing firstly is that there is not a firm understanding of the tariffs and their impact on businesses and so most or continue to operate their business in normal course.

Kevin Gorey: and instead implementing minor changes to their operations to preempt the impact of tariffs where they can, and this particularly applies to smaller tenants. Magnus specifically, and as I think they discussed in their call, the complexity of the existing supply chain. And the cost to increase or move capacity would be extremely significant and take years to. Conversely, we expect Magnet to continue to operate their Canadian business as they have and take any necessary steps to optimize their compliance with the CUSMA arrangements. One last comment on our Magna assets is to highlight the fact that we dispose of all of our Magna assets that were located in secondary markets in Canada.

Speaker Change: Instead implementing minor changes to their operations to Korea.

Speaker Change: Type of tariffs, where they can in this particularly applies to smaller tenants.

Speaker Change: I meant specifically that I think we discussed on the call the complexity of the existing supply chain and the cost to increase or move capacity would be extremely significant and take years to implement.

Speaker Change: Conversely, we expect to continue to operate their Canadian business as they have in place.

Speaker Change: Any necessary steps to optimize their compliance with the customer arrangement.

Speaker Change: One last comment on our Mega assets is to highlight the fact that we dispose of all of our Mega assets.

Speaker Change: That were located in secondary markets in Canada. This included Windsor in Woodstock over the past few years.

Kevin Gorey: This included Windsor and Woodstock over the past few years. our existing Magnet assets are all located in prime notes in the GTA market, including Branson, Mississauga, Vaughn, and Milton, and we believe would remain in demand if Magnet were ever to choose not to renew their lease.

Speaker Change: Our existing mainland assets are all located in prime nodes in the GTA market, including Branson Mississauga.

Speaker Change: And Milton and we believe would remain in demand of magna wherever to choose not to renew their lease.

Kevin Gorey: I'll end my prepared comments on strategy. We now plan to be active on the capital allocation front. In addition to funding our Houston development project, as Teresa mentioned, we have repurchased roughly 1.4 million granted units for 95 million in financial consideration, and we expect to continue to be active on our NCIB program. The team has also identified two acquisition opportunities in our current target markets in the U.S. and Europe, totaling roughly 100 million Canadians. And to fund this potential deployment, we have identified roughly $100 to $200 million in disposition targets in Canada, the U.S. and Europe that we will be focusing on over the next few quarters.

Speaker Change: I'll end my prepared comments on strategy.

Speaker Change: We now plan to be active on the capital allocation front in.

Speaker Change: In addition to funding our Houston development project as Teresa mentioned, we repurchased roughly $1 4 million granted units for $95 million and financial consideration and we expect to continue to be active on our NCI V program.

Speaker Change: The team has also identified two acquisition opportunities and our current target markets in the U S and Europe totaling roughly $100 million Canadian.

Speaker Change: And to fund this potential deployment, we have identified roughly $100 million to $200 million and disposition targets in Canada. The U S and Europe that we will be focusing on over the next few quarters.

Operator: And on that operator, I will open up the line for questions. Thank you, sir. At this time, I would like to remind everyone in order to ask a question, please press star and the number one on your telephone keypad. We'll pause for just a brief moment to compile the Q&A roster.

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

Speaker Change: Thank you Sir.

Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a brief moment to compile the Q&A roster.

Mark Rothschild: And your first question will be from Mark Rothschild at KennaCord. Please go ahead, Mark. Thanks. Good morning. Everyone. Kevin, you get some comments about. tariff capital. strategy.

Speaker Change: And your first question will be from Mark Rothschild Canaccord. Please go ahead Marc.

Mark Rothschild: Thanks, Good morning, everyone.

Kevin Gori: Kevin you gave some comments about.

Speaker Change: The impact of tariffs and our capital allocation strategy I'm, just curious to what extent are you thinking about the different regions you operate differently with what has changed the world, particularly over the past couple of months.

Kevin Gorey: I'm just curious, to what extent are you thinking about the different regions you operate in differently with what has changed the world, particularly over the past... It's a great question, Mark, and I don't think that tariffs are going to have. I would say a. a very large view in the long-term of where we're looking to invest. For example, the GTA is one of our largest single markets, if not the single largest market in our portfolio. We would like to continue to grow in this market, but I think being patient and understanding what the final view of tariffs looks like makes some sense.

Speaker Change: Absolutely Great question, Mark and I don't think that tariffs are going to have.

Speaker Change: I would say.

Speaker Change: It is very large view in the long term, where we're looking to invest for example, the GTA is one of our largest single markets if not the single largest market in our portfolio, we would like to continue to grow in this market.

Speaker Change: But I think being patient and understanding what the final view of tariffs looks like makes some sense.

Kevin Gorey: And as we look at putting money out the door, I think we have this market in Canada, which is the target market for us. We have select markets in the US and select markets in Europe. So we'll continue to monitor the situation, but I don't think tariffs themselves will have a material impact on the long-term view of assets and markets.

Speaker Change: And as we look out.

Speaker Change: Putting your money out the door I think we have this market in Canada, which is the target market for US we have select markets in the U S and select markets in Europe. So we will continue to monitor the situation, but I don't think tariffs themselves will have a.

Speaker Change: Material impact on our long term view of assets and markets.

Kevin Gorey: Okay, great, thanks. And maybe just one more. There is a natural hedge to the foreign exchange when you have mortgages on the specific properties. And there have been times when it's been very advantageous to have the debt in Europe. I'm just curious, you know, with the currency having, you know, it's been maybe more volatile of late or the past year or so. Do you think differently about the way you. approach hedging the income that you generate. Mark, I don't think so. I think like we've always taken the view that we will seek out the lowest cost of debt and place debt there, and that's why we've maximized certainly our European-based debt.

Speaker Change: Okay, great. Thanks, and maybe just one more.

Speaker Change: So there is a natural hedge.

Speaker Change: Foreign exchange when you have mortgages on.

Speaker Change: The specific properties and there have been times when it's been very advantageous to have the debt in Europe I'm, just curious now with the currency having been maybe more volatile of late over the past year.

So do you think differently about the way you.

Speaker Change: Approach hedging income that you.

Speaker Change: Generate in different regions.

Speaker Change: Okay.

Mark Rothschild: Mark I don't think so I think like we've always taken the.

Mark Rothschild: The view that we will seek out the lowest cost of <unk>.

Speaker Change: Debt and place that there and that's why we've maximized.

Certainly our European based that Europe still is our lowest cost option.

Kevin Gorey: Europe still is our lowest cost option of about like 40 basis points relative to Canada. So I think that is sort of the main driver as opposed to trying to get a pure hedge of assets versus debt. So we'll always just seek out the U.S. right now is much more costly than Canada, and we've maxed out in Europe. So if any incremental, at least today, barring any new investment in Europe, we would probably borrow in Canada.

Speaker Change: About like 40 basis points relative to Canada. So I think that is sort of the main driver as opposed to trying to get a pure hedge of assets versus debt will always just take out the U S. Right now is much more costly than Canada.

Speaker Change: So and we've maxed out in Europe, so if any incremental at least today barring any new investment in Europe would be we'd probably borrow in Canadian.

Mark Rothschild: Great. Thanks so much.

Speaker Change: Okay, great. Thanks, so much.

Operator: Thank you.

Sam Damiani: Next question will be from Sam Damiani at TD Cowan. Please go ahead, Sam. Well, thank you very much.

Speaker Change: Thank you next question will be from Sam Damiani of TD Cowen. Please go ahead Sam.

Sam Damiani: Well, thank you very much.

Kevin Gorey: Just to follow on Mark's question there on the sort of geographic preferences in this new post-tariff world we're in, I'm just curious, Kevin, what is the, I guess, the base assumption that you're making to not change your geographic sort of strategy? Well, I think it depends on the on the assets that you're looking to acquire. And if you're if you're asking if we felt like a business was exponentially exposed to tariffs, I think we'd have to take that into account as we're making an investment decision, Sam. But I think as we look at a long term in these markets and the viability and how they're going to perform, so say, for example, we look at Canada, do we believe that Toronto is going to is going to suffer in the long term from this and thereby the growth prospects would be lower and it would be something we wouldn't look at investing in.

Speaker Change: Just to follow on Mark's question, there on the sort of geographic preferences in this in this new proposed tariff will win.

Speaker Change: Curious given what is the I guess the base assumption that you're making to to not change your geographic sort of strategy at this time.

Speaker Change: Okay.

Speaker Change: Well I think it does.

Speaker Change: On the assets that Youre looking to acquire.

Speaker Change: Youre asking if we felt like the business was exponentially exposed to tariffs I think we'd have to take that into account as we're making an investment decision soon but.

Speaker Change: But I think as we look at it long term in these markets and the viability and how theyre going to perform so say for example, when we look at Canada do we believe the Toronto is going to the Toronto market is going to suffer in the long term from this and thereby the growth prospects would be lower and it would be something we wouldn't look at investing it is.

Kevin Gorey: It's part of the decision, but I don't think we're there where we think that this market is going to be permanently damaged by tariffs. We don't even know what exactly the end game is going to look like here. So it's something we take into account. But the point I'm trying to make is long term, we believe these markets are going to continue to perform well and we wouldn't discount them materially because of a short term shock from potential tariffs. If that answers the question.

Speaker Change: As part of the decision, but I don't think we're there where we think that.

Speaker Change: This market is going to be permanently damaged vitaros, we don't even know what exactly the endgame is going to look like here. So it's something we take into account.

Speaker Change: But the point I'm trying to make is long term. We believe these markets are going to continue to perform well and we wouldn't discount them materially because of its short term shock from potential tariffs if that answers. The question Tim Yeah. That's helpful. Thank you and then just on the guidance obviously.

Sam Damiani: Yeah, well, that's helpful. Thank you.

Kevin Gorey: And just on the guidance, there's obviously some minor moving parts here, but just curious. Is there a way you can quantify the change in timing of lease up that was sort of baked into the end result of leaving guidance? I don't think anything really changed. We were we were expecting this. So I think we mentioned on the I can't remember we mentioned this specifically on the last call, but we said 80 to 85 percent. So we were expecting 10, 15 to 20 percent to come back. We were expecting this in the timing. And so this is the end of the first quarter and early in the second quarter we have to move out.

Speaker Change: So minor moving parts here, but just curious.

Speaker Change: Uh huh.

Speaker Change: Either way you can quantify the change in.

Speaker Change: Timing of lease up that was sort of baked into the end result of leaving leaving guidance unchanged.

Speaker Change: I don't think anything really changed we were we were respecting. This so I think we mentioned on the I can't remember, we mentioned that specifically on the last call, but we said 80% to 85%. So we were expecting.

Speaker Change: 18% to 20% to come back.

Speaker Change: We were expecting this and the timing.

Speaker Change: And so this is the end of the first quarter and early in the second quarter, we have to move out that was expected.

Kevin Gorey: That was expected. And the rate increases that have been baked into it don't occur until the third quarter. And frankly, late in the third quarter. So this was expected. And I don't think it's anything's changed. And that's why we're maintaining our. Great.

Speaker Change: And the rate increases that has been baked into it don't occur until the third quarter and frankly late in the third quarter. So this was expected and I don't think anything's changed.

Speaker Change: And that's why we're maintaining our guidance.

Sam Damiani: And just last one for me is, you know, those two acquisitions you mentioned, are they land or income properties? Is there any other color you can provide on those two? Not too much color, but both are income-producing products. Leave it at that. Okay, thank you.

Speaker Change: Okay, Great and just last one from me is those two acquisitions you mentioned.

Speaker Change: Where we land or income properties is there any other color you can provide on almost two opportunities none too much color, but both are income producing properties.

Operator: I'll turn it back. Thank you.

Speaker Change: Okay. Thank.

Thank you I'll turn it back.

Fred Blondo: Next question will be from Fred Blondo at Green Street. Please go ahead, Fred. Thank you and good morning.

Speaker Change: Thank you next question will be from head Blondell of Green Street. Please go ahead Sir.

Head Blondell: Thank you and good morning, Ken.

Kevin Gorey: Kevin, just looking at your 2025 SP&Y guidance, 4.5 to 6%, can you remind us how you would qualify US, Europe, Austria and Canada's expected contribution from here? I don't think we spelled that out, Fred, and I'm not going to at this time. Fair enough, but can you tell us where do you see occupants in the U.S. heading from here? Oh, okay. You know what, maybe I shouldn't have that, but I think 95.5% and 96% overall by the end of the year, I think we would expect Canada to be around 98.5%, 98%. We expect Europe to be in that sort of 98% to 99%.

Head Blondell: Kevin just looking at your 2025 and span a wide guidance for five 6% can you remind us how you would qualify.

Head Blondell: Europe, ex Australia and Canada.

Head Blondell: The contribution from here.

Head Blondell: I don't think we spelled it out of breath.

Head Blondell: I'm not going to at this time.

Speaker Change: Okay fair enough, but can you.

Speaker Change: Tell us where do you see occupants in the U S heading from here.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: 95, 5% to 96% overall by the end of the year.

Speaker Change: I think we would expect Canada to be around 98% 90, 998%, we expect Europe to be in that sort of 90% to 99%. So if you do the math I think the U S would probably be in that sort of 93% to 94% by the end of the year.

Kevin Gorey: So if you do the math, I think the U.S. would probably be in that sort of 93% to 94% by the end of the year. Got it. Yeah, absolutely.

Fred Blondo: And last one for me, just in regards to your comments on Canada, what would be your scenario in regards to larger bay tenants for 2025? Do you feel like we could start seeing demand improving sometimes this year or it would still be a bit premature, notwithstanding the tariffs? Yeah, if you're talking about Canada specifically, I think it's a fair question. I think there were some large requirements that were in the market, in the TTA market earlier in the year, and I think they were put on pause because of the tariff. So I would say, I don't think, in the end, I don't think the large, I think that those requirements will resurface, but at the end of the day, I think it's really the uncertainty around the tariff, which is the greatest impediment right now.

Speaker Change: Yes, absolutely and last one for me.

Speaker Change: Regards to your comments on Canada, what would be your scenario in regards to larger date tenants four.

Speaker Change: 2025, do you feel do you feel like we could start seeing.

Speaker Change: Improving sometimes this year or.

Speaker Change: It would still be a bit premature notwithstanding the tourists of course.

Speaker Change: If youre talking about Canada, specifically.

Speaker Change: It's a fair question I think there were some large requirements that were in the market in the GTA market earlier in the year and I think they were put on pause because of the tariff. So I would say I don't think in the end I don't think that I think that those requirements will resurface.

Speaker Change: At the end of the day I think it's really the uncertainty around the tariffs, which has the greatest impediment right now.

Fred Blondo: So, and I think that there will be, I'm not sure how much opportunity, but certainly businesses will adapt and there may be some opportunities that come out of the new regime in certain markets like the TTA. So I expect demand in the large phase to resurface, maybe in the second half of this year, maybe in early 2026, once we have greater certainty on what the new rules are. That's great. Fair enough. Thank you.

And I think that there will be I'm not sure how much opportunity, but there's certainly businesses, we will adapt and there may be some opportunities that come out of the new regime.

Speaker Change: In certain markets like the GTA, So I expect demand in the large day to resurface.

Speaker Change: Maybe in the second half of this year, maybe in early 2026, once we have greater certainty on what the new rules.

Speaker Change: That's great fair enough. Thank you.

Speaker Change: Thank you next question will be from Himanshu Gupta.

Himanshu Gupta: Next question will be from Himanshu Gupta. Please go ahead.

Speaker Change: Please go ahead.

Kevin Gorey: Good morning. For Q2 expected, you know, vacancies in Atlanta and Indianapolis, what is the GLA or NOI associated with these vacancies? And then when do you expect to back So I would just say it's roughly 750,000 in total between the two. I don't want to get into specifics on the buildings. On one of them, we actually have a pretty active prospect on and actually we have an active prospect on both of those. I don't have timing for you on the releasing, but I would say we're encouraged by the activity on both of them. We are in discussions with the prospect on both spaces as we speak.

Speaker Change: And good morning.

Speaker Change: Q2 expected weekend season long haul in Indianapolis.

Speaker Change: The <unk> associated with these frequencies.

Speaker Change: And then when do you expect to <unk> the space.

Speaker Change: So I would just say its roughly 750000 in total between the two I don't want to get into the specifics on the buildings.

Speaker Change: On one of them, we actually have a pretty active prospect on.

Speaker Change: Actually we have an active prospect on both of those I don't have timing for you on the releasing but I would say we're encouraged by the activity on both of them, where we are in discussions with prospects on both spaces is we.

We speak.

Kevin Gorey: Thank you. And then, I mean, sticking to leasing for new leasing of the vacant space, I mean, where are we in the process? And do we still expect, you know, some leasing done in the second half of this year? Yeah, like I said, we are maintaining our guidance for occupancy to the end of this year, and I think that's based on the activity that we're seeing right now. I mean, the team is. working on leases on just over a million square feet right now of various sizes and various markets. And so we're pretty encouraged by the activity we're seeing.

Speaker Change: Okay. Thank you Paul and Tom.

Speaker Change: Meaning for.

Speaker Change: New leasing of the vacant space.

Speaker Change: I mean, the cross sells.

Speaker Change: And do we still have spoken with some leasing done the second half of this year.

Speaker Change: Yes, like I said, we are maintaining our guidance for occupancy to the end of this year and I think thats based on the activity that we're seeing right now I mean the team is.

Speaker Change: Working on leases on just over 1 million square feet right now.

Speaker Change: Various sizes and various markets.

Speaker Change: And so we're pretty encouraged by the activity we're seeing in on the other availabilities. We are encouraged by the number of tours and leasing activity in general So I would say I would just point to our maintaining our guidance for occupancy.

Kevin Gorey: And on the other availabilities, we are encouraged by the number of tours and leasing activity in general. So I would say, I would just point to our maintaining our guidance for occupancy at the end of this year based on the activity that we're experiencing at our assets and our availabilities in the markets in the US.

Speaker Change: The end of this year based on the activity that we're experiencing at our assets and our availabilities in the markets in the U S.

Kevin Gorey: All right, okay, that's helpful. And then I think Austria, some lease renewal got done for 2026 with Magna. Maybe, can you elaborate? And any discussions with Magna on the European footprint? I mean, any facilities, closures you have? No, in 2026 it was a planned renewal. I think their notice date was in the first quarter, so that has been renewed in Austria. That's 300,000 feet. And then I think, as you can see, there was an early renewal and a tenant in the U.S., 250,000 feet, that I think we did a few quarters ago. So now I think we have renewed roughly 10 percent of our 2026 expiries, one in the U.S.

Speaker Change: Okay. That's helpful.

Speaker Change: And then I think.

Speaker Change: Yeah.

Speaker Change: Meanwhile, got done hopefully 26 with Manuel maybe can you elaborate.

Speaker Change: Any discussions with melanoma beautiful Hudson.

Speaker Change: <unk> <unk> <unk>.

Speaker Change: No in 2026, it was a planned renewal I think their notice date was in the first quarter. So that has been renewed in Austria. That's 300000 feet and then I think as you can see there was an early renewal on a tenant in the U S 250000 feet that I think we did a few quarters ago.

Speaker Change: Now I think we have renewed roughly 10% over 2026 expire as one in the U S and one in Europe and one in Europe to your question list with a magnet facility and I will point out we actually had a decent sized magna renewal in the GTA that was exercised I think at the end of March.

Kevin Gorey: and one in Canada. And the one in Europe, to your question, was a Magna facility. And I will point out, we actually had a decent-sized Magna renewal in the GTA that was exercised, I think, at the end of March. I think it was March 31 or something like that. So the 2025 expiries related to Magna and the GTA have been both. I think both of those have been renewed.

Speaker Change: I think it was March 31, or something like that so the 2025 expires related to magna in the GTA have been both I think both of those have been renewed.

Kevin Gorey: Got it. Okay.

Speaker Change: Got it okay. Thank you.

Operator: Thank you.

Himanshu Gupta: Last question is on capital allocation. I think you mentioned this position of $100 to $200 million assets. How did you select your target disposition assets? I mean, are there some certain type of assets or certain. And will you consider some magnets as well? I think Magna would be part of it. I don't know if it's a major part of it, but certainly a part. We have non-core assets. It's quite a list of non-core assets that everyone would have in their portfolio. When you think about it, anything that does not match your strategy moving forward, moving forward, your investment strategy is probably non-core.

Speaker Change: Last question is on capital allocation.

Speaker Change: You mentioned that <unk> hundred million dollars losses.

Speaker Change: How did you select kiosks Basel disposition assets.

Speaker Change: I think some certain type of asset or some sort of market store.

Speaker Change: And welcome to those amendments.

Speaker Change: Physician.

Speaker Change: <unk> would be part of it I don't know if its a major part of it but certainly a part.

Speaker Change: Non core assets.

It's quite a bit.

Speaker Change: Quite a list of non core assets as everyone would have in our portfolio. When you think about it anything that does not match your strategy moving forward moving forward your investment strategy is probably non core.

Kevin Gorey: And so for us, we've identified, and part of this gets back to really the use of proceeds. You know, we've already deployed almost $100 million to the NCIV so far this year. And so we've identified clear, strategic, and in many ways, very accretive use of proceeds. So we could be putting $200 million to $250 million, maybe $300 million at the door this year. And so unless we decided to use our balance sheet, which is what we don't want to do really, we're willing to use it in the short term. But it's Teresa's point, the free cash flow, it is our expectations we'll be able to pay that off in a short period of time.

Speaker Change: And so for US we've identified and part of this gets back to really the use of proceeds.

Speaker Change: We have already deployed almost $100 million through the NCI V. So far this year and so we've identified clear strategic and in many ways very accretive use of proceeds that we could be putting $200 million to $250 million, maybe $300 million out the door. This year.

Speaker Change: And so unless we decided to use our balance sheet, which is what we don't want to do really we're willing to use it in the short term, but to <unk> point the free cash flow. It is our expectations will be able to pay that off in a short period of time.

Kevin Gorey: So it looks like rebalancing would be the best move for us. So there's a number of assets that we feel are not core to our strategy moving forward. And I think we'll be able to dispose of both in Canada and the U.S. and also in Europe.

Speaker Change: So it looks like rebalancing would be the best move for us. So there's a number of assets that we feel.

Speaker Change: Are not core to our strategy moving forward and I think we will be able to.

Speaker Change: Disposal.

Speaker Change: Both in Canada, and the U S and also also in Europe.

Kevin Gorey: And have you already put some of these assets in the market? I mean, any sense of like how the pricing could ship out to be there? I mean, in line, we're still in the most part, in the most part, we're still early days. But it's not uncommon in our sector if you have an asset that is non-core and goes vacant that you listed for sale or lease. We've done like our two availabilities in the GTA are listed for sale or lease, I believe. And so it could depend on who services first, the new tenant or a buyer of the asset at the right price.

Speaker Change: Have you already booked some of these assets in the market and then any sense of like how the pricing continues to be there.

Speaker Change: Language in the most part in the most part we're still early days, but it is not uncommon in our sector. If you have an asset.

Speaker Change: It is non core.

Speaker Change: And goes vacant that you listed for sale or lease we've done like our two availabilities in the GTA are listed for sale or lease I believe.

Speaker Change: And so it could depend on who services first the new tenant or a buyer of the asset at the right price. So that's very common in our sector. So thats one way. Another one is just looking at assets that are truly non core.

Kevin Gorey: So that's very common in our sector. So that's one way. Another one is just looking at assets that are truly non-core or not performing well, or we don't think we'll have the right return profile moving forward. Those are all assets we would identify for disposition. And listen $100 million to $200 million, I think, is kind of our expectation. It could grow depending on the sort of demand that we see in the market. And it will also depend on how how much capital and how swiftly we deploy that capital as well. So that will also impact the time.

Speaker Change: Or are not performing well or we don't think will have the right return profile moving forward. Those are all assets, we would identify for disposition.

Speaker Change: Listen.

Speaker Change: $100 million to $200 million I think is kind of our expectation it could grow.

Speaker Change: Pending on the sort of demand that we see in the market.

Speaker Change: It will also depend on how.

Speaker Change: How much capital how swiftly redeploy that capital as well so that will also impact the timing of that.

Himanshu Gupta: you and sorry one just last question here uh and i know you know you already responded on the tariff question there uh do you have any exposure to asian three pls in your Very few. I think we've got one in Houston that I know of. So I would say it would be less than two percent of our U.S. portfolio.

Speaker Change: Got it thank you.

Speaker Change: And then just last question here.

Speaker Change: And I know you know royalty responded on the wireless question Doug.

Speaker Change: Do you have any exposure to do Aegean TBS and your U S portfolio.

Speaker Change: Very few I think we've got one in Houston that I know, so I would say it would be less than 2% of our U S portfolio.

Operator: Okay, thank you guys and I'll turn.

Speaker Change: Okay. Thank you guys. Thank.

Speaker Change: Thank you.

Speaker Change: Sure.

Brad Sturgis: Next question will be from Brad Sturgis at Raymond James. Please go ahead. Hey there, just pulling on the lines of the capital recycling, just, I guess, as you execute on this plan, how do you think about it from like a cash flow perspective? I guess you've identified a few different uses with that. The combination of the development and acquisitions with that. Ultimately be neutral or accretive potentially the council, depending on how that sort of shakes out in terms of the. The allocation waiting or how should we think about the impact? Uh, at least initially. I would put it, I mean, we're using the line of credit as needed for the NCIB, and then we'll pay down the line of credit as capital becomes available.

Speaker Change: Thank you next question will be from Brad Sturges at the Raymond James. Please go ahead.

Brad Sturges: Hey, there.

Brad Sturges: Just following on the lines of the capital recycling just I guess as you execute on this plan how should we think about it from like a cash flow perspective, I guess you have identified a few different uses with that.

Brad Sturges: The combination of the NCI would be development and acquisitions would that ultimately be neutral or accretive potentially the cash flow depending on how that sort of shakes out in terms of the.

Brad Sturges: The allocation weightings or how should we think about the impact at.

Brad Sturges: At least initially.

Brad Sturges: I would put it.

Brad Sturges: We're using the line of credit as needed for the NCI and then we'll pay down our line of credit is.

Brad Sturges: As capital becomes available, but in terms of I think where you're going and correct me if I'm wrong. Brad is we're selling assets at a certain yield and buying assets at a certain yield I would say.

Kevin Gorey: But in terms of, I think, where you're going, and correct me if I'm wrong, Brad, is, you know, we're selling assets at a certain yield and buying assets at a certain yield. And I would say, I would say this way, I'm not suggesting that it would be accretive. I think we are willing to accept some dilution. to move into the markets and rebalance the portfolio in the way that we want. We are not, right now as we sit here today, we do not think that this will impact our guidance. We really don't think so. And so I think that that's a very positive story, to be honest with you, to be able to rebalance the portfolio and continue to grow the way that we are.

Brad Sturges: I'll say this way.

Brad Sturges: I'm not suggesting that it would be accretive I think we are willing to accept.

Brad Sturges: Some dilution.

Brad Sturges: To move into the markets and rebalanced the portfolio and the way that we want we're not right now as we sit here today, we do not think that this will impact our guidance, we really don't think so.

And so I think that Thats, a very positive story to be honest with you to be able to rebalance the portfolio.

Brad Sturges: And continue to grow the way that we are and I think that's what gives us confidence that go through this but I don't have a level of accretion or frankly specific dilution to give you on.

Kevin Gorey: And I think that's what gives us confidence to go through this.

Brad Sturgis: But I don't have a level of accretion or frankly specific dilution to give you on that, if that's what you were looking for.

Brad Sturges: If that's what you were looking for.

Kevin Gorey: Yeah, I think that's the question I have in terms of just maybe thinking about the interplay between the average blended cap rate exit and going in. And just maybe when you're thinking about the rebalancing, you think about what's non-core, what could go into that bucket, I guess what factors are driving that ultimate decision right now? Well, if there are assets that are legacy or otherwise that are in our portfolio, we wouldn't buy today. Those would be deemed non-core. And I think you could sort of see what those are. There also could be concentration, right? So if we're looking to potentially lower concentration in a certain market and redeploy it in a new market, that would also be a consideration as well for us.

Speaker Change: Yeah, No I think that's the question I have in terms of just maybe thinking about the interplay between.

Brad Sturges: The average blended cap rate exit in that OEM.

Speaker Change: Yes.

Speaker Change: And just maybe.

Speaker Change: When youre thinking about the rebalancing and you think about what's non core what could go into that bucket.

Speaker Change: I guess, what factors are driving that ultimate decision right now.

Speaker Change: Well if there are assets that are legacy or otherwise that are in our portfolio. We wouldn't buy today those would be deemed noncore.

Speaker Change: And I think you can sort of see what those are there also could be concentration right. So we're looking to.

Speaker Change: Potentially lower concentration in a certain market and redeployed in a new market that would also be a consideration as well for us and I think that these are all normal things I hope I hope other companies are talking we're talking about this too because we're always looking to do that.

Kevin Gorey: And I think that these are all normal things. I hope other companies are talking about this too, because we're always looking to do that. And let's take it back to some earlier comments I think I've made over the years. When we first wrote the strategy in 2018, we identified key top markets, primary markets, and secondary markets that we want to be in. And we understood well that we have a cost of capital and we're limited somewhat into what markets we can go and how much we can deploy in those specific markets. the idea always was, as we sort of grew and hopefully achieved a certain cost of capital, we would be able to continue to migrate into the primary markets.

Speaker Change: To get back to some earlier comments I think I've made over the years is.

Speaker Change: When we first wrote the strategy in 2018.

We identified key.

Speaker Change: Sure.

Speaker Change: Key top markets.

Speaker Change: Primary markets and secondary markets that we want to be in.

Speaker Change: And we understood well.

Speaker Change: We have a cost of capital and were limited somewhat and to what markets. We can go in and how much we can deploy it in those specific markets.

Speaker Change: It always was as we sort of grew and hopefully achieve a certain cost of capital we would be able to continue to migrate into the primary markets and I think where we are today is maybe we don't have the equity cost of capital to do that but I think we have a very strong growth profile and return profile that will enable.

Kevin Gorey: And I think where we are today is maybe we don't have the equity cost of capital to do that, but I think we have a very strong growth profile and return profile that will enable us to use rebalancing to move more into the primary markets that we're targeting and dispose of certain assets in the secondary market. So that's what we're really talking about here. And I think we have the very strong growth profile with which to play with.

Speaker Change: Enable us to use rebalancing to move more into the primary markets that we're targeting.

Speaker Change: And.

Speaker Change: Dispose of certain assets in the secondary market. So that's what we're really talking about here I think we have.

Speaker Change: A very strong growth proud with which to play with.

Brad Sturgis: I appreciate the color. Thanks a lot.

Speaker Change: Alright, I appreciate the color. Thanks, a lot I'll turn it back.

Operator: Thank you.

Mike Markidis: Next question will be from Mike Markidis at BMO Capital Markets. Please go ahead, Mike. Thank you, operator. I guess there was a lot of discussion earlier just on large-scale requirements, GTA specifically. Kevin, I think you mentioned a team working on a million-square-foot new lease pipeline today. I'm curious in the U.S. how that has changed. versus maybe six months ago and just given the nature of we've been in this environment of, you know, tenants delaying decisions. What gives you guys confidence that that lifts? by the end of the show. I'm not sure I was talking about millions per footers, but just to, for example, Mike, in the US, obviously there are markets we pay more attention to and monitor more closely than others.

Speaker Change: Thank you next question will be from Mike Martinez at BMO capital markets. Please go ahead Mike.

Mike Martinez: Thank you operator.

Speaker Change: I guess it was a lot of discussion earlier just on large bore requirements GTA, specifically, Kevin I think you mentioned team working on ammonia.

Speaker Change: New lease pipeline today I am curious in the U S. How about.

Speaker Change: Has changed.

Speaker Change: Versus maybe six months ago, and just given the nature of we did have some environmental tenants delaying decisions.

Speaker Change: What gives you guys confidence with that loss.

Speaker Change: By the end of this year.

Mike Martinez: I'm not sure I was talking about a million square footers, but just through is for example, Mike.

Mike Martinez: In the U S. Obviously their market, we pay more attention to a monitor more closely than others, but for example, if you look at.

Kevin Gorey: But for example, if you look at Indianapolis, last sort of market update that we did and that we went through, there are almost 50 new requirements in the market representing 16 million seats, which is above where it was last year, so that's picking up. And of those, there are five requirements that we believe are at or above a million feet. So they are coming back. E-commerce is coming back and returning to the market. In terms of the decision-making, I really would caution in our US portfolio, I would really caution about tariffs causing this. Sorry, I wouldn't say this.

Mike Martinez: Indianapolis.

Mike Martinez: What sort of market update that we did.

Mike Martinez: And that we went through they're almost 50, new requirements in the market, representing 16 million feet, which is above where it was last year. So that's picking up and of those there are five requirements that we believe are at or above 1 million feet. So they are coming back e-commerce is coming.

Mike Martinez: Back in returning to the market in terms of the decision making.

Mike Martinez: Really with caution in our U S portfolio I would really caution about tariffs, causing this sorry, I wouldn't say that it's not a tariff specifically, but I think in terms of uncertainty. Yes. We believe it is impacting decision, making but the decision making was already taking a long time and we're not seeing a.

Kevin Gorey: It's not tariff specifically. But I think in terms of uncertainty, yes, we believe it is impacting decision-making, but that decision-making was already taking a long time. And we're not seeing a... How would I put it? We're not seeing that becoming more intense or from the tariffs. I just think decision-making has been slow. Tenants continue to be cautious. Maybe this is another reason for them to be cautious, but activity has been strong. And we are seeing, I think, a lot more, I wouldn't use the word urgency. But I think the tenants that we're dealing with right now, the prospects we're dealing with have been very purposeful in terms of the discussions and negotiations that we're having with them in the US.

Mike Martinez: How would I put it we're not seeing that becoming more intense or.

Mike Martinez: From the tariffs I, just think decision making has been slow tenants continue to be cautious. Maybe this is another reason for them to be cautious but activity has been strong and we are seeing.

Speaker Change: Thank a lot more I wouldn't use the word urgency.

Speaker Change: But I think the tenants that we're dealing with right now are the prospects. There would we were dealing with have been very purposeful.

Speaker Change: In terms of the discussions and negotiations that we're having with them in the U S.

Mike Markidis: Okay. Thanks for that.

Kevin Gorey: And just to clarify, I wasn't talking about million square foot assets specifically. I think you had mentioned you're working on a million square feet of new leases. How that compares to your pipeline of new lease discussions three to six months ago. Right. Well, it certainly, I would say, is probably twice as high as it's been in previous quarters. OK.

Speaker Change: Okay. Thanks for that and just to clarify I wasn't talking about million square foot asset specifically I think you had mentioned youre working on a million square feet of new lease all serious.

Speaker Change: Curious how that compares to your pipeline of new lease discussions reach six months ago.

Speaker Change: Right.

Speaker Change: Certainly I would say is probably twice as high.

Speaker Change: As it's been in previous quarters.

Speaker Change: Okay.

Kevin Gorey: You also talked about, just in response to the tariff question, you talked about your magnet exposure and looked at the GTA and talked about how you sold out of the secondary assets and had confidence in the remaining assets. How would you think about the European footprint? I think If you're asking with respect to tariffs, we don't think that it's going to have a big impact on our European portfolio, so I think it's a completely different story. And frankly, listening to some of Magnus' comments, I think they feel the future of the European portfolio is good.

Speaker Change: You also talked about just in response to the tariff question you talked about your magna exposure and looked at the GTA and talked about how you sort of a secondary assets.

Speaker Change: Our confidence in the remaining assets.

Speaker Change: How would you think about the European footprint.

Speaker Change: I think.

Speaker Change: With respect if youre asking with respect to tariffs, we don't think that it's going to have.

Speaker Change: It is having or is going to have a big impact on our European portfolio. So I think it's a completely different story.

Speaker Change: And frankly listening to some of <unk> comments I think they feel the future European portfolio is good. So I don't think we have I don't think we see the European portfolio.

Kevin Gorey: So I don't think we see the European portfolio, any particular change happening with our assets anyways within the portfolio. OK, that's that's very helpful. Thanks for that.

Speaker Change: Any particular teams happening with our assets anyway within the portfolio.

Speaker Change: Okay.

Speaker Change: That's very helpful. Thanks, I'll turn it back.

Operator: Thank you.

Kyle Finley: Next question will be from Kyle Finley at Desjardins. Please go ahead, Kyle. Thanks. Good morning, everyone. Kind of just building on Mike's line of questioning there, but can you talk about maybe how differently or similarly, you know, your tenants across the various geographies are looking at making leasing decisions today in this environment, or would you say it's less of a geographic issue and more of a, you know, the end business with the tenant in or the size of the business that's driving decisions at this point? I would think that it's more the latter, I think.

Speaker Change: Thank you next question will be from Carlson Lee at <unk>.

Speaker Change: Please go ahead Kyle.

Kyle: Thanks, Good morning, everyone kind of just building on Mike's line of questioning there, but can you talk about maybe how differently or similarly.

Speaker Change: Tenants across the various geographies are looking at making leasing decisions today in this environment or would you say, it's less of a geographic issue or more of a.

Speaker Change: The end business, if the tenant Jane or the size of the business.

Speaker Change: Driving decisions at this point.

Speaker Change: I think I would think that it's more of the latter I think but to be fair. Kyle I mean, we don't have a lot of availability.

Kevin Gorey: But to be fair, Kyle, I mean, we don't have a lot of availability in Europe. And I think, as you can see, our renewal rates continue to be very high. And I think definitely demand has slowed down in Europe, for example, as it has in every market, but it's been steady. And rent growth continues to be particularly, I think, strong on a relative basis anyway. I think it does come down to the specific business and the tendency more than it does the job.

Speaker Change: In Europe, and I think our as you can see our renewal rates continue to be very high and I think definitely demand has slowed down in Europe. For example is as it has sort of in every market, but it's been steady and rent growth continues to be particularly I think strong on a relative basis anyway I think it.

Speaker Change: It does come down to the specific business and the tendency more than it does the geography.

Kyle Finley: Okay, thank you for that. And maybe just 1 other 1 obviously mentioned kind of throughout the commentary today that the lease renewals for this year really kind of are weighted towards 3 Q. Can you disclose of what percentage of those renewals coming online are are weighted to the third quarter? On a weighted basis, it's very much in the third quarter. Yeah, and the end of the third quarter. Okay, so fourth quarter is when we really see the benefit. Got it. Okay, thank you for that.

Speaker Change: Okay. Thank you for that and maybe just one other one.

Obviously, you mentioned kind of throughout the commentary today.

Speaker Change: The lease renewals for this you really kind of our weighted towards <unk>.

Speaker Change: Can you disclose what percentage of those renewals coming online are weighted to the third quarter.

Speaker Change: On a weighted basis is very much in the third quarter.

Speaker Change: Yeah in the end of the third quarter.

Speaker Change: Okay. So fourth quarter is when we really see the benefit got it correct. Okay. Thank you for that.

Speaker Change: Correct.

Operator: Thank you.

Pam Eber: Again, if you would like to ask a question, please press star and the number one on your telephone keypad.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question. Please press Star then the number one on your telephone keypad.

Operator: And your next question will be from Pam Eber at RBC Capital. Please go ahead, Pammy. Thanks. Hi, everyone. Kevin, just coming back to the commentary around acquisitions and the outlook there, what's changed in your mind in terms of maybe being more active? The NTIB makes sense, but in terms of actual assets, are you seeing more opportunities, maybe some dislocation in prices in certain markets, certain types of assets? Just what can you share on that? I would say I think we are more comfortable with pricing in those key markets today than we've been in the past few years, Tommy.

Speaker Change: And your next question will be from <unk> at RBC capital. Please go ahead.

Speaker Change: Thanks, Bye, everyone, just Kevin just coming back to the commentary around acquisitions and the outlook there what's changed in your mind in terms of maybe being more active.

Speaker Change: Makes sense, but in terms of actual assets are you seeing more opportunities maybe some dislocation in prices in certain markets certain types of assets just what can you share on that.

Speaker Change: I would see I think we are more comfortable with pricing in those key markets today than we've been in the past few years.

Kevin Gorey: And also I think the spread The spread between yields that we're seeing in our existing markets versus the yields in the markets that we've been targeting are probably at their lowest or close to the lowest that we've seen. So we think it's a pretty opportune time to start deploying capital in those new markets. I hope that answers the question. Yeah, yeah, no, that's helpful. Okay.

Speaker Change: And also I think the spread.

Speaker Change: The spread between yields that we're seeing in our existing markets versus the yields in the markets that we've been targeting are probably at their lowest or close to the lowest that we've seen but we think it's a pretty opportune time to start deploying capital in those in those new markets.

Speaker Change: That answers the question.

Speaker Change: Yes, no that's helpful.

Kevin Gorey: And then just coming back to those vacancies in Atlanta and Indianapolis, just can you comment on where the in place rents are relative to market? And I guess at this point, it kind of seems like the commentary would suggest that these are probably more 2026 releasing likelihood. It could be. I'm not close enough to the leasing decisions themselves to know what the timing of the new leases would be, but in terms of the rents, I think that these would be sort of 10 to 15% below market. Okay.

Speaker Change: Okay, and then just coming back to those vacancies in Atlanta and Indianapolis.

Speaker Change: Can you comment on where the in place rents are relative to market.

Speaker Change: Yes at this point it seems like the commentary, which suggests that these are probably more 2026 releasing likelihood.

Speaker Change: Hi.

Speaker Change: Could be.

Speaker Change: Yes, I'm not close enough to the leasing decisions themselves to know what the timing of the new leases would be but in terms of the rent. So I think that these would be sort of 10% to 15% below market.

Kevin Gorey: Any update on Veterans Way in terms of the prospects there? Sorry, say again. any update on the prospects that in on the Indianapolis properties that veterans away I would just say that there are prospects on both we are probably in more advanced discussions on smaller building right now than the newer one and I would say on sorry on the larger one not the new one on the larger one and on the larger one there's been more activity for half the building ie that 300 to 400,000 range than there has been on on the entire building and that that's a little different than in previous quarters and that could change in future quarters but that's what we're seeing Got it.

Speaker Change: Okay.

Speaker Change: Any update on veterans way in terms of the prospects there.

Speaker Change: Sorry say again.

Speaker Change: Any update on the prospects.

Speaker Change: On the Indianapolis properties Veterans Wayne.

Speaker Change: I would just say that there are prospects on both.

Speaker Change: We are probably in more advanced discussions on smaller building right now the newer one.

Speaker Change: And I would say on sorry on the large one not the nuance on the larger one and on the larger one theres been more activity for half the building our E 300 to 400000 range than there has been on the entire building and Thats, a little different than in previous quarters and that could change in future quarters, but that's what we're seeing today.

Kevin Gorey: Last one just on that true value lease assumption by do it best any changes there in terms of the total space that they're taking or any of the any concessions made on the rent. No, there was a minor concession in the first two years and sort of a recovery in later years. So the economics of the deal over the term haven't changed. A very small concession this year and next on the rent. And in terms of the square footage, no. Sounds great. Okay. Thanks very much. I'll turn it back. Thank you.

Speaker Change: Got it.

Speaker Change: Last one just on the true value lease assumption Baidu at best.

Speaker Change: Any changes there in terms of the total space that they are taking or any of the any concessions made on the rent.

Speaker Change: No there was a minor concession in the first two years and sort of a recovery in later years. So the economics of the deal over the term Hasnt changed.

Speaker Change: A very small concession this year and next on the rents and in terms of the square footage no change.

Speaker Change: Sounds great. Okay. Thanks, very much I'll turn it back.

Sumaya Syed: Next question will be from Sumaya Syed at CIBC. Please go ahead.

Speaker Change: Thank you next question will be comes from ISI up at CIBC. Please go ahead.

Sumaya Syed: Hey, good morning this following up on the on the do it best having assumed the lease and the quarter who else would you view as still being on the watch list or that you're keeping a closer eye on. I don't think we have anything particularly on the watch list. Not at the moment, no, not really, no.

Speaker Change: Thanks, Good morning, just following up on the on the.

Speaker Change: <unk> best having assumed lease in the quarter.

Speaker Change: Who else would you view as still being on the watch list that you're keeping a closer eye on.

Speaker Change: I don't think we have anything, particularly on the watch list not at the moment.

Speaker Change: Really no.

Speaker Change: Okay.

Kevin Gorey: Um, and then just, I guess, uh, some more color on just the pace of leasing activity. It sounds like things are fairly stable, but if you look at March, April, and so far in May, were there any notable shifts as and was there a low and then a pickup or has it just been constant the whole time? I think we felt it sort of, it felt to me like it sort of picked up in February, it got quiet, and now it's sort of picked up again, and again, I don't really have a particular reason to point to why that is, but I would say the activity that we're seeing has been in the last, more probably the last 60 days than anything else.

Speaker Change: And then just I guess some more color on just the pace of leasing activity. It sounds like things are fairly stable, but if you look at March April and so far in May.

Speaker Change: Or are there any notable shifts.

Speaker Change: And then a pick up or has it just been constant the whole time.

Speaker Change: I think we felt that sort of.

Speaker Change: It felt to me like it sort of picked up in February.

Speaker Change: Quiet now it sort of picked up again and again I don't really have.

Speaker Change: A particular reason to point to why.

Speaker Change: That is but I would say the activity that we're seeing has been in a lot more probably the last 60 days than anything else.

Speaker Change: Okay.

Kevin Gorey: And then, Kevin, you spoke earlier about the U.S. portfolio being a natural hedge against Canada. And the currency aside, from a fundamental perspective, do you have the same view today in that you're more optimistic long-term about your U.S. portfolio and would expect that to outperform Canada? I think it would. I think that just overall, if there are tariffs put in place, I think there's going to be ins and outs. And I don't fully understand what the implementation of tariffs will mean overall for business. And I don't think it's great for the economy. I'm not saying that.

Speaker Change: And then Kevin you spoke earlier about the U S portfolio being a natural hedge against.

Speaker Change: On the currency aside from a fundamental perspective.

Speaker Change: At the same view today and that Youre more optimistic long term about your U S portfolio I would expect that to outperform Canada.

Speaker Change: I think I would.

Speaker Change: I think just overall there are tariffs put in place.

Speaker Change: There's going to be ins and outs and I don't fully understand what the inflammation implementation of tariffs will mean overall for business and I don't think it's great for the economy, I'm, not saying that but for our sector in particular I think overall it will drive higher demand.

Kevin Gorey: But for our sector in particular, I think overall, it will drive higher demand. And I think that that will be better for our U.S. portfolio than it would be for, say, for example, our Canadian portfolio.

Speaker Change: And I think that that will be better for our U S portfolio that would be for say for example, our Canadian portfolio.

Speaker Change: Alright.

Operator: Okay, that's all. I will turn it back. Thank you. There are no further questions at this time.

Speaker Change: First of all I will turn it back thank you.

Speaker Change: Thank you.

Speaker Change: There are no further questions at this time, Mr. Gori I'll turn the call back over to you.

Kevin Gorey: Mr. Gori, I turn the call back over to you. Thank you, operator.

Kevin Gorey: Well, thanks everyone for being on the call today. Hopefully we'll speak to you on our Q2 call and have a great day. Thank you, sir.

Kevin Gori: Thank you operator, and thanks, everyone for being on the call today, hopefully, we'll speak to you on our Q2 call.

Speaker Change: Have a great day.

Speaker Change: Thank you, Sir ladies and gentlemen. This concludes today's conference call you may now disconnect your lines.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Thank you.

Speaker Change: Yeah.

Speaker Change: Okay.