Granite Real Estate Inc.

telephone keypad if you'd like to withdraw your question please press part two thank you speaking to you on the call this morning is kevin gory president and chief executive officer and teresa nito chief financial officer i would now turn the call over to teresa nito to go over certain advisories

Thank you. 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 Granted's material files of 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 2024 and Granted's management discussion and analysis for the year-end of December 31, 2024, filed on February 26, 2025. So, Grant had posted Q4 2021 results ahead of Q3 and ahead of management's expectations, largely driven by strong NOI growth, a positive impact from foreign exchange as a result of the strengthening of the U.S. dollar, and a few net positive adjustments, which I will go into detail later. FFO per unit in Q4 was $1.47, representing a $0.12 or 8.9% increase from Q3 24 and a $0.20 or 15.7% increase relative to the same quarter in the prior year. FFO per unit for fiscal year 2024 was $5.44, representing a 47 cent or 9.5 increase from 23. The growth in NOI this quarter is primarily derived from strong same property NOI growth enhanced by double digit leasing spreads in the U.S. and the lease commencement at a previously 308,000 square foot vacant unit in the U.S. in the fourth quarter. NOI growth was further enhanced by a foreign exchange as the US dollar was 3.5% stronger, partially offset by the euro being 0.9% weaker in comparison to Q3. Also impacting FFO this quarter were a few adjustments with a net positive impact, including a 1.6 million tax provision reversal relating to the prior tax year, a 0.5 million credit to capital tax, which is included in G&A expenses, and a foreign exchange gain realized on monetary assets and liabilities held or settled for $2.8 million, partially offset by a negative $0.8 million adjustment to non-controlling interest expense relating to a catch-up adjustment pertaining to the net income of our joint venture partner at our Houston development site. Excluding these specific four adjustments, FFO per unit would have been $1.41, still 4.5% ahead of Q3. ASFO per unit in Q4 was $1.25, which is $0.03 higher relative to Q3 and $0.10 higher relative to the same quarter last year, with the increase in Q3 mostly tied to FFO growth, partially offset by higher maintenance capital expenditures, higher tenant allowances incurred due to timing of leasing turnover, and higher leasing commissions primarily related to leasing activities in the U.S. and Canada, including the lease-up of two previously vacant units in the U.S., and an early lease renewal for a property in the U.S. in the fourth quarter. AFFO-related capital expenditures incurred in the quarter totaled $11.3 million, which is an increase of $6.1 million over Q3 and $5.3 million over the same quarter last year. However, for the 2024 year, total AFFO-related capital expenditures came in at $25.1 million in line with management's expectation and guidance. For 2025, we expect AFFO-related capital expenditures to come in at approximately $40 million for the year, with the increase relative to 2024 being mostly related to additional roofing and parking lot work planned for 2025, as well as additional forecasted spend on tenant allowances in support of expected new leasing activity. Same property NOI for Q4 was strong relative to the same quarter last year, increasing 6.3% on a constant currency basis and up 8.4% when foreign currency effects are included. For 2024, granted four-quarter average constant currency same property NOI growth came in at 5.9% in line with management's expectations. For 2025, we are updating our forecast for constant currency same property NOI based on a four-quarter average to come within a range of 4.5% to 6%, which Kevin will address in his remarks. G&A for the quarter was $8.3 million, which was $1.1 million lower than the same quarter last year, and $4.9 million lower than Q3. The main variance relative to Q3 is $5.6 million favorable fair value variance and non-cash compensation liabilities, partially offset by a $1 million unfavorable variance due to corporate restructuring costs relating to the uncoupling of granted stapled unit structure. But that does not impact SFO or AFFO metrics. G&A expenses that do impact FFO and AFFO were approximately $0.3 million lower than Q3, which is mostly related to an approximate $0.5 million capital tax refund mentioned earlier, resulting from changes in tax regulation in the state of Tennessee. For 2025, we continue to expect G&A expenses that impact FFO and AFFO are approximately $10 million per quarter, or roughly 7% of revenues. Interest expense was higher in Q4 relative to Q3 by $1.5 million, while interest income also increased by $2.2 million as compared to Q3, resulting in a decrease to net interest expense. As previously mentioned on the Q3 call, on October 4, Granted completed $800 million bond offering in two series. The net proceeds from the offering were used to immediately fully repay, without penalty, Granite's 2025 term loan with a principal balance outstanding of $400 million, which had a maturity date of September 15, 25. The remaining net proceeds from the offering were held in short-term cash deposits until used to fully repay Granite's 2024 term loan with a principal balance outstanding of U.S. $185 million upon maturity on December 19. For the period from October to December 19, 2024, Granite earned interest on these net proceeds from the offering at approximately 4.33%. Therefore, relative to Q3, interest expense increased due to the October 29 debentures being outstanding at the same time as the 2024 term loan, which was fully offset by the interest income noted previously, resulting in a decrease in net interest costs of $0.7 million. Post-quarter end on February 4th, Granite completed its inaugural $300 million floating rate note offering, which together with an existing cross-currency interest rate swap results in an effective fixed rate of 0.27% for the year of the term of the 26th debentures. Net proceeds from the offering were used to immediately fully repay without penalty Granite's December 2026 term loan with a principal balance of $300 million, which was due to mature on December 11th, 2026. The refinancing is expected to save Granite approximately $0.03 per unit per annum in interest expense for the next two years. On December 31st and prior to the completion of the refinancing in February, Granite's weighted average cost of debt was 2.74%, and the weighted average debt term of maturity was 4.3 years. After the refinancing, Granite's weighted average cost of debt is now 2.66%, with the weighted average debt term to maturity remaining unchanged at 4.3 years. With Granite's next maturity now in September 2026, we expect interest expense to remain stable over the next approximate two years at roughly $23 million per quarter, barring any new transactions. For income tax, Q4 2024 current income tax was 0.9 million, which is 0.8 million higher than the prior year and 1.8 million lower as compared to Q3. The movement in current tax relative to Q4 2023 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 Granite's current income tax is generated from its European region. As in prior years and mentioned earlier, Granite realized a credit to current income taxes of $1.6 million in Q4 due to the reversal of prior year tax provisions. For 2025, we are expecting current income taxes to remain at current levels at approximately $2.5 million per quarter. Also mentioned earlier, Granite realized foreign exchange gains in FFO of $2.8 million in Q4. This is a $3.6 million increase in foreign exchange gains in comparison to Q3. The items relate to the re-measurement of cash and monetary assets and liabilities denominated in foreign currencies and held in Canada, primarily as a result of the strengthening of the US dollar. Now, looking out to 2025 estimates, Granite is forecasting FFO per unit within a range of $5.70 to $5.85, representing an approximate 5% to 8% increase over 24. For AFFO per unit, we are forecasting a range of 480 to 495, representing an increase of approximately flat to 2% over 2024, and fully reflecting the expected increase in AFFO-related capital expenditures noted earlier. The FFO per unit forecast includes assumptions of some new leasing of vacant space, primarily in the second half of 2025. The high end of the range reflects foreign currency exchange rates of $1.50 for the Canadian dollar to euro, and 145 for the Canadian dollar to U.S. dollar exchange rate. On the low end of the range, Granite is assuming exchange rates of the Canadian dollar to Euro of 1.45 and the Canadian dollar to U.S. dollar of 1.40. Granite will provide updates to guidance each quarter as warranted based on leasing activity executed to date. Grant's balance sheet, comprising of total assets of 9.6 billion at the end of the quarter, was positively impacted by 280 million of translation gains on Grant's foreign-based investment properties, primarily due to the 6.4% increase in the spot USD exchange rate and 2% increase in the spot euro exchange rate, respectively, relative to Q3, partially offset by marginal movement in the fair valuation of Grant's portfolio with a net fair value loss of 1.5 million. The trust's overall weighted average cap rate of 5.3% on in-place NOI increased five basis points from the end of Q3 and has increased eight basis points since the same quarter last year. Our total net leverage as of December 31st, 24 was 32% and net debt to EBITDA was 6.8 times, which is slightly lower relative to Q3 and lower than Q4 2023 as a result of NOI growth, including the completion and stabilization of the majority of grants development properties. Granite's current liquidity is approximately $1.1 billion, representing cash on hand of approximately $120 million and the undrawn operating line of $998 million. As of today, Granite has no borrowings under the credit facility and there are 2.4 million of letters of credit outstanding. Granite's recent refinancing will have no material impact on its net leverage, net debt to EBITDA and liquidity position. Granite has been active on its NCIB for the three months ended December 31st, 24. Granite repurchased 23,000 units under the NCIB at an average unit cost of $69.08 for total consideration of $1.6 million. During the year 2024, granite purchased 667,300 units at an average cost of $68.64 for total consideration of $45.8 million. Post year end, granite has purchased 459,100 units under this NCIB at an average cost of $68.75 for a total consideration of $31.6 million. I'll now turn the call over to Kevin.

Thanks, Teresa, and good morning. I frankly don't have a lot of prepared comments to make. I think there will be a lot of questions, so we're happy to get to that. I do want to highlight a few things about the quarter and the year for you. beginning with same property in Hawaii, just to highlight the fact that it increased each quarter. And in the fourth quarter, it was muted somewhat by our Utrecht property vacancy and non-recoverable costs. And the reason why I'm highlighting it is Utrecht is technically a redevelopment site of ours in the Netherlands. And we keep it as IPP because we're not sure ultimately what we're going to do with the asset. But at the end of the day, we're unable to offer term to prospects. So it does limit our ability to lease. And I just want to highlight that. It is having an impact on our Saint-Pierre-Pied-en-Y performance, but it is technically to us a redevelopment site. The final thing on Saint-Pierre-Pied-en-Y I wanted to highlight is that our U.S. portfolio is generated 6.5% same property NOI growth in a quarter, which was very strong. Rent increases, just to point out again, that they naturally fluctuate each quarter for expiries within a quarter, and they're having no impact, as Theresa mentioned, on our guidance for 2025. The team also signed, I think, over 400,000 in new leases and a million square feet of renewals in the quarter at an average increase of 22% over expiring rents. And to date, as noted, we have renewed just under 70% of our 2025 expiries and an average increase of almost 45%. And I think we remain on target for an average increase in 2025 on renewals of 30 to 35%. The third thing I wanted to highlight is our cash position. We finished the year with $126 million in cash. That is up 10 million over 2023, despite a 3.1% increase to our annual distribution, and the fact that we deployed 46 million on unit buybacks and 34 million on development in 2024. And seeing as it's the fourth quarter end of the year, wanted to highlight FFO, NAV, and NOI per unit metrics, which I hope you find helpful or useful. Over the past three years, our FFO per unit has increased by 38%. That is an annual growth rate of 11.5%, all while reducing our debt to EBITDA from 8.1 times to 7.1 times over that period. Over five years, our FFO per unit has grown 50%. That's an 8.5% annual growth rate. NAP per unit has increased or has a five-year cater of 9.6%, this despite an $850 million downward adjustment in price associated with expansion in cap rates and discount rates. And finally, NOI per unit, which is something I like to track because as we can see with some other REITs, it is possible to grow NOI dilutably. Our NOI per unit has increased for 12 straight quarters and is up roughly 46% over the past three years, that is a CAGR of 13.6%. And just to highlight the fact that cash in Hawaii increased by 2.4 million over the third quarter, which is 4 cents per unit. And finally, just to recognize the new development that we announced in Houston, new build to suit on a long-term lease with a Fortune 50 company representing the third phase of our development site in Houston. I think the team did a, a fantastic job at landing this opportunity and negotiating this lease and this development at a very attractive return with income expected in late 2026. And I think as importantly, it displays very strong validation for our site and our location. And that's it on that. I'll open up the line for any questions, operator.

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. If you're using a speakerphone, please make sure to lift your handset before pressing any keys. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mike Markides from BMO Capital Markets. Your line is now open.

Thanks, operator. Good morning, Kevin and Teresa. Just two questions from my end, one somewhat granular, one more high level. I guess I'll start with the granular one. Teresa, I think it was $2.6 million you noted was the foreign currency gains that contributed to FFO this quarter?

Yeah, that's good. $2.8 million, that's correct.

$2.8, sorry, $2.8. Okay, and I guess that's in typically you've got a little bit of a loss on your callers and contracts. So how do you expect that to play out going forward? I mean, I know it's dependent on currency, but... Is there anything anomalous in that?

I think it was a bit of an unusual quarter. It's actually related to our term loan that we actually paid out. For accounting purposes, that loan was no longer effectively an accounting hedge, but it's still part of our net investment because it was Euro swapped. But the point is, it's a US-based loan and it gets translated and that unfortunately has to go through Fair Value as opposed to, sorry, through the P&L as opposed to the OCI. So you're seeing it flow through the P&L, which is a bit unusual because typically a lot of our fair value and foreign currency adjustments are flowing through OCI. But in this case, it was basically not accounting hedged for a period of time until we repaid it in December. And then, of course, with the swift movement and strong movement of USD into Q4, that just sort of added fuel to the foreign currency gain effectively. So we always have like monetary assets and liabilities sitting in our Canadian subsidiary, which does get translated. We try and minimize it, but it does have some swings up and down. But I think particularly because we're holding onto this term loan for this period of time in an unhedged position, it led to a larger than normal gain. For contrast, in Q3, we actually had a $900,000 loss in this same kind of category. So I'd say like, I wouldn't plan for any of this. I mean, I wouldn't forecast anything.

No, and we typically don't. We typically just run it at zero and it's usually plus or minus, not that significant, which is why I asked. And can you remind me, was that in your 141 X items number or like it adjusted for?

No, it's excluded. It's excluded. The 141 does not include the 2.8 million.

Does not include the 2.8. Okay. Awesome. thanks and then just um okay so moving forward and looking at the guidance thanks for the gna uh guidance there um just with respect to the noi i know you guys are expecting some lease up of vacancy in the back half of the year but how do you expect your occupancy to traject sort of throughout the year does it stay stable in the first half and then move higher or do you expect it to actually sort of leak a bit lower uh before gaining in the back half

Yeah, it could. I mean, it depends on the timing of the expiries and some of the move-outs that we have. The occupancy could go lower in the second quarter, and we expect it to increase in the third and fourth quarter after that.

Okay. I said two questions, so I'm going to keep to that. I'll turn it back. Thank you.

Okay. Your next question comes from the line of Sam Damiani from TD Cowan. Your line is now open.

Thank you, good morning everyone. So maybe just to pick up where Mike left off there, on the occupancy, or actually on the same property NOI guidance, the range, you know, aside from, I guess, the occupancy fluctuation mid-year, what scenarios would cause NOI growth to be at the lower end and also at the higher end of that guidance range?

well i i would say if we were to do no new leasing it obviously if we were to do no new leasing we would probably miss the range but probably not by much to backfill what we expect to vacate this year which is roughly a million would get us within the range of four and a half to six percent same property in hawaii and if we were to lease do if we were to complete a million and a half of new leases it would be in the upper end of the range

Okay, that's helpful. That's helpful. And I guess in the outlook sort of statement in the NDNA, there was a comment about market rents continuing to moderate broadly. Could you maybe just expand on what the meaning of that, of throwing that phrase in there?

I can't remember exactly what that phrase is about, Larry, but it certainly continues to make sense for us. So when we look at our markets, that we operate in, Sam. Some of the markets' rents continue to move up, and some of the markets, the rents, the market rents continue to go down. So, for example, of our markets, the worst performing market for rental rate growth was the GTA, which is down 6% year over year. The strongest markets that we had were Houston at 17%, up 17%, and Nashville's up just over 20% year over year. But overall, I think we would agree that market rents are continuing to moderate.

Okay, got it. And last one for me, just on the Houston, congratulations on that, by the way. Just looking at the site plan, is this project situated on the parcel that was earmarked for a million square foot building? I'm just trying to figure out where this... what this building sort of represents on the plan.

Correct. So you could see two smaller buildings on that parcel, which was always an option for us. We wanted to keep a million available, but I think this is the right size for that site and for that parcel in particular, 400,000 feet roughly.

And does it retain space on that parcel for another building, or is this basically going to be a lot of trailer parking on this?

Correct. No, it allows for another building on the parcel. Okay, perfect. Thank you. I'll turn it back.

Your next question comes from the line of Brad Sturgis from Raymond James. Their line is now open.

Hey, good morning. just to keep on the theme of on leasing, just I guess I'm curious, you know, since the U.S. election and just thinking about your U.S. markets, like, have you seen any noticeable change positively or negatively on leasing velocity or activity? And is that, you know, translated into more activity in certain markets, you know, whether it's the Midwest or, you know, further south?

Well, I would put it this way. I think we didn't see, it wasn't as though we saw a lot of pickup immediately following the election or January. We are seeing a pickup since maybe the beginning of February. Activity has been very good. I think this is one of the only times I recall where we've had multiple prospects on all of our larger availabilities. What we're still waiting for, though, is deal flow. We're waiting for these transactions to clear. We're waiting for tenants to sign leases. not that we don't expect that to happen but i think that's sort of the next phase of of this that we're waiting for so activity has been strong uh and we'll see these are these the important times i think this is a better conversation in may uh or in the second quarter because that'll really give us a picture of how how much the market's firming up in the u.s okay and when you think about occupancy as you head into the back half of the year it is it still did the

process that you'd get into the 96 plus range, maybe by the end of the year? Or how do you think about that timing?

I mean, right now, I think we would prefer to be cautious. I think we would say 95 and a half to 96 in that range for the end of 2026, I think would be a prudent target. Okay. That's great. I'll turn it back.

Thank you.

Next question comes from the line of Matt Kornack from National Bank Financial. Your line is now open.

Good morning, guys. Just returning to your comments on the 1 million square feet of kind of known non-renewals, I think you have 1.7 million of uncommitted. Can you give us a sense as to the geographies as to where you're having tenants not take space and maybe the prospects on that space as well?

yeah we have um 370 000 square feet remaining in canada 1.2 million in the u.s and 150 000 square feet in europe and is your thought process from a from a vacancy standpoint that that all of that would uh would be non-renewals or no no i think i think we said we expected to renew between 80 to 85 of our expiries in 2025 which is a very strong number but that still means roughly we expect roughly a million square feet of expiries the tenant will not will not renew okay and then with regards to uh leasing and the rent spreads uh you disclosed i think the 43 figure uh for that that has been committed to date and i think you said 30 to 35 um

for the fullness of the year. Can you give us a sense as to what those spreads look like in your geographic regions?

I don't have it in front of me, Matt, but I think the remaining ones we have an average 20% increase overall.

Okay, fair enough. Thank you.

Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open.

Thank you and good morning. So just on the leasing theme, any tenants on the watch list here? And any update on True Value? And basically, you know, any tenants on bankruptcy watch list?

Yeah, we don't have anyone, I think, on the tenancy watch list. As an update for True Value, we're in advanced discussions with Do It Best. We do not have a signed agreement yet, but we hopefully will have an update. on the next call.

Okay. And in your 2025 guidance, do you assume like full rent from True Value for the full year?

We don't have anything specific in there regarding True Value or tariffs, but I think overall we've tried to be cautious. I think we're setting guidance at a level that we're very comfortable we will achieve or we're comfortable that we will achieve. I don't think it takes anything specific into account.

Got it. Okay. Fair enough. And then, you know, you mentioned tariff and obviously, you know, the magna exposure. So any thoughts there? I see, you know, you have two special purpose properties in the GTA, Milton specifically. Have you heard anything from magna or any update there?

No, absolutely not. And we just completed a renewal with Magna and with business as usual. Just on the tariff side, I just would make a few points on that. And I mean, one is long term. I mean, the impact on, you know, industries and sectors and tenants in Canada, it's obviously going to depend a lot on the extent of tariffs in the length of time that they're in place. But we don't anticipate a material impact on our Canadian portfolio in the near term. And frankly, I'd be more concerned about tenants in markets like London and Windsor that cater more specifically to cross-border distribution. And I will make a point about Magna as well. You know, Magna started in the GTA. It's been in operation here for over 65 years. And we frankly don't anticipate that changing, particularly given that production and supply chains take several years to establish and don't change over a period of months. And then the final thing which I think is getting missed is the natural hedge that is provided by our U.S. portfolio on concerns regarding tariffs between Canada and the U.S. So if there were tariffs that had a material impact on Canadian tenants or our Canadian portfolio, I think there's an understanding that there would be a commensurate appreciation of the U.S. dollar against Canadian dollar, thereby increasing our income from our U.S. portfolio, thereby increasing our overall income. So we found that to be a rather natural hedge. Again, as I said, we're not anticipating a particular threat against our Canadian portfolios. But just the natural hedge of the U.S. denominated income from our portfolio seems to be missed by a number of investors.

Got it. Thanks. Thanks for the color on Naina. And now maybe the last question is on the U.S. markets. And specifically if I look at, you know, Indianapolis, India there, or Memphis. I mean, would you say these two markets continues to be soft? And this is where you have, you know, some vacancy. So we'll have to wait for those markets to get better before you show up better leasing results.

A few things I would say that can we just start with the six and a half percent same property and online growth for the fourth quarter? I'll start there. That's a pretty good number, I think, by any measure. Two is I didn't hear the middle. I heard Indy and I heard Memphis and I would say Memphis is actually doing quite well. Indy, we still have our availability there. The activity on both the buildings has picked up. But again, we still need to see some actual leasing being done. So I would agree that Indy is softer right now. But Memphis has been a strong market for us, I think, the past six months. And we expect it to continue to be healthy in 2025. I didn't hear the middle.

Yeah, no, I spoke about those two markets only. And in fact, the follow-up was like Nashville continues to be rather strong. I mean, on the other side, are you surprised that you're taking a bit longer to fill those two properties, which are still vacant?

Not really, because, I mean, we're holding it. These are, we consider these to be prestige and industrial, and we are, you know, looking for a premium in rents there. So, Yes and no. We would have thought it would have been leased by now, but at the end of the day, we are not the lowest cost alternative in the market and we're not trying to be. So I think we can afford to be patient for the right tenant and the right deal. And that's part of the reason why it's taking longer than maybe some other properties would.

Fair enough. Thank you.

Your next question comes from the line of Pamibir from RBC Capital Markets. Your line is open.

Thanks. Good morning. Just maybe sticking with the whole tariff discussion, are you seeing any of your U.S. tenants starting to maybe build inventory levels? You mentioned, you know, pickup and activity. Just curious if you're seeing any of that take hold.

No, I don't think there's anything. I mean, we're obviously paying more attention to our U.S. tenants than we normally would in a sort of environment like this, but we're not seeing any specific reaction to tariffs.

Yeah, it's okay. And then just coming back to Kevin, your comment about the occupancy dip in Q2, or just maybe more generally, I just want to confirm, is this really more specific to the US or is it maybe a little in Canada, a little bit in Europe?

Yeah, I think it's more the US. It's based on the expiries that are expected to occur over 2025.

Okay. I think you said 95.5% to 96%, but did you say by the end of 25% or 26%?

Oh, sorry, I meant 25%.

I meant 22%. Okay. All right. Just last one for me. On the Brantford site, what kind of interest have you seen in terms of building out or any built-to-suit inquiries on some of the remaining land there?

We've had a few. I think, Mike, they've kind of been smaller, right, recently, sort of in the 100,000 to 200,000 range? Yeah, we've had a few, but nothing that's sort of advanced to a serious stage yet.

And I guess to maybe just clarify, you're not looking to start anything on spec in any of your markets at this point, are you?

No.

Great. Thanks very much. I'll turn it back.

Next question is from the line of Sumaya Syed from CIBC. Your line is open.

Thanks. Good morning. First, a bit of a clarification on the AFFO guide. So there's a mention there of some additional spend on tenant allowances. Is that just based on the sheer size of the leasing pipeline or generally more allowances than you would have? Is it done or a combo of both?

First of all, I think the majority of the increase is actually tied to maintenance capex, so roofing and parking lot work. uh yes we are projecting higher uh tenant allowances relative to to that to 24 about 5 million more but i think it's more tied to the fact that you know we do have some vacancy we're not you know in the past in the past we're you know 99 occupied but we do have some vacancy and uh new leasing and typically the tas are going to be higher with new leasing associated with new leasing so it's not so much that the The TAs themselves are juiced up. It's more just the fact that we have new leasing on vacancies.

Yeah, and Samaya, Kevin, just to point out too, we highlighted it last year. With the renewal on Grasse, 5.3 million feet with no TAs, no leasing commission. So that was one of the reasons why you look at 2023. Sorry, I'm just...

Yeah, it was muted. Yeah, we didn't. Yeah, but the renewal in January, there was nothing associated with it. Yeah.

Yeah, sorry. And then 2024 heading into 2025, it certainly would be a difference for 2025.

Okay, got it. And then just on the development of projects, and Kevin, you kind of touched on it. It looks like the lease rate is about 65%. So for the assets that are taking longer to lease up and noting that, you know, the rents so far have been sickier or better, but do you think that reducing rents would actually help or is it not so much a factory of rent, just kind of continued deferred decision making?

Yeah, I don't think it would. And I don't think we would need to do that. I think we're still willing to wait for the right deal, but I don't think it's, A tenant is going to make a decision just based more on the location and the quality of building. I don't think you're going to lose a deal over $0.50, something like that.

OK. And then also along the lines of tenant behavior, are you seeing any changes in demand depending on, I guess, different size levels? Or is the trend of deferred demand kind of even or widespread across the different, I guess, square footage?

Well, I must say, I think I made the comment before, I am encouraged by the level of activity on our larger availabilities. And, you know, a few of them want half the building or a portion of the building. A few want the entire building. And I would say that there is more prospects today looking for the entire building than we've seen in the past. So I would say just overall we are seeing a pickup in larger requirements.

Okay, that's all I had. Thank you.

Again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Matt Cornack from National Bank Financial. Your line is open.

Sorry, two quick follow-ups. Going to Magna, I think in the Globe and Mail last week, there was some, and this is purely hypothetical, but speculation that they could potentially sell the European auto manufacturing business, possibly to a Chinese manufacturer that would want to build in Europe. Can you give us a sense as to the protections in the lease or what would happen in that type of scenario? Just out of curiosity.

Well, just in general, I mean, you have rights, the landlord has rights. I don't want to get into any specifics. specifically about the lease, but the landlord does have rights on the function of a lease or transition of a lease to a new tenant. So we certainly would have rights under the lease regarding a replacement of the credit.

Fair enough. And then... Someone was circulating, I'm not sure exactly who it was, that Samsung potentially has put up some space for sublet within your portfolio. I think they're in your top 10 tenants, but you've got some lease remaining there. Any ideas to what you'll do with that space or prospects?

No, I mean, there has been some interest in the space, very limited because there's still almost two years left on the lease. But our understanding is Samsung is looking to sublease their space until the end of the term. And if we can be involved in that process, we'll be involved in that process.

And the asset, I mean, can you give us, I'm not as familiar with the, I guess that Pennsylvania market, but the strengths of that market at this point, maybe leasing fundamentals.

Do you want to jump in here?

I mean, it's a great building, it's a great location, and at least currently the market metrics are positive. So, I mean, there's other buildings that would be worse to get back if we end up doing that than the Samsung building. So I'm not overly concerned about it. We're working well with the tenants, all of them speak. And as Kevin said, there's still two years left on it. A lot of things can change by the end of the season before we get to that stage. There should be an inherent upside with the in-place rents to market as well. Okay. Perfect.

Thank you. There are no further questions at this time. Mr. Gorey, I turn the call back over to you.

All right. Thank you, operator. So on behalf of management and trustees, Thank you for taking part on the Q4 call and we will speak to you again in May.

This concludes today's conference call. You may now disconnect.