Good morning, ladies and gentlemen, and welcome to the conference call of Granite REIT. Speaking to you on the call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer. Before we begin today's call, I would like to remind you that statements and information made in today's discussion may constitute forward-looking statements and forward-looking information, including, but not limited to expectations regarding future earnings and capital expenditures, as well as potential impact of COVID-19, 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. These risks and uncertainties are discussed in Granite's material filed with 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 2021, filed on March 3rd, 2021. Readers are cautioned not to place undue reliance on any of these forward-looking statements and forward-looking information. Granite undertakes no intention or obligation to update or revise any of these forward-looking statements or forward-looking information, whether as a result of new information, future events, or otherwise, except as required by law. In addition, the remarks this morning may include financial terms and measures that do not have standardized meaning under International Financial Reporting Standards. Please refer to the audited combined financial results and management discussion and analysis for the year ended December 31st, 2020 for Granite Real Estate Investment Trust and Granite REIT Inc. Other materials filed with Canadian securities administrators and U.S. Securities and Exchange Commission from time to time for additional relevant information. I'd now like to turn the call over to Kevan Gorrie. Please go right ahead. Thank you, operator. Thank you, everyone, for taking the time to join us on our Q4 and full-year 2020 earnings call. I hope everyone is doing okay. As usual, I am pleased to be joined this morning by Teresa Neto, our CFO, Lorne Kumer, our Executive Vice President of Real Estate, and Michael Ramparas, Executive Vice President and Head of Investments. For our call this morning, Teresa will begin our discussion with a review of the financial highlights, and I will then provide an update on our operations, acquisitions, development, and ESG activities, and then open up the call to any questions that you may have. Teresa? Great. Thanks, Kevan, and good morning, everyone. Granite's fourth quarter financial results completed a year of strong performance in 2020, with Granite posting FFO and AFFO per unit growth for the year of 9.9% and 8.2% respectively, relative to 2019. FFO per unit in Q4 was CAD 1, a nine cent or 10% increase relative to prior year and four cents higher than Q3. Included in this quarter's FFO is the reversal of CAD 1.7 million of current income tax provisions in Europe for tax positions relating to taxation years that have become statute-barred, offset partially by the temporary dilutive impact of the CAD 288 million equity offering that closed on November 24th, as well as the CAD 500 million bond offering which closed on December 18th, where proceeds have not yet been fully deployed. FFO this quarter was positively impacted by NOI growth from acquisitions completed in the year, as well as strong same property NOI growth, partially offset by negative foreign exchange translation of our foreign-based income, representing over 85% of our FFO as the US dollar and euro weakened by 2.2% and 0.3%, respectively, relative to Q3. Part of the foreign currency translation loss was mitigated through Granite's hedging program, which utilizes derivatives that protects Granite against significant declines of both the US dollar and euro. The settlement of such US dollar foreign exchange derivatives resulted in approximately CAD 1 million of foreign exchange gains realized in the fourth quarter, partially offsetting the translation losses. Granite's AFFO on a per unit basis in Q4 was CAD 0.94, which is CAD 0.06 or 6.8% higher than prior year and CAD 0.03 higher than Q3. AFFO-related capital expenditures, leasing costs, and tenant allowances incurred in the quarter were CAD 2.3 million, which was higher than the CAD 1.6 million in the same quarter last year and higher than the CAD 0.8 million incurred in Q3. Fiscal year 2020's maintenance CapEx and leasing costs came in lighter than expected, totaling only CAD 6.2 million due to the delay of certain projects over the spring and summer months and also impacted by leasing activity that did not occur at Granite's Novi, Michigan property. 2020's maintenance CapEx spend is not reflective of forward maintenance CapEx trends. As mentioned in the Q3 earnings call, we are expecting maintenance CapEx, tenant allowances, and leasing costs to increase in 2021 to approximately CAD 15 million or about CAD 0.30 per sq ft. AFFO also continues to be impacted by the temporary dilutive impact of the November equity and December bond offerings mentioned earlier. As a result of a relatively low CapEx quarter and strong FFO performance, the AFFO payout ratio came in below 80% at 79%. For the fourth quarter, contributing to a full-year AFFO payout ratio of 77%. NOI on a cash basis for the quarter increased CAD 13.6 million or 21.3% from the same quarter in 2019, and CAD 3 million or 4% from Q3. Same property NOI for Q4 came in strong relative to last year, increasing 4.6%, and on a constant currency basis, increasing 2.1%. Driven by contractual rent increases, incremental rent earned from an excess land at a GTA Magna property, and rent from an expansion completed at one of our West Jefferson, Ohio properties. Excluding this expansion rent, same property NOI for the quarter is 4.8%, and on a constant currency basis, 1.6%. G&A for the quarter was CAD 0.1 million lower than the same quarter last year and CAD 1.7 million lower than Q3. A positive variance relative to Q3 is primarily due to the CAD 1.1 million severance charge recognized in that quarter. For 2021, based on current run rates, we estimate G&A will come in approximately CAD 8 million per quarter, which includes approximately CAD 1.6 million of non-cash compensation expense, but assumes no fair value losses or gains associated with the increase or decrease in non-cash compensation liability, which cannot be predicted. With respect to current income tax, for Q4, current income tax was CAD 1.1 million, which was lower than Q3 by CAD 1.1 million due to the reversal of the CAD 1.7 million of tax provisions previously mentioned, offset partially by current taxes of CAD 700,000 relating to the gain on the sale of Granite's Spanish property in October. For 2021, our current tax run rate is approximately CAD 2.3 million per quarter. With respect to the potential recognition of tax assets, Granite will be recognizing CAD 0.2 million of tax assets in Q1, therefore reducing its estimated current tax expense for that quarter, for this quarter, of CAD 2.1 million for the quarter. Granite has a further potential CAD 2 million of tax assets that may be recognized in Q4 2021 relating to tax positions on taxation years which will go statute-barred. We cannot assess whether these tax assets can be realized at this time. The trust balance sheet, comprising total assets of approximately 6.7 billion at the end of the year, was positively impacted by approximately 140 million in fair value gains to Granite's investment property portfolio in the fourth quarter, offset by approximately 160 million of translation losses on Granite's foreign-based investment properties, particularly impacted by the decline in the US dollar of 4.3% relative to the end of Q3. The fair value gain on Granite's investment property portfolio is attributable to fair value gains in the trust of GTA, U.S. properties, as well as the trust's modern distribution warehouse assets in Germany and the Netherlands, due to increases in fair market rent assumptions and declines in capitalization rates, partially offset by fair value reductions in a few of the trust's Austrian assets. The trust's overall weighted average cap rate of 5.6% decreased 20 basis points from the end of Q3. The net leverage as of December 31st was 25%, only slightly higher by 1% from Q3 following the redemption of Granite's 2021 debentures on January 4th of this year. The trust's current liquidity is approximately CAD 1.1 billion, representing cash on hand of approximately CAD 580 million and the undrawn operating line of CAD 499 million. I will now turn the call over to Kevan. Thank you. Thanks, Teresa. as always, I'll keep my comments brief as the trustees had the opportunity to review the MD&A and press release. I'll first echo Teresa's comments on the quarter. FFO and to a degree, AFFO, were impacted by a multitude of factors, both good and bad, including tax provision reversals, FX losses, same property NOI growth, an increase in the valuation of our deferred units, and finally, the impact of the equity and debt offerings in the quarter. All said, though, I think we had a very solid finish to a strong year financially in 2020. Rent collection continues to be strong across our portfolio. We have one rent outstanding as of today related to a small space in Poland. As was the case in Q3, the tenant involved is a very creditworthy tenant that is permitted under the terms of their lease to pay their rent in arrears. As such, we expect to receive the outstanding rent very shortly, at which point we will have collected 100% of rents through February. There are no deferrals being contemplated at this time. On November 17th, related to our equity offering, we announced that we had completed what were in exclusive negotiations on CAD 564 million of acquisitions. As you can see from our MD&A and press release, we closed on roughly CAD 470 million of acquisitions in the U.S. and the Netherlands in the quarter, including one previously announced acquisition in Atlanta, Georgia, for approximately CAD 105 million. We are close to completing our remaining acquisition in the U.S. for approximately CAD 90 million, which should close in the next week or so. Our pipeline of acquisition and development opportunities remains active across our target markets in the GTA, Europe, and the U.S. I will point out our team's ability to pursue and execute on acquisitions in Europe is impaired by travel restrictions in place, at least in the near term. On the development front, we anticipate spending between CAD 100 million and CAD 140 million on new projects and expansions in 2021, depending on the timing of construction. The new projects in Altbach, Germany, Dallas, Texas, and two buildings representing the first phase of our business park in Houston will comprise roughly 1.25 million sq ft of space and generate a development yield on stabilization of 6.5%-7%. Construction on our Altbach project will commence this month, and we expect construction on our Houston and Dallas projects to commence sometime in the second half of 2021. The expansion of our Congebec facility in Mississauga is expected to commence in the second quarter, and that expansion will comprise roughly 60,000 ft of new generation cold storage space, and we expect to complete the project in the second quarter of 2022. Development will continue to play a critical role in our growth plans, and we are actively pursuing development opportunities across a number of our target markets. For an update on operations, just over 2.3 million sq ft of leases expired in 2020. We completed roughly 2.2 million of renewals or new leases on those expiries at an average increase in rental rate of approximately 8%. Two smaller spaces in Austria and Poland were not re-leased and are currently vacant and available. Further to my comments on our last call, we re-leased vacant space at two of our properties in Memphis and Savannah in the fourth quarter of 2021. We finished the year at a very respectable 99.6% occupancy. For 2021, 1.9 million sq ft or roughly 4% of our leasing core GLA are expected to expire. To date, we have renewed roughly 1.6 million of those expiries at an average rate increase of 5%. As Teresa mentioned earlier and as disclosed in our MD&A, same property NOI increased by 2.1% on a constant currency basis for the fourth quarter and 3.7% for the year, in line with our expectations. Same property NOI growth for the quarter was muted by vacancies in the U.S. and Austria and a negative CAM adjustment of CAD 300,000. As you may have seen, we issued our first green bond use of proceeds report with respect to the allocation of proceeds from our CAD 500 million green bond issued in June. I am very pleased to repeat that we have allocated roughly 69% or CAD 345 million towards eligible green projects as defined in our green bond framework and verified by Sustainalytics. The green bond use of proceeds report can be found on our website. By virtue of our planned development program, we expect to allocate additional funds towards eligible green projects in 2021 and 2022. Another notable mention on the ESG front is in partnership with our tenant, Decathlon, and KiesZon, a leading solar equipment provider in the Netherlands. The installation of a major 10,500 panel rooftop solar array project has been completed at our newly constructed distribution facility in Tilburg in the Netherlands. This project alone is expected to produce over 3,300 MWh of clean energy per year and reduce CO2 emissions by almost 2,000 tons annually. A similar rooftop solar installation exists at our recently constructed distribution center in Weert, Netherlands, and we are planning to add a rooftop solar array to our development in Altbach, Germany, when it is complete. We are also actively preparing our first annual corporate responsibility report, which we expect to publish in the second quarter of this year, which will outline our ESG objectives and targets for 2021 and beyond. In closing, with over CAD 1 billion in liquidity, as Theresa mentioned, we are positioned well financially to execute on our planned development projects and our current pipeline of acquisition opportunities. As Teresa mentioned, Granite recognized over CAD 270 million in fair value gains on our investment properties in 2020, which is highly reflective of the state and direction of cap rates and pricing we are observing in our markets for good product. Investment demand for modern logistics real estate has only intensified since soon after the onset of the pandemic, and we anticipate investment demand and leasing fundamentals to remain strong over the next few years. Accordingly, we will continue to deploy capital on select acquisitions in a disciplined manner, as we always have, and we will leverage our platform to incorporate further development and value add activities in our growth strategy in order to drive higher total returns for unitholders over the long term. On that note, I will now open up the floor for any questions. Thank you. And if you'd like to register any question, just press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered, to withdraw your registration, enter the one followed by the three. Using a speakerphone, please mute your handset before entering your request. One moment please for our first question. We'll get to our first question on the line from Himanshu Gupta, with Scotiabank. Go right ahead. Thank you, and good morning. First on the fair value gains, sizable fair value gains of CAD 140 million in the quarter. Just confirming, is that after translation FX losses? Then how much was it U.S., and how much was it Canada? Have you realized any fair value increases on acquisitions done in the last two years? Terri, did you want to start- Himanshu- In terms of the FX? Yeah, please. Yeah. Himanshu, that does not include the translation losses. In the quarter, we had CAD 115 million translation losses. That is separate from the CAD 143 million of fair value gains. Okay. How much was U.S., how much was Canada? I'm going to pull that up and while you're speaking to Kevan, I'll try and find that for you. Is there any other questions, Himanshu? Yeah, sure. the next question was, are you realizing any fair value gains on the acquisitions done in the last one or two years? Are you seeing the acquisitions which you have done recently, are you already seeing capital compression on those assets? We are. Our practice typically is not to recognize a fair value gain in the first year, but we have done it because there have been times, Chalk Hill was an example in the U.S. Tilburg, in the Netherlands would be another example where there has been clearly a move, in value, whether it's cap rate or market rents or a combination of both, where we have recognized the fair value gain in the first year. To answer your question, yes, we have seen fair value gains, definitely on assets that we have acquired in the last two years. Got it. Himanshu. Sorry, I can get it. The U.S. is about 103 million, Canada 34 million, and the remaining 3 million-5 million is in Europe. Awesome. Thank you. it's bulk of it is in the U.S. The next question was on the discount rate on Austria properties that was slightly increased. What led to that change? As you know, we get updated information every quarter from various brokers. again, it's just movement in that particular market being a little bit more challenged, a little less transparent than the German, obviously, and the rest of Europe. it's really just a view from the market just in Austria in general, just it's been on a decline this year. I'll start off too. Mike may want to step in and answer this too, but when we look at the Austrian assets, we use appraisals pretty actively as well. When we change, sometimes the discount rate will change, but the terminal rate will change in the other direction, the market rents will change. Sometimes the individual metrics themselves will move around. Mike, anything you want to add to that? Yeah, I think that's pretty fair, Kev. What I would say is that, it really revolves around the type of assets we have in that jurisdiction as well too. A lot of our legacy assets are Magna assets, so that's part and parcel of not seeing the increase we've been seeing in the logistics sector. Got it. Anyway, it's pretty small, so thanks for your comment. just turning to the leasing activity in the U.S., had a pretty active quarter, almost 400,000 sq ft done. Does that include Savannah vacancy and Memphis, like both taken care of now? That's right. Okay. How are the market rents looking in these markets? Are you seeing any increases over the in-place rents or over the last years? Yeah. Memphis was, I believe it was 5%- 6%, so that was a relatively minor move. The one in Savannah actually moved quite a bit. I believe it was just sub 4%, say around 4%, and we did a re-lease in the 5% range. That was a much bigger lift in Savannah versus Memphis. Got it. As you know, after this, there's pretty much no vacancy in the U.S. portfolio, right? It's almost 100% now. Just Novi. Novi we've had on it. just for if no one remembers, Novi is not really a core asset of ours in Novi, Michigan, but it's one that we feel if we get the remaining vacancy of 90,000 sq ft done, I think that's a significant value add event. we want to re-lease that space, and then we'll look at what the future of that asset holds in our portfolio. that's the only vacancy we have in the U.S. currently. Yes. Got it. Okay. just shifting gears to the acquisitions, I'm looking at the Northeastern Pennsylvania acquisition of $200 million. The cap rate is 5.1. Is that going in or is that stabilized? what kind of rent escalators do you have? Yeah, we won't go into the individual leases in terms of the rent escalators. We can't really do that. It is stabilized. There are free rent periods that are burning off shortly. It's not as though the stabilized rent is in 2022 per se, but there is some short-term, what would you say, fixturing period free rent on one of the assets there. It's on a stabilized basis, so that stabilized rents will be in place sometime around the middle of 2021, I think. Got it. Then the property's almost newly constructed, and a bunch of your acquisitions last year and previously have been new or almost new as well. Is that your bias, to go for newly developed assets? Is that likely to be in the future as well? Any comments? Well, yeah. I know the way it looks, and I've said before, I'd characterize our portfolio as being made up of bonds and equities. It just so happens that in the fourth quarter, a lot of our acquisitions were around bond-like assets, brand new assets, long-term leases with creditworthy tenants. listen, there's nothing wrong with that. that's not necessarily intent for us to go out there and do that. If you look at the Borssele assets just north of the Hague or just north of the port of Rotterdam in the Netherlands, we love the location, and we feel that down the road it will be a fantastic location for last-mile delivery. that's an asset that's not brand new, but has upside potential for us. we're just as excited to do those types of acquisitions versus these at 5.1 in that node with that tenant for that lease term, we felt was a strong investment. Got it. Thank you. Thank you, Kevan, for the color. I'll turn it back. Thank you very much. We'll get to our next question on the line. It's from the line of Mark Rothschild with Canaccord. Go right ahead. Thanks. Good morning, everyone. Kevan, maybe just talking about the market in the U.S. generally. You spoke about new development, and there is quite a bit of new development coming. To what extent do you see this having a material impact on the pace of rent growth, maybe as you look out later this year and into even next year? Well, it's hard, Mark, because when we went into 2020 was supposed to be the first year where new construction or deliveries strongly outpaced absorption. The U.S. has averaged between 250 million and 300 million of absorption, and deliveries have been in the 250 million range. It's been outpacing it for years, and I think 2019 was the first year where you saw a balance between new deliveries and absorption. 2020 was supposed to be between 300 million and 350 million of new deliveries, and absorption was supposed to be just under 250 million. Obviously, we didn't see that. With COVID, I think there was even more of an expectation of a drop-off of demand, but obviously that didn't happen. We've seen demand pick up. We continue to see demand pick up. New deliveries, particularly in certain markets of the U.S., are always going to keep rent growth in balance. I think from our perspective, the way we look at it is, if we're in the right location, which we focus very much is what nodes do we want to be in within larger markets, we'd like to also play on the development side as well and add more value there. What we are seeing is in those markets where development is very active, we're still seeing stabilized assets being traded at 15%-20% above where replacement costs are today. Now, the expectation may be that rents will drive replacement costs up, and so you'll be ahead of the game in terms of replacement costs down the road, five to 10 years down the road. that's what we've seen. The expectation is that rent growth will remain very strong across most of the major distribution markets in the U.S., at least over the next five years. When you talk about replacement costs, you mentioned rent. Is there any expectation from people looking at industrial properties in regards to inflation as well impacting that side? Yeah, I think that there is. Yes. You mean for land values in particular? Or just the cost of development. Yeah. I think we're actually seeing that. We've been pursuing land opportunities now for the past couple of years, and I can tell you anecdotally, we have seen land values rise 50% or higher across most of our markets. Now, one of the reasons I've mentioned before that the U.S. we see as an effective development market for us is that land values are certainly not where they are in Canada. In Toronto and Vancouver, certainly they're a percentage of that. Land values going up by 50% do not have that material an impact on your pro forma. We've seen it, and I don't think that's going to stop. In terms of construction costs, it's hard to say, Mark, because 2020 was such a weird year. We saw increases in construction costs across a number of our markets, but is that due to COVID or is that just due to underlying labor and cost dynamics? The cost of steel and the cost of concrete, though, has risen pretty dramatically. The cost of timber has as well. It has nothing really to do with us, but that's another factor that we're seeing as well. In short, I expect that inflation to be pretty high, and that will continue to drive up replacement costs and put more pressure on rents for sure. Okay. Thanks very much. Thank you. We'll get to our next question on the line from Sam Damiani from TD Securities. Go right ahead. Thanks, and good morning, everyone. First question just on cap rates, just given the backing up of bond yields. Kevan, is your team starting to see any impact on the market pricing dynamics given the sudden move in the yield curves? No, it's still a pretty short period of time since that's happened, Sam, but absolutely not. we're talking about seeing deals in the past three days or past days, let alone weeks, no impact whatsoever on pricing. It just feels like pricing's more aggressive today than it was last week, which was more aggressive than the week before. All the conversations that we're having and the numbers that we're seeing suggest that there's absolutely no softening of cap rates or the trajectory of cap rates because of the backup in bond yields recently. Okay, that's helpful. just on well, two acquisitions in Pennsylvania, that were detailed last night. Increasing Granite's exposure to that part of the state. Wonder if you could just provide a little bit of color on the rationale for investing this type of pricing in this location. Yeah. Happy to. That location of the I-78, I-81 corridor, it's one of the busiest truck corridors, probably in the world, if not in North America. That's a major part of our strategy. I'm sure it's in one of our investor presentations, following our strategic plan approval in November of 2018. It's one of the fastest emerging e-commerce distribution markets in the U.S. for all the reasons I've talked about before, proximity to U.S. population. This location, just outside of Scranton, where we've seen an awful lot of growth, this node itself is probably north of 20 million by now. Amazon's there anyway. We're talking about a node that's within a three-hour drive of New York, Philly, within a five-hour drive of Boston, Washington, D.C. These locations are really becoming critical for companies and their distribution chains and their e-commerce chains. Adding to that, just the availability of labor makes these nodes very desirable for large tenants. It's a market we identified years ago as being an important part of our portfolio. These are great assets at a cap rate north of five. We thought it made a lot of sense for our portfolio, and we thought the timing was right. That's great. Thank you. I'll turn it back. Thank you very much. We'll get to our next question on the line from Joanne Chen with BMO. Go right ahead. Good morning, everyone. Just really quickly, maybe on overall share picture for 2021, given that there's very little renewals coming up and your occupancy is already at 99.6%. How should we be thinking about the trends for same property NOI growth for 2021? Is it still kind of in that 2%-3% range? I think so. I think one of the things that was on our mind through 2020 as we head into this year, Joanne, is we have a number of CPI index leases. We have a few in the GTA, a few large ones, actually, in the GTA with Magna, and we have a number of inflation index leases in Europe, particularly in the Netherlands. We feel that will mute, at least for 2021, same property NOI. I would characterize it, the guidance I would provide today is we expect same property NOI to be in the low 2% to mid 2% in the first half of the year, and we expect it to be in the low to mid 3% in the second half of the year. We should average out somewhere in the high 2%-3%, with increase in same property NOI growth in the second half of the year. Got it. Maybe sticking with that note, and obviously very strong organic growth in Canada. Could you maybe provide some color in terms of which markets for you guys are driving a lot of that growth? Yeah, for sure. It's true, we've seen decent growth in the U.S. 2021, a lot of the turn is in Europe. We will still see some growth there, but not as much in Canada. We don't have as much turn in 2021 in Canada. Same property NOI may not be as strong. 2022, quite a bit of roll in the U.S. I think 70% is in the U.S. We expect rent increases on average in 2022 to be in the 7% range. We think 2022 will be a good year as well. There'll be a lot of noise around the re-leasing because we have over 5 million ft rolling in 2022. The direction of the rent is moving in the right way. In 2022 will be a good year in terms of rent increases and lead into a decent year of same-property NOI growth in the second half of 2022 and into 2023. Okay, got it. Maybe switching to acquisitions. Obviously, it was a very active year for you in 2020. Can we kind of expect, I know that negotiations are constantly undergoing, but kind of the same kind of scope for 2021? Well, I think it's an active pipeline. I made the comment of being disciplined pretty intentionally. Markets are all over the place right now. We have grown uncomfortable with cap rates in a number of our markets, to be honest with you, because we think in some cases, I made the comment just earlier about replacement costs. I don't fully disagree with the argument that replacement costs only have one way to go. If you have a really good location and you have a new asset and a good tenant, I understand stretching on pricing and the yields to a degree. In some cases, we've seen what we think is a full detachment from other fundamentals. We've grown a little concerned of where pricing is in markets. We're happy to sit back and continue to evaluate opportunities. If that means we do more land, and we do less stabilized property, then so be it. that's the direction that we'll go in. the pipeline right now is pretty active. For us, the key is just to remain disciplined, in the markets that we want and the assets we want. in terms of pricing, we do agree, we think pricing is going to remain very strong and very competitive for these assets over the foreseeable future, over the next few years at least. I think it's part of our DNA to remain disciplined on that front, and we'll see. we could be very active in the first quarter or the second quarter. I think we'll just continue to review market conditions and try and make the right decisions. Right. Okay, thanks. Maybe this will be a question more so for Teresa, but it looked like in Q4, there was a jump in the property operating costs in terms of the recoverable costs. Could you maybe give a little bit more color on what is in that bucket? Well, I think it'll be increasing, but the overall NOI, though, percentage remains pretty consistent. It's really just the new acquisitions coming on board and including their operating costs and then equal recovery rents. That's really what's driving it is the new acquisitions. Got it. Okay. No, I just wanted to clarify that. Yes. Okay. That's it from me. I will pass it back. Thank you. Yes. Operator? Our next question is from the line of Matt Kornack. Please go right ahead with your question. Hi, guys. Just with regards, it was asked earlier, and you don't have to speak to the specifics of a particular property. You've bought CAD 1 billion of assets this year with a 10-year weighted average lease term, and the market's talking about inflation increasing. Can you speak to the inflation protection in these longer-term leases? I think we've heard that industrial in particular, you're getting more in the way of either annual rent steps or periodic rent steps. Can you speak to that as well as where the existing portfolio in general sits on sort of embedded organic growth? Yeah. Matt, happy to. I think, if I'm not mistaken, all of the acquisitions this year with leases in place involve annual contractual rent increases or periodic rent increases, to your point, or they're CPI or inflation-indexed leases. I think that's important, too, is I'm maybe not as concerned about inflation as others are. As we're looking at acquisitions, particularly long-term leases, we are very aware of contractual rent increases and the importance of that. Just off the top of my head, I would say it would be on average around 2.5%. Now, the CPI ones, who knows where CPI is going to be in the short term. I wanted to point out and emphasize the fact that's a consideration for us. We've looked at a number of assets where the location's great. It fits our investment criteria. It's a long-term lease at 1.5% annual increases, and that's what gives us pause. Growth within the lease term is an important factor for us. Now, are you going to get 4%? No. Maybe in some markets at some point. We have on renewal. On certain renewals, we've been able to achieve that. In the 2%- 3% range, which is very common in the U.S., that's certainly what's been an important standard for us on new acquisitions with long-term leases. I guess, you don't have many of them this year. The European asset you noted is interesting. Would you entertain looking at some of these things that are exceptionally low going in cap rates, but the rent bumps could be 50% to, who knows, 100% on some of the assets? is that not something? A, do you think it's priced appropriately in the market today, and is that something that you'd entertain looking at? Yeah. I think the recent acquisitions that we've made in the GTA, I think, like the Tindley ones, the rent growth is very attractive for us. what was attractive for us on that acquisition was the price per square foot. again, just looking at other fundamentals that made sense for us. Where we choked a bit on these is, and as I said before, a three and a half going-in yield might make sense. That's not really, on its own, what scares us. It's just if that 3.5% represents CAD 300 a ft, well, then we have a problem. That's when we have an issue. what you're talking about, we absolutely look for, and we are willing to get aggressive on cap rate. It's when it starts contrasting with other important fundamentals. Listen, I'm not going to sit here and say prices in Toronto should be 125 a ft. That's gone. I realize that. In looking at land prices recently, cresting 3.5 million an acre, clearly replacement costs are much closer above 200 a ft than they are 100. I get that. Those are the opportunities that we look at from an aggressive cap rate perspective. It just has to make sense from other fundamentals for us to move forward on it. It definitely it's on our radar. Yes, we do it. That absolutely makes sense. just a technical question for Teresa on the straight line rent, which I think is Q3 was impacted by some free rent, and I think it's still going to wear off over the first half of 2021. Can you just give us a sense of the step down? Is it around CAD 500,000 a quarter, or how should we think about that? I'll probably have to take a closer look, Matt, but you're right. That free rent that we saw in Q3 will be burning off in the first quarter, and that's probably in the ballpark. That's 500,000. I can get back to you offline. Okay. No worries. That's perfect. Thanks. Yeah. Thank you very much. We'll get to our next question on the line from Howard Leung with Veritas Investment Research. Go right ahead. Good morning. There's been a lot of talk about the rent growth. I just wanted to ask, have you done kind of a market analysis of your properties? Is it right to say that, or fair to say that, I guess, the U.S. has way better mark-to-markets than what you see in Europe then? Well, I would say it's fair to say because of the Magna concentration in Europe, and not that we think that the rents at Magna are much higher than market. I would just point out that it's harder to determine what the market rent is in those markets versus logistics in the U.S. There's a lot more transparency around the U.S. and Europe. Just in general, I would say that you're right. The mark-to-market on our U.S. assets is higher than it is in Europe. I wouldn't look at it as much long term, Howard. I think it's better to focus on what happened in 2020, what do we anticipate is going to happen in 2021, and what do we anticipate is going to happen in 2022? For 2020, it was roughly 8% mark-to-market. For 2021 overall, and there is one asset in there on renewal where an amortization does burn off. It kind of skews the numbers a bit. For 2021, we anticipate it being in the 5% range. As I mentioned for 2022, as we sit here today, we expect a mark-to-market in the 7% range overall for 2022. I don't think we've looked carefully at 2023 yet. All to say, I think that that would indicate kind of where we feel the in-place rents are versus market. Right. No, it does. 2022, I think you mentioned earlier that it's because there's more U.S. supply compared to 2021, right? Yes, it's 70%. Now, interestingly, in 2022, when you look at the rents themselves, the renewals mostly involve Magna in Europe, and I think it represents over 45% of the rents that are expiring in 2022. We do expect rents to move positively on those renewals. We expect rent lifts to be positive in Europe as well as the U.S., obviously as well as Canada. Overall, we're anticipating at this point will be 7%. On average, right. No, that's fair. I guess I want to turn to kind of interest rates. I know it's been pretty recent of these rising bond yields, but any thoughts as to whether you would maybe do some financings earlier than anticipated on debentures just to maybe get ahead of the potential further rising yields? Howard, we have been looking at this. Our next maturity is in November 2023. That's almost two years, nine months. You're right, we could refinance right now probably a 10-year in 2.7% range. Lower financing, and we could certainly swap it to something much lower than our current 2023 debenture. The prepayment penalty right now is too prohibitive, and it doesn't really make sense to do that now. It's quite significant, and it's too costly to call, and interest rates would have to rise, or we would have the conviction that interest rates would have to rise significantly in order to make any sense of it. At this point in time, it doesn't look favorable to re-finance for 2023. Right. That's fair. Yeah. Who knows what's going to happen in two years for interest rates? Exactly. Just a last one on CapEx. I think you mentioned earlier that you're expecting in 2021 for the CapEx to be around CAD 0.30 a sq ft CapEx in leasing. I know that's kind of higher than what it has been, not just in 2020, but even the years before. Is that really a function of, I guess, less Magna, more logistics properties? We'd expect that to maybe go even a bit higher as more Magna properties are sold? That's exactly the case. You're right. Less of a Magna, which is really our quadruple net leases, to moving more to traditional properties where we're going to have more ongoing general maintenance CapEx programs in place. As we move away or as we have fewer and fewer exposure, less exposure to the manufacturing quadruple net leases, we should see it level off. It'll probably level off in that CAD 0.30 per square foot range longer term. Okay. No, that's great. That's very helpful. Thanks so much. I'll turn it back. Thank you. We'll get to our next question on the line from Pammi Bir with RBC Capital Markets. Go right ahead. Thanks. Hi, everyone. Just Kevan, I want to maybe go back to your comments about capital allocation. You mentioned that maybe it's getting a little bit uncomfortable with where cap rates are on some transactions. As you think about maybe the next 12 months-24 months, I'm just curious how you see perhaps your approach to development changing or maybe increasing some of the capital towards developments, or is there enough in the pipeline to keep you active such that acquisitions will likely outweigh development projects over the next few years? No, it's a great question. I don't think that we have enough. If we are successful, and we believe that we will be. If we're successful on our development projects this year, namely Dallas, Altbach in Germany, and the first phase of Houston. After this, we'll just have Houston as an ongoing development site. We wanted to add more development this year. It just so happened that the stabilized acquisitions made more sense for us. Our objective in 2021 is to continue to build up our development pipeline. It is a focus of ours this year to do it. We have the platform to do that, and we built the platform around that capability. It should be a core competency of ours. You will see us hopefully really ramp up the development side of our capital deployment program. Got it. I guess, and just coming back to, I think you partially answered one of my questions, really the only question I have left. You mentioned that I think it is roughly 45% of the 2022 maturities are with Magna, whether it's in U.S. or Europe. I'm just curious if you have a sense of, I think the total for 2022 is maybe just over 5 million sq ft. What portion of that would be subject to fixed-rate renewals? I think the majority of the Magna renewals are fixed-rate renewals. That 45% of revenue I referred to is Magna in Europe, and that is fixed-rate renewals. Would still the balance of the 2022 maturities would be at market rates? They would be at market. Yes. There is, I think 7% is in the GTA, and the remainder is in the U.S. Okay. I think you said- That would be fair market. Right. I think you mentioned that the Magna leases would be likely generating positive spreads. Is there a lot left in the Magna-tenanted assets where the rents actually roll down, or have we gone through most of all that in the last several years? No, I think we've gone through that. There are Magna leases where they do go to fair market value. The majority of them have fixed rate formulas in there. I won't go into the details of it. Where you're speaking about rents going down, no, that is certainly not the majority of the Magna assets moving forward at all. Great. No, that's great. Thanks very much. I will turn it back. All right. Thanks. Thank you very much. We'll get to our next question on the line from Mike Markidis for Desjardins Capital Markets. Go right ahead. Thanks, everybody. Just one question for me. Kevan, I was wondering if you could just revisit where some of the larger legacy maturities are in Austria, which I think you, based on your fair value disclosure or comments, cited as being a market that's maybe a little bit weaker than the others. Where the timing of that is, and just revisit what your thoughts are in terms of approaching Magna for an early renewal, or is it just better to wait at this juncture? Thank you. I'll start with the last part of the question, Mike. I think the best thing to do is wait. We have two larger ones coming up in Austria. At the end of 2022 is one asset in Austria. The other one is Graz in 2024, and we'll have renewed that in 2023. That's the notice period there. Those are the two big ones in Austria. Our approach to this hasn't changed at all. We obviously monitor, to the degree that we can, activities around Magna and what they're doing in Europe and what they're doing with Graz. We continue to be encouraged by contracts that they're taking on, partnerships that they're forming, including with Fisker, which in our opinion, will require Graz to a large degree. Our comfort around the likelihood of renewal continues to grow. I don't think it would make economic sense for us to try and do an early renewal. The renewal terms are prescribed, and I think the best thing to do is to wait until the renewal date is here, the notice period is here, and finalize that, and then assess what the best move forward is with those assets in Europe. Okay. Just to confirm, the one that's at the end of 2022, presumably that's part of the 45% of 2022 maturities with Magna, and that would- Correct bake into your 7% overall expectation for maintenance. Correct. Yes. Okay, that's it. Correct. Thank you very much. Yeah. Congrats on a strong year. Of course. Thank you very much. Mr. Gorrie, I have no further questions on the line. I'll turn it back to you. All right. Well, just on behalf of management and trustees at Granite, thanks again for joining us for the Q4 and 2020 year-end call. As always, to our unitholders, thank you for your continued faith and support. Thank you very much, and thank you, everyone. That does conclude the conference call for today. We thank you for your participation. Please disconnect your lines. Have a good day, everyone.