Granite Real Estate Investment Trust

TSX:GRT.UN

Earnings Call Transcript 2018-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the conference call for Granite REIT. Speaking to you on the call this morning are Mike Forsayeth, Chief Executive Officer; and Ilias Konstantopoulos, Chief Financial Officer. Before we begin today's call, I would like to remind you that the 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. These risks and uncertainties are discussed in Granite's material filed with the Canadian Securities Administrators and U.S. Securities and Exchange Commission from time to time, including the Risk Factors section of its Annual Information Form for 2017, dated March 1, 2018.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 first quarter 2018 condensed -- combined financial results and management's discussion and analyst -- analysis of Granite Real Estate Investment Trust and Granite REIT, Inc., and other materials filed with the Canadian Securities Administrators and U.S. Securities and Exchange Commission for any additional relevant information. I would like to remind everyone that this conference is being recorded today, Monday, May 14, 2018.I would now like to turn the call over to Mike Forsayeth. Please go ahead, sir.

[Michael Forsayeth, CEO & Trustee]

Thank you, France. With me here today is Lorne Kumer, our EVP, Head of Global Real Estate; Michael Ramparas, VP Global Real Estate; and Ilias Konstantopoulos, our CFO, who'll be taking you through some of the details of our financial results in a couple of moments.Before going into the highlights of the quarter, let me give you the details and some color on the Columbus portfolio acquisition we announced last Thursday night. We've agreed to acquire a portfolio of 4 Class A, single-tenanted buildings, totaling approximately 3.8 million square feet on 78 acres of land near Columbus. The purchase price of USD 232.5 million represents an ingoing stabilized yield of approximately 6%. The properties are located in West Jefferson, which is part of the Greater Columbus industrial market. This market has emerged as a major distribution corridor in the United States due to its central location, excellent interstate highway systems and strong labor base. The buildings are all modern distribution facilities with an average age of approximately 7 years and are currently 100% occupied.The tenant base is diverse and comprises of large public and global private entities, and 2 of the tenants have options to expand their facilities by at least an additional 200,000 square feet. And while one of the tenants is currently in liquidation and may vacate one of the buildings, we believe the re-leasing prospects for that building are strong. We underwrote the potential vacancy in our pricing of the portfolio, and given our success in a similar situation with a building outside of Memphis in the portfolio we acquired last fall, we're very comfortable taking on the potential vacancy risk.The deal is subject to customary closing conditions, and the closing is anticipated to take place later this month. Granite will fund the purchase through a combination of cash on hand, largely from the proceeds from the property sales that occurred in January and topped up by a drawdown of our unsecured credit facility. The acquisition will be immediately accretive to Granite's fund from operations and adjusted funds from operations.Turning to the results. We had a solid first quarter. And as reported, we've been very active on the sales, acquisition and leasing front since the beginning of the year.Here is a quick recap of the highlights. We reported funds from operation of $1.11 per unit for the first quarter of 2018 against $0.84 per unit in the first quarter of 2017. Excluding the significant foreign exchange gain and the lease termination fee recognized in the quarter, we see it as a solid performance, and particularly, given the significant revenue reduction from the 10 properties sold, 1/3 of the way into the first quarter.Our FFO in the quarter reflects the expected improvement CapEx of approximately $8 million at our Novi property, which was previously a Magna facility that was repurposed and we subsequently entered into a long-term lease for 70% of the space. It also includes the EUR 6 million legacy payment related to the Graz lease extension that has been accrued on our balance sheet since 2014.In January, we sold 10 properties, primarily Magna tenanted for approximately $390 million. We announced the acquisition of 6 quality warehouse and logistics properties in the United States; a target market for Granite, for approximately $391 million; and if you go back to last fall, that number is $545 million.We entered into a 5-year unsecured $500 million multi-currency credit facility. We spent over $61 million in unit repurchases under our normal course issuer bid since the beginning of the year and we intend to renew the NCIB upon expiry.We had just 1.3 million square feet of remaining 2018 lease expiries to contend with, comprising of 442,000 square feet under negotiation; 544,000 square feet listed for lease and 300,000 square feet that we're looking to be sold before the end of the year.At the end of the quarter, we were 98.7% occupied, and our weighted average lease term was just under 6 years.As a result of these announced initiatives and accomplishments, Granite made significant progress towards transformation from a largely single-tenanted REIT to a broadly tenanted, globally diversified, industrial real estate business, and we believe we've improved the underlying quality of Granite's real estate portfolio.Using gross leasable area as a measure, here are some pro forma metrics to help illustrate that progress. Since the beginning of the year, and after the Columbus deal, Granite's Magna concentration will have reduced from 61% to 52%. Our exposure to special purpose properties will go down to 41% -- from 41% to 31%, and Granite's warehouse and logistics property category will be Granite's dominant asset category, representing 41% of our gross leasable area.Also on a run rate basis, Granite will have made substantial progress replacing the cash flow from the 10 properties sold earlier in the year. This was one of our key priorities for 2018. And to further facilitate that, it's also worth noting that on a pro forma basis, after the Columbus deal, Granite's net debt leverage will be in the 23% range and we will still have close to $1 billion of borrowing capacity before reaching our internal leverage target of 40%.We will also continue to recycle certain properties as the year progresses. All of which gives us lots of dry power to continue our quest to further transform Granite into a high quality, globally diversified industrial real estate business.Lastly, as it relates to Granite finding a new CEO. Again, all I can say is that the search is now in its advanced stages. So stay tuned.And with that, I'll turn it over to Ilias to go over the financial highlights for the quarter.

[Ilias Konstantopoulos, Chief Financial Officer]

Good morning. I'll briefly summarize the operating results for the first quarter of '18, which were generally in line with our expectations.Revenue for the first quarter in '18 increased by $0.9 million to $61.7 million relative to Q1 2017 with a few offsetting items. The main contributing factors to the slight increase in revenue for the quarter include the acquisition of the 3 properties from IDI in the U.S. in October of '17, and the acquisition of the property in Plainfield, Indiana in late March, both of which contributed an aggregate of $2.9 million of revenue in the quarter.Contractual adjustments comprising CPI inflation and fixed contractual rent increases across our portfolio added a total of $1.2 million to revenue.A lease termination and close-out fee mentioned, in connection with the recently acquired property in the U.S. in October, increased revenue by $1 million. Incidentally, this property was released in Q1 '18, a positive development, which had originally been hoped and expected to be materialized. As well contributing was a net favorable impact in FX during the quarter of $1.7 million with the Canadian dollar depreciating against the euro and adding $2.5 million revenue while the Canadian dollar strengthened against the U.S. dollar reducing revenue by $0.8 million.These net favorable factors were offset by the sale of the 10 properties in January in Canada and the U.S., which in aggregate decreased our revenue by $4.9 million as well the vacancies from 3 lease expiries in North America and 1 in Germany, in total decreased revenue by $1.1 million.Each of the previously noted factors is described further in detail and quantified on Page 7 of our MD&A within our Q1 2018 quarterly report.Shifting to FFO. For the first quarter, FFO, as reported in accordance with REALPAC's definition, that is, was $51.3 million or $1.11 per unit relative to reported FFO for the prior year period of $39.6 million or $0.84 per unit. The $11.7 million or $0.27 a unit increase to FFO in the above quarter-over-quarter comparison was due primarily to a FX gain of $10.4 million that resulted from the remeasurement of the U.S. dollar cash proceeds received from the sale of 3 investment properties in January '18. I would point out that while this item is included in the reported FFO in accordance with REALPAC's definition and disclosure requirements, it is unusual and nonrecurring item that we benefited from for this particular quarter. The other contributing factors to FFO increasing include the previously described revenue increase of $0.9 million, an increase in interest income of $1 million on account of higher cash balances and a vendor take back mortgage receivable stemming from the sales of the 10 properties previously mentioned. The above items were offset by an increase of $1.3 million in G&A expenses, due primarily to compensation paid to the former COO, who's no longer with the company. As well, the other offset was slightly higher interest expense of $0.7 million. Excluding the lease termination and close-out fee of $1 million, which accounts for $0.02 a unit and the FX gain on the U.S. dollar proceeds, which accounts for $0.23 a unit, FFO would have been $39.9 million or $0.86 per unit in the 3 months ended March 2018, as compared to $39.6 million or $0.84 a unit in the prior year period.The corresponding FFO payout ratio for Q1 '18 after the above-noted adjustments was 79% as compared to 78% in the prior year period. Once again these above factors impacting FFO and the ones described regarding AFFO, which I won't repeat, as Mike covered them, are more detailed in our MD&A on Pages 13 and 14 of the Q1 report.For Q1 '18, we recorded fair value gains in connection with our investment properties, totaling $32 million, which is approximately 1% of the IFRS value of our investment portfolio as compared with a $7.3 million net fair value losses recorded in the prior year period.Turning to the balance sheet at quarter-end. The IFRS value of our investment portfolio stood at $2.9 billion, implying an overall cap rate of 7.5% and our balance sheet remained entirely unencumbered by any secured debt.Our income-producing portfolio of 85 properties at quarter-end comprised approximately 29.7 million square feet, that had an occupancy of 98.7% by GLA, had a WALT of 5.9 years as measured by square feet and was 70% tenanted by Magna if measured by revenue or 60% if measured by GLA.Our total debt was $745 million approximately, inclusive of $98 million swap mark-to-market. And our debt was comprised only of unsecured debt. It did not include any draw on our unsecured credit facility other than for letters of credit in the amount of $200,000. Our debt also had a weighted average term to maturity of 4.7 years and a weighted cost of 2.53% and represents a net leverage ratio of 16%, which, for greater clarity, is net of $274 million of cash and equivalents as at quarter-end.Please note that the above-noted balance figures are -- and property metrics, apologize, exclude the asset that we purchased subsequent to the first quarter in Greencastle, Pennsylvania on April 4 and the recently announced agreement to purchase the 4 properties in Columbus, Ohio as announced on May 10.We continue to expect annualized distributions for 2018 to be $2.72 per unit based on the current monthly distribution amount of $0.227 per unit.Total purchases made pursuant to our NCIB from its inception in May '17 up to and including May 11 were 1.47 million units for total consideration of approximately $73 million, which equates to an average purchase price of $49.50 per unit.During Q1 '18 alone, NCIB purchases amounted to just over $1 million -- sorry, just over 1 million units for a total consideration of $51 million, representing an average purchase price of $49.32. Our Board of Directors and trustees have approved the renewal of the NCIB program, which is subject to customary regulatory approvals that Granite has undertaken and expects to obtain.With that, I will turn the call back to Mike.

[Michael Forsayeth, CEO & Trustee]

Thank you, Ilias. Operator, please open it up for any questions.

[Operator]

[Operator Instructions] Our first question from the line of Mark Rothschild from Canaccord Genuity.

[Mark Rothschild, MD & Real Estate Analyst]

In regards to the acquisitions in Columbus, you gave some details. Is it possible to give any more detail on the locations and the types of locations of the properties, and any other information you can give on that?

[Michael Forsayeth, CEO & Trustee]

If you look at the addresses up on the -- just on Google Maps, you can probably get a pretty good sense of it, Mark. It's a submarket in the Columbus area. That total market has probably 250 million square feet in that total market, and this submarket has probably in the area of 35 million, 40 million square feet. It's just west of Columbus. And it's a growing little submarket that's got low vacancy in -- at least in that area of under 2%.

[Mark Rothschild, MD & Real Estate Analyst]

Okay, I will do that. In regards to the acquisition pipeline. The price that you're paying, the cap rate, the price per square foot for these assets, is there more -- quite a bit more available at this type of pricing? Is there anything unique about this deal versus what you're seeing broadly in the U.S. market?

[Michael Forsayeth, CEO & Trustee]

Yes. It's market dependent, Mark. And I'm not trying to sort of evade the question. But the -- you go into center ice area like Atlanta, Dallas, New Jersey, your price per pound is going to go up significantly. In these submarkets, we think, yes, there is available product that we can take advantage of. But in this one, as I mentioned, one of the buildings we literally priced as vacant. So that was also a factor.

[Mark Rothschild, MD & Real Estate Analyst]

Okay. And then just lastly. Ilias, I'm not sure if you mentioned anything on the straight-line rent. Is this quarter a good run rate for what we should expect going forward?

[Ilias Konstantopoulos, Chief Financial Officer]

No. The straight-line rent this quarter includes, in particular, of the $1.9 million, which you'll see in our financials, Mark, it includes 3 assets that were: one was the release of the Olive Branch location, which contributed about $900,000 of that amount, rent-free period. And then, we've 2 other assets, 1 in Germany -- Peine, Germany -- Peine, Germany, I should say, and 1 in New Jersey -- Logan, New Jersey, which together those 3 items comprise the lion's share of the straight-line. We expect that to diminish in the next quarter and the coming quarters.

[Operator]

Our next question will be from the line of Sam Damiani with TD Securities.

[Sam Damiani, Analyst]

Just to follow on the acquisition in Columbus. It is a fairly high concentration in a relatively small submarket. And as I understand, the vendor did retain some land for some potentially significant [ excess ] land for construction of new facilities in the future. What is your outlook for rental rate growth for these properties over the medium term? And curious also how you plan to finance these properties once the one building is stabilized, long term?

[Michael Forsayeth, CEO & Trustee]

Yes. I think on the -- on your first question, in terms of the rental growth in the market, these -- all of these leases have steps ups in them. So in the near term, certainly, we see the growth literally just from the leases themselves. As supply comes on, that will -- we'll see how much supply actually does come on and the market will determine what that pricing would be at that -- will be at that time. But overall, these are -- in terms of the rents that you see on average 3 50 to 3 60, there's not -- it's not a high-rent district. So we think there's opportunity for some -- for certainly some medium growth over the long term. From a financing perspective, ultimately, as we get our balance sheet leveraged up, I'd see us -- and utilizing our cash, ultimately, we would term that out. And Ilias?

[Ilias Konstantopoulos, Chief Financial Officer]

Yes. Sam, the only thing I would add is, this particular location is 20 miles west of Columbus. So the Greater Columbus market in going through the tenant interviews, you would hear each of those tenants speak very, very highly about this location, namely that you could reach half of the U.S. and Canadian population within 1 day's truck ride. So these markets and these tenants are servicing, particularly the Northeast, Mid-Atlantic and Midwest regions, and each has chosen to go there because of location as well as the, generally speaking, the access to labor is a very good in that market -- or has been. And so those are some of the attractive features around the market. And that 250 million square feet, that Mike refers to, is roughly 1/3 of the GTA, just to put it in perspective. So while it appears by U.S. definitions, small, it is frankly 1/3 of the GTA, which is quite remarkable. Anyway, so I thought I'd add that for additional context.

[Sam Damiani, Analyst]

And just on the long-term financing of these assets. Again, once the building is stabilized, what sort of -- how would you do it? And what sort of rate would you would get on perhaps a 5- or 7-year fixed rate?

[Ilias Konstantopoulos, Chief Financial Officer]

Right. So for the time being, as you know, we've got cash on hand, which for the most part will be used. We will tap the credit facility for any shortfall. There is some -- there are some other moving parts, Sam, that may lead to further monetizations, Mike mentioned that. But ultimately, when we get to a critical mass within our facility to term it out on a fixed basis, to answer your question, on 5- and 7-year money, I'm going to ballpark 3.75%, 4-ish percent fixed rate and question what we do from there in terms of other options of course, whether we swap, whether we consider other forms of financing including secured debt, that's all early days.

[Sam Damiani, Analyst]

So the 3.75% to 4% is on an unsecured basis?

[Ilias Konstantopoulos, Chief Financial Officer]

Yes. And that's directional. I...

[Sam Damiani, Analyst]

No, I know the market is always moving for sure. Maybe just one more and then I'll turn it back. Is just on the Olive Branch. The new tenant there, was there a TI required? And if so, how much? And when will the free-rent period end there on that new tenant?

[Michael Forsayeth, CEO & Trustee]

Lorne?

[Lorne Kumer, Executive VP & Head of Global Real Estate]

Yes. It was about -- the TI was about $3 million and the majority of that is going directly into the building dock doors and air conditioning the entire facility. So they're all primarily enhancements to the building.

[Operator]

Our next question from the line of Neil Downey with RBC Capital Markets.

[Neil William Edward Downey]

I'll just follow up with Sam's question. When did that Olive Branch lease start paying cash rent?

[Michael Forsayeth, CEO & Trustee]

Paying cash rent now on the majority of it. There is a small piece that they're not paying cash rent as we fill up these TIs. And I believe that starts in 1 year. It's for a couple -- I think it is about 200,000 square feet. Have I got that right?

[Ilias Konstantopoulos, Chief Financial Officer]

It's 300,000.

[Michael Forsayeth, CEO & Trustee]

300,000?

[Ilias Konstantopoulos, Chief Financial Officer]

Yes.

[Michael Forsayeth, CEO & Trustee]

Yes.

[Neil William Edward Downey]

Okay. And given that the company has cash in multiple jurisdictions...

[Michael Forsayeth, CEO & Trustee]

Oh, sorry, one other bit, Neil. The other part you need to factor into that whole thing is the whole lease termination. Like this was a 3-way deal in terms of cash that Granite was putting together in this packet. So yes, they're not paying cash rent on that portion of it, but we actually got the money.

[Neil William Edward Downey]

Right. No, no, understood. I was just coming at it from a cash NOI run rate perspective. Given that the company does have cash in multiple jurisdictions, how much do you anticipate drawing on your credit facility for the West Jefferson portfolio?

[Michael Forsayeth, CEO & Trustee]

Right. So...

[Neil William Edward Downey]

Conversely, how much cash do you actually...

[Ilias Konstantopoulos, Chief Financial Officer]

Yes. So Neil, keeping everything static, which it isn't, but keeping it static to answer your question, I'll say about 70-ish to USD 75 million. The other cash, you'll recall, in Europe, much of it we repatriated at year-end. And so our cash balances overseas are relatively small, i.e., in the order of EUR 20 million, EUR 25 million as we speak. And so we will tap the credit facility to the tune of $70 million to $75 million absent any another sales and absent any other purchase on the NCIB program and other acquisitions for that matter.

[Neil William Edward Downey]

Okay. I understood. And Mike, you mentioned, I think the wording you said, you "underwrote potential vacancy in the pricing of this portfolio."

[Michael Forsayeth, CEO & Trustee]

Yes.

[Neil William Edward Downey]

How do we think about that? Does that mean you underwrote potential for 6 to 12 months of vacancy plus a TI on the one building? Is that how we think about it?

[Michael Forsayeth, CEO & Trustee]

That's right. That's how we should think about it. Yes.

[Ilias Konstantopoulos, Chief Financial Officer]

12 months.

[Neil William Edward Downey]

12 months. Okay. And as I understand it, that tenant that's in liquidation, the liquidator, I think, is really looking to sell some of the leases. So is it possible that another tenant ultimately steps right into this building and there actually is no income interruption?

[Michael Forsayeth, CEO & Trustee]

Absolutely, right. Yes.

[Neil William Edward Downey]

Okay. Do you expect any close-out or lease termination fees in Q2? As I recall, I thought there was a situation here in Ontario where you might get something?

[Michael Forsayeth, CEO & Trustee]

Yes. There could be a little bit in the Clearview situation in Tillsonburg, but nothing significant, Neil.

[Neil William Edward Downey]

Okay. And lastly, again, just for my memory. Can you remind me that 70% of the Novi space that's leased -- is it paying cash rent in Q2?

[Michael Forsayeth, CEO & Trustee]

Yes.

[Operator]

Our next question will be from the line of Pammi Bir with Scotiabank Capital.

[Pammi Bir, Analyst]

Just with respect to 115 Enterprise in the Columbus transaction, can you just comment on the current availability in that submarket? And do you have a rough sense of how much spec space is under construction there?

[Michael Forsayeth, CEO & Trustee]

The availability for something of that nature in that submarket is 0 from our understanding. And I don't believe right now there is any current supply being built on a spec basis.

[Pammi Bir, Analyst]

So the prospects, I guess, on this space are, again, as you mentioned, pretty good. I guess, maybe just asking the question a little bit differently, with respect to the pricing, and I haven't had chance to do the math that quickly, but how much of a discount was applied in terms of your cap rate assumptions on this transaction had that space not been expected to vacate?

[Michael Forsayeth, CEO & Trustee]

I don't know. 20 -- maybe 20 -- 20%.

[Ilias Konstantopoulos, Chief Financial Officer]

Not 20%, 25 basis points.

[Michael Forsayeth, CEO & Trustee]

Basis points. Pardon me.

[Pammi Bir, Analyst]

Okay. All right. That's helpful. And then just lastly for me from a development standpoint. Can you remind us where you are on the Plainfield site? And any pre-leasing done there yet?

[Michael Forsayeth, CEO & Trustee]

No pre-leasing is done on that yet, Pammi. We're in the process of getting the permits on that site. But we're well along the path in terms of the plans, what we might build, et cetera on there. But right now, we're just working through the municipality and getting the permits in place.

[Pammi Bir, Analyst]

And what would the rough estimate of the potential investment on that site be?

[Michael Forsayeth, CEO & Trustee]

I'd say in the $25 million, $26 million.

[Ilias Konstantopoulos, Chief Financial Officer]

That's with land.

[Michael Forsayeth, CEO & Trustee]

Yes, with land. Because we already own the land.

[Ilias Konstantopoulos, Chief Financial Officer]

And that's U.S. dollars.

[Michael Forsayeth, CEO & Trustee]

Yes, and that's U.S. dollars.

[Pammi Bir, Analyst]

And what sort of, I guess, unlevered yield do you think you could actually realize on that?

[Michael Forsayeth, CEO & Trustee]

We think north of 7, all-in, from what we got.

[Pammi Bir, Analyst]

Okay. And just I guess, maybe adding to that. How actively are you pursuing additional sites, I guess, for -- from a development standpoint? Just given how competitive it is for acquisitions, you're clearly getting some deals done. But are there opportunities to expand the pipeline from a development...

[Michael Forsayeth, CEO & Trustee]

Yes, we're looking at the development side. We've been meeting with potential partners on the development side. So that's continuing. Nothing locked up yet. But we've got the Plainfield site and we're also looking at the one in Altbach in Germany, is another one that we're -- again, we're working on the permitting on that side. That's not in land under development yet. But once we get the permits, we'll move that property into the land under development. But those are 2 that we're actively working right now. And as I say we are working with and talking with potential joint venture partners on the development side.

[Pammi Bir, Analyst]

And would that be in the U.S.?

[Michael Forsayeth, CEO & Trustee]

Yes.

[Operator]

[Operator Instructions] Our next question from the line of Howard Leung with Veritas Investment Research.

[Howard Leung, Investment Analyst]

Just want to follow up on the Columbus, Ohio property. Mike, you'd mentioned that there were step-ups on there. Is that the fixed step-ups or are they based on CPI?

[Michael Forsayeth, CEO & Trustee]

No, they are fixed step-ups in the 1.5% to 2% range.

[Howard Leung, Investment Analyst]

Okay. And you mentioned that you've also put in -- budgeted, I guess, some TI potentially if there was -- if the tenant ended up being vacant. Is that -- what -- is there any kind of range that you'd expect to have to pay?

[Michael Forsayeth, CEO & Trustee]

Yes, we're thinking maybe $3 million -- $3 a square foot. $3 a square foot, sorry.

[Howard Leung, Investment Analyst]

Wait, wait. Just -- yes, so roughly 1 year's worth of rent or just a little under that. And then, on the COO, you mentioned that they are no longer there. Are there plans to hire another one or promote someone? Or there's no plan there for now?

[Michael Forsayeth, CEO & Trustee]

I'll leave it up to the next guy perhaps. But the team here has stepped up. Lorne's taken on additional step, Mike Ramparas has taken on additional step. So nothing in the immediate plans.

[Howard Leung, Investment Analyst]

All right. And just one last one, maybe for Ilias. The -- I guess, the tenant incentives in AFFO. I guess, that was -- it was a cash payment, but it was -- it had been expensed earlier, right, it was with the Graz facility, it was just cash outflow this quarter?

[Ilias Konstantopoulos, Chief Financial Officer]

Yes. So I'm not sure if you're referring to our -- yes, our AFFO breakdown, Howard, includes cash paid in terms of tenant incentives. That's the method that we've adopted just to state the actual. So indeed, that cash has gone out the door.

[Michael Forsayeth, CEO & Trustee]

Yes. And as I mentioned, Howard, that was -- that's been accrued on the balance sheet since 2014 and literally the terms of that were to be paid in January 2018.

[Howard Leung, Investment Analyst]

Right, right. So that -- and that's -- I think that's on this balance sheet as liability is 0 now, right? So there is no...

[Michael Forsayeth, CEO & Trustee]

That liability is 0, and you continue to see the amortization of that literally over the 10-year time frame.

[Howard Leung, Investment Analyst]

Oh, right. So with amortization, is that going to hit the revenue side now?

[Michael Forsayeth, CEO & Trustee]

The amortization is -- will hit in your -- following your straight line.

[Operator]

Our next question is a follow-up from Sam Damiani from TD Securities.

[Sam Damiani, Analyst]

Just on dispositions. I don't see anything in the held-for-sale bucket on the balance sheet. Are you pursuing in the near term additional Magna property disposals to bring the concentration down? It's still relatively high at around 64% of revenues?

[Michael Forsayeth, CEO & Trustee]

Yes. We're still looking at a few, nothing firm, nothing approved, but there are ones that we're looking at.

[Sam Damiani, Analyst]

Can we expect more this year?

[Michael Forsayeth, CEO & Trustee]

I think so.

[Sam Damiani, Analyst]

And just a follow-up on Olive Branch. What was the term of the new lease?

[Michael Forsayeth, CEO & Trustee]

10 years.

[Sam Damiani, Analyst]

10 years?

[Michael Forsayeth, CEO & Trustee]

Yes.

[Operator]

Mr. Forsayeth, we have no further questions at this time. I'll turn the call back to you at this time, sir.

[Michael Forsayeth, CEO & Trustee]

Thank you very much, France. So in closing, I'd like to thank certainly all our employees in both North America and Europe for their support, dedication and commitment to Granite. I thank everyone else on the phone for your time and attention. So with that, we'll sign off. Thanks very much. Bye for now.

[Operator]

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for participation today. And we kindly ask that you please disconnect your lines.