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Granite Real Estate Investment Trust
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Good morning, ladies and gentlemen, and welcome to the conference call of Granite REIT. Speakers to you -- 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 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 2021 filed on March 3, 2021. Readers are cautioned not to place undue reliance or 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 a standardized meaning under international financial reporting standards. Please refer the Q1 2021 condensed combined unaudited financial results and management's discussion and 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 from time to time for additional relevant information. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, May 6, 2021. I will now turn the call over to Kevan Gorrie. Please go ahead.
Thank you, operator, and thanks, everyone, for taking the time to join us for our Q1 2021 earnings call. I hope you're all doing well, and I'm taking yet another call from my house. As usual, I am pleased to be joined this morning by Teresa Neto, our CFO; Lorne Kumer, our EVP and Global Head of Real Estate; and Michael Ramparas, our EVP of Global Real Estate and Head of Investments.For our call this morning, Teresa will begin our discussion with a review of the financial highlights. I will then provide an update on our operations, acquisitions, developments and ESG. And then as usual, open up the call to any questions that you may have. Teresa, over to you.
Thanks, Kevan, and good morning, everyone. Granite's first quarter results are in line with expectations, with FFO and AFFO per unit coming in flat to Q4 2020 in light of negative foreign currency effects from the recently strengthening Canadian dollar and the impact of a few nonrecurring items pertaining to financing costs, current income tax and G&A.FFO per unit in Q4 was $0.93, but included in this quarter, FFO is $4 million of redemption premium incurred upon the early redemption of the 2021 debentures in January and $0.5 million of accelerated amortization of financing costs relating to the amendment and upsize on Granite's credit facility. Excluding the impact of these financing costs, FFO per unit would be $1, representing a $0.05 or 4.8% decrease relative to prior year and flat to Q4.FFO was negatively impacted by foreign exchange translation losses of our foreign-based income as the U.S. dollar and euro weakened by 3% and 2% respectively, resulting in a $0.02 decline in FFO relative to Q4. Partially offsetting these translation losses are a net $0.7 million of foreign currency gains being realized in the first quarter, mostly as a result of Granite's AFFO FX hedging program.Relative to Q1 last year, however, foreign currency gains are $2 million lower as the Canadian dollar had weakened significantly at the end of March 2020, resulting in a large $2.8 million foreign currency gain on foreign cash held at that time. FFO this quarter was also positively affected by the recognition of tax assets, reducing current income tax expense. In the first quarter, we realized tax assets of $0.3 million. However, this amount is lower than the $0.8 million of tax assets realized 1 year ago, resulting in a negative variance of $0.5 million relative to prior year.Lastly, FFO was impacted by higher G&A relative to prior year, mostly driven by incremental compensation costs pertaining to the 2020 fiscal year recognized in the current quarter and fair value gains realized in Q1 last year on deferred compensation liability when Granite unit price declined sharply at the end of March 2020. Granite's AFFO on a per unit basis in Q4 was $0.89, but adjusting for the financing costs previously mentioned, AFFO would be $0.96, which is $0.09 or 8% lower than prior year and flat to Q4.AFFO-related capital expenditures, leasing costs and tenant allowances incurred in the quarter were $0.6 million, which was lower than the $1.1 million incurred in the same quarter last year and also lower than the $2.3 million incurred in Q4. We expect maintenance CapEx and leasing costs to ramp up in Q2 and Q3 of this year and continue to estimate expenditures of approximately $15 million for the year. In addition to the impact of foreign currency, tax provision adjustments and G&A impacting FFO overall, FFO and AFFO also continued to be impacted by the temporary dilutive impact of the Q4 2020 equity and bond offerings where net proceeds have yet not been fully deployed.Granite's AFFO payout ratio came in at a conservative 79% for the quarter after adjusting for the previously mentioned financing costs. NOI on a cash basis for the quarter increased $12 million or 17.7% from the same quarter in 2020 and by $3.5 million or 4.6% from Q4. Same-property NOI for the first quarter was solid relative to Q1 last year, increasing 2.6% on a constant currency basis and increasing 1.2% when FX impacts are included.Same-property NOI growth was driven primarily by positive leasing spreads in Canada, contractual rent and CPI increases across the portfolio as well as incremental rent earned from excess land at a GTA Magna property. G&A for the quarter was $3.1 million higher than the same quarter last year and $0.9 million higher than Q4. The negative variance relative to Q4 is primarily due to an additional compensation expense of $0.9 million relating to the 2020 fiscal year and therefore, nonrecurring, recognized this quarter.In comparison to the first quarter of 2020, the $3.1 million variance is mostly related to the $0.9 million of additional compensation expense just mentioned, a negative change in the fair value gain on non-compensation liabilities of $1.4 million as Granite's unit price declined sharply at the end of March 2020 and no similar adjustment in Q1 2021 occurred. And higher cash -- noncash compensation expense of $0.7 million as a result of the increased director fees and higher amortization expense on outstanding LTIP grants.Excluding the $0.9 million of 2020-related compensation expense recognized this quarter, G&A would be $8 million, which is consistent to Q4 and in line with an expected run rate for the remaining quarters of 2020. Our estimated G&A expenses of $8 million per quarter assumes about $1.6 million of noncash compensation expense, but assumes no fair value losses or gains associated with the increase or decrease in noncash compensation liabilities, which cannot be predicted.With respect to current income tax, for Q1, income tax was $2 million, which was higher than Q4 by $0.3 million and higher than Q1 by $5.7 million. This quarter, as I mentioned, Granite recognized $0.3 million of tax assets in Germany relating to tax years that have now gone statute barred. Similarly, tax assets of $0.8 million were recognized in Q1 of last year and also $1.7 million of tax assets were recognized in Q4.On a run rate basis, current tax was approximately $2.3 million per quarter. With respect to the potential recognition of tax assets, as mentioned previously, Granite has a further potential $2 million of tax assets that may be recognized in Q4 this year relating to tax positions taken on taxation years, which will go statute barred, but we cannot assess whether these tax assets can be realized at this time.The Trust's balance sheet comprising total assets of approximately $6.6 billion at the end of the quarter was positively impacted by approximately $210 million in fair value gains to Granite's investment property portfolio in the first quarter, offset by approximately $140 million in translation losses on Granite's foreign-based investment properties, particularly impacted by the decline in the euro of 5.3% as well as a decline in the U.S. dollar of 1.4% relative to the end of Q4.The fair value gains on Granite's investment property portfolio is mostly attributable to fair value gains in the Trust's GTA and 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. The Trust's overall weighted average cap rate at 5.4% decreased 20 basis points from the end of Q4. Total net leverage as at March 31 was 25%, unchanged from Q4.As announced in March, Granite's credit rating was upgraded by DBRS Morningstar to BBB high, and as a result, Granite's borrowing costs on its term loans and creditability have declined by 25 basis points, resulting in annualized interest expense savings of approximately $1.8 million. However, this is mostly offset by higher financing fees relating to Granite's upside credit facility of approximately $1.5 million per year. The Trust's current liquidity is approximately $1.5 billion, representing cash on hand of around $500 million and the undrawn operating line of $999 million.I will now turn the call over to Kevan. Thank you.
Thanks, Teresa. As always, I'll keep my comments brief as I trust you had the opportunity to review our MD&A and press release. First of all, I'll echo Teresa's comments on the quarter. Normalizing for the impact of early redemption costs and negative FX impacts, our FFO and AFFO per unit were in line with expectations for the quarter. Rent collection continues to be strong across our portfolio. As of the time of this call, we have now collected 100% of rent for the quarter, and there are no deferrals being contemplated at this time.As disclosed in the MD&A and press release, we completed the sale of our single asset -- sorry, we completed the sale, yes, of our single asset in the U.K. and closed on our final remaining announced acquisition in Atlanta for roughly CAD 86 million. The 1 million square foot newly constructed property is 75% leased to Radial, an omnichannel logistics provider for a remaining lease term of roughly 7.5 years. The remaining 250,000 square feet of availability is currently listed for lease.Our pipeline of acquisition and development opportunities remain very active across our target markets in the GTA, Germany, the Netherlands and the U.S., including land sites for development. On the development front, our project in Altbach, Germany has commenced construction and is expected to be completed by the end of the year. Construction on our development projects in Dallas and Houston, Texas, comprising 3 buildings totaling roughly 1.3 million square feet, is scheduled to commence late in the second quarter or early third quarter with an anticipated completion date in the second quarter of 2022.In addition, the expansion of our Congebec cold storage facility in Mississauga has now commenced, and we expect completion to occur in the second quarter of 2022. As mentioned above and on previous calls, development will continue to play a critical role in our growth plans, particularly given current pricing levels for modern stabilized assets across our target markets.As a note, all of our developments will meet the green building requirements outlined in our Green Bond Framework, and we continue to make progress on our inaugural corporate responsibility report expected to be published in the second quarter, which will outline our ESG objectives and targets for 2021 and beyond. For an update on our operations, 2.3 million square feet of leases are expiries occur in 2021. To date, we have completed roughly 2.2 million square feet of renewals or new leases on those expiries and an average increase in rental rate of approximately 6%.The remaining 120,000 square feet of space in Germany is set to expire at the end of June and is currently being marketed for lease. Of the 5.4 million square feet in leases scheduled to expire in 2022, we have renewed 345,000 square feet to date and are currently in discussions on over 1 million square feet of further remaining expiries. As Teresa mentioned earlier and as disclosed in our MD&A, same-property NOI increased by 2.6% on a constant currency basis. Same-property NOI growth for the quarter was muted by lower CPI increases, which came in below 1% for 2020 and a vacancy in Austria.In closing, with roughly $480 million in cash, $1.5 billion in liquidity, as Teresa mentioned, we are very well-positioned financially to execute on our planned development projects and our current pipeline of acquisition opportunities. Also, as Teresa mentioned, Granite recognized over $200 million and set -- in net fair value gains on our investment properties in the quarter, reflecting the continued favorable movement of cap rates and in place and market rents, we are observing both in our portfolio and across our target markets. Investment demand for the modern logistics real estate continues to intensify, and we expect that 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, and we will leverage our platform to incorporate additional development and value-add activities in our growth strategy in order to drive NAV growth and higher total return for unitholders over the long term.On that note, operator, please open up the floor for any questions.
[Operator Instructions] And our first question is from the line of Mike Markidis with Desjardins Capital Markets.
Kevan, just with respect to the 6% leasing spread that you mentioned for 2021, just to confirm, is that a cash expiring exit rate versus the initial rate?
I think I understand the question, and yes.
Yes. No, just some people say over the average of the term. So I just want to make sure that we were comparing apple to apple...
I see. No, it's cash. So it would be -- exactly. Exactly.
Okay. Great. With 6%, a little more modest than perhaps some of the stats that we've seen coming out of others. And just looking at your profile for this year, it looks fairly balanced geographically. So is that skewed down by anything specifically? Just trying to get a sense of the 6% is dragged down by 1 or 2 properties or if it's just globally reflective of the 2021 pool?
Yes. I think the one point I would make there, Mike, is there's quite a bit that was rolling in Europe this year, i.e., versus Canada in maybe previous years. But the other thing, too, is there is a renewal in the GTA with Magna, and we were expecting strong rents on renewal, but there was an amortization in the rent. So any growth there is muted by the amortization. So this also includes a renewal in the GTA where the in-place rents because of a previous amortization were already quite high. So that 6% is muted by that and also part of the rollover being in Europe.
Okay. So just shifting then to 2022. You've actually got a lot coming in the U.S., I think it's 3.8 million square feet. How do you see that shaping up relatively?
Yes. I think the U.S. right now for 2022, we're projecting somewhere around 6% on average rental rate spread in the U.S., and that's where we sit today. In Europe, I think we have over $1 million, roughly the same. And then the smaller component we have in the GTA, we're projecting quite strong rental spreads over 25%.
25%. Okay. And then last one for me before I turn it back. Just I think in Austria, you've got the [ Lannic ] property coming in 2022, 802,000 square feet. Can you remind me, is that a special purpose? Or would that be more considered in your light industrial/warehouse bucket?
No. It is special purpose.
It is special. Okay.
I believe -- yes. Correct.
And is that one -- is it too early to comment on discussions? Have discussions commenced? Do they have an option to exercise there? Just getting a sense of maybe it's a tail-end 2022. I'm not sure.
No. I mean it is the renewal terms are set there. And so there is no point to have any discussion on it. So it will come at -- I believe it's at the end of 2022. And so it's already set. We just have to wait until we receive the notice of renewal.
Our next question is from the line of Sam Damiani, TD Securities.
So just on the acquisition side, Kevan, you've got a lot of liquidity with the credit facility increased by $500 million last month. What's the prospect of using some of the cash on the balance sheet in the near term? Are there acquisitions in the pipeline that could close in the next quarter or 2?
Well, there certainly is -- I mean I would characterize -- I would say the -- our active development pipeline right now remains probably in the $400 million to $500 million range. And again, it's -- it could go either -- it could go in a number of ways just because we're pricing -- where we have seen pricing go recently. I mean there's a high probability we won't be successful in a number of those. There's only so much we will press on pricing. And I think we've shown that, particularly at the beginning of this year.But that being said, it would not surprise me -- potentially, we wouldn't close on it by the end of the second quarter, but it would not surprise me at all that we would be under exclusive -- under contract or exclusive negotiations on roughly $100 million to $150 million in acquisitions before the end of the second quarter. And that could -- and I think we would expect that to include land sites for development.
Okay. That's helpful. And I actually wanted to ask about land sites. I know you mentioned a number of markets you're looking at, but what would be your sort of priority market for acquiring land at the moment?
Well, I would say it's more so going to be -- we expect -- I mean we are looking for development opportunities in Europe as well. But just because of the nature of the geography, it's more likely that will be done in partnerships. But we'll continue to look at opportunity there. I think for a Granite development program, a lot of it will take place in North America. And we continue to look at opportunities in the GTA. Obviously land costs are -- we know the story around the growth in land costs here in the GTA. And we're actively looking in our target markets in the U.S. So I would open the next 12 to 24 months, we'll have future development opportunities in the GTA and in the U.S.
Okay. Last one for me. Just on the Locust Grove asset, what would you be budgeting for the timing of getting that last 25% leased up?
By the end of the year.
[Operator Instructions] Our next question is from Matt Kornack with National Bank of Canada.
With regards to the development pipeline, would all of those projects be -- sort of meet the requirements for your Green Bond program?
They would.
And then just with regards to FX and how you think about it, it's been pretty volatile on the U.S. dollar front. Canadian dollar seems to be appreciating. But does that impact the way you look at any of these markets? Or are you looking at it exclusive of that? And on the hedging front, I know you have some direct hedging, but also carry debt and hedge that way. Just thinking -- sorry, just want to know your thoughts on FX and how you manage it.
Yes. It's a great question, Matt. And I'll start, and then I'll turn it over to Teresa to talk about our active hedging program and the future of that. But just in terms of deploying capital in the U.S., we've taken the view that we are not speculators, currency speculators. And so we don't look to geographies just because we're the Canadian dollars, but I would be lying to you if I didn't say with the Canadian dollar at a 3-year high or a 4-year high, that the acquisitions in the U.S. don't become more attractive to us from a financial perspective.So I wouldn't say that it really changes our approach to acquisitions in the various geographies, but it does make potential acquisitions or opportunities we're looking at the U.S. slightly more attractive today with cash that we have versus where it would have been 6 to 12 months ago. Teresa, I'll just turn it over to you on comments on the hedging program.
Yes. So as far as our hedging program, we do have a policy which allows us management the flexibility to hedge up to 75% of either transactions or cash flows. And so from time to time, we do take active hedging approaches. But first and foremost, our primary hedging is with foreign-based debt. And as you know, we skew more to Europe because of the lower cost of debt in that market. So as far as our European cash flow, most of that is hedged simply by having our euro loans there.And then in the U.S., we have a small amount hedged as far as the foreign U.S. debt. But over and above that, last year, coming out of the -- at the beginning of the pandemic, we took a view that the U.S. dollar specifically was going to decline, and we did set up a number of callers and put that in place up until the end of this year, until the end of 2021. So that protects us to some degree on the downside of the U.S. dollar, and we also did the same with the euro and protected it for this year on the downside of the euro.So we've hedged about 50% of our AFFO in the U.S. and 40% in Europe. And our average hedged rate on the downside is about $1.31. So we have been realizing gains on our U.S. dollar. But we realized actually about $1.6 million in the first quarter on U.S. dollar [ cards ] and specifically one euro [indiscernible] because euro is also declining. So we are putting in place some hedging, but we haven't extended that program out to 2022 because we've taken the view that the U.S. dollar has probably seen -- is at the lowest point and would probably be on the rise in the coming quarters.So we're going to leave it open and not hedge any further at this point in time. So we're trying to do a little bit of both, try to be active, but our primary hedging is foreign debt, placing foreign debt.
Okay. No, that's a lot of color, and I appreciate it. Last one for me. You guys have a bit of a hybrid cost of capital to some extent, the legacy special purpose assets, which are obviously higher implied cap rates, depending upon leasing that goes on there. But then you have extremely inexpensive access to debt financing. I'm wondering how as you look -- and you're sitting on liquidity in the form of balance sheet flexibility, how you think about hurdle return threshold that get you interested in the context of what is a pretty heavily bid asset class? And again, what markets make sense in that context?
Well, it's a -- it is a hard question to answer. We think if I could exaggerate for effect, if we can borrow in euros at sub-1%, does it make sense for us to pay 2 caps on assets in Europe? And the answer is no. I think one of the advantages we have is we're sitting here, being able to look at and evaluate opportunities across various geographies and what gives us the best risk-adjusted return. But we also have to underwrite, it's very important for us to try and understand what the market fundamentals are and where we think rents are growing or going.And I know that sounds obvious. But to us, what's compelling again about Europe is where we see the rent potential. And the rent growth has been good, but not obviously as strong in North America, but we look at the fundamentals there and a number of factors that point to very strong rent growth over the next 5 to 10 years. So that gives us comfort to be aggressive on going in yields with the expectation that we're going to see rent growth in the back end. But we have seen transactions where we are interested in the 3.5 to 4 going in yield range that are going for 3 and going for high 2s.And that gives us pause because despite your cost of capital and your ability to utilize your balance sheet at very low cost to deploy it, it still doesn't make sense to overpay for assets. And we know that. And I think it's -- one of our strategies is continue to grow in Europe for the comments I've just made around leasing fundamentals, but also on a cash and cash basis, it gives us an advantage. We know that. But we have to remain disciplined in what we think we're going to pay, and we're still an IRR-driven company, very much so.So it's -- we haven't done any deals yet in Germany despite having what we feel to be the cost of capital to do so because we think that pricing is too high, but we are willing to get aggressive in Europe, more so because of where we see fundamentals rather than the cost of capital in that jurisdiction. I think that answers the question, Matt?
[Operator Instructions] Our next question is from Joanne Chen with BMO Capital Markets.
Maybe just a quick one for me on the -- I think we talked quite a lot about on the acquisitions front, but maybe just on the other side, how much more in terms of any capital recycling opportunities do you see for the remainder of this year? And is there a particular market that you guys are focused on with respect to the capital recycling?
Well, I think, Joanne, we have said that we expect to be pretty light in terms of dispositions this year, and I've talked about this many times I think for a number of our assets in Europe. There are lease extension opportunities here that we definitely want to execute on before we evaluate that portfolio. And frankly, we're happy to hang on to a number of these assets if it's the best thing for Granite and for the unitholders. So I think we were projecting around $50 million this year in dispositions.We don't see any reason at this point to change that. So relatively light for this year. We have pointed to I think a couple in Austria. The one in Redditch in the U.K. was one we had identified for disposition. We're now completely out of the U.K., at least for now we're out of the U.K. And I think a couple in Austria and potentially one in the -- I'm not sure. But I think overall around $50 million this year. So a relatively light year for dispositions.
Okay. And maybe just shifting I guess to the development side. We're hearing a lot about obviously some of the cost inflation. But maybe if you could comment on what you're seeing in each of your target markets in terms of what you guys were seeing on the cost side that things were development? And has that shifted any thinking in the near-term with respect to some of your development activities?
Well, it makes me regret we didn't move sooner. So where the cost of steel has gone and just in concrete, it's frustrating. It has moved, and it has impacted our cost. But it certainly has been nothing to deter our focus on development. Frankly, it made sense to us -- our development projects when we evaluate them today, and we look at where cap rates are for stabilized asset, it makes more sense. I mean so even though the cost of construction may have gone up 5% to 10% overall because we thought the land has gone up 5% to 10%, cap rates have probably dropped 25 to 50 basis points, right?So the spread and maybe the development yield on cost has gone down. Maybe it was 6.5% before, and now it's 6% to 6.2%. But that spread over stabilized yield has gotten even larger. So our profit remains the same or has gotten better, but in a way, I feel it's fortunate. So we're definitely dealing with cost increases in the U.S. and when we're underwriting new land opportunities and development opportunities across any of our markets. It literally -- we have to rewrite our pro forma every 2 months, it feels like every 2 to 3 months to make sure we are on top of what market costs are, what market cap rates are.And it does not feel that the spreads have -- I would say in -- to be fair, in the GTA spreads have compressed. But again, looking at deals that are transacting right now in the market, we're probably wrong because we're probably off on our cap rates by another 25 basis points, right? So I would just say, a longwinded answer to a short question, but development spreads remain where they were when we first underwrote the deals we're working on or better.
Okay. That's great color. And maybe just on the acquisition this quarter and Locust Grove, there is some excess land for expansion. Would you have like a timing in terms of where you would like to proceed with that expansion? I mean you have quite a bit on the hop already, but just wondering, is that something that would proceed relatively soon?
Yes. Like Locust Grove, it is controlled by the tenant for this one. So for us -- and you'll notice there is kind of a pattern here. When we look to acquire assets, and this happens more in the U.S. and other jurisdictions just because of the supply plan, when we look at opportunity -- acquisition opportunities in the U.S. of stabilized assets, having expansion potential is attractive for us. So a lot of deals that we do have expansion potential. But to be fair, on the deal like Locust and others, we can't expand.It's really an expansion for the user, for the tenant. And our hope is that they exercise their expansion option. But we, in many cases, can't do it until the tenant agrees to or the lease expires, and we can decide if they're not going to renew or even if they are going to renew, is it worth renewing them in the existing space. Or is it worth not renewing them, expanding the building and looking for a newer, larger tenant.
Great. Okay. Well, just one last quick one for me. Given a lot of -- you mentioned the developments will be green certified. Do you see an opportunity for more Green Bond financing? And are you noticing now given that you guys kind of led the way there, but in terms of any pricing differentials on that front now? Because I know at the beginning there probably was not that much, but given the growing focus, do you see that opportunity?
Yes. I'll start and happy to defer to Teresa on the Green Bond pricing. But just to say that we're very confident we'll be able to deploy the capital to fulfill the Green Bond, $500 million commitment before the end of -- before the term expires. So we're very positive on that, particularly based on our active development program or a current development pipeline today. So the prospects of future Green Bond is very high for us I think over the next number of years. In terms of pricing, it certainly didn't feel that way when we issued the bond, not that we were unhappy with the rate that we received, I think it was very strong in the REIT contact, but it didn't feel like the Green Bond provided any favorable pricing. It did feel like we did see higher demand because of the Green Bond. So Teresa, any comments on what you're seeing or what you think today?
Yes. I definitely agree with your comments on when we did our bond, I don't think there was any pricing advantage other than we probably had more investors at the table. I'm not sure I'm seeing it at this point too. However, I think in the European market, I think you are seeing 2 to 3 basis points advantage on a green bond. So I feel that may translate into Canada. But at this point in time, not sure -- not sure I see it right now. But it potentially could be there soon.
Yes. Canada is always one step later.
Yes.
Like our [indiscernible] roller, right? Yes. There we go.
Yes.
Our next question is a follow-up question from Mike Markidis with Desjardins Capital Markets.
Just 2 more for me. Just in your investor presentation, special purpose of overall 7s. And then for Canada, it's much lower than it is in Europe. A much shorter duration of remaining term in Europe? Or is there anything specific to the assets that would cause that wide differential?
Mike, I think it's -- it is more -- I mean we -- the assets in Europe, particularly in Austria, we have them appraised. And so it is open to what the -- it is more influenced by appraised values, and I find just the data in Europe is lacking compared to North America and compared to the GTA. So when we look at Milton in the GTA, we have a much better idea of what land values are. We have a better idea of what prevailing market rents would be and if we were to get the site back and redevelop it.In Austria and Europe and Germany, it's different. And so we take a more -- we certainly take a more conservative tone in Europe. I don't think it's really to do with the -- well, I think part of it, you're right, is due to the remaining lease term. So if the term gets extended, there should be -- I would certainly expect there to be a positive movement in the value if that happens. But at the same time, we do struggle more in Europe with lack of data around those types of facilities and what the prevailing market rents would be or cap rates would be. Certainly, just based on what we've seen, there is more interest for long-term cash flow assets with good covenants. But again, there isn't enough data for us to point to, to have a stronger idea of exactly what the cap rate or the prevailing market rate would be for those assets in Europe versus the GTA.
Okay. And then, Teresa, just on the straight-line rent, I think it came in at around $3.1 million this quarter.
Right.
We had it actually coming down in our model. So I'm not sure if that was based on last quarter's comment there, haven't had a chance to check back. But maybe if you could just give your outlook for that item further.
Sure. Yes. It was also impacted by the recent acquisition. There's a little bit of free rent with Radial that will burn off in July. And we had some free rent with the December acquisition of [ Tradeport ]. So it will burn off. Q2, we're looking at about $1.7 million of straight-line rent and then leveling off to $1.5 million for Q3 and Q4. So that's before any adjustments that can come with new acquisitions. Clear? Operator, have we lost Michael?
No, I'm good. I don't know if it was...
Okay. Thanks.
Have we lost the operator?
Operator?
Operator, any further questions?
The line is connected. Do we move on?
Yes, please.
Yes.
Okay. Perfect. So question is another follow-up from Sam Damiani, TD Securities.
Just I guess confirm or get an update on your outlook for the same-property NOI growth for the balance of the year. I think on the last call, you were saying in the sort of low to mid-2%s for the first half and then the low to mid-3%s for the second half of the year. Is that still your outlook for 2021?
Yes, I can't exactly -- let me put it this way, can't exactly remember what I said on the last call, but there's no change to our outlook for same-property NOI for the year.
And there are no further questions.
Okay. Thank you, operator. So on behalf of the trustees and management team here at Granite, thank you for being on the call with us today. And to our unitholders, thank you again for your continued trust and support. Have a great day.
Thank you, everyone. That does conclude today's call. Thank you for your participation and ask that you please disconnect your lines. Have a great day, everyone.