Good morning, ladies and gentlemen, and welcome to the conference call of Garnet Reed. Speaking to you on the call this morning is Kevin Gorey, President and Chief Executive Officer and Theresa Neto, Chief Financial Officer. Before we begin today's call, I 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 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 Garnet'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 is on its annual information form for 2021 filed on March 3, 2021. Readers are cautions not to place undue reliance on any of these forward looking statements and forward looking information. Gurnite undertakes no intention or obligation to update or revise any of these forward looking statements are 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 the International Financial Reporting Standard.
Please refer the Q2 2021 consent condensed, combined unaudited financial results and management's discussion and analysis of Gornay's Real Tate Investment Trust and Garnet Reed, Inc, and other materials filed with the Canadian Securities Administrator and U. S. Securities and Exchange Commission from time to time for additional relevant information. Jewelers, we will conduct a question and answer session. Today's call is being recorded.
I will now turn the call over to Kevin Gorey. Please go ahead.
Thank you, operator, and thank you everyone for taking the time to join us for our Q2 earnings call. I hope you're all doing well and taught Amy and Warner's gold medal performance this morning in the decathlon. As usual, I am pleased to We'll be joined this morning by Teresa Neto, our CFO Lorne Kummer, our Executive Vice President, Global Real Estate and Michael Ramparis, our Executive Vice President of Investments. Teresa will begin our discussion this morning with a review of the financial highlights. I will then provide an update on our operations, Acquisitions, Developments and ESG and then open up the call to any questions that you may have.
Tricia?
Thanks, Kevin, and good morning, everyone. Granite's 2nd quarter results are in line with expectations with FFO and AFFO per unit coming in essentially flat to Q1 in light of continued negative foreign currency effects from the stronger Canadian dollar and the temporary dilutive effect of Garnet's recent equity and debt offerings. FFO per unit in Q2 was $0.99 representing a $0.02 or 2% increase relative to same quarter prior year and 0 point 0 $6 or 6.5 percent increase relative to Q1. However, normalizing Q1 for the $4,500,000 of financing costs associated with the redemption of Granite's 2021 debentures in January and accelerated amortization of financing costs Relating to the amendment and upsize of Grant's credit facility, Q1 FFO per unit would have been $1 level with Q2's performance. FFO was positively impacted by 12.7% growth in net operating income relative to prior year.
However, FFO continues 3% respectively relative to the same quarter last year. Partially offsetting these translation losses are $1,100,000 of net foreign Currency gains realized in the 2nd quarter as a result of Granite's AFFO, that's hedging program. Gurnai's AFFO on a per unit basis in Q2 was $0.96 which is flat to Q1 after adjusting for the previously mentioned financing costs and $0.03 or 3.2 percent higher than prior year. AFFO related capital expenditures, leasing costs and tenant allowances incurred in the quarter were $1,700,000 which was lower than the $2,000,000 occurred in the same quarter last year, but $1,100,000 higher than Q1. Maintenance projects are ramping up over the remainder of the year, and we estimate maintenance capital expenditures and leasing costs of approximately $13,000,000 for the year, which is $2,000,000 lower than communicated on the Q1 call.
In addition to the effects of foreign currency impacting FFO overall, FFO and AFFO per unit results are partially affected by the temporary dilutive effect of the $316,000,000 equity offering completed June 9th, as well as the Q4 2020 equity and bond offerings where net proceeds have not yet fully been deployed. Granite's AFFO payout ratio came in at a conservative 79% for the quarter. NOI on a cash basis for the quarter increased nearly $9,000,000 or 12.5% from the same quarter in 2020, and unchanged from Q1 of this year with NOI growth muted by the U. S. Dollar weakening further 3% in Q2 relative to Q1.
Same property NOI for Q2 2021 was solid relative to Q2 last year, increasing 2.9% on a constant currency basis, but 3.5% when foreign currency effects are included. Same property NOI growth was driven primarily by positive leasing spreads in Canada and incremental rent earned from land at a GTA Magna property as well as contractual rent and CPI increases across all of Granite's regions. G and A for the quarter was $8,300,000 which was $700,000 lower than the same quarter last year and $500,000 lower than Q1. The improvement over Q1 is primarily due to the non recurring compensation expense of $900,000 related to the 2020 fiscal year that we recognized in the Q1. In comparison to Q2 of 2020, the $700,000 positive variance is mostly related to lower fair value losses on non cash compensation liabilities.
We continue to estimate G and A expenses of approximately $8,000,000 per quarter on a run rate basis for the remaining half of 2021, which assumes approximately $1,600,000 per quarter of non cash compensation expenses, but assumes no fair value losses or gains associated with the increase or decrease in the non cash compensation liabilities, which we cannot predict. With respect to current income tax, for Q2, current income tax was $4,300,000 However, excluding $2,300,000 of current is relating to the sale of an Austrian property this quarter. Current taxes were $2,000,000 which was flat to Q1 and slightly lower than last year Q2 by 1000000 mostly due to a weaker euro relative to the prior year. On a run rate basis, we continue to estimate current tax at approximately $2,200,000 per quarter. With respect to the potential recognition of tax assets, as mentioned on the Q1 call, Granite has a further potential $2,000,000 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 make that assessment until the Q4.
The Trust balance sheet comprising total assets of $7,200,000,000 at the end of the quarter was positively impacted by approximately $308,000,000 in fair value gains to Granite's investment property portfolio in the 2nd quarter, offset by approximately $43,000,000 of translation Losses on Granite's foreign based investment properties, particularly impacted by the decline in the U. S. Dollar of 1.4% relative to Q1. The fair value gains on Granite's investment property portfolio is mostly attributable to fair value gains in the Trust GTA and U. S.
Properties. The Trust's overall weighted average cap rate of 5.1 percent decreased 30 basis points from the end of Q1. The total net leverage as of June 30 was 20%, down 5 percentage points from Q1 and debt to EBITDA remains healthy at 6.7 times. The Trust's current liquidity is approximately $1,700,000 representing cash of approximately $690,000,000 and the undrawn operating line of 998,000,000 I will now turn the call over to Kevin.
Thanks, Theresa. As always, I will keep my comments brief as I trust we've had the opportunity to review our MD and A and press release. I'll begin again by echoing Teresa's comments. Once again, an in line quarter, Although it is worth mentioning, highlighting that FFO and AFFO per unit for the quarter increased year over year despite a corresponding negative move in FX of roughly $0.08 per unit. I think also worth repeating is the increase in the market value of our portfolio in the quarter, representing almost $5 per unit with gains across our entire portfolio on a constant currency basis, led by fair market value increases in our portfolios in the U.
S, GTA and the Netherlands due to a combination of rising market rental rates And the client in cap rates for industrial assets. As disclosed in the MD and A and press release, We completed the sale of 1 non core asset in Austria and closed on 2 strategic acquisitions in the quarter, including a 1,100,000 square foot portfolio in Chicago for US94 $1,000,000 and the forward purchase of an 800,000 Square Foot's state of the art e commerce distribution facility in the Murfreesboro suburb of Nashville. The development will Sure. Several key sustainability features and we'll meet the criteria set out in our Green Bond framework. Leasing fundamentals in Nashville continue to be very strong with current vacancy in the Nashville East market sitting at just over 1.5%.
It is a market we have been targeting for many months now. We are also in advanced due diligence on roughly 370,000,000 and acquisitions of stabilized assets and development sites in our target markets in the U. S. And the GTA, which we expect to close on in August and a further $200,000,000 in acquisitions in the U. S, The GTA and the Netherlands also comprising stabilized assets and development projects, which we hope to complete by the end of the Q3.
As an update on our development pipeline, our projects in Alpbach, Germany is well in progress and remains on schedule to be completed by the end of the year. Construction on our development projects in Dallas and Houston, comprising 3 buildings totaling nearly 1,300,000 square feet has commenced with completion scheduled for the Q2 of 2022. We are now also in negotiations with a national e commerce retailer for a 690,000 square foot build to suit project on our Houston development site. In addition, vertical construction on the expansion of Konjavec cold storage facility in Mississauga is well underway and we expect completion to occur in the Q2 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 Stabilize assets across our target markets.
As a note, all of our developments will meet the green building criteria outlined in our Green Bond framework. And we are pleased to have published our comprehensive global ESG plus R report for 2020 in conjunction with our Q2 financials and MD and A. As mentioned in our earnings release, a copy of the report is available on our website for review at your convenience. Operationally, we have now renewed or re leased all 2,300,000 square feet of our 2021 lease expiries. Although we are still finalizing fair market rent on 2 renewals, we estimate an average increase in rental rate of is roughly 6%.
Of the 5,600,000 square feet in leases scheduled to expire in 2022, We have renewed 650,000 square feet to date and are currently in discussions on over 1,200,000 square feet of remaining expiries. As Teresa mentioned and as disclosed in her MD and A, same property NOI increased by 2.9% on a constant currency basis. Same property NOI growth for the quarter was again muted by lower CPI increases, which came in below 1% for the year and a vacancy in Poland. Through June 30, 2021 CPI is tracking at 5.4% and 3.1% for the U. S.
And Canada respectively and between 2% and 3% for our respective markets in Europe. As mentioned or as announced in our press release, I would like to recognize the appointment of Emily Pang to our Board of Trustees. Emily brings a wealth of experience in the logistics sector, finance and governance among other skills and she will be a great addition to our organization. A sincere welcome to Emily. In closing, I think the quarter was characterized by operational stability and strength and fair value gains.
While our cash flow per unit metrics were impacted somewhat by the dilution from our June equity offering, We are poised to deploy a significant portion of our cash in hand in the Q3 on strategic acquisitions. We continue to benefit from Strong leasing and investment market fundamentals broadly across our portfolio and our pipeline of investment opportunities remains very robust at well over $1,000,000,000 currently. On that note, I will now open up the floor for any questions.
Thank you. We do have a question from the first one is from the line of Brad Sturges with Raymond James. Please go ahead. Your line is open.
Hi, good morning. Just thanks for the color on the acquisition pipeline that you have near term. Just wanted to Please give a little bit more sense on the potential development and stabilized assets within those two buckets you identified that are closing in August and maybe by the end of the quarter.
Yes, sure, Brad. For the $370,000,000 in This month, 2 thirds would be stabilized and roughly 1 third would be related to development. And for the remainder $200,000,000 by the end of the Q3, it's roughly a fifty-fifty split between stabilized and development projects.
With those development projects, are those opportunities that you'll be able to Commence in the near term, are those more like land bank and longer term prospects?
Well, we'd be commencing construction, but we would not expect to See any income in 2021.
Got it. Okay. And in terms of the leasing The expiries that you're addressing or have addressed in 2022 so far, I think 650,000 square feet That was recently done and another 1,200,000 square feet. Can you just give a little bit more context on the 1,200,000 square feet in terms of location and the types of rent What you're seeing right now for those or you expect
to see for those renewals? Happy to. So on the 650,000 We've achieved roughly 9% rent lift. Of the $1,200,000 is in the U. S.
And I'll just say this, overall, we're tracking, we estimate an average increase of 7.5% to 8%
for 2022.
Okay. That's pretty similar to your guidance this quarter. Good. Yes. Okay.
So I mean, The rent market or rents in the market are changing pretty rapidly, but at this stage you're not thinking that will change
too much for your near term expires?
Well, you're right on that. And certainly, we feel that same demand pressure as well. But we're basing it on deals we're actually seeing occurring in the market. So I agree with you, we expect, we Hope to maybe do better in 2022 on those renewals, but we're still basing it on transaction data, rental transaction data that we're We're seeing and receiving on the markets as of today.
Okay. That's great. I'll turn it back. Thanks a lot.
Our next question is from the line of Matt Kornack with National Bank of Canada. Please go ahead. Your line is
Good morning, guys. A bit of a broader question here with regards to the United States. They're a bit Further than we are here in Canada on the reopening, has that changed anything in terms of industrial tenancies? Obviously, you'd expect e commerce take up to go down a bit as people gained flexibility, but it sounds like things are still quite But any color you can provide on how the market is unfolding post pandemic would be great.
Matt, I think it's a very Your question and I always worry about saying that our sector is immune in any way to what's going on in the world in the pandemic, but the truth is we have seen the strongest absorption in late 2020 and I think it was $100,000,000 in the U. S. Absorption in the Q1. Is that related to any reopening activities? We can't point to that.
So it's hard for me to sit here today and comment whether the reopening is causing more absorption. I would certainly think it's plausible, but we can't see any evidence that the reopening is having a major impact, Which I think is a good thing. Overall, as I think a positive comment, we can't see that the reopening, it's certainly not hurting us, but we can't point out any evidence quantitatively that it is assisting our sector.
And just I guess at a time there were guys looking for shorter term space Just to meet a crunch in terms of what they were doing. Is that gone? Are tenants in the market At this point looking for longer term leases and locking in rents as quickly as they can.
Yes, I don't think maybe there was a short period of time early on in 2020 where they were And for short term leases, I saw it more that landlords were looking at doing shorter term leases. I think there was a period of time where Tenants were really unsure of the future and not wanting to commit. That changed very quickly and I think What was happening was those tenants were seeking longer term commitments on the space, but it was the landlords that wanted to lock in on shorter term leases and capture You know that expected rent growth in the future. So I think that was more the dynamic that we saw. Everything that we're seeing today, I think tenants on the whole are looking for longer term leases, maybe more in North America right now than In Europe, but I think as we've mentioned before, we think that that dynamic is certainly going to make its way to Europe shortly.
Fair enough. That makes sense. The last one is a little bit more technical and it may be Theresa. But in terms of the mechanics behind these Forward purchases for development. How does it work exactly?
Do you put the money out today and get some sort of yield in the interim? Or is it like you purchased it At some point in the future when the money goes out then.
No. So at this point in time, so with the first euro,
I always pronounced that wrong,
So we purchased the land effectively and then as construction commences, we will be funding the construction and we'll be adding to that property under development. And then at the end, we settle on the profit and full price once it's complete. So it will be a gradual spend or use of cash over the construction period.
And the numbers quoted in terms of the value, is that the full project or is that just
That's the full project. But as you noticed, we just recorded as far Acquisition for this quarter is $17,000,000 that's really just the land cost, but what we've described, I think the $66,000,000 that's the total cost of the project.
Okay, perfect. Thanks, Ed.
Thank you. And our next one is from the line of Joanne Chen with BMO Capital Markets. Please go ahead. Your line is open.
Hi, good morning. Maybe just jumping back on the acquisition comments. For the stabilized assets, would you be able to give kind of a range of Kind of what kind of cap rates you're seeing right now for those stabilized assets?
The ones that were still to close, I don't want to disclose it at this time, not even a range. I apologize. We'll announce it as soon as we're able to close any acquisitions. Yes, we're not able to at this point in time under the terms of the purchase and sale agreement.
Okay. Now that's fair. Would you say the bulk of the 370 that balance between kind of U. S. And Canada?
Well, the ones in August, yes, it's roughly, I think, 2 thirds U. S, 1 third Canada. And then for the remainder in the Q3, I think it's roughly 25% Canada, 25% the Netherlands and 50% the U. S.
Got it. Okay. And in the U. S, it would be markets that you already operate in or any new markets?
Correct, as of today.
Okay. And I guess just looking to on the other side of things, how much capital recycling opportunities do you think
Roughly $35,000,000 I think is the number and It could be a bit higher, but it's not going to be it's going to be very consistent with that number, I think,
Okay. I guess sorry, I just wanted to clarify, I might have missed it earlier. In terms of the rent moves You were expecting for the 2022 lease maturity expiries, did you say, around 7% to 8%? Sorry, I just wanted to Yes.
Reed. Our next question is from the line of Sam Damiani with TD Securities. Please go ahead. Your line is open.
Thank you. Good morning, everyone. Just first off on the acquisitions, Kevin, I just want to clarify the larger pools of assets that you're Expecting to close over the next couple of months. These are these include the deals that you announced with the equity offering and then you've added To that, in other words, those original deals back in June are still underway as planned?
Absolutely. Yes, absolutely. And I would just offer the comment that Particularly on land acquisitions, there's a lot of due diligence involved. And so we're still confident we're going to close. I think the due diligence Going well overall, but there is still work to be done to make sure that we cover off all of the issues related to those types of acquisitions.
So it's what we announced already and plus add on acquisitions.
Perfect. And then just switching over To Magna, nice to see the concentration falling to 32% on revenue. I guess just three quick questions. The new tenant over at, I guess, Oberthausen, did you are you familiar with them? Are they going to stay in the building for the Longer term?
Yes. So the sale to Materis, we do know Materis as private equity And these types of business acquisitions, the due diligence that we did, that our team did, I think we're very comfortable that they're going to Continue to invest and commit to that building. I don't see much of a point of buying that business and not using that So I think we gained a lot of comfort from what we learned in the tariffs and their plans for the building.
And are you able to share the current lease expiry?
I think
it's 2023.
I think it's 2023.
Okay. And then just I assume there's no news, but Magna has a notice deadline at the end of this year on 1 or more leases. Any update there?
No, I would tell you that's just their modus operandi. We would not expect for them to engage with us on those And there's no change in our I mean, we have a high degree of comfort that they're going to renew on those assets.
Thank you, Jacqueline. Okay. And then just finally, the small building you did sell in Austria, I know it's hard to extrapolate, but were the metrics Is there at all relevant in terms of how you look at the value of industrial property generally in Austria and specifically the rest of your portfolio there?
Well, yes, keep in mind, it did have a vacancy in the building. So I think the cap rate as reported is low. I would think the sale would be closer to a 7 On that asset, that's not exact, but it's a little misleading with the in place income.
Okay. Just finally one for Teresa, which is, I mean if the exchange rates You'll stay the same for the balance of the year. Do you expect the quarterly impact to stay around $1,100,000 or would that sort of taper off a bit?
I'm glad you asked that question. Yes, it will be tapering off simply because even the our hedge levels are Going to be a little bit lower in the 3rd Q4. So on the U. S. Dollar, things don't change.
I'm not expecting a lot of gains on our U. S. Hedges. On the euro, We'll probably continue to see maybe about $300,000 each quarter for the remaining half of this year, assuming the euro stays where it is. So yes, we will see smaller gains with respect to the callers.
And really, we're only hedged to the end of December. We haven't extended out to 2022.
Question is from the line of Mark Rothschild with Canaccord. Please go ahead. Your line is open.
Thanks, and good morning, everyone. Kevin, in regards So development projects, have you seen any change in the way people are underwriting or the way even you're looking at going into new development projects in the context of a market with rising inflation?
Well, I would say, yes, for example, if you look at land values in the GTA, certainly, I think people are underwriting From where we even sit today, a fair amount of rent growth in the short term. When it comes to the U. S, Probably not so much. And I think that's where we see that's where we continue to see, I think, the most opportunity to drive value there. Whereas the rents continue to climb, maybe not as much as the GTA, but they continue to climb pretty handsomely, But there's still the opportunity to acquire well located land that has not frankly kept pace with the increase in rents.
So And it's as I've mentioned many, many times before, it's just a lot less expensive to carry land in the U. S. Than it is to carry land in the GTA and Europe for that matter. So, that's why we continue to look at opportunities in the U. S.
Although we were looking at opportunity and We're closing on the remainder of each year. That's why we continue to be busy in the U. S.
And And I know in Chicago, it's more it's not necessarily development, but should we connect your comment about seeing opportunities in the U. S. With expanding in markets Like Chicago where historically Granite has not been and it's been more difficult to grow?
We would like to. It is one of our I mentioned Nashville and Chicago. They are target markets for us we've been focused on for the better part of the year. So we hope to continue to grow in the Chicago market and hope to continue to grow in the Nashville market for that matter. And
then just lastly, you have prior experience in the Vancouver market. Have you seen any opportunities there that would make sense for Granite? Or is that just
I mean, we certainly see the opportunities. I just think where cap rates are and what is really our what is the realistic ability for us To grow with scale in that market, it frankly is not a focused market of ours. If the right opportunity came up with scale, I think we certainly would give it a lot of careful attention, but we're not expecting an opportunity like that to come up. So we're focused on Other markets, frankly, and I would say in Canada, our main focus obviously is the GTA.
Great. Thanks so
Our next question is from the line of Himanshu Gupta with Scotiabank. Please go ahead. Your line is open.
Thank you and good morning. Just a follow-up on 2022 lease Expiries, I think Kevin you mentioned rental spread of 7.5% to 8%. Does that include All 2020 lease expiries or only on the U. S. Portfolio?
No, all.
All, okay. And As you know, that includes Magna Large expiry as well. So you're expecting some rental pickup on that expiry as well?
Yes.
Okay. And then just turning to the balance sheet, how much Cash will you have left in oppose the announced acquisitions? And by when do you think you can deploy most of the cash
So based on what Kevin mentioned earlier, so we're probably going to end maybe mid 3rd quarter or end of Q3, around $100,000,000 or so. So we have quite a bit in the pipeline, which we're sitting above $680,000,000 $90,000,000 right now. So I anticipate somewhere in that $100,000,000 range by sometime in Q4.
Okay. And that is that includes all the announced acquisitions. And I think you guys mentioned another $200,000,000 under So that includes the closing of that acquisition. Okay, that's great. And then maybe broader question, Kevin, on the acquisition strategy in the U.
S, I mean, recent acquisitions have been in Chicago, Atlanta, Nashville, Northern Pennsylvania. So are you looking to add more markets or the plan is to gain scale in some of the existing U. S. Markets now?
I think we have enough in the existing markets to keep us busy. We've said before, we do like the Florida market. That's something that we have been Looking and pursuing opportunities and it's not just in Florida or Atlanta, but cap rates have really, really tightened across those markets. So certainly, we're not the only ones that are interested in Florida, but that's a market that you could see us add in. We don't have anything on the go currently, but it's something you could see in the next 12 months.
So what we're working on Right now, we're all in markets where we have existing assets or development land today.
Got it. Okay, that's great. And let me just one final question on the forward purchase of property in Tennessee. I think it was in the suburb of Nashville. Is it being built on speculative basis or do you plan to pre lease the property?
Correct. And I think just Sure. Just as a comment, in that market, that vacancy, existing vacancy rate and what we're building, I mean, it is It's a perfect for us. I think it's a perfect e commerce market. So we're comfortable moving ahead.
And for a lot of these projects, it's difficult To pre lease until at least you're going vertical with the steel. So we hope to make progress on the leasing side as we move through this development In the coming months, but yes, as of now, it is a speculative development.
Got it. And just to clarify, this property will qualify for eligible green certification. And I think you still have some room to deploy on the proceeds from your lean bond offer.
Yes, that is correct.
Awesome. Okay. Thank you, guys. I'll turn it back.
Our next question is from the line of Sami Berraves, for RBC Capital Markets. Please go ahead. Your line is now open.
Thanks and hi everyone. Just With respect to coming back, I guess, those leasing spreads for 2022, the 7% to 8% that you quoted, I'm just curious, does that fully close The mark to market opportunity on that on those expiries, and really just I guess a second piece of that question would be, Are you trying to balance occupancy and near term growth? Or are you willing to sacrifice some occupancy for perhaps some stronger upside I think longer term.
No, I don't think it's a question of trying to balance It's a question of prioritizing occupancy over cash flow. I certainly think internally we When you're 99.5 percent occupied, you can't really improve on that. And I think you've seen where We're willing to purchase assets with vacancy, which drives our vacancy up a little bit like Locus Growth this quarter as an example. So it's not about maintaining a high occupancy, it's about driving the highest NOI growth that we can. So I would say looking today, Pammi, at Overall and our portfolio and remember a lot of these special purpose or not, the special purpose properties in Europe, A few of them have CPI look backs.
So it's hard to look at those and say, okay, what is the mark to market on that rents? But Taking a conservative view, I would say that overall, we're roughly our in place rents are roughly 10% below market rents and that's just generally across our entire portfolio.
Got it.
Yes, I know that's good color. Yes, it certainly recognized the challenges on some of the magnet leases on getting more just given the unique nature of those assets. That's it for me. I'll turn it back. Thanks very much.
Thank you. And there are no further We have another question and that is a follow-up question. One moment, your line is now open. It is Sam Damiani with TD Securities. Please go ahead.
Thanks. Just wanted to touch on your comment, Kevin, about the CPI increases recently being below average, but with inflation tracking How much of an impact on NOI growth will this higher inflation have on Gornay's portfolio?
It's a good question. And I mentioned this special purpose probably. So overall, roughly 40% of our portfolio by revenue was tied to CPI. Now a portion of that is again CPI look back mechanisms and a part of it is related to annual CPI increases. So roughly, I would say half of that 20% of our portfolio is tied to annual CPI adjustments.
So that's the impact that it will have. So hopefully, we go from Sub-one percent for 2021 to somewhere, I don't know, 3% for 2022, We should assist overall same property NOI growth for next year.
Okay, that's great. Thank you very much.
Thank you. And there are no further questions at this
Okay. Thank you, operator. So on behalf of the trustees and management team here at Granite, thank you for participating on our Thank you, Paul, and we look forward to speaking with you again in November. Have a great day.
Thank you, ladies and gentlemen. That does conclude today's call. We thank you for your participation. I ask that you please disconnect your lines.