Good morning. My name is Lily, and I will be your conference operator for today. At this time, I would like to welcome everyone to Granite REIT 's third quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. Speaking to you on this call this morning is Kevan Gorrie, President and Chief Executive Officer, and Teresa Neto, Chief Financial Officer. I will now turn the call over to Teresa Neto to go over some certain advisories.
Good morning, everyone. Before we begin today's call, I would like to remind you that statements and information made in today's discussion may constitute forward-looking statements and forward-looking information, and that actual results could differ materially from any conclusion, forecast, or projection. These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements or information. These risks and uncertainties and material factors and assumptions applied in making forward-looking statements or information are discussed in 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 2024, Granite management discussion and analysis for the year ended December 31, 2024, filed on February 26, 2025, and for the quarter ended September 30, 2025, filed on November 5, 2025. Granite posted Q3 2025 results ahead of Q2 and in line with management's annual forecast and guidance that reflects continued strength in our operating fundamentals, supported by strong NOI growth representing CAD 0.06 per unit of the CAD 0.09 per unit growth in FFO quarter over sequential quarter. FFO per unit in Q3 was CAD 1.48, representing the CAD 0.09 or 6.5% increase from Q2 2025 and the CAD 0.13 or 9.6% increase relative to the same quarter in the prior year.
The growth in NOI this quarter is primarily derived from strong same property NOI growth enhanced by leasing spreads of 88% and the lease up of previously vacant units in Canada and the U.S. NOI growth was further enhanced by the Florida acquisitions completed last quarter. AFFO per unit in Q3 2025 was CAD 1.26, which is CAD 0.03 higher relative to Q2 and CAD 0.04 higher relative to the same quarter last year, with the increase versus Q2 mostly tied to FFO growth and lower leasing costs due to timing of leasing turnover, partially offset by higher capital expenditures incurred. AFFO-related capital expenditures incurred in the quarter totaled CAD 10.5 million, which is an increase of CAD 2.5 million over Q2 and CAD 5.3 million higher than the same quarter last year.
For 2025, we continue to expect AFFO-related capital expenditures to come in at approximately CAD 40 million for the year, and that is unchanged from our estimates previously provided. Same property NOI for Q3 remained robust, increasing 5.2% on a constant currency basis and up 8.4% when foreign currency effects are included. Same property NOI growth was driven primarily by CPI and contractual rent increases across all regions, positive leasing spreads on lease renewals primarily in the U.S. and Canada, and the lease up of previously vacant units in the U.S. and Canada, and expiration of a free rent period at a property in the United States.
Given the continued strong leasing activity in the third quarter of 2025, we are increasing our guidance for the year and narrowing the range for constant currency same property NOI based on a four-quarter average to come in at approximately 5.4%-6.2% from the range previously provided of 5%-6.5%. G&A for the quarter was CAD 14.1 million, which is CAD 0.9 million higher than the same quarter last year and CAD 4.1 million higher than Q2. The main variance relative to Q2 is the CAD 4.2 million unfavorable fair value adjustment to non-cash compensation liabilities, which do not impact Granite's FFO and AFFO metrics. For the fourth quarter, we expect G&A expenses that impact FFO and AFFO to be approximately CAD 10.5 million. Interest expense was slightly higher in Q3 2025 relative to Q2 by CAD 500,000, while interest income remained flat as compared to Q2.
The slight increase in interest expense was primarily driven by the draws on the credit facility to fund last quarter's Florida acquisitions. Granite's weighted average cost of debt is currently 2.7%, and the weighted average debt term to maturity is 3.6 years. With Granite's next debt maturity in September of 2026, we continue to expect interest expense to remain stable over the next approximate four quarters at roughly CAD 24.5 million per quarter, barring any new transactions. Q3 2025 current income tax was CAD 3 million, which is CAD 0.3 million higher as compared to the prior year and remained flat compared to Q2. For the fourth quarter in 2025, we are expecting current income taxes to come in at approximately CAD 3 million as well. As in prior years, Granite may realize a credit to current income taxes of approximately CAD 1.8 million in Q4 due to the reversal of prior year tax provisions.
However, we cannot confirm the certainty of such credit until December 31, and our guidance does not factor any tax provision reversals. Regarding the 2025 outlook, Granite is increasing its 2025 guidance and narrowing the ranges relative to estimates previously provided. Granite's current outlook reflects lease renewals and new leasing of vacant space completed year to date, which have increased overall NOI estimates. The current outlook reflects the Florida acquisitions but does not include any assumption for potential property disposition. In addition, the current outlook reflects year-to-date financing and NCIB activity completed in the first half of 2025 and embeds the year-to-date positive impact to FFO of the weaker Canadian dollar relative to the euro and U.S. dollar. For FFO per unit, we are raising guidance from last quarter to the range of CAD 5.83-CAD 5.90, representing an approximate 7%-9% increase over 2024.
For AFFO per unit, we are raising guidance to the range of CAD 5.03-CAD 5.10, representing an increase of 4%-5% over 2024. Granite's balance sheet remains strong. Investment properties totaled CAD 9.1 billion at the end of the quarter, which excludes CAD 370.7 million of six assets held for sale, consistent with Granite's messaging last quarter on its disposition program. The increase in investment properties from last quarter was primarily due to CAD 156.5 million of foreign exchange translation gains on Granite's foreign-based investment properties, driven by a 2.3% increase in the spot U.S. exchange rate and a 1.9% increase in the spot euro exchange rate relative to Q2, partially offset by net fair value losses of CAD 34.6 million.
The trust's overall weighted average cap rate is 5.6% on in-place NOI, increased five basis points from the end of Q2, and it has increased 32 basis points since the same quarter last year. Net leverage ratio at the end of the quarter was 35%, a decrease of 100 basis points from last quarter. Net debt to EBITDA was 7x , a slight decrease from the 7.1 x in Q2, and consistent relative to the same quarter last year. Granite's key leverage ratios remained slightly elevated due to the classification of the six assets held for sale as they are excluded from investment properties, resulting in a decrease in the denominator for the net leverage ratio. In addition, Granite has increased unsecured debt due to drawing on the credit facility to fund the Florida acquisitions, resulting in an outstanding balance of CAD 78 million at the end of the quarter.
Granite does expect these ratios to normalize when the asset sales are completed. The trust's liquidity is approximately CAD 1 billion, representing cash on hand of approximately CAD 109 million, and the undrawn operating line of approximately CAD 918 million. As of today, Granite has CAD 79.5 million drawn on the credit facility and CAD 3 million of letters of credit outstanding. Granite does expect to reduce the balance on the credit facility throughout 2026 with free cash flow from operations or with proceeds from disposition of certain properties, barring any other major transactions. I'll now turn over the call to Kevan. Thank you.
Thanks, Teresa. As usual, I'll be brief with my comments and hopefully provide some helpful context to our results. As Teresa mentioned, our Q3 results were in line with expectations driven by strong leasing momentum and NOI growth. As you can see from our updated year-end guidance, we expect our financial performance to continue to strengthen over the remainder of the year. Firstly, strong leasing momentum continued as the team executed on over 400,000 sq ft of new leases in the quarter and extended six leases related to expiries in the fourth quarter of 2025 and in 2026, representing just over 2.3 million sq ft. In this quarter, as you can see, the increase on renewals in the third quarter was extremely strong at 88% on 1.85 million sq ft of Q3 expiries in the GTA and the U.S.
We have now renewed 81%, roughly, of our 2025 expiries at a weighted average increase of roughly 47%. That excludes the increase on the new lease in Atlanta, where the team achieved an increase in rental rate of 58% over expiring rent at the end of the first quarter. Staying on leasing, a few comments on relevant market data. Eight of our 16 markets in North America reported flat or declined in market vacancy from the second quarter, and all of our portfolio markets reported positive net absorption in the quarter, led by Dallas, Fort Worth, Indianapolis, Savannah, and Houston. With respect to market rents, asking rents fell year over year in four of our portfolio markets in North America and increased in 11, led by Houston at 10.3%, Nashville at 8.3%, and Louisville at 6.3%.
Our weakest market was once again the Greater Toronto Area, as asking rents fell roughly 5.5% year over year. While leasing conditions steadily improve across our portfolio and our leasing performance continues to be strong, net absorption overall remains below the 10-year average in conditions or competitive. I would highlight at this time that modern, functional, well-located portfolios are, as expected, clearly outperforming the general markets. I will provide a detailed update on our European portfolio markets in the fourth quarter as we receive the data. In viewing our leasing performance and NOI growth over a longer term, over the past three years, we have generated cash NOI growth per unit of 44%, a CAGR of 12.9% over a period which most of you would characterize as challenging for our sector.
I provided an update on our last call regarding the publication of our 2024 corporate ESG report. I did want to mention at this time that Granite was recognized for the second consecutive year with the top ranking in our industrial peer group by GRESB for overall score in public ESG disclosure. I'll comment briefly on the changes to our IFRS values. As Teresa mentioned, we made minor negative adjustments to capitalization and discount rates broadly across our U.S. and European portfolios, which was partially offset by positive gains from recent renewals in our GTA portfolio. Our overall IFRS value was obviously positively impacted, as Teresa mentioned, by the favorable movement in the USD and EUR against CAD in the quarter. Moving on to capital allocation, I'll begin with an update on the planned dispositions.
Of the CAD 370 million of assets held for sale, we have agreed to terms on roughly CAD 190 million of those assets in the U.S., and the transactions are progressing well, and we expect to provide a more fulsome update on the dispositions with our Q4 results at the very latest. In terms of capital deployment so far in 2025, we have acquired roughly CAD 145 million in Granite units through our NCIB, as well as funding roughly CAD 10 million year-to-date on our development projects and CAD 50 million related to our recent acquisition in the Miami market. To fund over CAD 200 million in these areas and finish the quarter with only, I think, CAD 79 million drawn on Atlantic Credit and roughly CAD 128 million in cash, you can see the power of our low payout ratio and free cash flow.
We have also agreed to terms on approximately CAD 240 million in new acquisitions in our target markets in the U.S. and Europe and expect to close on those transactions in late Q4 or early Q1 2026. Staying on capital allocation, our CAD 0.15 distribution increase represents the 15th consecutive annual increase since our inception in 2011 and marks the first above CAD 0.10, as we believe the incremental increase is merited at this time and sustainable, supported by the strength of our cash flow growth over the past number of years and the conservative nature of our capital structure and correspondingly low AFFO payout ratio. We are able to fund the increased distribution while continuing to reinvest strongly in our business without compromising the strength of our balance sheet and capital ratios.
Looking out to the remainder of the year, our leasing pipeline remains quite strong at well over 500,000 sq ft currently under lease negotiation. Although we'll provide specific guidance in conjunction with our Q4 results, we are confident that the achievements made by the team in 2025 have positioned us well to execute on our financial, operational, and strategic objectives for 2026 and beyond. Operator, I'll now open it up for questions.
Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for a while to compile the Q&A roster. One moment. Your first question comes from the line of Brad Sturges of Raymond James. Your line is now open.
Hey, good morning. Just on the transactions, I want to clarify there, Kevan. The transactions you were talking about, U.S., Europe, I think that was referring to the dispositions or assets held for sale. Would all that, everything that's held for sale now, could that close by early 2026, or how are you thinking about the timeline to those transactions right now?
If you're referring to the dispositions, Brad, I think that, yes, all of the CAD 370 million would be expected to close as we sit here today by the end of 2026.
Okay. How is, in terms of redeploying that cash, obviously, I think you've talked about opportunities you're even looking at on the acquisition side. How does that pipeline look today? How do you think about sort of capital allocation priorities once the cash comes back beyond, I guess, repaying the line?
As I mentioned, we have CAD 240 million in acquisitions that we are currently working on. I would estimate probably another CAD 100 million that we are currently looking at, not pursuing in earnest, but looking at. That is what the pipeline of acquisitions looks like. As I mentioned before, particularly in the U.S., we have to balance the acquisitions with the dispositions or the pace of those. Obviously, the pace of our acquisitions will rely somewhat on the pace of dispositions.
Okay. Just last question, just on the leasing front. I think last call. On the, I guess, within the Indianapolis market, you had the larger facility you're still looking to lease. You were looking at RFPs or reviewing them for the entire building there in Indianapolis. Is there any update on that front?
I do not want to update on particular markets. I may sound a little paranoid, but I do not want to do anything that will compromise our efforts on the leasing front, acquisition front, or disposition front. Just to say, at over 500,000 sq ft under lease negotiation, that obviously involves some of our large spaces. Those deals are progressing well.
Okay. Appreciate it. I'll turn it back. Thank you.
Your next question comes from the line of Kyle Stanley of Desjardins Capital Markets. Your line is now open.
Thanks. Morning, everyone. You've made great progress on the '26 maturities already as well. With most of the expiries happening in the U.S., is there any kind of early non-renewal concerns that you might have? Generally, what kind of leasing spreads would you expect overall, and then maybe more for the U.S. portfolio specifically?
I think other than the Samsung space in the U.S. next year, nothing that really stands out to us. I think we've had some very high levels of renewals. We were over 90% in 2024, over 80% in 2025. I would expect us to be sort of in that traditional range of 70%-75% renewals for next year, partly because of the Samsung non-renewal. In terms of spreads, I think it would be, like, I wouldn't expect anyone to expect a repeat of 2025, i.e., 47%. I think it would be closer to our range in 2024, which was more in that 20% range for 2026. I'll have more details on the next call.
Okay. No, that's very helpful. I mean, leasing activity seems to have remained quite strong or improved even since our last update. What's changed in the last maybe four to six months that has allowed for this improvement in demand more broadly in the market, and then specifically within your portfolio to convert leasing tours and RFPs to signed leases at this point?
I do not know if there is anything specific. I think the two trends that sort of come to mind to me that I think I have mentioned is, one, I think tenants have put off their leasing decisions for a long time. I think that they are reaching sort of a point in time where they have to make a decision to move forward. Two, I do think we are seeing a fight to quality. I think strong location and assets are really starting to outperform the market. I mentioned that in my remarks, and I would certainly highlight that. I think in terms of our portfolio, and I said this on calls before, look, if the market vacancy rate in the U.S. overall or across our portfolio markets is 7%, we expect to outperform that. Our vacancy is expected to be lower than that.
I think we are seeing that. I will tell you, I think the activity across our specific portfolio is quite strong relative to the overall market and maybe some of our competitors. I think that is a testament to the quality of the platform and the quality of the real estate that we own and starting to show.
Okay. No, appreciate that. Just one more question. With the fundamentals across the U.S. firming up, are you seeing any new developments start to percolate, particularly, I guess, on spec? Has your outlook towards development changed at all in the last several months?
No, I think we're continuing to see a gradual decline. Like in the U.S., it's never going to go to zero in terms of new supply. There has been a gradual decline. I think 2026, if you look at some of the expectations from CBRE and others, they're expecting the lowest, I think, development pipeline in well over 10 years. It's never going to go to zero. I think we've seen preleasing in the sort of 30%-35% range, which is pretty consistent with pre-COVID levels. We're not seeing an uptick in development if that's what you're asking or new supply. If there is, it's usually build to suit. In terms of speculative, I think it continues to slow down. We expect that trend to continue in 2026.
Okay. Thank you very much. I will turn it back.
Your next question comes from Himanshu Gupta of Scotiabank. Your line is now open.
Thank you and good morning, everyone. First on capital allocation, distribution increase was a bit higher than the last couple of years. Just wondering what led to that decision. Is that a reflection of stronger expected FFO growth next year?
It's a great question. I think, look, we've been at CAD 0.10 since inception in 2011. I think our first distribution was CAD 2. So CAD 0.10 represented the first year would have been 5%. On a percentage basis, the increase was declining every year. If we had stayed with CAD 0.10 this year, it would have been sub 3% increase. I think it would have been 2.91%. I think we thought long and hard about what the right distribution increase was for Granite. I do not think we would have been in this place if we did not have such strong FFO and AFFO per unit growth over the past five years. Where we sit today, I mean, obviously, we want to prioritize reinvestment in our business.
When you have a payout ratio, an AFFO payout ratio in the mid-60%, and you have CAD 100 million + in free cash flow, the CAD 0.10-CAD 0.15 only represents CAD 3 million in incremental distributions on an annual basis. We feel we can do that and continue to reinvest in the business and not compromise our liquidity and not compromise our free cash flow. That is why we made the decision. What was really important is if we move to CAD 0.15, we have to be able to sustain it. I think all of us on the management team and the board are very confident we can sustain that level of increase. Again, there is no guarantee. We have to review it every year. The sustainability of the distribution increase was an important consideration for us when we made this decision to move to CAD 0.15.
Got it. Very helpful. On the capital recycling, you are selling in markets like Indianapolis, Columbus. You are looking to buy in core markets. How tight is the cap rate spread now versus historically speaking, which encourages you to make that move from selling these assets and buying on the other side?
It depends on the markets. I think what we've siG&Aled is, look, as we're continuing this rotation into the tier one markets that we believe are going to be the strongest markets over the next decade. A spread of 75 basis points-100 basis points is probably something the market should expect. It may not be that case all the time, but that's sort of what we're seeing right now in terms of our dispositions versus our acquisitions. Now, keep in mind, that's a year one yield. We're certainly targeting assets where we feel we can drive that yield over the next three to four, say, five years. When you look at it on a year one basis, yes, you might see a spread of 75 basis points-100 basis points.
We certainly expect to eat into that spread over the near to medium term, if that makes sense.
Got it. No, that's helpful. As you kickstarted this disposition program, did you consider adding MAGNA to the mix as well, any of the MAGNA assets to that list?
Yeah. I mean, it depends on the market. I certainly think. We look at all of our non-core assets as part of this disposition program. The short answer to your question is yes, we do. I would think in 2026 and 2027, as we look at further dispositions, certainly MAGNA assets could form part of that disposition program.
Got it. Thank you, Kevan. I'll turn it back. Thank you.
Your next question comes from the line of Tal Woolley of CIBC. Your line is now open.
Hey, good morning. Actually, just following up on Haimeng's question. Now that we're sort of six-plus months out from when the tariff drama sort of began, you've had a little bit of time to assess how things have shaken out. How are you feeling overall just about automotive exposure in the portfolio period?
I think one thing I've talked about, Tal, I think one thing that really gets missed here, and I don't know, really, sorry, it's interesting to me reading some of the analyst reports on MAGNA and other automotive parts providers is you don't see tariffs mentioned in their analyst reports. You see tariffs mentioned more with respect to Granite. Let's not forget that the automotive parts industry is covered under CUSMA. That is an important piece. That's an important trade agreement for sure and something that we monitor. In listening to MAGNA's calls and MAGNA's disclosures, they've been very clear. There hasn't been a lot of noise around the tariff side. I certainly don't think that it merits any immediate action on our part. Those assets continue to perform well.
Hopefully, the trade agreement that's in place continues in its current form or as close to it as possible. If that's the case, then these assets will, in our opinion, continue to perform well.
You're just sort of leading me into where I wanted to go next, which was with the CUSMA renegotiation coming up. Given what you sort of saw this year, do you have any insights for us on how to think about leasing velocity going into 2026, like how you would expect your clients to respond?
Are you talking about overall in the portfolio in 2026?
Yes.
I think we've talked about Canada. If there are any changes to the MAGNA portfolio specifically, in our view, it's not related to tariffs at all. For the U.S. portfolio, it's hard for us to see how it's actually hurt our U.S. portfolio at all. I can't say with any sort of certainty that it has helped the U.S. portfolio, but certainly, we have seen an uptick in manufacturing demand. Not in all markets. Looking at a stat the other day, if you look at construction spending on manufacturing facilities in the U.S. the last 12 months, 80% of it has occurred in the Midwest through the South and Southeast. There is an awful lot of investment, particularly on the manufacturing side, going into those markets. That has benefited our portfolio for sure. I have no concerns with the U.S. market.
With respect to Europe, it has not affected our leasing that we can see anyways at all. I do not anticipate any impact on our 2026 leasing as a result of the trade sort of narrative that is going on right now or tariffs, if that helps.
Okay. Just lastly, if you look sort of over the last maybe decade or so, there's been a big change in rent levels in some of your markets. Have you noticed sort of any long-term kind of implications around, for industrial development, with occupiers preferring to build their own stuff given that the rents have risen, or any sort of changes in terms of whether potential tenants decide to own on their own versus decide to lease?
No. I mean, we did go through this. There was a period of time where companies like Amazon wanted to own their facilities, and then they wanted to not own all of their facilities because they probably had better use of funds within their own business. I do not think we have—so I am looking at the team here—I do not think we have seen a trend of ownership. Now, the legislation in the U.S., I think, and the pending legislation and the budget in Canada, I think, certainly incentivizes capital spending. I do not think we anticipate that there will be a big impact on tenant decisions regarding ownership of their facilities. I mean, we have certainly seen it. There is always a percentage of tenants that will want to own mission-critical facilities, but we have not seen an uptick in that trend.
We don't expect to see it in the next couple of years.
Perfect. Thanks very much, everybody.
Your next question comes from Matt Kornack of National Bank. Your line is now open.
Hey, guys. Just to follow up to Tal's questioning there, through this kind of capital recycling that you're anticipating to do, is there a theme that you're trying to play that you currently aren't playing or something? In those markets that you see that would be different than where you are? Because to your point, it seems like the markets you're in are actually the ones that have been kind of net beneficiaries of some of the changes in industrial.
Okay. So we should invest more in the Midwest? Is that the point?
Is there something outside the Midwest or what are you trying to get at in going into these new markets relative to your view?
Look, I think—look, I'm not trying to be facetious, but I think we've been clear that it was always our intent. We like the markets that we're in. I agree with you. Certainly, when you look from a tenant-demand perspective, Indianapolis and other markets in the Midwest have performed as well as any markets in the U.S. Dallas would be in there. Houston would be in there. Savannah had a terrific year last year despite high levels of supply. They seem to sort of continue to absorb that. We like the markets that we're in. As we said, it was always our intent to continue to rotate into tier one markets. There are markets that we feel are going to perform very well, and we like the pricing in those markets as we sit here today.
It is not so much looking at an India or Columbus and saying we just like the market. It is that we have a relatively high level of concentration in those markets. If we are very interested in moving into Miami, for example, or the U.K. or France or certain markets in the U.S., we have to use our existing assets to move into those markets. That is what we are doing. I hope that is coming through clear. It is really more a concentration play than anything else. This allows us to enter the markets that we have been monitoring closely and coveting for years at prices that we think make a lot of sense to us, both from an ingoing yield perspective and from a total return perspective.
In terms of the type of industrial building that you'd be getting in these markets, it's consistent with what you own, large bay and high-quality sticky tenants, etc.?
Yeah. It doesn't.
No value add or anything along those lines?
It has to be modern. It has to be modern as something that we can make modern. We are never going to play in the small bay, older generation assets. It's just not what we do. If you're truly a logistics company, you want to try to the best of your ability to stay with logistics tenants. It doesn't have to be large bay. We're certainly looking at some very attractive opportunities that involve some mid-bay tenants in there. The point is that it has to be very functional logistics type of assets for us. It doesn't have to be large bay. We're rather agnostic about whether it's multi-bay or a single-tenant large bay. It's just the functionality of the asset that's a top priority for us and location within the market.
Okay. Of course, this is not to say that you need to be there, but have you not caught the data center bug at this point that some of your peers are chasing?
I think. If you look at portfolios where companies have converted assets to data centers, we are one of them. We actually have converted an asset in the GTA to a data center. So we have a data center within our portfolio. With respect to the new generation data centers, they are extremely capital-intensive. It is an area that our team has been paying more attention to, both from converting existing assets at some point to data centers, if feasible, or looking at new builds. I would just say they are very capital-intensive and certainly not something that I think would be in the immediate radar of Granite as we sit here today.
Okay. Last one for me. Wayfair moved up your tenant list, which presumably was part of the really strong leasing spread that you got this quarter. Can you give us a sense? Obviously, the Toronto market, you've said, has been a little bit more challenging, but why they would have needed to stay in that space and pay a much higher rent relative to what they were paying?
Yeah. I think that that's one of the top three assets in the country, to be honest with you. Forty-foot clear, excess trailer parking, literally across the street from the GTA. It's on two bus routes, Mississauga and Branson, large labor pool. It is just an absolutely fantastic asset. I don't think Wayfair had any intentions of moving. We certainly, although we were confident in our ability to release the space, it's a large space, and we were happy to keep them in that space. I think there's a lot of things that were going for that building that Wayfair recognized in terms of value. We were able to get a very strong renewal done in a relatively short period of time.
Okay. Thanks, guys.
Your next question comes from the line of Pammi Bir of RBC. Your line is now open.
Thanks, and good morning. Just coming back to the CAD 240 million of acquisitions in progress, are these all stabilized assets, or are you perhaps willing to take on some vacancy and maybe create some value in that way?
For the most part, they're stabilized assets. One that we're looking at would be a redevelopment play with income in the short term. I just don't want to provide too much more detail than that, Pami. All of them would be stabilized assets at this time.
Okay. Sort of the mix between the U.S. and Europe, can you provide some context there? What sort of cap rates are you kind of seeing these deals come in at?
It is a mixture of the U.S. and Europe, predominantly in the U.S. As we've said, I think we're targeting ingoing yields in the low to mid-5%.
Okay. Sorry. Just coming back to, I think, one of the earlier questions on Samsung. Have you started marketing that space? Any color you can provide in terms of where the releasing prospects are?
Yeah. No. We have started marketing the space for lease. The only thing I would say is I would remind people that the in-place rents or the expiring rents are roughly 25% of the market. We do not have anything to update you on at this time.
Is it fair? And can you remind me when that lease is due? A year or so, basically before the end of Q3 in 2026?
At the end of Q3 2026.
Right. I guess it would be fair to assume that there's going to be some downtime there, probably if it does get released, let's say, into 2027?
Yeah. I think that's fair.
Yeah. Okay. And then just lastly, on the 500,000 sq ft of leases that I think you mentioned were in progress or in discussions, what's the mix there between new leasing versus renewals?
It's all new leasing.
Sorry. Can you repeat that?
All new leasing. It's all new.
All new. Okay. All new. Okay. Thanks very much. I'll turn it back.
The last question comes from the line of Sam Damiani of TD Securities. Your line is now open.
Thank you. Good morning. Obviously, most of my questions have been answered, but just wanted to get your sense, Kevan, at this point in the cycle, if you see cap rates more likely to be moving in a meaningful way in the next year or so, and if there are any markets in particular where you see potentially some bigger moves.
Oh, I do not want to discuss specific markets. Those would be markets that we are paying a lot of attention to. I can assure you of that. Certainly, we have seen more capital come off the sidelines. There is still more of a focus on value-add assets. By the way, we have probably put ourselves in a category, with probably a more refined focus on modern assets. Core assets are still catching a bit, but it is not that deep. Looking at the dispositions that we are going through, it does feel like momentum is picking up. If you were to ask me, do I think that there is a greater chance that cap rates are rising or falling, I would say absolutely not.
Our expectation is cap rates will fall in 2026, just based on the activity that we're seeing, the competition that we're seeing on our acquisition targets, etc. It certainly feels like it's going in a favorable direction.
That's great, Kevan. Thank you very much, and I'll turn it back.
There are no further questions at this time. I will now turn the call over to Mr. Kevan. Please continue.
Thank you, operator. Thank you, everyone, for joining us on our Q3 call. We look forward to speaking to you in the new year on our fourth-quarter results. Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.