TORONTO, March 6, 2019
/PRNewswire/ - Granite Real Estate Investment Trust and
Granite REIT Inc. (TSX: GRT.UN; NYSE: GRP.U) ("Granite" or
the "Trust") announced today its combined results for the three
month period and year ended December 31, 2018.
"The Granite team successfully executed on its corporate
objectives for 2018, including the further reduction in Magna
concentration and continued acquisition growth in modern
distribution and e‑commerce properties in our target markets. While
the sale of the special purpose assets completed in 2018 has
impacted NOI, FFO(1) and AFFO(2) in the short
term, we are confident that we can more than offset this impact in
2019 as we successfully capitalize on strategic growth
opportunities in our target markets and deploy our strong balance
sheet and ample liquidity in accordance with our strategic plan.
The announced increase in our distribution to an annualized target
of $2.80 per unit for 2019 and longer
term target AFFO payout ratio(3) of 80% reflect our
confidence in achieving those objectives," commented Kevan Gorrie, President and Chief Executive
Officer.
HIGHLIGHTS
Highlights for the three month period and year ended
December 31, 2018, including events subsequent to the quarter,
are set out below:
- Granite's net operating income ("NOI")(4) was
$52.4 million in the fourth
quarter of 2018 compared to $54.5 million in the prior year period. Same
property NOI — cash basis(5) increased by 1.9% for
the three month period ended December 31, 2018, excluding the
impact of foreign exchange;
- Funds from operations ("FFO")(1) was $40.9 million ($0.90 per unit) in the fourth quarter of 2018
compared to $41.6 million
($0.89 per unit) in the fourth
quarter of 2017;
- Adjusted funds from operations ("AFFO")(2) was
$39.8 million ($0.87 per unit) in the fourth quarter of 2018
compared to $32.6 million
($0.69 per unit) in the fourth
quarter of 2017;
- For the year 2018, Granite's NOI was $216.6 million compared to $213.3 million in the prior year. Same
property NOI — cash basis increased by 0.3% for the year ended
December 31, 2018, excluding the impact of foreign exchange.
FFO was $168.9 million
($3.68 per unit) in 2018 compared to
$153.2 million ($3.25 per unit) in 2017. AFFO was $138.1 million ($3.01 per unit) in the year 2018 compared to
$145.4 million ($3.09 per unit) in the year 2017;
- On December 3, 2018, Granite acquired a 0.7 million
square foot fully leased property in Shepherdsville, KY with a remaining lease term
of 4.8 years for $65.9 million (US$49.0 million) and approximately
13 acres of development land in West
Jefferson, OH for $1.2 million. Granite has also committed to
acquire the leasehold interest in two income‑producing properties
located in Mississauga, ON for
total consideration of $154.0 million. This commitment to purchase
the leasehold interest is subject to customary closing conditions
and the consent of the ground lessor and is expected to close in
the second quarter of 2019;
- On March 1, 2019, Granite acquired two fully leased
properties near Dallas, TX with a
weighted average lease term of 9.7 years for total
consideration of $168.8 million
(US$123.7 million). One of the
properties is a 0.8 million square foot distribution
centre with excess land that can support a building expansion of up
to 0.3 million square feet. The other property contains
three buildings totaling 0.2 million square feet, which
represents a site coverage ratio of only 2.6%, providing
significant potential for future development;
- Granite sold one property in the fourth quarter of 2018 and six
properties subsequent to year end for total consideration of
$47.3 million that comprised a
0.1 million square foot property in Germany, a parcel of vacant land in
Brampton, ON, a 0.1 million
square foot property located in Richmond Hill, ON and four Magna‑tenanted
properties with a weighted average age of 40 years comprising
0.6 million square feet in Iowa, United States. These properties
generated revenue of $2.5 million in 2018;
- Granite increased its 2019 targeted annualized monthly
distribution by 2.9% to $2.80
($0.233 per month) per stapled unit
commencing with the monthly distribution paid in January 2019.
This is Granite's seventh consecutive annual increase to its
distribution and represents a cumulative increase
of 40.0%;
- On December 12, 2018, Granite entered into and fully drew
down a $300.0 million seven‑year
senior unsecured non‑revolving term facility (the "2025 Term
Loan"). Through a cross currency interest rate swap, Granite has
exchanged the variable rate interest payments from the 2025 Term
Loan for Euro denominated payments at a 2.202% fixed interest rate.
On December 19, 2018, Granite also entered into and fully drew
down a US$185.0 million
four‑year senior unsecured non‑revolving term facility
(the "2022 Term Loan"). Through a cross currency interest rate
swap, Granite has exchanged the variable rate interest payments
from the 2022 Term Loan for Euro denominated payments at a 1.225%
fixed interest rate; and
- As a result of the increase in taxable income generated
primarily by the sale transactions in 2018, Granite's Board of
Trustees declared a special distribution in December 2018 of
$1.20 per stapled unit which
comprised $0.30 per unit payable in
cash and $0.90 per unit payable by
the issuance of stapled units. The cash portion of the special
distribution was intended to provide liquidity to unitholders to
cover all or part of any non‑resident withholding taxes or other
income tax obligations that may arise from the additional taxable
income being distributed via the special distribution. On
January 15, 2019, immediately following the issuance of the
stapled units related to the portion of the special distribution
payable in stapled units of $0.90 per
unit, the stapled units were consolidated such that each unitholder
held the same number of stapled units after the consolidation as
each unitholder held prior to the special distribution.
GRANITE'S FINANCIAL, OPERATING AND PROPERTY
HIGHLIGHTS
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
(in millions,
except as noted)
|
2018
|
2017
|
|
2018
|
2017
|
Net operating income
("NOI")(4)
|
$52.4
|
$54.5
|
|
$216.6
|
$213.3
|
Net income
attributable to stapled unitholders
|
$85.9
|
$233.6
|
|
$465.2
|
$357.7
|
Funds from operations
("FFO")(1)
|
$40.9
|
$41.6
|
|
$168.9
|
$153.2
|
Adjusted funds from
operations ("AFFO")(2)
|
$39.8
|
$32.6
|
|
$138.1
|
$145.4
|
Diluted FFO per
stapled unit(1)
|
$0.90
|
$0.89
|
|
$3.68
|
$3.25
|
Diluted AFFO per
stapled unit(2)
|
$0.87
|
$0.69
|
|
$3.01
|
$3.09
|
Monthly distributions
paid per stapled unit
|
$0.68
|
$0.65
|
|
$2.72
|
$2.60
|
Special distribution
declared per stapled unit
|
$1.20
|
—
|
|
$1.20
|
—
|
|
|
|
As at
December 31,
|
|
2018
|
2017
|
Fair value of
investment properties
|
|
$3,425.0
|
$2,733.6
|
Assets held for
sale
|
|
$44.2
|
$391.4
|
Cash and cash
equivalents
|
|
$658.2
|
$69.0
|
Total debt
|
|
$1,303.2
|
$741.4
|
Net leverage
ratio(6)
|
|
19%
|
25%
|
Number of
income‑producing properties
|
|
80
|
84
|
Gross leasable area
("GLA"), square feet
|
|
32.2
|
29.1
|
Occupancy, by
GLA
|
|
99.1%
|
98.4%
|
Magna as a percentage
of annualized revenue
|
|
54%
|
71%
|
Magna as a percentage
of GLA
|
|
47%
|
61%
|
Weighted average
lease term, in years by GLA
|
|
6.0
|
5.9
|
Overall
capitalization rate(7)
|
|
6.7%
|
7.6%
|
A more detailed discussion of Granite's combined financial
results for the three month periods and years ended
December 31, 2018 and 2017 is contained in Granite's
Management's Discussion and Analysis of Results of Operations and
Financial Position ("MD&A") and the audited combined financial
statements for the year ended December 31, 2018 and the notes
thereto, which are available through the internet on the Canadian
Securities Administrators' System for Electronic Document Analysis
and Retrieval ("SEDAR") and can be accessed at www.sedar.com
and on the United States Securities and Exchange Commission's
(the "SEC") Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"), which can be accessed at www.sec.gov.
CONFERENCE CALL
Granite will hold a conference call on Thursday, March 7,
2019 at 8:30 a.m. Eastern time. The toll free number to use
for this call is 1 (800) 582 4086. For international callers,
please use 1 (416) 981 9037. Please dial in at least
10 minutes prior to the commencement of the call. The
conference call will be chaired by Kevan
Gorrie, President and Chief Executive Officer. To hear a
replay of the scheduled call, please
dial 1 (800) 558 5253 (North America) or 1 (416) 626 4100
(International) and enter reservation number 21916279. The
replay will be available until Tuesday,
March 19, 2019.
OTHER INFORMATION
Additional property statistics as at December 31, 2018 have
been posted to our website
at http://www.granitereit.com/propertystatistics/view‑property‑statistics.
Copies of financial data and other publicly filed documents are
available through the internet on SEDAR which can be accessed
at www.sedar.com and on EDGAR which can be accessed
at www.sec.gov.
Granite has filed its annual report on Form 40‑F for the
year ended December 31, 2018 with the SEC. The Form 40‑F,
including the audited combined financial statements, included
therein, is available at http://www.granitereit.com. Hard
copies of the audited combined financial statements are available
free of charge on request by calling (647) 925 7500 or
writing to:
Investor Inquiries
77 King Street West, Suite 4010,
P.O. Box 159
Toronto‑Dominion Centre
Toronto, Ontario
M5K 1H1
Granite is a Canadian‑based REIT engaged in the acquisition,
development, ownership and management of industrial, warehouse and
logistics properties in North
America and Europe. Granite
owns over 85 investment properties representing approximately
34 million square feet of leasable area.
For further information, please see our website at
www.granitereit.com or contact Ilias
Konstantopoulos, Chief Financial Officer, at (647) 925
7540.
NON‑IFRS MEASURES
Reconciliation of FFO and AFFO to Net Income Attributable to
Stapled Unitholders
|
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
(in millions,
except per unit amounts)
|
|
2018
|
2017
|
|
2018
|
2017
|
Net income
attributable to stapled unitholders
|
|
$85.9
|
$233.6
|
|
$465.2
|
$357.7
|
Add
(deduct):
|
|
|
|
|
|
|
Fair value gains on
investment properties, net
|
|
(52.9)
|
(185.2)
|
|
(354.7)
|
(212.1)
|
Fair value losses on
financial instruments
|
|
1.4
|
0.4
|
|
0.5
|
0.8
|
Acquisition
transaction costs
|
|
0.4
|
0.4
|
|
8.0
|
0.7
|
Loss on sale of
investment properties
|
|
1.5
|
0.4
|
|
6.9
|
0.4
|
Other income —
settlement award
|
|
—
|
—
|
|
(2.3)
|
—
|
Current income tax
expense associated with the sale of an investment
property
|
|
—
|
—
|
|
0.2
|
—
|
Deferred income tax
expense
|
|
4.6
|
(8.0)
|
|
45.0
|
5.7
|
Non‑controlling
interests relating to the above
|
|
—
|
—
|
|
0.1
|
—
|
FFO(1)
|
[A]
|
$40.9
|
$41.6
|
|
$168.9
|
$153.2
|
Add
(deduct):
|
|
|
|
|
|
|
Maintenance or
improvement capital expenditures paid
|
|
(1.2)
|
(9.3)
|
|
(17.8)
|
(10.7)
|
Leasing commissions
paid
|
|
(0.2)
|
(1.2)
|
|
(4.2)
|
(2.6)
|
Tenant incentives
paid
|
|
(0.2)
|
(0.2)
|
|
(9.9)
|
(1.0)
|
Tenant incentive
amortization
|
|
1.3
|
1.4
|
|
5.4
|
5.4
|
Straight‑line rent
amortization
|
|
(0.8)
|
0.3
|
|
(4.3)
|
1.1
|
AFFO(2)
|
[B]
|
$39.8
|
$32.6
|
|
$138.1
|
$145.4
|
Basic and Diluted
FFO per stapled unit
|
[A]/[C] and
[A]/[D]
|
$0.90
|
$0.89
|
|
$3.68
|
$3.25
|
Basic and Diluted
AFFO per stapled unit
|
[B]/[C] and
[B]/[D]
|
$0.87
|
$0.69
|
|
$3.01
|
$3.09
|
Basic weighted
average number of stapled units
|
[C]
|
45.7
|
46.9
|
|
45.9
|
47.1
|
Diluted weighted
average number of stapled units
|
[D]
|
45.7
|
47.0
|
|
45.9
|
47.1
|
Readers are cautioned that certain terms used in this press
release such as FFO, AFFO, AFFO payout ratio, same property
NOI — cash basis, net leverage ratio and any related per unit
amounts used by management to measure, compare and explain the
operating results and financial performance of the Trust do not
have standardized meanings prescribed under International Financial
Reporting Standards ("IFRS") and, therefore, should not be
construed as alternatives to net income, cash provided by operating
activities or any other measure calculated in accordance with IFRS.
Additionally, because these terms do not have a standardized
meaning prescribed by IFRS, they may not be comparable to similarly
titled measures presented by other publicly traded entities.
(1)
|
FFO is a non‑IFRS
performance measure that is widely used by the real estate industry
in evaluating the operating performance of real estate entities.
Granite calculates FFO as net income attributable to stapled
unitholders excluding fair value gains (losses) on investment
properties and financial instruments, gains (losses) on sale of
investment properties including the associated current income tax,
acquisition transaction costs, deferred income taxes and certain
other items, net of non‑controlling interests in such items. The
Trust's determination of FFO follows the definition prescribed by
the Real Estate Property Association of Canada ("REALPAC") White
Paper on Funds From Operations & Adjusted Funds From
Operations for IFRS dated February 2018 and as subsequently
amended ("White Paper"). Granite considers FFO to be a meaningful
supplemental measure that can be used to determine the Trust's
ability to service debt, fund capital expenditures and provide
distributions to stapled unitholders. FFO is reconciled to net
income, which is the most directly comparable IFRS measure
(see above). FFO should not be construed as an alternative to
net income or cash flow generated from operating activities
determined in accordance with IFRS.
|
|
|
(2)
|
AFFO is a non‑IFRS
performance measure that is widely used by the real estate industry
in evaluating the recurring economic earnings performance of real
estate entities after considering certain costs associated with
sustaining such earnings. Granite calculates AFFO as net income
attributable to stapled unitholders including all adjustments used
to calculate FFO and further adjusts for actual maintenance capital
expenditures that are required to sustain Granite's productive
capacity, leasing costs such as leasing commissions and tenant
allowances paid, tenant improvements and non‑cash straight‑line
rent and tenant incentive amortization, net of non‑controlling
interests in such items. The Trust's determination of AFFO follows
the definition prescribed by REALPAC's White Paper. Granite
considers AFFO to be a meaningful supplemental measure that can be
used to determine the Trust's ability to service debt, fund
expansion capital expenditures, fund property development and
provide distributions to stapled unitholders after considering
costs associated with sustaining operating earnings. AFFO is also
reconciled to net income, which is the most directly comparable
IFRS measure (see above). AFFO should not be construed as an
alternative to net income or cash flow generated from operating
activities determined in accordance with IFRS.
|
|
|
(3)
|
The AFFO payout ratio
is calculated as monthly distributions declared to unitholders
divided by AFFO in a period. The AFFO payout ratio is a
supplemental measure widely used by analysts and investors in
evaluating the sustainability of the Trust's distributions to
stapled unitholders.
|
|
|
(4)
|
NOI is calculated in
accordance with IFRS and is included in the audited combined
financial statements as at and for the year ended December 31,
2018. Previously, Granite reported NOI as a non‑IFRS financial
measure, calculated as set forth in the MD&A but excluding
lease termination and close‑out fee revenue. NOI for the year ended
December 31, 2017 as calculated under the prior method was
previously reported as $211.7 million, and for the quarter
ended December 31, 2017 was previously reported as
$54.5 million.
|
|
|
(5)
|
Same property
NOI — cash basis refers to the NOI — cash basis
(NOI excluding lease termination and close‑out fees, and the
non‑cash impact from straight‑line rent and tenant incentive
amortization) for those properties owned by Granite throughout the
entire current and prior year periods under comparison. Same
property NOI — cash basis excludes properties that were
acquired, disposed of, classified as properties under or held for
development or assets held for sale during the periods under
comparison. Granite believes that same property NOI — cash
basis is a useful supplementary measure in understanding
period‑over‑period organic changes in NOI — cash basis from
the same stock of properties owned.
|
|
|
(6)
|
The net leverage
ratio is calculated as the net debt (carrying value of total debt
less cash and cash equivalents) divided by the fair value of
investment properties. The net leverage ratio is a supplemental
measure used in evaluating the Trust's degree of financial
leverage, borrowing capacity and the relative strength of its
balance sheet.
|
|
|
(7)
|
Overall
capitalization rate is calculated as stabilized net operating
income (property revenue less property expenses) divided by the
fair value of the property.
|
|
|
FORWARD‑LOOKING STATEMENTS
This press release may contain statements that, to the extent
they are not recitations of historical fact, constitute
"forward‑looking statements" or "forward‑looking information"
within the meaning of applicable securities legislation, including
the United States Securities Act of 1933, as amended, the
United States Securities Exchange Act of 1934, as amended, and
applicable Canadian securities legislation. Forward‑looking
statements and forward‑looking information may include, among
others, statements regarding Granite's future plans, goals,
strategies, intentions, beliefs, estimates, costs, objectives,
capital structure, cost of capital, tenant base, tax consequences,
economic performance or expectations, or the assumptions underlying
any of the foregoing. Words such as "outlook", "may", "would",
"could", "should", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate",
"seek" and similar expressions are used to identify forward‑looking
statements and forward‑looking information. Forward‑looking
statements and forward‑looking information should not be read as
guarantees of future events, performance or results and will not
necessarily be accurate indications of whether or the times at or
by which such future performance will be achieved. Undue reliance
should not be placed on such statements. There can also be no
assurance that: the expansion and diversification of Granite's real
estate portfolio and the reduction in Granite's exposure to Magna
and the special purpose properties; the ability of Granite to find
satisfactory acquisition, joint venture and development
opportunities and to strategically redeploy the proceeds from
recently sold properties and financing initiatives; the expected
completion of the acquisitions of a property in the
United States and the construction and leasing of a building
thereon and the leasehold interest in two properties in
Canada; Granite's ability to
dispose of any non‑core assets on satisfactory terms; Granite's
ability to meet its target occupancy goals; and the expected amount
of any distributions, can be achieved in a timely manner, with the
expected impact or at all. Forward‑looking statements and
forward‑looking information are based on information available at
the time and/or management's good faith assumptions and analyses
made in light of Granite's perception of historical trends, current
conditions and expected future developments, as well as other
factors Granite believes are appropriate in the circumstances, and
are subject to known and unknown risks, uncertainties and other
unpredictable factors, many of which are beyond Granite's control,
that could cause actual events or results to differ materially from
such forward‑looking statements and forward‑looking information.
Important factors that could cause such differences include, but
are not limited to, the risk of changes to tax or other laws and
treaties that may adversely affect Granite Real Estate Investment
Trust's mutual fund trust status under the Income Tax Act
(Canada) or the effective tax rate
in other jurisdictions in which Granite operates; economic, market
and competitive conditions and other risks that may adversely
affect Granite's ability to expand and diversify its real estate
portfolio and dispose of any non‑core assets on satisfactory terms;
and the risks set forth in the "Risk Factors" section in Granite's
Annual Information Form for 2018 dated March 6, 2019, filed on
SEDAR at www.sedar.com and attached as Exhibit 1
to the Trust's Annual Report on Form 40‑F for the year
ended December 31, 2018 filed with the SEC and available
online on EDGAR at www.sec.gov, all of which investors are
strongly advised to review. The "Risk Factors" section also
contains information about the material factors or assumptions
underlying such forward‑looking statements and forward‑looking
information. Forward‑looking statements and forward‑looking
information speak only as of the date the statements and
information were made and unless otherwise required by applicable
securities laws, Granite expressly disclaims any intention and
undertakes no obligation to update or revise any forward‑looking
statements or forward‑looking information contained in this press
release to reflect subsequent information, events or circumstances
or otherwise.
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SOURCE Granite Real Estate Investment Trust