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 and six month periods
ended June 30, 2021 and also announced the closing of the
acquisitions of three income-producing properties and a development
property in the United States at a combined purchase price of $198
million, including committed development costs. Further, Granite
announced that it has appointed Ms. Emily Pang to its Board of
Trustees and Board of Directors and today released its 2020
Environmental, Social, Governance + Resilience (ESG+R) Report.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210804006144/en/
Rock Run Business Park Joliet, Illinois
(Photo: Business Wire)
SECOND QUARTER 2021
HIGHLIGHTS
Highlights for the three month period ended June 30, 2021,
including events subsequent to the quarter, are set out below:
Financial:
- Granite’s net operating income (“NOI”) was $80.3 million in the
second quarter of 2021 compared to $71.2 million in the prior year
period, an increase of $9.1 million primarily as a result of
acquisition activity beginning in the second quarter of 2020;
- Same property NOI — cash basis(4) increased by 2.9% for the
three month period ended June 30, 2021, excluding the impact of
foreign exchange;
- Funds from operations (“FFO”)(1) was $62.2 million ($0.99 per
unit) in the second quarter of 2021 compared to $53.5 million
($0.97 per unit) in the second quarter of 2020;
- Adjusted funds from operations (“AFFO”)(2) was $60.1 million
($0.96 per unit) in the second quarter of 2021 compared to $51.3
million ($0.93 per unit) in the second quarter of 2020;
- AFFO payout ratio(3) was 79% for the second quarter of 2021
compared to 78% in the second quarter of 2020;
- Granite recognized $308.0 million in net fair value gains on
investment properties in the second quarter of 2021 driven by lower
capitalization rates and terminal capitalization rates and/or
higher market rents observed across Granite’s portfolio, but
largely attributable to the Greater Toronto Area and U.S.A. The
fair value gains on investment properties were partially offset by
unrealized foreign exchange losses of $43.0 million resulting from
the relative strengthening of the Canadian dollar against the US
dollar and the Euro; and
- Granite’s net income attributable to stapled unitholders
increased to $316.9 million in the second quarter of 2021 from
$75.7 million in the prior year period primarily due to a $273.5
million increase in net fair value gains on investment properties
and a $9.1 million increase in net operating income as noted above,
partially offset by a $44.6 million increase in income tax
expense.
Investments:
Further to the announcement on June 2, 2021 of acquisitions
under contract, the following acquisitions have now closed:
Rock Run Business Park Joliet, Illinois
- On June 25, 2021, Granite acquired three distribution
warehouses located in the Chicago submarket of Joliet, Illinois
totaling 1.1 million square feet and were acquired at an in-going
yield of 4.8% for $115.6 million (US $94.0 million). The properties
are 100% leased to five tenants for a weighted average remaining
lease term of 4.1 years. These highly-functional assets have 30’
clear heights, flexible design and distribution characteristics,
and are strategically located adjacent to the principal
intersection of the I-55 and I-80. Chicago is a critical
transportation and distribution hub in the United States, being the
only metropolitan area in North America where six Class I railroads
converge. In addition, the assets are located less than six miles
from the CenterPoint Intermodal Center and the Union Pacific IV
facility; and
2120 Logistics Way, Murfreesboro, Tennessee
- On June 30, 2021, Granite acquired on a forward-funding basis a
0.8 million square foot modern distribution facility to be
constructed on 50.8 acres in Murfreesboro, Tennessee. Currently in
early-stage development, the property is expected to be completed
in the third quarter of 2022 at a total fixed cost (including land)
of approximately $82.1 million (US $66.2 million). The
state-of-the-art facility will have modern features including
cross-dock configuration, 40’ clear height, LED lighting and other
sustainable design features. The property has direct access to the
I-24, is 26 miles from Nashville International Airport and 31 miles
from downtown Nashville. The property is expected to achieve a
stabilized development yield of 5.3%.
Operations:
- On June 30, 2021, Granite disposed of one property located in
Weikersdorf, Austria for gross proceeds of $13.2 million (€9.0
million).
Financing:
- On June 9, 2021, Granite completed an offering of 3,979,000
stapled units at a price of $79.50 per unit for total gross
proceeds of $316.3 million, including 519,000 stapled units issued
pursuant to the exercise of the over-allotment option granted to
the underwriters. The net proceeds received by Granite after
deducting the total costs related to the offering were $303.1
million.
GRANITE’S FINANCIAL, OPERATING AND
PROPERTY HIGHLIGHTS
Three Months Ended June
30,
Six Months Ended June
30,
(in millions, except as noted)
2021
2020
2021
2020
Revenue(4)
$
94.0
$
81.0
$
189.9
$
159.1
Net operating income (“NOI”)
$
80.3
$
71.2
$
161.9
$
139.1
Net income attributable to stapled
unitholders
$
316.9
$
75.7
$
547.1
$
157.0
Funds from operations (“FFO”)(1)
$
62.2
$
53.5
$
119.4
$
110.3
Adjusted funds from operations
(“AFFO”)(2)
$
60.1
$
51.3
$
114.9
$
106.9
Diluted FFO per stapled unit(1)
$
0.99
$
0.97
$
1.92
$
2.02
Diluted AFFO per stapled unit(2)
$
0.96
$
0.93
$
1.85
$
1.96
Monthly distributions paid per stapled
unit
$
0.75
$
0.73
$
1.50
$
1.45
AFFO payout ratio(3)
79%
78%
78%
74%
As at June 30 and December 31,
2021
2020
Fair value of investment properties
$
6,396.6
$
5,855.6
Cash and cash equivalents
$
678.1
$
831.3
Total debt
$
1,936.0
$
2,297.5
Net leverage ratio(5)
20%
25%
Number of income-producing properties
110
108
Gross leasable area (“GLA”), square
feet
51.3
49.5
Occupancy, by GLA
99.3%
99.6%
Magna as a percentage of annualized
revenue(7)(8)
34%
36%
Magna as a percentage of GLA(8)
26%
27%
Weighted average lease term in years, by
GLA
6.0
6.3
Overall capitalization rate(6)
5.1%
5.6%
A more detailed discussion of Granite’s combined financial
results for the three and six month periods ended June 30, 2021 and
2020 is contained in Granite’s Management’s Discussion and Analysis
of Results of Operations and Financial Position (“MD&A”) and
the unaudited combined financial statements for those periods 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.
COVID-19 PANDEMIC UPDATE
Granite continues to monitor developments regarding the COVID-19
pandemic and to ensure the safety of its tenants and staff. While
the full impact of the COVID-19 pandemic continues to be difficult
to predict, Granite believes at this time that its portfolio and
strong liquidity position will allow it to weather the on-going
impact of COVID-19.
During the three and six months ended June 30, 2021, there has
not been a significant impact on Granite’s operations, assets or
liabilities as a result of COVID-19. Throughout the pandemic thus
far, Granite has collected 100% of rents due and therefore has not
recognized any provisions for uncollected rent at this time.
Granite reviewed its future cash flow projections and the valuation
of its properties considering the impacts of the COVID-19 pandemic
during the six months ended June 30, 2021 and Granite does not
expect, at this time, that COVID-19 will have a significant
negative impact to the fair value of its investment property
portfolio. In addition, there have not been any significant fair
value losses on investment properties recorded in the three and six
months ended June 30, 2021.
From a liquidity perspective, as at August 4, 2021, Granite has
total liquidity of approximately $1.7 billion, including its fully
undrawn operating facility which is sufficient to meet its current
commitments, development and construction projects. Granite’s
nearest debt maturity of $400.0 million does not occur until
November 2023 and Granite’s investment property portfolio of
approximately $6.4 billion remains fully unencumbered. Granite
believes it is well-positioned to weather any short-term negative
impacts on its business; however, Granite will continue to evaluate
and monitor its liquidity as the situation prolongs.
TRUSTEE APPOINTMENT
Today, Granite appointed Ms. Emily Pang to its Board of Trustees
and Board of Directors effective immediately and Ms. Pang was also
appointed to Granite’s Audit Committee. Ms. Pang is currently the
Chief Operating Officer of the SickKids Foundation and also serves
as the Corporate Secretary for its Board. Ms. Pang is a seasoned
business executive with a diverse range of experience, including
strategy, accounting and taxation, communications and investor
relations, human resource matters, data integrity and reporting, as
well as governance. She has held roles both in Canada and abroad in
the banking, consulting and postal/logistics industries, driving
and implementing transformational change in large organizations.
Ms. Pang is a CPA CA who earned a Bachelor of Commerce degree from
Queen’s University. She is also a graduate of the joint
Kellogg-Schulich MBA program and holds the ICD.D designation from
the Institute of Corporate Directors. Ms. Pang currently serves on
the boards of two not-for-profit organizations: Ontario Nonprofit
Network and Quantum Valley Ideas Laboratories.
2020 GLOBAL ENVIRONMENTAL, SOCIAL,
GOVERNANCE + RESILIENCE (ESG+R) REPORT
Today, Granite released its 2020 ESG+R report which highlights
Granite’s ESG+R program implementation and updates from the 2020
calendar year. A copy of the report can be found on Granite’s
website at https://granitereit.com/2020-global-esgr-report/.
CONFERENCE CALL
Granite will hold a conference call on Thursday, August 5, 2021
at 11:00 a.m. (ET). The toll free number to use for this call is 1
(800) 908-8951. For international callers, please call 1 (416)
641-6712. 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 21995711. The replay will be available until Monday, August
16, 2021.
OTHER INFORMATION
Additional property statistics as at June 30, 2021 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 is a Canadian-based REIT engaged in the acquisition,
development, ownership and management of logistics, warehouse and
industrial properties in North America and Europe. Granite owns 118
investment properties representing approximately 51.3 million
square feet of leasable area.
For further information, please see our website at
www.granitereit.com or contact Teresa Neto, Chief Financial
Officer, at (647) 925-7560.
NON-IFRS MEASURES
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,
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 2019 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 below). 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 incurred 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
below). AFFO should not be construed as an alternative to net
income or cash flow generated from operating activities determined
in accordance with IFRS.
Three Months Ended June
30,
Six Months Ended June
30,
(in millions, except per unit
amounts)
2021
2020
2021
2020
Net income attributable to stapled
unitholders
$
316.9
$
75.7
$
547.1
$
157.0
Add (deduct):
Fair value gains on investment properties,
net
(308.0
)
(34.5
)
(517.5
)
(70.5
)
Fair value losses on financial
instruments
0.2
3.9
0.5
5.8
Loss on sale of investment properties
0.4
—
0.6
—
Current income tax expense associated with
the sale of an investment property
2.3
—
2.3
—
Deferred income tax expense
49.8
7.4
85.7
17.7
Fair value remeasurement expense relating
to the Executive Deferred Stapled Unit Plan
0.6
1.0
0.6
0.2
Non-controlling interests relating to the
above
—
—
0.1
0.1
FFO(1)
[A]
$
62.2
$
53.5
$
119.4
$
110.3
Add (deduct):
Maintenance or improvement capital
expenditures incurred
(1.4
)
(1.9
)
(1.9
)
(3.0
)
Leasing commissions incurred
(0.2
)
(0.1
)
(0.2
)
(0.1
)
Tenant allowances incurred
(0.1
)
—
(0.2
)
—
Tenant allowance amortization
1.3
1.3
2.6
2.6
Straight-line rent amortization
(1.7
)
(1.5
)
(4.8
)
(2.9
)
AFFO(2)
[B]
$
60.1
$
51.3
$
114.9
$
106.9
Basic and Diluted FFO per stapled
unit
[A]/[C]
and
[A]/[D]
$
0.99
$
0.97
$
1.92
$
2.02
Basic and Diluted AFFO per stapled
unit
[B]/[C]
and
[B]/[D]
$
0.96
$
0.93
$
1.85
$
1.96
Basic weighted average number of
stapled units
[C]
62.7
54.9
62.2
54.5
Diluted weighted average number of
stapled units
[D]
62.8
54.9
62.2
54.5
(3)
AFFO payout ratio is calculated
as monthly distributions, which exclude the special distribution,
declared to unitholders divided by AFFO in a period. AFFO payout
ratio may exclude revenue or expenses incurred during a period that
can be a source of variance between periods. The AFFO payout ratio
is a supplemental measure widely used by analysts and investors in
evaluating the sustainability of the Trust’s monthly distributions
to stapled unitholders. Refer to the change in the current year
period to the calculation of AFFO payout ratio in footnote (2)
above.
(4)
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.
(5)
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.
(6)
Overall capitalization rate is
calculated as stabilized net operating income (property revenue
less property expenses) divided by the fair value of the
property.
(7)
Annualized revenue for each
period presented is calculated as rental revenue excluding tenant
recoveries, for the month of June 2021 or June 2020, as applicable,
recognized in accordance with IFRS, multiplied by 12 months.
(8)
Subsequent to quarter end, the
sale of Magna’s business operations in Obertshausen, Germany to
Mutares SE & Co. KGaA was finalized. As a result of this change
in tenant, Granite’s exposure to Magna is further reduced to 32% of
Granite’s annualized revenue and 25% of Granite’s GLA.
FORWARD-LOOKING
STATEMENTS
This MD&A 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: Granite’s
expectations regarding the impact of the COVID-19 pandemic and
government measures to contain it, including with respect to
Granite’s ability to weather the impact of COVID-19, the
effectiveness of measures intended to mitigate such impact, and
Granite’s ability to deliver cash flow stability and growth and
create long-term value for unitholders; Granite’s ability to
implement its ESG+R program and related targets and goals; 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 accelerate growth and
to grow its net asset value and FFO and AFFO per unit; the ability
of Granite to find and integrate satisfactory acquisition, joint
venture and development opportunities and to strategically deploy
the proceeds from recently sold properties and financing
initiatives; Granite’s intended use of the net proceeds of its
equity and debenture offerings to fund potential acquisitions and
for the other purposes described previously; the potential for
expansion and rental growth at the properties in Mississauga and
Ajax, Ontario and the expected enhancement to the yields of such
properties from such potential expansion and rental growth; the
expected construction on and development yield of the site in
Houston, Texas; the expected development and construction of an
e-commerce and logistics warehouse on land in Fort Worth, Texas;
the expected construction of the distribution/light industrial
facility on the 13-acre site in Altbach, Germany; the expected
construction of a modern distribution facility on the 50.8 acre
site in Murfreesboro, Tennessee; the expected development of a
multi-phased business park on the 9.2 acre site in Brantford,
Ontario, and the potential yield from the project; the timing of
payment of associated unpaid construction costs and holdbacks;
Granite’s ability to dispose of any non-core assets on satisfactory
terms; Granite’s ability to meet its target occupancy goals;
Granite’s ability to secure sustainability or other certifications
for any of its properties; the expected impact of the refinancing
of the term loans on Granite’s returns and cash flow; and the
expected amount of any distributions and distribution increase, 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. Given the impact of the COVID-19
pandemic and government measures to contain it, there is inherently
more uncertainty associated with our assumptions as compared to
prior periods. Forward-looking statements and forward-looking
information 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 impact of the COVID-19
pandemic and government measures to contain it, and the resulting
economic downturn, on Granite’s business, operations and financial
condition; the risk that the pandemic or such measures intensify;
the duration of the pandemic and related impacts; the risk of
changes to tax or other laws and treaties that may adversely affect
Granite REIT’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 AIF for 2020 dated March 3, 2021,
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,
2020 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 MD&A to reflect subsequent information, events or
circumstances or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804006144/en/
Teresa Neto Chief Financial Officer (647) 925-7560
Granite Real Estate Inve... (TSX:GRT.UN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Granite Real Estate Inve... (TSX:GRT.UN)
Historical Stock Chart
From Jul 2023 to Jul 2024