Bullboard - Stock Discussion Forum Granite Real Estate Investment Trust T.GRT.UN

Alternate Symbol(s): GRP.U

Granite Real Estate Investment Trust (the Trust) is a Canada-based real estate investment trust. The Trust is engaged in the acquisition, development, ownership and management of logistics, warehouse and industrial properties in North America and Europe. The Trust owns 143 investment properties representing approximately 62.9 million square feet of leasable area. The Trust has approximately 38... see more

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TSX:GRT.UN - Post Discussion

Granite Real Estate Investment Trust > RBC

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Post by retiredcf on Mar 09, 2023 4:01pm

RBC

March 8, 2023

Granite Real Estate Investment Trust
A good finish, with Q4 results ahead; solid leasing momentum

TSX: GRT.UN | CAD 81.42 | Outperform | Price Target CAD 100.00

Sentiment: Positive

Our view: GRT reported Q4/22 FFOPU of $1.20, ahead of RBC/Street at $1.12E/$1.11E, and up from $1.02 last year (+19% YoY). Overall, a strong finish to the year, with the positive spread to our call from higher NOI ($0.03/unit; partly from higher straight line rent), lower net interest costs ($0.03), lower G&A ($0.01), and higher realized F/X gains ($0.01). Notably, 2022 FFOPU ($4.43) hit the top end of GRT’s guidance ($4.31-4.43). Importantly, Q4 SP NOI growth accelerated to +6%, occupancy increased, and leasing spreads remain solid (+24%). As well, GRT has already renewed ~80% of 2023 lease expiries, with average rent increases of ~20%, while 55% of 2024 maturities are addressed following the previously announced Magna lease extensions in Graz, Austria. Good progress was also made on developments, while the NCIB was active, although the IFRS NAV was -3% QoQ. We expect 2023 FFOPU guidance will be provided on the Mar-9 conference call (11 am ET; 1-800-754-1366).

Highlights:

Q4 SP NOI (constant currency) +6% YoY (+3.4% YTD), mainly from higher rents via contractual increases (CPI and fixed) and re- leasing and renewals in Canada, the US, Germany, and the Netherlands. The US led (+6.8% YoY SP NOI), followed by Canada (+6.1%) and Europe (+4.4%). Including F/X impacts, Q4 SP NOI was +8.8% YoY (+2.3% YTD).
Occupancy rose to 99.6% (+50 bps QoQ, -10 bps YoY). The lift was mainly driven by the US (+50 bps QoQ to 99.7%) and Germany (+400 bps to 100%), partly offset by slips in Canada (-110 bps to 98.9%) and the Netherlands (-30 bps to 99.1%).
Q4 blended new/renewal leasing spreads at a strong +24% (+26% in 2022), including +78% on renewals in Canada, +24% new/ renewals in US, and +9% in the Netherlands from CPI escalations.
IFRS BVPU (pre-tax) declined to $94.68 (-3% QoQ, +5% YoY). GRT’s IFRS cap rate increased to 4.87% (+19 bps QoQ, +34 bps YoY) vs. our 4.9% NAV cap rate/5.3% current implied cap. In Q4, GRT booked $230MM ($3.59/unit; ~3% of portfolio value) of net fair value losses on the portfolio for higher discount and terminal cap rates, partly offset by higher market rents and net $80MM ($1.25/unit) of unrealized F/X gains.
NCIB active in Q4 with $69MM units repurchased (1MM units @ $67.60/unit), raising 2022 to $156MM (2.2MM units @ $71.81)
Good progress on developments. In Q4/22 and Q1/23, GRT completed 1) its 844K sf project in Murfreesboro, TN (lease started Dec-1/22), 2) phase one of its project in Houston, TX (521K sf leased of 669K sf total), 3) phase two of its 689K sf Houston project (lease commenced Q1/23), and 4) a 329K sf expansion in Indiana (fully leased). Acquisitions were muted in Q4 ($481MM in

2022), while assets held for sale total a modest $41MM.
Net debt/GAV at 32% (+300 bps QoQ, +700 bps YoY), D/EBITDA at 8.3x. Available liquidity at $1.1B
Magna exposure declined to 26% of revenue (flat QoQ, -300 bps YoY).