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 63.3 million square feet of leasable area. The Trust’s investment properties consist of income-producing properties, and development properties. The income-producing properties consist primarily of logistics, e-commerce and distribution warehouses, and light industrial and heavy industrial manufacturing properties. The Trust has approximately 38 industrial properties in Canada, 66 in the United States, 16 in the Netherlands, 14 in Germany and nine in Australia. All of its income-producing properties are for industrial use and can be categorized as distribution/e-commerce, industrial/warehouse, flex/office or special purpose properties.

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Granite Real Estate Investment Trust

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Post by retiredcfon Nov 09, 2023 7:09am

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Post# 35725467

RBC

November 8, 2023

Granite Real Estate Investment Trust
Q3 print in line, with solid organic growth; distribution hiked 3%

TSX: GRT.UN | CAD 65.14 | Outperform | Price Target CAD 97.00

Sentiment: Neutral

Our view: GRT reported Q3/23 FFOPU of $1.24, in line with RBC/Street at $1.25E/$1.24E, vs. $1.08 last year (+15% YoY). The - $0.01/unit spread to our call was mainly driven by lower NOI. On balance, a strong quarter with solid earnings growth, robust leasing spreads, strong organic NOI growth, and a 3% distribution hike that matched our call. Still, overall occupancy dropped sequentially on slippage in the US (not entirely surprising). Importantly, good progress was also made on financing activities, while the IFRS NAV was relatively stable. Conference call Nov-9 (11 am ET; 1-800-584-1012).

Highlights:

Distribution hiked 3.1% to annualized $3.30/unit effective Dec (payable Jan-2024), in line with our 2024E.
Q3 SP NOI (constant currency) +7% YoY (+5.7% YTD), mainly from higher rents (contractual steps, re-leasing, renewals) and 3 expansion completions, partly offset by higher vacancy. Canada led (+8.7% YoY SP NOI), followed by the US (+7.6%), and Europe (+5.4%). Including F/X impacts, Q3 SP NOI was +12.2% YoY (+10.7%).
Occupancy declined to 95.6% (-70 bps QoQ, -350 bps YoY). The QoQ drop was due to the US which fell to 93.3% (-110 bps QoQ). Canada (98.9%), Austria (100%), Germany (100%), and the Netherlands were unchanged QoQ.
Q3 renewal leasing spreads were solid at +33% on 1.9MM sf (+21% YTD). Spreads were strongest in Canada (+206%), followed by the US (+43%), Netherlands (+7%), and Germany (flat).
IFRS BVPU (pre-tax) was fairly stable at $93.08 (flat QoQ, -4% YoY). GRT’s IFRS cap rate edged up to 5.14% (+5 bps QoQ, +46 bps YoY) vs. our 5.1% NAV cap rate/6.2% implied cap. In Q3, GRT booked a net $53MM ($0.83/unit) fair value loss on the portfolio (higher discount/terminal cap rates, partly offset by higher market rents) and $87MM ($1.36/unit) of unrealized F/X gains.
Progress on financing activities. In Sept., GRT arranged a new €70MM term loan (due Sept-2026) and, through a swap, fixed the rate at 4.33% (proceeds used to pay down lines). In Oct., GRT issued $400MM of Series 7 unsecured debentures (due Apr-2029) at a 6.07% rate. Through a cross-currency swap, the effective interest rate drops to 4.93%. Proceeds will be used to repay the $400MM Series 3 unsecured debentures due Nov-2023 (2.43% effective rate).
Net debt/GAV at 32% (flat QoQ, +300 bps YoY), D/EBITDA 7.8x (-0.1x QoQ, -0.8x YoY). Available liquidity at $1.2B.
Magna exposure at 25% of revenue (-100 bps QoQ and YoY).