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 May 09, 2024 7:23am

98 Views

Post# 36030585

RBC

May 8, 2024

Granite Real Estate Investment Trust
Q1 modestly ahead; occupancy steady (including US), with FFOPU guidance intact

TSX: GRT.UN | CAD 70.96 | Outperform | Price Target CAD 89.00

Sentiment: Positive

Our view: GRT reported Q1/24 FFOPU of $1.30, modestly ahead of RBC/Street at $1.26E/$1.27E, vs. $1.25 last year (+4% YoY). Our overall read on the quarter leans slightly positive, particularly with incremental progress on US leasing. Overall occupancy held steady (including the US) after four straight quarters of erosion, renewal spreads remain healthy (moderation was anticipated), and guidance ranges were upheld for 2024 FFOPU (+7-10% YoY) and SP NOI growth (albeit at lower end of +7-8% quarterly average). Notably, US leasing advanced post Q1 in the face of a slower environment. As well, the balance sheet remains in solid shape, while the IFRS NAV modestly increased. Conference call May 9 (11 am ET; 1-800-579-2543).

Highlights:

Results modestly ahead. The +$0.04/unit vs. our call was evenly split between higher NOI and lower G&A.
2024 FFOPU guidance intact, AFFOPU outlook trimmed 1%. GRT maintained its FFOPU guide at $5.30-5.45, with the $5.38 mid- point 1% ahead of RBC/Street at $5.33E/$5.34E. Guidance range for quarterly average SP NOI growth held at +7-8%, but skewed to the lower end based on revised leasing assumptions. GRT tweaked its AFFOPU forecast by -$0.05 to $4.60-4.75 (+2-6% YoY) on higher capex/leasing costs, with the $4.68 mid-point 1%/2% below RBC/Street at $4.73E/$4.78E.
Q1 constant currency SP NOI +4.9% YoY from higher rents and expansions, partly offset by higher vacancy. Canada led (+11.3% YoY SP NOI), followed by Europe (+4.6%) and the US (+3.2%). Including F/X impacts, Q1 SP NOI +5.1% YoY.
In-place occupancy held steady at 95% (flat QoQ, -280 bps YoY). Netherlands edged up to 99.1% (+10 bps QoQ), while the US (92.2%), Canada (98.9%), Austria (100%), and Germany (100%) were all flat sequentially. Notably, in Q1, GRT signed a 125K sf lease at one of its recently completed projects in Lebanon, TN (5.3 year term; starts Jun-2024) and post-Q1, a 148K sf lease was signed at a Houston, TX property (3.3 year term, starts May 2024). As at May 8, committed occupancy is 95.4%.
Q1 new/renewal leasing spreads were +10% on 6.4MM sf (vs. 22% in 2023), including +10% in Austria (previously announced Magna renewal) and +12% in the US.
IFRS BVPU (pre-tax) increased to $93.68 (+2% QoQ, flat YoY). IFRS cap rate was stable at 5.26% (+2 bps QoQ, +25 bps YoY) vs. our 5.45% NAV cap rate/6.2% implied cap. In Q1, GRT booked a net $13MM ($0.20/unit) fair value gain on the portfolio, plus $117MM ($1.84/unit) of unrealized F/X gains.
Net debt/GAV at 32% (-100 bps QoQ, flat YoY), D/EBITDA 7.5x (-0.1x QoQ, -0.6x YoY). Available liquidity at $1.1B. Post Q1, GRT repurchased $26MM of units pursuant to its NCIB (376K units at $69.39/unit).