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 07, 2024 8:54am

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Post# 36300628

TD

Have a $91.00 target. GLTA

Q3/24: LEADING SPNOI & FFO GROWTH; PROGRESS ON US VACANCIES; 3% DIST'N BUMP

THE TD COWEN INSIGHT

GRT delivered another quarter of strong SPNOI and FFO/unit growth. Despite announcing some progress in leasing-up its U.S. vacancies, mgmt's year-end occupancy targets have (unsurprisingly) been pushed back. While consensus may need to reflect a slower occupancy ramp-up, we remind that with half of GRT's assets in the U.S., the USD's recent strength could provide a substantial offset.

Impact: NEUTRAL

Q3 results were in-line with TD/consensus and continue to reflect GRT's strong embedded growth. Both FFO/unit of $1.35 and our $1.20 calculation of AFFO/unit increased +9% y/ y (see exhibit). Versus our forecast, GRT's Q3 had a small F/X tailwind, offset by slightly higher interest expense.

GRT announced some good progress on its list of U.S. vacancies, signing a 5-year lease for 307,800sf at 8740 South Crossroads Dr, Olive Branch, MS (Memphis market) that commenced in October. That represents 9% of the US vacancies in Q2 and 0.5% of GRT's total portfolio.
GRT's occupancy was 94.3% in-place (-0.2% q/q) and 94.7% committed (+0.2% q/q), reflecting the Memphis lease that commenced post-Q3. We are aware of one of GRT's buildings in the U.S. that recently was placed on the sublet market for up to 750,000sf with 2 years of remaining term.
SPNOI growth (cash basis) held strong at +6.2% y/y (highest since Q3/23). New and renewal leasing generated +31% higher rents. GRT completed an early 5-year extension of a 773,300sf lease in the GTA (likely the Wayfair space at 2020 Logistics Drive, near the airport). This property was acquired (and the lease commenced) in 2019 just as GTA market rents started their rapid ascent.

2024 Outlook Lowered/Delayed: GRT updated its vacancy and leasing assumptions, causing its 2024 SPNOI growth guidance (4-qtr average) to be tightened at the bottom-end of the prior 6.0% to 6.5% range (was previously a range of 7% to 8%). This suggests to us that
the prior occupancy targets of ~97% committed and ~96% in-place by year-end have been either lowered or pushed back, which is not surprising with less than two months remaining in the year. We believe the evolving expectations around the U.S. election over the past two months and corresponding volatility in bond yields likely caused some tenant prospects to postpone their decisions on committing to new leases.

Today's trading valuation (~14x 2025E P/AFFO, 82% P/NAV, 6.3% implied cap rate) feels to us like a trough given GRT's growth track record and consistent annual distribution increases (including today's 3% bump).

Conference call Nov 7: 11:00 a.m. (1-800-579-2543;