Have a $93.00 target. GLTA
GRANITE REIT
Q3/23 First Look: In Line With A ~3% Distribution Bump
Q3/23 FFO of $1.24/unit was in line with our estimate and consensus.
Occupancy declined sequentially from 96.3% to 95.6%, reflecting the U.S.
segment (~110bps sequential decline). Renewals, however, reflect healthy
blended spreads of ~33%. Along with the quarter, GRT raised its distribution
by ~3.1% to an annualized $3.30/unit (~5% implied yield).
Conference Call: Thursday, November 9 at 11:00 a.m. ET; 1 (800) 584-1012.
Organic Growth & Operations:
• Cash SPNOI came in at 12.2% on higher rents from CPI indexation, fixed
rent increases, U.S. and Canada leasing, favourable foreign exchange, and
certain expansion and development properties. On a constant-currency
basis, SPNOI was up 7.0%. By region (and excluding FX), growth was led by
12.7% in Germany, 8.7% in Canada, 7.6% in the U.S., and 6.7% in the
Netherlands. Austria grew by 1.2%.
• GRT completed ~1.9MM sq. ft. of renewals at a spread of ~33% over
expiring rents. Canadian leasing spreads came in at 206% (one GTA lease)
and the U.S. achieved healthy leasing spreads of 43% on 900,000 sq. ft.
• Magna exposure was ~25% of annualized revenue at Q3/23.
Development Progress:
• Construction continued on the ~410k sq. ft. Brantford, ON property and the
~50k sq. ft. Ajax, ON expansion. Both projects are expected to be completed
in Q1 2024. During the quarter, Granite also commenced the site plan
approval process for the third phase of the Houston, Texas development site.
Fair Value Update:
• GRT recognized ~$53.2MM of net fair value losses, primarily driven by
higher discount and terminal cap rates across all markets, offset partially by
higher market rents in the GTA and certain US and European markets.
Portfolio cap rate was ~5.14%, from ~5.09% last quarter.
Q/Q Cap Rate Moves:
• Canada: 3.73% from 3.75%
• U.S.: 5.16% from 5.10%
• Austria: 8.05% from 7.95%
• Germany: 5.65% from 5.61%
• The Netherlands: 5.02% from 4.90%.