TORONTO, Nov. 2, 2016 /CNW/ - Granite Real Estate Investment Trust and Granite
REIT Inc. (TSX: GRT.UN; NYSE: GRP.U) ("Granite" or the "Trust") today announced their combined results for the three and nine
month periods ended September 30, 2016, and an increase to Granite's targeted annualized distribution, to $2.60 from $2.40 per stapled unit, to be effective upon the declaration of
the distribution in respect of the month of December 2016, payable January
2017.
HIGHLIGHTS
Highlights for the three month period ended September 30, 2016, including events subsequent to the quarter, are set out
below:
- Granite entered into binding agreements with Magna International Inc. and certain of its operating subsidiaries (collectively
"Magna") to extend or renew early and extend existing leases at seven special purpose properties and eight multi-purpose
facilities in Canada, Austria and the
United States, representing an aggregate square footage of 7 million (24% of total square footage and excluding the
building expansions to two special purpose properties that Granite has agreed to acquire in the first quarter of 2017) and
annualized lease payments(1) of $69.2 million (31% of total annualized lease payments).
The lease extension periods range from approximately five to 16 years from the existing lease expiry dates. As a result of the
binding agreements, annualized lease payments decreased by approximately $0.8 million (including
the impact of the two building expansions), however, it is anticipated that annualized lease payments will increase thereafter;
- Primarily as a result of the binding agreements to extend or renew early and extend existing leases at seven special purpose
properties, the reported fair value of those properties increased by approximately $135.3 million
since December 31, 2015;
- Granite's weighted average lease term for the special purpose portion of its portfolio has increased to 11.0 years from 5.9
years at the beginning of 2016 and the weighted average lease term for Granite's entire income producing portfolio has increased
to 7.2 years from 4.7 years at the beginning of the year;
- Funds from operations ("FFO")(2) increased 6% from $39.8 million ($0.85 per stapled unit) in the prior year period to $42.2 million ($0.90 per stapled unit) in the third quarter of 2016. The third quarter had higher revenues from the lease up
of two recently developed properties in the United States and lower general and administrative
expenses;
- The targeted annualized distribution will increase to $2.60 ($0.217 per month) per stapled unit commencing with the declaration of the monthly distribution for December 2016, payable January 2017. For 2016, Granite expects to make total distributions of
approximately $2.40 per stapled unit. The new targeted annualized distribution therefore represents
an annualized increase of 8.3%; and
- Mr. Ilias Konstantopoulos was appointed Granite's Chief Financial Officer effective
September 12, 2016.
Granite's results for the three and nine month periods ended September 30, 2016 and 2015 are summarized below (all figures
are in Canadian dollars):
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(in thousands, except per unit figures)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2016
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2015
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2016
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2015
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Revenues
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$56,347
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$54,854
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$169,111
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$161,360
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Net income
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$150,241
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$47,053
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$251,164
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$150,109
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Funds from operations ("FFO")(2)
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$42,178
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$39,771
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$123,479
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$118,870
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Basic FFO per stapled unit(2)
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$0.90
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$0.85
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$2.62
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$2.53
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Diluted FFO per stapled unit(2)
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$0.90
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$0.84
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$2.62
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$2.52
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Fair value of investment properties(3)
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$2,674,451
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$2,542,477
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Readers are cautioned that certain terms used in this press release such as
FFO, annualized lease payments and any related per unit amounts used by management to measure, compare and explain
the operating results and financial performance of the Trust do not have standardized meanings prescribed under
International Financial Reporting Standards ("IFRS") and, therefore, should not be construed as alternatives to net income,
cash flow from operating activities or revenue, as appropriate, calculated in accordance with IFRS. Additionally,
because these terms do not have a standardized meaning prescribed by IFRS, they may not be comparable to similarly titled
measures presented by other publicly traded
entities.
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(1)
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Annualized lease payments ("ALP") represents Granite's total annual rent
assuming that contractual lease payments in place at the last day of the reporting period were in place for an entire year
or less than a year if non-renewal or termination notices have been provided or the disposal of a property is certain. In
addition, rents denominated in foreign currencies are converted to Canadian dollars based on exchange rates in effect at
the last day of the reporting period. Any other revenue changes from future contractual rent adjustments, renewal and
re-leasing activities or expansion and improvement projects to be completed are not reflected in ALP as at September 30,
2016. Granite considers ALP to be a useful indicator of rental revenue excluding tenant recoveries and straight-line
revenue adjustments anticipated in the upcoming 12 month period. ALP is also a measure that is used by analysts in
evaluating the outlook for real estate entities, as it provides a forward-looking estimate of such revenue using the
present trends and foreign exchange rates in effect at the last day of the reporting period. ALP is not reconciled to any
IFRS measure as it is an indicator of anticipated revenue excluding tenant recoveries and straight-line revenue and
therefore not comparable to any measure in the combined financial statements.
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(2)
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FFO is defined as net income attributable to stapled unitholders prior to
fair value gains (losses), gains (losses) on sale of investment properties, acquisition transaction costs, deferred income
taxes and certain other non-cash items, adjusted for non-controlling interests in such items. The Trust's
determination of FFO follows the definition prescribed by the Real Estate Property Association of Canada ("REALPAC") and is
a widely used measure by analysts and investors in evaluating the performance of real estate entities. Granite considers
FFO to be a meaningful supplemental measure that can be used to determine the Trust's ability to service debt, finance
capital expenditures and provide distributions to stapled unitholders. FFO is reconciled to net income, which is the
most directly comparable IFRS measure (see "Reconciliation of Funds from Operations to Net Income Attributable to
Stapled Unitholders"). FFO does not represent or approximate cash generated from operating activities determined
in accordance with IFRS and is not reconciled to cash flow from operating activities as the calculation of FFO does not
consider changes in working capital items or adjust for certain other non-cash items that are included in the determination
of cash flow from operating activities in accordance with IFRS.
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(3)
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At period end.
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GRANITE'S COMBINED FINANCIAL RESULTS
Three month period ended September 30, 2016
For the three month period ended September 30, 2016, rental revenue increased by $1.4 million
to $56.3 million from $54.9 million in the third quarter of 2015.
The increase in rental revenue was primarily due to the lease up of two recently developed properties in the United States.
Granite's net income in the third quarter of 2016 was $150.2 million compared to $47.1 million for the third quarter of 2015. Net income increased primarily due to the after tax impact of the
increase in the net fair value gains on investment properties. The increase in fair value gains on investment properties of
$119.7 million was primarily attributable to positive changes in leasing assumptions relating to
extensions or renewals and extensions associated with the 15 properties concluded with Magna as previously noted. The changes in
leasing assumptions generally resulted in a compression in discount and terminal capitalization rates for certain properties due to
the increased certainty and extension of contractual cash flows.
FFO for the third quarter of 2016 was $42.2 million compared to $39.8
million in the prior year period. The $2.4 million increase was primarily due to the increase
in rental revenue and reductions in general and administrative expenses and current income tax expense.
Nine month period ended September 30, 2016
For the nine month period ended September 30, 2016, rental revenue increased $7.7 million to
$169.1 million from $161.4 million in the prior year period primarily
due to the favourable impact of foreign exchange rates and the lease up of the developed properties in the United States, partially offset by the reduction in revenue from property disposals.
Granite's net income for the nine month period ended September 30, 2016 was $251.2 million
compared to $150.1 million in the prior year period. The increase of $101.1
million is primarily attributable to the after tax impact of the increase in net fair value gains on investment properties
and higher rental revenue explained above.
FFO for the nine month period ended September 30, 2016 was $123.5 million compared to
$118.9 million in the prior year period. The increase of $4.6 million
was primarily due to an increase in rental revenue, partially offset by higher current income tax expense due to a favourable
settlement of an income tax audit in 2015 and increased interest expense and property operating costs.
A more detailed discussion of Granite's combined financial results for the three and nine month periods ended September 30,
2016 and 2015 is contained in Granite's Management's Discussion and Analysis of Results of Operations and Financial Position and
the unaudited condensed combined financial statements for those periods and the notes thereto, which are available through the
internet on Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed
at www.sedar.com and on the United States Securities and
Exchange Commission's (the "SEC") Electronic Data Gathering, Analysis and Retrieval System ("EDGAR") which can be accessed at
www.sec.gov.
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET INCOME ATTRIBUTABLE TO STAPLED UNITHOLDERS
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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(in thousands, except per unit information)
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2016
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2015
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2016
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2015
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Net income attributable to stapled unitholders
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$150,293
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$47,710
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$249,897
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$148,169
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Add (deduct):
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Fair value gains on investment properties, net
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(134,967)
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(15,287)
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(169,715)
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(62,041)
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Fair value losses on financial instruments
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2,553
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1,258
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2,386
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1,498
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Loss on sale of investment properties
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1,070
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726
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2,444
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959
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Current income tax expense associated with the sale of investment
properties
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561
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351
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1,268
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701
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Deferred income tax expense
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22,984
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5,746
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36,449
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27,809
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Non-controlling interests relating to the above
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(316)
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(733)
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750
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1,775
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FFO
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$42,178
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$39,771
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$123,479
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$118,870
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Basic FFO per stapled unit
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$0.90
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$0.85
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$2.62
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$2.53
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Diluted FFO per stapled unit
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$0.90
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$0.84
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$2.62
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$2.52
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Basic number of stapled units outstanding
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47,073
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47,017
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47,057
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47,017
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Diluted number of stapled units outstanding
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47,083
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47,100
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47,066
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47,107
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CONFERENCE CALL
Granite will hold a conference call on Thursday, November 3, 2016 at 8:30
a.m. Eastern time. The number to use for this call is 1-800-676-1545. Overseas callers should use
+1-416-981-9080. Please call in at least 10 minutes prior to start time. The conference call will be chaired by
Michael Forsayeth, Chief Executive Officer. For anyone unable to listen to the scheduled call,
the rebroadcast numbers will be: North America – 1-800-558-5253 and Overseas - +1-416-626-4100
(enter reservation number 21819852) and will be available until Monday November 14, 2016.
ABOUT GRANITE
Granite is a Canadian-based REIT engaged in the ownership and management of predominantly industrial, warehouse and logistics
properties in North America and Europe. Granite owns
approximately 30 million square feet in over 90 rental income properties. Our tenant base currently includes Magna International
Inc. and its operating subsidiaries as our largest tenants, together with tenants from other industries.
For further information, please contact Michael Forsayeth, Chief Executive Officer, at
647-925-7600 or Ilias Konstantopoulos, Chief Financial Officer, at 647-925-7540.
OTHER INFORMATION
Additional property statistics as at September 30, 2016 have been posted to our website at http://www.granitereit.com/propertystatistics/view-property-statistics. Copies of financial data and other
publicly filed documents are available through the internet on SEDAR which can be accessed at www.sedar.com and on EDGAR which can be accessed at www.sec.gov.
FORWARD-LOOKING STATEMENTS
This press release may contain statements that, to the extent they are not recitations of historical fact, constitute
"forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation, including
the United States Securities Act of 1933, as amended, the United States Securities Exchange Act of 1934, as amended, and applicable
Canadian securities legislation. Forward-looking statements and forward-looking information may include, among others,
statements regarding Granite's future plans, goals, strategies, intentions, beliefs, estimates, costs, objectives, economic
performance, expectations, or foresight or the assumptions underlying any of the foregoing. Words such as "may", "would",
"could", "should", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate", "seek"
and similar expressions are used to identify forward-looking statements and forward-looking information. Forward-looking
statements and forward-looking information should not be read as guarantees of future events, performance or results and will not
necessarily be accurate indications of whether or the times at or by which such future performance will be achieved. Undue
reliance should not be placed on such statements. There can be no assurance that the expected increase in the monthly distribution,
the intended developments in Granite's relationships with its tenants, the expansion and diversification of Granite's real estate
portfolio, the expected cost of development and re-development projects and the expected sources of funding and increases in
leverage can be achieved in a timely manner, with the expected impact or at all. Forward-looking statements and forward-looking
information are based on information available at the time and/or management's good faith assumptions and analyses made in light of
Granite's perception of historical trends, current conditions and expected future developments, as well as other factors Granite
believes are appropriate in the circumstances, and are subject to known and unknown risks, uncertainties and other unpredictable
factors, many of which are beyond Granite's control, that could cause actual events or results to differ materially from such
forward-looking statements and forward-looking information. Important factors that could cause such differences include, but
are not limited to, the risk of changes to tax or other laws and treaties that may adversely affect Granite Real Estate Investment
Trust's mutual fund trust status under the Income Tax Act (Canada) or the effective tax
rate in other jurisdictions in which Granite operates; economic, market and competitive conditions and other risks that may
adversely affect Granite's ability to achieve desired developments in its relationships with its tenants, expand and diversify its
real estate portfolio and increase its leverage; and the risks set forth in the "Risk Factors" section in Granite's Annual
Information Form for 2015 dated March 2, 2016, filed on SEDAR at www.sedar.com and attached as Exhibit 1 to the Trust's Annual Report on Form 40-F for the year
ended December 31, 2015, filed with the SEC and available online on EDGAR at www.sec.gov, all of which investors are strongly advised to review.
The "Risk Factors" section also contains information about the material factors or assumptions underlying such forward-looking
statements and forward-looking information. Forward-looking statements and forward-looking information speak only as
of the date the statements and information were made and unless otherwise required by applicable securities laws, Granite expressly
disclaims any intention and undertakes no obligation to update or revise any forward-looking statements or forward-looking
information contained in this press release to reflect subsequent information, events or circumstances or otherwise.
SOURCE Granite Real Estate Investment Trust