Tuesday 16th August 2022

Granite Announces 2021 Third Quarter Results, $260 Million of New Acquisitions and

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TORONTO–()–Granite Real Estate Investment Trust and Granite REIT Inc. (TSX: GRT.UN; NYSE: GRP.U) (“Granite” or the “Trust”) announced today its combined results for the three and nine month periods ended September 30, 2021 and also announced $260 million of committed/completed acquisitions in the United States and Netherlands, as well as a distribution increase of 3.3% effective with the December 2021 distribution.

THIRD QUARTER 2021 HIGHLIGHTS

Highlights for the three month period ended September 30, 2021, including events subsequent to the quarter, are set out below:

Financial:

  • Granite’s net operating income (“NOI”) was $84.5 million in the third quarter of 2021 compared to $76.5 million in the prior year period, an increase of $8.0 million primarily as a result of acquisition activity beginning in the third quarter of 2020;
  • Same property NOI — cash basis(4) increased by 5.0% for the three month period ended September 30, 2021, excluding the impact of foreign exchange;
  • Funds from operations (“FFO”)(1) was $65.2 million ($0.99 per unit) in the third quarter of 2021 compared to $55.5 million ($0.96 per unit) in the third quarter of 2020;
  • Adjusted funds from operations (“AFFO”)(2) was $61.2 million ($0.93 per unit) in the third quarter of 2021 compared to $52.7 million ($0.91 per unit) in the third quarter of 2020;
  • AFFO payout ratio(3) was 81% for the third quarter of 2021 compared to 80% in the third quarter of 2020;
  • Granite recognized $432.2 million in net fair value gains on investment properties in the third quarter of 2021 which were attributable to various factors including fair market rent increases as well as compression in discount and terminal capitalization rates for properties located in the GTA, across the United States and Europe. The value of investment properties was further increased by unrealized foreign exchange gains of $68.9 million resulting from the relative weakening of the Canadian dollar against the US dollar as at September 30, 2021 versus June 30, 2021;
  • Granite’s net income attributable to stapled unitholders increased to $421.8 million in the third quarter of 2021 from $105.2 million in the prior year period primarily due to a $370.1 million increase in net fair value gains on investment properties and a $8.0 million increase in net operating income as noted above, partially offset by a $61.3 million increase in deferred and current income tax expense; and
  • On November 3, 2021, the Trust increased its targeted annualized distribution by 3.3% to $3.10 ($0.2583 cents per month) per stapled unit from $3.00 ($0.2500 cents per month) per stapled unit to be effective upon the declaration of the distribution in respect of the month of December 2021 and payable in mid-January 2022.

Investments:

During the quarter, Granite closed the following previously announced acquisitions:

  • On August 16, 2021, Granite completed the acquisition of a 92.2 acre parcel of land in Brantford, Ontario for the development of a multi-phased business park comprising a total of approximately 1.7 million square feet of modern distribution and logistics space for $62.2 million. The greenfield site is serviced and capable of accommodating state-of-the-art buildings ranging from 100,000 square feet to 500,000 square feet with the first phase of construction anticipated to commence in the third quarter of 2022. The site is centrally located 0.5 kilometers from Highway 403, in one of Brantford’s rapidly evolving distribution nodes, providing access to nearly 9 million people within a 90-minute drive;
  • On September 3, 2021, Granite completed the acquisition of a portfolio of four modern distribution warehouses located in Chicago, Cincinnati and Memphis (the “US Portfolio”), collectively totaling 2.4 million square feet. The properties were acquired at a combined purchase price of approximately $243.7 million (US$195.0 million) representing an in-going yield of 4.7%. The properties are 100% leased to seven prominent tenants for a weighted average remaining lease term of 3.2 years. These institutional-quality assets have minimum 32’ clear heights with an average age of 8 years. All of the assets are well located in their respective markets, with close proximity to key transportation and distribution infrastructure;
  • On September 7, 2021, Granite completed the acquisition of a 0.1 million square foot modern distribution facility located in the Chicago submarket of Joliet, IL for $20.7 million (US$16.4 million). The property is 100% leased to two tenants for a weighted average remaining lease term of 4.4 years and is being acquired at an in-going yield of 4.9%. Located in immediate proximity to Granite’s three recently acquired assets in Chicago, the building features 32’ clear height and is situated on 8 acres of land, near the intersection of the I-55 and I-80; and
  • On September 8, 2021, Granite acquired on a forward funding basis a portfolio of three modern distribution facilities totaling 0.5 million square feet to be constructed on 39.0 acres in the Nashville suburb of Lebanon, Tennessee for $6.5 million (US$5.2 million). Currently in early-stage development, the properties are expected to be completed in Q4 2022 at a total fixed cost, including land, of $83.9 million (US$66.2 million). These state-of-the-art facilities will have modern features including 32’ clear height, LED lighting and other sustainable design features. The properties have direct access to Highway 109, and are located 19 miles from Nashville International Airport and 24 miles from downtown Nashville. The properties are expected to achieve a stabilized development yield of 5.3%.

In addition to the above, during the quarter, Granite committed to and/or completed the following new acquisitions:

  • On September 1, 2021, Granite entered into a purchase and sale agreement to acquire two modern industrial properties in Indiana upon completion for $98.2 million (US$77.5 million) plus estimated leasing costs and sustainability features of $8.6 million (US$6.8 million), subject to customary closing conditions. The properties are located in close proximity to significant distribution infrastructure with access to major highways/ thoroughfares providing regional and national connectivity. During the development period, Granite will finance the development by means of a loan to the developer that has a maximum draw amount of $69.7 million (US$55.0 million). Due upon completion of the development which is expected to be in late 2022, the loan is secured by the properties under construction and related land;
  • On September 17, 2021, Granite acquired Sophialaan 5, a 0.2 million square foot logistics complex situated on 10.1 acres in Utrecht, Netherlands for $42.1 million (€28.2 million). The property is 60% leased with below-market rents to 18 tenants for a weighted average lease term of 2.0 years. Strategically located in Utrecht, one of the most central logistics markets in the Netherlands, the property is adjacent to the A2 motorway and in close proximity to the A12 and A27 motorways, which connect to the Belgian and German borders. The property is being acquired at an in-going yield of approximately 2.3%. Upon stabilization, the property is expected to generate a yield of approximately 4.5%. The site’s premier location within the Netherlands also provides for future re-development potential; and
  • On September 17, 2021, Granite signed a commitment to purchase an approximate 495,000 square foot modern distribution centre in Tilburg, Netherlands once completed in the third quarter of 2022 for $111.1 million (€75.7 million), subject to customary closing conditions. The property is 100% leased for 10 years to a prominent European supplier of domestic appliances and is located within Business Park Kraaiven, a main logistics hub within the Netherlands and one kilometer from Granite’s De Kroonstraat 1 asset acquired in 2020.

Each of the above-noted development properties are expected to receive a green building certification and to meet the criteria of an Eligible Green Project (as described in the Granite Green Bond Framework, which is available on Granite’s website).

Operations:

  • As at September 30, 2021, two income producing properties and one parcel of land held for development located in Poland and Austria were classified as assets held for sale with a combined fair value of $43.2 million. Granite expects to…

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