TORONTO, May 7, 2019 /CNW/
- 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 month
period ended March 31, 2019.
HIGHLIGHTS
Highlights for the three month period ended March 31, 2019,
including events subsequent to the quarter, are set
out below:
- Granite's net operating income ("NOI")(1) was
$55.2 million in the first
quarter of 2019 compared to $53.8 million in the prior year period. Same
property NOI — cash basis(2) increased by 4.8% for
the three month period ended March 31, 2019, excluding the
impact of foreign exchange;
- Funds from operations ("FFO")(3) was $40.7 million ($0.89 per unit) in the first quarter of 2019
compared to $51.3 million
($1.11 per unit) in the first quarter
of 2018;
- Adjusted funds from operations ("AFFO")(4) was
$39.3 million ($0.86 per unit) in the first quarter of 2019
compared to $31.1 million
($0.67 per unit) in the first quarter
of 2018;
- On March 1, 2019, Granite acquired two fully leased
properties near Dallas, TX with a
weighted average lease term of 9.7 years for total
consideration of $164.2 million
(US$123.7 million) at an
in‑going yield of 6.2%. On April 9, 2019, Granite acquired the
leasehold interest in two income‑producing properties located in
Mississauga, Ontario for total
consideration of $154.0 million.
The properties were acquired at an in‑going yield of 4.5%, which is
expected to be significantly enhanced by rental growth and future
expansion. The properties are located adjacent to Toronto Pearson
International Airport and are fully leased to creditworthy tenants
with a weighted average lease term of 8.7 years;
- Granite sold six properties during the quarter for total
consideration of $43.8 million,
which comprised a parcel of vacant land in Brampton, ON, a 0.1 million
square foot property located in Richmond Hill, ON and four Magna‑tenanted
properties comprising 0.6 million square feet in
Iowa,
United States; and
- On April 30, 2019, Granite completed an offering of
3,260,000 stapled units at a price of $61.50 per unit for gross proceeds of
approximately $200.5 million. On
April 26, 2019, the syndicate of underwriters elected,
pursuant to the terms of the underwriting agreement in respect of
the offering, to exercise its over‑allotment option in full,
resulting in the issuance of an additional 489,000 stapled
units on April 30, 2019 for additional gross proceeds of
$30.1 million. The aggregate
gross proceeds raised pursuant to the offering, including the
exercise of the over‑allotment option (the "Offering"), were
$230.6 million. The net proceeds
received by Granite after deducting the underwriters' fees and the
estimated expenses of the Offering were approximately $220.5 million. Subsequent to the Offering
and as at May 7, 2019, Granite had 49,443,103 stapled units
issued and outstanding.
Granite intends to use the net proceeds of the Offering (i) to
partially fund the potential acquisition of two properties in
Columbus, Ohio and Calgary, Alberta for total expected costs of
$126.3 million (post‑development
of the Calgary property),
(ii) to fund approximately $32 million of development
costs associated with the Indiana
development project and (iii) for general
trust purposes.
GRANITE'S FINANCIAL, OPERATING AND PROPERTY
HIGHLIGHTS
|
Three Months
Ended
March 31,
|
(in millions,
except as noted)
|
2019
|
2018
|
Net operating income
("NOI")(1)
|
$55.2
|
$53.8
|
Net income
attributable to stapled unitholders
|
$78.3
|
$72.4
|
Funds from operations
("FFO")(3)
|
$40.7
|
$51.3
|
Adjusted funds from
operations ("AFFO")(4)
|
$39.3
|
$31.1
|
Diluted FFO per
stapled unit(3)
|
$0.89
|
$1.11
|
Diluted AFFO per
stapled unit(4).
|
$0.86
|
$0.67
|
Monthly distributions
paid per stapled unit
|
$0.70
|
$0.68
|
Special distribution
paid per stapled unit
|
$0.30
|
—
|
|
|
|
As at
March 31 and December 31,
|
2019
|
2018
|
Fair value of
investment properties
|
$3,532.8
|
$3,425.0
|
Assets held for
sale
|
$38.7
|
$44.2
|
Cash and cash
equivalents
|
$501.0
|
$658.2
|
Total debt
|
$1,261.6
|
$1,303.2
|
Net leverage
ratio(5)
|
22%
|
19%
|
Number of
income‑producing properties
|
77
|
80
|
Gross leasable area
("GLA"), square feet
|
32.8
|
32.2
|
Occupancy, by
GLA
|
98.8%
|
99.1%
|
Magna as a percentage
of annualized revenue
|
51%
|
54%
|
Magna as a percentage
of GLA
|
43%
|
47%
|
Weighted average
lease term, in years by GLA
|
6.1
|
6.0
|
Overall
capitalization rate(6)
|
6.5%
|
6.7%
|
A more detailed discussion of Granite's combined financial
results for the three month periods ended March 31, 2019 and
2018 is contained in Granite's Management's Discussion and Analysis
of Results of Operations and Financial Position ("MD&A") and
the unaudited condensed combined financial statements for those
periods and the notes thereto, which are available through the
internet on the 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.
CONFERENCE CALL
Granite will hold a conference call on Wednesday, May 8,
2019 at 2:00 p.m. (ET). The toll free number to use for this
call is 1 (800) 909 7944. For international callers, please
use 1 (416) 981 9011. Please dial in at least 10 minutes
prior to the commencement of the call. The conference call will be
chaired by Kevan Gorrie, President
and Chief Executive Officer. To hear a replay of the scheduled
call, please dial 1 (800) 558 5253 (North America) or 1 (416) 626 4100
(International) and enter reservation number 21922544. The
replay will be available until Monday, May 20, 2019.
OTHER INFORMATION
Additional property statistics as at March 31, 2019 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.
Granite is a Canadian‑based REIT engaged in the acquisition,
development, ownership and management of industrial, warehouse and
logistics properties in North
America and Europe. Granite
owns over 80 investment properties representing approximately
34 million square feet of leasable area.
For further information, please see our website
at www.granitereit.com or contact Ilias Konstantopoulos, Chief Financial Officer,
at (647) 925 7540.
NON‑IFRS MEASURES
Readers are cautioned that certain terms used in this press
release such as FFO, AFFO, same property NOI — cash basis, net
leverage ratio 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 provided by operating activities or any other
measure 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.
(1)
|
NOI is calculated in
accordance with IFRS and is included in the unaudited condensed
combined financial statements as at and for the three month period
ended March 31, 2019. In the prior year period, Granite
reported NOI as a non‑IFRS financial measure, calculated as set
forth below but excluding lease termination and close‑out fee
revenue. NOI for the quarter ended March 31, 2018 was
previously reported as $52.8 million.
|
|
|
(2)
|
Same property
NOI — cash basis refers to the NOI — cash basis
(NOI excluding lease termination and close‑out fees, and the
non‑cash impact from straight‑line rent and tenant incentive
amortization) for those properties owned by Granite throughout the
entire current and prior year periods under comparison. Same
property NOI — cash basis excludes properties that were
acquired, disposed of, classified as properties under or held for
development or assets held for sale during the periods under
comparison. Granite believes that same property NOI — cash
basis is a useful supplementary measure in understanding
period‑over‑period organic changes in NOI — cash basis from
the same stock of properties owned.
|
|
Three
Months Ended
March 31,
|
|
2019
|
2018
|
Revenue
|
$63.4
|
$61.7
|
Less: Property
operating costs
|
(8.2)
|
(7.9)
|
NOI
|
$55.2
|
$53.8
|
Add
(deduct):
|
|
|
Lease termination and
close‑out fees
|
(0.3)
|
(1.0)
|
Straight‑line rent
amortization
|
(1.1)
|
(1.9)
|
Tenant incentive
amortization
|
1.3
|
1.4
|
NOI — cash
basis
|
$55.1
|
$52.3
|
Less NOI — cash
basis for:
|
|
|
Acquisitions
|
(8.9)
|
(0.1)
|
Dispositions, assets
held for sale and developments
|
(1.1)
|
(8.8)
|
Same property
NOI — cash basis
|
$45.1
|
$43.4
|
(3)
|
FFO is a non‑IFRS
performance measure that is widely used by the real estate industry
in evaluating the operating performance of real estate entities.
Granite calculates FFO as net income attributable to stapled
unitholders excluding fair value gains (losses) on investment
properties and financial instruments, gains (losses) on sale of
investment properties including the associated current income tax,
acquisition transaction costs, deferred income taxes and certain
other items, net of 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") White
Paper on Funds From Operations & Adjusted Funds From
Operations for IFRS dated February 2019 and as subsequently
amended ("White Paper"). Granite considers FFO to be a meaningful
supplemental measure that can be used to determine the Trust's
ability to service debt, fund capital expenditures and provide
distributions to stapled unitholders. FFO is reconciled to net
income, which is the most directly comparable IFRS measure
(see below). FFO should not be construed as an alternative to
net income or cash flow generated from operating activities
determined in accordance with IFRS.
|
|
|
(4)
|
AFFO is a non‑IFRS
performance measure that is widely used by the real estate industry
in evaluating the recurring economic earnings performance of real
estate entities after considering certain costs associated with
sustaining such earnings. Granite calculates AFFO as net income
attributable to stapled unitholders including all adjustments used
to calculate FFO and further adjusts for actual maintenance capital
expenditures that are required to sustain Granite's productive
capacity, leasing costs such as leasing commissions and tenant
allowances paid, tenant improvements and non‑cash straight‑line
rent and tenant incentive amortization, net of non‑controlling
interests in such items. The Trust's determination of AFFO follows
the definition prescribed by REALPAC's White Paper. Granite
considers AFFO to be a meaningful supplemental measure that can be
used to determine the Trust's ability to service debt, fund
expansion capital expenditures, fund property development and
provide distributions to stapled unitholders after considering
costs associated with sustaining operating earnings. AFFO is also
reconciled to net income, which is the most directly comparable
IFRS measure (see below). AFFO should not be construed as an
alternative to net income or cash flow generated from operating
activities determined in accordance with IFRS.
|
|
|
Three Months Ended
March 31,
|
(in millions,
except per unit amounts)
|
|
2019
|
2018
|
Net income
attributable to stapled unitholders
|
|
$78.3
|
$72.4
|
Add
(deduct):
|
|
|
|
Fair value gains on
investment properties, net
|
|
(50.5)
|
(32.3)
|
Fair value losses on
financial instruments
|
|
0.1
|
1.9
|
Acquisition
transaction costs
|
|
0.4
|
0.2
|
Loss on sale of
investment properties
|
|
0.7
|
1.1
|
Deferred income tax
expense
|
|
10.9
|
8.0
|
Fair value
remeasurement expense relating to the Executive Deferred Stapled
Unit Plan(7)
|
|
0.7
|
—
|
Non‑controlling
interests relating to the above
|
|
0.1
|
—
|
FFO(3)
|
[A]
|
$40.7
|
$51.3
|
Add
(deduct):
|
|
|
|
Maintenance or
improvement capital expenditures paid
|
|
(1.2)
|
(8.8)
|
Leasing commissions
paid
|
|
(0.2)
|
(1.8)
|
Tenant incentives
paid
|
|
(0.2)
|
(9.1)
|
Tenant incentive
amortization
|
|
1.3
|
1.4
|
Straight‑line rent
amortization
|
|
(1.1)
|
(1.9)
|
AFFO(4)
|
[B]
|
$39.3
|
$31.1
|
Basic and Diluted
FFO per stapled unit
|
[A]/[C]
|
$0.89
|
$1.11
|
Basic and Diluted
AFFO per stapled unit
|
[B]/[C]
|
$0.86
|
$0.67
|
Basic and Diluted
weighted average number of stapled units
|
[C]
|
45.7
|
46.3
|
|
|
(5)
|
The net leverage
ratio is calculated as the net debt (carrying value of total debt
less cash and cash equivalents) divided by the fair value of
investment properties. The net leverage ratio is a supplemental
measure used in evaluating the Trust's degree of financial
leverage, borrowing capacity and the relative strength of its
balance sheet.
|
|
|
(6)
|
Overall
capitalization rate is calculated as stabilized net operating
income (property revenue less property expenses) divided by the
fair value of the property.
|
|
|
(7)
|
The Executive
Deferred Stapled Unit Plan provides equity‑based compensation in
the form of stapled units to executives and other employees. It is
anticipated that the fair value remeasurement relating to the
Executive Deferred Stapled Unit Plan will fluctuate and have a
greater impact on FFO and AFFO going forward and has, therefore,
been adjusted in FFO and AFFO in accordance with the REALPAC White
Paper. The comparative amount was not adjusted as it was not
significant in the prior year period and the
year 2018.
|
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,
capital structure, cost of capital, tenant base, tax consequences,
economic performance or expectations, or the assumptions underlying
any of the foregoing. Words such as "outlook", "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 also be no
assurance that: the expansion and diversification of Granite's real
estate portfolio and the reduction in Granite's exposure to Magna
and the special purpose properties; the ability of Granite to
accelerate growth and to grow its net asset value and FFO and AFFO
per unit; the ability of Granite to find satisfactory acquisition,
joint venture and development opportunities and to strategically
redeploy the proceeds from recently sold properties and financing
initiatives; Granite's intended use of the net proceeds of the
Offering to fund potential acquisitions and for the other purposes
described previously; the potential for expansion and rental growth
at the properties in Mississauga,
Ontario; the expected enhancement to the yield of such
properties from such potential expansion and rental growth;
Granite's ability to dispose of any non‑core assets on satisfactory
terms; Granite's ability to meet its target occupancy goals; and
the expected amount of any distributions, 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 expand and diversify its real estate portfolio
and dispose of any non‑core assets on satisfactory terms; and the
risks set forth in the "Risk Factors" section in Granite's Annual
Information Form for 2018 dated March 6, 2019, 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, 2018 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.
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SOURCE Granite Real Estate Investment Trust