TORONTO, May 11, 2018 /PRNewswire/ - 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, 2018.
''Over the past 12 months Granite has made significant strides
in the realignment, diversification and quality enhancement of its
real estate portfolio through the sale of approximately
$390 million of primarily
Magna-tenanted properties, the announced acquisitions of nine
warehouse and logistics income- producing properties for
approximately $545 million and the
repositioning of properties previously tenanted by Magna. While
more work needs to be done, we are pleased with our progress to
date as well as the results for the quarter,'' commented
Michael Forsayeth, Chief Executive
Officer.
HIGHLIGHTS
Highlights for the three month period ended March 31, 2018, including events subsequent to
the quarter, are set out below:
- Granite's revenue was $61.7
million in the first quarter of 2018 compared to
$60.8 million in the prior year
period;
- Funds from operations (''FFO'')(1) was $51.3 million ($1.11 per unit) in the first quarter of 2018
compared to $39.6 million
($0.84 per unit) in the first quarter
of 2017 and includes a $10.4 million
($0.23 per unit) foreign exchange
gain on US dollar cash proceeds from the sale of three special
purpose properties in January 2018
and a $1.0 million ($0.02 per unit) lease termination fee recognized
in revenue in the quarter;
- Adjusted funds from operations (''AFFO'')(2) was
$31.1 million ($0.67 per unit) in the first quarter of 2018
compared to $40.3 million
($0.86 per unit) in the first quarter
of 2017;
- On March 23, 2018, Granite
acquired a 0.6 million square foot property located in Plainfield, Indiana for consideration of
$50.8 million (US$ 39.3 million). On April 4, 2018, Granite acquired a 0.4 million
square foot property located in Greencastle, Pennsylvania for consideration of
$44.3 million (US$ 34.8 million). Each property is 100% occupied
and, together, they have a weighted average lease term of
approximately 9.5 years and were purchased at an in-going yield of
approximately 5.5%;
- On May 10, 2018, Granite agreed
to acquire a portfolio of four Class A, single tenanted buildings
totaling 3.8 million square feet on 78 acres of land near
Columbus, Ohio. The purchase price
of the portfolio is US$ 232.5 million
which represents an in-going stabilized yield of approximately
6.0%. The buildings are modern distribution facilities with an
average age of approximately 7 years;
- In January 2018, Granite sold 10
investment properties (including three special purpose properties)
located in Canada and the United States for gross proceeds of
approximately $388 million. The 10
properties represented approximately 3.3 million square feet of
Granite's property portfolio, were primarily Magna-tenanted and
contributed approximately $25.6
million in rental revenue in 2017;
- Granite entered into a new five-year unsecured revolving credit
facility in the amount of $500.0
million that matures on February 1,
2023;
- The Board of Trustees/Directors is well-advanced in its search
for Granite's new Chief Executive Officer; and
- Pursuant to the normal course issuer bid, Granite has
repurchased 1,036,141 stapled units for $51.1 million in the first quarter of 2018 and an
additional 197,318 units for $9.9
million subsequent to the quarter-end. As at May 11, 2018, a total of 1,474,493 units have
been repurchased for $73.0 million at
an average price of $49.50 per unit
since inception of the normal course issuer bid in May 2017. On May 11,
2018, the Board of Trustees/Directors approved the renewal
of the normal course issuer bid which will be subject to customary
regulatory approvals.
Financial, Operating and Property Highlights
|
|
Three Months
Ended
March 31,
|
(in millions,
except as noted)
|
|
2018
|
|
2017
|
Revenue(3)
|
|
$61.7
|
|
$60.8
|
Net income
|
|
$72.4
|
|
$30.3
|
Funds from operations
(''FFO'')(1)
|
|
$51.3
|
|
$39.6
|
Adjusted funds from
operations (''AFFO'')(2)
|
|
$31.1
|
|
$40.3
|
Basic and Diluted FFO
per stapled unit(1)
|
|
$1.11
|
|
$0.84
|
Basic and Diluted
AFFO per stapled unit(2)
|
|
$0.67
|
|
$0.86
|
|
|
|
|
|
As at March 31 and
December 31,
|
|
2018
|
|
2017
|
|
|
|
|
|
Fair value of
investment properties
|
|
$
|
2,916.1
|
|
$
|
2,733.6
|
Properties held for
sale
|
|
—
|
|
$
|
391.4
|
Cash and cash
equivalents
|
|
$
|
273.8
|
|
$
|
69.0
|
Total debt
|
|
$
|
745.7
|
|
$
|
741.4
|
Number of
income-producing properties(4)
|
|
85
|
|
84
|
Gross leasable area
(''GLA''), square feet(4)
|
|
29.7
|
|
29.1
|
Occupancy, by
GLA(4)
|
|
98.7%
|
|
98.4%
|
Weighted average
lease term, in years by square
footage(4)
|
|
6.0
|
|
5.9
|
GRANITE'S COMBINED FINANCIAL RESULTS
For the three month period ended March
31, 2018, revenue increased by $0.9
million to $61.7 million from
$60.8 million in the first quarter of
2017. The increase in revenue was primarily due to the
acquisitions, favourable foreign exchange rates and a lease
termination and close-out fee, partially offset by a decrease in
revenue from property disposals and vacancies.
Granite's net income in the first quarter of 2018 was
$72.4 million compared to
$30.3 million for the first quarter
of 2017. Net income increased by $42.1
million mainly from net fair value gains on investment
properties and foreign exchange gains, partially offset by an
increase in deferred tax expense associated with the higher net
fair value gains on investment properties.
FFO for the first quarter of 2018 was $51.3 million compared to $39.6 million in the prior year period. The$11.7
million increase in FFO was largely related to the significant
foreign exchange gain on US dollar cash proceeds from the sale of
three special purpose properties in January
2018.
AFFO for the first quarter of 2018 was $31.1 million compared to $40.3 million in the prior year period. The net
$9.2 million decrease in AFFO was
primarily due to payments made in connection with a tenant
incentive allowance and improvement capital expenditures,
partially offset by the
increase in FFO noted above.
A more detailed discussion of Granite's combined financial
results for the three month periods ended March 31, 2018 and 2017 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 Monday, May 14, 2018 at 8:30 a.m. Eastern time. The number to use for
this call is 1-800-954-0652. Overseas
callers should use +1-416-981-9029.
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 21887882) and the rebroadcast will be
available until Monday, May 28,
2018.
OTHER INFORMATION
Additional property statistics as at March 31, 2018 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 predominantly industrial,
warehouse and logistics properties in North America and Europe. Granite owns over 85 rental income
properties representing approximately 30 million square feet of
leasable area. Through the thoughtful deployment of its balance
sheet and selective dispositions, Granite is continuing to build a
high quality, globally diversified industrial real estate
business.
For further information, please contact Michael Forsayeth, Chief Executive Officer, at
647-925-7600 or Ilias
Konstantopoulos, Chief Financial Officer, at
647-925-7540.
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 find satisfactory
acquisition, joint venture and development opportunities and to
replace the revenue from recently sold properties; Granite's
ability to dispose of any non-core assets on satisfactory terms;
Granite's ability to meet its target occupancy goals; the
completion of Granite's search for a new Chief Executive Officer;
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 2017
dated March 1, 2018, 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, 2017 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.
_________________________________
|
Readers are cautioned
that certain terms used in this press release such as FFO, AFFO 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 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)
|
FFO is a 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 2018 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.
|
|
|
(2)
|
AFFO is a 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.
|
|
|
(3)
|
The Trust has
retrospectively applied IFRS 15, Revenue from Contracts with
Customers (see ''NEW ACCOUNTING PRONOUNCEMENTS AND
DEVELOPMENTS'' in Granite's MD&A).
|
|
|
(4)
|
Ten investment
properties located in Canada and the United States were classified
as assets held for sale on the combined financial statements at
December 31, 2017 and were subsequently sold in January 2018.
The property metrics at December 31, 2017
exclude these properties that were classified as assets held for
sale.
|
Reconciliation of
FFO and AFFO to Net Income Attributable to Stapled
Unitholders
|
|
|
Three Months
Ended
March 31,
|
(in millions,
except per unit amounts)
|
|
|
2018
|
|
2017
|
Net income
attributable to stapled unitholders
|
|
|
$
|
72.4
|
|
$30.3
|
Add
(deduct):
|
|
|
|
|
|
|
Fair value losses
(gains) on investment properties, net
|
|
|
(32.3)
|
|
7.3
|
|
Fair value losses on
financial instruments
|
|
|
1.9
|
|
0.7
|
|
Acquisition
transaction costs
|
|
|
0.2
|
|
—
|
|
Loss on sale of
investment properties
|
|
|
1.1
|
|
—
|
|
Deferred income tax
expense
|
|
|
8.0
|
|
1.3
|
FFO
|
[A]
|
|
$
|
51.3
|
|
$39.6
|
Add
(deduct):
|
|
|
|
|
|
|
Maintenance or
improvement capital expenditures paid
|
|
|
(8.8)
|
|
(0.6)
|
|
Leasing commissions
paid
|
|
|
(1.8)
|
|
(0.1)
|
|
Tenant incentives
paid
|
|
|
(9.1)
|
|
(0.1)
|
|
Tenant incentive
amortization
|
|
|
1.4
|
|
1.3
|
|
Straight-line rent
amortization
|
|
|
(1.9)
|
|
0.2
|
AFFO
|
[B]
|
|
$
|
31.1
|
|
$40.3
|
|
|
|
|
|
|
|
Basic and Diluted
FFO per stapled unit
|
[A]/[C]
|
|
$
|
1.11
|
|
$0.84
|
Basic and Diluted
AFFO per stapled unit
|
[B]/[C]
|
|
$
|
0.67
|
|
$0.86
|
Basic and Diluted
weighted average number of stapled units
|
[C]
|
|
46.3
|
|
47.1
|
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SOURCE Granite Real Estate Investment Trust