Granite Announces 2025 First Quarter Results
TORONTO--(BUSINESS WIRE)--May 07, 2025--
Granite Real Estate Investment Trust (TSX: GRT.UN; NYSE: GRP.U) ("Granite" or the "Trust") announced today its condensed consolidated combined results for the three month period ended March 31, 2025.
FIRST QUARTER 2025 HIGHLIGHTS
Highlights for the three month period ended March 31, 2025 are set out below:
Financial:
-- Granite's net operating income ("NOI") was $125.7 million in the first
quarter of 2025 compared to $114.5 million in the prior year period, an
increase of $11.2 million primarily as a result of contractual rent
adjustments and consumer price index based increases, renewal and
re-leasing activity, and the lease commencement of four completed
development and expansion projects in Canada, the United States and
Netherlands during 2024;
-- Same property NOI - cash basis(4) increased by 4.7% for the first quarter
of 2025, excluding the impact of foreign exchange;
-- Funds from operations ("FFO")(1) was $91.0 million ($1.46 per unit) in
the first quarter of 2025 compared to $82.4 million ($1.30 per unit) in
the first quarter of 2024;
-- Adjusted funds from operations ("AFFO")(2) was $88.4 million ($1.41 per
unit) in the first quarter of 2025 compared to $77.9 million ($1.22 per
unit) in the first quarter of 2024;
-- During the three month period ended March 31, 2025, the Canadian dollar
weakened against the Euro and the US dollar relative to the prior year
period. The impact of foreign exchange on FFO and AFFO for the three
month period ended March 31, 2025, relative to the same period in 2024,
was favourable by $0.07 per unit for each measure;
-- AFFO payout ratio(3) was 60% for the first quarter of 2025 compared to
67% in the first quarter of 2024;
-- Occupancy as at March 31, 2025 was 94.8%, with committed occupancy as at
May 7, 2025 also at 94.8%, a decrease of 10 basis points and 20 basis
points relative to December 31, 2024 and February 26, 2025, respectively;
-- Granite recognized $48.2 million in net fair value losses on investment
properties in the first quarter of 2025 mostly related to higher discount
rates across select properties in all regions. The value of investment
properties was increased by unrealized foreign exchange gains of $83.5
million in the first quarter of 2025 primarily resulting from the
relative weakening of the Canadian dollar against the Euro, partially
offset by the slight strengthening of the Canadian dollar against the US
dollar as at March 31, 2025; and
-- Granite's net income attributable to unitholders in the first quarter of
2025 was $43.9 million in comparison to $89.1 million in the prior year
period primarily due to an unfavourable change in the fair value
adjustment on investment properties of $60.9 million, partially offset by
an $11.2 million increase in net operating income as noted above, and a
$4.1 million decrease in income tax expense.
Operations:
-- During the first quarter of 2025, Granite achieved average rental rate
spreads of 10% over expiring rents representing approximately 736,000
square feet of new leases and renewals taking effect in the quarter; and
-- In April 2025, a subsidiary of Do it Best Corp. assumed True Value's
lease for Granite's property at 12 Tradeport Road in Hanover Township,
Pennsylvania for the remaining term of 15.9 years.
Financing:
-- During the first quarter of 2025, Granite repurchased 930,969 units under
the normal course issuer bid ("NCIB") at an average unit cost of $68.30
for total consideration of $63.6 million, excluding commissions and taxes
on net repurchases of units;
-- Subsequent to March 31, 2025, Granite repurchased 497,300 units under the
NCIB at an average unit cost of $63.42 for total consideration of $31.5
million, excluding commissions and taxes on net repurchases of units; and
-- On March 28, 2025, Granite amended its existing unsecured revolving
credit facility agreement to extend the maturity date by one year for a
new five-year term to March 31, 2030.
GRANITE'S FINANCIAL, OPERATING AND PROPERTY HIGHLIGHTS
Three Months Ended
March 31,
--------------------------
(in millions, except as noted) 2025 2024
---------------------------------------------- ------- -------
Revenue $ 154.7 $ 138.9
Net operating income ("NOI") $ 125.7 $ 114.5
Net income attributable to unitholders $ 43.9 $ 89.1
Funds from operations ("FFO")(1) $ 91.0 $ 82.4
Adjusted funds from operations ("AFFO")(2) $ 88.4 $ 77.9
Diluted FFO per unit(1) $ 1.46 $ 1.30
Diluted AFFO per unit(2) $ 1.41 $ 1.22
Monthly distributions paid per unit $ 0.85 $ 0.83
AFFO payout ratio(3) 60% 67%
As at March 31, 2025 and December 31, 2024 2025 2024
---------------------------------------------- ------- -------
Fair value of investment properties $9,441.2 $9,397.3
Cash and cash equivalents $ 123.1 $ 126.2
Total debt(5) $3,162.1 $3,087.8
Net leverage ratio(6) 32% 32%
Number of income-producing properties 138 138
Gross leasable area ("GLA"), square feet 63.3 63.3
Occupancy, by GLA 94.8% 94.9%
Committed occupancy, by GLA(9) 94.8% 95.0%
Magna as a percentage of annualized revenue(8) 27% 26%
Magna as a percentage of GLA 19% 19%
Weighted average lease term in years, by GLA 5.6 5.7
Overall capitalization rate(7) 5.4% 5.3%
---------------------------------------------- ------- -------
A more detailed discussion of Granite's condensed consolidated combined financial results for the three month periods ended March 31, 2025 and 2024 is contained in Granite's Management's Discussion and Analysis of Results of Operations and Financial Position ("MD&A") and the unaudited condensed consolidated combined financial statements for those periods and the notes thereto, which are available through the internet on the Canadian Securities Administrators' System for Electronic Data Analysis and Retrieval Plus ("SEDAR+") and can be accessed at www.sedarplus.ca 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.
2025 OUTLOOK
Granite is maintaining its 2025 guidance as presented on February 26, 2025. Granite's current outlook does not significantly change assumptions relating to new leasing of vacant space which continues to be projected primarily later in the second half of 2025 and also reflects year to date financing and NCIB activity. Granite's FFO per unit forecast represents an approximate 5% to 8% increase over 2024 and the AFFO per unit forecast represents a change of -1% to 2% over 2024 driven by higher maintenance capital expenditures relative to the prior year.
The high and low ranges of Granite's forecast are driven by foreign currency exchange rate assumptions for the nine-month forecast period between April and December, 2025, which have been modified relative to guidance provided on February 26, 2025, reflecting a recent weakening of the Canadian dollar relative to the Euro offset by the strengthening of the Canadian dollar against the U.S. dollar.
The table below outlines Granite's current forecast for the year ending December 31, 2025:
Measure Current Previously Published ----------------------------------------- ------------- -------------------- EUR:CAD exchange rate (1) 1.52 to 1.58 1.45 to 1.50 ----------------------------------------- ------------- -------------------- USD:CAD exchange rate (1) 1.37 to 1.42 1.40 to 1.45 ----------------------------------------- ------------- -------------------- FFO per unit no change $5.70 to $5.85 ----------------------------------------- ------------- -------------------- AFFO per unit no change $4.80 to $4.95 ----------------------------------------- ------------- -------------------- Maintenance capital expenditures, tenant allowances and leasing commissions impacting AFFO no change $40.0 million ----------------------------------------- ------------- -------------------- Constant currency same property NOI - no change 4.5% to 6.0% cash basis, four quarter average ----------------------------------------- ------------- -------------------- (1) Foreign exchange rate assumptions pertain to forecast period only of the respective outlook.
Granite's 2025 forecast assumes no acquisitions and dispositions, and assumes no favourable reversals of tax provisions relating to prior years which cannot be determined at this time. Non-GAAP performance measures are included in Granite's 2025 forecast above (see "NON-GAAP PERFORMANCE MEASURES"). See also "FORWARD-LOOKING STATEMENTS".
CONFERENCE CALL
Granite will hold a conference call and live audio webcast to discuss its financial results. The conference call will be chaired by Kevan Gorrie, President and Chief Executive Officer.
Date: Thursday, May 8, 2025 at 11:00 a.m. $(ET)$ North America Telephone: (Toll-Free): 1-800-549-8228 International (Toll): 1-289-819-1520 Conference ID/Passcode: 15227 Webcast: To access the live audio webcast in listen-only mode, please visit https://events.q4inc.com/attendee/860556702 or https://granitereit.com/events.
To hear a replay of the webcast, please visit https://granitereit.com/events. The replay will be available for 90 days.
ANNUAL GENERAL MEETING OF UNITHOLDERS
Granite's Annual General Meeting of Unitholders (the "Meeting") will take place on June 5, 2025 at 10:00 a.m. (ET) virtually by way of a live audio webcast. Unitholders can participate at the Meeting by joining the live audio webcast online at https://meetnow.global/MWDGPMW. Refer to the "Voting Information and General Proxy Matters" within Granite's Management Information Circular/Proxy Statement for detailed instructions on how to vote at the Meeting. The webcast of the Meeting will be archived on our website following the conclusion of the Meeting. Please refer to the Annual Meetings page at www.granitereit.com for additional details on the virtual Meeting.
OTHER INFORMATION
Additional property statistics as at March 31, 2025 have been posted to our website at https://granitereit.com/property-statistics-q1-2025. Copies of financial data and other publicly filed documents are available through the internet on SEDAR+, which can be accessed at www.sedarplus.ca 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 logistics, warehouse and industrial properties in North America and Europe. Granite owns 144 investment properties representing approximately 63.3 million square feet of gross leasable area.
For further information, please see our website at www.granitereit.com or contact Teresa Neto, Chief Financial Officer, at (647) 925-7560.
NON-GAAP PERFORMANCE MEASURES, RATIOS AND RECONCILIATIONS
Readers are cautioned that certain terms used in this press release such as FFO, AFFO, FFO payout ratio, AFFO payout ratio, same property NOI - cash basis, constant currency same property NOI - cash basis, total debt and net debt, 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 IFRS$(R)$ Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "GAAP") 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 Accounting Standards. Additionally, because these terms do not have a standardized meaning prescribed by IFRS Accounting Standards, they may not be comparable to similarly titled measures presented by other publicly traded entities.
(1) FFO is a non-GAAP 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
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,
foreign exchange gains (losses) on certain monetary items not forming
part of a net investment in a foreign operation, deferred income taxes,
corporate restructuring costs 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 Property Association
of Canada ("REALPAC") guidelines on Funds From Operations & Adjusted
Funds From Operations for IFRS Accounting Standards dated January 2022
("REALPAC Guidelines") except for the exclusion of corporate
restructuring costs. 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
unitholders. FFO is reconciled to net income, which is the most
directly comparable GAAP measure (see table below). FFO should not be
construed as an alternative to net income or cash flow provided by
operating activities determined in accordance with IFRS Accounting
Standards.
(2) AFFO is a non-GAAP 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 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 incurred 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
the REALPAC Guidelines except for the exclusion of corporate
restructuring costs as noted above. 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 unitholders
after considering costs associated with sustaining operating earnings.
AFFO is also reconciled to net income, which is the most directly
comparable GAAP measure (see table below). AFFO should not be construed
as an alternative to net income or cash flow provided by operating
activities determined in accordance with IFRS Accounting Standards.
Three Months Ended March 31,
--------------------------------------
(in millions,
except per unit
amounts) 2025 2024
------------------- ----------------- --- --------- ----------
Net income attributable to unitholders $ 43.9 $ 89.1
Add (deduct):
Fair value losses (gains) on
investment properties, net 48.2 (12.7)
Fair value (gains) losses on
financial instruments, net (0.1) 2.0
Deferred tax (recovery) expense (0.3) 3.8
Fair value remeasurement of the
Executive Deferred Unit Plan (0.3) 0.2
Fair value remeasurement of the
Directors Deferred Unit Plan (0.3) --
Corporate restructuring costs -- 0.2
Non-controlling interests relating
to the above (0.1) (0.2)
-------------------------------------- --- --------- ----------
FFO [A] $ 91.0 $ 82.4
Add (deduct):
Maintenance or improvement capital
expenditures incurred (0.4) (0.6)
Leasing costs (0.3) (0.2)
Tenant allowances -- (0.6)
Tenant incentive amortization -- 0.1
Straight-line rent amortization (1.9) (3.2)
Non-controlling
interests
relating to the
above -- --
------------------- ----------------- --- --------- ----------
AFFO [B] $ 88.4 $ 77.9
------------------- ----------------- --- --------- ----------
Basic and Diluted [A]/[C] and
FFO per unit [A]/[D] $ 1.46 $ 1.30
Basic AFFO per unit [B]/[C] $ 1.42 $ 1.23
Diluted AFFO per
unit [B]/[D] $ 1.41 $ 1.22
Basic weighted
average number of
units [C] 62.3 63.4
Diluted weighted
average number of
units [D] 62.5 63.6
------------------- ----------------- --- --------- ----------
(3) The FFO and AFFO payout ratios are calculated as monthly distributions,
which exclude special distributions, declared to unitholders divided by
FFO and AFFO (non-GAAP performance measures), respectively, in a
period. FFO payout ratio and AFFO payout ratio may exclude revenue or
expenses incurred during a period that can be a source of variance
between periods. The FFO payout ratio and AFFO payout ratio are
supplemental measures widely used by investors in evaluating the
sustainability of the Trust's monthly distributions to unitholders.
Three Months Ended March 31,
--------------------------------------
(in millions, except as
noted) 2025 2024
---------------------------- -------- -------- ---- -------- ----
Monthly distributions
declared to unitholders [A] $ 52.8 $ 52.3
FFO [B] 91.0 82.4
AFFO [C] 88.4 77.9
FFO payout ratio [A]/[B] 58% 63%
AFFO payout ratio [A]/[C] 60% 67%
---------------------------- -------- -------- --- -------- ---
(4) 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 development
properties 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
Sq ft(1) March 31,
---------------------------------------
%
(in millions) 2025 2024 $ change change
-------------- ------------- ----- ----- ---------- ---------
Revenue $154.7 $138.9 15.8
Less: Property
operating
costs 29.0 24.4 4.6
-------------- ------------- ----- ----- ------ ---------
NOI $125.7 $114.5 11.2 9.8%
Add (deduct):
Lease
termination
and close-out
fees (0.8) -- (0.8)
Straight-line
rent
amortization (1.9) (3.2) 1.3
Tenant
incentive
amortization -- 0.1 (0.1)
-------------- ------------- ----- ----- ------ ---------
NOI - cash
basis 63.3 $123.0 $111.4 11.6 10.4%
Less NOI -
cash basis
for:
Acquisitions -- -- -- --
Developments 0.5 (1.5) (0.2) (1.3)
Dispositions
and assets
held for sale -- -- -- --
-------------- ------------- ----- ----- ------ ---------
Same property
NOI - cash
basis 62.9 $121.5 $111.2 10.3 9.3%
-------------- ------------- ----- ----- ------ -----
Constant
currency same
property NOI
- cash
basis(2) 62.9 $121.5 $116.0 5.5 4.7%
-------------- ------------- ----- ----- ------ -----
(1) (The square footage relating to the NOI -- cash basis represents GLA of
63.3 million square feet as at March 31, 2025. The square footage
relating to the same property NOI -- cash basis represents the
aforementioned GLA excluding the impact from the acquisitions,
dispositions, assets held for sale and developments during the relevant
period.)
(2) (Constant currency same property NOI - cash basis is calculated by
converting the comparative same property NOI - cash basis at current
period average foreign exchange rates.)
(5) Total debt is calculated as the sum of all current and non-current
debt, the net mark to market fair value of derivatives and lease
obligations. Net debt subtracts cash and cash equivalents from total
debt. Granite believes that it is useful to include the derivatives and
lease obligations for the purposes of monitoring the Trust's debt
levels.
(6) The net leverage ratio is calculated as net debt (a non-GAAP
performance measure defined above) divided by the fair value of
investment properties (excluding assets held for sale). The net
leverage ratio is a non-GAAP ratio used in evaluating the Trust's
degree of financial leverage, borrowing capacity and the relative
strength of its balance sheet.
As at March 31, 2025 and December
31, 2024 2025 2024
------------------------------------ -------- ------- -------
Unsecured debt, net $3,092.1 $3,078.5
Derivatives, net 35.3 (25.1)
Lease obligations 34.7 34.4
---------------------------------------------- ------- -------
Total debt $3,162.1 $3,087.8
Less: cash and cash equivalents 123.1 126.2
---------------------------------------------- ------- -------
Net debt [A] $3,039.0 $2,961.6
------------------------------------ -------- ------- -------
Investment properties [B] $9,441.2 $9,397.3
------------------------------------ -------- ------- -------
Net leverage ratio [A]/[B] 32% 32%
------------------------------------ -------- ------- -------
(7) Overall capitalization rate is calculated as stabilized net operating
income (property revenue less property expenses) divided by the fair
value of the income-producing property.
(8) Annualized revenue for each period presented is calculated as the
contractual base rent for the month subsequent to the quarterly
reporting period multiplied by 12 months. Annualized revenue excludes
revenue from properties classified as assets held for sale.
(9) Committed occupancy as at May 7, 2025.
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 Granite's expectations regarding various matters, including the following, will be realized in a timely manner, with the expected impact or at all: the effectiveness of measures intended to mitigate such impact, and Granite's ability to deliver cash flow stability and growth and create long-term value for unitholders; Granite's ability to advance its ESG+R program and related targets and goals; the expansion and diversification of Granite's real estate portfolio and the reduction in Granite's exposure to Magna and the special purpose properties; Granite's ability to accelerate growth and to grow its net asset value, FFO and AFFO per unit, and constant currency same property NOI - cash basis; Granite's ability to execute on its strategic plan and its priorities in 2025; Granite's 2025 outlook for FFO per unit, AFFO per unit and constant currency same property NOI, including the anticipated impact of future foreign currency exchange rates on FFO and AFFO per unit and expectations regarding Granite's business strategy; fluctuations in foreign currency exchange rates and the effect on Granite's revenues, expenses, cash flows, assets and liabilities; Granite's ability to offset interest or realize interest savings relating to its term loans, debentures and cross currency interest rate swaps; Granite's ability to find and integrate satisfactory acquisition, joint venture and development opportunities and to strategically deploy the proceeds from recently sold properties and financing initiatives; Granite's intended use of available liquidity, its ability to obtain secured funding against its unencumbered assets and its expectations regarding the funding of its ongoing operations and future growth; any future offerings under Granite's base shelf prospectuses; obtaining site planning approval of a 0.7 million square foot distribution facility on the 34.0 acre site in Brantford, Ontario; obtaining site plan approval for the future phases of its development for up to 0.7 million square feet on the 68.7 acre site in Houston, Texas and up to 0.4 million square feet on the 30.8 acre site in Houston, Texas and the expected timing and potential yield from each project; the development of 12.9 acres of land in West Jefferson, Ohio and the potential yield from that project; the development of a 0.6 million square foot multi-phased business park on the remaining 36.0 acre parcel of land in Brantford, Ontario and the potential yield from that project; the development of a 0.2 million square foot modern distribution/logistics facility on the 10.1 acres of land in Brant
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