Granite Announces 2024 First Quarter Results
Granite Real Estate Investment Trust and Granite REIT Inc. announced their combined results for the first quarter of 2024. Financial highlights include a net operating income increase, FFO and AFFO growth, net income rise, and fair value gains. Developments and operations also showed positive outcomes, with a lease signed and rental rate spreads achieved. Financing-wise, Granite extended its credit facility agreement. The 2024 outlook maintains FFO per unit but adjusts AFFO per unit due to increased capital expenditures.
Net operating income increased by $7.1 million in Q1 2024.
FFO rose to $82.4 million in Q1 2024 compared to $79.6 million in Q1 2023.
AFFO increased to $77.9 million in Q1 2024 compared to $75.1 million in Q1 2023.
Granite recognized $12.7 million in net fair value gains on investment properties in Q1 2024.
Granite's net income in Q1 2024 was $89.1 million compared to $9.8 million in Q1 2023.
During Q1 2024, Granite signed a lease for 124,500 square feet in Lebanon, Tennessee.
Granite achieved average rental rate spreads of 10% in Q1 2024.
Granite extended its unsecured revolving credit facility agreement to March 31, 2029.
AFFO payout ratio slightly decreased to 67% in Q1 2024 compared to 68% in Q1 2023.
AFFO per unit forecast range was adjusted downward by $0.05 for 2024.
AFFO-related capital expenditures are estimated to increase by approximately $3.0 million for fiscal year 2024.
Insights
FIRST QUARTER 2024 HIGHLIGHTS
Highlights for the three month period ended March 31, 2024 are set out below:
Financial:
-
Granite's net operating income ("NOI") was
$114.5 million $107.4 million $7.1 million -
Same property NOI - cash basis(4) increased by
4.9% for the first quarter of 2024, excluding the impact of foreign exchange; -
Funds from operations ("FFO")(1) was
$82.4 million $1.30 $79.6 million $1.25 -
Adjusted funds from operations ("AFFO")(2) was
$77.9 million $1.22 $75.1 million $1.18 - During the three month period ended March 31, 2024, the Canadian dollar weakened and strengthened slightly against the Euro and the US dollar, respectively, relative to the prior year period. There was no impact of foreign exchange on FFO and AFFO on a per unit basis for the three month period ended March 31, 2024;
-
AFFO payout ratio(3) was
67% for the first quarter of 2024 compared to68% in the first quarter of 2023; -
Occupancy as at March 31, 2024 was
95.0% and committed occupancy as at May 8, 2024 is95.4% ; -
Granite recognized
$12.7 million Brantford, Canada , which was completed and transferred to income-producing properties during the first quarter of 2024, partially offset by the expansion in discount and terminal capitalization rates across selective Granite assets largely due to market conditions. The value of investment properties was further increased by unrealized foreign exchange gains of$117.2 million -
Granite's net income in the first quarter of 2024 was
$89.1 million $9.8 million $85.7 million $7.1 million $16.3 million
Developments:
-
During the first quarter of 2024, Granite signed a lease for 124,500 square feet of one of its recently developed properties in
Lebanon, Tennessee , commencing in June 2024 for a 5.3 year term.
Operations:
-
During the first quarter of 2024, Granite achieved average rental rate spreads of
10% over expiring rents representing approximately 6,394,000 square feet of new leases and renewals completed in the quarter. -
Subsequent to the first quarter of 2024, Granite signed a lease for 148,144 square feet at one of its properties in
Houston, Texas , commencing in May 2024 for a 3.3 year term.
Financing:
- On March 27, 2024, Granite amended its existing unsecured revolving credit facility agreement to extend the maturity date for a new five-year term to March 31, 2029.
GRANITE’S FINANCIAL, OPERATING AND PROPERTY HIGHLIGHTS
(in millions, except as noted) |
|
|
||
For the three months ended March 31, |
|
2024 |
|
2023 |
|
|
|
||
Revenue |
$ |
138.9 |
$ |
129.6 |
Net operating income ("NOI") |
$ |
114.5 |
$ |
107.4 |
Net income attributable to stapled unitholders |
$ |
89.1 |
$ |
9.8 |
Funds from operations ("FFO")(1) |
$ |
82.4 |
$ |
79.6 |
Adjusted funds from operations ("AFFO")(2) |
$ |
77.9 |
$ |
75.1 |
Diluted FFO per stapled unit(1) |
$ |
1.30 |
$ |
1.25 |
Diluted AFFO per stapled unit(2) |
$ |
1.22 |
$ |
1.18 |
Monthly distributions paid per stapled unit |
$ |
0.83 |
$ |
0.80 |
AFFO payout ratio(3) |
|
67 % |
|
68 % |
|
|
|
||
As at March 31, 2024 and December 31, 2023 |
|
2024 |
|
2023 |
Fair value of investment properties |
$ |
8,952.4 |
$ |
8,808.1 |
Cash and cash equivalents |
$ |
139.9 |
$ |
116.1 |
Total debt(5) |
$ |
3,034.5 |
$ |
2,998.4 |
Net leverage ratio(6) |
|
32 % |
|
33 % |
Number of income-producing properties |
|
138 |
|
137 |
Gross leasable area (“GLA”), square feet |
|
63.3 |
|
62.9 |
Occupancy, by GLA |
|
95.0 % |
|
95.0 % |
Committed occupancy, by GLA(9) |
|
95.4 % |
NA |
|
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 |
|
6.1 |
|
6.2 |
Overall capitalization rate(7) |
|
5.3 % |
|
5.2 % |
A more detailed discussion of Granite’s combined financial results for the three month periods ended March 31, 2024 and 2023 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 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.
2024 OUTLOOK
For 2024 outlook, Granite’s forecast for FFO per unit remains unchanged from the outlook Granite provided on February 28, 2024, which is estimated to be within a range of
Non-IFRS measures are included in Granite’s 2024 forecasts above (see “NON-IFRS 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 9, 2024 at 11:00 a.m. (ET) |
|
Telephone: |
|
|
International (Toll): 1-785-424-1699 |
||
Conference ID/Passcode: |
REIT |
|
Webcast: |
To access the live audio webcast in listen-only mode, please visit https://events.q4inc.com/attendee/751825028 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 AND SPECIAL MEETINGS OF UNITHOLDERS
Granite’s Annual and Special Meetings of Unitholders (the "Meetings") will take place on June 6, 2024 at 10:00 a.m. (ET) virtually by way of a live audio webcast. Unitholders can participate at the Meetings by joining the live audio webcast online at https://meetnow.global/MR6Z6J9. 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 Meetings. The webcast of the Meetings will be archived on our website following the Meetings. Please refer to the Annual Meetings Page at www.granitereit.com for additional details on the virtual Meetings.
OTHER INFORMATION
Additional property statistics as at March 31, 2024 have been posted to our website at https://granitereit.com/property-statistics-q1-2024. 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
For further information, please see our website at www.granitereit.com or contact Teresa Neto, Chief Financial Officer, at (647) 925-7560.
NON-IFRS 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 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) 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, 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 Estate Property Association of
(2) 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 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 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 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.
|
|
Three Months Ended March 31, |
|||||
(in millions, except per unit amounts) |
|
|
2024 |
|
|
2023 |
|
Net income attributable to stapled unitholders |
|
$ |
89.1 |
|
$ |
9.8 |
|
Add (deduct): |
|
|
|
||||
Fair value (gains) losses on investment properties, net |
|
|
(12.7 |
) |
|
73.0 |
|
Fair value losses on financial instruments, net |
|
|
2.0 |
|
|
0.5 |
|
Loss on sale of investment properties |
|
|
— |
|
|
0.6 |
|
Deferred tax expense (recovery) |
|
|
3.8 |
|
|
(12.3 |
) |
Fair value remeasurement of the Executive Deferred Stapled Unit Plan |
|
|
0.2 |
|
|
4.6 |
|
Fair value remeasurement of the Directors Deferred Stapled Unit Plan |
|
|
— |
|
|
1.3 |
|
Corporate restructuring costs(1) |
|
|
0.2 |
|
|
— |
|
Non-controlling interests relating to the above |
|
|
(0.2 |
) |
|
2.1 |
|
FFO |
[A] |
$ |
82.4 |
|
$ |
79.6 |
|
Add (deduct): |
|
|
|
||||
Maintenance or improvement capital expenditures incurred |
|
|
(0.6 |
) |
|
(0.1 |
) |
Leasing costs |
|
|
(0.2 |
) |
|
(0.4 |
) |
Tenant allowances |
|
|
(0.6 |
) |
|
(0.6 |
) |
Tenant incentive amortization |
|
|
0.1 |
|
|
1.1 |
|
Straight-line rent amortization |
|
|
(3.2 |
) |
|
(4.6 |
) |
Non-controlling interests relating to the above |
|
|
— |
|
|
0.1 |
|
AFFO |
[B] |
$ |
77.9 |
|
$ |
75.1 |
|
Basic and Diluted FFO per stapled unit |
[A]/[C] and [A]/[D] |
$ |
1.30 |
|
$ |
1.25 |
|
Basic AFFO per stapled unit |
[B]/[C] |
$ |
1.23 |
|
$ |
1.18 |
|
Diluted AFFO per stapled unit |
[B]/[D] |
$ |
1.22 |
|
$ |
1.18 |
|
Basic weighted average number of stapled units |
[C] |
|
63.4 |
|
|
63.7 |
|
Diluted weighted average number of stapled units |
[D] |
|
63.6 |
|
|
63.9 |
|
(1) Effective January 1, 2024, Granite amended its definition of Funds From Operations (FFO) to exclude corporate restructuring costs associated with the uncoupling of the Trust’s stapled unit structure (refer to “NON-IFRS PERFORMANCE MEASURES”). See also “SIGNIFICANT MATTERS - SUBSEQUENT EVENTS - STAPLED UNIT STRUCTURE”. Granite views these restructuring costs as non-recurring, as they are solely related to this specific transaction and do not reflect normal operating activities.
(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-IFRS 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 stapled unitholders.
|
|
Three Months Ended March 31, |
|||||
(in millions, except as noted) |
|
|
2024 |
|
|
2023 |
|
Monthly distributions declared to unitholders |
[A] |
$ |
52.3 |
|
$ |
51.0 |
|
FFO |
[B] |
|
82.4 |
|
|
79.6 |
|
AFFO |
[C] |
|
77.9 |
|
|
75.1 |
|
FFO payout ratio |
[A]/[B] |
|
63 |
% |
|
64 |
% |
AFFO payout ratio |
[A]/[C] |
|
67 |
% |
|
68 |
% |
(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 measure in understanding period-over-period organic changes in NOI — cash basis from the same stock of properties owned.
|
Sq ft(1) |
Three Months Ended March 31, |
|||||||||
|
(in millions) |
|
2024 |
|
|
2023 |
|
$ change |
% change |
||
Revenue |
|
$ |
138.9 |
|
$ |
129.6 |
|
9.3 |
|
|
|
Less: Property operating costs |
|
|
24.4 |
|
|
22.2 |
|
2.2 |
|
|
|
NOI |
|
$ |
114.5 |
|
$ |
107.4 |
|
7.1 |
|
6.6 |
% |
Add (deduct): |
|
|
|
|
|
||||||
Straight-line rent amortization |
|
|
(3.2 |
) |
|
(4.6 |
) |
1.4 |
|
|
|
Tenant incentive amortization |
|
|
0.1 |
|
|
1.1 |
|
(1.0 |
) |
|
|
NOI - cash basis |
63.3 |
$ |
111.4 |
|
$ |
103.9 |
|
7.5 |
|
7.2 |
% |
Less NOI - cash basis for: |
|
|
|
|
|
||||||
Acquisitions |
1.0 |
|
0.3 |
|
|
— |
|
0.3 |
|
|
|
Developments |
2.5 |
|
(2.6 |
) |
|
0.2 |
|
(2.8 |
) |
|
|
Dispositions and assets held for sale |
0.3 |
|
— |
|
|
(0.3 |
) |
0.3 |
|
|
|
Same property NOI - cash basis |
59.8 |
$ |
109.1 |
|
$ |
103.8 |
|
5.3 |
|
5.1 |
% |
Constant currency same property NOI - cash basis(2) |
59.8 |
$ |
109.1 |
|
$ |
104.0 |
|
5.1 |
|
4.9 |
% |
(1) The square footage relating to the NOI — cash basis represents GLA of 63.3 million square feet as at March 31, 2024. 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 as per the consolidated financial statements. 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-IFRS performance measure defined above) divided by the fair value of investment properties. The net leverage ratio is a non-IFRS 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, 2024 and December 31, 2023 |
|
|
2024 |
|
|
2023 |
|
Unsecured debt, net |
|
$ |
3,085.8 |
|
$ |
3,066.0 |
|
Derivatives, net |
|
|
(86.1 |
) |
|
(100.8 |
) |
Lease obligations |
|
|
34.8 |
|
|
33.2 |
|
Secured debt |
|
|
— |
|
|
— |
|
Total debt |
|
$ |
3,034.5 |
|
$ |
2,998.4 |
|
Less: cash and cash equivalents |
|
|
139.9 |
|
|
116.1 |
|
Net debt |
[A] |
$ |
2,894.6 |
|
$ |
2,882.3 |
|
Investment properties |
[B] |
$ |
8,952.4 |
|
$ |
8,808.1 |
|
Net leverage ratio |
[A]/[B] |
|
32 |
% |
|
33 |
% |
(7) Overall capitalization rate is calculated as stabilized net operating income (property revenue less property expenses) divided by the fair value of the 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 8, 2024.
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 implement 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 for the remainder of 2024; Granite's 2024 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 the Shelf Prospectuses; the potential for expansion and rental growth at the property in
View source version on businesswire.com: https://www.businesswire.com/news/home/20240508170299/en/
Teresa Neto
Chief Financial Officer
(647) 925-7560
Source: Granite Real Estate Investment Trust
FAQ
What was Granite's net operating income in Q1 2024?
What was Granite's FFO in Q1 2024?
Did Granite sign any leases in Q1 2024?
What was the AFFO per unit forecast range for 2024?
