Granite REIT Announces C$800 Million Offering of Senior Unsecured Debentures

Rhea-AI Summary

Granite REIT announced that its subsidiary, Granite REIT Holdings Partnership, has priced a C$800 million offering of senior unsecured debentures in two series. The offering includes C$250 million of 3.999% Series 8 debentures due October 4, 2029, and C$550 million of 4.348% Series 9 debentures due October 4, 2031. The debentures will be guaranteed by Granite and Granite REIT Inc.

The offering is expected to close around October 4, 2024, subject to customary conditions. Granite LP plans to use the net proceeds to refinance existing debt, including a US$185 million facility due December 19, 2024, and a US$400 million facility maturing September 15, 2025. The company has also arranged a cross currency interest rate swap for the 2029 debentures, resulting in an effective fixed interest rate of 3.494% for the five-year term.

Positive

• C$800 million senior unsecured debentures offering to refinance existing debt
• Effective fixed interest rate of 3.494% for the October 2029 Debentures through cross currency interest rate swap
• Expected credit ratings of 'BBB (high)' or higher from Morningstar DBRS and 'Baa2' or higher from Moody's

Negative

• Increased debt load with C$800 million in new debentures

Insights

Financial Analyst

Granite REIT's C$800 million debenture offering is a significant financial move that strengthens its balance sheet and improves its debt profile. The two-series structure, with C$250 million due in 2029 at 3.999% and C$550 million due in 2031 at 4.348%, provides a balanced approach to debt management.

The use of proceeds to refinance existing debt, including the US$185 million facility due in December 2024 and the US$400 million facility due in September 2025, demonstrates proactive liability management. This refinancing should extend the company's debt maturity profile and potentially reduce interest expenses, given the current rate environment.

The cross-currency interest rate swap for the 2029 debentures, resulting in an effective 3.494% rate in Euros, shows sophisticated financial engineering to manage currency risk and potentially lower borrowing costs. Overall, this offering enhances Granite's financial flexibility and supports its growth strategy in the real estate sector.

Real Estate Investment Expert

This debenture offering underscores Granite REIT's strong market position and investor confidence in the industrial real estate sector. The ability to raise C$800 million in the current economic climate is noteworthy, indicating robust demand for high-quality real estate investment vehicles.

The BBB (high) and Baa2 minimum credit rating requirements from DBRS and Moody's, respectively, reflect Granite's solid credit profile and the perceived stability of its real estate portfolio. These investment-grade ratings are important for attracting institutional investors and securing favorable borrowing terms.

The private placement approach in Canada suggests a targeted investor base, potentially allowing for more flexible terms compared to a public offering. This strategy may also indicate Granite's desire to maintain strong relationships with key institutional investors.

For investors, this offering represents Granite's commitment to optimizing its capital structure, which could lead to improved returns and a more resilient business model in the face of economic uncertainties.

NOT FOR DISTRIBUTION TO U.S. NEWSWIRES OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO--(BUSINESS WIRE)-- Granite Real Estate Investment Trust (“Granite”) (TSX: GRT.UN / NYSE: GRP.U) announced today that its wholly owned subsidiary Granite REIT Holdings Limited Partnership (“Granite LP”) has priced an offering on October 1, 2024 (the “Offering”) of C$800 million aggregate principal amount of senior unsecured debentures in two series. The Offering includes (i) C$250 million aggregate principal amount of 3.999% Series 8 senior unsecured debentures due October 4, 2029 (the “October 2029 Debentures”); and (ii) C$550 million aggregate principal amount of 4.348% Series 9 senior unsecured debentures due October 4, 2031 (collectively, the “Debentures”). The Debentures will be guaranteed by Granite and Granite REIT Inc. The Offering is expected to close on or about October 4, 2024, subject to the satisfaction of certain customary closing conditions.

The Debentures are being offered on an agency basis by a syndicate of agents co-led by Scotia Capital, TD Securities and BMO Capital Markets. It is a condition of closing that Morningstar DBRS and Moody’s Investor Service, Inc. assign credit ratings of “BBB (high)” with a stable trend or higher, and “Baa2” or higher, respectively, relating to the Debentures.

The Offering is being made on a private placement basis in each of the provinces and territories of Canada. The Debentures will rank equally with all other senior unsecured indebtedness of Granite.

Granite LP intends to use the net proceeds from the Offering to refinance existing debt, including (i) its US$185 million senior unsecured non-revolving term facility, to be repaid upon maturity on December 19, 2024, and (ii) its US$400 million senior unsecured non-revolving term facility, maturing on September 15, 2025 (the “2025 Term Loan”), to be repaid immediately following the closing of the Offering, and for general corporate purposes. Prior to such use, the net proceeds may be initially used, in part or in full, for investments in bank deposits or other cash equivalents, in each case in accordance with Granite’s internal liquidity management policies. The 2025 Term Loan is fully prepayable without penalty.

Through a cross currency interest rate swap, Granite LP has exchanged the Canadian dollar denominated principal and interest payments related to the October 2029 Debentures for Euro denominated principal and interest payments, resulting in an effective fixed interest rate of 3.494% for the five year term of the October 2029 Debentures.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the Debentures in any jurisdiction in which such offer, solicitation or sale would be unlawful.

ABOUT GRANITE

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 143 investment properties representing approximately 63.3 million square feet of leasable area.

OTHER INFORMATION

Copies of financial data and other publicly filed documents about Granite are available through the internet on SEDAR+ which can be accessed at www.sedarplus.ca and on the United States Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) which can be accessed at www.sec.gov.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, and the Debentures may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the United States Securities Act of 1933, as amended.

For further information, please see our website at www.granitereit.com or contact Teresa Neto, Chief Financial Officer, at 647-925-7560 or Andrea Sanelli, Associate Director, Legal & Investor Services, at 647-925-7504.

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 the expected closing date of the Offering, the use of the net proceeds of the Offering, the expected final credit ratings for the Debentures, and Granite’s plans, goals, strategies, intentions, beliefs, estimates, costs, objectives, economic performance, expectations, or foresight or the assumptions underlying any of the foregoing. Words such as “may”, “would”, “could”, “will”, “likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”, “estimate”, “seek”, “objective” 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 the expected closing date of the Offering, the use of the net proceeds of the Offering, the expected final credit ratings for the Debentures, or other events, performance or results and will not necessarily be accurate indications of whether or the times at or by which future events or performance will be achieved. Undue reliance should not be placed on such statements. 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 its perception of historical trends, current conditions and expected future developments, as well as other factors management 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 risks set forth in the annual information form of Granite Real Estate Investment Trust and Granite REIT Inc. dated February 28, 2024 (the “Annual Information Form”) and management’s discussion and analysis of results of operations and financial position for the three and six month periods ended June 30, 2024 (“Q2 MD&A”). The “Risk Factors” section of the Annual Information Form and the “Risks and Uncertainties” section of the Q2 MD&A also contain 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241001123305/en/

Teresa Neto

Chief Financial Officer

647-925-7560

Andrea Sanelli

Associate Director, Legal & Investor Services

647-925-7504

Source: Granite Real Estate Investment Trust

FAQ

What is the total value of Granite REIT's (GRPU) new debenture offering?

Granite REIT's subsidiary has priced a C$800 million offering of senior unsecured debentures in two series.

When is the expected closing date for Granite REIT's (GRPU) debenture offering?

The offering is expected to close on or about October 4, 2024, subject to customary closing conditions.

What are the interest rates for Granite REIT's (GRPU) new debentures?

The Series 8 debentures due October 4, 2029, have a 3.999% interest rate, while the Series 9 debentures due October 4, 2031, have a 4.348% interest rate.

How does Granite REIT (GRPU) plan to use the proceeds from the debenture offering?

Granite LP intends to use the net proceeds to refinance existing debt, including a US$185 million facility due December 19, 2024, and a US$400 million facility maturing September 15, 2025, as well as for general corporate purposes.