Stockwatch...Granite Real Estate Investment Trust

Stockwatch...Granite Real Estate Investment Trust 

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 141 investment properties representing approximately 60.6 million square feet of leasable area.

Here's a breakdown of what you should know about them:

Core Business and Portfolio

Focus: Granite specializes in the acquisition, development, ownership, and management of logistics, warehouse, and industrial properties.

Geographic Diversification: While based in Canada, their portfolio is geographically diverse, with properties located across North America and Europe (including the US and Austria).

Portfolio Size: As of recent reports, their portfolio comprises over 140 investment properties representing approximately 60.6 million square feet of gross leasable area.

Revenue Source: Nearly all their revenue comes from rental income from their properties.

Key Tenant: Historically, the company has significant ties to and reliance on Magna International Inc. (an automotive parts and systems manufacturer) as a principal tenant, though their tenant base is diversifying.

Public Trading Information

Canadian Exchange (TSX): The ticker symbol is GRT.UN.

US Exchange (NYSE): The ticker symbol is GRP.U.

REIT Structure: As a REIT, they are generally required to distribute a significant portion of their taxable income to unitholders, which often results in attractive distribution (dividend) yields. Granite pays distributions monthly.

History and Structure

Origins: Granite was originally a part of Magna International and was spun off as a public company called MI Developments in 2003. It later converted to a stapled unit REIT structure and changed its name to Granite Real Estate Investment Trust.

Management: It is led by a President and CEO and overseen by a Board of Trustees.

Recent Performance Highlights (Based on latest available reports)

Industrial Sector Focus: Their focus on industrial properties (logistics and warehousing) has been a strong driver, aligning with the growth of e-commerce and supply chain modernization.

Distribution Increases: They have recently announced distribution increases, reflecting confidence in their operating results.

Strong Occupancy: Their portfolio typically maintains a high occupancy rate.

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Granite REIT just released its Q3 2025 results a few days ago, which is the main news event.

Here are the key takeaways from the recent news and the Q3 2025 earnings release (for the period ending September 30, 2025):

Financial Highlights & Distribution Increase

Distribution Hike: Granite announced a 4.41% increase in its targeted annualized distribution (dividend), raising it from $3.40 to $3.55 per unit. This increase is effective with the December 2025 distribution.

NOI Growth: Net Operating Income (NOI) for Q3 2025 increased to $127.1 million, up from $119.6 million in the prior year period.

Same Property NOI: Constant currency same-property NOI (cash basis) increased by 5.2% for the quarter, driven primarily by contractual rent escalations and strong re-leasing activity.

FFO/AFFO Growth:

Funds From Operations (FFO) per unit was $1.48, an increase over the prior year's $1.35.

Adjusted Funds From Operations (AFFO) per unit was $1.26, an increase over the prior year's $1.22.

Net Income: Net income was lower compared to the prior year, primarily due to an unfavourable change in the fair value adjustments on investment properties, reflecting market cap rate expansion in some US and European markets.

Portfolio and Operational Highlights

High Occupancy: In-place occupancy as of September 30, 2025, was 96.8%, a solid figure for a massive industrial portfolio.

Strong Leasing Spreads: During the quarter, Granite achieved exceptional average rental rate spreads of 88% over expiring rents on renewals and new leases, demonstrating the embedded growth potential in their existing portfolio.

Asset Repositioning/Dispositions: The REIT classified six income-producing properties located in the United States and Netherlands with a fair value of $370.7 million as assets held for sale. This indicates a strategy of optimizing the portfolio by selling non-core or lower-growth assets.

In summary, the key message is solid operational execution in the industrial sector, resulting in another distribution increase, despite the headwind of property valuation adjustments (fair value losses) due to the current interest rate and market environment.

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THIRD QUARTER 2025 HIGHLIGHTS

Highlights for the three month period ended September 30, 2025 are set out below:

Financial:

• Granite's net operating income ("NOI") was $127.1 million in the third quarter of 2025 compared to $119.6 million in the prior year period, an increase of $7.5 million primarily as a result of contractual rent adjustments and consumer price index based increases, renewal and re-leasing activity, the acquisition of two income-producing properties in the United States in the second quarter of 2025, and the lease commencement of two completed expansion projects in Canada and Netherlands during 2024;
• Constant currency same property NOI - cash basis ⁽⁴⁾ increased by 5.2% for the third quarter of 2025;
• Funds from operations ("FFO") ⁽¹⁾ was $89.9 million ($1.48 per unit) in the third quarter of 2025 compared to $85.2 million ($1.35 per unit) in the third quarter of 2024;
• Adjusted funds from operations ("AFFO") ⁽²⁾ was $77.0 million ($1.26 per unit) in the third quarter of 2025 compared to $76.6 million ($1.22 per unit) in the third quarter of 2024;
• During the three month period ended September 30, 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 September 30, 2025, relative to the same period in 2024, was favourable by $0.04 per unit for each measure;
• AFFO payout ratio ⁽³⁾ was 67% for the third quarter of 2025 compared to 68% in the third quarter of 2024;
• In-place occupancy as at September 30, 2025 was 96.8%, representing an increase of 100 basis points relative to in-place occupancy as at June 30, 2025. Committed occupancy as at November 5, 2025 is 97.1%;
• Net leverage ratio as at September 30, 2025 was 35%, representing an increase of 300 basis points relative to December 31, 2024. The increase was primarily driven by the classification of certain assets as held for sale, which reduced investment properties by $370.7 million, as well as increased unsecured debt of $78.0 million, from draws on the credit facility to fund, in the short-term, unit repurchases under the normal course issuer bid ("NCIB"). If the assets held for sale were included in the fair value of investment properties, net leverage ratio would be 34%;
• Granite recognized $34.6 million in net fair value losses on investment properties in the third quarter of 2025, primarily attributable to the expansion in the discount and terminal capitalization rates at select properties in the United States and Europe due to market conditions. The value of investment properties was increased by unrealized foreign exchange gains of $156.5 million in the third quarter of 2025 primarily resulting from the relative weakening of the Canadian dollar against the Euro and the US dollar as at September 30, 2025 compared to June 30, 2025;
• Granite's net income attributable to unitholders in the third quarter of 2025 was $68.0 million in comparison to $111.6 million in the prior year period primarily due to an unfavourable change in the fair value adjustments on investment properties of $77.2 million, and a $2.2 million increase in interest expense and other financing costs, partially offset by a $26.5 million increase in income tax recovery, a $7.5 million increase in net operating income as noted above, and a $2.0 million favourable change in fair value losses on financial instruments; and
• On November 5, 2025, Granite increased its targeted annualized distribution by 4.41% to $3.55 ($0.2958 per month) per unit from $3.40 ($0.2833 per month) per unit to be effective upon the declaration of the distribution in respect of the month of December 2025 and payable in mid-January 2026.

Operations:

• As at September 30, 2025, six income producing properties located in the United States and Netherlands were classified as assets held for sale with a fair value of $370.7 million;
• During the third quarter of 2025, Granite achieved average rental rate spreads of 88% over expiring rents representing approximately 1,846,000 square feet of new leases and renewals taking effect in the quarter; and
• During the third quarter of 2025, Granite executed a lease commencing in the first quarter of 2026 for the remaining vacant unit comprising approximately 148,000 square feet at its completed phase I development in Houston, Texas for a 126 month term with a global automotive accessories manufacturer and distributor.

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Source

Google Gemini

https://money.tmx.com/en/quote/GRT.UN/news