Mr. Kevan Gorrie reports

GRANITE ANNOUNCES FIRST QUARTER 2023 RESULTS

Granite REIT Real Estate Investment Trust and Granite REIT Inc. have released their combined results for the three-month period ended March 31, 2023.

First quarter 2023 highlights

Highlights for the three-month period ended March 31, 2023, including events subsequent to the quarter, are set out herein.

Financial:

• Granite REIT's net operating income (NOI) was $107.4-million in the first quarter of 2023 compared with $91.2-million in the prior-year period, an increase of $16.2-million primarily as a result of net acquisition activity, the completion of developments and expansions beginning in the first quarter of 2022, and contractual rent adjustments.
• Same-property NOI -- cash basis -- increased by 5.4 per cent for the first quarter of 2023, excluding the impact of foreign exchange.
• Funds from operations (FFO) were $79.6-million ($1.25 per unit) in the first quarter of 2023 compared with $69.4-million ($1.05 per unit) in the first quarter of 2022.
• Adjusted funds from operations (AFFO) were $75.1-million ($1.18 per unit) in the first quarter of 2023 compared with $65.9-million ($1 per unit) in the first quarter of 2022.
• During the three-month period ended March 31, 2023, the Canadian dollar weakened against the U.S. dollar and the euro relative to the prior-year period. The impact of foreign exchange for FFO for the three-month period ended March 31, 2023, relative to the same period in 2022, was six cents per unit, and for AFFO, the impact of foreign exchange was five cents per unit.
• AFFO payout ratio was 68 per cent for the first quarter of 2023 compared with 77 per cent in the first quarter of 2022.
• Granite REIT recognized $73.0-million in net fair value losses on investment properties in the first quarter of 2023, which were attributable to the expansion in discount and terminal capitalization rates across all of Granite REIT's markets in response to rising interest rates, partially offset by fair market rent increases across the Greater Toronto Area and selective U.S. and European markets, the lease renewals of three special-purpose properties in Austria and Germany, and the stabilization of three properties under development in Houston, Tex., which were completed and transferred to income-producing properties during the first quarter of 2023. The value of investment properties was increased by unrealized foreign exchange gains of $32.5-million in the first quarter of 2023 primarily resulting from the relative weakening of the Canadian dollar against the euro as at March 31, 2023.
• Granite REIT's net income in the first quarter of 2023 was $9.8-million in comparison with net income of $497.7-million in the prior-year period primarily due to a negative change in the fair value of investment properties of $563.6-million, partially offset by a $16.2-million increase in net operating income as noted above and a $78.5-million increase in income tax recovery.

Developments

During the first quarter of 2023, including the subsequent events period, Granite REIT achieved the following milestones with respect to its development and expansion pipeline.

10144 and 10207 Veterans Dr., Avon, Ind.:

• On March 30, 2023, Granite REIT closed on the previously announced forward purchase of two completed industrial properties totalling 1.0 million square feet in Avon, Ind., for total proceeds of $106.9-million ($79.0-million (U.S.)). In conjunction with closing, the loan made by Granite REIT to the developer with an outstanding balance of $76.8-million ($56.4-million (U.S.)) was repaid. The properties are located in close proximity to significant distribution infrastructure with access to major highways/thoroughfares, providing regional and national connectivity. The properties were acquired vacant, and leasing activity is under way.

Highway 109 Business Park, Lebanon, Tenn.:

• On April 6, 2023, Granite REIT reached substantial completion of three properties totalling 509,250 square feet in Lebanon, Tenn. These state-of-the-art facilities have modern features including 32-foot clear heights, LED (light-emitting diode) lighting and other sustainable design features. The properties have direct access to Highway 109, and are located 19 miles from Nashville International Airport and 24 miles from downtown Nashville. Leasing of the properties is under way, and subsequent to quarter-end, Granite REIT signed a lease for 66,500 square feet with an industrial packaging company commencing in June, 2023, for a 10.2-year term.

905 Belle Lane, Bolingbrook, Ill.:

• On April 12, 2023, Granite REIT reached substantial completion of its 220,620-square-foot development in Bolingbrook, Ill. The building is 100 per cent leased to La-Z-Boy Manufacturing for an initial term of 12.4 years. The facility has modern features including cross-dock configuration, 32-foot clear heights, expandable parking and trailer stalls, upgraded dock equipment, and sustainability features. The property is well located with visibility from the I-55, which offers connectivity between Chicago and the southern United States.

The newly constructed properties in Avon, Ind., received Two Green Globes certification upon completion, and the Lebanon, Tenn., and Bolingbrook, Ill., properties are also expected to receive green building certifications to meet the criteria of eligible green projects (as defined in Granite REIT's Green Bond Framework, which is available on Granite REIT's website).

Operations:

• During the first quarter of 2023, Granite REIT achieved average rental rate spreads of 3 per cent over expiring rents, representing approximately 805,000 square feet of renewals completed in the quarter, of which approximately 678,000 square feet related to a contractual renewal at expiring rents of an existing lease in the United States. The remaining approximately 127,000 square feet of renewals in Europe achieved an average rental rate spread of 9 per cent.
• On March 15, 2023, Granite REIT completed the disposition of a property located in Muncie, Ind., for total proceeds of $24.7-million ($17.9-million (U.S.)). The property is leased to a subsidiary of Magna International Inc. As at March 31, 2023, one income-producing property located in Canada was classified as an asset held for sale with a fair value of $17.5-million.

A more detailed discussion of Granite REIT's combined financial results for the three-month periods ended March 31, 2023, and 2022, is contained in Granite REIT's management's discussion and analysis of results of operations and financial position 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' SEDAR and can be viewed at SEDAR, and on the U.S. Securities and Exchange Commission's EDGAR, which can be viewed at the SEC website.

Conference call

Granite REIT will hold a conference call on Thursday, May 11, 2023, at 11 a.m. ET. The toll-free number to use for this call is 1-800-920-3395. For international callers, please call 1-416-641-6700. Please dial in at least 10 minutes prior to the commencement of the call. The conference call will be chaired by Kevan Gorrie, president and chief executive officer. To hear a replay of the scheduled call, please dial 1-800-558-5253 (North America) or 1-416-626-4100 (international) and enter reservation No. 22026631. The replay will be available until Monday, May 22, 2023.

Annual meeting of unitholders

Granite REIT's annual meeting of unitholders will take place on June 8, 2023, at 10 a.m. ET in person at Vantage Venues located at 150 King St. West, 27th floor, Main Dining Room, Toronto, Ont. Refer to the voting information and general proxy matters within Granite REIT's management information circular/proxy statement for detailed instructions on how to vote at the meetings. A live webcast of the meetings will be available through Granite REIT's website, in which unitholders may listen to the live webcast and will have the ability to ask questions, but will not have the ability to vote virtually. The webcast of the meetings will be archived on its website following the meetings.

Other information

Additional property statistics as at March 31, 2023, have been posted to the REIT's website. Copies of financial data and other publicly filed documents are available through the Internet on SEDAR, which can be viewed at SEDAR, and on EDGAR, which can be viewed at the SEC website.

Granite REIT 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 REIT owns 142 investment properties representing approximately 62.8 million square feet of leasable area.

We seek Safe Harbor.