Ms. Teresa Neto reports

GRANITE ANNOUNCES THIRD QUARTER 2023 RESULTS AND A 3.125% DISTRIBUTION INCREASE COMMENCING IN DECEMBER 2023

Granite Real Estate Investment Trust and Granite REIT Inc. have released their combined results for the three- and nine-month periods ended Sept. 30, 2023, and made a distribution increase of 3.125 per cent effective with the December, 2023, distribution.

Third quarter 2023 highlights

Highlights for the three-month period ended Sept. 30, 2023, are set out below:

Financial:

• Granite's net operating income (NOI) was $109.2-million in the third quarter of 2023, compared with $94.0-million in the prior-year period, an increase of $15.2-million primarily as a result of the completion of developments and expansions beginning in the third quarter of 2022, contractual rent adjustments and consumer price index based increases, and renewal leasing activity.
• Same-property NOI -- cash basis increased by 7.0 per cent for the third quarter of 2023, excluding the impact of foreign exchange.
• Funds from operations (FFO) was $79.1-million ($1.24 per unit) in the third quarter of 2023, compared with $70.7-million ($1.08 per unit) in the third quarter of 2022;
• Adjusted funds from operations (AFFO) was $69.6-million ($1.09 per unit) in the third quarter of 2023, compared with $63.3-million (97 cents per unit) in the third quarter of 2022.
• During the three-month period ended Sept. 30, 2023, the Canadian dollar weakened against the U.S. dollar and the euro relative to the prior-year period. The impact of foreign exchange on FFO for the three-month period ended Sept. 30, 2023, relative to the same period in 2022, was six cents per unit, and for AFFO, the impact of foreign exchange was six cents per unit.
• AFFO payout ratio was 73 per cent for the third quarter of 2023, compared with 80 per cent in the third quarter of 2022.
• Granite recognized $53.2-million in net fair value losses on investment properties in the third quarter of 2023, which were primarily attributable to the expansion in discount and terminal capitalization rates across selective Granite 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 value of investment properties was increased by unrealized foreign exchange gains of $86.8-million in the third quarter of 2023, primarily resulting from the relative weakening of the Canadian dollar against the U.S. dollar, partially offset by the relative strengthening of the Canadian dollar against the euro as at Sept. 30, 2023.
• Granite's net income in the third quarter of 2023 was $33.1-million, in comparison with a net loss of $93.3-million in the prior-year period, primarily due to a decrease in the fair value losses on investment properties of $176.0-million and a $15.2-million increase in net operating income as noted above, partially offset by a $51.3-million decrease in income tax recovery.
• On Nov. 8, 2023, the trust increased its targeted annualized distribution by 3.125 per cent to $3.30 (27.50 cents per month) per stapled unit from $3.20 (26.67 cents per month) per stapled unit to be effective upon the declaration of the distribution in respect of the month of December, 2023, and payable in mid-January, 2024.

Operations:

• During the third quarter of 2023, Granite achieved average rental rate spreads of 33 per cent over expiring rents, representing approximately 1,921,000 square feet of renewals completed in the quarter.
• On Aug. 15, 2023, Granite completed the disposition of a property located in Concord, Ont., for total proceeds of $20.6-million, which was previously classified as held for sale.

Financing:

• On Sept. 7, 2023, Granite REIT Holdings LP (Granite LP) entered into and fully drew upon a 70.0-million-euro senior unsecured non-revolving term facility that matures on Sept. 7, 2026 (September, 2026, term loan). The September, 2026, term loan is fully prepayable without penalty. In conjunction with the September, 2026, term loan financing, Granite entered into a floating to fixed interest rate swap to exchange the floating euro interbank offer rate portion of the interest payments from the September, 2026, term loan for fixed interest payments resulting in an all-in fixed interest rate of 4.3325 per cent. Granite used the net proceeds from the September, 2026, term loan to fully repay all draws outstanding on the credit facility with the remainder to be used for general corporate purposes, including to finance development and property acquisitions.
• On Oct. 12, 2023, Granite LP completed an offering of $400.0-million aggregate principal amount of 6.074 per cent Series 7 senior unsecured debentures due April 12, 2029 (the 2029 debentures). The net proceeds received by Granite LP after deducting the financing costs totalling $2.4-million were $397.6-million. The 2029 debentures are guaranteed by Granite REIT and Granite GP. The 2029 debentures are Granite's third green bond issuance pursuant to its green bond framework. Granite intends to use an amount equal to the net proceeds of the 2029 debentures to finance or refinance, in whole or in part, expenditures associated with eligible green projects as described in the Granite green bond framework, which is available on Granite's website. Initially and prior to the full allocation, the net proceeds from the 2029 debentures will be used to refinance existing debt, including Granite's Series 3 senior unsecured debentures due Nov. 30, 2023, on maturity, and for general corporate purposes. On Oct. 10, 2023, Granite also entered into a cross-currency interest rate swap commencing on Oct. 12, 2023, to exchange the Canadian-dollar-denominated principal and interest payments of the 2029 debentures for euro-denominated payments, resulting in an effective fixed interest rate of 4.9285 per cent for the 5.5-year term of the 2029 debentures.

A more detailed discussion of Granite's combined financial results for the three- and nine-month periods ended Sept. 30, 2023, and Sept. 30, 2022, 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 SEDAR+ and EDGAR.

Environmental, social, governance plus resilience (ESG+R)

Granite completed its fourth annual GRESB real estate assessment in June, 2023. GRESB's 2023 results were published in October, 2023, and Granite ranked first out of nine in the Northern America industrial, listed, tenant-controlled GRESB peer group. Granite's score increased by six points (8 per cent) compared with 2022, improving Granite's overall position from second to first place in 2023 within its peer group. Granite also achieved a score of A in the 2023 GRESB public disclosure report and was ranked second in the United States industrial sector comprising 10 reporting entities, which is an improvement of one position from third place in 2022. The GRESB public disclosure report evaluates the level of ESG disclosure by listed property companies and REITs. Granite continues to implement strategic initiatives to enhance its ESG+R program into 2024 and beyond.

Conference call

Granite will hold a conference call on Thursday, Nov. 9, 2023, at 11 a.m. ET. The toll-free number to use for this call is 1-800-584-1012. For international callers, please call 1-416-981-9021. 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. 22028186. The replay will be available until Monday, Nov. 20, 2023.

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 62.9 million square feet of leasable area.

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