TORONTO,
Nov. 7, 2012 /PRNewswire/ -
Granite Real Estate Inc. (TSX: GRT; NYSE: GRP) ("Granite" or
the "Company") today announced its results for the three and nine
month periods ended September 30,
2012 and declared a Canadian ("Cdn.") dollar denominated
dividend of $0.50 per share on the
Company's Common Shares.
"Our financial results for the third quarter
continue to demonstrate stability in rental revenues and overall
cash flows. In addition, we are pleased to report that, year to
date, we have renewed or extended 13 leases with Magna and its
operating subsidiaries, including all but one of the 2012 expires,
representing approximately 2.4 million square feet. In the quarter
we also made considerable progress towards completing the
conversion to a Real Estate Investment Trust, with the upcoming
shareholder meeting to approve the conversion set for November 15th," commented Tom Heslip, Chief Executive Officer.
Granite's consolidated results for the three and
nine month periods ended September 30,
2012 and 2011 are summarized below (all figures are in Cdn.
dollars):
|
|
|
|
|
|
|
|
|
(in thousands,
except per share figures) |
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
|
|
|
2012 |
2011 |
|
|
2012 |
2011 |
|
|
|
|
|
(previously
reported
in US dollars) |
|
|
|
(previously
reported
in US dollars) |
Revenues(1) |
|
|
$ |
44,685 |
$ |
45,485 |
|
$ |
135,800 |
$ |
134,577 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
$ |
21,962 |
$ |
18,141 |
|
$ |
68,694 |
$ |
49,119 |
Income from continuing
operations(1) (3) |
|
|
|
18,919 |
|
15,277 |
|
|
56,189 |
|
54,328 |
Income from discontinued
operations(1) |
|
|
|
-- |
|
-- |
|
|
-- |
|
94,449 |
Net income |
|
|
$ |
18,919 |
$ |
15,277 |
|
$ |
56,189 |
$ |
148,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share from: |
|
|
|
|
|
|
|
|
|
|
|
|
- continuing operations |
|
|
$ |
0.40 |
$ |
0.33 |
|
$ |
1.20 |
$ |
1.16 |
|
- discontinued operations |
|
|
|
-- |
|
-- |
|
|
-- |
|
2.01 |
Diluted earnings per share |
|
|
$ |
0.40 |
$ |
0.33 |
|
$ |
1.20 |
$ |
3.17 |
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations
("FFO")(2) |
|
|
$ |
29,446 |
$ |
25,902 |
|
$ |
88,226 |
$ |
85,976 |
Diluted FFO per share
(2) |
|
|
$ |
0.63 |
$ |
0.55 |
|
$ |
1.88 |
$ |
1.83 |
__________________________
(1) Following the close of business on
June 30, 2011, the Racing &
Gaming Business, substantially all of the Company's lands held for
development, a property in the United
States and an income-producing property in Canada (the "Arrangement Transferred Assets
& Business") were transferred to entities owned by Mr.
Frank Stronach and his family (the
"Stronach Shareholder") in consideration for the elimination of the
Company's dual class share structure (the "Arrangement"). The
operating results of the Arrangement Transferred Assets &
Business have been presented as discontinued operations.
Income from continuing operations pertains to the Company's
income-producing property portfolio.
(2) FFO and diluted FFO per share are
measures widely used by analysts and investors in evaluating the
operating performance of real estate companies. However, FFO
does not have a standardized meaning under U.S. generally accepted
accounting principles and therefore may not be comparable to
similar measures presented by other companies. The Company
determines FFO using the definition prescribed in the United States by the National Association
of Real Estate Investment Trusts®. For a reconciliation of
FFO to income from continuing operations, please refer to the
section titled "Reconciliation of Funds from Operations to
Income from Continuing Operations".
(3) Income from continuing operations for
the nine month period ended September 30,
2011 includes the recovery of $12.9
million in income tax resulting from an internal
amalgamation that was set aside and cancelled by the courts.
SPECIAL SHAREHOLDER MEETING TO APPROVE CONVERSION TO A REAL
ESTATE INVESTMENT TRUST
A special shareholder meeting will take place on November 15, 2012 to seek the approval of the
Company's conversion to a Canadian Real Estate Investment Trust
(the "REIT Conversion"). The REIT Conversion is a key component of
the Company's strategic plan announced in October 2011 and was expected, at the time, to
result in a significant reduction in annual cash income taxes
estimated to be approximately $8.0
million. The REIT structure, as now proposed, is expected to
reduce Granite's cash income taxes for 2013 by approximately
$11.0 million. If the REIT Conversion
is approved, the Company expects to be a REIT on or about
December 31, 2012, and beginning in
fiscal 2013, the new REIT is expected to commence monthly
distributions of $0.175 per stapled
unit (an increase in the annual distribution to $2.10 per stapled unit from the current annual
dividend of $2.00 per share). The
first distribution to be declared for the month of January 2013 is expected to be paid on or about
February 15, 2013. The REIT
Conversion is subject to customary conditions and approvals,
including court approval. On completion of the REIT
Conversion, shareholders of Granite will exchange their Common
Shares for a stapled unit comprised of one common share of Granite
REIT Inc. and one unit of Granite Real Estate Investment
Trust. The assets, liabilities and operations of the new
combined stapled unit structure will be comprised of all the
assets, liabilities and operations of Granite.
CURRENCY CHANGE FOR FINANCIAL REPORTING
Effective January 1, 2012, the
Company's reporting currency was changed from the U.S. dollar to
the Cdn. dollar. All comparative financial information contained in
this press release and in the unaudited interim consolidated
financial statements and related Management's Discussion and
Analysis for the three and nine month periods ended September 30, 2012 has been recast to reflect the
Company's results as if the information had been historically
reported in Cdn. dollars. As a result of the change in
reporting currency, dividends are declared in Cdn. dollars. Please
refer to the section titled "Dividends". The Company continues to
report in accordance with U.S. generally accepted accounting
principles.
GRANITE'S CONSOLIDATED FINANCIAL RESULTS
Three Month Period Ended September 30,
2012
For the three month period ended September 30, 2012, rental revenue decreased by
$0.8 million from $45.5 million in the third quarter of 2011 to
$44.7 million in the third quarter of
2012 primarily due to the unfavourable effects of changes in
foreign currency exchange rates partially offset by completed
projects coming on-stream and the additional rent earned from
contractual rent increases.
The Company's income from continuing operations
and net income was $18.9 million in
the third quarter of 2012 compared to $15.3
million in the prior year period. The increase of
$3.6 million was primarily due to (i)
a decrease in general and administrative expenses of $4.5 million (primarily due to reduced employee
termination expense) and (ii) lower depreciation and amortization
expense of $0.2 million, partially
offset by (i) a decrease in rental revenue of $0.8 million, (ii) higher income tax expense of
$0.1 million and (iii) lower gains on
disposal of real estate of $0.1
million.
FFO for the third quarter of 2012 increased
$3.5 million from $25.9 million in the prior year period to
$29.4 million in the current period
primarily due to the $3.6 million
increase in income from continuing operations.
Nine Month Period Ended September 30, 2012
Continuing Operations
For the nine month period ended September 30, 2012, rental revenue increased by
$1.2 million from $134.6 million in 2011 to $135.8 million in 2012 primarily due to completed
projects coming on-stream, the additional rent earned from
contractual rent increases and renewals and re-leasing of
income-producing properties partially offset by the unfavourable
effects of changes in foreign currency exchange rates.
The Company's income from continuing operations
was $56.2 million in the nine month
period ended September 30, 2012
compared to $54.3 million in the
prior year period. Income from continuing operations in the nine
month period ended September 30, 2011
includes a recovery of $12.9 million
in income tax resulting from an internal amalgamation undertaken in
2010 that was subsequently cancelled. Excluding the
$12.9 million recovery of income tax,
income from continuing operations increased by $14.8 million primarily due to (i) an increase in
rental revenue of $1.2 million, (ii)
a reduction in general and administrative expenses of $16.2 million (primarily related to reduced
advisory costs, decreased insurance expense, decreased compensation
expense to former executives of the Company and higher retainer
fees in 2011 due to the Arrangement), (iii) an increase in foreign
exchange gains of $0.7 million and
(iv) the decrease in the write-down of a long-lived asset of
$2.7 million. Partially offsetting
these increases were (i) higher property operating costs of
$0.8 million, (ii) an increase of
$0.3 million in depreciation and
amortization expense and (iii) an increase of income tax expense of
$4.8 million, excluding the income
tax recovery noted above.
FFO for the nine month period ended September 30, 2012 increased $2.2 million from $86.0
million in the prior year period to $88.2 million primarily due to the $1.9 million increase in income from continuing
operations and the $0.3 million
increase in depreciation and amortization expense.
Discontinued Operations
Income from discontinued operations for the nine
month period ended September 30, 2011
of $94.4 million is primarily
comprised of the net gain on the disposal of the Arrangement
Transferred Assets & Business of $87.4
million.
Net income for the nine month period ended
September 30, 2012 decreased by
$92.6 million to $56.2 million from $148.8
million in the prior year period. The decrease was due to
the reduction in income from discontinued operations of
$94.4 million partially offset by an
increase in income from continuing operations of $1.9 million.
A more detailed discussion of Granite's
consolidated financial results for the three and nine month periods
ended September 30, 2012 and 2011 is
contained in the Company's Management's Discussion and Analysis of
Results of Operations and Financial Position and the unaudited
interim consolidated financial statements and notes thereto, which
are available through the internet on Canadian Securities
Administrators' Systems for Electronic Document Analysis and
Retrieval (SEDAR) and can be accessed at www.sedar.com 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.
RECONCILIATION OF FUNDS FROM OPERATIONS TO INCOME FROM
CONTINUING OPERATIONS
|
|
|
|
|
Three
months ended
September 30, |
|
Nine
months ended
September 30, |
(in thousands,
except per share information) |
|
|
|
|
2012 |
2011 |
|
|
2012 |
2011 |
|
|
|
|
|
|
|
(previously
reported in
US dollars) |
|
|
|
(previously reported in
US dollars) |
Income from continuing operations |
|
|
|
$ |
18,919 |
$ |
15,277 |
|
$ |
56,189 |
$ |
54,328 |
Add back depreciation and
amortization |
|
|
|
|
10,506 |
|
10,716 |
|
|
32,016 |
|
31,739 |
Add back (deduct) loss
(gain) on disposal of real estate |
|
|
|
|
21 |
|
(91) |
|
|
21 |
|
(91) |
Funds from
operations |
|
|
|
$ |
29,446 |
$ |
25,902 |
|
$ |
88,226 |
$ |
85,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
funds from operations per share |
|
|
|
$ |
0.63 |
$ |
0.55 |
|
$ |
1.88 |
$ |
1.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic number of shares
outstanding |
|
|
|
|
46,824 |
|
46,843 |
|
|
46,863 |
|
46,894 |
Diluted number of
shares outstanding |
|
|
|
|
46,846 |
|
46,862 |
|
|
46,883 |
|
46,996 |
DIVIDENDS
Granite's Board of Directors has declared a
dividend of Cdn. $0.50 per share on
the Company's Common Shares for the third quarter ended
September 30, 2012. The
dividend is payable on or about December 13,
2012 to shareholders of record at the close of business on
November 23, 2012. The Common Shares
will begin trading on an ex-dividend basis at the opening of
trading on November 21, 2012.
Unless indicated otherwise, Granite has
designated the entire amount of all past and future taxable
dividends paid since January 1, 2006
to be an "eligible dividend" for purposes of the Income Tax Act
(Canada).
CONFERENCE CALL
Granite will hold a conference call on
Thursday, November 8, 2012 at
8:30 a.m. Eastern time. The
number to use for this call is 1-800-619-2736. Overseas
callers should use +1-416-981-9084. Please call in at least
10 minutes prior to start time. The conference call will be
chaired by Tom Heslip, Chief
Executive Officer. For anyone unable to listen to the
scheduled call, the rebroadcast numbers will be: North America - 1-800-558-5253 and Overseas -
+1-416-626-4100 (enter reservation number 21608649) and will be
available until Thursday, November 15,
2012.
ABOUT GRANITE
Granite is a Canadian-based real estate company
engaged in the ownership and management of predominantly industrial
properties in Canada, the United States, Mexico and Europe. The Company owns and manages
approximately 28 million square feet in 104 rental income
properties. Our tenant base currently includes operating
subsidiaries of Magna International Inc. (together "Magna") as our
largest tenants, together with tenants from other industries.
OTHER INFORMATION
Additional property statistics have been posted
to our website at
http://www.graniterealestate.com/uploads/File/propertystatistics.pdf.
Copies of financial data and other publicly filed documents are
available through the internet on Canadian Securities
Administrators' Systems for Electronic Document Analysis and
Retrieval (SEDAR) which can be accessed at www.sedar.com 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. For further information about
Granite, please see our website at www.graniterealestate.com.
FORWARD-LOOKING STATEMENTS
This press release may contain statements that,
to the extent they are not recitations of historical fact,
constitute "forward-looking statements" within the meaning of
applicable securities legislation, including the United States
Securities Act of 1933 and the United States Securities Exchange
Act of 1934. Forward-looking statements may include, among
others, statements regarding the Company's future plans, goals,
strategies, intentions, beliefs, estimates, costs, objectives,
economic performance or expectations, or the assumptions underlying
any of the foregoing. In particular, this press release
contains forward-looking statements regarding our proposed
conversion to a REIT. Words such as "may", "would", "could",
"will", "likely", "expect", "anticipate", "believe", "intend",
"plan", "forecast", "project", "estimate" and similar expressions
are used to identify forward-looking statements.
Forward-looking statements 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. In particular, Granite cautions
that the timing or completion of the REIT Conversion cannot be
predicted with certainty, and there can be no assurance at this
time that all required or desirable approvals and consents to
effect the REIT Conversion will be obtained in a timely manner or
at all and there can be no assurance that the anticipated reduction
in cash income taxes payable following the REIT Conversion will be
realized. Forward-looking statements are based on information
available at the time and/or management's good faith assumptions
and analyses made in light of our perception of historical trends,
current conditions and expected future developments, as well as
other factors we believe are appropriate in the circumstances, and
are subject to known and unknown risks, uncertainties and other
unpredictable factors, many of which are beyond the Company's
control, that could cause actual events or results to differ
materially from such forward-looking statements. Important
factors that could cause such differences include, but are not
limited to, the risk of changes to tax or other laws that may
adversely affect the REIT Conversion; inability of Granite to
implement a suitable structure for the REIT Conversion; the
inability to obtain all required consents and approvals for the
REIT Conversion; the inability to realize the anticipated reduction
in cash income taxes payable following the REIT Conversion and the
risks set forth in the "Risk Factors" section in the Company's
Annual Information Form for 2011, filed on SEDAR at www.sedar.com
and attached as Exhibit 1 to the Company's Annual Report on Form
40-F for the year ended December 31,
2011, and in the notice of special meeting of shareholders
and management information circular/proxy statement in respect of
the special meeting of shareholders dated October 11, 2012, and also filed on SEDAR, all of
which investors are strongly advised to review. The "Risk Factors"
section also contains information about the material factors or
assumptions underlying such forward-looking
statements. Forward-looking statements speak only as
of the date the statements were made and unless otherwise required
by applicable securities laws, the Company expressly disclaims any
intention and undertakes no obligation to update or revise any
forward-looking statements contained in this press release to
reflect subsequent information, events or circumstances or
otherwise.
SOURCE Granite Real Estate Inc.