Granite Real Estate Investment Trust

Granite reported Q2 2026 FFO per unit of $1.56, down $0.01 sequentially and up $0.17 or 12.2% year over year. AFFO per unit was $1.26, down $0.15 sequentially and up $0.03 year over year. Same-property NOI increased 8.3% on a constant currency basis and 9.1% including FX. Investment properties totaled $9.6 billion, excluding $66.2 million related to assets held for sale. Management also disclosed two nonrecurring items: about $1.3 million of termination/closeout fee revenue and a $2.6 million HST audit provision, which together reduced FFO and AFFO by about $0.02 per unit. For 2026, Granite expects FFO per unit of $6.30 to $6.40, AFFO per unit of $5.45 to $5.55, same-property NOI growth of 6% to 6.5%, AFFO-related capex of about $40 million, G&A impacting FFO/AFFO of about $11.5 million per quarter, interest expense of around $23.5 million per quarter, and current income tax expense of about $3.2 million to $3.3 million per quarter.

Kevan Gorrie described the quarter as positive and in line with expectations, with the main drivers being strong same-property NOI, leasing execution, and disciplined capital allocation. He said the team renewed about 250,000 square feet in the quarter, has renewed roughly 65% of 2026 expiries by GLA at a 21% average rent increase, and continues to see constructive leasing conditions across most markets. His tone was confident but measured, emphasizing that growth is supported by nearshoring, onshoring, and data center-related demand, while acknowledging that higher-cost coastal markets and the GTA remain weaker.

Teresa Neto focused on the financial mechanics behind the quarter, including the two nonrecurring items that netted to a negative $1.3 million impact and roughly $0.02 per unit to FFO/AFFO. She highlighted improving leverage metrics: net leverage of 32%, debt-to-EBITDA of 6.6x, weighted average cost of debt of 2.62%, and liquidity of $1.2 billion, including about $165 million of cash and a nearly undrawn $997 million operating line. She also said year-to-date ATM issuance totaled 1.4 million units at an average price of $96.61 for gross proceeds of about $138.4 million, and noted that management is considering a shorter-term refinancing approach for the December maturity, with a 5-year Canadian unsecured rate around 4.25% and low-4% if swapped to euros.

Analysts pressed on whether Granite’s rent spreads are nearing a peak and how the 20% to 25% mark-to-market thesis should evolve; management said the contribution will be lumpy, but reiterated that the long-term mark-to-market remains about 20% to 25% over the next five years. Questions also focused on the 2027 lease roll, with management saying many European renewals are fixed-rate while U.S. leases are more market-based, and that the GTA likely is near a bottom but may need a few more quarters before rents fully flatten. On capital allocation, management said the pending acquisitions are in the U.K. and Southern Texas, are currently stabilized, and were chosen because they are modern, functional assets in the right locations at low-to-mid-5 cap rates, with little to no dilution to 2026 AFFO per unit.