Granite REIT’s Earnings Call: Strong Growth and Positive Outlook

Granite Real Estate (($TSE:GRT.UN)) has held its Q3 earnings call. Read on for the main highlights of the call.

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Granite Real Estate’s recent earnings call painted a picture of robust financial health and strategic growth, underscored by a positive sentiment. The company reported strong financial performance and leasing activity, buoyed by favorable market conditions and an increased distribution. However, challenges such as higher G&A expenses and capital expenditures, as well as difficulties in the Greater Toronto Area, were also acknowledged. Overall, the positive aspects of the call significantly outweighed the negatives, indicating a strong outlook for Granite REIT.

Strong Financial Performance and Guidance Increase

Granite REIT’s Q3 2025 results surpassed those of Q2 and aligned with the management’s annual forecast. The Funds From Operations (FFO) per unit reached $1.48, marking a 6.5% increase from the previous quarter and a 9.6% rise compared to the same period last year. This performance led to an upward revision of the 2025 guidance, driven by strong leasing activity and Net Operating Income (NOI) growth.

Robust Leasing Activity

The quarter saw over 400,000 square feet of new leases executed, alongside the extension of six leases totaling over 2.3 million square feet. The renewal rate was impressive, with an 88% increase for Q3 expiries in key markets, showcasing Granite’s strong leasing capabilities.

Positive Market Conditions

Granite’s portfolio benefited from positive market conditions, with eight out of sixteen North American markets reporting stable or declining vacancy rates. Notably, markets such as Houston and Nashville experienced significant rent increases, contributing to the company’s overall positive performance.

Strong Balance Sheet and Liquidity

Granite’s financial stability is evident in its strong balance sheet, with investment properties valued at $9.1 billion. The company’s liquidity remains robust at approximately $1 billion, supported by substantial cash reserves and an undrawn operating line.

Increased Distribution

The company announced a $0.15 increase in distribution, marking the 15th consecutive annual increase since 2011. This decision reflects Granite’s strong cash flow growth and a conservative capital structure.

Increased G&A Expenses

General and administrative expenses rose to $14.1 million, a $4.1 million increase from Q2, primarily due to an unfavorable fair value adjustment to noncash compensation liabilities.

Higher Capital Expenditures

Capital expenditures related to AFFO in Q3 amounted to $10.5 million, an increase of $2.5 million from Q2 and $5.3 million higher than the same quarter last year, indicating significant investment in property enhancements.

Interest Expense Increase

Interest expenses saw a slight rise in Q3 2025, up by $0.5 million from Q2, driven mainly by credit facility draws to fund acquisitions in Florida.

Challenges in Greater Toronto Area

The Greater Toronto Area faced challenges with a 5.5% year-over-year decline in asking rents, marking it as the weakest market in terms of rent growth, which could impact future leasing strategies.

Forward-Looking Guidance

Granite REIT has raised its full-year guidance for 2025, projecting FFO per unit to range between $5.83 and $5.90, reflecting a 7% to 9% increase over 2024. The company anticipates reducing its credit facility balance through free cash flow from operations and property dispositions, maintaining a strong balance sheet with a net leverage ratio of 35%.

In conclusion, Granite Real Estate’s earnings call highlighted a period of strong financial performance and strategic growth, with positive sentiment prevailing. Despite challenges such as increased expenses and market-specific difficulties, the company’s robust leasing activity, favorable market conditions, and strong balance sheet position it well for future success.