Granite Real Estate Investment Trust (GRTUN) Earnings Call Transcript

Thank you, Mike. May I have a motion seconded?

I second the motion.

Thank you, Lawrence. Is there any discussion on this matter? Seeing none, we will now conduct the vote by way of online ballot. I will announce the results of the vote at the conclusion of the meeting. We will now move on to the next item of business, which is a consideration of the nonbinding advisory resolution on Granite's approach to executive compensation. As described in the management information circular dated April 24, 2020, made available by -- to shareholders by -- of stapled units, unitholders are being asked to approve the resolution on Granite's approach to executive compensation. Our Board values the opinion of Granite unitholders. Although the vote is nonbinding, the Board and its committees will take into account the outcome of the vote when considering Granite's compensation philosophy. Granite will also -- will disclose the voting results of the Say-on-Pay Resolution as part of its reporting on voting results for the meeting. The advisory resolution is set out on Page 21 of the management information circular. May I have a motion on the advisory resolution?

I, Mike Ramparas, so move.

Thank you, Mike. May I have the motion seconded?

I, Lawrence Clarfield, second the motion.

Thank you, Lawrence. Is there any discussion on this matter? Seeing none, we will conduct the vote by way of online ballot, and I will announce results at the conclusion of the meeting. Is there any other formal business that may be properly brought before these meetings? It is now 10:15 and the polls on all matters of business will close at 10:17. For those of you who have not voted on all matters of the business, please do so now. We will now take a short break while the polls close and the results are tabulated by the scrutineers. [Voting]

I confirm the polls are now closed and scrutineers have reported to me that all matters put to ballot have been passed with the requisite shareholder and unitholder approval and will be disclosed in a press release following today's meeting. Accordingly, as a result, I hereby declare that trustees and directors elected, the auditors reappointed, and the advisory resolution on executive compensation approved. The report disclosing the voting results will be filed on SEDAR and disclosed in a press release promptly following the meeting. That concludes the voting at today's meeting. For the information of the meetings with respect to Granite's majority voting policy, I note that Granite has received proxies in respect to the election of each nominee that results in a greater number of votes in favor of his and her election than the number withheld from his or her election. There being no further business, that concludes the formal business of the meetings. I declare that the formal portion of the meetings is now terminated. I will now hand the meeting over to Kevan Gorrie, our President and CEO, who will provide an update on our overall business. Thank you.

Thank you, Kelly. Good morning, everyone, and thank you for joining our 2019 AGM call, our first fully virtual AGM. First and foremost, we hope you are all healthy and holding up well. Secondly, while we are pleased to be able to reach you all virtually, I do miss the opportunity to meet a number of you who have, in the past, attended our EGM -- AGMs in person. It is always a pleasure to meet unitholders in person and hear your feedback, and we hope to move to a hybrid model where we will be able to connect with all of you, either virtually or in person at future AGMs. As Kelly mentioned, I will take you through a brief presentation on our highlights from 2019 and our objectives for 2020, which you should hopefully all be able to see on the right-hand side of the screen and then we can take your questions at the end. If there are any questions that we miss, please reach out to our Investor Relations' e-mail shown at the end of the presentation and on our website. [Operator Instructions] If there are any formatting errors on today's slides, please note that the full presentation will be posted on our website following the meeting. First, you should all be able to see the cover page with a photo of our new asset in Dallas, a brand-new 4-storey e-commerce fulfillment center leased to Amazon for 20 years. It was completed in November 2019 and reflects our continued investment focus on e-commerce and logistics real estate. I'll now move to Slide 3, which provides an overview of Granite as at the end of 2019. As you can see, we finished the year in a very strong financial position. We also made significant progress against our strategic objectives and made important enhancements to our platform and ESG programs. Instead of covering each point, I will highlight a few major changes from the previous year. Our portfolio grew from 32 million to 40 million square feet and from $3.4 billion in value to $4.5 billion. Our market cap increased from $2.4 to $3.7 billion, an increase of over 50%, and our enterprise value increased from $3 billion to $4.6 billion. Our Magna concentration by revenue fell from 54% to 42%, and the weighted average lease term of our tenants actually increased from 6 to 6.5 years, providing a bit more cash flow stability. Slide 4, titled Corporate Objectives Recap, summarizes the progress against our corporate targets for 2019. With the exception of planned dispositions of noncore assets, which came in slightly below expectations, we met or exceeded our targets for the year. Investment for 2019 totaled nearly $1 billion, funded primarily by the successful completion of 2 equity offerings totaling approximately $525 million and proceeds from the sale of noncore assets in 2018. Despite the short-term dilution from the equity offerings, free cash flow or AFFO per unit grew by 17% over the previous year. The next slide provides further detail on the major milestones performance metrics for the year. 2019 was again a very active year for Granite. And as you can see, the slide is accordingly very busy. I have already touched upon our financial highlights and the allocation of capital. I will now use this slide to highlight a few operational and organizational milestones. Operationally, performance was strong. The team completed almost 3 million square feet of renewals and new leases in the year and generated very respectable same-property NOI growth of 4.5%. And I am pleased to report that our portfolio has held up well during this lockdown, a testament to the quality of our tenants. We also made enhancements to our platform and ESG program. Witsard Schaper and Jon Sorg were appointed as our new Heads of Europe and the U.S., respectively. Witsard and Jon will improve our investment and operational capabilities in their respective regions. In addition, we also welcome Fern Grodner and Sheila Murray as new trustees in 2019. Fern currently sits as a member of our investment committee, and Sheila serves as a member of our compensation, governance and nomination committee and both have been outstanding additions to our Board of Trustees. Slide 6, titled ESG Commitment, provides a high-level summary of our ESG activities in 2019. Delivering returns for unitholders has always been our core mission, but doing so responsibly is part of our DNA at Granite. Building upon our sustainability plan, announced in 2019, we have incorporated ESG principles and practices comprehensively in our decision-making processes and in our corporate policies. You will all have noticed that we elected to deliver our proxy materials using notice of access procedure, which effectively eliminated hundreds of thousands of pages of printed materials. And further to the highlights on this slide, most of you have likely seen the announcement regarding Granite's $500 million 7-year green bond offering launched on Tuesday. The offering was extremely well received with over $3.3 billion in demand, the second highest demand ever recorded in Canada for a REIT bond. The proceeds will be used to fund the acquisition and development of certified green buildings as well as for various energy conservation and climate change adaptation measures. The $500 million is the largest green bond ever offered by a Canadian REIT and reflects our deep commitment to sustainable investment and development. The following slide, commitment to green investment, provides a few examples of our certified green building development projects. The 2 on the left are located in the Netherlands and the 1 on the right was constructed on existing vacant land at our property in the AllPoints market in Indianapolis. All are being delivered in 2020. The facility in the middle is a new concept grocery e-commerce fulfillment center being delivered for Ahold, a global food retailer and will feature an entire fleet of electric delivery vehicles once complete in September of this year, and we are very proud to have this property to our portfolio. Now I'll turn my attention to our total return performance for 2019 on Slide 8 presented in the same format as last year and illustrates our relative performance to the REIT Index and the TSX Composite Index through the end of 2019 and up to May 15 this year. I'm happy to report that our outperformance over the short and longer term continues on a relative basis, and our total return for 2019 was approximately 30%. With the obvious impact of the pandemic and restrictions on global economies and markets, we thought it would be useful to include a slide, Slide 9, showing our year-to-date performance, again, on a relative basis. The results are similar to those from the previous slide. Slide 10 now outlines our corporate objectives for 2020. In 2019, we continued to put the building blocks in place to generate long-term value for unitholders. Particularly given the challenging circumstances we all find ourselves in, 2020 for Granite will be about continuing to prudently execute on our strategic plan. With the successful completion of our recent equity offering and the expected closing of our bond offering, we are very well positioned to achieve our corporate objectives while maintaining the strength of our balance sheet. In closing, our leadership and management teams are captured in the final 2 slides. Leadership and teamwork have been a critical part of our success these past few months, and we will continue to work together as a team for our unitholders. On behalf of the entire Granite team, thank you for your time today and for your continued support.

Thank you, Kevan. And on behalf of trustees, my partners on the Board, we would just like to congratulate the senior management team for their effort, their focus and through a very, very difficult time. We all recognize that our business was fortunate. It has not been directly negatively impacted by the virus. And to be honest, that's just good luck, good fortune. And so we're humbled by that. But equally, the team has taken upon this situation and worked diligently and hard towards growing the business, and shown great courage in making transactions that I think will make our business even more successful in the future. So as I say, on behalf of my fellow trustees, we would like to thank them and look forward to a successful year. We would now like to invite any supplemental questions from unitholders or proxy holders present at the meeting. As with the physical meeting, we will observe the same protocols of appropriateness and relevance to the meetings. Rest assured, we will not be attempting to limit or filter legitimate questions, and we do our best to address issues raised. [Operator Instructions] We will now give attendees a moment to type in their questions. As there are no questions, on behalf of the Board and management of Granite REIT, I would like to thank you -- thank all of our unitholders as well as others who have joined us today for your support and your attendance at this meeting. Thank you.

This concludes the meeting. You may now disconnect.