Fixed Income Investor Presentation April 2018

Transcription

1 Fixed Income Investor Presentation April

2 PRESENTATION OF CERTAIN INFORMATION Unless otherwise indicated in this presentation, all statistical and financial information is presented in Canadian dollars as of December 31, 2017 and all financial information that is identified as LTM or LTM Q refers to the 12-month period ending December 31, This presentation may contain statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements " or forward-looking information within the meaning of applicable securities legislation, including the United States Securities Act of 1933 as amended, the United States Securities Exchange Act of 1934 as amended, and applicable Canadian securities legislation. Forward-looking statements and forwardlooking information may include, among others, statements regarding Granite s future plans, goals, strategies, intentions, beliefs, estimates, costs, objectives, economic performance or expectations, or the assumptions underlying any of the foregoing. Words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate, seek and similar expressions are used to identify forwardlooking statements and forward-looking information. Forward-looking statements and forward-looking information 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. There can also be no assurance that the expansion and diversification of Granite s real estate portfolio and the reduction in Granite s exposure to Magna and the special purpose properties; the ability of Granite to find satisfactory acquisition, joint venture and development opportunities; Granite s ability to dispose of any non-core assets on satisfactory terms; the expected revenues from new leasing activity; any increase in Granite s leverage; and the expected amount of any distributions, including any expected increases, can be achieved in a timely manner, with the expected impact or at all. Forward-looking statements and forward-looking information 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 Granite's control, that could cause actual events or results to differ materially from such forward looking statements and forward-looking information. Important factors that could cause such differences include, but are not limited to: the risk of changes to tax or other laws and treaties that may adversely affect Granite REIT s mutual fund trust status under the Income Tax Act (Canada) or the effective tax rate in other jurisdictions in which Granite operates; economic, market and competitive conditions and other risks that may adversely affect Granite s ability to expand and diversify its real estate portfolio, dispose of any non-core assets on satisfactory terms, and increase its leverage; and the risks set forth in the Annual Information Form of Granite REIT and Granite REIT Inc. dated March 1, The Risk Factors section of the Annual Information Form also contains information about the material factors or assumptions underlying such forward-looking statements and forward-looking information, and is incorporated herein by reference. This presentation is qualified in its entirety by the information in such risk factors, which readers are strongly advised to review. Forward-looking statements and forward-looking information speak only as of the date the statements and information were made and unless otherwise required by applicable securities laws, Granite expressly disclaims any intention and undertakes no obligation to update or revise any forward-looking statements or forward-looking information contained in this presentation to reflect subsequent information, events or circumstances or otherwise. 2

3 GRANITE OVERVIEW Description Portfolio Owner and manager of industrial, warehouse and logistics properties Operates in nine countries in North America and Europe (1) Magna International Inc. (A- / A (low) / A3) and its operating subsidiaries ( Magna ) as the largest tenant Creditworthy tenant base (8) 86 income-producing properties (8) 30.1 M square feet (8) $2.8 B in property value 6.0 years of weighted average lease term ( WALT ) (2) (8) Financial Information Public Listing (3) $222.6 M in annual revenue $158 M in Funds From Operations ( FFO ) (3)(4) (5) 78% FFO payout ratio (3) (6) 25% net leverage ratio (3) (4) (5) GRT.UN on TSX and GRP.U on NYSE Market cap of $2.3 B and enterprise value of $2.8 B Granite elects 5 new Board members (of 8) in June 2017 Investment grade ratings with stable outlook (BBB / Baa2) (7) Global industrial real estate platform (1) Ratings (S&P / DBRS / Moody s) based on public filings of Magna International Inc. (2) WALT is defined as weighted average lease term based on square footage. (3) Figures are for the 12-month period ended December 31, 2017 and include tenant recovery revenue. (4) FFO and FFO payout ratio are non-ifrs measures. For definitions see Appendix. (5) Granite received $1.6M in lease termination and close-out fee revenue in Q3 2017, incurred $5.9M of expenses relating to the proxy contest in Q2 2017, and $11.9M in costs relating to the redemption of debentures in Q These amounts are excluded from FFO and FFO payout ratios. (6) Net leverage ratio is calculated as the face value of total debt including the cross currency interest rate swap less cash divided by the fair value of investment properties. (7) Ratings from DBRS / Moody s. (8) Figures include proforma acquisitions & dispositions recently announced. 3

4 INVESTMENT HIGHLIGHTS (1) Global industrial property portfolio Strategically located in Canada, US and Europe Unique and high quality portfolio of large scale properties 98.7% occupied Strong track record of profitability and stable cash flow generation Consistent growth in FFO per unit since January 2012 Conservative payout ratio Diverse and creditworthy tenant base 42 tenants across broad spectrum of industries Magna, a technology company and one of the world s largest automotive suppliers, is the principal tenant representing 69% of 2017 annualized revenue, 59% of GLA Favourable lease terms Predominantly net lease structure with tenant responsible for operating costs Contractual rent escalators typical both during term and upon renewal WALT of 6.0 years overall and 8.7 years for special purpose properties Industry leading balance sheet provides a pathway for accelerated growth Unencumbered assets, low leverage and investment grade ratings (BBB \ Baa2) Foreign denominated debt provides partial natural currency hedge Potential for further diversification and optimization of portfolio Growth opportunities through development and acquisitions Continue to divest non-core assets (1) Figures include proforma acquisitions & dispositions recently announced. 4

5 GRANITE EVOLUTION THEN & NOW Income-Producing Properties Summary Then December 31, 2011 Now December 31, 2017 (1) 90 Multi- Purpose $802M $1.9B Value 15 Special Purpose $1,089M 54 Multi- Purpose $730M $2.8B Value 23 Modern Logistics / Distribution Warehouse $864M 9 Special Purpose $1,210M % 11% 86 59% 16% # of Income- Producing Properties Magna % of GLA Net Leverage Ratio # of Income- Producing Properties Magna % of GLA Net Leverage Ratio De-risked the portfolio while maintaining low leverage, creating value and enhancing debt capacity (1) Figures include proforma acquisitions & dispositions recently announced. 5

6 STRATEGIC PRIORITIES Build a high quality diversified industrial real estate business by growing and diversifying Granite s asset base Accelerate Growth & Diversification Leverage Granite s geographic footprint to seek investment opportunities that: o Meet Granite s investment criteria and disciplined approach o Are opportunistic in terms of the real estate cycle o Are accretive to both FFO and AFFO Explore and pursue: o Property, portfolio and company acquisitions and development opportunities o Joint venture and similar arrangements with local partners Reduce Magna concentration over the long term Replace income sold Optimize Value of Core Business Actively manage Granite s core portfolio for value creation opportunities: o Manage and optimize operating efficiencies of core business o Support growth of tenants, including Magna, where economics justify doing so o Recycle non-core properties (primarily Magna tenanted) o Exploit development opportunities from existing portfolio Capital Structure Preserve investment grade rating, relatively low leverage and strong liquidity Target long term net leverage ratio of approximately 40% Use global footprint to access lowest cost and most flexible sources of capital Reduce overall cost of capital Return of Capital Since inception of NCIB, Granite has purchased 1,132,474 units ($56M) as of March 1, Seek to consistently grow distributions over the long term while retaining financial flexibility and a prudent FFO/AFFO payout ratio Strategic priorities to be guided by value creation potential on a risk-adjusted basis 6

7 RECENT TRANSACTIONS IDI Portfolio Pennsylvania & Indianapolis Assets 10 Asset Disposition Date October 2017 April 2018 January 2018 Location Cincinnati, OH/Memphis, TN Greencastle, PA/Plainfield, IN Newmarket, ON/ St Thomas, ON/ Bowling Green, KY # of Properties (incl. 3 SPP) Total SF 2.2 M SF 1.0 M SF 3.3M SF WALT 4.9 Yrs (1) 9.5 Yrs N/A Tenants Diversified Non-Auto Diversified Non-Auto Primarily Magna Going-In Yield 6.1% 5.5% 6.5% Total Consideration US$123 US$74M C$391M (1) Subsequent to acquisition, a new lease was signed increasing the WALT to 7.55Yrs currently. Significant Capital turnover in last 6 months 7

8 GRANITE HISTORICAL PERFORMANCE (1) Historical Operating Performance ($M) Cash Distributions and FFO payout % Revenue EBITDA FFO Cash Distributions per Unit FFO Payout % $181 $203 $170 $214 $216 $183 $181 $223 $223 $188 $185 85% 69% 68% 68% 71% 78% $145 $143 $154 $158 $162 $153 $110 $1.99 $2.11 $2.21 $2.30 $2.43 $ Track record of growth and stable cash flows with conservative payout *Distributions increased to an annualized amount of $2.72/unit beginning in January 2018 (1) For the year ended December 31 st, unless otherwise noted. These figures should be read in conjunction with Granite s audited combined financial statements for the years ended December 31, 2017, 2016, and 2015, together in each case with the Management s Discussion and Analysis of Results of Operations and Financial Position accompanying such financial statements, each of which is available on SEDAR at and each of which is incorporated by reference here in its entirety. (2) EBITDA, FFO and FFO payout % excludes certain large and/or unusual items such as lease termination and close-out fee revenue, costs relating to the redemption of debentures, proxy contest expenses, and withholding taxes that affect the comparability of financial results. 8

9 GLOBALLY DIVERSIFIED PORTFOLIO (1) Globally 30 Properties 5.6 M Square Feet 27 Properties 11.0 M Square Feet 11 Properties 8.1 M Square Feet 18 Properties 5.4 M Square Feet 86 Income-Producing Properties 30.1 M Square Feet (1) Figures include proforma acquisitions & dispositions recently announced. Global footprint with unique and large scale properties 9

10 PORTFOLIO SEGMENTATION BY GEOGRAPHY (1) By Income-Producing Property Fair Value By Rental Revenue (2) $455.4 M 16% 22% $608.9 M $36.3 M 18% 22% $57.3 M $780.0 M 28% $2.8 B Value 34% $962.4 M $60.9 M 31% $201.9 M Rental Revenue 30% $73.0 M By Square Feet By Number of Income-Producing Properties 5.4 M 18% 19% 5.6 M 18 21% 35% 27% 30.1 M Square Feet 11 13% 86 Properties 30 Canada US 8.1 M 36% 11.0 M 27 31% Austria Rest of Europe (Excl. Austria) (1) Figures include proforma acquisitions & dispositions recently announced. (2) Revenue figures are based on annualized. Geographically diversified asset base 10

11 PORTFOLIO SEGMENTATION BY CATEGORY Income-Producing Properties by Rental Revenue Segmented by Category Modern Logistics 23 Properties 10.1 M sqft $866.9 M Fair Value WALT: 4.5 years Special Purpose 9 Properties 10.5 M sqft Modern Logistics Recently acquired or newly developed / redeveloped within the last five years $55.4 M Rental Revenue 100% $1,210.4 M Fair Value 31% $201.9 M Rental Revenue (1) 43% WALT: 8.7 years Special Purpose Designed and built with unique features $88.6 M Rental Revenue 100% Multi-Purpose 26% 54 Properties 9.5 M sqft $730.4 M Fair Value WALT: 4.3 years Special Purpose Multi-Purpose Modern Logistics Multi-Purpose Tenantable by a wide variety of potential users 13% $57.9 M Rental Revenue 87% Magna Non-Magna Total Rental Revenue (1) of $201.9 M with an overall WALT of 6.0 years (1) Annualized revenue figures include proforma acquisitions & dispositions recently announced. 11

12 LEASE EXPIRATION PROFILE Overall WALT = 5.9 years Special Purpose WALT = 8.7 years Occupancy = 98.4% Total Rental Revenue (1) = $196.9 M Lease Expiration By Annualized Revenue & Beyond % of Annualized Revenue 8.1% 7.2% 7.7% 5.9% 12.4% 11.5% 47.2% Canada US Austria Rest of Europe (Excluding Austria) Staggered and geographically diversified lease maturity profile (1) Annualized revenue excluding tenant recoveries. For more information see MD&A in 2017 annual report. 12

13 TENANTS Select Current Tenants Total Rental Revenue 1 by Tenant 31% 41% 69% 59% by Revenue by GLA Non-Magna Magna Non-Magna tenants individually comprise of <10% of non-magna Rental Revenue (1) Figures include proforma acquisitions & dispositions recently announced. 13

14 PRINCIPAL TENANT MAGNA Overview Magna Property Summary Third largest global automotive supplier with operations in 28 countries and ~168 K employees US$38.9 B revenues; US$2.0 B Adjusted EBIT (9.9% Margin) Enterprise value (1) of US$24.2 B and market cap of US$20.6 B Customer Mix Product Mix 19% 18% 7% 7% 8% 25% 10% 11% 12% GM Fiat/Chrysler BMW Other 16% 9% 13% 14% Body/Chassis Ford Daimler AG Exterior Volkswagen Tooling Electronics Credit Attributes 14% 17% Powetrain Seating Assembly Closure Magna has 160 facilities in North America, 166 in Europe, 15 in South America, and 86 in Asia. Magna has US$316 M in 2018 operating lease commitments which represent Less than 1% of total 2017 COGS (US$33.3 B) ~US$6 / sqft Magna as a Proportion of Rental Revenue ($ M) (2) Magna is a high credit quality tenant (A- \ A (low) \ A3) Mission Critical assets Sticky tenant burdensome to move equipment to new facilities Heavily invested in facilities Equipment US$178 / sqft (US$12.3 B) Significant expansion History of: Timely and complete payments Renewals and extensions Expansion and investment Note: All information is based on Magna s public filings except for Granite s rental revenues from Magna. (1) Defined as market capitalization plus debt and non-controlling interests and less cash and cash equivalents as at December 31, (2) Figures include proforma acquisitions & dispositions recently announced. Rental income from Magna represent 69% of Granite s total revenue but < 1% of Magna s COGS Non-Magna $63 M 29% $201.9M Ann. Rental Revenue 71% Magna $139 M 14

15 ( $ M) CAPITAL STRUCTURE OVERVIEW (1) Capitalization ($ M) Debt Maturity Profile ($ M) (2) Unit Price (03/29/2018) $50.81 Units Outstanding (f/d) 45.9 Market Capitalization $2,331.7 Credit Facility (2) $0.0 Debentures 3.788% due Jul/21 $250.0 Debentures 3.873% due Nov/23 $400.0 Currency Interest Rate Swaps $61.5 Total Unsecured Debt $711.5 Less: Cash and Cash Equivalents (2)(3) ($255.0) Add: Non-controlling Interests $1.2 Enterprise Value $2,799.4 Available Liquidity ($ M) Cash and Cash Equivalents (2)(3) $255.0 Credit Facility Available (2) $500.0 Total Available Liquidity $ Available Liquidity under credit facility Credit Facility 2 Debentures 3.788% due July/21 swapped into euros with an effective interest rate of 2.68% Debentures 3.873% due Nov/23 swapped into euros with an effective interest rate of 2.43% Select Debt Metrics LTM EBITDA / Interest 9.5x Total Debt / LTM EBITDA 3.8x Total Debt / Fair Value of Investment Properties (3) 25% Net Debt / Fair Value of Investment Properties (3) 16% Unencumbered Assets / Unsecured Debt 3.9x Unencumbered assets and low leverage provide financial flexibility (1) Figures are as at December 31, 2017 unless noted otherwise. These figures should be read in conjunction with Granite s unaudited condensed combined financial statements for the three and nine month periods ended December 31, 2017 and the audited combined financial statements for the year ended December 31, 2016, together in each case with the Management s Discussion and Analysis of Results of Operations and Financial Position accompanying such financial statements, each of which are available on SEDAR at (2) Credit facility availability and cash balance as at April 9, Subsequent to December 31, 2017, Granite entered into a new $500M 5 year agreement. (3) Figures include proforma acquisitions & dispositions recently announced. 15

16 CREDIT METRICS SUMMARY The following table was sourced from DBRS Canadian Real Estate Peer Comparison dated June The peer figures presented are as at Q while Granite s figures are as at Q DBRS Canadian Real Estate Peer Comparison (1) : Peer Group Granite Rank Granite Average Among Peer Group Total Debt to Capital 31.4% 46.4% #1 Total Debt to EBITDA 3.6x 8.7x #1 Cash Flow to Total Debt 22.8% 8.9% #1 Debt Service Coverage 9.6x 2.5x #1 EBITDA Interest Coverage 9.5x 3.4x #1 Distributions to FFO (2) 80.1% 75.8% #2 Granite s balance sheet offers a competitive advantage for growth (1) Source: DBRS Canadian Real Estate Peer Comparison June Certain terms used, such as EBITDA and FFO, do not have standardized meanings under IFRS and as such may not be comparable between the Canadian Real Estate Peer issuers used in the study. (2) Based on Canadian Real Estate Peers excluding Morguard Corporation. 16

17 FINANCIAL FLEXIBILITY & TARGET LONG-TERM LEVERAGE RATIO Strong balance sheet provides a pathway for accelerated growth, diversification, and optimization of the portfolio Target long term leverage profile of approximately 40% while maintaining an opportunistic approach to acquisitions and development Long term leverage target fully reflected in current credit ratings from Moody s and DBRS Net Debt / Fair Value of Investment Properties Incremental Debt Capital 1 Incremental Debt Capital ($ M) 16% (current) N/A 30% $560 40% $1,120 50% $1,904 (1) Figures include proforma acquisitions & dispositions recently announced. Rating Agency Commentary Moody s 04/09/2018: Baa2 (Stable) The rating reflects the REIT's conservative balance sheet and strong credit metrics, including low leverage and high fixed charge coverage. Granite has a high quality pool of assets which are 100% unencumbered. Granite's unencumbered NOI coverage on unsecured interest expense was 4.7x as of year-end 2017, a key credit plus. A ratings upgrade would be contingent upon greater tenant diversification with Magna comprising less than 40% of Granite's total revenues, while maintaining net debt/ebitda closer to 5.5x, fixed charge coverage above 4.0x and secured debt % gross assets at or below 10%. DBRS 3/15/2018: BBB (Stable) The Stable rating outlook reflects DBRS s view that, in the near to medium term, Granite will lever the balance sheet and deploy several hundred million dollars to acquire accretive assets, primarily in the United States, potentially resulting in improving the diversification of the portfolio by reducing property/tenant/ geographic concentration risks while increasing leverage. Significant financial flexibility provides a pathway for accelerated growth, diversification, and optimization of the portfolio Current ratings profile reflects target leverage 17

18 KEY DIFFERENCES BETWEEN GRANITE AND OTHER REITS Unique asset base Unencumbered assets and low leverage Significant liquidity and debt capacity Historically low maintenance capex / tenant improvements / leasing commissions Favourable operating leverage results in significant pass-through of cash flow Prudent payout ratio Not entirely dependent on capital markets for acquisition capital Patient and opportunistic approach to acquisitions and development Benefits of a REIT with the financial flexibility of a corporation 18

19 APPENDIX 19

20 IDI PORTFOLIO ACQUISITION SUMMARY Overview On October 6, 2017, Granite acquired a 100% interest in ~2.2M SF of logistics space located near Cincinnati, Ohio and Olive Branch, Mississippi (Memphis sub-market). The portfolio consists of modern logistic facilities located on ~115 acres of land. The price paid was US$122.8M and represents a 6.1% going-in yield. The properties have modern specifications, with clear heights of 32 feet, cross-dock capability, over 500 trailer parking spaces, with an average age of ~6 years. Property Detail Portfolio consists of two multi-tenant properties and one single tenant property, with a weighted average lease term (WALT) of 4.9 years. IDI transaction is consistent with Granite s stated strategy 20

21 DISPOSITION SUMMARY Overview Highlights On January 17, 2018, Granite entered into agreements to sell 10 properties for a total net sales price of $391M. Three of the ten properties are characterized by Granite as special purpose; representing 2.7M SF in St Thomas, ON and Bowling Green, KY. The total sales price for these three properties was ~$328M (7.1%cap rate). The remaining seven properties are all contiguous, and located in the Greater Toronto Area and represent approximately 0.6 million square feet on 45 acres of land. The total sales price for these seven assets is $63 million (4.5% cap rate). The benefits and highlights of these Transactions are summarized below: The total sales price of approximately $391 million for these ten properties represents nearly $70 million, or $1.50 per stapled unit, in excess of the values reported for them in Granite s 2017 third quarter report. Pro-forma, upon completion of the Transactions and based on gross leasable area: Granite s Magna concentration will reduce from approximately 65% to 61%; the proportion of Granite s portfolio comprising of high quality warehouse and logistics properties is expected to increase by 3% to approximately 31%; and the special purpose properties will reduce by 5% to approximately 36% of Granite s total portfolio Disposition is consistent with Granite s stated strategy 21

22 EXPERIENCED LEADERSHIP TEAM Michael Forsayeth Chief Executive Officer From June 2007 to July 2011, was Chief Financial Officer of Intrawest Over his 40 year career, has held senior executive financial and operating positions in several large public and private real estate, hospitality, transportation, manufacturing and financial companies Ilias Konstantopoulos Chief Financial Officer Over 25 years experience in corporate finance, M&A, and capital markets Previously Managing Partner at Brookfield Financial and Managing Director at BMO Capital Markets with extensive real estate industry and transaction experience Lorne Kumer Executive Vice President, Head Global Real Estate Over 25 years of experience in the real estate industry working for both public and private development companies Experience includes acquisitions, due diligence, leasing, land use and development approvals, sales and construction Michael Ramparas Vice President of Global Real Estate Over 10 years of broad work experience with a focus on real estate and equity investments, corporate underwriting, operations and valuations. Responsible for valuation analysis, property underwriting and the development of asset strategies and business plans for the portfolio. 22

23 GRANITE HISTORY Chronology of Key Events Over last 6 years, 23 properties acquired or developed valued at ~$840M, 41 non-core properties sold totaling $625 M 2011 January 2012 New executive team in place June 2012 Name change to Granite June 2014 Sale of Mexican portfolio to Magna (US$105 M, 8 properties, 2.4 M sqft) 2013 December 2014 Acquisition of US portfolio (US$69 M, 2 properties) Jan / Mar 2014 Graz leases extended 2015 Nov 2016 Don Clow appointed as Trustee & Director Sept 2016 Ilias Konstantopoulos appointed as CFO March 2016 Strategic review concluded October 2016 Early renewed or extended 15 leases (7 SPP), 7 M sqft June 2016 Speculative US development properties fully leased (2 properties, 1.4 M sqft) 2017 January 2018 Granite Unlocks Value with sale of 10 properties incl. 3 Special Purpose Assets for $391M Feb 2018 $500M 5-Yr Credit Facility signed. Now June 2011 New independent board February 2013 US property acquisitions October / November 2013 Europe portfolio acquisition ( 129 M, 7 properties) January 2013 REIT conversion (US$40 M, 2 properties) May / August 2013 US property acquisitions (US$42 M, 2 properties) November 2013 German property acquisition ( 7 M, 1 property) June 2015 Strategic review announced January 2017 Two building expansions acquired from Magna (~$71M) June 2017 Five new board members elected. October 2017 US property acquisitions (US$123M, 3 properties) April 2018 Granite acquired 2 properties in the US; ~1M SF for US$74.1million. Granite has undergone a significant transformation since the June 30, 2011 reorganization 23

24 PERFORMANCE MEASUREMENT (1) Key Definitions Funds From Operations (FFO) FFO Payout Ratio Net Operating Income (NOI) EBITDA FFO is considered an operating performance measure and is calculated as net income attributable to stapled unitholders excluding fair value gains (losses) on investment properties and financial instruments, gains (losses) on sale of investment properties including the associated current income tax, acquisition transaction costs, deferred income taxes and certain other items, net of non-controlling interests in such items. The Trust s determination of FFO follows the definition prescribed by the Real Estate Property Association of Canada ( REALPAC ) White Paper on Funds From Operations & Adjusted Funds From Operations for IFRS dated February Granite considers FFO to be a meaningful supplemental measure that can be used to determine the Trust s ability to service debt, finance capital expenditures and provide distributions to stapled unitholders. FFO is reconciled to net income, which is the most directly comparable IFRS measure; please see the MD&A dated March 1, FFO should not be construed as an alternative to net income or cash flow generated from operating activities determined in accordance with IFRS and is not reconciled to cash flow from operating activities, as the calculation of FFO does not consider changes in working capital items or adjust for certain other non-cash items that are included in the determination of cash flow from operating activities in accordance with IFRS. The FFO payout ratio is calculated as distributions declared to unitholders divided by FFO in a period and is a supplemental measure widely used by analysts and investors in evaluating the sustainability of the Trust s distributions to stapled unitholders. FFO payout ratio may exclude revenue or expenses incurred during a period that are unusual and can be a source of variance between periods. NOI is defined as rental revenue and tenant recoveries less property operating costs. Granite also uses NOI on a cash basis, which adjusts NOI for straight-line rent and tenant incentives amortization recognized during the period. Granite believes that NOI and NOI - cash basis are useful supplementary measures of the income generated by and operating performance of income-producing properties in addition to the most comparable IFRS measure, which Granite believes is revenue. Such measures are also key inputs in Granite s determination of the fair value of its investment property portfolio. EBITDA is calculated as net income before lease termination and close-out fees, interest expense and other financing costs, income tax expense, depreciation and amortization expense, early redemption costs, proxy contest expenses, fair value gains (losses) on investment properties and financial instruments, acquisition transaction costs, and gains (losses) on the sale of investment properties. EBITDA represents an operating cash flow measure. (1) See Management Discussion and Analysis dated November 7,

25 PERFORMANCE MEASUREMENT (1) Key Definitions Net income attributable to stapled unitholders Add (deduct): Fair value losses (gains) on investment properties, net (30.3) (73.1) (175.9) (212.1) Fair value losses (gains) on financial instruments 0.4 (0.1) (0.2) (0.8) Gain on Meadows holdback - (5.1) Acquisition transaction costs Loss (gain) on sale of investment properties (1.4) Current income tax expense associated with the sale of investment properties Deferred income tax expense (6.8) (41.9) Non-controlling interests relating to the above (0.1) (0.1) (0.1) FFO adjustments related to discontinued operations (3.1) 9.2 (0.8) FFO as reported Early redemption costs of unsecured debentures Proxy contest expenses Lease termination and close-out fee revenue (1.6) Withholding tax payment FFO excluding lease termination and close-out fee revenue, proxy contest expenses, early redemption costs of unsecured debentures and withholding tax payment Non-controlling interests Current income tax expense Depreciation and amortization Interest expense and other financing costs, net EBITDA (1) See Management Discussion and Analysis dated March 1,