Granite’s new U.S. industrial buy has ‘significant’ growth potential

IMAGE: Granite has purchased three U.S. industrial properties including 120 Velocity Way in Louisville (top)_ and 201 Sunridge in Dallas (bottom). (Courtesy Granite REIT)

Granite has purchased three U.S. industrial properties including 120 Velocity Way near Louisville (top) and 201 Sunridge near Dallas (bottom). (Courtesy Granite REIT)

Granite Real Estate Investment Trust (GRT-UN-T) is acquiring three large U.S. logistics and industrial properties, which include “significant” future development potential, for about $227 million (all figures Canadian).

The portfolio encompasses approximately 1.7 million square feet of leasable area and the sites located in the major logistics markets of Dallas and Louisville. Granite says all three properties are fully leased, and the purchase price represents a going-in yield of about six per cent.

The remaining average lease term is 7.7 years.

“These acquisitions further our strategy of acquiring and developing an institutional quality portfolio in key e-commerce and distribution markets in North America and Europe,” said Granite president and CEO Kevan Gorrie in a prepared statement. “The assets are well-located in two of our U.S. target markets and provide a strong combination of stable and growing cash flow and significant potential for future development.”

Granite closed on the Louisville acquisition on Dec. 3 and expects the Dallas-area purchases to close before the end of Q1 2019.

Louisville acquisition

120 Velocity Way is a 721,050-square-foot, 36-foot clear height e-commerce fulfillment centre situated on 41.6 acres of land in Shepherdsville, Ky. The state-of-the-art facility was completed in 2018 and is 100 per cent leased to Jet.com, a Walmart e-commerce subsidiary, for a remaining term of 4.8 years.

The property is in the Bullitt County submarket of Louisville, providing access to approximately 65 per cent of the U.S. population within a day’s drive. It offers access to I-65 and proximity to the Louisville International Airport and Worldport, UPS’s largest worldwide air hub.

Dallas acquisitions

Granite has agreed to acquire 201 Sunridge Blvd., an 822,550-square-foot, 30-foot clear height distribution centre on 53.4 acres of land in Wilmer, Texas. Constructed in 2008, the property is 100 per cent leased to a subsidiary of Unilever for a remaining term of 9.5 years.

The property is located within the southeast Dallas-Fort Worth industrial market, less than 25 kilometres from downtown Dallas and approximately five kms from the Union Pacific Dallas Intermodal Terminal. Excess land on the property can support a building expansion of up to 250,000 square feet.

Granite has also agreed to acquire 3501 North Lancaster Hutchins Road, a 174.6 acre site, containing three buildings totalling 196,366 square feet, in Hutchins, Texas. The property is 100 per cent leased to a wholesale automotive auction company, for a remaining term of 10.4 years.

The property is also located within the southeast Dallas-Fort Worth industrial market, about 25 kms from downtown Dallas and three kms from the Union Pacific Dallas Intermodal Terminal. The gross leasable area of the existing buildings represents a site coverage ratio of only 2.6 per cent, providing significant potential for future development.

Both Dallas-area properties are subject to standard closing conditions and approvals.

Granite said funding for the acquisitions is being provided by existing cash on hand.

“Following our recently announced term loan financings totalling approximately $550 million at a fixed interest rate of 1.76 per cent for a weighted average term of 5.6 years, we expect these acquisitions to be highly accretive to FFO and AFFO per unit,” Gorrie said in the statement. “The financings also provide further liquidity for future investment.”

About Granite

Granite is a Canadian-based REIT engaged in the acquisition, development, ownership and management of industrial, warehouse and logistics properties in North America and Europe.

Granite owns more than 85 rental income properties representing approximately 33 million square feet of leasable area.

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