Granite Real Estate Investment Trust has added almost a million square feet of leasable space to its portfolio with the acquisitions of leasehold interest in two large, new Mississauga distribution centres.
Granite (CRT.UN-T) paid $154 million for the properties, which comprise approximately 943,000 square feet. The price represents a going-in yield of approximately 4.5 per cent, which it says will be “significantly enhanced” by rental growth and future expansion.
“This core acquisition provides a strong combination of cash flow stability and growth for our unitholders, while increasing our presence in the GTA and advancing our strategy of acquiring and developing institutional quality assets in key e-commerce and distribution markets,” said Granite CEO and president Kevan Gorrie in a release. “These assets are exceptionally well-located and exemplify some of the highest-quality e-commerce and food distribution product in Canada.
“They will be great additions to our portfolio.”
The warehouses were completed in 2018 to the “highest design specifications,” Granite says, including 40-foot clear heights to offer superior capacity. The site also offers multiple entry and exit points, with easy access to the airport and Toronto’s major highway system, including Highways 401, 410 and 427.
The two buildings are situated on approximately 45 acres of land, leased to Granite until 2056, subject to a further eight-year extension option.
About the buildings
2020 Logistics Drive: This is a 773,318-square-foot, state-of-the-art e-commerce distribution centre. The 40-foot clear height, dual-load building features modern e-commerce design specifications including 138 truck-level doors, LED lighting, eight-foot reinforced floors, 65-foot loading bays and optimal column spacing. E-commerce retailer Wayfair Inc., is the sole tenant, with a current lease at below-market rents and 6.4 years remaining in the contract.
2095 Logistics Drive: This is a 170,018-square-foot, state-of-the-art freezer/cooler building. The 40-foot, 10-inch clear height facility has 28 shipping doors, LED lighting, 10-inch reinforced floors and ample car parking. It is 100 per cent leased to Congebec Inc. on a long-term lease. The building is to be expanded by about 59,000 square feet during the next 36 months. Granite projects this to generate additional NOI at an 8.9 per cent yield.
The buildings, which sit in Mississauga just across the City of Toronto boundary, are in one of the tightest industrial submarkets in the country, with a vacancy rate of just 0.6 per cent. Granite says rents in the area have increased 16.8 per cent during the past 24 months, and it expects that growth to continue due to ongoing high demand and the limited availability of large land parcels in the area.
Granite funded the acquisition with existing cash on hand.
About Granite REIT
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. It owns over 85 rental income properties representing approximately 35 million square feet of leasable area.
Originally founded in 1998, Granite was a spinoff of Magna International, but has been extensively diversifying its holdings during recent years. The REIT is based in Toronto.