Granite Real Estate Inc.

Good morning, ladies and gentlemen, and welcome to the conference call of Granite REIT. Speaking to you on the call this morning is Kevin Gorey, President and Chief Executive Officer, and Teresa Netto, Chief Financial Officer. Before we begin today's call, I would like to remind you that statements and information made in today's discussion may constitute forward-looking statements and forward-looking information, including but not limited to expectations regarding future earnings, and capital expenditures, as well as the potential impact of COVID-19 on Granite's operations, and that actual results could differ material from any conclusion, forecast, or projection. These statements and information are based on certain material facts or assumptions, reflect management's current expectations, and are subject to known and unknown risks and uncertainties. These risks and uncertainties are discussed in Granite's material filed with the Canadian Securities Administrators, and the U.S. Securities and Exchange Commission from time to time, including the risk factor section of its annual information form for 2020, filed on March 4, 2020. Readers are cautioned not to place undue reliance on any of these forward-looking statements and forward-looking information. Granite undertakes no intention or obligation to update or revise any of these forward-looking statements or forward-looking information. whether as a result of new information, future events, or otherwise, except as required by law. In addition, the remarks this morning may include financial terms and measures that do not have a standardized meaning under international financial reporting standards. Please refer to the Q1 2020 condensed combined unaudited financial results and management's discussion and analysis of Granite Real Estate Investment Trust and Granite Read, Inc., and other materials filed with the Canadian Securities Administrators and U.S. Securities and Exchange Commission from time to time for additional relevant information. I will now turn the call over to Kevin Gorey. Please go ahead.

Thank you. Good morning, everyone. Thank you for taking the time to join us for our Q1 earnings call. As usual, I am pleased to be joined by Teresa Meadow, our CFO, Oren Kuhner, our Executive Vice President of Real Estate, and Michael Ramperis, Senior Vice President of Investments and Global Real Estate. First and foremost, I hope that everyone is healthy and holding up well during this lockdown. For our call this morning, Teresa will begin our discussion with a review of the financial highlights. I will then provide an update on our operations, acquisitions, developments, and ESG, and then we can open up the call for any questions that you may have. Teresa, over to you.

Thanks, Kevin, and good morning, everyone. First off, before I get started, I do want to apologize for releasing the results a little bit late yesterday, particularly when we had a 9 a.m. call this morning. So I do apologize for that and hopefully strive to do a little bit better next year. Granting posted a strong first quarter, delivering solid same property NOI and low-budget FSO per unit growth relative to the prior year. FFO per unit in Q1 was $1.05, a $0.16 increase relative to prior year and $0.14 higher than Q4 2019. Included in this quarter, FFO is a $2.8 million foreign currency gain on foreign cash held, as well as the reversal of $800,000 of current contact provisions in Canada relating to the 2013 tax year that has become statute part. Excluding these two items, FFO per unit would be $0.98, which is $0.09 or 10.1% higher than prior year, and $0.07 or 7.7% higher than Q4 2019. FFO has been positively impacted by strong state property growth, the full quarter impact of 2019 acquisitions, and lower interest expense as a result of term loan refinances completed in the fourth quarter last year. The impact of foreign exchange translation in the quarter was minimal, as the U.S. average dollar relative to the Canadian dollar was 1% stronger, partially offset by the euro, which was 2% weaker relative to the Canadian dollar. However, at the end of the quarter, the Canadian dollar weakened significantly by approximately 9% relative to the U.S. dollar and 7% relative to the euro and continues to remain weak at this time. The weakening of the Canadian dollar will have a favorable impact on Granite's NOI, FFO, and ASFO, while foreign currency rates remain at this level. Generally, a one-cent change in either U.S. dollar or Euro FX rates relative to the Canadian dollar will result in an approximate one-cent per unit change in FFO or ASFO. Granted, ASFO on a per unit basis in Q1 was $1.03, which is $0.16 higher than prior year and $0.14 higher than Q4 2019. Excluding the foreign currency gain or cash and reversal of the tax provision mentioned earlier, ASFO per unit would have been $0.96, which is $0.09 or 10.3% higher than prior year and $0.07 or 7.9% higher than Q4 2019. ASFO per unit was favorably impacted by higher FFO per unit, while ASFO-related capital expenditures, leasing costs, and tenant incentives incurred in the quarter of $1.1 million was consistent with the same period last year and lower than Q4 2019. Looking forward to 2020, we are estimating total maintenance capital expenditures, leasing costs, and commissions to reach approximately $14 million for the year, which includes approximately $4 million of recoverable maintenance CapEx that was pushed out from 2019. As a result of a relatively low CapEx quarter and strong FFO performance, the ASFO payout ratio came in at 70% for the first quarter. Operating metrics continue to demonstrate positive momentum. NOI on a cash basis for the quarter increased $12.7 million, or 23% from the same quarter in 2019, and $4 million, or 6.3%, from the fourth quarter of 2019. Same property NOI for Q1 came in strong relative to the same period last year, increasing 3.4%, and on a constant currency basis, increasing 4.2%. Driven by occupancy gains in the GTA and New Jersey, contractual rent increases, and rent from an expansion completed at one of our West Jefferson, Ohio properties. Excluding this expansion rent, same property NOI for the quarter is 2.7% and on a constant currency basis, 3.4%. G&A for the quarter was $2.2 million lower than the same quarter last year and $2.3 million lower than the fourth quarter of 2019. In this quarter, Granite realized a fair value gain of $1.5 million as a result of remeasuring its unit-based compensation liabilities, positively impacting G&A. Looking out to fiscal 2020, GNA is estimated to be approximately $7.5 to $8 million per quarter, which includes about $1.6 million of non-cash compensation expense per quarter, but assumes no fair value losses or gains associated with the increase or decrease in non-cash compensation liabilities, which can't be predicted at this time. With respect to current income tax, we are estimating about $2.2 million in current income tax per quarter for the remainder of the year. We have another potential reversal of $1.7 million of tax revisions in Q4 of this year, but it is too early to assess whether these tax assets can be realized at this time. The trust balance sheet comprising total assets of approximately $5.1 billion at the end of the first quarter increased by $315 million since the end of 2019, driven mostly by $278 million translation gains on Granite's foreign-based investment properties, and a net $36 million fair value gain recognized on the trust's investment property portfolio. This fair value gain is primarily attributable to the trust's property in Dallas, Texas, partially offset by fair value reductions in a number of the trust's Austrian and German assets. The trust's overall weighted average cap rate decreased 10 basis points to 6% relative to the end of 2019. During the month of March, Granite was active under the acquiring just under 491,000 units at an average price of $50.95 for consideration of $25 million. The NCIB activity was placed on hold at the end of March to preserve credit liquidity in light of the uncertainty around COVID-19 pandemic. Net leverage as of March 31 was 22%, only slightly higher by 1% from before March. And the trust's current liquidity is approximately $730 million, representing cash on hand of about $230 million and the undrawn operating facility of $500. I'll now turn the call over to Kevin, who will discuss further operations results. Thank you. Kevin?