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 Theresa 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 potential impact of COVID-19, and that actual results could differ materially 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 factors 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 standardized meaning under international financial reporting standards. please refer to the Q3 2020 Condensed Combined Unaudited Financial Results and Management Discussion and Analysis of Granite Real Estate Investment Trusts and Granite Reef, Inc., and other materials filed with 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.

Thank you, operator, and thank you, everyone, for taking the time to join us for our Q3 earnings call. I hope you're all doing well. As usual, I am pleased to be joined this morning by Theresa Netto, our CFO, Warren Coomer, our Executive Vice President of Real Estate, and Michael Wren-Parris, our Senior Vice President, Global Real Estate, and Head of Investments. For our call this morning, Theresa will begin our discussion with a review of our financial highlights. And then I will provide an update on our operations, acquisitions, development, and ESG, and then open up the call to any questions that you may have. Teresa?

Thanks, Kevin, and good morning, everyone. Granton's third quarter delivered solid financial results with a continuation of strong same-property NOI and ASFO per unit growth relative to prior year. FFO per unit in Q3 was 96 cents, a 3 cent or 3% increase relative to prior year and 1 cent lower than Q2 2020. Included in this quarter's FFO is a severance charge of 1.1 million related to the departure of a senior management member. Excluding the severance item, FFO per unit would be 98 cents on a more comparable basis. Further, we continue to realize fair value losses related to the revaluation of trustee deferred stapled unit liabilities due to the increase in granted unit price, which negatively impacted the third quarter with a half a million dollar expense or close to one cent of SFO per unit. SFO this quarter has been positively impacted by strong same property and a wide growth, but was partially offset by net negative foreign exchange translation of our foreign-based income representing over 85% of our FFO as the U.S. dollar weakened by 3.9%, while the Euro strengthened 2% on average in Q3 relative to Q2. Part of this foreign currency translation loss is mitigated through Granite's hedging program, which utilizes derivatives that protects Granite against significant declines of both U.S. dollar and Euro. The settlement of such foreign exchange derivatives resulted in approximately $0.3 million of net foreign exchange gains realized in the third quarter, partially offsetting the translation losses. In addition, SFO per unit this quarter continued to be impacted by the temporary dilutive impact of the $289 million equity offering completed late in the second quarter, where the net proceeds have not yet been fully deployed, and the higher interest rate expense from the $500 million green bond also issued in June. Granted, ASFO on a per-unit basis in Q3 was $0.91, which is $0.01 or 1% higher than prior year, but $0.02 lower than Q2. Excluding this impact of the severance expense previously mentioned, ASFO per unit on a more comparable basis for Q3 is $0.93, essentially flat to Q2. ASFO-related capital expenditures, leasing costs, and tenant incentives incurred in this quarter were light at $0.8 million. which was lower than $1.6 million incurred in the same quarter last year and lower than the $2 million incurred in Q2. For the fourth quarter, we are estimating total maintenance capital expenditures, leasing commissions and tenant allowances of approximately $2 to $2.5 million for a total year estimate of about $5.9 to $6.5 million. This year's maintenance capex came in lighter than expected due to the delay of certain projects of the spring and summer months and is not reflective of forward maintenance capex trends. We are expecting maintenance capex, tenant allowance and leasing costs to increase in 2021 to approximately 15 million or about 30 cents per square foot. ASFO also continues to be impacted by the temporary dilutive impact of the June equity and bond offerings mentioned earlier as well. As a result of a relatively low capex quarter and strong SFO performance, the AFFO payout ratio came in at 80% in the third quarter. NOI on a cash basis for the quarter increased $14.2 million or 23.5% from the same quarter last year and by $3.5 million or close to 5% from Q2. Same property NOI for Q3 came in very strong relative to Q3 last year, increasing 6%, and on a constant currency basis, increased 3%. Driven by occupancy gains in the GTA, New Jersey, and Oregon, contractual rent increases and rent from an expansion completed at one of our West Jefferson, Ohio properties. Excluding the expansion rent, same property NOI for the quarter is 5.4%, and on a constant currency basis, 2.4%. G&A for the quarter was $2.7 million higher than the same quarter last year and $0.6 million higher than Q2. The variance to last year is primarily due to the $1.1 million severance charge mentioned earlier and $1 million in higher fair value losses recognized related to unit-based compensation liability due to, again, an increase in grant unit prices quarter. For the fourth quarter, we estimate G&A will come in approximately $7.5 to $8 million, which includes approximately $1.6 million of non-cash compensation expense, but again, assumes no fair value losses or gains associated with the increase or decrease in our compensation liabilities, which we cannot predict. With respect to current income tax, for Q3 2020, current income tax was 2.2 million, up slightly, about 0.1 million from Q2, due to the foreign exchange impact on Euro-based current taxes. Current tax for Q4 should be consistent with Q3, excluding any current tax expected to be realized on the sale of this main asset. As mentioned on the first quarter earnings call, we have another potential reversal of 1.7 million of tax provisions in the fourth quarter, but cannot assess whether these tax assets can be realized at this time. The trust balance sheet comprising total assets of approximately $5.9 billion at the end of the third quarter was positively impacted by approximately $62 million in fair value gains to Granite's investment property portfolio, offset by approximately $19 million in translation losses on Granite's foreign-based investment properties, where the U.S. dollar weakness exceeded the impact of the strength in euros. The fair value gain of Granite's investment property portfolio is attributable to fair value gains in the Trust's GTA and U.S. properties, as well as the Trust's modern distribution warehouse assets in Germany, due to increases in fair market rent assumptions and declines in capitalization rates, partially offset by fair value reductions in a few of the Trust's Austrian assets. The Trust's overall weighted average cap rate of 5.8 decreased 20 basis points from the end of Q2. Total net leverage at September 30th was 24%, only slightly higher by 1% from Q2, and the trust's current liquidity is approximately $1 billion, representing cash on hand of about $540 million and the undrawn operating line of $499. Per former, the announced Atlanta acquisition liquidity is estimated to be just over $900 million. I will now turn the call over to Kevin. Thank you.