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Granite REIT (TSX:GRT.UN) is the largest pure-play industrial REIT in the Canadian market. The name may be familiar to some as Granite has been associated with Magna International (TSX:MG) for most of its history. Nearly a decade ago, the entire property portfolio was essentially rented to Magna, but the story has changed quite a bit over the past few years. While Magna provided stable cash flows for the REIT, the single source tenant concentration and lack of growth was rather problematic.
About Granite Real Estate Investment TrustLast updated Mar 23, 2023, 05:58:41am EDT
Management decided to pivot a few years ago by aggressively building a ‘light’ industrial portfolio which could benefit from the secular tailwinds associated with e-commerce. This was a wise move, and has been executed quite well by the management team. When we say ‘light’ industrial property, we’re referring to modern warehousing, distribution, and logistics property which has been one of the best performing asset classes within the REIT universe. Demand for this type of industrial property has surged in recent years, outstripping supply in most markets, and leading to consistent appreciation in property value.
Looking ahead, ‘light’ industrial portfolios are positioned very well to drive impressive rent growth while maintaining high occupancy rates. Today, Granite rakes in roughly 70% of its annual rental income from its modern industrial portfolio, while its Magna-centric portfolio contributes roughly 21% of total rental revenue. We expect this trend will continue in the years ahead as it further expands its modern portfolio in Ontario, the U.S., and European markets.