A Member of Pat McKeough’s Inner Circle recently asked for his advice on a Canadian-based REIT engaged in the acquisition, development, ownership and management of 141 logistics, warehouse and industrial properties in North America and Europe.
Pat likes the trust’s disciplined acquisition strategy and consistent expansion in core markets as well as its broad portfolio of logistics and industrial properties. However, Pat notes the portfolio is sensitive to cyclical shifts, interest rate changes and economic downturns that could pressure tenant demand or rental rates.
Granite Real Estate Investment Trust (Symbol GRT.UN on Toronto; www.granitereit.com) is a real estate investment trust, or REIT. It owns, manages and operates a portfolio of diversified industrial properties.
Granite, originally a part of Magna International Inc., was spun off as a public company in 2003. It converted to a REIT in January 2013.
The trust acquires, develops, owns, and manages logistics, warehouse, and industrial holdings in North America and Europe. As of June 30, 2025, it held 141 investment properties in five countries, comprising 60.6 million square feet of leasable area. Its occupancy rate is 96.5%.
Granite’s investment properties consist of both income-producing and development properties. The income-producing properties consist mostly of logistics, e-commerce and distribution warehouses, and both light and heavy industrial manufacturing facilities.
Granite is currently completing two development projects. The first is in Brantford, Ontario, where it’s finishing the approval process for up to 700,000 square feet. The second is in Houston, Texas, where it has started site infrastructure work on a 1.3 million square-foot project.
On August 1, 2024, Granite completed the 49,000 square-foot expansion of its 100,000 square-foot industrial facility in Ajax, Ontario. On August 30, 2024, it completed the 52,000 square-foot expansion of its distribution facility in Weert, Netherlands.
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As of June 30, 2025, the REIT’s largest tenant was Magna, which accounted for 28% of the annualized revenue. Notably, in 2012, Magna contributed 97% of the REIT’s lease payments.
Rising rental rates bode well for future cash flow
In the three months ended June 30, 2025, Granite’s revenue rose 6.4%, to $149.3 million from $140.3 million a year earlier. Revenue was higher mostly due to increased renewal and re-leasing activity, as well as upward rent adjustments.
Granite’s cash flow in the quarter was $75.1 million, or $1.23 a unit. That was up 1.8% from $73.8 million, or $1.17 a unit. Cash flow rose less quickly than revenue because costs rose from a year earlier.
The growth of industrial real estate is moderating as the demand for e-commerce and retail warehousing decreases. But the outlook for this sector remains positive, as the supply of industrial real estate remains tight. Meanwhile, rents continue to rise.
Granite shares trade at just 13.3 times the forecast 2025 cash flow of $5.21 a unit. The REIT raised its monthly distribution by 3.0% with the January 2025 payment, to $0.2833 a unit from $0.2750. The units yield a high 4.4%.
Recommendation in Pat’s Inner Circle: Granite Real Estate Investment Trust is okay to hold.
