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Granite to resume commercial property Deals in Europe, the US

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Granite Real Estate Investment Trust is dusting off a pipeline of asset purchases it had planned before the global pandemic as the commercial property firm bets on growing demand for storage and warehouse space in developed economies.

[TORONTO] Granite Real Estate Investment Trust is dusting off a pipeline of asset purchases it had planned before the global pandemic as the commercial property firm bets on growing demand for storage and warehouse space in developed economies.

Toronto-based Granite raised C$789 million (S$820 million) through debt and equity deals last week as the business of industrial and logistic warehouses is re-emerging relatively unscathed from the crisis, Chief Financial Officer Teresa Neto said in an interview last week. The firm, which has operations in nine countries, will continue to focus on acquisitions in the US, Europe and the Greater Toronto Area, she said.

Global financial markets have been in recovery mode in recent weeks as government and central bank backstops provide comfort to investors just as countries move to reopen their economies. That in turn is making it easier for companies such as Granite to raise financing.

"We have a fairly large acquisition pipeline," said Ms Neto in a telephone interview. "We are now ready and we've moved things a little bit more forward with the existing pipeline that we have."

Granite issued C$500 million of seven-year green bonds at a spread of 260 basis points on June 2, Bloomberg data show. The debt transaction came after the company raised C$289 million by issuing new shares at C$68 apiece as its equity rose almost 70 per cent since late March when markets tumbled amid the global economic lockdown.

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While some of Granite's tenants such as auto-parts maker Magna International had to limit or shut down their activities, the firm's business hasn't been impacted "as significantly" as other commercial real estate companies that focus on offices and retail stores, Ms Neto said. Granite may even benefit from growing demand for storage and warehousing space as companies consider keeping larger inventories or producing more locally to be better protected from global supply line interruptions, she said.

Also Granite's business may be supported by an accelerated consumer shift toward online shopping as social distancing measures limit in-store purchases, Ms Neto said. On the flip side, it could be hurt by the slowdown in consumer spending due to the economic contraction. Magna and Amazon.com Inc are the firms' two largest tenants accounting for 41 per cent and 7 per cent of its annualized revenues.

"We have the benefit of being in the industrial asset class, in which the impact of Covid-19 is different than other asset categories, such as retail and office," Ms Neto said. "The majority of our portfolio is in modern distribution, logistics or e-commerce assets, and for the most part this kind of tenants has been less impacted by Covid-19."

While the company has the capital it needs to finance its existing pipeline of purchases, it is monitoring bond markets in case an opportunity arises to redeem early a C$250 million bond due in July 2021, Ms Neto said.

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