Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2017shares | |
Document and Entity Information | |
Entity Registrant Name | GRANITE REAL ESTATE INVESTMENT TRUST |
Entity Central Index Key | 1,564,538 |
Document Type | 40-F |
Document Period End Date | Dec. 31, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Stapled Units Outstanding | 46,903,302 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | FY |
Combined Balance Sheets
Combined Balance Sheets - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Non-current assets: | ||
Investment properties | CAD 2,733,568 | CAD 2,653,095 |
Deferred tax assets | 5,742 | 6,399 |
Fixed assets, net | 951 | 775 |
Other assets | 666 | 714 |
Total non-current assets | 2,740,927 | 2,660,983 |
Current assets: | ||
Assets held for sale | 391,453 | |
Accounts receivable | 2,310 | 1,066 |
Income taxes receivable | 180 | 381 |
Prepaid expenses and other | 2,029 | 2,434 |
Restricted cash | 515 | 563 |
Cash and cash equivalents | 69,019 | 246,215 |
Total assets | 3,206,433 | 2,911,642 |
Non-current liabilities: | ||
Unsecured debentures, net | 647,306 | 646,768 |
Cross currency interest rate swaps | 61,466 | 10,641 |
Deferred tax liabilities | 244,052 | 238,251 |
Other liability | 7,777 | |
Total non-current liabilities | 952,824 | 903,437 |
Current liabilities: | ||
Other liability | 8,968 | |
Deferred revenue | 3,965 | 5,489 |
Bank indebtedness | 32,552 | |
Accounts payable and accrued liabilities | 43,342 | 31,465 |
Distributions payable | 10,647 | 10,226 |
Income taxes payable | 16,273 | 11,289 |
Total liabilities | 1,068,571 | 961,906 |
Equity: | ||
Stapled unitholders' equity | 2,136,614 | 1,948,207 |
Non-controlling interests | 1,248 | 1,529 |
Total equity | 2,137,862 | 1,949,736 |
Total liabilities and equity | CAD 3,206,433 | CAD 2,911,642 |
Combined Statements of Income
Combined Statements of Income - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Combined Statements of Income | ||
Rental revenue and tenant recoveries | CAD 221,031 | CAD 223,401 |
Lease termination and close-out fees | 1,607 | |
Revenue | 222,638 | 223,401 |
Property operating costs | 9,300 | 7,638 |
General and administrative expenses | 26,066 | 27,960 |
Proxy contest expenses | 5,866 | |
Depreciation and amortization | 335 | 707 |
Interest expense and other financing costs, net | 19,471 | 19,587 |
Early redemption costs of unsecured debentures | 11,920 | |
Foreign exchange losses (gains), net | 572 | (374) |
Fair value gains on investment properties, net | (212,106) | (175,924) |
Fair value losses on financial instruments | 823 | 1,150 |
Acquisition transaction costs | 718 | |
Loss on sale of investment properties | 427 | 2,420 |
Income before income taxes | 371,166 | 328,317 |
Income tax expense | 13,418 | 47,625 |
Net income | 357,748 | 280,692 |
Net income attributable to: | ||
Stapled unitholders | 357,702 | 279,325 |
Non-controlling interests | 46 | 1,367 |
Net income | CAD 357,748 | CAD 280,692 |
Combined Statements of Comprehe
Combined Statements of Comprehensive Income - CAD CAD in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | ||
Combined Statements of Comprehensive Income | |||
Net income | CAD 357,748 | CAD 280,692 | |
Other comprehensive income (loss): | |||
Foreign currency translation adjustment | [1] | 17,825 | (81,689) |
Fair value gain (loss) on cross currency interest rate swaps | [1] | (51,213) | 13,162 |
Net foreign exchange gain (loss) on net investment hedge, includes income taxes of nil | [1] | (1,597) | 1,451 |
Total other comprehensive loss | (34,985) | (67,076) | |
Comprehensive income | 322,763 | 213,616 | |
Comprehensive income attributable to: | |||
Stapled unitholders | 322,534 | 212,559 | |
Non-controlling interests | 229 | 1,057 | |
Comprehensive income | CAD 322,763 | CAD 213,616 | |
[1] | Items that may be reclassified subsequently to net income if a foreign subsidiary is disposed of or hedges are terminated or no longer assessed as effective (note 2(h)). |
Combined Statements of Compreh5
Combined Statements of Comprehensive Income (Parenthetical) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Combined Statements of Comprehensive Income | ||
Incomes taxes, foreign exchange gain (loss) on investment hedge | CAD 0 | CAD 0 |
Combined Statements of Unithold
Combined Statements of Unitholders' Equity CAD in Thousands, $ in Millions | Stapled UnitsCADshares | Contributed surplusCAD | DeficitCAD | Accumulated other comprehensive income (loss)CAD | Stapled Unitholders' EquityUSD ($) | Stapled Unitholders' EquityCAD | Non-controlling interestsCAD | CAD |
Equity at beginning of period at Dec. 31, 2015 | CAD 2,124,198 | CAD 61,425 | CAD (557,092) | CAD 220,500 | CAD 1,849,031 | CAD 9,756 | CAD 1,858,787 | |
Balance at beginning of period (in units) at Dec. 31, 2015 | shares | 47,017,000 | |||||||
Net income | 279,325 | 279,325 | 1,367 | 280,692 | ||||
Other comprehensive income (loss) | (66,766) | (66,766) | (310) | (67,076) | ||||
Distributions | (114,293) | (114,293) | (461) | (114,754) | ||||
Acquisition of non-controlling interests (note 11) | (3,270) | $ (2.4) | (3,270) | (8,823) | (12,093) | |||
Units issued on exercise of stapled unit options | CAD 2,084 | 2,084 | 2,084 | |||||
Units issued on exercise of stapled unit options (in units) | shares | 50,000 | |||||||
Units issued under the stapled unit plan | CAD 2,097 | 2,097 | 2,097 | |||||
Units issued under the stapled unit plan (in units) | shares | 56,000 | |||||||
Units repurchased for cancellation | CAD (1) | (1) | (1) | |||||
Units repurchased for cancellation (in units) | shares | (20) | |||||||
Equity at end of period at Dec. 31, 2016 | CAD 2,128,378 | 61,425 | (395,330) | 153,734 | 1,948,207 | 1,529 | 1,949,736 | |
Balance at end of period (in units) at Dec. 31, 2016 | shares | 47,123,000 | |||||||
Net income | 357,702 | 357,702 | 46 | 357,748 | ||||
Other comprehensive income (loss) | (35,168) | (35,168) | 183 | (34,985) | ||||
Distributions | (123,058) | (123,058) | (510) | (123,568) | ||||
Units issued under the stapled unit plan | CAD 977 | 977 | 977 | |||||
Units issued under the stapled unit plan (in units) | shares | 22,000 | |||||||
Units repurchased for cancellation | CAD (10,895) | (1,151) | (12,046) | (12,046) | ||||
Units repurchased for cancellation (in units) | shares | (242,000) | |||||||
Equity at end of period at Dec. 31, 2017 | CAD 2,118,460 | CAD 60,274 | CAD (160,686) | CAD 118,566 | CAD 2,136,614 | CAD 1,248 | CAD 2,137,862 | |
Balance at end of period (in units) at Dec. 31, 2017 | shares | 46,903,000 |
Combined Statements of Cash Flo
Combined Statements of Cash Flows - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
OPERATING ACTIVITIES | ||
Net income | CAD 357,748 | CAD 280,692 |
Items not involving current cash flows | (192,530) | (121,864) |
Leasing commissions paid | (2,581) | (2,485) |
Tenant incentives paid | (1,036) | (1,174) |
Current income tax expense | 7,709 | 6,881 |
Income taxes paid | (3,468) | (225) |
Interest expense | 18,151 | 17,792 |
Interest paid | (17,719) | (19,585) |
Changes in working capital balances | (7,597) | (41) |
Cash provided by operating activities | 158,677 | 159,991 |
INVESTING ACTIVITIES | ||
Business acquisition | (153,979) | |
Proceeds from disposals, net | 39,594 | |
Capital expenditures - Maintenance or improvements | (10,736) | (2,063) |
Capital expenditures - Developments or expansions | (72,404) | (17,221) |
Payment of contingent consideration | (8,802) | |
Fixed asset additions | (553) | (225) |
Decrease (increase) in other assets | (175) | 496 |
Cash provided by (used in) investing activities | (237,847) | 11,779 |
FINANCING ACTIVITIES | ||
Distributions paid | (122,637) | (113,095) |
Proceeds from unsecured debentures | 400,008 | |
Repayment of unsecured debentures | (200,000) | |
Proceeds from secured long-term debt | 11,820 | |
Repayments of secured long-term debt | (106,662) | |
Proceeds from bank indebtedness | 121,097 | 96,595 |
Repayments of bank indebtedness | (90,142) | (114,521) |
Financing costs paid | (1,000) | (1,505) |
Termination of cross currency interest rate swap | (1,657) | |
Acquisition of non-controlling interests | (12,093) | |
Distributions to non-controlling interests | (510) | (461) |
Repurchase of stapled units | (12,046) | (1) |
Proceeds from units issued | 1,611 | |
Cash used in financing activities | (105,238) | (39,961) |
Effect of exchange rate changes on cash and cash equivalents | 7,212 | (4,749) |
Net increase (decrease) in cash and cash equivalents during the year | (177,196) | 127,060 |
Cash and cash equivalents, beginning of year | 246,215 | 119,155 |
Cash and cash equivalents, end of year | CAD 69,019 | CAD 246,215 |
NATURE AND DESCRIPTION OF THE T
NATURE AND DESCRIPTION OF THE TRUST | 12 Months Ended |
Dec. 31, 2017 | |
NATURE AND DESCRIPTION OF THE TRUST | |
NATURE AND DESCRIPTION OF THE TRUST | 1. NATURE AND DESCRIPTION OF THE TRUST Effective January 3, 2013, Granite Real Estate Inc. ("Granite Co.") completed its conversion from a corporate structure to a stapled unit real estate investment trust ("REIT") structure. All of the common shares of Granite Co. were exchanged, on a one-for-one basis, for stapled units, each of which consists of one unit of Granite Real Estate Investment Trust ("Granite REIT") and one common share of Granite REIT Inc. ("Granite GP"). Granite REIT is an unincorporated, open-ended, limited purpose trust established under and governed by the laws of the province of Ontario and created pursuant to a Declaration of Trust dated September 28, 2012 and as subsequently amended on January 3, 2013 and December 20, 2017. Granite GP was incorporated on September 28, 2012 under the Business Corporations Act (British Columbia). Granite REIT, Granite GP and their subsidiaries (together "Granite" or the "Trust") are carrying on the business previously conducted by Granite Co. The stapled units trade on the Toronto Stock Exchange and on the New York Stock Exchange. The principal office of Granite REIT is 77 King Street West, Suite 4010, P.O. Box 159, Toronto-Dominion Centre, Toronto, Ontario, M5K 1H1, Canada. The registered office of Granite GP is Suite 2600, Three Bentall Centre, 595 Burrard Street P.O. Box 49314, Vancouver, British Columbia, V7X 1L3, Canada. The Trust is a Canadian-based REIT engaged in the ownership and management of predominantly industrial, warehouse and logistics properties in North America and Europe. The Trust's tenant base includes Magna International Inc. and its operating subsidiaries (together "Magna") as its largest tenants, in addition to tenants from other industries. These combined financial statements were approved by the Board of Trustees of Granite REIT and Board of Directors of Granite GP on March 1, 2018. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES The accounting policies described below have been applied consistently to all periods presented in these combined financial statements. (a) Basis of Presentation and Statement of Compliance The combined financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). (b) Combined Financial Statements and Basis of Consolidation As a result of the REIT conversion described in note 1, the Trust does not have a single parent; however, each unit of Granite REIT and each share of Granite GP trade as a single stapled unit and accordingly, Granite REIT and Granite GP have identical ownership. Therefore, these financial statements have been prepared on a combined basis whereby the assets, liabilities and results of Granite GP and Granite REIT have been combined. The combined financial statements include the subsidiaries of Granite GP and Granite REIT. Subsidiaries are fully consolidated by Granite GP or Granite REIT from the date of acquisition, being the date on which control is obtained. The subsidiaries continue to be consolidated until the date that such control ceases. Control exists when Granite GP or Granite REIT have power, exposure or rights to variable returns and the ability to use their power over the entity to affect the amount of returns it generates. All intercompany balances, income and expenses and unrealized gains and losses resulting from intercompany transactions are eliminated. (c) Trust Units The stapled units are redeemable at the option of the holder and therefore are required to be accounted for as financial liabilities, except where certain exemption conditions are met, in which case redeemable instruments may be classified as equity. The attributes of the stapled units meet the exemption conditions set out in IAS 32, Financial Instruments: Presentation and are therefore presented as equity for purposes of that standard. (d) Investment Properties The Trust accounts for its investment properties, which include income-producing properties, properties under development and land held for development, in accordance with IAS 40, Investment Property. For acquired investment properties that meet the definition of a business, the acquisition is accounted for as a business combination (note 2(e)); otherwise they are initially measured at cost including directly attributable expenses. Subsequent to acquisition, investment properties are carried at fair value, which is determined based on available market evidence at the balance sheet date including, among other things, rental revenue from current leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about rental revenue from future leases less future cash outflows in respect of capital expenditures. Gains and losses arising from changes in fair value are recognized in net income in the period of change. Income-Producing Properties The carrying value of income-producing properties includes the impact of straight-line rental revenue (note 2(k)), tenant incentives and deferred leasing costs since these amounts are incorporated in the determination of the fair value of income-producing properties. When an income-producing property is disposed of, the gain or loss is determined as the difference between the disposal proceeds, net of selling costs and the carrying amount of the property and is recognized in net income in the period of disposal. Properties Under Development The Trust's development properties are classified as such until the property is substantially completed and available for occupancy. The Trust capitalizes acquisition, development and expansion costs, including direct construction costs, borrowing costs and indirect costs wholly attributable to development. Borrowing costs are capitalized to projects under development or construction based on the average accumulated expenditures outstanding during the period multiplied by the Trust's average borrowing rate on existing debt. Where borrowings are associated with specific developments, the amount capitalized is the gross borrowing cost incurred on such borrowings less any investment income arising on temporary investment of these borrowings. The capitalization of borrowing costs is suspended if there are prolonged periods that development activity is interrupted. The Trust capitalizes direct and indirect costs, including property taxes and insurance of the development property if activities necessary to ready the development property for its intended use are in progress. Costs of internal personnel and other indirect costs that are not wholly attributable to a project are expensed as incurred. Properties under development are measured at fair value with appropriate estimates made for construction costs and timeline and related assumptions in order to determine the fair value of the property. (e) Business Combinations The Trust accounts for investment property acquisitions as a business combination if the particular assets and set of activities acquired can be operated and managed as a business in their current state for the purpose of providing a return to the unitholders. The Trust applies the acquisition method to account for business combinations. The consideration transferred for a business combination is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Trust. The total consideration includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Trust recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognized amounts of the acquiree's identifiable net assets. Acquisition related costs are expensed as incurred. Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration that is recorded as an asset or liability is recognized in accordance with IAS 39, Financial Instruments: Recognition and Measurement ("IAS 39") in net income. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the identifiable net assets acquired. If the consideration transferred is lower than the fair value of the net assets acquired, the difference is recognized in net income. (f) Assets Held for Sale Non-current assets (and disposal groups) are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is satisfied when the asset is available for immediate sale in its present condition, management is committed to the sale, and it is highly probable to occur within one year. (g) Foreign Currency Translation The assets and liabilities of the Trust's foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case, for material transactions, the exchange rates at the dates of those transactions are used. Exchange differences arising are recognized in other comprehensive income and accumulated in equity. In preparing the financial statements of each entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the average rates of exchange prevailing in the period. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in net income in the period in which they arise except for: • The effective portion of exchange differences on transactions entered into in order to hedge certain foreign currency risks are recognized in other comprehensive income; • Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation) are recognized in other comprehensive income; and • Exchange differences on foreign currency borrowings related to capitalized interest for assets under construction. (h) Financial Instruments and Hedging Financial assets The Trust classifies its financial assets upon initial recognition as fair value through profit or loss ("FVTPL"), held to maturity, loans and receivables or available for sale. Loans and receivables, which include accounts receivable, cash and cash equivalents, restricted cash and certain other assets, are initially measured at fair value and are subsequently measured at amortized cost less provision for impairment. A provision for impairment is recognized when there is objective evidence that collection may not be possible under the original terms of the contract. Indicators of impairment include default on payments and significant financial difficulty of the tenant or counterparty. The carrying amount of the asset is reduced through a provision account, and the amount of the loss is recognized in net income. Bad debt write-offs occur when the Trust determines collection is unlikely. Any subsequent recoveries of amounts previously written off are credited against general and administrative expenses in net income. Accounts receivable that are more than one month past due are not considered impaired unless there is evidence that collection is not possible. The Trust does not currently have any financial assets classified as held to maturity or available for sale. Financial liabilities The Trust classifies its financial liabilities upon initial recognition as FVTPL or other financial liabilities. Other financial liabilities, which include unsecured debentures, bank indebtedness, accounts payable and accrued liabilities, distributions payable and certain other liabilities, are measured at amortized cost. The Trust's policy for the treatment of financing costs related to the issuance of long-term debt is to present debt instruments on the balance sheet net of the related financing costs, with the net balance accreting to the face value of the debt over its term following the effective interest method. The costs of obtaining a revolving credit facility are capitalized and amortized over the term of the facility on a straight-line basis. Derivatives and Hedging Derivative instruments, including the cross currency interest rate swaps and foreign exchange forward contracts, are recorded in the combined balance sheet at fair value including those derivatives that are embedded in financial or non-financial contracts. Changes in the fair value of derivative instruments which are not designated as hedges for accounting purposes are recognized in the statement of income. The Trust utilizes derivative financial instruments from time to time in the management of its foreign currency and interest rate exposures. The Trust's policy is not to utilize derivative financial instruments for trading or speculative purposes. The Trust applies hedge accounting to certain derivative and non-derivative financial instruments designated as hedges of net investments in subsidiaries with a functional currency other than the Canadian dollar. Hedge accounting is discontinued prospectively when the hedge relationship is terminated or no longer qualifies as a hedge, or when the hedging item is sold or terminated. In a net investment hedging relationship, the effective portion of foreign exchange gains or losses on the hedging instruments is recognized in other comprehensive income and the ineffective portion is recognized in net income. The amounts recorded in accumulated other comprehensive income are recognized in net income when there is a disposition or partial disposition of the foreign subsidiary. (i) Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on account, demand deposits and short-term investments with maturities of less than three months at the date of acquisition. In accordance with IAS 7, Statement of Cash Flows, also recognized in cash equivalents may be short-term investments with original maturities longer than three months but less than six months since they can be readily converted into known amounts of cash and are subject to an insignificant risk of changes in value. Restricted cash represents segregated cash accounts for a specific purpose and cannot be used for general corporate purposes. (j) Fixed Assets Fixed assets are recorded at cost less accumulated depreciation. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the fixed assets, which typically range from 3 to 5 years for computer hardware and software and 5 to 7 years for other furniture and fixtures. Leasehold improvements are amortized over the term of the applicable lease. (k) Revenue Recognition Where Granite has retained substantially all the benefits and risks of ownership of its rental properties, leases with its tenants are accounted for as operating leases. Where substantially all the benefits and risks of ownership of the Trust's rental properties have been transferred to its tenants, the Trust's leases are accounted for as finance leases. All of the Trust's current leases (the "Leases") are operating leases. The majority of the Leases are net leases under which the lessee is responsible for the direct payment of all operating costs related to the properties, including property taxes, insurance, utilities and non-structural repairs and maintenance. Revenues and operating expenses for these Leases do not include any amounts related to operating costs paid directly by such lessees. The remaining Leases generate rental revenue that includes the recovery of operating costs. The Leases may provide for either scheduled fixed rent changes or periodic rent increases based on increases in a local price index. Where periodic rent increases depend on increases in a local price index, such rent increases are accounted for as contingent rentals and recognized in income in applicable future years. Where scheduled fixed rent changes exist in operating leases, the total scheduled fixed lease payments of the lease are recognized in income evenly on a straight-line basis over the term of the lease. In addition, cash allowances provided to tenants are recognized in income evenly on a straight-line basis over the term of the lease. (l) Unit-Based Compensation Plans Incentive Stock Option Plan Compensation expense for option grants is based on the fair value of the options at the grant date and is recognized over the period from the grant date to the date the award is vested. A liability was recognized for outstanding options based upon the fair value as the Trust is an open-ended trust making its units redeemable. During the period in which options are outstanding, the liability is adjusted for changes in the fair value with such adjustments being recognized as compensation expense in general and administrative expenses in the period in which they occur. The liability balance is reduced as options are exercised and recorded in equity as stapled units along with the proceeds received on exercise. Executive Deferred Stapled Unit Plan The executive deferred stapled unit plan is measured at fair value at the date of grant and amortized to compensation expense from the effective date of the grant to the final vesting date. Compensation expense is recognized on a proportionate basis consistent with the vesting features of each tranche of the grant. Compensation expense for executive deferred stapled units granted under the plan is recognized as general and administrative expenses with a corresponding liability recognized based on the fair value of the Trust's stapled units as the Trust is an open-ended trust making its units redeemable. During the period in which the executive deferred stapled units are outstanding, the liability is adjusted for changes in the market value of the Trust's stapled unit, with such adjustments being recognized as compensation expense in general and administrative expenses in the period in which they occur. The liability balance is reduced as deferred stapled units are settled for stapled units and recorded in equity. Director/Trustee Deferred Share Unit Plan The compensation expense and a corresponding liability associated with the director/trustee deferred share unit plan is measured based on the market value of the underlying stapled units. During the period in which the awards are outstanding, the liability is adjusted for changes in the market value of the underlying stapled unit, with such positive or negative adjustments being recognized in general and administrative expenses in the period in which they occur. (m) Income Taxes Operations in Canada Granite qualifies as a mutual fund trust under the Income Tax Act (Canada) (the "Act") and as such the Trust itself will not be subject to income taxes provided it continues to qualify as a REIT for purposes of the Act. A REIT is not taxable and not considered to be a Specified Investment Flow-through Trust provided it complies with certain tests and it distributes all of its taxable income in a taxation year to its unitholders. The Trust's qualification as a REIT results in no current or deferred income tax being recognized in the combined financial statements for income taxes related to the Canadian investment properties. Current income tax related to certain taxable Canadian entities is determined on the basis of enacted or substantively enacted tax rates and laws at each balance sheet date. Operations in the United States The Trust's investment property operations in the United States are conducted in a qualifying United States REIT ("US REIT") for purposes of the Internal Revenue Code of 1986, as amended. As a qualifying US REIT, it is not taxable provided it complies with certain tests in addition to the requirement to distribute substantially all of its taxable income. As a qualifying US REIT, current income taxes on U.S. taxable income have not been recorded in the combined financial statements. However, the Trust has recorded deferred income taxes that may arise on the disposition of its investment properties as the Trust will likely be subject to entity level income tax in connection with such transactions pursuant to the Foreign Investment in Real Property Tax Act. Operations in Europe The Trust consolidates certain entities that continue to be subject to income tax. Income taxes for taxable entities in Europe, as well as other entities in Canada or the United States subject to tax, are recorded as follows: Current Income Tax The current income tax expense is determined on the basis of enacted or substantively enacted tax rates and laws at each balance sheet date. Deferred Income Tax Deferred income tax is recorded, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and the amounts reported in the combined financial statements. Deferred income tax is measured using tax rates and laws that are enacted and substantively enacted as at each balance sheet date which are expected to apply when the temporary differences are expected to reverse. Deferred income tax assets are recognized only to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary difference can be utilized. Each of the current and deferred tax assets and liabilities are offset when they are levied by the same taxation authorities on either the same taxable entities, or different taxable entities within the same reporting group that settle on a net basis, and when there is a legal right to offset. (n) Significant Accounting Judgments, Estimates and Assumptions The preparation of these combined financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that the judgments, estimates and assumptions utilized in preparing the combined financial statements are reasonable and prudent; however, actual results could be materially different and require an adjustment to the reported results. Judgments The following are the critical judgments that have been made in applying the Trust's accounting policies and that have the most significant effect on the amounts recognized in the combined financial statements: Leases The Trust's policy for revenue recognition is described in note 2(k). The Trust makes judgments in determining whether certain leases are operating or finance leases, in particular tenant leases with long contractual terms, leases where the property is a large square-footage and/or architecturally specialized and long-term ground leases where the Trust is the lessee. Investment properties The Trust's policy relating to investment properties is described in note 2(d). In applying this policy, judgment is used in determining whether certain costs incurred for tenant improvements are additions to the carrying amount of the property or represent incentives, identifying the point at which practical completion of properties under development occurs and determining borrowing costs to be capitalized to the carrying value of properties under development. Judgment is also applied in determining the use, extent and frequency of independent appraisals. Income taxes The Trust applies judgment in determining whether it will continue to qualify as a REIT for both Canadian and U.S. tax purposes for the foreseeable future. However, should it at some point no longer qualify, it would be subject to income tax and would be required to recognize current and deferred income taxes. Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include the following: Valuation of investment properties The fair value of investment properties is determined by management using primarily the discounted cash flow method in which the income and expenses are projected over the anticipated term of the investment plus a terminal value discounted using an appropriate discount rate. The Trust obtains, from time to time, appraisals from independent qualified real estate valuation experts. However, the Trust does not measure its investment properties based on these valuations but uses such appraisals as data points, together with other external market information accumulated by management, in arriving at its own conclusions on values. Management uses valuation assumptions such as discount rates, terminal capitalization rates and market rental rates applied in external appraisals or sourced from valuation experts; however, the Trust also uses its historical renewal experience with tenants, its direct knowledge of the specialized nature of Granite's portfolio and tenant profile and the actual condition of the properties in making business judgments about lease renewal probabilities, renewal rents and capital expenditures. The critical assumptions relating to the Trust's estimates of fair values of investment properties include the receipt of contractual rents, contractual renewal terms, expected future market rental rates, discount rates that reflect current market uncertainties, capitalization rates and recent investment property prices. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of investment properties may change materially. Refer to note 4 for further information on the estimates and assumptions made by management. Fair value of financial instruments Where the fair value of financial assets or liabilities recorded on the balance sheet or disclosed in the notes cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flow method. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as credit risk and volatility. Changes in assumptions about these factors could materially affect the reported fair value of financial instruments. Income taxes The Trust operates in a number of countries and is subject to the income tax laws and related tax treaties in each of its operating jurisdictions. These laws and treaties can be subject to different interpretations by relevant taxation authorities. Significant judgment is required in the estimation of Granite's income tax expense, interpretation and application of the relevant tax laws and treaties and provision for any exposure that may arise from tax positions that are under audit by relevant taxation authorities. The recognition and measurement of deferred tax assets or liabilities is dependent on management's estimate of future taxable profits and income tax rates that are expected to be in effect in the period the asset is realized or the liability is settled. Any changes in management's estimate can result in changes in deferred tax assets or liabilities as reported in the combined balance sheets and also the deferred income tax expense in the combined statements of income. (o) Future Accounting Policy Changes IFRS 9, Financial Instruments In July 2014, the IASB issued IFRS 9, Financial Instruments ("IFRS 9") which replaces IAS 39, Financial Instruments: Recognition and Measurement effective January 1, 2018. IFRS 9 provides new guidance on the classification and measurement, impairment and hedge accounting for financial instruments in addition to clarification for the treatment of modifications of financial liabilities. IFRS 9 is required to be adopted retrospectively with certain available transition provisions which allow the Trust to elect not to restate prior period comparative information. The Trust is in the final stages of its evaluation of the impact of this standard on its combined financial statements. The Trust will adopt IFRS 9 for the annual period beginning January 1, 2018, however, this standard is not expected to have any significant impact on the combined financial statements. Classification and measurement: IFRS 9 requires a new approach for the classification and measurement of financial assets based on the Trust's business models for managing these financial assets and their contractual cash flow characteristics. This approach is summarized as follows: • Assets held for the purpose of collecting contractual cash flows that solely represent payments of principal and interest will be measured at amortized cost. • Assets held within a business model where assets are both held for the purpose of collecting contractual cash flows or sold prior to maturity and the contractual cash flows solely represent payments of principal and interest will be measured at fair value through other comprehensive income ("FVTOCI"). • Assets held within another business model or assets that do not have contractual cash flow characteristics that are solely payments of principal and interest will be measured at fair value through profit or loss ("FVTPL"). The Trust has completed its review of all financial instruments held and has performed cash flow and business model assessments on the Trust's financial assets, and the expected impact is summarized as follows: • The Trust's cash and cash equivalents, restricted cash, accounts receivable, and long-term receivables currently measured at amortized costs will continue to be measured at amortized cost. • The Trust's derivative asset and liability instruments will continue to be measured at FVTPL. Impairment: IFRS 9 introduces a new expected credit loss ("ECL") impairment model for all financial assets measured at amortized cost or debt instruments measured at FVTOCI. The new ECL model will result in an allowance for expected credit losses being recorded regardless of whether there has been an actual loss event. The ECL model is forward-looking and requires the use of a reasonable and supportable forecast of future conditions in the determination of whether there has been a significant increase in credit risk since the origination of the financial instrument. The Trust continues to refine certain aspects of the expected credit loss modelling process leading up to its March 31, 2018 first quarter reporting, and the expected impact is summarized as follows: • The Trust does not expect to record a material ECL allowance against loans and notes receivable as historical experience of loss on these balances is insignificant and based on the assessment of forward looking information no significant increases in expected losses are expected. The Trust will continue to assess the valuation of these instruments. • The Trust does not expect to record a material ECL allowance against accounts receivable and has determined that its internal processes of evaluating each receivable on a specific basis for collectability using historical experience and adjusted for forward looking information, would appropriately allow the Trust to determine if there are significant increases in credit risk to then record a corresponding ECL allowance. Hedge accounting: IFRS 9 also introduces a new hedge accounting model that expands the scope of hedge items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. This new standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it will provide for more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. Special transitional requirements have been set for the application of the new general hedging model. Financial Liabilities: Generally, IFRS 9 does not introduce changes to the classification of financial liabilities. The Trust will continue to measure its financial liabilities at amortized cost. In regards to term modifications for financial liabilities, IFRS 9 requires that when a financial liability measured at amortized cost is modified or exchanged, and such modification or exchange does not result in derecognition, the adjustment to the amortized cost of the financial liability is recognized in profit or loss. IFRS 15, Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers ("IFRS 15") which replaces IAS 18, Revenue and IAS 11, Construction Contracts effective January 1, 2018. The objective of IFRS 15 is to establish the principles that the Trust will apply to report useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The Trust is currently evaluating the adoption method for applying this new standard to prior periods. The Trust is in the final stages of its evaluation of the impact of this standard on its combined financial statements. As the Trust's most material revenue stream of rental revenue is outside the scope of the new standard, the adoption of the new standard is not expected to have a material impact on the combined statements of income and comprehensive income. The Trust has concluded that the pattern of revenue recognition will remain unchanged. However, the Trust will be required to disclose the |
ACQUISITION
ACQUISITION | 12 Months Ended |
Dec. 31, 2017 | |
ACQUISITION | |
ACQUISITION | 3. ACQUISITION On October 6, 2017, the Trust acquired three income-producing properties in the United States. The following table summarizes the consideration paid for the acquisition and the fair value of the assets acquired and liabilities assumed at the acquisition date: Total Purchase consideration: Cash sourced from credit facility $ Cash on hand Total cash consideration paid $ Recognized amounts of identifiable assets acquired and liabilities assumed measured at their respective fair values: Investment properties $ Working capital ) Total identifiable net assets $ From the date of acquisition, the Trust recognized revenue of $2.8 million and net income of $1.6 million related to the aforementioned acquisition. Had this acquisition occurred on January 1, 2017, the Trust would have recognized approximately $10.4 million (pro-forma) of revenue and $7.0 million (pro-forma) of net income during the year ended December 31, 2017. The Trust incurred legal and advisory costs of $0.5 million associated with the acquisition, which are included in acquisition transaction costs in the combined statements of income. The Trust incurred an additional $0.2 million of costs related to pursuing other acquisition opportunities. These costs are also included in acquisition transaction costs in the combined statements of income. |
INVESTMENT PROPERTIES
INVESTMENT PROPERTIES | 12 Months Ended |
Dec. 31, 2017 | |
INVESTMENT PROPERTIES | |
INVESTMENT PROPERTIES | 4. INVESTMENT PROPERTIES As at December 31, Income-Producing Properties $ $ Land Held For Development $ $ Changes in investment properties are shown in the following table: Years ended December 31, 2017 2016 Income- Properties Land Held For Income- Properties Land Held For Balance, beginning of year $ $ — $ $ $ $ Additions — Capital expenditures: Maintenance or improvements — — — — Developments or expansions — — — — Acquisition (note 3) — — — — — — Transfer to land held for development ) — — — — — Completed projects — — — ) — — Leasing commissions — — — — — Tenant incentives — — — — Fair value gains, net — — — — Foreign currency translation, net — ) ) ) Disposals — — — ) — — Amortization of straight-line rent ) — — — — Amortization of tenant incentives ) — — ) — — Other changes — — — — Classified as assets held for sale (note 5) ) — — — — — Balance, end of year $ $ — $ $ $ — $ During the year ended December 31, 2017, the Trust incurred $0.4 million of costs associated with 10 properties held for sale and disposed of in January 2018 (note 5) which are included in loss on sale of investment properties on the combined statements of income. During the year ended December 31, 2016, the Trust disposed of seven income-producing properties located in the United States, Austria and Germany for aggregate gross proceeds of $42.0 million and incurred a $2.4 million loss on disposal due to the associated selling costs. The fair value gains during the year ended December 31, 2016, excluding properties sold in the year, was $170.7 million. The Trust determines the fair value of an income-producing property based upon, among other things, rental income from current leases and assumptions about rental income from future leases reflecting market conditions and lease renewals at the applicable balance sheet dates, less future cash outflows in respect of such leases. Fair values are primarily determined by discounting the expected future cash flows, generally over a term of 10 years, plus a terminal value based on the application of a capitalization rate to estimated year 11 cash flows. The fair values of properties and land under development are measured using a discounted cash flow model, net of costs to complete, as of the balance sheet date. The Trust measures its investment properties using valuations prepared by management. The Trust does not measure its investment properties based on valuations prepared by external appraisers but uses such external appraisals as data points, together with other external market information accumulated by management, in arriving at its own conclusions on values. Management uses valuation assumptions such as discount rates, terminal capitalization rates and market rental rates applied in external appraisals or sourced from valuation experts; however, the Trust also uses its historical renewal experience with tenants, its direct knowledge of the specialized nature of Granite's portfolio and tenant profile and its knowledge of the actual condition of the properties in making business judgments about lease renewal probabilities, renewal rents and capital expenditures. There has been no change in the valuation methodology during the year. The Trust's internal valuation team consists of individuals knowledgeable and experienced in fair value techniques for investment properties. On a quarterly basis, the fair values of the investment properties are updated by the Trust's internal valuation team for current leasing and market assumptions, utilizing market discount and terminal capitalization rates as provided by independent real estate appraisal firms with representation and expertise in the various jurisdictions in which Granite's investment properties are located. The resulting changes in fair values are analyzed at each reporting date with the internal valuation team presenting a report to senior management that explains the fair value movements. This report and the results of the updated valuations and processes are formally reviewed by and discussed with senior management quarterly. For all investment properties, the current use equates to the highest and best use. Valuations are most sensitive to changes in discount rates and terminal capitalization rates. The key valuation metrics for income-producing properties by country are set out below: As at December 31, 2017 (1) 2016 Maximum Minimum Weighted (2) Maximum Minimum Weighted (2) Canada Discount rate Terminal capitalization rate United States Discount rate Terminal capitalization rate Germany Discount rate Terminal capitalization rate Austria Discount rate Terminal capitalization rate Netherlands Discount rate Terminal capitalization rate Other Discount rate Terminal capitalization rate Total Discount rate Terminal capitalization rate (1) Excludes properties held for sale (note 5). (2) Weighted based on income-producing property fair value. The table below summarizes the sensitivity of the fair value of investment properties to changes in either the discount rate or terminal capitalization rate: Discount Rate Terminal Rate sensitivity Fair value Change in Fair value Change in +50 basis points $ $ ) $ $ ) +25 basis points ) ) Base rate — — –25 basis points –50 basis points Included in investment properties is $9.8 million (2016 — $11.3 million) of net straight-line rent receivable arising from the recognition of rental revenue on a straight-line basis over the lease term. Details about contractual obligations to purchase, construct and develop properties can be found in the commitments and contingencies note (note 20). Tenant minimum rental commitments payable to Granite on non-cancellable operating leases (excluding properties held for sale) are as follows: Not later than 1 year $ Later than 1 year and not later than 5 years Later than 5 years $ |
ASSETS HELD FOR SALE
ASSETS HELD FOR SALE | 12 Months Ended |
Dec. 31, 2017 | |
ASSETS HELD FOR SALE | |
ASSETS HELD FOR SALE | 5. ASSETS HELD FOR SALE At December 31, 2017, 10 investment properties located in Canada and the United States were classified as assets held for sale. On January 30, 2018, the income-producing property in Bowling Green, Kentucky, and two income-producing properties in St. Thomas, Ontario were sold for gross proceeds of approximately $328 million (US$ 262.3 million). On January 31, 2018, seven income-producing properties in Newmarket, Ontario were sold for gross proceeds of $63.0 million. During the year ended December 31, 2017, Granite incurred $0.4 million of legal and advisory costs associated with the planned disposal of the investment properties held for sale which is included in loss on sale of investment properties on the combined statements of income. |
UNSECURED DEBENTURES, NET AND C
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS | 12 Months Ended |
Dec. 31, 2017 | |
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS | |
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS | 6. UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS (a) Unsecured Debentures, Net As at December 31, 2017 2016 Maturity Date Amortized Principal Amortized Cost Principal 3.788% Debentures July 5, 2021 $ $ $ $ 3.873% Debentures November 30, 2023 $ $ $ $ 3.788% Debentures On July 3, 2014, Granite REIT Holdings Limited Partnership ("Granite LP"), a wholly-owned subsidiary of Granite, issued at par $250.0 million aggregate principal amount of 3.788% Series 2 senior debentures due July 5, 2021 (the "2021 Debentures"). Interest on the 2021 Debentures is payable semi-annually in arrears on January 5 and July 5 of each year. The unamortized portion of the $1.6 million of expenses incurred in connection with the issuance of the 2021 Debentures is presented as a reduction of the carrying amount of the 2021 Debentures. The 2021 Debentures are redeemable, in whole or in part, at Granite's option at any time and from time to time, at a price equal to accrued and unpaid interest plus the greater of (a) 100% of the principal amount of the 2021 Debentures to be redeemed; and (b) the Canada Yield Price. The Canada Yield Price means, in respect of a 2021 Debenture, a price equal to which, if the 2021 Debenture were to be issued at such price on the redemption date, would provide a yield thereon from the redemption date to its maturity date equal to 46.0 basis points above the yield that a non-callable Government of Canada bond, trading at par, would carry if issued on the redemption date with a maturity date of July 5, 2021. Granite also has the option to redeem the 2021 Debentures at par plus any accrued and unpaid interest within 30 days of the maturity date of July 5, 2021. 3.873% Debentures On December 20, 2016, Granite LP issued $400.0 million aggregate principal amount of 3.873% Series 3 senior debentures due November 30, 2023 (the "2023 Debentures") at a nominal premium. Interest on the 2023 Debentures is payable semi-annually in arrears on May 30 and November 30 of each year. The unamortized portion of the $2.2 million of expenses incurred in connection with the issuance of the 2023 Debentures is presented as a reduction of the carrying amount of the 2023 Debentures. The 2023 Debentures are redeemable, in whole or in part, at Granite's option at any time and from time to time, at a price equal to accrued and unpaid interest plus the greater of (a) 100% of the principal amount of the 2023 Debentures to be redeemed; and (b) the Canada Yield Price. The Canada Yield Price means, in respect of a 2023 Debenture, a price equal to which, if the 2023 Debenture were to be issued at such price on the redemption date, would provide a yield thereon from the redemption date to its maturity date equal to 62.5 basis points above the yield that a non-callable Government of Canada bond, trading at par, would carry if issued on the redemption date with a maturity date of November 30, 2023. Granite also has the option to redeem the 2023 Debentures at par plus any accrued and unpaid interest within 30 days of the maturity date of November 30, 2023. The 2021 Debentures and 2023 Debentures rank equally with all of the Trust's existing and future unsubordinated and unsecured indebtedness and are guaranteed by Granite REIT and Granite GP. (b) Cross Currency Interest Rate Swaps As at December 31, Financial liability 2021 Cross Currency Interest Rate Swap — fair value $ $ 2023 Cross Currency Interest Rate Swap — fair value $ $ On July 3, 2014, the Trust entered into a cross currency interest rate swap (the "2021 Cross Currency Interest Rate Swap") to exchange the 3.788% interest payments from the 2021 Debentures for euro denominated payments at a 2.68% interest rate. In addition, under the terms of the swap, the Trust will pay principal proceeds of €171.9 million for $250.0 million on July 5, 2021. On December 20, 2016, the Trust entered into a cross currency interest rate swap (the "2023 Cross Currency Interest Rate Swap") to exchange the 3.873% interest payments from the 2023 Debentures for euro denominated payments at a 2.43% interest rate. In addition, under the terms of the swap, the Trust will pay principal proceeds of €281.1 million for $400.0 million on November 30, 2023. The cross currency interest rate swaps are designated as net investment hedges of the Trust's investment in foreign operations. The effectiveness of the hedges are assessed quarterly. For the year ended December 31, 2017, the Trust has assessed that the hedges continued to be effective. As an effective hedge, the fair value gains or losses on the cross currency interest rate swaps are recognized in other comprehensive income (loss). The Trust has elected to record the differences resulting from the lower interest rate associated with the cross currency interest rate swaps in the statement of income. (c) Redemption of Debentures On December 21, 2016, Granite LP redeemed all of the $200.0 million aggregate principal amount outstanding of 4.613% Series 1 senior debentures due October 2, 2018 (the "2018 Debentures") for an aggregate redemption price of $213.2 million, which included accrued and unpaid interest to December 21, 2016 of $2.0 million. In the year ended December 31, 2016, the Trust recorded early redemption costs of $11.9 million, consisting of a redemption premium of $11.2 million and $0.7 million of accelerated amortization of issuance costs. Due to the early redemption of the 2018 Debentures, the Trust settled the associated cross currency interest rate swap with a payment of $1.2 million that included $1.7 million related to the fair value of the principal proceeds less $0.5 million of interest rate swap savings. |
OTHER LIABILITY
OTHER LIABILITY | 12 Months Ended |
Dec. 31, 2017 | |
OTHER LIABILITY | |
OTHER LIABILITY | 7. OTHER LIABILITY As at December 31, 2017, the other liability consists of a tenant allowance payable of $9.0 million (2016 — $7.8 million). This tenant allowance payable of €6.0 million is due in 2018 and relates to a 2014 lease extension at the Eurostar facility in Graz, Austria. The payable of €6.0 million was discounted and is being accreted to its face value through a charge to interest expense. During the year ended December 31, 2017, the liability increased by the accretion charge of $0.7 million and foreign exchange translation of $0.5 million. On February 2, 2018, the €6.0 million allowance was paid to the tenant. |
BANK INDEBTEDNESS
BANK INDEBTEDNESS | 12 Months Ended |
Dec. 31, 2017 | |
BANK INDEBTEDNESS | |
BANK INDEBTEDNESS | 8. BANK INDEBTEDNESS As at December 31, 2017, Granite LP had an unsecured senior revolving credit facility in the amount of $250.0 million that was available by way of Canadian dollar, US dollar or euro denominated loans or letters of credit (the "Credit Facility"). Interest on drawn amounts was calculated based on an applicable margin determined by the Trust's external credit rating. The Credit Facility was guaranteed by Granite REIT and Granite GP and would have matured on February 1, 2019 had Granite LP not entered into a new credit facility as noted below. At December 31, 2017, Granite LP had $32.6 million (US$ 26.0 million) (2016 — nil) drawn under the Credit Facility and $0.2 million (2016 — $0.2 million) in letters of credit issued against the Credit Facility. Subsequent to December 31, 2017, Granite LP entered into a new unsecured revolving credit facility in the amount of $500.0 million that is available by way of Canadian dollar, US dollar or euro denominated loans or letters of credit and matures on February 1, 2023. The Trust has the option to extend the maturity date by one year to February 1, 2024, subject to the agreement of lenders in respect of a minimum of 66 2 / 3 % of the aggregate amount committed under the new facility. The new facility provides the Trust with the ability to increase the amount of the commitment by an additional aggregate principal amount of up to $100.0 million with the consent of the participating lenders. Interest on drawn amounts is calculated based on an applicable margin determined by reference to the external credit rating of Granite REIT and Granite GP, as is a commitment fee in respect of undrawn amounts. The new facility is guaranteed by Granite REIT and Granite GP. |
CURRENT ASSETS AND CURRENT LIAB
CURRENT ASSETS AND CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
CURRENT ASSETS AND CURRENT LIABILITIES | |
CURRENT ASSETS AND CURRENT LIABILITIES | 9. CURRENT ASSETS AND CURRENT LIABILITIES Prepaid Expenses and Other As at December 31, 2017, prepaid expenses and other assets primarily includes unrealized gains on foreign exchange forward contracts of $0.7 million (2016 — $1.5 million), and prepaid insurance premiums of $0.6 million (2016 — $0.5 million). Deferred Revenue Deferred revenue relates to prepaid and unearned revenue received from tenants and fluctuates with the timing of rental receipts. Accounts Payable and Accrued Liabilities As at December 31, Accounts payable $ $ Accrued salaries, incentives and severance Accrued interest payable Accrued construction payable Accrued professional fees Accrued employee unit-based compensation Accrued trustee/director unit-based compensation Accrued property operating costs Other accrued liabilities $ $ |
DISTRIBUTIONS TO STAPLED UNITHO
DISTRIBUTIONS TO STAPLED UNITHOLDERS | 12 Months Ended |
Dec. 31, 2017 | |
DISTRIBUTIONS TO STAPLED UNITHOLDERS | |
DISTRIBUTIONS TO STAPLED UNITHOLDERS | 10. DISTRIBUTIONS TO STAPLED UNITHOLDERS Total distributions declared to stapled unitholders in the year ended December 31, 2017 were $123.1 million (2016 — $114.3 million) or $2.61 per stapled unit (2016 — $2.43 per stapled unit). Distributions payable at December 31, 2017 of $10.6 million, representing the December 2017 distribution, were paid on January 16, 2018. The distribution declared in January 2018 in the amount of $10.6 million was paid on February 15, 2018 and the distribution declared in February 2018 of $10.5 million will be paid on March 15, 2018. |
EQUITY
EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
EQUITY | |
EQUITY | 11. EQUITY Stapled Unitholders' Equity (a) Stapled Units The stapled units consist of one unit of Granite REIT and one common share of Granite GP. Granite REIT is authorized to issue an unlimited number of units. Granite GP's authorized share capital consists of an unlimited number of common shares without par value. Each stapled unit is entitled to distributions and/or dividends in the case of Granite GP as and when declared and, in the event of termination of Granite REIT and Granite GP, to the net assets of Granite REIT and Granite GP remaining after satisfaction of all liabilities. (b) Unit-Based Compensation Incentive Stock Option Plan The Incentive Stock Option Plan (the "Option Plan") allows for the grant of stock options or appreciation rights to directors, officers, employees and consultants. As at December 31, 2017 and December 31, 2016, there were no options outstanding under this plan. No options have been granted since August 2010. Director/Trustee Deferred Share Unit Plan Effective November 3, 2003, Granite Co. established a Non-Employee Director Share-Based Compensation Plan (the "DSP"), which provides for a deferral of up to 100% of each non-employee director's total annual remuneration, at specified levels elected by each director, until such director ceases to be a director. In connection with the REIT conversion (note 1), effective January 3, 2013, the DSP was amended to entitle the holder to receive a payment based on the fair market value of a preferred share of Granite Co. that is equal in value to a stapled unit of the Trust. In addition, effective January 3, 2013, a new deferred share unit plan (the "new DSP") was established by Granite GP whereby each non-employee director/trustee is entitled to receive a portion of their annual retainer (and to elect to receive up to 100% of their annual remuneration) as deferred share units, which entitles them to receive a payment based on the fair market value of a preferred share of Granite Co. that is equal in value to a stapled unit. The amounts deferred under the DSP and new DSP plans are reflected by notional deferred share units ("DSUs") whose value at the time that the particular payment to the director is determined reflects the fair market value of the Granite Co. preferred shares. The value of a DSU thus appreciates or depreciates with changes in the market price of the stapled units. The DSP and new DSP also provide for the accrual of notional distribution equivalents on any distributions paid on the stapled units. Under the DSP and new DSP, when a director or trustee leaves the Board, the director or trustee receives a cash payment at an elected date equal to the value of the accrued DSUs at such date. There is no option under the DSP and new DSP for directors or trustees to receive stapled units in exchange for DSUs. A reconciliation of the changes in the DSUs outstanding is presented below: 2017 2016 Number Weighted Average Number Weighted Average DSUs outstanding, January 1 $ $ Granted Settled ) ) DSUs outstanding, December 31 $ $ Executive Deferred Stapled Unit Plan The Executive Share Unit Plan (the "Stapled Unit Plan") is designed to provide equity-based compensation in the form of stapled units to executives and other employees (the "Participants"). The maximum number of stapled units which may be issued pursuant to the Stapled Unit Plan is 1.0 million. The Stapled Unit Plan entitles a Participant to receive a stapled unit or a cash payment equal to the market value of the stapled unit, which on any date is the volume weighted average trading price of a stapled unit on the Toronto Stock Exchange or New York Stock Exchange over the preceding five trading days. The form of redemption of the stapled units is determined by the Compensation, Governance and Nominating Committee and is not at the option of the Participant. Vesting conditions in respect of a grant are determined by the Compensation, Governance and Nominating Committee at the time the grant is made and may result in the vesting of more or less than 100% of the number of stapled units. The Stapled Unit Plan also provides for the accrual of distribution equivalent amounts based on distributions paid on the stapled units. Stapled units are, unless otherwise agreed or otherwise required by the Stapled Unit Plan, settled within 60 days following vesting. A reconciliation of the changes in stapled units outstanding under the Stapled Unit Plan is presented below: 2017 2016 Number Weighted Average Number Weighted Average Stapled units outstanding, January 1 $ $ New grants Forfeited (1) ) — Settled (2) ) ) Stapled units outstanding, December 31 $ $ (1) Three thousand stapled units (2016 — 198 stapled units) were forfeited during the year ended December 31, 2017. (2) 22 thousand stapled units (2016 — 57 thousand stapled units) were settled during the year ended December 31, 2017. The Trust's unit-based compensation expense recognized in general and administrative expenses was: Years ended December 31, DSPs for trustees/directors $ $ Stapled Unit Plan for employees Option Plan — Unit-based compensation expense $ $ Fair value remeasurement expense included in the above $ $ (c) Normal Course Issuer Bid On May 11, 2017, Granite announced the acceptance by the Toronto Stock Exchange ("TSX") of Granite's Notice of Intention to Make a Normal Course Issuer Bid ("NCIB"). Pursuant to the NCIB, Granite proposes to purchase through the facilities of the TSX and any alternative trading system in Canada, from time to time and if considered advisable, up to an aggregate of 4,118,757 of Granite's issued and outstanding stapled units. The NCIB commenced on May 16, 2017 and will conclude on the earlier of the date on which purchases under the bid have been completed and May 15, 2018. Pursuant to the policies of the TSX, daily purchases made by Granite through the TSX may not exceed 26,267 stapled units, subject to certain exceptions. Granite entered into an automatic securities purchase plan with a broker in order to facilitate repurchases of the stapled units under the NCIB during specified blackout periods. As at December 31, 2017, Granite has repurchased 241,034 stapled units for consideration of $12.0 million. The $1.2 million difference between the repurchase price and the average cost of the stapled units was charged to contributed surplus. An additional 891,440 units for consideration of $43.9 million were repurchased subsequent to the year-end and as of March 1, 2018. (d) Accumulated Other Comprehensive Income Accumulated other comprehensive income consists of the following: As at December 31, Foreign currency translation gains on investments in subsidiaries, net of related hedging activities and non-controlling interests (1) $ $ Fair value losses on derivatives designated as net investment hedges ) ) $ $ (1) Includes foreign currency translation gains and losses from non-derivative financial instruments designated as net investment hedges. Non-Controlling Interests On November 17, 2016, the Trust acquired the remaining 10% interest in DGI LS, LLC, DGI Berks, LP and DGI Shepherdsville, LLC as well as the remaining 5% interest in DGI Portland, LLC for cash consideration totaling $12.1 million (US$ 9.0 million) which resulted in a 100% ownership interest in each of these subsidiaries. A change in the Trust's ownership interest in a subsidiary that does not result in a loss of control is recorded as an equity transaction. As a result of the above mentioned acquisitions, $3.3 million (US$ 2.4 million) was recorded in Deficit, representing the difference between the total consideration paid of $12.1 million (US$ 9.0 million) and the $8.8 million (US$ 6.6 million) carrying value of the non-controlling interests which were derecognized on November 17, 2016. |
COSTS AND EXPENSES (INCOME)
COSTS AND EXPENSES (INCOME) | 12 Months Ended |
Dec. 31, 2017 | |
COSTS AND EXPENSES (INCOME) | |
COSTS AND EXPENSES (INCOME) | 12. COSTS AND EXPENSES (INCOME) (a) Property operating costs consist of: Years ended December 31, Non-recoverable from tenants: Property taxes and utilities $ $ Legal Consulting Environmental and appraisals Repairs and maintenance Ground rents Other Recoverable from tenants: Property taxes and utilities Repairs and maintenance Property management fees Other Property operating costs $ $ (b) General and administrative expenses consist of: Years ended December 31, Salaries and benefits $ $ Audit, legal and consulting Trustee/director fees and related expenses Unit-based compensation including distributions and revaluations Other public entity costs Office rents Other $ $ (c) Proxy contest expenses In connection with the proxy contest that preceded the June 2017 annual general meeting ("AGM"), Granite incurred $5.9 million of expenses in the year ended December 31, 2017. Included in the proxy contest expenses are legal, advisory and proxy solicitation costs incurred directly by Granite and a $2.0 million reimbursement of out-of-pocket fees and expenses incurred by Front Four Capital Group and Sandpiper Group regarding matters relating to the AGM. Sandpiper Group received $0.7 million of the reimbursement. An individual affiliated with Sandpiper Group is a related party of Granite by virtue of becoming a director of Granite GP and a trustee of Granite REIT. (d) Interest expense and other financing costs, net consist of: Years ended December 31, Interest and amortized issuance costs relating to debentures $ $ Interest on mortgages payable and construction loans — Amortization of deferred financing costs Other interest and accretion charges Capitalized interest — ) Interest income ) ) $ $ (e) Fair value losses (gains) on financial instruments consist of: Years ended December 31, Foreign exchange forward contracts, net $ $ ) Interest rate caps — Contingent consideration — $ $ Contingent consideration was recognized in connection with acquisitions completed in 2013. During 2016, with the properties fully leased and the increases in the fair value of the properties acquired, the contingent consideration obligation was increased by $3.5 million to reflect these changes in the valuation assumptions. Concurrent with the acquisition of the non-controlling interests in November 2016 (note 11), the contingent consideration recognized of $8.8 million (US$ 6.6 million) was paid. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 13. INCOME TAXES (a) The major components of the income tax expense are: Years ended December 31, Current income tax: Current taxes $ $ Current taxes referring to previous periods ) Withholding taxes and other $ $ Deferred income tax: Origination and reversal of temporary differences $ $ Impact of changes in tax rates ) ) Withholding taxes on profits of subsidiaries ) Other ) $ $ Income tax expense $ $ For the year ended December 31, 2017, there was no current tax expense associated with property dispositions. For the year ended December 31, 2016, current tax expense includes $2.3 million of expense associated with the disposition of properties in Germany and the United States and a $1.0 million current tax recovery associated with the disposition of a property in Austria. (b) The effective income tax rate reported in the combined statements of income varies from the Canadian statutory rate for the following reasons: Years ended December 31, Income before income taxes $ $ Expected income taxes at the Canadian statutory tax rate of 26.5% (2016 — 26.5%) $ $ Income distributed and taxable to unitholders ) ) Net foreign rate differentials ) Net change in provisions for uncertain tax positions Net permanent differences Net effect of change in tax rates ) ) Withholding taxes and other Income tax expense $ $ On December 22, 2017, the US tax legislation commonly known as the Tax Cuts and Jobs Act (the "Tax Act") was signed into law. Recognition of the tax effects of the Tax Act is required in the interim and annual periods that include December 22, 2017. The key impact of the Tax Act that affects the Trust's year ended December 31, 2017 was a change in the federal corporate tax rate to 21% compared to a maximum of 35%. As a result of the reduction in the federal corporate tax rate to 21% under the Tax Act, the Trust's deferred tax liability was reduced by $35.0 million for the year ended December 31, 2017. (c) Deferred tax assets and liabilities consist of temporary differences related to the following: As at December 31, Deferred tax assets: Investment properties $ $ Eligible capital expenditures Other Deferred tax assets $ $ Deferred tax liabilities: Investment properties $ $ Withholding tax on undistributed subsidiary profits Other — Deferred tax liabilities $ $ (d) Changes in the net deferred tax liabilities consist of the following: Years ended December 31, Balance, beginning of year $ $ Deferred tax expense recognized in net income Foreign currency translation of deferred tax balances ) Net deferred tax liabilities, end of year $ $ (e) Net cash payments of income taxes amounted to a payment of $3.5 million for the year ended December 31, 2017 (2016 — $0.2 million) which included $1.0 million of withholding taxes paid (2016 — $0.7 million). (f) The Trust conducts operations in a number of countries with varying statutory rates of taxation. Judgment is required in the estimation of income tax expense and deferred income tax assets and liabilities in each of the Trust's operating jurisdictions. This process involves estimating actual current tax exposure, assessing temporary differences that result from the different treatments of items for tax and accounting purposes, assessing whether it is more likely than not that deferred income tax assets will be realized and, based on all the available evidence, determining if a provision is required on all or a portion of such deferred income tax assets. The Trust reports a liability for uncertain tax positions ("unrecognized tax benefits") taken or expected to be taken in a tax return. The Trust recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As at December 31, 2017, the Trust had $12.0 million (2016 — $10.1 million) of unrecognized income tax benefits, (including $0.2 million (2016 — $0.2 million) related to accrued interest and penalties), all of which could ultimately reduce the Trust's effective tax rate should these tax benefits become recognized. The Trust believes that it has adequately provided for reasonably foreseeable outcomes related to tax examinations and that any resolution will not have a material effect on the combined financial position, results of operations or cash flows. However, the Trust cannot predict with any level of certainty the exact nature of any future possible outcome. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: As at December 31, Unrecognized tax benefits balance, beginning of year $ $ Decreases for tax positions of prior years ) ) Increases for tax positions of current year Foreign currency impact ) Unrecognized tax benefits balance, end of year $ $ It is reasonably possible that the gross unrecognized tax benefits, as of December 31, 2017, could decrease in the next 12 months. The quantum of the decrease could range between a nominal amount and $0.4 million (2016 — a nominal amount and $1.9 million) and relates primarily to tax years becoming statute barred for purposes of future tax examinations by local taxing authorities and the outcome of current tax examinations. For the year ended December 31, 2017, $0.1 million of interest and penalties was recorded (2016 — $0.1 million) as part of the provision for income taxes in the combined statements of income. As at December 31, 2017, the following tax years remained subject to examination: Major Jurisdictions Canada 2012 through 2017 United States 2014 through 2017 Mexico 2011 through 2017 Austria 2013 through 2017 Germany 2012 through 2017 Netherlands 2013 through 2017 As at December 31, 2017, the Trust had approximately $327.8 million of Canadian capital loss carryforwards that do not expire and other losses and deductible temporary differences in various tax jurisdictions of approximately $25.2 million. The Trust believes it is not probable that these tax assets can be realized; and accordingly, no related deferred tax asset was recognized at December 31, 2017. |
SEGMENTED DISCLOSURE INFORMATIO
SEGMENTED DISCLOSURE INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENTED DISCLOSURE INFORMATION | |
SEGMENTED DISCLOSURE INFORMATION | 14. SEGMENTED DISCLOSURE INFORMATION The Trust has one reportable segment — the ownership and rental of industrial real estate as determined by the information reviewed by the chief operating decision maker who is the Chief Executive Officer. The following tables present certain information with respect to geographic segmentation: Revenue Years ended December 31, Canada $ $ United States Austria Germany Netherlands Other Europe $ $ For the year ended December 31, 2017, revenue from Magna comprised approximately 74% (2016 — 76%) of the Trust's total revenue. Investment properties As at December 31, Canada $ $ United States Austria Germany Netherlands Other Europe $ $ |
DETAILS OF CASH FLOWS
DETAILS OF CASH FLOWS | 12 Months Ended |
Dec. 31, 2017 | |
DETAILS OF CASH FLOWS | |
DETAILS OF CASH FLOWS | 15. DETAILS OF CASH FLOWS (a) Items not involving current cash flows are shown in the following table: Years ended December 31, Straight-line rent amortization $ $ ) Tenant incentive amortization Unit-based compensation expense (note 11(b)) Fair value gains on investment properties ) ) Depreciation and amortization Fair value losses on financial instruments Loss on sale of investment properties Amortization of issuance costs relating to debentures Amortization of deferred financing costs Deferred income taxes Other ) $ ) $ ) (b) Changes in working capital balances are shown in the following table: Years ended December 31, Accounts receivable $ ) $ Prepaid expenses and other ) Accounts payable and accrued liabilities ) ) Deferred revenue ) ) Restricted cash $ ) $ ) (c) Non-cash financing activities During the year ended December 31, 2017, 22 thousand stapled units (2016 — 56 thousand stapled units) with a value of $1.0 million (2016 — $2.1 million) were issued under the Stapled Unit Plan. (d) Cash and cash equivalents consists of: Years ended December 31, Cash $ $ Short-term deposits $ $ |
FAIR VALUE AND RISK MANAGEMENT
FAIR VALUE AND RISK MANAGEMENT | 12 Months Ended |
Dec. 31, 2017 | |
FAIR VALUE AND RISK MANAGEMENT | |
FAIR VALUE AND RISK MANAGEMENT | 16. FAIR VALUE AND RISK MANAGEMENT (a) Fair Value of Financial Instruments The following table provides the classification and measurement of financial assets and liabilities as at December 31, 2017: Fair value Loans and receivables / Total Total Measurement basis Fair value Amortized Fair value Carrying Fair Value Financial assets Other assets $ — $ (1) $ $ $ Accounts receivable — Prepaid expenses and other (2) — — Restricted cash — Cash and cash equivalents — $ $ $ $ $ Financial liabilities Unsecured debentures, net $ — $ $ $ $ Cross currency interest rate swaps — — Other liability — — Bank indebtedness — Accounts payable and accrued liabilities (3) Distributions payable — $ $ $ $ $ (1) Long-term receivables included in other assets. (2) Foreign exchange forward contracts included in prepaid expenses. (3) Foreign exchange forward contracts included in accounts payable and accrued liabilities. The following table provides the classification and measurement of financial assets and liabilities as at December 31, 2016: Fair value Loans and receivables / Total Total Measurement basis Fair value Amortized Fair value Carrying Fair Value Financial assets Other assets $ — $ (4) $ $ $ Accounts receivable — Prepaid expenses and other (5) — — Restricted cash — Cash and cash equivalents — $ $ $ $ $ Financial liabilities Unsecured debentures, net $ — $ $ $ $ Cross currency interest rate swaps — — Other liability — — Accounts payable and accrued liabilities — Distributions payable — $ $ $ $ $ (4) Long-term receivables included in other assets. (5) Foreign exchange forward contracts included in prepaid expenses. The fair values of the Trust's accounts receivable, cash and cash equivalents, restricted cash, bank indebtedness, accounts payable and accrued liabilities and distributions payable approximate their carrying amounts due to the relatively short periods to maturity of these financial instruments. The fair value of the other liability approximates its carrying value as the liability is revalued at each reporting date. The fair values of the unsecured debentures are determined using quoted market prices. The fair values of the cross currency interest rate swaps are determined using market inputs quoted by their counterparties. The Trust periodically purchases foreign exchange forward contracts to hedge specific anticipated foreign currency transactions and to mitigate its foreign exchange exposure on its net cash flows. At December 31, 2017, the Trust held 18 outstanding foreign exchange forward contracts (2016 — 13 contracts outstanding). The foreign exchange contracts are comprised of 12 contracts to purchase $39.6 million and sell €26.0 million, three contracts to purchase US$ 18.0 million and sell €15.0 million and three contracts to purchase €15.0 million and sell US$ 17.8 million. For the year ended December 31, 2017, the Trust recorded a net fair value loss of $0.8 million (2016 — net fair value gain of $2.4 million) on these outstanding foreign exchange forward contracts (note 12(e)). (b) Fair Value Hierarchy Fair value measurements are based on inputs of observable and unobservable market data that a market participant would use in pricing an asset or liability. IFRS establishes a fair value hierarchy which is summarized below: Level 1: Fair value determined using quoted prices in active markets for identical assets or liabilities. Level 2: Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active. Level 3: Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows or similar techniques. The following tables represent information related to the Trust's assets and liabilities measured or disclosed at fair value on a recurring and non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall. As at December 31, 2017 Level 1 Level 2 Level 3 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE Assets measured at fair value Investment properties $ — $ — $ Assets held for sale — — Foreign exchange forward contracts included in prepaid expenses and other — — Liabilities measured or disclosed at fair value Unsecured debentures, net — — Cross currency interest rate swaps — — Other liability — — Bank indebtedness — — Foreign exchange forward contracts included in accounts payable and accrued liabilities — — Net assets (liabilities) measured or disclosed at fair value $ ) $ ) $ As at December 31, 2016 Level 1 Level 2 Level 3 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE Assets measured at fair value Investment properties $ — $ — $ Foreign exchange forward contracts included in prepaid expenses and other — — Liabilities measured or disclosed at fair value Unsecured debentures, net — — Cross currency interest rate swaps — — Other liability — — Net assets (liabilities) measured or disclosed at fair value $ ) $ ) $ For assets and liabilities that are measured at fair value on a recurring basis, the Trust determines whether transfers between the levels of the fair value hierarchy have occurred by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the years ended December 31, 2017 and 2016, there were no transfers between the levels. Refer to note 4, Investment Properties, for a description of the valuation techniques and inputs used in the fair value measurement and for a reconciliation of the fair value measurements of investment properties and assets held for sale recognized in Level 3 of the fair value hierarchy. Refer to note 7, Other Liability, for a description of the valuation techniques used in the fair value measurement of the liability in Level 3 of the fair value hierarchy. (c) Risk Management The main risks arising from the Trust's financial instruments are credit, interest rate, foreign exchange and liquidity risks. The Trust's approach to managing these risks is summarized below: (i) Credit risk The Trust's financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents include short-term investments, such as commercial paper, which are invested in governments, financial institutions and corporations with a minimum credit rating of BBB (based on Standard & Poor's ("S&P") rating scale) or A3 (based on Moody's Investor Services' ("Moody's") rating scale). Concentration of credit risk is further reduced by limiting the amount that is invested in any one government, financial institution or corporation. Magna accounts for approximately 74% of the Trust's rental revenue. Although its operating subsidiaries are not individually rated, Magna International Inc. has an investment grade credit rating from Moody's, S&P and Dominion Bond Rating Service which mitigates the Trust's credit risk. Substantially all of the Trust's accounts receivable are collected within 30 days. The balance of accounts receivable past due is not significant. (ii) Interest rate risk As at December 31, 2017, the Trust's exposure to interest rate risk is limited. Approximately 95% of the Trust's interest bearing debt consists of fixed rate debt in the form of the 2021 Debentures and the 2023 Debentures. These debentures, after taking into account the related cross currency interest rate swaps, have effective fixed interest rates of 2.68% and 2.43%, respectively. As a result, an insignificant amount of the Trust's debt is exposed to variable interest rate risk. (iii) Foreign exchange risk As at December 31, 2017, the Trust is exposed to foreign exchange risk primarily in respect of movements in the euro and the US dollar. The Trust is structured such that its foreign operations are primarily conducted by entities with a functional currency which is the same as the economic environment in which the operations take place. As a result, the net income impact of currency risk associated with financial instruments is limited as its financial assets and liabilities are generally denominated in the functional currency of the subsidiary that holds the financial instrument. However, the Trust is exposed to foreign currency risk on its net investment in its foreign currency denominated operations and certain Trust level foreign currency denominated assets and liabilities. At December 31, 2017, the Trust's foreign currency denominated net assets are $1.9 billion primarily in US dollars and euros. A 1% change in the US dollar and euro exchange rates relative to the Canadian dollar would result in a gain or loss of approximately $9.5 million and $9.5 million, respectively, to comprehensive income. Granite generates rental income that is not all denominated in Canadian dollars. Since the financial results are reported in Canadian dollars, the Trust is subject to foreign currency fluctuations that could, from time to time, have an impact on the operating results. For the year ended December 31, 2017, a 1% change in the US dollar and euro exchange rates relative to the Canadian dollar would have impacted revenue by approximately $0.7 million and $1.0 million, respectively. For the year ended December 31, 2017, the Trust designated its US dollar borrowings under the Credit Facility as a hedge of its net investment in the U.S. operations. In addition, the Trust has designated its cross currency interest rate swaps relating to the $650.0 million of unsecured debentures as hedges of its net investment in the European operations (note 6(b)). (iv) Liquidity risk Liquidity risk is the risk the Trust will encounter difficulties in meeting its financial obligations as they become due. The Trust may also be subject to the risks associated with debt financing, including the risks that the 2021 Debentures, 2023 Debentures and Credit Facility may not be able to be refinanced. The Trust's objectives in minimizing liquidity risk are to maintain prudent levels of leverage on its investment properties, staggering its debt maturity profile and maintaining investment grade credit ratings. In addition, the Declaration of Trust establishes certain debt ratio limits. The contractual maturities of the Trust's financial liabilities are summarized below: Payments due by year As at December 31, 2017 Total Thereafter Unsecured debentures $ $ — $ — $ — $ $ — $ Cross currency interest rate swaps — — — — Bank indebtedness — — — — — Interest payments (1) : Unsecured debentures, net of cross currency interest rate swap savings Bank indebtedness Tenant allowance payable — — — — — Accounts payable and accrued liabilities — — — Distributions payable — — — — — $ $ $ $ $ $ $ (1) Represents aggregate interest expense expected to be paid over the term of the debt, on an undiscounted basis, based on actual current interest rates and average foreign exchange rates. |
CAPITAL MANAGEMENT
CAPITAL MANAGEMENT | 12 Months Ended |
Dec. 31, 2017 | |
CAPITAL MANAGEMENT | |
CAPITAL MANAGEMENT | 17. CAPITAL MANAGEMENT The Trust's capital structure comprises the total of the stapled unitholders' equity and consolidated debt. The total managed capital of the Trust is summarized below: As at December 31, Unsecured debentures, net $ $ Cross currency interest rate swaps Bank indebtedness — Total debt Stapled unitholders' equity Total managed capital $ $ The Trust manages, monitors and adjusts its capital balances in response to the availability of capital, economic conditions and investment opportunities with the following objectives in mind: • Compliance with investment and debt restrictions pursuant to the Declaration of Trust; • Compliance with existing debt covenants; • Maintaining investment grade credit ratings; • Supporting the Trust's business strategies including: ongoing operations, property development and acquisitions; • Generating stable and growing cash distributions; and • Building long-term unitholder value. The Declaration of Trust contains certain provisions with respect to capital management which include: • The Trust shall not incur or assume any indebtedness if, after giving effect to the incurring or assumption of the indebtedness, the total indebtedness of the Trust would be more than 65% of the Gross Book Value (as defined in the Declaration of Trust); and • The Trust shall not invest in raw land for development, except for (i) existing properties with additional development, (ii) the purpose of renovating or expanding existing properties or (iii) the development of new properties, provided that the aggregate cost of the investments of the Trust in raw land, after giving effect to the proposed investment, will not exceed 15% of Gross Book Value. At December 31, 2017, the Trust's consolidated debt consists of the Credit Facility, the 2021 Debentures and the 2023 Debentures which have various financial covenants. These covenants are defined within the Credit Facility and the trust indenture and, depending on the debt instrument, include a total indebtedness ratio, a secured indebtedness ratio, an interest coverage ratio, an unencumbered asset ratio, and a minimum equity threshold. The Trust monitors these provisions and covenants and was in compliance with their respective requirements as at December 31, 2017. Distributions are made at the discretion of the Board of Trustees (the "Board"). However, Granite REIT intends to distribute each year all of its taxable income as calculated in accordance with the Income Tax Act. For the fiscal year 2017, the Trust declared a monthly distribution of $0.217 per stapled unit from January to November and a monthly distribution of $0.227 per stapled unit for the month of December. The Board determined these distribution levels having considered, among other factors, estimated 2017 and 2018 cash generated from operations and capital requirements, the alignment of its current and targeted payout ratios with the Trust's strategic objectives and compliance with the above noted provisions and financial covenants. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 18. RELATED PARTY TRANSACTIONS For the years ended December 31, 2017 and 2016, key management personnel include the Trustees/Directors, the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer. Information with respect to the Trustees'/Directors' fees is included in notes 11(b) and 12(b). The compensation paid or payable to the Trust's key management personnel was as follows: Years ended December 31, Salaries, incentives and short-term benefits $ $ Unit-based compensation expense including fair value adjustments $ $ Related party transactions for the year ended December 31, 2017 also included a $0.7 million reimbursement of proxy contest expenses to a company affiliated with a director/trustee of Granite in connection with the 2017 annual general meeting (note 12(c)). |
COMBINED FINANCIAL INFORMATION
COMBINED FINANCIAL INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
COMBINED FINANCIAL INFORMATION | |
COMBINED FINANCIAL INFORMATION | 19. COMBINED FINANCIAL INFORMATION The combined financial statements include the financial position and results of operations and cash flows of each of Granite REIT and Granite GP. Below is a summary of the financial information for each entity along with the elimination entries and other adjustments that aggregate to the combined financial statements: Balance Sheet As at December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and ASSETS Non-current assets: Investment properties $ $ Investment in Granite LP — ) — Other non-current assets ) Current assets: Assets held for sale Other current assets Intercompany receivable (1) — ) — Cash and cash equivalents Total assets $ ) $ LIABILITIES AND EQUITY Non-current liabilities: Unsecured debentures, net $ $ Other non-current liabilities Current liabilities: Bank indebtedness Intercompany payable (1) ) — Other current liabilities Total liabilities ) Equity: Stapled unitholders' equity Non-controlling interests ) Total liabilities and equity $ ) $ (1) Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP. Balance Sheet As at December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and ASSETS Non-current assets: Investment properties $ $ Investment in Granite LP — ) — Other non-current assets ) Current assets: Other current assets Intercompany receivable (1) — ) — Cash and cash equivalents Total assets $ ) $ LIABILITIES AND EQUITY Non-current liabilities: Unsecured debentures, net $ $ Other non-current liabilities Current liabilities: Intercompany payable (1) ) — Other current liabilities Total liabilities ) Equity: Stapled unitholders' equity Non-controlling interests ) Total liabilities and equity $ ) $ (1) Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP. Income Statement Year ended December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and Revenue $ $ General and administrative expenses Proxy contest expenses Interest expense and other financing costs, net Other costs and expenses, net Share of (income) loss of Granite LP — ) — Fair value gains on investment properties, net ) ) Fair value losses on financial instruments Acquisition transaction costs Loss on sale of investment properties Income before income taxes ) Income tax expense Net income ) Less net income attributable to non-controlling interests ) Net income attributable to stapled unitholders $ — $ Income Statement Year ended December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and Revenue $ $ General and administrative expenses Interest expense and other financing costs, net Early redemption costs of unsecured debentures Other costs and expenses, net Share of (income) loss of Granite LP — ) — Fair value gains on investment properties, net ) ) Fair value losses on financial instruments Loss on sale of investment properties Income before income taxes ) Income tax expense Net income ) Less net income attributable to non-controlling interests ) Net income attributable to stapled unitholders $ — $ Statement of Cash Flows Year ended December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and OPERATING ACTIVITIES Net income $ ) $ Items not involving current cash flows ) ) ) Changes in working capital balances ) ) Other operating activities Cash provided by operating activities — INVESTING ACTIVITIES Business acquisition ) ) Investment property capital additions — Maintenance or improvements ) ) — Developments or expansions ) ) Other investing activities ) ) Cash used in investing activities ) — — ) FINANCING ACTIVITIES Distributions paid ) ) Other financing activities Cash used in financing activities ) — — ) Effect of exchange rate changes Net increase (decrease) in cash and cash equivalents during the year $ ) — $ ) Statement of Cash Flows Year ended December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and OPERATING ACTIVITIES Net income $ ) $ Items not involving current cash flows ) ) ) Changes in working capital balances ) — ) Other operating activities Cash provided by (used in) operating activities ) — INVESTING ACTIVITIES Investment property capital additions — Maintenance or improvements ) ) — Developments or expansions ) ) Other investing activities Cash provided by investing activities — — FINANCING ACTIVITIES Distributions paid ) ) Other financing activities Cash used in financing activities ) — — ) Effect of exchange rate changes ) ) Net increase (decrease) in cash and cash equivalents during the year $ ) — $ |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 20. COMMITMENTS AND CONTINGENCIES (a) The Trust is subject to various legal proceedings and claims that arise in the ordinary course of business. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Trust. However, actual outcomes may differ from management's expectations. (b) At December 31, 2017, the Trust's contractual commitments related to construction and development projects amounted to approximately $7.9 million of which $6.4 million will be reimbursed from a tenant. (c) At December 31, 2017, the Trust had commitments on non-cancellable operating leases requiring future minimum annual rental payments as follows: Not later than 1 year $ Later than 1 year and not later than 5 years Later than 5 years — $ In addition, the Trust is committed to making annual payments under two ground leases for the land upon which two income-producing properties are situated of $0.5 million and $0.1 million to the years 2049 and 2096, respectively. As at December 31, 2017, the fair value of the investment properties situated on the land under ground leases is $53.8 million. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 21. SUBSEQUENT EVENTS (a) In January 2018, the Trust sold 10 properties, classified as assets held for sale at December 31, 2017, for gross proceeds of approximately $391.4 million (note 5). (b) On February 2, 2018, the Trust paid its tenant allowance obligation of $9.0 million (€6.0 million) (note 7). (c) On February 1, 2018, the Trust entered into a new five-year unsecured credit facility in the amount of $500.0 million that matures on February 1, 2023 (note 8). (d) Subsequent to December 31, 2017, the Trust declared distributions in January and February 2018 of $10.6 million and $10.5 million, respectively (note 10). (e) Subsequent to year end and as of March 1, 2018, the Trust purchased 891,440 stapled units for total consideration of $43.9 million pursuant to the NCIB (note 11(c)). |
SIGNIFICANT ACCOUNTING POLICI29
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Statement of Compliance | (a) Basis of Presentation and Statement of Compliance The combined financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). |
Combined Financial Statements and Basis of Consolidation | (b) Combined Financial Statements and Basis of Consolidation As a result of the REIT conversion described in note 1, the Trust does not have a single parent; however, each unit of Granite REIT and each share of Granite GP trade as a single stapled unit and accordingly, Granite REIT and Granite GP have identical ownership. Therefore, these financial statements have been prepared on a combined basis whereby the assets, liabilities and results of Granite GP and Granite REIT have been combined. The combined financial statements include the subsidiaries of Granite GP and Granite REIT. Subsidiaries are fully consolidated by Granite GP or Granite REIT from the date of acquisition, being the date on which control is obtained. The subsidiaries continue to be consolidated until the date that such control ceases. Control exists when Granite GP or Granite REIT have power, exposure or rights to variable returns and the ability to use their power over the entity to affect the amount of returns it generates. All intercompany balances, income and expenses and unrealized gains and losses resulting from intercompany transactions are eliminated. |
Trust Units | (c) Trust Units The stapled units are redeemable at the option of the holder and therefore are required to be accounted for as financial liabilities, except where certain exemption conditions are met, in which case redeemable instruments may be classified as equity. The attributes of the stapled units meet the exemption conditions set out in IAS 32, Financial Instruments: Presentation and are therefore presented as equity for purposes of that standard. |
Investment Properties | (d) Investment Properties The Trust accounts for its investment properties, which include income-producing properties, properties under development and land held for development, in accordance with IAS 40, Investment Property. For acquired investment properties that meet the definition of a business, the acquisition is accounted for as a business combination (note 2(e)); otherwise they are initially measured at cost including directly attributable expenses. Subsequent to acquisition, investment properties are carried at fair value, which is determined based on available market evidence at the balance sheet date including, among other things, rental revenue from current leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about rental revenue from future leases less future cash outflows in respect of capital expenditures. Gains and losses arising from changes in fair value are recognized in net income in the period of change. Income-Producing Properties The carrying value of income-producing properties includes the impact of straight-line rental revenue (note 2(k)), tenant incentives and deferred leasing costs since these amounts are incorporated in the determination of the fair value of income-producing properties. When an income-producing property is disposed of, the gain or loss is determined as the difference between the disposal proceeds, net of selling costs and the carrying amount of the property and is recognized in net income in the period of disposal. Properties Under Development The Trust's development properties are classified as such until the property is substantially completed and available for occupancy. The Trust capitalizes acquisition, development and expansion costs, including direct construction costs, borrowing costs and indirect costs wholly attributable to development. Borrowing costs are capitalized to projects under development or construction based on the average accumulated expenditures outstanding during the period multiplied by the Trust's average borrowing rate on existing debt. Where borrowings are associated with specific developments, the amount capitalized is the gross borrowing cost incurred on such borrowings less any investment income arising on temporary investment of these borrowings. The capitalization of borrowing costs is suspended if there are prolonged periods that development activity is interrupted. The Trust capitalizes direct and indirect costs, including property taxes and insurance of the development property if activities necessary to ready the development property for its intended use are in progress. Costs of internal personnel and other indirect costs that are not wholly attributable to a project are expensed as incurred. Properties under development are measured at fair value with appropriate estimates made for construction costs and timeline and related assumptions in order to determine the fair value of the property. |
Business Combinations | (e) Business Combinations The Trust accounts for investment property acquisitions as a business combination if the particular assets and set of activities acquired can be operated and managed as a business in their current state for the purpose of providing a return to the unitholders. The Trust applies the acquisition method to account for business combinations. The consideration transferred for a business combination is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Trust. The total consideration includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Trust recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognized amounts of the acquiree's identifiable net assets. Acquisition related costs are expensed as incurred. Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration that is recorded as an asset or liability is recognized in accordance with IAS 39, Financial Instruments: Recognition and Measurement ("IAS 39") in net income. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the identifiable net assets acquired. If the consideration transferred is lower than the fair value of the net assets acquired, the difference is recognized in net income. |
Assets Held for Sale | (f) Assets Held for Sale Non-current assets (and disposal groups) are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is satisfied when the asset is available for immediate sale in its present condition, management is committed to the sale, and it is highly probable to occur within one year. |
Foreign Currency Translation | (g) Foreign Currency Translation The assets and liabilities of the Trust's foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case, for material transactions, the exchange rates at the dates of those transactions are used. Exchange differences arising are recognized in other comprehensive income and accumulated in equity. In preparing the financial statements of each entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the average rates of exchange prevailing in the period. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in net income in the period in which they arise except for: • The effective portion of exchange differences on transactions entered into in order to hedge certain foreign currency risks are recognized in other comprehensive income; • Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation) are recognized in other comprehensive income; and • Exchange differences on foreign currency borrowings related to capitalized interest for assets under construction. |
Financial Instruments and Hedging | (h) Financial Instruments and Hedging Financial assets The Trust classifies its financial assets upon initial recognition as fair value through profit or loss ("FVTPL"), held to maturity, loans and receivables or available for sale. Loans and receivables, which include accounts receivable, cash and cash equivalents, restricted cash and certain other assets, are initially measured at fair value and are subsequently measured at amortized cost less provision for impairment. A provision for impairment is recognized when there is objective evidence that collection may not be possible under the original terms of the contract. Indicators of impairment include default on payments and significant financial difficulty of the tenant or counterparty. The carrying amount of the asset is reduced through a provision account, and the amount of the loss is recognized in net income. Bad debt write-offs occur when the Trust determines collection is unlikely. Any subsequent recoveries of amounts previously written off are credited against general and administrative expenses in net income. Accounts receivable that are more than one month past due are not considered impaired unless there is evidence that collection is not possible. The Trust does not currently have any financial assets classified as held to maturity or available for sale. Financial liabilities The Trust classifies its financial liabilities upon initial recognition as FVTPL or other financial liabilities. Other financial liabilities, which include unsecured debentures, bank indebtedness, accounts payable and accrued liabilities, distributions payable and certain other liabilities, are measured at amortized cost. The Trust's policy for the treatment of financing costs related to the issuance of long-term debt is to present debt instruments on the balance sheet net of the related financing costs, with the net balance accreting to the face value of the debt over its term following the effective interest method. The costs of obtaining a revolving credit facility are capitalized and amortized over the term of the facility on a straight-line basis. Derivatives and Hedging Derivative instruments, including the cross currency interest rate swaps and foreign exchange forward contracts, are recorded in the combined balance sheet at fair value including those derivatives that are embedded in financial or non-financial contracts. Changes in the fair value of derivative instruments which are not designated as hedges for accounting purposes are recognized in the statement of income. The Trust utilizes derivative financial instruments from time to time in the management of its foreign currency and interest rate exposures. The Trust's policy is not to utilize derivative financial instruments for trading or speculative purposes. The Trust applies hedge accounting to certain derivative and non-derivative financial instruments designated as hedges of net investments in subsidiaries with a functional currency other than the Canadian dollar. Hedge accounting is discontinued prospectively when the hedge relationship is terminated or no longer qualifies as a hedge, or when the hedging item is sold or terminated. In a net investment hedging relationship, the effective portion of foreign exchange gains or losses on the hedging instruments is recognized in other comprehensive income and the ineffective portion is recognized in net income. The amounts recorded in accumulated other comprehensive income are recognized in net income when there is a disposition or partial disposition of the foreign subsidiary. |
Cash and Cash Equivalents and Restricted Cash | (i) Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on account, demand deposits and short-term investments with maturities of less than three months at the date of acquisition. In accordance with IAS 7, Statement of Cash Flows, also recognized in cash equivalents may be short-term investments with original maturities longer than three months but less than six months since they can be readily converted into known amounts of cash and are subject to an insignificant risk of changes in value. Restricted cash represents segregated cash accounts for a specific purpose and cannot be used for general corporate purposes. |
Fixed Assets | (j) Fixed Assets Fixed assets are recorded at cost less accumulated depreciation. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the fixed assets, which typically range from 3 to 5 years for computer hardware and software and 5 to 7 years for other furniture and fixtures. Leasehold improvements are amortized over the term of the applicable lease. |
Revenue Recognition | (k) Revenue Recognition Where Granite has retained substantially all the benefits and risks of ownership of its rental properties, leases with its tenants are accounted for as operating leases. Where substantially all the benefits and risks of ownership of the Trust's rental properties have been transferred to its tenants, the Trust's leases are accounted for as finance leases. All of the Trust's current leases (the "Leases") are operating leases. The majority of the Leases are net leases under which the lessee is responsible for the direct payment of all operating costs related to the properties, including property taxes, insurance, utilities and non-structural repairs and maintenance. Revenues and operating expenses for these Leases do not include any amounts related to operating costs paid directly by such lessees. The remaining Leases generate rental revenue that includes the recovery of operating costs. The Leases may provide for either scheduled fixed rent changes or periodic rent increases based on increases in a local price index. Where periodic rent increases depend on increases in a local price index, such rent increases are accounted for as contingent rentals and recognized in income in applicable future years. Where scheduled fixed rent changes exist in operating leases, the total scheduled fixed lease payments of the lease are recognized in income evenly on a straight-line basis over the term of the lease. In addition, cash allowances provided to tenants are recognized in income evenly on a straight-line basis over the term of the lease. |
Unit-Based Compensation Plans | (l) Unit-Based Compensation Plans Incentive Stock Option Plan Compensation expense for option grants is based on the fair value of the options at the grant date and is recognized over the period from the grant date to the date the award is vested. A liability was recognized for outstanding options based upon the fair value as the Trust is an open-ended trust making its units redeemable. During the period in which options are outstanding, the liability is adjusted for changes in the fair value with such adjustments being recognized as compensation expense in general and administrative expenses in the period in which they occur. The liability balance is reduced as options are exercised and recorded in equity as stapled units along with the proceeds received on exercise. Executive Deferred Stapled Unit Plan The executive deferred stapled unit plan is measured at fair value at the date of grant and amortized to compensation expense from the effective date of the grant to the final vesting date. Compensation expense is recognized on a proportionate basis consistent with the vesting features of each tranche of the grant. Compensation expense for executive deferred stapled units granted under the plan is recognized as general and administrative expenses with a corresponding liability recognized based on the fair value of the Trust's stapled units as the Trust is an open-ended trust making its units redeemable. During the period in which the executive deferred stapled units are outstanding, the liability is adjusted for changes in the market value of the Trust's stapled unit, with such adjustments being recognized as compensation expense in general and administrative expenses in the period in which they occur. The liability balance is reduced as deferred stapled units are settled for stapled units and recorded in equity. Director/Trustee Deferred Share Unit Plan The compensation expense and a corresponding liability associated with the director/trustee deferred share unit plan is measured based on the market value of the underlying stapled units. During the period in which the awards are outstanding, the liability is adjusted for changes in the market value of the underlying stapled unit, with such positive or negative adjustments being recognized in general and administrative expenses in the period in which they occur. |
Income Taxes | (m) Income Taxes Operations in Canada Granite qualifies as a mutual fund trust under the Income Tax Act (Canada) (the "Act") and as such the Trust itself will not be subject to income taxes provided it continues to qualify as a REIT for purposes of the Act. A REIT is not taxable and not considered to be a Specified Investment Flow-through Trust provided it complies with certain tests and it distributes all of its taxable income in a taxation year to its unitholders. The Trust's qualification as a REIT results in no current or deferred income tax being recognized in the combined financial statements for income taxes related to the Canadian investment properties. Current income tax related to certain taxable Canadian entities is determined on the basis of enacted or substantively enacted tax rates and laws at each balance sheet date. Operations in the United States The Trust's investment property operations in the United States are conducted in a qualifying United States REIT ("US REIT") for purposes of the Internal Revenue Code of 1986, as amended. As a qualifying US REIT, it is not taxable provided it complies with certain tests in addition to the requirement to distribute substantially all of its taxable income. As a qualifying US REIT, current income taxes on U.S. taxable income have not been recorded in the combined financial statements. However, the Trust has recorded deferred income taxes that may arise on the disposition of its investment properties as the Trust will likely be subject to entity level income tax in connection with such transactions pursuant to the Foreign Investment in Real Property Tax Act. Operations in Europe The Trust consolidates certain entities that continue to be subject to income tax. Income taxes for taxable entities in Europe, as well as other entities in Canada or the United States subject to tax, are recorded as follows: Current Income Tax The current income tax expense is determined on the basis of enacted or substantively enacted tax rates and laws at each balance sheet date. Deferred Income Tax Deferred income tax is recorded, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and the amounts reported in the combined financial statements. Deferred income tax is measured using tax rates and laws that are enacted and substantively enacted as at each balance sheet date which are expected to apply when the temporary differences are expected to reverse. Deferred income tax assets are recognized only to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary difference can be utilized. Each of the current and deferred tax assets and liabilities are offset when they are levied by the same taxation authorities on either the same taxable entities, or different taxable entities within the same reporting group that settle on a net basis, and when there is a legal right to offset. |
Significant Accounting Judgments, Estimates and Assumptions | (n) Significant Accounting Judgments, Estimates and Assumptions The preparation of these combined financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that the judgments, estimates and assumptions utilized in preparing the combined financial statements are reasonable and prudent; however, actual results could be materially different and require an adjustment to the reported results. Judgments The following are the critical judgments that have been made in applying the Trust's accounting policies and that have the most significant effect on the amounts recognized in the combined financial statements: Leases The Trust's policy for revenue recognition is described in note 2(k). The Trust makes judgments in determining whether certain leases are operating or finance leases, in particular tenant leases with long contractual terms, leases where the property is a large square-footage and/or architecturally specialized and long-term ground leases where the Trust is the lessee. Investment properties The Trust's policy relating to investment properties is described in note 2(d). In applying this policy, judgment is used in determining whether certain costs incurred for tenant improvements are additions to the carrying amount of the property or represent incentives, identifying the point at which practical completion of properties under development occurs and determining borrowing costs to be capitalized to the carrying value of properties under development. Judgment is also applied in determining the use, extent and frequency of independent appraisals. Income taxes The Trust applies judgment in determining whether it will continue to qualify as a REIT for both Canadian and U.S. tax purposes for the foreseeable future. However, should it at some point no longer qualify, it would be subject to income tax and would be required to recognize current and deferred income taxes. Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include the following: Valuation of investment properties The fair value of investment properties is determined by management using primarily the discounted cash flow method in which the income and expenses are projected over the anticipated term of the investment plus a terminal value discounted using an appropriate discount rate. The Trust obtains, from time to time, appraisals from independent qualified real estate valuation experts. However, the Trust does not measure its investment properties based on these valuations but uses such appraisals as data points, together with other external market information accumulated by management, in arriving at its own conclusions on values. Management uses valuation assumptions such as discount rates, terminal capitalization rates and market rental rates applied in external appraisals or sourced from valuation experts; however, the Trust also uses its historical renewal experience with tenants, its direct knowledge of the specialized nature of Granite's portfolio and tenant profile and the actual condition of the properties in making business judgments about lease renewal probabilities, renewal rents and capital expenditures. The critical assumptions relating to the Trust's estimates of fair values of investment properties include the receipt of contractual rents, contractual renewal terms, expected future market rental rates, discount rates that reflect current market uncertainties, capitalization rates and recent investment property prices. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of investment properties may change materially. Refer to note 4 for further information on the estimates and assumptions made by management. Fair value of financial instruments Where the fair value of financial assets or liabilities recorded on the balance sheet or disclosed in the notes cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flow method. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as credit risk and volatility. Changes in assumptions about these factors could materially affect the reported fair value of financial instruments. Income taxes The Trust operates in a number of countries and is subject to the income tax laws and related tax treaties in each of its operating jurisdictions. These laws and treaties can be subject to different interpretations by relevant taxation authorities. Significant judgment is required in the estimation of Granite's income tax expense, interpretation and application of the relevant tax laws and treaties and provision for any exposure that may arise from tax positions that are under audit by relevant taxation authorities. The recognition and measurement of deferred tax assets or liabilities is dependent on management's estimate of future taxable profits and income tax rates that are expected to be in effect in the period the asset is realized or the liability is settled. Any changes in management's estimate can result in changes in deferred tax assets or liabilities as reported in the combined balance sheets and also the deferred income tax expense in the combined statements of income. |
Future Accounting Policy Changes | (o) Future Accounting Policy Changes IFRS 9, Financial Instruments In July 2014, the IASB issued IFRS 9, Financial Instruments ("IFRS 9") which replaces IAS 39, Financial Instruments: Recognition and Measurement effective January 1, 2018. IFRS 9 provides new guidance on the classification and measurement, impairment and hedge accounting for financial instruments in addition to clarification for the treatment of modifications of financial liabilities. IFRS 9 is required to be adopted retrospectively with certain available transition provisions which allow the Trust to elect not to restate prior period comparative information. The Trust is in the final stages of its evaluation of the impact of this standard on its combined financial statements. The Trust will adopt IFRS 9 for the annual period beginning January 1, 2018, however, this standard is not expected to have any significant impact on the combined financial statements. Classification and measurement: IFRS 9 requires a new approach for the classification and measurement of financial assets based on the Trust's business models for managing these financial assets and their contractual cash flow characteristics. This approach is summarized as follows: • Assets held for the purpose of collecting contractual cash flows that solely represent payments of principal and interest will be measured at amortized cost. • Assets held within a business model where assets are both held for the purpose of collecting contractual cash flows or sold prior to maturity and the contractual cash flows solely represent payments of principal and interest will be measured at fair value through other comprehensive income ("FVTOCI"). • Assets held within another business model or assets that do not have contractual cash flow characteristics that are solely payments of principal and interest will be measured at fair value through profit or loss ("FVTPL"). The Trust has completed its review of all financial instruments held and has performed cash flow and business model assessments on the Trust's financial assets, and the expected impact is summarized as follows: • The Trust's cash and cash equivalents, restricted cash, accounts receivable, and long-term receivables currently measured at amortized costs will continue to be measured at amortized cost. • The Trust's derivative asset and liability instruments will continue to be measured at FVTPL. Impairment: IFRS 9 introduces a new expected credit loss ("ECL") impairment model for all financial assets measured at amortized cost or debt instruments measured at FVTOCI. The new ECL model will result in an allowance for expected credit losses being recorded regardless of whether there has been an actual loss event. The ECL model is forward-looking and requires the use of a reasonable and supportable forecast of future conditions in the determination of whether there has been a significant increase in credit risk since the origination of the financial instrument. The Trust continues to refine certain aspects of the expected credit loss modelling process leading up to its March 31, 2018 first quarter reporting, and the expected impact is summarized as follows: • The Trust does not expect to record a material ECL allowance against loans and notes receivable as historical experience of loss on these balances is insignificant and based on the assessment of forward looking information no significant increases in expected losses are expected. The Trust will continue to assess the valuation of these instruments. • The Trust does not expect to record a material ECL allowance against accounts receivable and has determined that its internal processes of evaluating each receivable on a specific basis for collectability using historical experience and adjusted for forward looking information, would appropriately allow the Trust to determine if there are significant increases in credit risk to then record a corresponding ECL allowance. Hedge accounting: IFRS 9 also introduces a new hedge accounting model that expands the scope of hedge items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. This new standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it will provide for more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. Special transitional requirements have been set for the application of the new general hedging model. Financial Liabilities: Generally, IFRS 9 does not introduce changes to the classification of financial liabilities. The Trust will continue to measure its financial liabilities at amortized cost. In regards to term modifications for financial liabilities, IFRS 9 requires that when a financial liability measured at amortized cost is modified or exchanged, and such modification or exchange does not result in derecognition, the adjustment to the amortized cost of the financial liability is recognized in profit or loss. IFRS 15, Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers ("IFRS 15") which replaces IAS 18, Revenue and IAS 11, Construction Contracts effective January 1, 2018. The objective of IFRS 15 is to establish the principles that the Trust will apply to report useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The Trust is currently evaluating the adoption method for applying the new standard to prior periods. The Trust is in the final stages of its evaluation of the impact of this standard on its combined financial statements. As the Trust's most material revenue stream of rental revenue is outside the scope of the new standard, the adoption of the new standard is not expected to have a material impact on the combined statements of income and comprehensive income. The Trust has concluded that the pattern of revenue recognition will remain unchanged. However, the Trust will be required to disclose the separate components of each revenue stream, including those included within gross leases, to the combined financial statements. Further, in respect of the Trust's net leases where the tenant is responsible for direct payment of both property taxes and insurance, because the Trust is the beneficiary, the amounts of expense and related revenue for these amounts will be presented on a gross basis in the statement of income and comprehensive income. There is no impact to net income or unitholders equity. In addition, no impact to the combined statement of cash flow is expected from adoption. IFRS 16, Leases In January 2016, the IASB issued IFRS 16, Leases ("IFRS 16") which replaces IAS 17, Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted for entities that apply IFRS 15. The Trust does not expect this standard to have a significant impact on its combined financial statements as leases with tenants are expected to be accounted for as operating leases in the same manner they are currently being reported. The Trust has two investment properties located on land that is leased. Currently, the ground rent payments are expensed. It is expected that under IFRS 16, a right-of-use asset addition to investment properties and a lease obligation liability will be recorded with associated financing charges. The Trust also has rent expense associated with office space in Toronto, Canada and Vienna, Austria. A right-of-use asset addition and obligation liability will be recorded for these lease obligations as well. IFRS 2, Share-based Payment In June 2016, the IASB issued amendments to IFRS 2, Share-based Payment ("IFRS 2") clarifying how to account for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments, share-based payment transactions with a net settlement feature and a modification to the terms and conditions that change the classification of the transactions. These amendments are effective for annual periods beginning on or after January 1, 2018. The Trust does not believe there will be a significant impact on the combined financial statements from adopting this standard. IFRIC 23, Uncertainty over Income Tax Treatments In June 2017, the IFRS Interpretations Committee issued IFRIC 23, Uncertainty over Income Tax Treatments ("IFRIC 23") which clarifies how the recognition and measurement requirements of IAS 12, Income Taxes, are applied where there is uncertainty over income tax treatments. This standard is effective for annual reporting periods beginning on or after January 1, 2019. The Trust is currently assessing the impact of IFRIC 23 on its combined financial statements. IAS 40, Investment Properties On December 8, 2016, the IASB issued an amendment to IAS 40, Investment Properties that requires an asset to be transferred to or from investment property only when there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. Granite will adopt these amendments and clarifications in its combined financial statements for the annual period beginning on January 1, 2018. |
ACQUISITION (Tables)
ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ACQUISITION | |
Schedule of consideration paid for the acquisition and fair values of assets and liabilities | Total Purchase consideration: Cash sourced from credit facility $ Cash on hand Total cash consideration paid $ Recognized amounts of identifiable assets acquired and liabilities assumed measured at their respective fair values: Investment properties $ Working capital ) Total identifiable net assets $ |
INVESTMENT PROPERTIES (Tables)
INVESTMENT PROPERTIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INVESTMENT PROPERTIES | |
Schedule of investment property summary | As at December 31, Income-Producing Properties $ $ Land Held For Development $ $ |
Schedule of changes in investment properties | Years ended December 31, 2017 2016 Income- Properties Land Held For Income- Properties Land Held For Balance, beginning of year $ $ — $ $ $ $ Additions — Capital expenditures: Maintenance or improvements — — — — Developments or expansions — — — — Acquisition (note 3) — — — — — — Transfer to land held for development ) — — — — — Completed projects — — — ) — — Leasing commissions — — — — — Tenant incentives — — — — Fair value gains, net — — — — Foreign currency translation, net — ) ) ) Disposals — — — ) — — Amortization of straight-line rent ) — — — — Amortization of tenant incentives ) — — ) — — Other changes — — — — Classified as assets held for sale (note 5) ) — — — — — Balance, end of year $ $ — $ $ $ — $ |
Schedule of the key valuation metrics for income-producing properties by country | As at December 31, 2017 (1) 2016 Maximum Minimum Weighted (2) Maximum Minimum Weighted (2) Canada Discount rate Terminal capitalization rate United States Discount rate Terminal capitalization rate Germany Discount rate Terminal capitalization rate Austria Discount rate Terminal capitalization rate Netherlands Discount rate Terminal capitalization rate Other Discount rate Terminal capitalization rate Total Discount rate Terminal capitalization rate (1) Excludes properties held for sale (note 5). (2) Weighted based on income-producing property fair value. |
Schedule of sensitivity of the fair value of investment properties to changes in either the discount rate or terminal capitalization rate | Discount Rate Terminal Rate sensitivity Fair value Change in Fair value Change in +50 basis points $ $ ) $ $ ) +25 basis points ) ) Base rate — — –25 basis points –50 basis points |
Schedule of minimum rental commitments payable on non-cancellable operating leases | Not later than 1 year $ Later than 1 year and not later than 5 years Later than 5 years $ |
UNSECURED DEBENTURES, NET AND32
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS | |
Schedule of unsecured debentures, net | As at December 31, 2017 2016 Maturity Date Amortized Principal Amortized Cost Principal 3.788% Debentures July 5, 2021 $ $ $ $ 3.873% Debentures November 30, 2023 $ $ $ $ |
Schedule of cross currency interest rate swaps | As at December 31, Financial liability 2021 Cross Currency Interest Rate Swap — fair value $ $ 2023 Cross Currency Interest Rate Swap — fair value $ $ |
CURRENT ASSETS AND CURRENT LI33
CURRENT ASSETS AND CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CURRENT ASSETS AND CURRENT LIABILITIES | |
Schedule of accounts payable and accrued liabilities | As at December 31, Accounts payable $ $ Accrued salaries, incentives and severance Accrued interest payable Accrued construction payable Accrued professional fees Accrued employee unit-based compensation Accrued trustee/director unit-based compensation Accrued property operating costs Other accrued liabilities $ $ |
EQUITY (Tables)
EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Unit-based Compensation | |
Schedule of unit-based compensation expense recognized in general and administrative expenses | Years ended December 31, DSPs for trustees/directors $ $ Stapled Unit Plan for employees Option Plan — Unit-based compensation expense $ $ Fair value remeasurement expense included in the above $ $ |
Schedule of accumulated other comprehensive income | As at December 31, Foreign currency translation gains on investments in subsidiaries, net of related hedging activities and non-controlling interests (1) $ $ Fair value losses on derivatives designated as net investment hedges ) ) $ $ (1) Includes foreign currency translation gains and losses from non-derivative financial instruments designated as net investment hedges. |
Director/Trustee Deferred Share Unit Plan | |
Unit-based Compensation | |
Summary of reconciliation of the changes in unit-based compensation | 2017 2016 Number Weighted Average Number Weighted Average DSUs outstanding, January 1 $ $ Granted Settled ) ) DSUs outstanding, December 31 $ $ |
Executive Deferred Stapled Unit Plan | |
Unit-based Compensation | |
Summary of reconciliation of the changes in unit-based compensation | 2017 2016 Number Weighted Average Number Weighted Average Stapled units outstanding, January 1 $ $ New grants Forfeited (1) ) — Settled (2) ) ) Stapled units outstanding, December 31 $ $ (1) Three thousand stapled units (2016 — 198 stapled units) were forfeited during the year ended December 31, 2017. (2) 22 thousand stapled units (2016 — 57 thousand stapled units) were settled during the year ended December 31, 2017. |
COSTS AND EXPENSES (INCOME) (Ta
COSTS AND EXPENSES (INCOME) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COSTS AND EXPENSES (INCOME) | |
Schedule of property operating costs | Years ended December 31, Non-recoverable from tenants: Property taxes and utilities $ $ Legal Consulting Environmental and appraisals Repairs and maintenance Ground rents Other Recoverable from tenants: Property taxes and utilities Repairs and maintenance Property management fees Other Property operating costs $ $ |
Schedule of general and administrative expenses | Years ended December 31, Salaries and benefits $ $ Audit, legal and consulting Trustee/director fees and related expenses Unit-based compensation including distributions and revaluations Other public entity costs Office rents Other $ $ |
Schedule of interest expense and other financing costs, net | Years ended December 31, Interest and amortized issuance costs relating to debentures $ $ Interest on mortgages payable and construction loans — Amortization of deferred financing costs Other interest and accretion charges Capitalized interest — ) Interest income ) ) $ $ |
Schedule of fair value losses (gains) on financial instruments | Years ended December 31, Foreign exchange forward contracts, net $ $ ) Interest rate caps — Contingent consideration — $ $ |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
Schedule of major components of the income tax expense | Years ended December 31, Current income tax: Current taxes $ $ Current taxes referring to previous periods ) Withholding taxes and other $ $ Deferred income tax: Origination and reversal of temporary differences $ $ Impact of changes in tax rates ) ) Withholding taxes on profits of subsidiaries ) Other ) $ $ Income tax expense $ $ |
Schedule of effective income tax rate reported in the combined statements of income reconciled to the Canadian statutory rate | Years ended December 31, Income before income taxes $ $ Expected income taxes at the Canadian statutory tax rate of 26.5% (2016 — 26.5%) $ $ Income distributed and taxable to unitholders ) ) Net foreign rate differentials ) Net change in provisions for uncertain tax positions Net permanent differences Net effect of change in tax rates ) ) Withholding taxes and other Income tax expense $ $ |
Schedule of temporary differences in deferred tax assets and liabilities | As at December 31, Deferred tax assets: Investment properties $ $ Eligible capital expenditures Other Deferred tax assets $ $ Deferred tax liabilities: Investment properties $ $ Withholding tax on undistributed subsidiary profits Other — Deferred tax liabilities $ $ |
Schedule of changes in the net deferred tax liabilities | Years ended December 31, Balance, beginning of year $ $ Deferred tax expense recognized in net income Foreign currency translation of deferred tax balances ) Net deferred tax liabilities, end of year $ $ |
Schedule of reconciliation of the beginning and ending amounts of unrecognized tax benefits | As at December 31, Unrecognized tax benefits balance, beginning of year $ $ Decreases for tax positions of prior years ) ) Increases for tax positions of current year Foreign currency impact ) Unrecognized tax benefits balance, end of year $ $ |
Schedule of tax years subject to examination | Major Jurisdictions Canada 2012 through 2017 United States 2014 through 2017 Mexico 2011 through 2017 Austria 2013 through 2017 Germany 2012 through 2017 Netherlands 2013 through 2017 |
SEGMENTED DISCLOSURE INFORMAT37
SEGMENTED DISCLOSURE INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENTED DISCLOSURE INFORMATION | |
Schedule of revenue by geographic segmentation | Years ended December 31, Canada $ $ United States Austria Germany Netherlands Other Europe $ $ |
Schedule of investment properties by geographic segmentation | As at December 31, Canada $ $ United States Austria Germany Netherlands Other Europe $ $ |
DETAILS OF CASH FLOWS (Tables)
DETAILS OF CASH FLOWS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DETAILS OF CASH FLOWS | |
Schedule of items not involving current cash flows | Years ended December 31, Straight-line rent amortization $ $ ) Tenant incentive amortization Unit-based compensation expense (note 11(b)) Fair value gains on investment properties ) ) Depreciation and amortization Fair value losses on financial instruments Loss on sale of investment properties Amortization of issuance costs relating to debentures Amortization of deferred financing costs Deferred income taxes Other ) $ ) $ ) |
Schedule of changes in working capital balances | Years ended December 31, Accounts receivable $ ) $ Prepaid expenses and other ) Accounts payable and accrued liabilities ) ) Deferred revenue ) ) Restricted cash $ ) $ ) |
Schedule of cash and cash equivalents | Years ended December 31, Cash $ $ Short-term deposits $ $ |
FAIR VALUE AND RISK MANAGEMENT
FAIR VALUE AND RISK MANAGEMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
FAIR VALUE AND RISK MANAGEMENT | |
Schedule of classification and measurement of financial assets and liabilities | The following table provides the classification and measurement of financial assets and liabilities as at December 31, 2017: Fair value Loans and receivables / Total Total Measurement basis Fair value Amortized Fair value Carrying Fair Value Financial assets Other assets $ — $ (1) $ $ $ Accounts receivable — Prepaid expenses and other (2) — — Restricted cash — Cash and cash equivalents — $ $ $ $ $ Financial liabilities Unsecured debentures, net $ — $ $ $ $ Cross currency interest rate swaps — — Other liability — — Bank indebtedness — Accounts payable and accrued liabilities (3) Distributions payable — $ $ $ $ $ (1) Long-term receivables included in other assets. (2) Foreign exchange forward contracts included in prepaid expenses. (3) Foreign exchange forward contracts included in accounts payable and accrued liabilities. The following table provides the classification and measurement of financial assets and liabilities as at December 31, 2016: Fair value Loans and receivables / Total Total Measurement basis Fair value Amortized Fair value Carrying Fair Value Financial assets Other assets $ — $ (4) $ $ $ Accounts receivable — Prepaid expenses and other (5) — — Restricted cash — Cash and cash equivalents — $ $ $ $ $ Financial liabilities Unsecured debentures, net $ — $ $ $ $ Cross currency interest rate swaps — — Other liability — — Accounts payable and accrued liabilities — Distributions payable — $ $ $ $ $ (4) Long-term receivables included in other assets. (5) Foreign exchange forward contracts included in prepaid expenses. |
Schedule of assets and liabilities measured or disclosed at fair value on a recurring and non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall | As at December 31, 2017 Level 1 Level 2 Level 3 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE Assets measured at fair value Investment properties $ — $ — $ Assets held for sale — — Foreign exchange forward contracts included in prepaid expenses and other — — Liabilities measured or disclosed at fair value Unsecured debentures, net — — Cross currency interest rate swaps — — Other liability — — Bank indebtedness — — Foreign exchange forward contracts included in accounts payable and accrued liabilities — — Net assets (liabilities) measured or disclosed at fair value $ ) $ ) $ As at December 31, 2016 Level 1 Level 2 Level 3 ASSETS AND LIABILITIES MEASURED OR DISCLOSED AT FAIR VALUE Assets measured at fair value Investment properties $ — $ — $ Foreign exchange forward contracts included in prepaid expenses and other — — Liabilities measured or disclosed at fair value Unsecured debentures, net — — Cross currency interest rate swaps — — Other liability — — Net assets (liabilities) measured or disclosed at fair value $ ) $ ) $ |
Schedule of contractual maturities of financial liabilities | Payments due by year As at December 31, 2017 Total Thereafter Unsecured debentures $ $ — $ — $ — $ $ — $ Cross currency interest rate swaps — — — — Bank indebtedness — — — — — Interest payments (1) : Unsecured debentures, net of cross currency interest rate swap savings Bank indebtedness Tenant allowance payable — — — — — Accounts payable and accrued liabilities — — — Distributions payable — — — — — $ $ $ $ $ $ $ (1) Represents aggregate interest expense expected to be paid over the term of the debt, on an undiscounted basis, based on actual current interest rates and average foreign exchange rates. |
CAPITAL MANAGEMENT (Tables)
CAPITAL MANAGEMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CAPITAL MANAGEMENT | |
Schedule of total managed capital structure of the Trust | As at December 31, Unsecured debentures, net $ $ Cross currency interest rate swaps Bank indebtedness — Total debt Stapled unitholders' equity Total managed capital $ $ |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
Schedule of transactions with related parties | Years ended December 31, Salaries, incentives and short-term benefits $ $ Unit-based compensation expense including fair value adjustments $ $ |
COMBINED FINANCIAL INFORMATION
COMBINED FINANCIAL INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMBINED FINANCIAL INFORMATION | |
Schedule of Balance Sheet | Balance Sheet As at December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and ASSETS Non-current assets: Investment properties $ $ Investment in Granite LP — ) — Other non-current assets ) Current assets: Assets held for sale Other current assets Intercompany receivable (1) — ) — Cash and cash equivalents Total assets $ ) $ LIABILITIES AND EQUITY Non-current liabilities: Unsecured debentures, net $ $ Other non-current liabilities Current liabilities: Bank indebtedness Intercompany payable (1) ) — Other current liabilities Total liabilities ) Equity: Stapled unitholders' equity Non-controlling interests ) Total liabilities and equity $ ) $ (1) Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP. Balance Sheet As at December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and ASSETS Non-current assets: Investment properties $ $ Investment in Granite LP — ) — Other non-current assets ) Current assets: Other current assets Intercompany receivable (1) — ) — Cash and cash equivalents Total assets $ ) $ LIABILITIES AND EQUITY Non-current liabilities: Unsecured debentures, net $ $ Other non-current liabilities Current liabilities: Intercompany payable (1) ) — Other current liabilities Total liabilities ) Equity: Stapled unitholders' equity Non-controlling interests ) Total liabilities and equity $ ) $ (1) Represents employee and trustee/director compensation related amounts which will be reimbursed by Granite LP. |
Schedule of Income Statement | Income Statement Year ended December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and Revenue $ $ General and administrative expenses Proxy contest expenses Interest expense and other financing costs, net Other costs and expenses, net Share of (income) loss of Granite LP — ) — Fair value gains on investment properties, net ) ) Fair value losses on financial instruments Acquisition transaction costs Loss on sale of investment properties Income before income taxes ) Income tax expense Net income ) Less net income attributable to non-controlling interests ) Net income attributable to stapled unitholders $ — $ Income Statement Year ended December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and Revenue $ $ General and administrative expenses Interest expense and other financing costs, net Early redemption costs of unsecured debentures Other costs and expenses, net Share of (income) loss of Granite LP — ) — Fair value gains on investment properties, net ) ) Fair value losses on financial instruments Loss on sale of investment properties Income before income taxes ) Income tax expense Net income ) Less net income attributable to non-controlling interests ) Net income attributable to stapled unitholders $ — $ |
Schedule of Statement of Cash Flows | Statement of Cash Flows Year ended December 31, 2017 Granite REIT Granite GP Eliminations/ Granite REIT and OPERATING ACTIVITIES Net income $ ) $ Items not involving current cash flows ) ) ) Changes in working capital balances ) ) Other operating activities Cash provided by operating activities — INVESTING ACTIVITIES Business acquisition ) ) Investment property capital additions — Maintenance or improvements ) ) — Developments or expansions ) ) Other investing activities ) ) Cash used in investing activities ) — — ) FINANCING ACTIVITIES Distributions paid ) ) Other financing activities Cash used in financing activities ) — — ) Effect of exchange rate changes Net increase (decrease) in cash and cash equivalents during the year $ ) — $ ) Statement of Cash Flows Year ended December 31, 2016 Granite REIT Granite GP Eliminations/ Granite REIT and OPERATING ACTIVITIES Net income $ ) $ Items not involving current cash flows ) ) ) Changes in working capital balances ) — ) Other operating activities Cash provided by (used in) operating activities ) — INVESTING ACTIVITIES Investment property capital additions — Maintenance or improvements ) ) — Developments or expansions ) ) Other investing activities Cash provided by investing activities — — FINANCING ACTIVITIES Distributions paid ) ) Other financing activities Cash used in financing activities ) — — ) Effect of exchange rate changes ) ) Net increase (decrease) in cash and cash equivalents during the year $ ) — $ |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum annual rental payments of non-cancellable operating leases | Not later than 1 year $ Later than 1 year and not later than 5 years Later than 5 years — $ |
NATURE AND DESCRIPTION OF THE44
NATURE AND DESCRIPTION OF THE TRUST (Details) | Jan. 03, 2013shares |
Nature and description of the Trust | |
Common shares exchange ratio for stapled units | 1 |
Granite REIT | |
Nature and description of the Trust | |
Number of units included in one stapled unit (in units) | 1 |
Granite GP | |
Nature and description of the Trust | |
Number of common shares included in one stapled unit (in shares) | 1 |
SIGNIFICANT ACCOUNTING POLICI45
SIGNIFICANT ACCOUNTING POLICIES - Financial Assets (Details) | Dec. 31, 2017CAD |
Financial assets | |
Financial assets classified as held to maturity or available for sale | CAD 0 |
SIGNIFICANT ACCOUNTING POLICI46
SIGNIFICANT ACCOUNTING POLICIES - Fixed Assets (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Computer hardware and software | Minimum | |
Fixed Assets | |
Useful Lives of Fixed Assets | 3 years |
Computer hardware and software | Maximum | |
Fixed Assets | |
Useful Lives of Fixed Assets | 5 years |
Other furniture and fixtures | Minimum | |
Fixed Assets | |
Useful Lives of Fixed Assets | 5 years |
Other furniture and fixtures | Maximum | |
Fixed Assets | |
Useful Lives of Fixed Assets | 7 years |
SIGNIFICANT ACCOUNTING POLICI47
SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Investment Properties: | ||
Current and deferred income tax expense | CAD 13,418 | CAD 47,625 |
Canada | ||
Investment Properties: | ||
Current and deferred income tax expense | CAD 0 |
SIGNIFICANT ACCOUNTING POLICI48
SIGNIFICANT ACCOUNTING POLICIES - Future Accounting Policy Changes (Details) | 12 Months Ended |
Dec. 31, 2017property | |
Future Accounting Policy Changes IFRS 16, Leases | |
Number of investment properties located on land that is leased | 2 |
ACQUISITION - Number of Propert
ACQUISITION - Number of Properties (Details) | Oct. 06, 2017property |
Income-Producing Properties | United States | |
Disclosure of detailed information about business combination | |
Number of properties | 3 |
ACQUISITION - Consideration (De
ACQUISITION - Consideration (Details) - Income-Producing Properties CAD in Thousands | Oct. 06, 2017CAD |
Purchase consideration: | |
Cash sourced from credit facility | CAD 117,227 |
Cash on hand | 36,752 |
Total cash consideration paid | 153,979 |
Recognized amounts of identifiable assets acquired and liabilities assumed measured at their respective fair values: | |
Investment properties | 154,726 |
Working capital | (747) |
Total identifiable net assets | CAD 153,979 |
ACQUISITION - Additional Inform
ACQUISITION - Additional Information (Details) - CAD CAD in Thousands | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure of detailed information about business combination | |||
Revenue | CAD 222,638 | CAD 223,401 | |
Net income | 357,748 | 280,692 | |
Acquisition transaction costs | 718 | ||
United States | |||
Disclosure of detailed information about business combination | |||
Revenue | 66,774 | CAD 63,515 | |
Income-Producing Properties | United States | |||
Disclosure of detailed information about business combination | |||
Revenue | CAD 2,800 | ||
Net income | CAD 1,600 | ||
Revenue of combined entity as if combination occurred at beginning of period | 10,400 | ||
Profit (loss) of combined entity as if combination occurred at beginning of period | 7,000 | ||
Acquisition transaction costs | 500 | ||
Additional cost related to pursuing other acquisition opportunities | CAD 200 |
INVESTMENT PROPERTIES - Compone
INVESTMENT PROPERTIES - Components of investment properties (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Investment Properties: | |||
Investment properties | CAD 2,733,568 | CAD 2,653,095 | |
Income-Producing Properties | |||
Investment Properties: | |||
Investment properties | 2,714,684 | 2,646,292 | CAD 2,576,562 |
Land Held For Development | |||
Investment Properties: | |||
Investment properties | CAD 18,884 | CAD 6,803 | CAD 7,173 |
INVESTMENT PROPERTIES - Changes
INVESTMENT PROPERTIES - Changes in investment properties (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Investment Properties: | ||
Balance, beginning of year | CAD 2,653,095 | |
Fair value gains, net | 212,106 | CAD 175,924 |
Balance, end of year | 2,733,568 | 2,653,095 |
Income-Producing Properties | ||
Investment Properties: | ||
Balance, beginning of year | 2,646,292 | 2,576,562 |
Capital expenditures: Maintenance or improvements | 21,065 | 2,089 |
Capital expenditures: Developments or expansions | 72,774 | 8,224 |
Acquisition (note 3) | 154,726 | |
Transfer to land held for development | (12,076) | |
Completed projects | 13,685 | |
Leasing commissions | 3,573 | 2,058 |
Tenant incentives | 803 | 1,458 |
Fair value gains, net | 212,106 | 175,924 |
Foreign currency translation, net | 12,800 | (89,096) |
Disposals | (42,014) | |
Amortization of straight- line rent | (1,101) | 371 |
Amortization of tenant incentives | (5,410) | (5,229) |
Other changes | 585 | 2,260 |
Classified as assets held for sale (note 5) | (391,453) | |
Balance, end of year | 2,714,684 | 2,646,292 |
Properties and Land Under Development | ||
Investment Properties: | ||
Balance, beginning of year | 8,651 | |
Capital expenditures: Developments or expansions | 5,826 | |
Completed projects | (13,685) | |
Foreign currency translation, net | (792) | |
Land Held For Development | ||
Investment Properties: | ||
Balance, beginning of year | 6,803 | 7,173 |
Transfer to land held for development | 12,076 | |
Foreign currency translation, net | 5 | (370) |
Balance, end of year | CAD 18,884 | CAD 6,803 |
INVESTMENT PROPERTIES - Disposi
INVESTMENT PROPERTIES - Dispositions (Details) CAD in Thousands | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2018property | Dec. 31, 2017CAD | Dec. 31, 2016CADproperty | |
Fair value | |||
Loss on sale of investment properties | CAD 427 | CAD 2,420 | |
Number of income-producing properties disposed | property | 10 | ||
Fair value gains excluding properties sold | CAD 170,700 | ||
United States, Austria and Germany | |||
Fair value | |||
Number of income-producing properties disposed | property | 7 | ||
Aggregate gross proceeds | CAD 42,000 | ||
Loss on disposal | CAD 2,400 |
INVESTMENT PROPERTIES - Key val
INVESTMENT PROPERTIES - Key valuation metrics by country (Details) - Y | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Investment Properties: | ||
General period of discounting the expected future cash flows | 10 years | |
Year of application of capitalization rate to the estimated cash flows in that year | 11 | |
Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 11.00% | 10.75% |
Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 10.75% | 11.25% |
Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.25% | 6.25% |
Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 5.75% | 5.75% |
Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.59% | 7.80% |
Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.48% | 7.74% |
Canada | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.25% | 8.25% |
Canada | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.00% | 8.00% |
Canada | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.50% | 6.50% |
Canada | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 5.75% | 5.75% |
Canada | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.84% | 7.17% |
Canada | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.17% | 6.68% |
United States | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 11.00% | 10.75% |
United States | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 10.75% | 11.25% |
United States | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.25% | 6.25% |
United States | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 5.75% | 5.75% |
United States | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.68% | 7.88% |
United States | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.30% | 7.69% |
Germany | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 9.00% | 9.00% |
Germany | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 9.50% | 9.50% |
Germany | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.50% | 7.00% |
Germany | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 5.75% | 5.75% |
Germany | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.89% | 8.03% |
Germany | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.91% | 8.06% |
Austria | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 10.00% | 9.00% |
Austria | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 9.50% | 9.50% |
Austria | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.75% | 8.00% |
Austria | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.25% | 8.50% |
Austria | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.05% | 8.33% |
Austria | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.53% | 8.83% |
Netherlands | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.00% | 7.50% |
Netherlands | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.30% | 7.30% |
Netherlands | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.25% | 6.85% |
Netherlands | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.05% | 7.15% |
Netherlands | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.62% | 7.09% |
Netherlands | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.17% | 7.23% |
Other | Income-Producing Properties | Maximum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 9.85% | 10.00% |
Other | Income-Producing Properties | Maximum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 10.00% | 10.50% |
Other | Income-Producing Properties | Minimum | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 7.25% | 9.00% |
Other | Income-Producing Properties | Minimum | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 6.75% | 7.35% |
Other | Income-Producing Properties | Weighted average | Discount rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.62% | 9.69% |
Other | Income-Producing Properties | Weighted average | Terminal capitalization rate | ||
Investment Properties: | ||
Key valuation metrics (as a percent) | 8.39% | 9.79% |
INVESTMENT PROPERTIES - Sensiti
INVESTMENT PROPERTIES - Sensitivity (Details) CAD in Thousands | Dec. 31, 2017CAD |
Discount rate | |
Investment Properties: | |
Fair value at +50 basis points | CAD 2,640,364 |
Fair value at +25 basis points | 2,686,415 |
Fair value at base rate | 2,733,568 |
Fair value at -25 basis points | 2,781,853 |
Fair value at -50 basis points | 2,831,301 |
Change in fair value at +50 basis points | (93,204) |
Change in fair value at +25 basis points | (47,153) |
Change in fair value at -25 basis points | 48,285 |
Change in fair value at -50 basis points | 97,733 |
Terminal capitalization rate | |
Investment Properties: | |
Fair value at +50 basis points | 2,648,843 |
Fair value at +25 basis points | 2,690,533 |
Fair value at base rate | 2,733,568 |
Fair value at -25 basis points | 2,783,184 |
Fair value at -50 basis points | 2,834,883 |
Change in fair value at +50 basis points | (84,725) |
Change in fair value at +25 basis points | (43,035) |
Change in fair value at -25 basis points | 49,616 |
Change in fair value at -50 basis points | CAD 101,315 |
INVESTMENT PROPERTIES - Net str
INVESTMENT PROPERTIES - Net straight-line rent receivable (Details) - CAD CAD in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
INVESTMENT PROPERTIES | ||
Net straight-line rent receivable | CAD 9.8 | CAD 11.3 |
INVESTMENT PROPERTIES - Minimum
INVESTMENT PROPERTIES - Minimum rental commitments payable on non-cancellable operating leases (Details) CAD in Thousands | Dec. 31, 2017CAD |
Investment Properties: | |
Minimum rental commitments on non-cancellable tenant operating leases | CAD 1,395,783 |
Not later than 1 year | |
Investment Properties: | |
Minimum rental commitments on non-cancellable tenant operating leases | 202,293 |
Later than 1 year and not later than 5 years | |
Investment Properties: | |
Minimum rental commitments on non-cancellable tenant operating leases | 655,288 |
Later than 5 years | |
Investment Properties: | |
Minimum rental commitments on non-cancellable tenant operating leases | CAD 538,202 |
ASSETS HELD FOR SALE (Details)
ASSETS HELD FOR SALE (Details) CAD in Millions, $ in Millions | Jan. 31, 2018CADproperty | Jan. 30, 2018USD ($)property | Jan. 30, 2018CADproperty | Jan. 31, 2018property | Dec. 31, 2017CADproperty |
Assets held for sale | |||||
Number of investment properties | 10 | ||||
Number of income-producing properties disposed | 10 | ||||
Legal and advisory costs | CAD | CAD 0.4 | ||||
Bowling Green, Kentucky | |||||
Assets held for sale | |||||
Number of income-producing properties disposed | 1 | 1 | |||
St. Thomas, Ontario | |||||
Assets held for sale | |||||
Number of income-producing properties disposed | 2 | 2 | |||
Bowling Green, Kentucky and St. Thomas, Ontario | |||||
Assets held for sale | |||||
Proceeds from Disposal of Income-Producing Properties | $ 262.3 | CAD 328 | |||
Newmarket, Ontario | |||||
Assets held for sale | |||||
Number of income-producing properties disposed | 7 | ||||
Proceeds from Disposal of Income-Producing Properties | CAD | CAD 63 |
UNSECURED DEBENTURES, NET AND60
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS (Details) - CAD CAD in Thousands | Dec. 20, 2016 | Jul. 03, 2014 | Dec. 31, 2017 | Dec. 31, 2016 |
Unsecured debentures, net: | ||||
Amortized Cost | CAD 647,306 | CAD 646,768 | ||
Principal issued and outstanding | CAD 650,000 | 650,000 | ||
2021 Debentures | ||||
Unsecured debentures, net: | ||||
Interest rate | 3.788% | |||
Amortized Cost | CAD 249,201 | 248,979 | ||
Principal issued and outstanding | CAD 250,000 | 250,000 | ||
2021 Debentures | Granite LP | ||||
Unsecured debentures, net: | ||||
Interest rate | 3.788% | |||
Principal issued and outstanding | CAD 250,000 | |||
Unamortised cost of debt | CAD 1,600 | |||
Redemption percentage | 100.00% | |||
Redemption spread (in percent) | 0.46% | |||
Redemption period of debentures | 30 days | |||
2023 Debentures | ||||
Unsecured debentures, net: | ||||
Interest rate | 3.873% | |||
Amortized Cost | CAD 398,105 | 397,789 | ||
Principal issued and outstanding | CAD 400,000 | CAD 400,000 | ||
2023 Debentures | Granite LP | ||||
Unsecured debentures, net: | ||||
Interest rate | 3.873% | |||
Principal issued and outstanding | CAD 400,000 | |||
Unamortised cost of debt | CAD 2,200 | |||
Redemption percentage | 100.00% | |||
Redemption spread (in percent) | 0.625% | |||
Redemption period of debentures | 30 days |
UNSECURED DEBENTURES, NET AND61
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS - Cross Currency Interest Rate Swaps (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 20, 2016 | Jul. 03, 2014 |
Cross currency interest rate swaps | ||||
Cross Currency Interest Rate Swap - fair value | CAD 61,466 | CAD 10,641 | ||
Principal issued and outstanding of debenture | 650,000 | 650,000 | ||
2021 Cross Currency Interest Rate Swap | ||||
Cross currency interest rate swaps | ||||
Cross Currency Interest Rate Swap - fair value | 19,429 | 443 | ||
Interest rate on CAD | 3.788% | |||
Effective fixed interest rate on EUR | 2.68% | |||
2021 Cross Currency Interest Rate Swap | July 5 2021 | ||||
Cross currency interest rate swaps | ||||
Principal issued and outstanding of debenture | CAD 250,000 | |||
2023 Cross Currency Interest Rate Swap | ||||
Cross currency interest rate swaps | ||||
Cross Currency Interest Rate Swap - fair value | CAD 42,037 | CAD 10,198 | ||
Interest rate on CAD | 3.873% | |||
Effective fixed interest rate on EUR | 2.43% | |||
2023 Cross Currency Interest Rate Swap | November 30, 2023 | ||||
Cross currency interest rate swaps | ||||
Principal issued and outstanding of debenture | CAD 400,000 |
UNSECURED DEBENTURES, NET AND62
UNSECURED DEBENTURES, NET AND CROSS CURRENCY INTEREST RATE SWAPS - Redemption of Debentures (Details) CAD in Thousands, € in Millions | Dec. 21, 2016CAD | Dec. 31, 2016CAD | Dec. 31, 2017CAD | Dec. 20, 2016EUR (€) | Dec. 20, 2016CAD | Jul. 03, 2014EUR (€) | Jul. 03, 2014CAD |
Unsecured debentures, net: | |||||||
Amortized Cost | CAD 646,768 | CAD 647,306 | |||||
Principal issued and outstanding | 650,000 | CAD 650,000 | |||||
Early redemption cost | 11,920 | ||||||
Interest rate swap savings | CAD 500 | ||||||
Net payment on the settlement of cross currency interest rate swap | 1,200 | ||||||
Termination of the cross currency interest rate swap | CAD 1,700 | ||||||
2021 Cross Currency Interest Rate Swap | |||||||
Unsecured debentures, net: | |||||||
Interest rate | 3.788% | 3.788% | |||||
2021 Cross Currency Interest Rate Swap | July 5 2021 | |||||||
Unsecured debentures, net: | |||||||
Principal issued and outstanding | CAD 250,000 | ||||||
Exchange of principal proceeds | € | € 171.9 | ||||||
2023 Cross Currency Interest Rate Swap | |||||||
Unsecured debentures, net: | |||||||
Interest rate | 3.873% | 3.873% | |||||
2023 Cross Currency Interest Rate Swap | November 30, 2023 | |||||||
Unsecured debentures, net: | |||||||
Principal issued and outstanding | CAD 400,000 | ||||||
Exchange of principal proceeds | € | € 281.1 | ||||||
2018 Debentures | |||||||
Unsecured debentures, net: | |||||||
Early redemption cost | 11,900 | ||||||
Redemption premium | 11,200 | ||||||
Accelerated amortization of issuance costs | CAD 700 | ||||||
2018 Debentures | Granite LP | |||||||
Unsecured debentures, net: | |||||||
Interest rate | 4.613% | ||||||
Principal issued and outstanding | CAD 200,000 | ||||||
Aggregate redemption price | 213,200 | ||||||
Accrued and unpaid interest | CAD 2,000 |
OTHER LIABILITY (Details)
OTHER LIABILITY (Details) € in Millions, CAD in Millions | Feb. 02, 2018EUR (€) | Dec. 31, 2017EUR (€) | Dec. 31, 2017CAD | Dec. 31, 2016CAD |
Other liabilities | ||||
Tenant allowance payable | CAD 9 | CAD 7.8 | ||
Accretion charge | 0.7 | |||
Foreign exchange translation | CAD 0.5 | |||
Austria | ||||
Other liabilities | ||||
Tenant allowance payable | € | € 6 | |||
Tenant allowance paid | € | € 6 |
BANK INDEBTEDNESS (Details)
BANK INDEBTEDNESS (Details) CAD in Thousands, $ in Millions | Feb. 01, 2018CAD | Dec. 31, 2017USD ($) | Dec. 31, 2017CAD | Dec. 31, 2016CAD |
Bank Indebtedness | ||||
Amount of credit facility | CAD 650,000 | CAD 650,000 | ||
Outstanding borrowings | 741,324 | 657,409 | ||
Credit Facility | SUBSEQUENT EVENT | ||||
Bank Indebtedness | ||||
Amount of credit facility | CAD 500,000 | |||
Percentage of minimum aggregate amount | 66.66% | |||
Additional aggregate principal amount | CAD 100,000 | |||
Granite LP | Credit Facility | ||||
Bank Indebtedness | ||||
Amount of credit facility | 250,000 | |||
Outstanding borrowings | $ 26 | 32,600 | 0 | |
Granite LP | Letters of credit | ||||
Bank Indebtedness | ||||
Outstanding borrowings | CAD 200 | CAD 200 |
CURRENT ASSETS AND CURRENT LI65
CURRENT ASSETS AND CURRENT LIABILITIES - Prepaid Expenses and Other (Details) - CAD CAD in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Prepaid Expenses and Other | ||
Unrealized gains on foreign exchange forward contracts | CAD 0.7 | CAD 1.5 |
Prepaid insurance premiums | CAD 0.6 | CAD 0.5 |
CURRENT ASSETS AND CURRENT LI66
CURRENT ASSETS AND CURRENT LIABILITIES - Accounts Payable and Accrued Liabilities (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Accounts Payable and Accrued Liabilities | ||
Accounts payable | CAD 5,676 | CAD 5,660 |
Accrued salaries, incentives and severance | 4,304 | 5,161 |
Accrued interest payable | 6,016 | 5,201 |
Accrued construction payable | 12,622 | 1,922 |
Accrued professional fees | 2,434 | 2,283 |
Accrued employee unit-based compensation | 3,416 | 1,474 |
Accrued trustee/director unit-based compensation | 1,367 | 6,568 |
Accrued property operating costs | 3,110 | 499 |
Other accrued liabilities | 4,397 | 2,697 |
Total accounts payable and accrued liabilities | CAD 43,342 | CAD 31,465 |
DISTRIBUTIONS TO STAPLED UNIT67
DISTRIBUTIONS TO STAPLED UNITHOLDERS (Details) - CAD CAD / shares in Units, CAD in Thousands | Mar. 15, 2018 | Feb. 15, 2018 | Jan. 16, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Distributions to stapled unitholders | |||||
Distributions paid | CAD 123,568 | CAD 114,754 | |||
Stapled Unitholders' Equity | |||||
Distributions to stapled unitholders | |||||
Distributions declared per stapled unit | CAD 2.61 | CAD 2.43 | |||
Distributions paid | CAD 123,058 | CAD 114,293 | |||
Stapled Unitholders' Equity | Distributions declared | |||||
Distributions to stapled unitholders | |||||
Distributions paid | CAD 10,500 | CAD 10,600 | CAD 10,600 |
EQUITY - Stapled Units (Details
EQUITY - Stapled Units (Details) | Jan. 03, 2013shares |
Granite REIT | |
Disclosure of detailed information about business combination | |
Number of Units per Stapled Unit (in units) | 1 |
Granite GP | |
Disclosure of detailed information about business combination | |
Number of Common Shares per Stapled Unit (in shares) | 1 |
EQUITY - Incentive Stock Option
EQUITY - Incentive Stock Option Plan (Details) - Option Option in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Incentive Stock Option Plan | ||
Unit-based Compensation | ||
Options outstanding | 0 | 0 |
EQUITY - Director_Trustee Defer
EQUITY - Director/Trustee Deferred Share Unit Plan (Details) | Nov. 03, 2003 |
Director/Trustee Deferred Share Unit Plan | |
Executive Deferred Stapled Unit Plan | |
Maximum percent of deferral of each non-employee director's total annual remuneration | 100.00% |
EQUITY - Director_Trustee Def71
EQUITY - Director/Trustee Deferred Share Unit Plan - Reconciliation of the changes (Details) - Director/Trustee Deferred Share Unit Plan EquityInstruments in Thousands | 12 Months Ended | |
Dec. 31, 2017CADEquityInstruments | Dec. 31, 2016CADEquityInstruments | |
Executive Deferred Stapled Unit Plan | ||
Outstanding, Number, beginning balance | EquityInstruments | 147 | 135 |
Granted, Number | EquityInstruments | 23 | 28 |
Settled, Number | EquityInstruments | (142) | (16) |
Outstanding, Number, ending balance | EquityInstruments | 28 | 147 |
Outstanding, Weighted Average Grant Date Fair Value, beginning balance | CAD | CAD 35.43 | CAD 35.51 |
New Grants, Weighted Average Grant Date Fair Value | CAD | 48.75 | 40.27 |
Settled, Weighted Average Grant Date Fair Value | CAD | 50.81 | 44.44 |
Outstanding, Weighted Average Grant Date Fair Value, ending balance | CAD | CAD 41.88 | CAD 35.43 |
EQUITY - Executive Deferred Sta
EQUITY - Executive Deferred Stapled Unit Plan (Details) - Executive Deferred Stapled Unit Plan shares in Millions | 12 Months Ended |
Dec. 31, 2017shares | |
Disclosure of terms and conditions of share-based payment arrangement [line items] | |
Number of preceding trading days in Toronto Stock Exchange or New York Stock Exchange | 5 days |
Percentage of vesting of the number of stapled units | 100.00% |
Maximum | |
Disclosure of terms and conditions of share-based payment arrangement [line items] | |
Number of stapled units which may be issued | 1 |
Settlement period | 60 days |
EQUITY - Executive Deferred S73
EQUITY - Executive Deferred Stapled Unit Plan - Reconciliation of the changes (Details) - Executive Deferred Stapled Unit Plan | 12 Months Ended | |
Dec. 31, 2017CADEquityInstruments | Dec. 31, 2016CADEquityInstruments | |
Executive Deferred Stapled Unit Plan | ||
Outstanding, Number, beginning balance | EquityInstruments | 82,000 | 72,000 |
New Grants, Number | EquityInstruments | 49,000 | 67,000 |
Forfeited, Number | EquityInstruments | (3,000) | (198) |
Settled, Number | EquityInstruments | (22,000) | (57,000) |
Outstanding, Number, ending balance | EquityInstruments | 106,000 | 82,000 |
Outstanding, Weighted Average Grant Date Fair Value, beginning balance | CAD | CAD 42.34 | CAD 41.03 |
New Grants, Weighted Average Grant Date Fair Value | CAD | 45.81 | 40.61 |
Forfeited, Weighted Average Grant Date Fair Value | CAD | 45.23 | 37.33 |
Settled, Weighted Average Grant Date Fair Value | CAD | 45.36 | 38.24 |
Outstanding, Weighted Average Grant Date Fair Value, ending balance | CAD | CAD 43.32 | CAD 42.34 |
EQUITY - Trust's unit-based com
EQUITY - Trust's unit-based compensation expense (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Unit-based Compensation | ||
Unit-based compensation expense | CAD 4,912 | CAD 3,682 |
Fair value remeasurement expense included in the above | 1,237 | 1,361 |
Director/Trustee Deferred Share Unit Plan | ||
Unit-based Compensation | ||
Unit-based compensation expense | 2,001 | 2,078 |
Executive Deferred Stapled Unit Plan | ||
Unit-based Compensation | ||
Unit-based compensation expense | CAD 2,911 | 1,330 |
Incentive Stock Option Plan | ||
Unit-based Compensation | ||
Unit-based compensation expense | CAD 274 |
EQUITY - Normal Course Issuer B
EQUITY - Normal Course Issuer Bid (Details) - CAD CAD in Thousands | Mar. 01, 2018 | May 11, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Normal Course Issuer Bid | ||||
Maximum number of stapled units issued and outstanding that may be repurchased pursuant to the normal course issuer bid | 4,118,757 | |||
Maximum daily purchases that may be made by Granite | 26,267 | |||
Units repurchased for cancellation | CAD (12,046) | CAD (1) | ||
Normal Course Issuer Bid | ||||
Normal Course Issuer Bid | ||||
Units repurchased for cancellation | CAD (12,000) | |||
Units repurchased for cancellation (in units) | (241,034) | |||
Stapled Units | ||||
Normal Course Issuer Bid | ||||
Units repurchased for cancellation | CAD (10,895) | CAD (1) | ||
Units repurchased for cancellation (in units) | (242,000) | (20) | ||
Difference between the repurchase price and the average cost | CAD 1,200 | |||
Stapled Units | Distributions declared | ||||
Normal Course Issuer Bid | ||||
Units additional repurchase (in units) | (891,440) | |||
Units additional repurchase | CAD (43,900) |
EQUITY - Accumulated Other Comp
EQUITY - Accumulated Other Comprehensive Income (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
EQUITY | ||
Foreign currency translation gains on investments in subsidiaries, net of related hedging activities and non-controlling interests | CAD 183,729 | CAD 167,684 |
Fair value losses on derivatives designated as net investment hedges | (65,163) | (13,950) |
Accumulated Other Comprehensive Income | CAD 118,566 | CAD 153,734 |
EQUITY - Non-Controlling Intere
EQUITY - Non-Controlling Interests (Details) CAD in Thousands, $ in Millions | Nov. 17, 2016USD ($) | Nov. 17, 2016CAD | Dec. 31, 2016USD ($) | Dec. 31, 2016CAD | Dec. 31, 2017CAD | Nov. 17, 2016CAD |
Non-Controlling Interests | ||||||
Cash consideration | $ 9 | CAD 12,100 | ||||
Deficit | CAD (12,093) | |||||
Carrying value of non controlling interests | 1,529 | CAD 1,248 | ||||
Carrying value | ||||||
Non-Controlling Interests | ||||||
Carrying value of non controlling interests | $ (6.6) | CAD (8,800) | ||||
Stapled Unitholders' Equity | ||||||
Non-Controlling Interests | ||||||
Deficit | $ (2.4) | CAD (3,270) | ||||
DGI LS, LLC | ||||||
Non-Controlling Interests | ||||||
Acquired ownership interest percent | 10.00% | 10.00% | ||||
Percent of ownership interest after acquisition | 100.00% | 100.00% | ||||
DGI Berks, LP | ||||||
Non-Controlling Interests | ||||||
Acquired ownership interest percent | 10.00% | 10.00% | ||||
Percent of ownership interest after acquisition | 100.00% | 100.00% | ||||
DGI Shepherdsville, LLC | ||||||
Non-Controlling Interests | ||||||
Acquired ownership interest percent | 10.00% | 10.00% | ||||
Percent of ownership interest after acquisition | 100.00% | 100.00% | ||||
DGI Portland, LLC | ||||||
Non-Controlling Interests | ||||||
Acquired ownership interest percent | 5.00% | 5.00% | ||||
Percent of ownership interest after acquisition | 100.00% | 100.00% |
COSTS AND EXPENSES (INCOME) - P
COSTS AND EXPENSES (INCOME) - Property operating costs (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property operating costs | ||
Property operating costs | CAD 9,300 | CAD 7,638 |
Non-recoverable from tenants: | ||
Property operating costs | ||
Property taxes and utilities | 1,035 | 747 |
Legal | 324 | 348 |
Consulting | 379 | 482 |
Environmental and appraisals | 708 | 477 |
Repairs and maintenance | 659 | 465 |
Ground rents | 628 | 628 |
Other | 653 | 660 |
Property operating costs | 4,386 | 3,807 |
Recoverable from tenants: | ||
Property operating costs | ||
Property taxes and utilities | 2,644 | 2,209 |
Repairs and maintenance | 749 | 531 |
Property management fees | 741 | 592 |
Other | 780 | 499 |
Property operating costs | CAD 4,914 | CAD 3,831 |
COSTS AND EXPENSES (INCOME) - G
COSTS AND EXPENSES (INCOME) - General and administrative expenses (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
COSTS AND EXPENSES (INCOME) | ||
Salaries and benefits | CAD 12,113 | CAD 13,332 |
Audit, legal and consulting | 3,382 | 4,807 |
Trustee/director fees and related expenses | 1,438 | 1,673 |
Unit-based compensation including distributions and revaluations | 4,017 | 2,921 |
Other public entity costs | 1,687 | 1,564 |
Office rents | 901 | 905 |
Other | 2,528 | 2,758 |
General and administrative expenses | CAD 26,066 | CAD 27,960 |
COSTS AND EXPENSES (INCOME) -80
COSTS AND EXPENSES (INCOME) - Proxy contest expenses (Details) CAD in Millions | 12 Months Ended |
Dec. 31, 2017CAD | |
Proxy contest expenses | |
Proxy contest expenses | CAD 5.9 |
Reimbursed out-of-pocket incurred proxy contest expenses | 2 |
Sandpiper Group | |
Proxy contest expenses | |
Reimbursed out-of-pocket incurred proxy contest expenses | CAD 0.7 |
COSTS AND EXPENSES (INCOME) - I
COSTS AND EXPENSES (INCOME) - Interest expense and other financing costs, net (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
COSTS AND EXPENSES (INCOME) | ||
Interest and amortized issuance costs relating to debentures | CAD 17,416 | CAD 14,800 |
Interest on mortgages payable and construction loans | 3,057 | |
Amortization of deferred financing costs | 219 | 193 |
Other interest and accretion charges | 2,376 | 1,946 |
Interest expense and other financing costs | 20,011 | 19,996 |
Capitalized interest | (91) | |
Interest income | (540) | (318) |
Interest expense and other finance costs, net | CAD 19,471 | CAD 19,587 |
COSTS AND EXPENSES (INCOME) - F
COSTS AND EXPENSES (INCOME) - Fair value losses (gains) on financial instruments (Details) CAD in Thousands, $ in Millions | 12 Months Ended | |||
Dec. 31, 2017CAD | Dec. 31, 2016CAD | Nov. 17, 2016USD ($) | Nov. 17, 2016CAD | |
Fair value losses (gains) on financial instruments | ||||
Foreign exchange forward contracts, net | CAD 823 | CAD (2,394) | ||
Interest rate caps | 79 | |||
Contingent consideration | 3,465 | |||
Fair value losses on financial instruments | 823 | 1,150 | ||
Non-controlling interests | CAD 1,248 | CAD 1,529 | ||
Carrying value | ||||
Fair value losses (gains) on financial instruments | ||||
Non-controlling interests | $ (6.6) | CAD (8,800) |
INCOME TAXES - Major components
INCOME TAXES - Major components (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current income tax: | ||
Current taxes | CAD 6,503 | CAD 7,873 |
Current taxes referring to previous periods | 228 | (1,686) |
Withholding taxes and other | 978 | 694 |
Total current income tax | 7,709 | 6,881 |
Deferred income tax: | ||
Origination and reversal of temporary differences | 42,250 | 39,774 |
Impact of changes in tax rates | (35,047) | (55) |
Withholding taxes on profits of subsidiaries | (629) | 120 |
Other | (865) | 905 |
Total deferred income tax | 5,709 | 40,744 |
Total income tax expense | 13,418 | 47,625 |
Disposition of property | ||
Current income tax: | ||
Current taxes | CAD 0 | |
Germany and United States | Disposition of property | ||
Current income tax: | ||
Current taxes | 2,300 | |
Austria | Disposition of property | ||
Current income tax: | ||
Current taxes | CAD (1,000) |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of Canadian statutory rate and the effective income tax rate (Details) - CAD CAD in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
INCOME TAXES | |||
Reduction in deferred tax liability | CAD (35,000) | ||
Reconciliation of accounting profit multiplied by applicable tax rates | |||
Income before income taxes | 371,166 | CAD 328,317 | |
Expected income taxes at the Canadian statutory tax rate of 26.5% (2016 - 26.5%) | 98,359 | 87,004 | |
Income distributed and taxable to unitholders | (50,005) | (53,039) | |
Net foreign rate differentials | (3,708) | 9,152 | |
Net change in provisions for uncertain tax positions | 1,762 | 825 | |
Net permanent differences | 1,947 | 2,229 | |
Net effect of change in tax rates | (35,047) | (55) | |
Withholding taxes and other | 110 | 1,509 | |
Total income tax expense | CAD 13,418 | CAD 47,625 | |
Tax rate (in percent) | 26.50% | 26.50% | |
United States | |||
Reconciliation of accounting profit multiplied by applicable tax rates | |||
Tax rate (in percent) | 35.00% | ||
United States | Forecast | |||
Reconciliation of accounting profit multiplied by applicable tax rates | |||
Tax rate (in percent) | 21.00% |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets and liabilities (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Temporary differences | ||
Deferred tax assets | CAD 5,742 | CAD 6,399 |
Deferred tax liabilities | 244,052 | 238,251 |
Investment properties | ||
Temporary differences | ||
Deferred tax assets | 11 | 1,249 |
Deferred tax liabilities | 243,357 | 237,159 |
Eligible capital expenditures | ||
Temporary differences | ||
Deferred tax assets | 2,625 | 2,822 |
Withholding tax on undistributed subsidiary profits | ||
Temporary differences | ||
Deferred tax liabilities | 512 | 1,092 |
Other | ||
Temporary differences | ||
Deferred tax assets | 3,106 | CAD 2,328 |
Deferred tax liabilities | CAD 183 |
INCOME TAXES - Changes in net d
INCOME TAXES - Changes in net deferred tax liabilities (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Changes in the net deferred tax liabilities: | ||
Balance, beginning of year | CAD 231,852 | CAD 200,190 |
Deferred tax expense recognized in net income | 5,709 | 40,744 |
Foreign currency translation of deferred tax balances | 749 | (9,082) |
Net deferred tax liabilities, end of year | CAD 238,310 | CAD 231,852 |
INCOME TAXES - Income tax paid
INCOME TAXES - Income tax paid (refund) - (Details) - CAD CAD in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income tax paid (refund) | ||
Income tax paid (refund) | CAD 3.5 | CAD 0.2 |
Withholding taxes | ||
Income tax paid (refund) | ||
Income tax paid (refund) | CAD 1 | CAD 0.7 |
INCOME TAXES - Unrecognized tax
INCOME TAXES - Unrecognized tax benefits (Details) - CAD CAD in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Unrecognized tax benefits | ||
Unrecognized income tax benefits that could impact effective tax rate | CAD 12 | CAD 10.1 |
Unrecognized income tax benefits related to accrued interest and penalties | CAD 0.2 | CAD 0.2 |
INCOME TAXES - Reconciliation89
INCOME TAXES - Reconciliation of unrecognized tax benefits (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
INCOME TAXES | ||
Unrecognized tax benefits balance, beginning of year | CAD 10,143 | CAD 11,883 |
Decreases for tax positions of prior years | (416) | (3,066) |
Increases for tax positions of current year | 1,727 | 1,979 |
Foreign currency impact | 581 | (653) |
Unrecognized tax benefits balance, end of year | 12,035 | 10,143 |
Maximum possible decrease in unrecognized tax benefits | 400 | 1,900 |
Interest and penalties | 100 | CAD 100 |
Carryforwards of Canadian capital loss | 327,800 | |
Other losses and deductible temporary differences in various tax jurisdictions | CAD 25,200 |
SEGMENTED DISCLOSURE INFORMAT90
SEGMENTED DISCLOSURE INFORMATION - Revenues (Details) CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017CADsegment | Dec. 31, 2016CADsegment | |
Geographic segmentation: | ||
Reportable segments | segment | 1 | 1 |
Revenue | CAD 222,638 | CAD 223,401 |
Canada | ||
Geographic segmentation: | ||
Revenue | 58,484 | 62,733 |
United States | ||
Geographic segmentation: | ||
Revenue | 66,774 | 63,515 |
Austria | ||
Geographic segmentation: | ||
Revenue | 60,328 | 60,285 |
Germany | ||
Geographic segmentation: | ||
Revenue | 22,271 | 23,091 |
Netherlands | ||
Geographic segmentation: | ||
Revenue | 9,577 | 9,515 |
Other Europe | ||
Geographic segmentation: | ||
Revenue | CAD 5,204 | CAD 4,262 |
SEGMENTED DISCLOSURE INFORMAT91
SEGMENTED DISCLOSURE INFORMATION - Magna (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Magna | Credit risk | ||
Disclosure of major tenant | ||
Trust's total revenue (in percent) | 74.00% | 76.00% |
SEGMENTED DISCLOSURE INFORMAT92
SEGMENTED DISCLOSURE INFORMATION - Investment Properties (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Geographic segmentation: | ||
Investment properties | CAD 2,733,568 | CAD 2,653,095 |
Canada | ||
Geographic segmentation: | ||
Investment properties | 621,003 | 763,701 |
United States | ||
Geographic segmentation: | ||
Investment properties | 874,499 | 779,196 |
Austria | ||
Geographic segmentation: | ||
Investment properties | 780,030 | 699,001 |
Germany | ||
Geographic segmentation: | ||
Investment properties | 265,734 | 242,467 |
Netherlands | ||
Geographic segmentation: | ||
Investment properties | 127,807 | 118,123 |
Other Europe | ||
Geographic segmentation: | ||
Investment properties | CAD 64,495 | CAD 50,607 |
DETAILS OF CASH FLOWS - Items n
DETAILS OF CASH FLOWS - Items not involving current cash flows (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
DETAILS OF CASH FLOWS | ||
Straight-line rent amortization | CAD 1,101 | CAD (371) |
Tenant incentive amortization | 5,410 | 5,236 |
Unit-based compensation expense | 4,912 | 3,682 |
Fair value gains on investment properties, net | (212,106) | (175,924) |
Depreciation and amortization | 335 | 707 |
Fair value losses on financial instruments | 823 | 1,150 |
Loss on sale of investment properties | 427 | 2,420 |
Amortization of issuance costs relating to debentures | 542 | 1,749 |
Amortization of deferred financing costs | 219 | 193 |
Deferred income taxes | 5,709 | 40,744 |
Other | 98 | (1,450) |
Items not involving current cash flows | CAD (192,530) | CAD (121,864) |
DETAILS OF CASH FLOWS - Changes
DETAILS OF CASH FLOWS - Changes in working capital balances (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
DETAILS OF CASH FLOWS | ||
Accounts receivable | CAD (1,191) | CAD 2,723 |
Prepaid expenses and other | (362) | 333 |
Accounts payable and accrued liabilities | (4,681) | (2,448) |
Deferred revenue | (1,411) | (1,376) |
Restricted cash | 48 | 727 |
Changes in working capital balances | CAD (7,597) | CAD (41) |
DETAILS OF CASH FLOWS - Non-cas
DETAILS OF CASH FLOWS - Non-cash financing activities (Details) - CAD shares in Thousands, CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Value of stapled units issued | CAD 977 | CAD 2,097 |
Stapled Units | ||
Units issued under the stapled unit plan (in units) | 22 | 56 |
Value of stapled units issued | CAD 977 | CAD 2,097 |
DETAILS OF CASH FLOWS - Cash an
DETAILS OF CASH FLOWS - Cash and cash equivalents (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
DETAILS OF CASH FLOWS | |||
Cash | CAD 55,608 | CAD 109,414 | |
Short-term deposits | 13,411 | 136,801 | |
Total cash and cash equivalents | CAD 69,019 | CAD 246,215 | CAD 119,155 |
FAIR VALUE AND RISK MANAGEMEN97
FAIR VALUE AND RISK MANAGEMENT - Fair Value of Financial Instruments (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | CAD 73,004 | CAD 249,860 |
Financial liabilities | 812,010 | 718,434 |
Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 73,004 | 249,860 |
Financial liabilities | 804,281 | 706,877 |
Fair value through profit or loss (liabilities) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 70,476 | 18,418 |
Other financial liabilities | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 733,805 | 688,459 |
Other financial liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 741,534 | 700,016 |
Fair value through profit or loss (assets) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 705 | 1,486 |
Loans and receivables | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 72,299 | 248,374 |
Loans and receivables | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 72,299 | 248,374 |
Unsecured debentures, net | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 655,035 | 658,325 |
Unsecured debentures, net | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 647,306 | 646,768 |
Unsecured debentures, net | Other financial liabilities | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 647,306 | 646,768 |
Unsecured debentures, net | Other financial liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 655,035 | 658,325 |
Cross currency interest rate swaps | Level 2 | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 61,466 | 10,641 |
Cross currency interest rate swaps | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 61,466 | 10,641 |
Cross currency interest rate swaps | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 61,466 | 10,641 |
Cross currency interest rate swaps | Fair value through profit or loss (liabilities) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 61,466 | 10,641 |
Other liability | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 8,968 | 7,777 |
Other liability | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 8,968 | 7,777 |
Other liability | Fair value through profit or loss (liabilities) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 8,968 | 7,777 |
Bank indebtedness | Level 2 | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 32,552 | |
Bank indebtedness | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 32,552 | |
Bank indebtedness | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 32,552 | |
Bank indebtedness | Other financial liabilities | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 32,552 | |
Bank indebtedness | Other financial liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 32,552 | |
Accounts payable and accrued liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 43,342 | 31,465 |
Accounts payable and accrued liabilities | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 43,342 | 31,465 |
Accounts payable and accrued liabilities | Fair value through profit or loss (liabilities) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 42 | |
Accounts payable and accrued liabilities | Other financial liabilities | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 43,300 | 31,465 |
Accounts payable and accrued liabilities | Other financial liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 43,300 | 31,465 |
Distributions payable | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 10,647 | 10,226 |
Distributions payable | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 10,647 | 10,226 |
Distributions payable | Other financial liabilities | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 10,647 | 10,226 |
Distributions payable | Other financial liabilities | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial liabilities | 10,647 | 10,226 |
Other assets | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 455 | 530 |
Other assets | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 455 | 530 |
Other assets | Loans and receivables | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 455 | 530 |
Other assets | Loans and receivables | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 455 | 530 |
Accounts receivable | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 2,310 | 1,066 |
Accounts receivable | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 2,310 | 1,066 |
Accounts receivable | Loans and receivables | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 2,310 | 1,066 |
Accounts receivable | Loans and receivables | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 2,310 | 1,066 |
Prepaid expenses and other | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 705 | 1,486 |
Prepaid expenses and other | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 705 | 1,486 |
Prepaid expenses and other | Fair value through profit or loss (assets) | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 705 | 1,486 |
Restricted cash | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 515 | 563 |
Restricted cash | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 515 | 563 |
Restricted cash | Loans and receivables | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 515 | 563 |
Restricted cash | Loans and receivables | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 515 | 563 |
Cash and cash equivalents | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 69,019 | 246,215 |
Cash and cash equivalents | Carrying value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 69,019 | 246,215 |
Cash and cash equivalents | Loans and receivables | Amortized cost | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | 69,019 | 246,215 |
Cash and cash equivalents | Loans and receivables | Fair value | ||
Disclosure of fair value measurements of assets and liabilities | ||
Financial assets | CAD 69,019 | CAD 246,215 |
FAIR VALUE AND RISK MANAGEMEN98
FAIR VALUE AND RISK MANAGEMENT - Foreign Exchange Forward Contracts (Details) CAD in Thousands, € in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2017USD ($)contract | Dec. 31, 2017EUR (€)contract | Dec. 31, 2017CADcontract | Dec. 31, 2016CADcontract | |
Foreign exchange forward contracts | ||||
Net fair value (gain) loss | CAD | CAD (823) | CAD 2,394 | ||
Foreign exchange forward contract | ||||
Foreign exchange forward contracts | ||||
Number of contracts outstanding | 18 | 18 | 18 | 13 |
Purchase CAD and sell EURO | ||||
Foreign exchange forward contracts | ||||
Number of contracts outstanding | 12 | 12 | 12 | |
Purchase of functional currency | CAD | CAD (39,600) | |||
Sale of foreign currency | € | € 26 | |||
Purchase USD and sell EURO | ||||
Foreign exchange forward contracts | ||||
Number of contracts outstanding | 3 | 3 | 3 | |
Sale of foreign currency | € | € 15 | |||
Purchase of foreign currency | $ | $ (18) | |||
Purchase EURO and sell USD | ||||
Foreign exchange forward contracts | ||||
Number of contracts outstanding | 3 | 3 | 3 | |
Sale of foreign currency | $ | $ 17.8 | |||
Purchase of foreign currency | € | € (15) |
FAIR VALUE AND RISK MANAGEMEN99
FAIR VALUE AND RISK MANAGEMENT - Fair Value Hierarchy (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Level 1 | ||
Disclosure of detailed information about financial instruments | ||
Net assets (liabilities) measured or disclosed at fair value | CAD (655,035) | CAD (658,325) |
Level 2 | ||
Disclosure of detailed information about financial instruments | ||
Net assets (liabilities) measured or disclosed at fair value | (93,355) | (9,155) |
Level 3 | ||
Disclosure of detailed information about financial instruments | ||
Net assets (liabilities) measured or disclosed at fair value | 3,116,053 | 2,645,318 |
Unsecured debentures, net | Level 1 | ||
Disclosure of detailed information about financial instruments | ||
Financial liabilities | 655,035 | 658,325 |
Cross currency interest rate swaps | Level 2 | ||
Disclosure of detailed information about financial instruments | ||
Financial liabilities | 61,466 | 10,641 |
Other liability | Level 3 | ||
Disclosure of detailed information about financial instruments | ||
Financial liabilities | 8,968 | 7,777 |
Bank indebtedness | Level 2 | ||
Disclosure of detailed information about financial instruments | ||
Financial liabilities | 32,552 | |
Foreign exchange forward contracts | Level 2 | ||
Disclosure of detailed information about financial instruments | ||
Financial liabilities | 42 | |
Investment properties | Level 3 | ||
Disclosure of detailed information about financial instruments | ||
Financial assets | 2,733,568 | 2,653,095 |
Assets held for sale | Level 3 | ||
Disclosure of detailed information about financial instruments | ||
Financial assets | 391,453 | |
Foreign exchange forward contracts | Level 2 | ||
Disclosure of detailed information about financial instruments | ||
Financial assets | CAD 705 | CAD 1,486 |
FAIR VALUE AND RISK MANAGEME100
FAIR VALUE AND RISK MANAGEMENT - Transfers (Details) - CAD CAD in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
FAIR VALUE AND RISK MANAGEMENT | ||
Transfer of assets at fair value from level 1 to level 2 | CAD 0 | CAD 0 |
Transfer of assets at fair value from level 2 to level 1 | 0 | 0 |
Transfer of assets at fair value into level 3 | 0 | 0 |
Transfer of assets at fair value from level 3 | 0 | 0 |
Transfer of liabilities at fair value from level 1 to level 2 | 0 | 0 |
Transfer of liabilities at fair value from level 2 to level 1 | 0 | 0 |
Transfer of liabilities at fair value into level 3 | 0 | 0 |
Transfer of liabilities at fair value from level 3 | CAD 0 | CAD 0 |
FAIR VALUE AND RISK MANAGEME101
FAIR VALUE AND RISK MANAGEMENT - Risk Management (Details) - CAD CAD in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
2021 Debentures and 2023 Debentures | ||
Risk management strategy related to hedge accounting | ||
Percentage of debt | 95.00% | |
Effective interest rate risk | Fixed interest rate | 2021 Debentures | ||
Risk management strategy related to hedge accounting | ||
Interest rate | 2.68% | |
Effective interest rate risk | Fixed interest rate | 2023 Debentures | ||
Risk management strategy related to hedge accounting | ||
Interest rate | 2.43% | |
Foreign exchange risk | ||
Risk management strategy related to hedge accounting | ||
Foreign currency denominated net assets | CAD 1,900 | |
Change in foreign currency rate (in percent) | 1.00% | |
US dollar exchange risk | ||
Risk management strategy related to hedge accounting | ||
Gain or Loss on change in value of foreign currency exchange rate | CAD 9.5 | |
Effect of exchange rate changes on revenue | 0.7 | |
Euro exchange risk | ||
Risk management strategy related to hedge accounting | ||
Gain or Loss on change in value of foreign currency exchange rate | 9.5 | |
Effect of exchange rate changes on revenue | CAD 1 | |
Magna | Credit risk | ||
Risk management strategy related to hedge accounting | ||
Percentage of trust's rental revenue | 74.00% | 76.00% |
FAIR VALUE AND RISK MANAGEME102
FAIR VALUE AND RISK MANAGEMENT - Contractual Maturities (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Contractual maturities | ||
Unsecured debentures | CAD 650,000 | CAD 650,000 |
Cross currency interest rate swaps | 61,466 | 10,641 |
Bank indebtedness | 32,552 | |
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 89,798 | |
Interest payments: Bank indebtedness | 4,799 | |
Tenant allowance payable | 9,029 | |
Accounts payable and accrued liabilities | 43,342 | 31,465 |
Distributions payable | 10,647 | CAD 10,226 |
Total payments | 901,633 | |
Not later than 1 year | ||
Contractual maturities | ||
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 17,288 | |
Interest payments: Bank indebtedness | 944 | |
Tenant allowance payable | 9,029 | |
Accounts payable and accrued liabilities | 42,529 | |
Distributions payable | 10,647 | |
Total payments | 80,437 | |
2,019 | ||
Contractual maturities | ||
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 17,288 | |
Interest payments: Bank indebtedness | 944 | |
Accounts payable and accrued liabilities | 390 | |
Total payments | 18,622 | |
2,020 | ||
Contractual maturities | ||
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 17,288 | |
Interest payments: Bank indebtedness | 944 | |
Accounts payable and accrued liabilities | 423 | |
Total payments | 18,655 | |
2,021 | ||
Contractual maturities | ||
Unsecured debentures | 250,000 | |
Cross currency interest rate swaps | 19,429 | |
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 17,288 | |
Interest payments: Bank indebtedness | 944 | |
Total payments | 287,661 | |
2,022 | ||
Contractual maturities | ||
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 10,323 | |
Interest payments: Bank indebtedness | 944 | |
Total payments | 11,267 | |
Later than 5 years | ||
Contractual maturities | ||
Unsecured debentures | 400,000 | |
Cross currency interest rate swaps | 42,037 | |
Bank indebtedness | 32,552 | |
Interest payments: Unsecured debentures, net of cross currency interest rate swap savings | 10,323 | |
Interest payments: Bank indebtedness | 79 | |
Total payments | CAD 484,991 |
CAPITAL MANAGEMENT (Details)
CAPITAL MANAGEMENT (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
CAPITAL MANAGEMENT | ||
Unsecured debentures, net | CAD 647,306 | CAD 646,768 |
Cross currency interest rate swaps | 61,466 | 10,641 |
Bank indebtedness | 32,552 | |
Total debt | 741,324 | 657,409 |
Stapled unitholders' equity | 2,136,614 | 1,948,207 |
Total managed capital | CAD 2,877,938 | CAD 2,605,616 |
CAPITAL MANAGEMENT - Declaratio
CAPITAL MANAGEMENT - Declaration of Trust (Details) | 12 Months Ended |
Dec. 31, 2017 | |
CAPITAL MANAGEMENT | |
Maximum percentage of total indebtedness on Gross Book Value | 65.00% |
Maximum percentage of proposed investment on Gross Book Value | 15.00% |
CAPITAL MANAGEMENT - Distributi
CAPITAL MANAGEMENT - Distributions (Details) - CAD / shares | 1 Months Ended | |||||||||||
Dec. 31, 2017 | Nov. 30, 2017 | Oct. 31, 2017 | Sep. 30, 2017 | Aug. 31, 2017 | Jul. 31, 2017 | Jun. 30, 2017 | May 31, 2017 | Apr. 30, 2017 | Mar. 31, 2017 | Feb. 28, 2017 | Jan. 31, 2017 | |
CAPITAL MANAGEMENT | ||||||||||||
Distribution (per stapled unit) | CAD 0.227 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 | CAD 0.217 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
RELATED PARTY TRANSACTIONS | ||
Salaries, incentives and short-term benefits | CAD 3,051 | CAD 2,645 |
Unit-based compensation expense including fair value adjustments | 2,371 | 761 |
Total compensation paid or payable to key management personnel | 5,422 | CAD 3,406 |
Reimbursement of proxy contest expense | CAD 700 |
COMBINED FINANCIAL INFORMATI107
COMBINED FINANCIAL INFORMATION - Balance Sheet (Details) - CAD CAD in Thousands | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Non-current assets: | |||
Investment properties | CAD 2,733,568 | CAD 2,653,095 | |
Other non-current assets | 7,359 | 7,888 | |
Total non-current assets | 2,740,927 | 2,660,983 | |
Current assets: | |||
Assets held for sale | 391,453 | ||
Other current assets | 5,034 | 4,444 | |
Cash and cash equivalents | 69,019 | 246,215 | CAD 119,155 |
Total assets | 3,206,433 | 2,911,642 | |
Non-current liabilities: | |||
Unsecured debentures, net | 647,306 | 646,768 | |
Other non-current liabilities | 305,518 | 256,669 | |
Total non-current liabilities | 952,824 | 903,437 | |
Current liabilities: | |||
Bank indebtedness | 32,552 | ||
Other current liabilities | 83,195 | 58,469 | |
Total liabilities | 1,068,571 | 961,906 | |
Equity: | |||
Stapled unitholders' equity | 2,136,614 | 1,948,207 | |
Non-controlling interests | 1,248 | 1,529 | |
Total liabilities and equity | 3,206,433 | 2,911,642 | |
Granite REIT | |||
Non-current assets: | |||
Investment properties | 2,733,568 | 2,653,095 | |
Other non-current assets | 7,359 | 7,888 | |
Total non-current assets | 2,740,927 | 2,660,983 | |
Current assets: | |||
Assets held for sale | 391,453 | ||
Other current assets | 4,988 | 4,392 | |
Cash and cash equivalents | 68,572 | 246,182 | |
Total assets | 3,205,940 | 2,911,557 | |
Non-current liabilities: | |||
Unsecured debentures, net | 647,306 | 646,768 | |
Other non-current liabilities | 305,518 | 256,669 | |
Total non-current liabilities | 952,824 | 903,437 | |
Current liabilities: | |||
Bank indebtedness | 32,552 | ||
Intercompany payable | 6,331 | 8,029 | |
Other current liabilities | 76,371 | 50,355 | |
Total liabilities | 1,068,078 | 961,821 | |
Equity: | |||
Stapled unitholders' equity | 2,136,602 | 1,948,199 | |
Non-controlling interests | 1,260 | 1,537 | |
Total liabilities and equity | 3,205,940 | 2,911,557 | |
Granite GP | |||
Non-current assets: | |||
Investment in Granite LP | 12 | 8 | |
Total non-current assets | 12 | 8 | |
Current assets: | |||
Other current assets | 46 | 52 | |
Intercompany receivable | 6,331 | 8,029 | |
Cash and cash equivalents | 447 | 33 | |
Total assets | 6,836 | 8,122 | |
Current liabilities: | |||
Other current liabilities | 6,824 | 8,114 | |
Total liabilities | 6,824 | 8,114 | |
Equity: | |||
Stapled unitholders' equity | 12 | 8 | |
Total liabilities and equity | 6,836 | 8,122 | |
Eliminations/Adjustments | |||
Non-current assets: | |||
Investment in Granite LP | (12) | (8) | |
Total non-current assets | (12) | (8) | |
Current assets: | |||
Intercompany receivable | (6,331) | (8,029) | |
Total assets | (6,343) | (8,037) | |
Current liabilities: | |||
Intercompany payable | (6,331) | (8,029) | |
Total liabilities | (6,331) | (8,029) | |
Equity: | |||
Non-controlling interests | (12) | (8) | |
Total liabilities and equity | CAD (6,343) | CAD (8,037) |
COMBINED FINANCIAL INFORMATI108
COMBINED FINANCIAL INFORMATION - Income Statement (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
COMBINED FINANCIAL INFORMATION - Income Statement | ||
Revenue | CAD 222,638 | CAD 223,401 |
General and administrative expenses | 26,066 | 27,960 |
Proxy contest expenses | 5,866 | |
Interest expense and other financing costs, net | 19,471 | 19,587 |
Early redemption costs of unsecured debentures | 11,920 | |
Other costs and expenses, net | 10,207 | 7,971 |
Fair value gains on investment properties, net | (212,106) | (175,924) |
Fair value losses on financial instruments | 823 | 1,150 |
Acquisition transaction costs | 718 | |
Loss on sale of investment properties | 427 | 2,420 |
Income before income taxes | 371,166 | 328,317 |
Income tax expense | 13,418 | 47,625 |
Net income | 357,748 | 280,692 |
Less net income attributable to non-controlling interests | 46 | 1,367 |
Net income attributable to stapled unitholders | 357,702 | 279,325 |
Granite REIT | ||
COMBINED FINANCIAL INFORMATION - Income Statement | ||
Revenue | 222,638 | 223,401 |
General and administrative expenses | 26,066 | 27,960 |
Proxy contest expenses | 5,866 | |
Interest expense and other financing costs, net | 19,471 | 19,587 |
Early redemption costs of unsecured debentures | 11,920 | |
Other costs and expenses, net | 10,207 | 7,971 |
Fair value gains on investment properties, net | (212,106) | (175,924) |
Fair value losses on financial instruments | 823 | 1,150 |
Acquisition transaction costs | 718 | |
Loss on sale of investment properties | 427 | 2,420 |
Income before income taxes | 371,166 | 328,317 |
Income tax expense | 13,418 | 47,625 |
Net income | 357,748 | 280,692 |
Less net income attributable to non-controlling interests | 50 | 1,370 |
Net income attributable to stapled unitholders | 357,698 | 279,322 |
Granite GP | ||
COMBINED FINANCIAL INFORMATION - Income Statement | ||
Share of (income) loss of Granite LP | (4) | (3) |
Income before income taxes | 4 | 3 |
Net income | 4 | 3 |
Net income attributable to stapled unitholders | 4 | 3 |
Eliminations/Adjustments | ||
COMBINED FINANCIAL INFORMATION - Income Statement | ||
Share of (income) loss of Granite LP | 4 | 3 |
Income before income taxes | (4) | (3) |
Net income | (4) | (3) |
Less net income attributable to non-controlling interests | CAD (4) | CAD (3) |
COMBINED FINANCIAL INFORMATI109
COMBINED FINANCIAL INFORMATION - Cash Flows (Details) - CAD CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
OPERATING ACTIVITIES | ||
Net income | CAD 357,748 | CAD 280,692 |
Items not involving current cash flows | (192,530) | (121,864) |
Changes in working capital balances | (7,597) | (41) |
Other operating activities | 1,056 | 1,204 |
Cash provided by operating activities | 158,677 | 159,991 |
INVESTING ACTIVITIES | ||
Business acquisition | (153,979) | |
Investment property capital additions - Maintenance or improvements | (10,736) | (2,063) |
Investment property capital additions - Developments or expansions | (72,404) | (17,221) |
Other investing activities | (728) | 31,063 |
Cash provided by (used in) investing activities | (237,847) | 11,779 |
FINANCING ACTIVITIES | ||
Distributions paid | (122,637) | (113,095) |
Other financing activities | 17,399 | 73,134 |
Cash used in financing activities | (105,238) | (39,961) |
Effect of exchange rate changes | 7,212 | (4,749) |
Net increase (decrease) in cash and cash equivalents during the year | (177,196) | 127,060 |
Granite REIT | ||
OPERATING ACTIVITIES | ||
Net income | 357,748 | 280,692 |
Items not involving current cash flows | (192,530) | (121,864) |
Changes in working capital balances | (8,011) | 81 |
Other operating activities | 1,056 | 1,204 |
Cash provided by operating activities | 158,263 | 160,113 |
INVESTING ACTIVITIES | ||
Business acquisition | (153,979) | |
Investment property capital additions - Maintenance or improvements | (10,736) | (2,063) |
Investment property capital additions - Developments or expansions | (72,404) | (17,221) |
Other investing activities | (728) | 31,063 |
Cash provided by (used in) investing activities | (237,847) | 11,779 |
FINANCING ACTIVITIES | ||
Distributions paid | (122,637) | (113,095) |
Other financing activities | 17,399 | 73,134 |
Cash used in financing activities | (105,238) | (39,961) |
Effect of exchange rate changes | 7,212 | (4,749) |
Net increase (decrease) in cash and cash equivalents during the year | (177,610) | 127,182 |
Granite GP | ||
OPERATING ACTIVITIES | ||
Net income | 4 | 3 |
Items not involving current cash flows | (4) | (3) |
Changes in working capital balances | 414 | (122) |
Cash provided by operating activities | 414 | (122) |
FINANCING ACTIVITIES | ||
Net increase (decrease) in cash and cash equivalents during the year | 414 | (122) |
Eliminations/Adjustments | ||
OPERATING ACTIVITIES | ||
Net income | (4) | (3) |
Items not involving current cash flows | CAD 4 | CAD 3 |
COMMITMENTS AND CONTINGENCIE110
COMMITMENTS AND CONTINGENCIES (Details) CAD in Thousands | 12 Months Ended | |
Dec. 31, 2017CADpropertylease | Dec. 31, 2016CAD | |
Disclosure of commitments and contingencies | ||
Contractual commitments related to construction, development and capital projects | CAD 7,900 | |
Reimbursed from tenant | 6,400 | |
Minimum annual rental payments payable under non-cancellable operating leases | 1,558 | |
Fair value of investment properties | CAD 2,733,568 | CAD 2,653,095 |
Long term ground lease | ||
Disclosure of commitments and contingencies | ||
Number of ground leases | lease | 2 | |
Number of income-producing properties | property | 2 | |
Fair value of investment properties | CAD 53,800 | |
Not later than 1 year | ||
Disclosure of commitments and contingencies | ||
Minimum annual rental payments payable under non-cancellable operating leases | 453 | |
Later than 1 year and not later than 5 years | ||
Disclosure of commitments and contingencies | ||
Minimum annual rental payments payable under non-cancellable operating leases | 1,105 | |
Lease maturity in 2049 | Long term ground lease | ||
Disclosure of commitments and contingencies | ||
Annual payment | 500 | |
Lease maturity in 2096 | Long term ground lease | ||
Disclosure of commitments and contingencies | ||
Annual payment | CAD 100 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) CAD in Thousands, € in Millions | Mar. 01, 2018CADshares | Feb. 01, 2018CAD | Jan. 31, 2018CAD | Dec. 31, 2017CADpropertyshares | Dec. 31, 2016CADshares | Feb. 28, 2018CAD | Feb. 02, 2018EUR (€) | Feb. 02, 2018CAD |
SUBSEQUENT EVENTS | ||||||||
Number of investment properties | property | 10 | |||||||
Amount of credit facility | CAD 650,000 | CAD 650,000 | ||||||
Units repurchased for total consideration | 12,046 | 1 | ||||||
Stapled Unitholders' Equity | ||||||||
SUBSEQUENT EVENTS | ||||||||
Units repurchased for total consideration | CAD 12,046 | CAD 1 | ||||||
Stapled Units | ||||||||
SUBSEQUENT EVENTS | ||||||||
Units repurchased (in units) | shares | 242,000 | 20 | ||||||
Units repurchased for total consideration | CAD 10,895 | CAD 1 | ||||||
SUBSEQUENT EVENT | ||||||||
SUBSEQUENT EVENTS | ||||||||
Gross proceeds from assets held for sale | CAD 391,400 | |||||||
Tenant allowance paid | € 6 | CAD 9,000 | ||||||
SUBSEQUENT EVENT | Stapled Unitholders' Equity | ||||||||
SUBSEQUENT EVENTS | ||||||||
Declared distributions | CAD 10,600 | CAD 10,500 | ||||||
SUBSEQUENT EVENT | Stapled Units | ||||||||
SUBSEQUENT EVENTS | ||||||||
Units repurchased (in units) | shares | 891,440 | |||||||
Units repurchased for total consideration | CAD 43,900 | |||||||
SUBSEQUENT EVENT | Credit Facility | ||||||||
SUBSEQUENT EVENTS | ||||||||
Term of credit facility (in years) | 5 years | |||||||
Amount of credit facility | CAD 500,000 |