Granite REIT’s NCIB Renewal: A Bold Bet on Undervaluation and Strategic Capital Allocation

The real estate investment trust (REIT) sector is no stranger to volatility, but Granite Real Estate Investment Trust (TSX: GRT.UN) has just signaled its confidence in its intrinsic value—and investors would be wise to take note. On May 22, 2025, Granite REIT announced the renewal of its Normal Course Issuer Bid (NCIB), authorizing the repurchase of up to 6.06 million units—equivalent to 10% of its public float—over the next 12 months. This move is more than a routine capital management tactic; it’s a bold statement of undervaluation and a strategic play to amplify shareholder returns.

The Numbers Tell a Story of Undervaluation

Granite REIT’s management has explicitly stated that repurchases will occur only when the market price per unit is below their assessment of intrinsic value. This is a critical threshold. Let’s break down the math:

• Previous NCIB Performance: During the prior 12-month NCIB (May 2024–May 2025), Granite repurchased 2.14 million units at an average price of $66.86 per unit.
• Current Market Context: As of May 22, 2025, the closing price for Granite units was $65.25, slightly below the prior average buyback price.
• Forward-Looking Confidence: By renewing the NCIB at this price point, management is effectively stating that Granite’s intrinsic value is higher than its current trading price.

This data underscores a compelling opportunity: investors buying Granite units at today’s price could be purchasing them at a discount to management’s perceived value.

Strategic Capital Allocation: Canceling Units to Boost Metrics

Unlike some REITs that hoard cash or issue new shares, Granite is using its liquidity to reduce the share count permanently. Every unit repurchased under the NCIB is canceled, directly increasing metrics like Funds from Operations (FFO) per unit and dividend coverage ratios. With a 63.3 million sq ft logistics portfolio—a sector in high demand due to e-commerce growth—Granite’s assets are positioned to generate steady cash flows.

The prior NCIB’s underutilization (only 34% of the authorized limit was used) suggests Granite was selective, buying only when prices were attractive. Now, with shares trading near the lower end of their historical range, the company is primed to deploy capital aggressively.

Why Logistics REITs Are a Growth Catalyst

Granite’s focus on logistics, warehouse, and industrial properties across North America and Europe isn’t just a sector bet—it’s a bet on secular trends. E-commerce continues to reshape retail, and companies like Amazon, Shopify, and regional retailers are expanding their distribution networks. Granite’s portfolio of 144 properties, including high-demand Class A warehouses, offers both defensive income and growth potential.

The Risks? Manageable in This Strategic Play

No investment is risk-free, but Granite’s NCIB renewal mitigates several key concerns:
1. Liquidity: The company’s balance sheet remains strong, with a debt-to-FFO ratio of 7.5x (as of Q1 2025)—comfortably within REIT norms.
2. Regulatory Flexibility: The automatic securities purchase plan allows Granite to buy during blackout periods, ensuring consistent execution.
3. Valuation Safety Net: Management’s focus on buying only below intrinsic value acts as a floor, minimizing overpayment risks.

Call to Action: Act Before the Market Catches Up

Granite REIT’s NCIB renewal is a textbook example of shareholder-friendly capital allocation. With shares trading below prior buyback averages and management’s stated intrinsic value threshold, now is the time to position ahead of potential price appreciation.

Investment Thesis:
- Buy: Accumulate Granite units at current prices, leveraging the NCIB’s implied valuation floor.
- Hold: Benefit from dividend stability (yield ~4.8% as of May 2025) and FFO growth from its logistics portfolio.
- Watch: Monitor buyback execution and Granite’s Q2 2025 results for further signals of undervaluation.

In a market where uncertainty looms, Granite REIT’s strategic moves and sector tailwinds make it a must-watch name for income-seeking investors. The question isn’t whether to act—it’s why wait?

Granite REIT’s NCIB isn’t just a repurchase program—it’s a roadmap to value creation. The math, the sector, and management’s confidence all align. This is a call to capitalize on a mispriced opportunity before the market catches up.