Home > News > Slate Retail REIT Reports Third Quarter 2017 Results
Thursday, November 2, 2017

Slate Retail REIT Reports Third Quarter 2017 Results

(All amounts are expressed in U.S. dollars unless otherwise stated)

TORONTO, ON - Slate Retail REIT (TSX: SRT.U) (TSX: SRT.UN) (the "REIT"), an owner of U.S. grocery-anchored real estate, today announced its financial results for the three and nine months ended September 30, 2017. Senior management will host a conference call at 9:00 a.m. ET on Friday, November 3, 2017 to discuss the results and ongoing business initiatives of the REIT. The dial-in details can be found below.

"We proactively renewed four grocery-anchor tenants in advance of their expiration, executed over 490,000 square feet of leases at rents meaningfully above in-place rents and continued to make positive progress on our redevelopment projects," commented Greg Stevenson, Chief Executive Officer of the REIT. "In addition, we deployed over $230 million into 11 new properties in our existing markets allowing us to leverage our expertise and scale. Our third quarter results simply reflect the tremendous job our team continues to do creating quantifiable long-term value for unitholders."

For the CEO's letter to unitholders for the quarter, please follow the link here.

Quarterly Highlights

  • The REIT will increase its monthly distribution by 3.7% to U.S.$0.07 per unit, or U.S.$0.84 annually, beginning with its November 2017 distribution.  This increase is the fourth consecutive annual distribution increase since the REIT listed its Class U units on the Toronto Stock Exchange in 2014. 

  • Completed 490,422 square feet of leasing in the quarter, comprised of 104,837 square feet of new leasing and 385,585 square feet of renewals, the majority coming from five grocery-anchor tenants. With no grocery-anchor expiries in 2017, this leasing activity reflects management's strategy to proactively renew anchor tenants well in advance of their maturities.

  • Executed 17 new shop space leases at an average rental rate of $23.24 per square foot, which is $10.42 per square foot or 81.3% higher than the weighted average in-place rent for comparable space.

  • Increased quarterly year-over-year same-property net operating income ("NOI") by $0.1 million or 0.9% to $15.3 million.  This is the fifth consecutive quarterly same-property NOI increase.

  • The REIT acquired 11 properties and 1 property outparcel, adjacent to an existing property, for an aggregate $238.9 million ($123 million per square foot), at a weighted average capitalization rate of 7.1%. The REIT will or has closed an additional $48.5 million acquisitions subsequent to the end of the third quarter.

  • The REIT has received commitments for a new $250 million term loan from a syndicate of lenders.  The REIT expects to close the term loan in November 2017, with proceeds being used to repay existing debt.  The new term loan has terms similar to its existing term loan and revolver and will have a maturity of February 2023. 

  • The REIT reported a $6.3 million increase in rental revenue to $30.0 million compared to the third quarter of 2016 as a result of rental rate growth from leasing and new acquisitions.

  • Net loss as determined under IFRS for the quarter was $8.8 million.

  • Funds from operations ("FFO") was $14.4 million or $0.31 per unit, a decrease of $0.01 per unit compared to the same period in the prior year as a result of timing between the May 31, 2017 equity raise and contribution to net operating income ("NOI") from acquisitions.

  • Adjusted funds from operations ("AFFO") was $11.2 million or $0.24 per unit.  AFFO was impacted by a $1.1 million increase in capital and leasing costs as a result of the high volume of new and renewal leasing activity.

  • The AFFO payout ratio for the third quarter was 84.0%. On a trailing twelve month basis, the AFFO payout ratio was 78.1%, excluding the impact of the defeasance of certain debt in the fourth quarter of 2016.

Summary of Q3 2017 Results

Three months ended September 30,

(in thousands of U.S. dollars except, per unit amounts)

                     2017

                    2016

Change %

Rental revenue

 

$

30,030

 

 

$

23,699

 

 

26.7

%

NOI

 

$

21,891

 

 

$

17,019

 

 

28.6

%

Net loss

 

 

$

(8,816

)

 

$

(15,309

)

 

42.4

%

 

 

 

 

 

 

 

Leasing - shop space

 

124,175

 

 

83,831

 

 

48.1

%

Leasing - anchor

 

366,247

 

 

33,974

 

 

978.0

%

Total leasing activity (square feet)

 

490,422

 

 

117,805

 

 

316.3

%

 

 

 

 

 

 

 

Same-property NOI

 

$

15,304

 

 

$

15,172

 

 

0.9

%

 

 

 

 

 

 

 

Weighted average number of units outstanding ("WA units")

 

46,372

 

 

35,469

 

 

30.7

%

FFO

 

$

14,448

 

 

$

11,193

 

 

29.1

%

FFO per WA units

 

$

0.31

 

 

$

0.32

 

 

(3.1

)%

FFO payout ratio

 

64.9

%

 

62.4

%

 

4.0

%

AFFO

 

$

11,168

 

 

$

9,114

 

 

22.5

%

AFFO per WA units

 

$

0.24

 

 

$

0.26

 

 

(7.7

)%

AFFO payout ratio

 

84.0

%

 

76.7

%

 

9.5

%

 

 

 

 

 

 

 

As at September 30,

(in thousands of U.S. dollars except, per unit amounts)

                    2017

                    2016

Change %

Total assets

 

$

1,476,651

 

 

$

1,076,668

 

 

37.2

%

Total debt

 

$

846,325

 

 

$

589,213

 

 

43.6

%

Net asset value per unit

 

$

13.08

 

 

$

13.28

 

 

(1.5

)%

Portfolio occupancy

 

92.6

%

 

93.6

%

 

(1.1

)%

Debt / GBV ratio

 

57.3

%

 

54.7

%

 

4.8

%

Interest coverage ratio

 

3.36x

 

3.31x

 

1.5

%

 

Conference Call and Webcast

Senior management will host a live conference call at 9:00 a.m. ET on Friday, November 3, 2017 to discuss the results and ongoing business initiatives.

The conference call can be accessed by dialing (647) 427-2311 or 1 (866) 521-4909. Additionally, the conference call will be available via simultaneous audio found at www.snwebcastcenter.com/webcast/slate/2017/1103. A replay will be accessible until November 17, 2017 via the REIT’s website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 88360622) approximately two hours after the live event.

About Slate Retail REIT (TSX: SRT.U / SRT.UN)

Slate Retail REIT is a real estate investment trust focused on U.S. grocery-anchored real estate. The REIT owns and operates over U.S. $1 billion of assets located across the top 50 U.S. metro markets that are visited regularly by consumers for their everyday needs. The REIT’s conservative payout ratio, together with its diversified portfolio and quality tenant covenants, provides a strong basis to continue to grow unitholder distributions and the flexibility to capitalize on opportunities that drive value appreciation. Visit slateretailreit.com to learn more about the REIT.

About Slate Asset Management L.P.

Slate Asset Management L.P. is a leading real estate investment platform with over $4 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly-traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm's careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a proven ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

Supplemental Information

All interested parties can access Slate Retail’s Supplemental Information online at slateretailreit.com in the Investors section. These materials are also available on SEDAR or upon request to the REIT at info@slateam.com or (416) 644-4264.

Forward Looking Statements

Certain statements herein may be forward-looking statements within the meaning of applicable securities laws. These statements reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance and business prospects and opportunities of the REIT including expectations for the current financial year, and include, but are not limited to, statements with respect to management’s beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Statements that contain words such as “could”, “should”, “would”, “anticipate”, “expect”, “believe”, “plan”, “intend”, “will”, “may”, “might” and similar expressions or statements relating to matters that are not historical facts constitute forward-looking statements.

These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on the REIT’s current estimates and assumptions, which are subject to significant risks and uncertainties. Forward-looking statements contained herein are made as the date hereof and accordingly are subject to change after such date. The REIT does not undertake to update any forward-looking statements that are contained herein except as expressly required by applicable securities laws.

Non-IFRS Measures

This news release and accompanying financial statements are based on International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

We disclose a number of financial measures in this news release that are not measures used under IFRS, including NOI, same-property NOI, FFO, FFO payout ratio, AFFO, AFFO payout ratio, adjusted EBITDA and the interest coverage ratio, in addition to certain measures on a per unit basis.

  • NOI is defined as rental revenue less operating expenses, prior to straight-line rent and IFRIC 21 adjustments. Same-property NOI includes those properties owned by the REIT for each of the current period and the relevant comparative period excluding those properties under development.

  • FFO is defined as net income (loss) adjusted for certain items including transaction costs, change in fair value of properties, deferred income taxes, unit expense and IFRIC 21 property tax adjustments.

  • AFFO is defined as FFO adjusted for straight-line rental revenue and sustaining capital, leasing costs and tenant improvements.

  • FFO payout ratio and AFFO payout ratio are defined as distributions declared divided by FFO and AFFO, respectively.

  • FFO per WA unit and AFFO per WA unit are defined as FFO and AFFO divided by the weighted average class U equivalent units outstanding, respectively.

  • Adjusted EBITDA is defined as earnings before interest, income taxes, distributions, fair value gains (losses) from both financial instruments and properties, while also excluding certain items not related to operations such as transaction costs from dispositions, acquisitions, debt termination costs, or other events.

  • Interest coverage ratio is defined as adjusted EBITDA divided by cash interest paid.

We utilize these measures for a variety of reasons, including measuring performance, managing the business, capital allocation and the assessment of risk. Descriptions of why these non-IFRS measures are useful to investors and how management uses each measure are included in Management’s Discussion and Analysis. We believe that providing these performance measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a manner similar to management. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar measures presented by others.

For Further Information
Investor Relations
Slate Retail REIT
Tel: +1 416 644 4264
E-mail: ir@slateam.com

Calculation and Reconciliation of Non-IFRS Measures

The table below summarizes a calculation of non-IFRS measures based on IFRS financial information.

Three months ended September 30,

(in thousands of U.S. dollars except, per unit amounts)

 

            2017

 

           2016

Rental revenue

 

$

30,030

 

 

$

23,699

 

Straight-line rent revenue

 

(367

)

 

(453

)

Property operating expenses

 

(3,988

)

 

(3,221

)

IFRIC 21 property tax adjustment

 

(3,784

)

 

(3,006

)

NOI (1)

 

$

21,891

 

 

$

17,019

 

 

 

 

 

 

Cash flow from operations

 

$

9,888

 

 

$

10,817

 

Changes in non-cash working capital items

 

4,072

 

 

(798

)

Acquisition and disposition costs

 

187

 

 

661

 

Finance charge and mark-to-market adjustments

 

(281

)

 

(91

)

Interest, net and TIF note adjustments

 

215

 

 

151

 

Capital

 

(1,431

)

 

(380

)

Leasing costs

 

(596

)

 

(215

)

Tenant improvements

 

(886

)

 

(1,031

)

AFFO (1)

 

$

11,168

 

 

$

9,114

 

 

 

 

 

 

Net loss
 

 

$

(8,816

)

 

$

(15,309

)

Acquisition and disposition costs

 

187

 

 

661

 

Change in fair value of properties

 

1,142

 

 

4,865

 

Deferred income taxes

 

5,827

 

 

2,701

 

Unit expense

 

19,892

 

 

21,281

 

IFRIC 21 property tax adjustment

 

(3,784

)

 

(3,006

)

FFO (1)

 

$

14,448

 

 

$

11,193

 

Straight-line rental revenue

 

(367

)

 

(453

)

Capital

 

(1,431

)

 

(380

)

Leasing costs

 

(596

)

 

(215

)

Tenant improvements

 

(886

)

 

(1,031

)

AFFO (1)

 

$

11,168

 

 

$

9,114

 

 

 

 

 

 

NOI

 

$

21,891

 

 

$

17,019

 

Other expenses

 

(1,880

)

 

(1,722

)

Cash interest, net

 

(5,649

)

 

(4,466

)

Finance charge and mark-to-market adjustments

 

(281

)

 

(91

)

Capital

 

(1,431

)

 

(380

)

Leasing costs

 

(596

)

 

(215

)

Tenant improvements

 

(886

)

 

(1,031

)

AFFO (1)

 

$

11,168

 

 

$

9,114

 

 

 

 

 

 

WA units

 

46,372

 

 

35,469

 

FFO per WA unit (1)

 

$

0.31

 

 

$

0.32

 

FFO payout ratio (1)

 

64.9

%

 

62.4

%

AFFO per WA unit (1)

 

$

0.24

 

 

$

0.26

 

AFFO payout ratio (1)

 

84.0

%

 

76.7

%

 

 

 

 

 

 

 

Three months ended September 30,

(in thousands of U.S. dollars except, per unit amounts)

 

            2017

 

            2016

NOI

 

$

21,891

 

 

$

17,019

 

Other expenses

 

(1,880

)

 

(1,722

)

Adjusted EBITDA (1)

 

$

20,011

 

 

$

15,297

 

Cash interest paid

 

(5,947

)

 

(4,617

)

Interest coverage ratio (1)

 

            3.36x

 

              3.31x

(1) Refer to “Non-IFRS Measures” section above