(All amounts are expressed in U.S. dollars unless otherwise stated)
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, 2016. Senior
management will host a conference call at 9:00 a.m. ET on Thursday,
November 3, 2016 to discuss the results and ongoing business initiatives
of the REIT. The dial-in details can be found below.
During the quarter, the REIT continued to execute on its organic and
external growth strategies. Remarking on the achievements of the past
quarter Greg Stevenson, the REIT’s Chief Executive Officer, said:
“Slate Retail continued to achieve solid results in the third quarter
highlighted by positive leasing spreads on both new and renewal leasing
activity as well as positive same-property NOI growth. While strong
leasing fundamentals in the U.S. continue to create a tailwind for SRT,
it is our exceptional team that continues to execute on our value-add
strategies and drive gains across the portfolio.”
Highlights
-
Subsequent to period end, the REIT fixed $300 million of its floating
rate debt with an interest rate swap through to April 2021. As a
result, 76% of the REIT’s debt is now subject to fixed interest rates.
-
The REIT completed the disposition of five Food Lion anchored assets
totaling 227,529 square feet (the "Food Lion Portfolio"), for gross
proceeds of $21.9 million ($96 per square foot) at an estimated
weighted average capitalization rate of 7.7%. The disposition of these
assets reduced NOI in the third quarter by approximately $0.3 million.
These sales exemplify the REIT's strategy to purchase well located
properties that can be enhanced through leasing, extending term and
proactive asset management to increase cash flow and as a result value.
-
The REIT continued to execute on its capital recycling program and has
actively redeployed all of the sales proceeds from the Food Lion
Portfolio by either closing on or entering into binding agreements for
the purchase of 5 grocery-anchored properties totaling $64.4 million
during and subsequent to the end of the quarter. The gain from the
sale of the Food Lion portfolio was completed on a U.S. tax deferred
basis.
-
In the third quarter of 2016, the REIT completed 117,805 square feet
of leasing. Notably, the REIT renewed 30 tenants at an 8.6% spread
over expiring rents and in addition, 11 new tenants at an average
rental rate of $16.56 per square foot which is $4.66 per square foot
or 39.2% higher than the weighted average in-place rent for comparable
space across the portfolio.
-
Same-property net operating income increased 0.7% compared to the same
period in the prior year.
-
On September 15, 2016, the REIT declared a distribution of $0.0675 per
class U unit, or $0.81 on an annualized basis for the month of
September. This distribution represents a 4% increase of the monthly
distribution to unitholders. The increased distribution is the third
consecutive annual distribution increase by the REIT since listing on
the TSX in 2014. Management continues to target a 70% AFFO payout
ratio.
-
Acquired one grocery-anchored property, located in the Salt Lake City
metropolitan statistical area (“MSA”), Utah for a total of $14.5
million, totaling 127,231 square feet ($114 per square foot) at a 7.3%
capitalization rate. This asset is anchored by Fresh Market.
Summary of Q3 2016 Results
|
Three months ended September 30,
|
|
|
|
(Thousands of U.S. dollars except, per unit amounts)
|
2016
|
|
2015
|
|
|
Change %
|
|
Rental revenue
|
|
$
|
23,699
|
|
|
$
|
22,416
|
|
|
5.7%
|
|
Net operating income
|
|
$
|
17,019
|
|
|
$
|
16,307
|
|
|
4.4%
|
|
|
|
|
|
|
|
|
|
|
|
Leasing - shop space
|
|
83,831
|
|
|
53,675
|
|
|
56.2%
|
|
Leasing - anchor
|
|
33,974
|
|
|
165,698
|
|
|
(79.5)%
|
|
Total leasing activity (square feet)
|
|
117,805
|
|
|
219,373
|
|
|
(46.3)%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of units outstanding ("WA units")
|
|
35,469
|
|
|
32,253
|
|
|
10.0%
|
|
Funds from operations (“FFO”)
|
|
$
|
11,193
|
|
|
$
|
10,793
|
|
|
3.7%
|
|
FFO per WA units
|
|
$
|
0.32
|
|
|
$
|
0.33
|
|
|
(3.0)%
|
|
Adjusted funds from operations ("AFFO")
|
|
$
|
9,205
|
|
|
$
|
8,812
|
|
|
4.5%
|
|
AFFO per WA units
|
|
$
|
0.26
|
|
|
$
|
0.27
|
|
|
(3.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
(Thousands of U.S. dollars)
|
|
2016
|
|
|
2015
|
|
|
Change %
|
|
Total assets
|
|
$
|
1,076,668
|
|
|
$
|
1,013,481
|
|
|
6.2%
|
|
Total debt
|
|
$
|
585,773
|
|
|
$
|
577,280
|
|
|
1.5%
|
|
Portfolio occupancy
|
|
93.6%
|
|
|
94.7%
|
|
|
(1.2)%
|
|
FFO payout ratio
|
|
62.4%
|
|
|
57.8%
|
|
|
8.0%
|
|
AFFO payout ratio
|
|
75.9%
|
|
|
70.4%
|
|
|
7.8%
|
|
Debt / GBV ratio
|
|
54.7%
|
|
|
57.5%
|
|
|
(4.9)%
|
|
Interest coverage ratio
|
|
3.31x
|
|
|
3.19x
|
|
|
3.8%
|
Operating Results
FFO on a per unit basis for the quarter has decreased to $0.32 which is
a $0.03 per unit or 8.6% decrease from the June 30, 2016 quarter and a
$0.01 per unit or 3.0% decrease compared to the same quarter in 2015.
AFFO on a per unit basis was $0.26 for the quarter, which represents a
$0.03 per unit or 10.3% decrease from the second quarter and a $0.01 per
unit or 3.7% decrease compared to the same quarter in 2015. NOI was
$17.0 million for the three month period ended September 30, 2016,
compared to $17.4 million in the second quarter of 2016, which
represents a $0.42 million or 2.4% decrease. The decline in FFO, AFFO
and NOI is primarily the result of disposed properties no longer
providing contributions to NOI after sale. Management expects earnings
to improve as the proceeds from sale are recycled into new acquisitions.
Distributions and Payout Ratio
The REIT's monthly distribution to unitholders is $0.0675 per class U
unit, or $0.81 per class U unit on an annualized basis. Distributions
were $7.0 million for the three month period ended September 30, 2016.
The AFFO payout ratio was 75.9% for the three month period ended
September 30, 2016, compared to an AFFO payout ratio of 68.9% for the
same period in the prior year. Management continues to target a 70% AFFO
payout ratio.
“We are happy to announce our third consecutive annual distribution
increase since listing on the TSX on 2014,” stated Greg Stevenson. “With
the distribution increase and cash flow growth, we continue to maintain
an industry-leading payout ratio that allows for reinvestment and future
cashflow growth.”
Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on
Thursday, November 3, 2016 to discuss the results and ongoing business
initiatives.
The conference call can be accessed by dialing (647) 788-4919 or 1 (877)
291-4570. Additionally, the conference call will be available via
simultaneous audio found at http://www.gowebcasting.com/8033.
A replay will be accessible until November 17, 2016 via the REIT's
website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code
83598772) approximately two hours after the live event.
About Slate Retail REIT (TSX: SRT.U) (TSX: 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 primarily across the top 50 U.S. metro
markets. The REIT is focused on maximizing value through internal
organic rental growth and strategic acquisitions. Visit slateam.com/SRT
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 $3.5 billion in assets under management. Slate is a
value-oriented company and a significant sponsor of all 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 about Slate Asset Management L.P.
Supplemental Information
All interested parties can access Slate Retail’s Supplemental
Information online at slateam.com/SRT 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 Financial Measures
We disclose a number of financial measures in this news release that are
not measures used under IFRS, including net operating income, same
property net operating income, funds from operations, adjusted funds
from operations, AFFO payout ratio, adjusted EBITDA and the interest
coverage ratio, in addition to certain measures on a per unit basis. 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. Reconciliations of these non-IFRS measures
to the most directly comparable financial measures calculated and
presented in accordance with IFRS are included within this news release.
For Further Information
Investor Relations
Slate Asset Management L.P.
+1 (416) 644-4264
ir@slateam.com