(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 twelve months ended December 31, 2016. Senior
management will host a conference call at 9:00 a.m. ET on Thursday,
February 23, 2017 to discuss the results and ongoing business
initiatives of the REIT. The dial-in details can be found below.
“The fourth quarter capped off a very successful year for us,” said Greg
Stevenson, the REIT’s Chief Executive Officer. “The REIT’s same-property
NOI growth of 2.5% is reflective of the investments our people have made
to continually improve our business and grow unitholder value. We are
looking forward to a successful 2017 where we can continue to build on
our growth.”
For the CEO's letter to unitholders for the quarter, please link here.
Quarterly Highlights
-
Increased quarterly year-over-year same-property net operating income
("NOI") by 2.5%.
-
Acquired five grocery-anchored properties for a total purchase price
of $49.8 million ($101 per square foot).
-
Completed 258,168 square feet of leasing, an increase of 107,803
square feet compared to the same period in the prior year. The REIT
renewed 36 tenants at a 9.7% spread over expiring rents and in
addition 10 new shop space tenants, of less than 10,000 square feet,
at an average rental rate of $16.48 per square foot which is $4.66 per
square foot or 38.8% higher than the weighted average in-place rent
for comparable space across the portfolio.
-
Reduced floating rate interest exposure by fixing $300.0 million of
debt through an interest rate swap. At December 31, 2016 the swap had
a fair value of $7.0 million.
-
Completed the defeasance of a $26.7 million mortgage secured by five
properties. The defeasance reduces annual interest costs and provides
the REIT with the flexibility to potentially dispose of certain
properties and undertake redevelopment opportunities that would have
been restricted by the lender. Additionally, the REIT received $2.7
million previously held in escrow that was not otherwise available to
the REIT until maturity of the mortgage in 2021.
-
The REIT reported a $1.9 million increase in rental revenue to $25.0
million compared to the fourth quarter of 2015.
-
Net loss of $12.4 million, representing an $11.3 million decrease from
the same period in 2015.
-
FFO was $8.7 million, a decrease of $1.9 million compared to Q4 2015,
due primarily to a $2.8 million charge to income from the mortgage
defeasance. FFO on a per unit basis would have been $0.32 had the
defeasance not been completed.
-
AFFO was $5.6 million for the fourth quarter, or $0.16 per unit. After
adjusting for the defeasance AFFO per unit would have been $0.28 per
unit.
-
Subsequent to the end of the quarter, the REIT completed a public
offering and private placement for an aggregate of 5.6 million class U
units at a price of $10.89 or C$14.35 per unit for gross proceeds to
the REIT of approximately $60.5 million or C$79.8 million. The REIT
used the net proceeds to initially repay debt, but has and expects to
continue to redraw such amounts to fund acquisitions.
-
The AFFO payout ratio for the fourth quarter was 129.2% compared to an
AFFO payout ratio of 70.4% for the same period in the prior year.
Adjusting the fourth quarter AFFO for the loss on the defeasance, the
AFFO payout ratio would have been 72.3%.
Summary of 2016 Results
|
Three months ended December 31,
|
|
|
|
(in thousands of U.S. dollars except, per unit amounts)
|
2016
|
|
2015
|
|
Change %
|
|
Rental revenue
|
|
$
|
25,044
|
|
|
$
|
23,104
|
|
|
8.4%
|
|
Net operating income ("NOI")
|
|
$
|
17,931
|
|
|
$
|
16,248
|
|
|
10.4%
|
|
Net loss
|
|
$
|
(12,397)
|
|
|
$
|
(1,057)
|
|
|
1,072.8%
|
|
|
|
|
|
|
|
|
|
|
|
Leasing - shop space
|
|
97,917
|
|
|
98,178
|
|
|
(0.3)%
|
|
Leasing - anchor
|
|
160,251
|
|
|
52,187
|
|
|
207.1%
|
|
Total leasing activity (square feet)
|
|
258,168
|
|
|
150,365
|
|
|
71.7%
|
|
|
|
|
|
|
|
|
|
|
|
Same property NOI
|
|
$
|
15,229
|
|
|
$
|
14,854
|
|
|
2.5%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of units outstanding ("WA units")
|
|
35,494
|
|
|
31,957
|
|
|
11.1%
|
|
Funds from operations (“FFO”) (1)
|
|
$
|
8,688
|
|
|
$
|
10,543
|
|
|
(17.6)%
|
|
FFO per diluted weighted average ("WA") units (1)
|
|
$
|
0.24
|
|
|
$
|
0.33
|
|
|
(27.3)%
|
|
FFO per WA units, excluding defeasance costs (2)
|
|
$
|
0.32
|
|
|
$
|
0.33
|
|
|
(3.0)%
|
|
FFO Payout ratio (1)
|
|
82.6%
|
|
|
57.8%
|
|
|
42.9%
|
|
FFO Payout ratio, excluding defeasance costs (2)
|
|
62.3%
|
|
|
57.8%
|
|
|
7.8%
|
|
Adjusted funds from operations ("AFFO") (1)
|
|
$
|
5,557
|
|
|
$
|
8,647
|
|
|
(35.7)%
|
|
AFFO per WA units, excluding defeasance costs (2)
|
|
$
|
10,085
|
|
|
$
|
8,647
|
|
|
16.6%
|
|
AFFO per WA units (1)
|
|
$
|
0.16
|
|
|
$
|
0.27
|
|
|
(40.7)%
|
|
AFFO per WA units, excluding defeasance costs (2)
|
|
$
|
0.28
|
|
|
$
|
0.27
|
|
|
3.7%
|
|
AFFO Payout ratio (1)
|
|
129.2%
|
|
|
70.4%
|
|
|
83.5%
|
|
AFFO Payout ratio, excluding defeasance costs (2)
|
|
71.2%
|
|
|
70.4%
|
|
|
1.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands of U.S. dollars except, per unit amounts)
|
2016
|
|
2015
|
|
Change %
|
|
Total assets
|
|
$
|
1,114,606
|
|
|
$
|
1,013,481
|
|
|
10.0%
|
|
Total debt
|
|
$
|
621,442
|
|
|
$
|
577,280
|
|
|
7.7%
|
|
Net asset value per unit
|
|
$
|
13.36
|
|
|
$
|
13.17
|
|
|
1.4%
|
|
Portfolio occupancy
|
|
93.5%
|
|
|
94.7
|
|
|
(1.3)%
|
|
Debt / GBV ratio
|
|
56.1%
|
|
|
57.5
|
|
|
(2.4)%
|
|
Interest coverage ratio
|
|
3.35x
|
|
|
3.19x
|
|
|
5.0%
|
(1) The REIT completed a defeasance of a mortgage during
the fourth quarter, at a cost of $4.5 million representing the excess of
the U.S. Treasury securities required to be funded over the outstanding
principal balance of the mortgage. A $2.8 million charge to income was
recorded which was determined as the $4.5 million cost, less $1.7
million, representing the unamortized mark-to-market premium associated
with the mortgage. FFO was impacted by the $2.8 million charge to income
and AFFO was impacted by the aggregate amount of $4.5 million.
(2) Excludes the impact of the defeasance of the mortgage in
the 2016 year.
Appointment of Robert Armstrong as Chief Financial Officer
The Board of Trustees also appointed Robert Armstrong as Chief Financial
Officer of the REIT, effective for March 2017. Brady Welch, the REIT’s
current Chief Financial Officer, will continue to serve the REIT in his
capacity as a Trustee. Robert brings a wealth of experience to the REIT,
as Chief Financial Officer of Slate Office REIT, and his over 15 years
of experience in the real estate industry.
Defeasance of $26.7 million Mortgage
On December 15, 2016, the REIT completed the defeasance of a $26.7
million mortgage due April 30, 2021 with an annual interest rate of 5.8%.
The defeasance reduces annual interest costs and provides the REIT with
the flexibility to potentially dispose of certain properties and
undertake redevelopment opportunities that would have been restricted by
the lender. Additionally, the REIT received $2.7 million required to be
held in escrow that was not otherwise available to the REIT until
maturity of the mortgage in 2021.
The defeasance had an impact to net loss, FFO and AFFO for the three
months and year ended December 31, 2016 as follows:
|
|
|
Three months ended
December 31, 2016
|
|
Year ended
December 31, 2016
|
|
(in thousands of U.S. dollars
except, per unit amounts)
|
|
Including impact of defeasance
|
|
Excluding impact of defeasance
|
|
Including impact of defeasance
|
|
Excluding impact of defeasance
|
|
Net loss
|
|
$
|
(12,397)
|
|
|
$
|
(9,565)
|
|
|
$
|
(29,071)
|
|
|
$
|
(26,239)
|
|
IFRIC 21 property tax adjustment
|
|
(3,055)
|
|
|
(3,055)
|
|
|
(414)
|
|
|
(414)
|
|
Transaction costs
|
|
—
|
|
|
—
|
|
|
1,030
|
|
|
1,030
|
|
Unit expense
|
|
15,360
|
|
|
15,360
|
|
|
55,170
|
|
|
55,170
|
|
Change in fair value of investment properties
|
|
8,276
|
|
|
8,276
|
|
|
4,295
|
|
|
4,295
|
|
Deferred income taxes
|
|
504
|
|
|
504
|
|
|
11,554
|
|
|
11,554
|
|
FFO
|
|
8,688
|
|
|
11,520
|
|
|
42,564
|
|
|
45,396
|
|
Straight-line rental revenue
|
|
(287)
|
|
|
(287)
|
|
|
(1,582)
|
|
|
(1,582)
|
|
Mark-to-market amounts on defeased debt (1)
|
|
(1,696)
|
|
|
—
|
|
|
(1,696)
|
|
|
—
|
|
Finance charge and mark-to-market adjustments
|
|
143
|
|
|
143
|
|
|
295
|
|
|
295
|
|
Income support payments
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
Tenant improvements and leasing commissions
|
|
(851)
|
|
|
(851)
|
|
|
(4,792)
|
|
|
(4,792)
|
|
Landlord work and maintenance capital
|
|
(440)
|
|
|
(440)
|
|
|
(2,241)
|
|
|
(2,241)
|
|
AFFO
|
|
$
|
5,557
|
|
|
$
|
10,085
|
|
|
$
|
32,554
|
|
|
$
|
37,082
|
|
|
|
|
|
|
|
|
|
|
|
FFO per WA units outstanding
|
|
$
|
0.24
|
|
|
$
|
0.32
|
|
|
$
|
1.24
|
|
|
$
|
1.32
|
|
FFO pay-out ratio
|
|
82.6%
|
|
|
62.3%
|
|
|
64.1%
|
|
|
60.1%
|
|
AFFO per WA units outstanding
|
|
$
|
0.16
|
|
|
$
|
0.28
|
|
|
$
|
0.95
|
|
|
$
|
1.08
|
|
AFFO pay-out ratio
|
|
129.2%
|
|
|
71.2%
|
|
|
83.8%
|
|
|
73.5%
|
Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on
Thursday, February 23, 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 http://www.gowebcasting.com/8303.
A replay will be accessible until March 9, 2017 via the REIT’s website
or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 51919738)
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 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 approximately $4.0 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 include
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 IFRIC 21 property tax adjustments, transaction costs, unit
expense, change in fair value of investment properties, change in fair
value of interest rate caps, goodwill impairment and deferred income
taxes.
-
AFFO is defined as FFO adjusted for certain items including
straight-line rental revenue, income support payments received by the
REIT but not recognized in income, non-cash adjustments related to
financial instruments, amortization of finance and mark-to-market
charges in interest, tenant improvements and leasing commissions and
landlord work.
-
The FFO and AFFO payout ratios are defined as distributions declared
divided by FFO and AFFO, respectively.
-
Adjusted EBITDA is defined earnings before interest, income taxes,
distributions, fair value gains (losses) from both financial
instruments and investment 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.
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 December 31,
|
|
(in thousands of U.S. dollars except, per unit amounts)
|
|
2016
|
|
2015
|
|
Rental revenue
|
|
25,044
|
|
|
23,104
|
|
Straight-line rent revenue
|
|
(287)
|
|
|
(412)
|
|
Property operating expenses
|
|
(3,771)
|
|
|
(3,409)
|
|
IFRIC 21 property tax adjustment
|
|
(3,055)
|
|
|
(3,035)
|
|
NOI
(1)
|
|
$
|
17,931
|
|
|
$
|
16,248
|
|
|
|
|
|
|
|
Net loss
(2)
|
|
$
|
(12,397)
|
|
|
$
|
(1,057)
|
|
IFRIC 21 property tax adjustment
|
|
(3,055)
|
|
|
(3,035)
|
|
Transaction costs
|
|
—
|
|
|
(30)
|
|
Unit expense
|
|
15,360
|
|
|
9,644
|
|
Change in fair value of investment properties
|
|
8,276
|
|
|
648
|
|
Deferred income taxes
|
|
504
|
|
|
4,373
|
|
FFO
(1) (2)
|
|
$
|
8,688
|
|
|
$
|
10,543
|
|
Straight-line rental revenue
|
|
(287)
|
|
|
(412)
|
|
Finance charge and mark-to-market adjustments
|
|
143
|
|
|
73
|
|
Mark-to-market amounts on defeased debt (2)
|
|
(1,696)
|
|
|
—
|
|
Income support payments
|
|
—
|
|
|
9
|
|
Tenant improvements and leasing commissions
|
|
(851)
|
|
|
(1,279)
|
|
Landlord work and maintenance capital
|
|
(440)
|
|
|
(287)
|
|
AFFO
(1) (2)
|
|
$
|
5,557
|
|
|
$
|
8,647
|
|
|
|
|
|
|
|
NOI
|
|
$
|
17,931
|
|
|
$
|
16,248
|
|
Other expenses
|
|
(1,724)
|
|
|
(1,593)
|
|
Cash interest expense
|
|
(4,840)
|
|
|
(4,600)
|
|
Debt defeasance costs (2)
|
|
(4,528)
|
|
|
—
|
|
Interest, net
|
|
9
|
|
|
149
|
|
Income support payments
|
|
—
|
|
|
9
|
|
Tenant improvements and leasing commissions
|
|
(851)
|
|
|
(1,280)
|
|
Landlord work and maintenance capital
|
|
(440)
|
|
|
(286)
|
|
AFFO
(1) (2)
|
|
$
|
5,557
|
|
|
$
|
8,647
|
|
|
|
|
|
|
|
WA units
|
|
35,494
|
|
|
31,957
|
|
FFO per WA unit (2)
|
|
$
|
0.24
|
|
|
$
|
0.33
|
|
FFO per WA units, excluding defeasance costs (2)
|
|
$
|
0.32
|
|
|
$
|
0.33
|
|
FFO Payout ratio (1) (2)
|
|
82.6%
|
|
|
57.8%
|
|
FFO Payout ratio, excluding defeasance costs (2)
|
|
62.3%
|
|
|
57.8%
|
|
AFFO per WA unit (2)
|
|
$
|
0.16
|
|
|
$
|
0.27
|
|
AFFO per WA units, excluding defeasance costs (2)
|
|
$
|
0.28
|
|
|
$
|
0.27
|
|
AFFO Payout ratio (1) (2)
|
|
129.2%
|
|
|
70.4%
|
|
AFFO Payout ratio, excluding defeasance costs (2)
|
|
71.2%
|
|
|
70.4%
|
(1) Refer to “Non-IFRS Measures” on page 3.
(2)The REIT completed a defeasance of a mortgage during the
fourth quarter, at a cost of $4.5 million representing the excess of the
U.S. Treasury securities required to be funded over the outstanding
principal balance of the mortgage. A $2.8 million charge to income was
recorded which was determined as the $4.5 million cost, less $1.7
million, representing the unamortized mark-to-market premium associated
with the mortgage. FFO was impacted by the $2.8 million charge to income
and AFFO was impacted by the aggregate amount of $4.5 million.
For Further Information
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E-mail: ir@slateam.com