(All amounts are expressed in U.S. dollars unless otherwise stated)
TORONTO--(BUSINESS WIRE)--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, 2018.
“Our strong results in the fourth quarter continue to highlight the
durability and attractiveness of the REIT's grocery-anchored portfolio,
with a $0.9 million or 4.2% increase in same-property net operating
income year-over-year and an occupancy rate of 94.2%. In addition, we
executed on over 640,000 square feet of leasing, including several major
anchor renewals, driven by an industry leading 95.8% tenant retention
ratio. By the end of the fourth quarter, 43% of all 2019 renewals have
already been completed.
Moreover, the fourth quarter results contributed to a strong close to
the 2018 year highlighted by solid organic growth with total portfolio
net operating income up $3.8 million on an annualized basis or 3.8%
year-over-year, driven by gains in same-property net operating income
and from successfully completing several redevelopment projects with
double-digit returns on cost.
Heading into 2019, we are excited about continued growth in net
operating income driven by active projects in the portfolio today. In
addition, we will capitalize on the opportunity to recycle capital
through property sales to fund accretive unit repurchases completed in
the fourth quarter of 2018 and through the substantial issuer bid.
Property sales will also contribute to reducing our financial leverage
toward our longer-term target level of 50% debt to total assets.
Anticipated income growth and completion of existing capital projects
will contribute to lowering the AFFO payout ratio to our target of 89%
in 2019 and set the stage for the sixth consecutive distribution
increase in six years.”
For the CEO's letter to unitholders for the quarter, please follow the
link
here
.
Highlights
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Completed 642,773 square feet of leasing in the quarter, comprised of
588,211 square feet of lease renewals at a 4.4% weighted average
spread above expiring rent and 54,562 square feet of new leasing,
which is a 26.9% premium above the weighted average in-place rent for
comparable space.
-
Occupancy increased by 0.5% during the year to 94.2%, with a
significant portion of the REIT’s leasing activity to still impact
future periods.
-
The weighted average tenant retention rate for the fourth quarter is
95.8%, an increase of 5.4% compared to the fourth quarter of 2017.
-
The REIT approved an increase of its monthly distribution by 1.8% to
U.S.$0.07125 per unit, or U.S.$0.855 annually, beginning with its
December 2018 distribution. This increase is the fifth consecutive
annual distribution increase since the REIT listed its class U units
on the Toronto Stock Exchange in 2014.
-
The REIT continued to actively repurchase units, with 1.4 million
class U units purchased and subsequently canceled under the REIT’s
normal course issuer bid (“NCIB”) for a total cost of $12.9 million at
an average price of $9.47 during the fourth quarter. For the year
ended December 31, 2018, the REIT repurchased 2.2 million units which
will result in approximately $1.9 million less distributions on an
annualized basis.
-
On January 16, 2019, the REIT commenced a substantial issuer bid (the
"offer"), pursuant to which the REIT offered to purchase up to 4.2
million class U units at a purchase price of C$12.54 (USD$9.51). On
February 20, 2019, the offer announced on January 9, 2019 expired and
the REIT has taken up and paid for 0.3 million class U units for an
aggregate cost of $3.2 million or C$4.2 million, excluding fees and
expenses related to the offer. The class U units purchased for
cancellation under the offer approximate 0.8% of the REIT's class U
units outstanding at December 31, 2018 and 0.8% of class U units
outstanding at February 20, 2019, immediately prior to the expiry of
the offer. Upon completion of the offer, 44.1 million class U units
remain outstanding.
-
Rental revenue was $36.3 million, which is an increase of $1.4 million
over the same period in the prior year. The increase is primarily due
to rental rate growth from re-leasing at rates above in-place rents
and new leasing in addition to net acquisitions.
-
Net operating income ("NOI") increased by $0.8 million to $25.4
million compared to the same period in the prior year, primarily due
to the aforementioned increases in rental revenue, partially offset by
the lost contribution from the sale of two properties and 13
outparcels during the 2018 period.
-
Same-property NOI increased by 4.2% (comprised of 77 properties) and
increased by 1.7% (comprised of 62 properties) for the three and
twelve month periods ended December 31, 2018, respectively. Including
the impact of the REIT’s redevelopment projects completed from the
fourth quarter of 2017, same-property NOI increased by 4.2% and 2.4%
for the three and twelve month periods ended December 31, 2018,
respectively. Of the last 10 quarters, the REIT has now had eight
quarters of positive same-property NOI growth.
-
Funds from operations ("FFO") was $13.5 million or $0.30 per unit, a
decrease of $0.03 per unit from the same period in the prior year,
primarily due to the $2.0 million increase in cash interest paid as a
result of fixing the REIT’s debt through interest rate swaps that
fixed the rate on 99.2% of debt, partially offset by aforementioned
increases in rental revenue over the prior quarter. On a pro forma
basis after taking into account the REIT's repurchases of units in the
fourth quarter of 2018 and in early 2019, the REIT's FFO per unit
would have been $0.31 for the quarter, and $1.31 for 2018. We expect
the full impact of these repurchases to be realized beginning in the
second quarter of 2019.
-
Adjusted funds from operations ("AFFO") was $9.2 million or $0.20 per
unit, representing a $0.04 per unit decrease compared to the same
quarter in 2017, mainly due to a $0.6 million increase in leasing and
tenant improvement spend to primarily support new leasing over the
prior quarter.
-
The AFFO payout ratio for the three and twelve month periods ended
December 31, 2018 was 102.6% and 99.5%, respectively. Following the
completion of the offer, on a pro forma basis as at December 31, 2018,
the AFFO payout ratio would be 97.3%.
-
Net loss for the quarter was $9.0 million, a decrease of $40.4 million
from the same quarter in the prior year. The decrease is due to the
decrease in deferred income tax recovery of $27.4 million and the
decrease in the change in fair value of properties of $6.3 million,
partially offset by the aforementioned increases in revenue of $1.4
million.
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Three months ended December 31,
|
|
(in thousands of U.S. dollars, except per unit amounts)
|
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|
|
2018
|
|
2017
|
|
Change %
|
|
Rental revenue
|
|
|
|
$
|
36,301
|
|
$
|
34,859
|
|
4.1
|
%
|
|
NOI
|
|
|
|
$
|
25,353
|
|
$
|
24,592
|
|
3.1
|
%
|
|
Net (loss) income
|
|
|
|
$
|
(9,017)
|
|
$
|
31,421
|
|
(128.7
|
)%
|
|
|
|
|
|
|
|
|
|
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Leasing - shop space
|
|
|
|
138,505
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|
177,902
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(22.1
|
)%
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Leasing - anchor / junior anchor
|
|
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504,268
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224,148
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125.0
|
%
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|
Total leasing activity (square feet)
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642,773
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402,050
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59.9
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%
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|
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|
|
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|
|
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|
Weighted average number of units outstanding ("WA units")
|
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44,971
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46,443
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|
(3.2
|
)%
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FFO (1)
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$
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13,536
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$
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15,406
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(12.1
|
)%
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FFO per WA units (1)
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|
|
|
$
|
0.30
|
|
$
|
0.33
|
|
(9.1
|
)%
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|
FFO payout ratio (1)
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|
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69.7%
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62.5%
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7.2
|
%
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|
AFFO (1)
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|
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|
$
|
9,201
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$
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11,360
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(19.0
|
)%
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AFFO per WA units (1)
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$
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0.20
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$
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0.24
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(16.7
|
)%
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AFFO payout ratio (1)
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102.6%
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84.7%
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17.9
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%
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(in thousands of U.S. dollars)
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2018
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2017
|
|
Change %
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|
Same-property NOI (3 month period, 77 properties)
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|
|
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$
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22,691
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|
$
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21,786
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4.2
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%
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Same-property NOI (12 month period, 62 properties)
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|
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$
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66,292
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$
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65,213
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1.7
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%
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As at December 31,
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(in thousands of U.S. dollars, except per unit amounts)
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|
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2018
|
|
2017
|
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Change %
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Total assets
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$
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1,416,334
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$
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1,499,519
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(5.5
|
)%
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Total debt
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|
|
|
$
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871,562
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|
$
|
883,046
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(1.3
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)%
|
|
Net asset value per unit
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|
|
|
$
|
11.61
|
|
$
|
12.78
|
|
(9.2
|
)%
|
|
Portfolio occupancy
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|
|
|
94.2%
|
|
93.7%
|
|
0.5
|
%
|
|
Debt / GBV ratio
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|
|
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61.5%
|
|
58.9%
|
|
2.6
|
%
|
|
Interest coverage ratio (1)
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|
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2.41x
|
|
3.05x
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(21.0
|
)%
|
|
(1) Refer to “Non-IFRS Measures” section below.
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Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on
Wednesday, February 27, 2019 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/2019/0227
.
A replay will be accessible until March 13, 2019 via the REIT’s website
or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 3874077)
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 approximately
U.S. $1.4 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 $6 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, Levies ("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 (income) 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 NOI less other expenses.
-
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.
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|
|
Three months ended December 31,
|
|
(in thousands of U.S. dollars, except per unit amounts)
|
|
|
|
2018
|
|
2017
|
|
Rental revenue
|
|
|
|
$
|
36,301
|
|
$
|
34,859
|
|
Straight-line rent revenue
|
|
|
|
(331)
|
|
(523)
|
|
Property operating expenses
|
|
|
|
(5,747)
|
|
(5,357)
|
|
IFRIC 21 property tax adjustment
|
|
|
|
(4,870)
|
|
(4,387)
|
|
NOI
(1)
|
|
|
|
$
|
25,353
|
|
$
|
24,592
|
|
|
|
|
|
|
|
|
|
Cash flow from operations
|
|
|
|
$
|
9,065
|
|
$
|
13,559
|
|
Changes in non-cash working capital items
|
|
|
|
3,708
|
|
1,569
|
|
Disposition costs
|
|
|
|
575
|
|
104
|
|
Finance charge and mark-to-market adjustments
|
|
|
|
(401)
|
|
(564)
|
|
Interest, net and TIF note adjustments
|
|
|
|
258
|
|
215
|
|
Capital
|
|
|
|
(1,397)
|
|
(1,485)
|
|
Leasing costs
|
|
|
|
(621)
|
|
(390)
|
|
Tenant improvements
|
|
|
|
(1,986)
|
|
(1,648)
|
|
AFFO
(1)
|
|
|
|
$
|
9,201
|
|
$
|
11,360
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
$
|
(9,017)
|
|
$
|
31,421
|
|
Disposition costs
|
|
|
|
575
|
|
104
|
|
Change in fair value of properties
|
|
|
|
33,419
|
|
27,150
|
|
Deferred income tax recovery
|
|
|
|
(4,223)
|
|
(31,582)
|
|
Unit income
|
|
|
|
(2,348)
|
|
(7,300)
|
|
IFRIC 21 property tax adjustment
|
|
|
|
(4,870)
|
|
(4,387)
|
|
FFO
(1)
|
|
|
|
$
|
13,536
|
|
$
|
15,406
|
|
Straight-line rental revenue
|
|
|
|
(331)
|
|
(523)
|
|
Capital
|
|
|
|
(1,397)
|
|
(1,485)
|
|
Leasing costs
|
|
|
|
(621)
|
|
(390)
|
|
Tenant improvements
|
|
|
|
(1,986)
|
|
(1,648)
|
|
AFFO
(1)
|
|
|
|
$
|
9,201
|
|
$
|
11,360
|
|
|
|
|
|
|
|
|
|
NOI (1)
|
|
|
|
$
|
25,353
|
|
$
|
24,592
|
|
Other expenses
|
|
|
|
(2,540)
|
|
(1,962)
|
|
Cash interest, net
|
|
|
|
(9,207)
|
|
(7,183)
|
|
Finance charge and mark-to-market adjustments
|
|
|
|
(401)
|
|
(564)
|
|
Capital
|
|
|
|
(1,397)
|
|
(1,485)
|
|
Leasing costs
|
|
|
|
(621)
|
|
(390)
|
|
Tenant improvements
|
|
|
|
(1,986)
|
|
(1,648)
|
|
AFFO
(1)
|
|
|
|
$
|
9,201
|
|
$
|
11,360
|
|
(1) Refer to “Non-IFRS Measures” section above.
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
|
|
(in thousands of U.S. dollars, except per unit amounts)
|
|
|
|
2018
|
|
2017
|
|
NOI (1)
|
|
|
|
$
|
25,353
|
|
$
|
24,592
|
|
Other expenses
|
|
|
|
(2,540)
|
|
(1,962)
|
|
Adjusted EBITDA (1)
|
|
|
|
$
|
22,813
|
|
$
|
22,630
|
|
Cash interest paid
|
|
|
|
(9,465)
|
|
(7,430)
|
|
Interest coverage ratio
(1)
|
|
|
|
2.41x
|
|
3.05x
|
|
|
|
|
|
|
|
|
|
WA units
|
|
|
|
44,971
|
|
46,443
|
|
FFO per WA unit (1)
|
|
|
|
$
|
0.30
|
|
$
|
0.33
|
|
FFO payout ratio (1)
|
|
|
|
69.7%
|
|
62.5%
|
|
AFFO per WA unit (1)
|
|
|
|
$
|
0.20
|
|
$
|
0.24
|
|
AFFO payout ratio (1)
|
|
|
|
102.6%
|
|
84.7%
|
|
(1) Refer to “Non-IFRS Measures” section above.
|
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|
|
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|
Investor Relations
Slate Retail REIT
Tel: +1 416 644 4264
E-mail: ir@slateam.com