SOURCE: Slate Retail REIT

Slate Retail REIT

November 02, 2016 22:30 ET

Slate Retail REIT Reports Third Quarter 2016 Results

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

TORONTO, ON--(Marketwired - November 02, 2016) - 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.

Contact Information

  • For Further Information
    Investor Relations
    Slate Asset Management L.P.
    +1 (416) 644-4264
    ir@slateam.com