TORONTO--(BUSINESS WIRE)--Slate Grocery REIT (TSX: SGR.U) (TSX: SGR.UN) (the "REIT"), an owner and operator of U.S. grocery-anchored real estate, today announced its financial results and highlights for the three and nine months ended September 30, 2024.
"We are pleased to see the impact of several consecutive quarters of strong leasing volumes at high spreads on our same-property net operating income this quarter, which increased by 6.2% year-over-year, including the impact of redevelopments," said Blair Welch, Chief Executive Officer of Slate Grocery REIT. "At the same time, our team worked with both existing and new institutional lenders to refinance the revolving credit facility and term loan, which we secured at interest rate spreads similar to the maturing debt, reflecting the quality of our real estate portfolio and the strength of our lender relationships. By staggering the maturity profile of our debt, we reduced the risk to our balance sheet, allowing us to focus on maintaining strong operations and performance over the coming quarters."
For the CEO's letter to unitholders for the quarter, please follow the link here.
Highlights
- Achieved 6.2% or $2.4 million same-property Net Operating Income ("NOI") growth year-over-year, adjusting for completed developments, driven by several consecutive quarters of strong leasing volumes at attractive spreads
- Completed 850,455 square feet of total leasing in the quarter; new deals were completed at 24.8% above comparable average in-place rent, and non-option renewals at 14.1% above expiring rents
- Portfolio occupancy remained stable at 94.6% as at quarter end
- The REIT's average in-place rent of $12.61 per square foot remains well below the market average of $23.581, providing significant runway for continued rent increases
- Refinanced $500.0 million of debt subsequent to quarter end, addressing a significant portion of upcoming debt maturities
- Entered into a new credit facility agreement for an aggregate principal amount of up to $500.0 million, comprising a $275.0 million revolving credit facility and a $225.0 million term loan facility, at interest rate spreads similar to the maturing debt facility
- The REIT is also in advanced stages with lenders to refinance another $138.0 million of upcoming debt maturities, which are expected to be completed during the fourth quarter
- Subsequent to these refinancings, the REIT's forecasted weighted average interest rate will be 4.8% when accounting for in-place interest rate swap contracts, providing significant positive leverage and stability for the REIT
- The REIT's units continue to trade at a discount to Net Asset Value ("NAV"), presenting a compelling investment opportunity for unitholders looking for an attractive total return
- As at September 30, 2024, the REIT's unit price represents a 24.5% discount to NAV
(1) CBRE Econometric Advisors, Q3 2024
Summary of Q3 2024 Results
Three months ended September 30, | ||||||
(thousands of U.S. dollars, except per unit amounts) | 2024 | 2023 | Change % | |||
Rental revenue | $ | 52,325 | $ | 50,629 | 3.3% | |
NOI 1 2 | $ | 41,897 | $ | 40,182 | 4.3% | |
Net income 2 | $ | 7,248 | $ | 12,370 | (41.4)% | |
Same-property NOI (3 month period, 111 properties) 1 2 | $ | 40,204 | $ | 38,367 | 4.8% | |
Same-property NOI (12 month period, 110 properties) 1 2 | $ | 154,649 | $ | 152,294 | 1.5% | |
New leasing (square feet) 2 | 123,841 | 103,142 | 20.1% | |||
New leasing spread 2 | 24.8% | 18.4% | 34.8% | |||
Total leasing (square feet) 2 | 850,455 | 691,421 | 23.0% | |||
Total leasing spread 2 | 8.5% | 10.9% | (22.0)% | |||
New leasing - anchor / junior anchor 2 | 72,582 | 32,400 | 124.0% | |||
Weighted average number of units outstanding ("WA units") | 60,347 | 60,473 | (0.2)% | |||
FFO 1 2 | $ | 17,552 | $ | 16,329 | 7.5% | |
FFO per WA units 1 2 | $ | 0.29 | $ | 0.27 | 7.4% | |
FFO payout ratio 1 2 | 73.9% | 79.6% | (7.2)% | |||
AFFO 1 2 | $ | 14,303 | $ | 13,061 | 9.5% | |
AFFO per WA units 1 2 | $ | 0.24 | $ | 0.22 | 9.1% | |
AFFO payout ratio 1 2 | 90.7% | 99.6% | (8.9)% | |||
Interest coverage ratio 1 | 2.79x | 2.91x | (3.8)% | |||
(thousands of U.S. dollars, except per unit amounts) | September 30, 2024 | December 31, 2023 | Change % | |||
Total assets, IFRS | $ | 2,223,198 | $ | 2,235,798 | (0.6)% | |
Total assets, proportionate interest 1 2 | $ | 2,436,010 | $ | 2,448,127 | (0.5)% | |
Debt, IFRS | $ | 1,157,092 | $ | 1,161,756 | (0.4)% | |
Debt, proportionate interest 1 2 | $ | 1,361,832 | $ | 1,369,053 | (0.5)% | |
Net asset value per unit | $ | 13.77 | $ | 13.97 | (1.4)% | |
Number of properties 2 | 116 | 117 | (0.9)% | |||
Portfolio occupancy 2 | 94.6% | 94.7% | (0.1)% | |||
Debt / GBV ratio | 52.0% | 52.0% | -% | |||
(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 am ET on November 6, 2024 to discuss the results and ongoing business initiatives of the REIT.
The conference call can be accessed dialing (289) 514-5100 or 1 (800) 717-1738. Additionally, the conference call will be available via simultaneous audio found at https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=38F10948-4142-4C56-A49C-7912FF4A5BCA&LangLocaleID=1033. A replay will be accessible until November 20, 2024 via the REIT's website or by dialing (289) 819-1325 or 1 (888) 660-6264 (access code 79701#) approximately two hours after the live event.
About Slate Grocery REIT (TSX: SGR.U / SGR.UN)
Slate Grocery REIT is an owner and operator of U.S. grocery-anchored real estate. The REIT owns and operates approximately $2.4 billion of critical real estate infrastructure across major U.S. metro markets that communities rely upon for their everyday needs. The REIT's resilient grocery-anchored portfolio and strong credit tenants provide unitholders with durable cash flows and the potential for capital appreciation over the longer term. Visit slategroceryreit.com to learn more about the REIT.
About Slate Asset Management
Slate Asset Management is a global alternative investment platform. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform focuses on four areas of real assets, including real estate equity, real estate credit, real estate securities, and infrastructure. We are supported by exceptional people and flexible capital, which enable us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more, and follow Slate Asset Management on LinkedIn, X (Twitter), and Instagram.
Supplemental Information
All interested parties can access Slate Grocery's Supplemental Information online at slategroceryreit.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 information herein constitutes "forward-looking information" as defined under Canadian securities laws which reflect management's expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words "plans", "expects", "does not expect", "forecasts", "scheduled", "estimates", "intends", "anticipates", "does not anticipate", "projects", "believes", or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "might", "occur", "be achieved", or "continue" and similar expressions identify forward-looking statements. Management believes that the expectations reflected in its forward-looking statements are based upon reasonable assumptions, however, management can give no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.
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, IFRIC 21, Levies ("IFRIC 21") property tax adjustments and adjustments for equity investments. 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 adjusted for certain items including transaction/disposition costs, change in fair value of properties, change in fair value of financial instruments, deferred income taxes, unit income (expense), adjustments for equity investments and IFRIC 21 property tax adjustments.
- AFFO is defined as FFO adjusted for straight-line rental revenue and revenue 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 general and administrative expenses.
- Interest coverage ratio is defined as adjusted EBITDA divided by cash interest paid.
- Net asset value is defined as the aggregate of the carrying value of the REIT's equity, deferred income taxes and exchangeable units of subsidiaries.
- Proportionate interest represents financial information adjusted to reflect the REIT's equity accounted joint ventures and financial real estate assets and its share of net income (losses) from equity accounted joint ventures and financial real estate assets on a proportionately consolidated basis at the REIT's ownership percentage of the related investment.
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.
SGR-FR
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) | 2024 | 2023 | ||||||
Rental revenue | $ | 52,325 | $ | 50,629 | ||||
Straight-line rent revenue | (110) | (391) | ||||||
Property operating expenses | (8,742) | (8,830) | ||||||
IFRIC 21 property tax adjustment | (6,778) | (6,532) | ||||||
Contribution from joint venture investments | 5,202 | 5,306 | ||||||
NOI 1 2 | $ | 41,897 | $ | 40,182 | ||||
Cash flow from operations | $ | 18,221 | $ | 22,978 | ||||
Changes in non-cash working capital items | 975 | (4,639) | ||||||
Disposition costs | 8 | - | ||||||
Finance charge and mark-to-market adjustments | (425) | (435) | ||||||
Interest, net and TIF note adjustments | 72 | 39 | ||||||
Adjustments for joint venture investments | 1,912 | 2,851 | ||||||
Non-controlling interest | (3,654) | (3,623) | ||||||
Taxes on dispositions | 38 | - | ||||||
Capital expenditures | (1,451) | (1,516) | ||||||
Leasing costs | (678) | (759) | ||||||
Tenant improvements | (715) | (998) | ||||||
AFFO 1 2 | $ | 14,303 | $ | 13,061 | ||||
Net income 2 | $ | 7,248 | $ | 12,370 | ||||
Change in fair value of financial instruments | 3,606 | 782 | ||||||
Disposition costs | 8 | - | ||||||
Change in fair value of properties | 11,395 | 9,621 | ||||||
Deferred income tax expense | 1,845 | 1,583 | ||||||
Unit expense (income) | 3,077 | (1,685) | ||||||
Adjustments for joint venture investments | 1,476 | 4,584 | ||||||
Non-controlling interest | (4,363) | (4,394) | ||||||
Taxes on dispositions | 38 | - | ||||||
IFRIC 21 property tax adjustment | (6,778) | (6,532) | ||||||
FFO 1 2 | $ | 17,552 | $ | 16,329 | ||||
Straight-line rental revenue | (110) | (391) | ||||||
Capital expenditures | (1,451) | (1,516) | ||||||
Leasing costs | (678) | (759) | ||||||
Tenant improvements | (715) | (998) | ||||||
Adjustments for joint venture investments | (1,004) | (375) | ||||||
Non-controlling interest | 709 | 771 | ||||||
AFFO 1 2 | $ | 14,303 | $ | 13,061 | ||||
(1) Refer to "Non-IFRS Measures" section above.
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Three months ended September 30, | ||||||||
(in thousands of U.S. dollars, except per unit amounts) | 2024 | 2023 | ||||||
NOI 1 2 | $ | 41,897 | $ | 40,182 | ||||
General and administrative expenses | (3,988) | (3,935) | ||||||
Cash interest, net | (13,501) | (12,419) | ||||||
Finance charge and mark-to-market adjustments | (425) | (435) | ||||||
Current income tax recovery (expense) | 108 | (981) | ||||||
Adjustments for joint venture investments | (3,290) | (2,455) | ||||||
Non-controlling interest | (3,654) | (3,623) | ||||||
Capital expenditures | (1,451) | (1,516) | ||||||
Leasing costs | (678) | (759) | ||||||
Tenant improvements | (715) | (998) | ||||||
AFFO 1 2 | $ | 14,303 | $ | 13,061 | ||||
(1) Refer to "Non-IFRS Measures" section above.
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Three months ended September 30, | ||||
(in thousands of U.S. dollars, except per unit amounts) | 2024 | 2023 | ||
Net income 1 | $ | 7,248 | $ | 12,370 |
Interest and finance costs | 13,926 | 12,854 | ||
Change in fair value of financial instruments | 3,606 | 782 | ||
Disposition costs | 8 | - | ||
Change in fair value of properties | 11,395 | 9,621 | ||
Deferred income tax expense | 1,845 | 1,583 | ||
Current income tax (recovery) expense | (70) | 981 | ||
Unit expense (income) | 3,077 | (1,685) | ||
Adjustments for joint venture investments | 3,762 | 6,664 | ||
Straight-line rent revenue | (110) | (391) | ||
IFRIC 21 property tax adjustment | (6,778) | (6,532) | ||
Adjusted EBITDA 1 2 | $ | 37,909 | $ | 36,247 |
NOI 1 2 | 41,897 | 40,182 | ||
General and administrative expenses 1 2 | (3,988) | (3,935) | ||
Adjusted EBITDA 1 2 | $ | 37,909 | $ | 36,247 |
Cash interest paid | (13,573) | (12,458) | ||
Interest coverage ratio 1 2 | 2.79x | 2.91x | ||
(1) Includes the REIT's share of joint venture investments.
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September 30, 2024 | December 31, 2023 | |||||||||||
(in thousands of U.S. dollars, except per unit amounts) | Statement of
| Joint Venture
| Proportionate
| Statement of
| Joint Venture
| Proportionate
| ||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
Properties | $ | 2,052,522 | $ | 309,900 | $ | 2,362,422 | $ | 2,062,599 | $ | 307,300 | $ | 2,369,899 |
Joint venture investments | 111,191 | (111,191) | - | 107,101 | (107,101) | - | ||||||
Interest rate swaps | - | - | - | 7,652 | 580 | 8,232 | ||||||
Other assets | 361 | - | 361 | 718 | 4,268 | 4,986 | ||||||
| $ | 2,164,074 | $ | 198,709 | $ | 2,362,783 | $ | 2,178,070 | $ | 205,047 | $ | 2,383,117 |
Current assets | ||||||||||||
Cash | 19,648 | 4,916 | 24,564 | 23,587 | 4,420 | 28,007 | ||||||
Accounts receivable | 22,396 | 1,809 | 24,205 | 22,172 | 1,813 | 23,985 | ||||||
Other assets | 6,342 | 5,554 | 11,896 | 6,985 | - | 6,985 | ||||||
Prepaids | 7,632 | 1,534 | 9,166 | 4,984 | 1,049 | 6,033 | ||||||
Interest rate swaps | 3,106 | 290 | 3,396 | - | - | - | ||||||
$ | 59,124 | $ | 14,103 | $ | 73,227 | $ | 57,728 | $ | 7,282 | $ | 65,010 | |
Total assets | $ | 2,223,198 | $ | 212,812 | $ | 2,436,010 | $ | 2,235,798 | $ | 212,329 | $ | 2,448,127 |
LIABILITIES | ||||||||||||
Non-current liabilities | ||||||||||||
Debt | $ | 554,938 | $ | 162,089 | $ | 717,027 | $ | 859,637 | $ | 205,831 | $ | 1,065,468 |
Interest rate swaps | 2,349 | - | 2,349 | - | - | - | ||||||
Deferred income taxes | 150,039 | 2 | 150,041 | 146,651 | 2 | 146,653 | ||||||
Other liabilities | 3,924 | 169 | 4,093 | 4,346 | 482 | 4,828 | ||||||
| $ | 711,250 | $ | 162,260 | $ | 873,510 | $ | 1,010,634 | $ | 206,315 | $ | 1,216,949 |
Current liabilities | ||||||||||||
Debt | 602,154 | 42,651 | 644,805 | 302,119 | 1,466 | 303,585 | ||||||
Accounts payable and accrued liabilities | 46,096 | 7,901 | 53,997 | 43,217 | 4,548 | 47,765 | ||||||
Exchangeable units of subsidiaries | 9,433 | - | 9,433 | 8,269 | - | 8,269 | ||||||
Distributions payable | 4,323 | - | 4,323 | 4,323 | - | 4,323 | ||||||
| $ | 662,006 | $ | 50,552 | $ | 712,558 | $ | 357,928 | $ | 6,014 | $ | 363,942 |
Total liabilities | $ | 1,373,256 | $ | 212,812 | $ | 1,586,068 | $ | 1,368,562 | $ | 212,329 | $ | 1,580,891 |
EQUITY | ||||||||||||
Unitholders' equity | $ | 671,820 | $ | - | $ | 671,820 | $ | 687,443 | $ | - | $ | 687,443 |
Non-controlling interest | 178,122 | - | 178,122 | 179,793 | - | 179,793 | ||||||
Total equity | $ | 849,942 | $ | - | $ | 849,942 | $ | 867,236 | $ | - | $ | 867,236 |
Total liabilities and equity | $ | 2,223,198 | $ | 212,812 | $ | 2,436,010 | $ | 2,235,798 | $ | 212,329 | $ | 2,448,127 |
Contacts
For Further Information
Investor Relations
Tel: +1 416 644 4264
E-mail: ir@slateam.com
