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, 2019.
"The team at Slate Retail REIT worked tirelessly throughout 2019 to execute our business plan and reposition the portfolio. We sold $110.7 million of real estate at a 7.0% cap rate, disposing primarily of non-core assets and proving out the value of our portfolio. Collectively, the team grew our redevelopment pipeline to $36.4 million, with a diverse mix of quality tenant-driven, value-add projects that will yield upwards of 10.0% on cost," said David Dunn, Chief Operating Officer.
Mr. Dunn continued, "As we start a new decade, the team is excited to build upon our recent successes and grow the business. Our balance sheet has never been stronger, having refinanced our credit facility both improving our cost of debt ($1.7 million of annual interest savings) and extending the term (4.8 years on a weighted average basis). By creating approximately $200 million of liquidity, we are poised to buy quality assets in growth markets that will drive unitholder value. We head into 2020 with strong momentum, fundamentals and relationships with our business partners, and are excited about what the future holds."
For the COO's letter to unitholders for the quarter, please follow the link here.
Highlights
- Subsequent to year end, the REIT refinanced its existing revolving credit facility and term loan for four- and five-year terms, respectively, for an aggregate of $525.0 million and reduced pricing for its $250.0 million term loan. The REIT has also entered into a commitment for an $83.3 million 10 year mortgage bearing interest of 3.48%. On a pro-forma basis, the weighted-average term of the REIT's debt is 4.8 years at a weighted average cost of 4.0% with interest savings of $1.7 million or a $0.04 impact per weighted average class U equivalent unit basis.
- Completed 95,563 square feet of lease renewals at a 4.9% weighted average increase to expiring rent and 53,653 square feet of new leasing at a 4.8% premium above the weighted average in-place rent for comparable space.
- The weighted average tenant retention rate for the fourth quarter was 93.1%. Since the beginning of 2016, the weighted average retention rate has been 94.8%.
- The REIT approved an increase of its monthly distribution by 1.1% to U.S. $0.072 per unit, or U.S. $0.864 annually, beginning with its December 2019 distribution. This increase is the sixth consecutive annual distribution increase since the REIT listed its class U units on the Toronto Stock Exchange in 2014.
- The REIT continues to execute on its capital recycling program. On a year-to-date basis, the REIT has completed 17 dispositions for $110.7 million at a weighted average cap rate of 7.0% on trailing twelve-month net operating income ("NOI"). The REIT will seek to reinvest net proceeds into new accretive investment opportunities that will strengthen the quality of the REIT’s portfolio and drive growth in NOI.
- The REIT continued to actively repurchase units with 1.9 million class U units purchased and subsequently canceled under the REIT's normal course issuer bid ("NCIB") for a total cost, including transaction costs, of $18.8 million at an average price of $9.90 during the fourth quarter. For the year ended December 31, 2019, 2.2 million class U units were repurchased under the REIT's NCIB and the substantial issuer bid ("SIB") completed February 20, 2019, which will result in approximately $1.9 million less distributions on an annualized basis.
- Occupancy decreased by 1.2% during the year to 93.0% due to the REIT's acquired interest in the property Windmill Plaza, a 50% joint venture with The Kroger Company at an 85.9% occupancy rate and lease expiries, partially offset by the disposition of 10 properties and seven outparcels at various properties which had a weighted average occupancy rate of 86.4%. Lease expirations of 130,439 square feet during the quarter were primarily due to terminating a grocery anchor tenant at Mapleridge Center and a grocery anchor tenant at Westminster Plaza vacating at expiry. These anchor boxes have been added to the REIT's redevelopment pipeline and there is an active leasing strategy in-place. Subsequent to year-end, the Westminster Plaza anchor space was re-leased, resulting in a $0.4 million increase in base rent on the space.
- Rental revenue for the three month period ended December 31, 2019 was $34.3 million, which represents a $2.0 million decrease over the same period in the prior year. The decrease is primarily due to the disposition of 10 properties and seven outparcels, partially offset by rental rate growth from re-leasing at rates above in-place rents, new leasing and the acquisition of an interest in one property.
- Net income for the three month period ended December 31, 2019 was $14.0 million, which is a $23.0 million increase from the same quarter of the prior year. The increase is attributed to the change in fair value of properties, partially offset by increased disposition costs as a result of the aforementioned dispositions.
- NOI for the three month period ended December 31, 2019 decreased by $0.1 million from the third quarter of 2019 to $24.3 million. This is primarily due to the aforementioned dispositions and temporary vacancies, partially offset by higher termination fees and uplifts in rental rates from new leasing typically above in-place rent.
- Of the last 12 quarters, the REIT has had eight quarters of positive same-property NOI growth. Same-property NOI for the trailing twelve month period ended December 31, 2019 (comprised of 64 properties) increased by 0.7% over the same period in the prior year. Same-property NOI for the three month period ended December 31, 2019 (comprised of 68 properties) decreased by 0.9% over the comparative period, primarily due to the timing of termination income. Including the impact of the completion of the REIT's redevelopment projects completed from the fourth quarter of 2018, same-property NOI increased by 1.2% for the trailing twelve month period ended December 31, 2019.
- Funds from operations ("FFO") was $12.7 million or $0.29 per unit for the quarter, which represented a $0.01 per unit decrease from the same period in the prior year, primarily due to lost contribution in rental revenue from the aforementioned dispositions over the comparative period, partially offset by a decrease in cash interest paid.
- Adjusted funds from operations ("AFFO") was $10.6 million or $0.25 per unit for the quarter, which is a $0.05 per unit increase compared to the same quarter in 2018, mainly due to a $2.1 million decrease in capital, leasing and tenant improvement spend.
Three months ended December 31, |
||||||||||
| (in thousands of U.S. dollars, except per unit amounts) |
|
2019 |
2018 |
Change % |
||||||
| Rental revenue | $ | 34,338 |
$ | 36,301 |
|
(5.4 |
)% | |||
| NOI 1 |
|
$ | 24,266 |
|
$ | 25,353 |
|
(4.3 |
)% | |
| Net income (loss) |
|
$ | 14,016 |
|
$ | (9,017) |
255.4 |
% | ||
|
|
|
||||||||
| Leasing – shop space |
|
|
126,744 |
|
|
138,505 |
|
(8.5 |
)% | |
| Leasing – anchor / junior anchor |
|
|
22,472 |
|
|
504,268 |
|
(95.5 |
)% | |
| Total leasing activity (square feet) 2 |
|
|
149,216 |
|
|
642,773 |
|
(76.8 |
)% | |
|
|
|
||||||||
| Weighted average number of units outstanding ("WA units") |
|
|
43,145 |
|
|
44,971 |
|
(4.1 |
)% | |
| FFO 1 |
|
$ |
12,650 |
|
$ | 13,536 |
|
(6.5 |
)% | |
| FFO per WA units 1 |
|
$ |
0.29 |
|
$ | 0.30 |
|
(3.3 |
)% | |
| FFO payout ratio 1 |
|
|
72.8 |
% |
|
69.7 |
% |
3.1 |
% | |
| AFFO 1 |
|
$ |
10,616 |
|
$ | 9,201 |
|
15.4 |
% | |
| AFFO per WA units 1 |
|
$ |
0.25 |
|
$ | 0.20 |
|
25.0 |
% | |
| AFFO payout ratio 1 |
|
|
86.8 |
% |
|
102.6 |
% |
(15.8 |
)% | |
|
|
|
||||||||
| (in thousands of U.S. dollars) |
|
2019 |
|
2018 |
|
Change % | ||||
| Same-property NOI (3 month period, 68 properties) |
|
$ |
21,511 |
|
$ | 21,698 |
|
(0.9 |
)% | |
| Same-property NOI (12 month period, 64 properties) |
|
$ |
79,364 |
|
$ | 78,851 |
|
0.7 |
% | |
|
|
|
||||||||
As at December 31, |
||||||||||
| (in thousands of U.S. dollars, except per unit amounts) |
|
2019 |
|
2018 |
|
Change % |
||||
| Total assets |
|
$ |
1,315,080 |
|
$ | 1,416,334 |
|
(7.1 |
)% | |
| Total debt |
|
$ |
789,395 |
|
$ | 871,562 |
|
(9.4 |
)% | |
| Net asset value per unit |
|
$ |
11.29 |
|
$ | 11.61 |
|
(2.8 |
)% | |
| Number of properties 2 |
|
|
76 |
|
|
85 |
|
(10.6 |
)% | |
| Portfolio occupancy 2 |
|
|
93.0 |
% |
|
94.2 |
% |
(1.2 |
)% | |
| Debt / GBV ratio |
|
|
60.0 |
% |
|
61.5 |
% |
(1.5 |
)% | |
| Interest coverage ratio 1 |
|
2.51x |
2.41x |
4.1 |
% | |||||
| 1 Refer to “Non-IFRS Measures” section below. | ||||||||||
| 2 Includes the REIT's share of its equity accounted property investment. | ||||||||||
Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on Wednesday, February 26, 2020 to discuss the results and ongoing business initiatives of the REIT.
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/2020/0226. A replay will be accessible until March 11, 2020 via the REIT’s website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 6646947) 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. $1.3 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 diversified portfolio and quality tenant covenants provide 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
Slate Asset Management is a leading real estate focused alternative 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 demonstrated 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, IFRIC 21, Levies ("IFRIC 21") property tax adjustments and adjustments for equity investment. 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, change in fair value of financial instruments, deferred income taxes, unit expense (income), adjustments for equity investment 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.
- 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.
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) |
|
2019 |
2018 |
|||
| Rental revenue |
|
$ |
34,338 |
|
$36,301 |
|
| Straight-line rent revenue |
|
(118 |
) |
(331) |
||
| Property operating expenses |
|
(5,029 |
) |
(5,747) |
||
| IFRIC 21 property tax adjustment |
|
(4,934 |
) |
(4,870) |
||
| Adjustments for equity investment |
|
9 |
|
— |
||
| NOI 1 |
|
$ |
24,266 |
|
$25,353 |
|
|
|
|
||||
| Cash flow from operations |
|
$ |
9,533 |
|
$9,065 |
|
| Changes in non-cash working capital items |
|
2,104 |
|
3,708 |
||
| Disposition costs |
|
1,331 |
|
575 |
||
| Finance charge and mark-to-market adjustments |
|
(410 |
) |
(401) |
||
| Interest, net and TIF note adjustments |
|
42 |
|
258 |
||
| Adjustments for equity investment |
|
(68 |
) |
— |
||
| Capital |
|
(568 |
) |
(1,397) |
||
| Leasing costs |
|
(489 |
) |
(621) |
||
| Tenant improvements |
|
(859 |
) |
(1,986) |
||
| AFFO 1 |
|
$ |
10,616 |
|
$9,201 |
|
|
|
|
||||
| Net income (loss) |
|
$ |
14,016 |
|
$(9,017) |
|
| Change in fair value of financial instruments |
|
(284 |
) |
— |
||
| Disposition costs |
|
1,331 |
|
575 |
||
| Change in fair value of properties |
|
(3,015 |
) |
33,419 |
||
| Deferred income tax expense (recovery) |
|
5,045 |
|
(4,223) |
||
| Adjustments for equity investment |
|
(185 |
) |
— |
||
| Unit expense (income) |
|
676 |
|
(2,348) |
||
| IFRIC 21 property tax adjustment |
|
(4,934 |
) |
(4,870) |
||
| FFO 1 |
|
$ |
12,650 |
|
$13,536 |
|
| Straight-line rental revenue |
|
(118 |
) |
(331) |
||
| Capital |
|
(568 |
) |
(1,397) |
||
| Leasing costs |
|
(489 |
) |
(621) |
||
| Tenant improvements |
|
(859 |
) |
(1,986) |
||
| AFFO 1 |
|
$ |
10,616 |
|
$9,201 |
|
|
|
|
||||
| NOI 1 |
|
$ |
24,266 |
|
$25,353 |
|
| Other expenses |
|
(2,479 |
) |
(2,540) |
||
| Cash interest, net |
|
(8,654 |
) |
(9,207) |
||
| Finance charge and mark-to-market adjustments |
|
(410 |
) |
(401) |
||
| Adjustments for equity investment |
|
(77 |
) |
— |
||
| Current income tax expense |
|
(114 |
) |
— |
||
| Capital |
|
(568 |
) |
(1,397) |
||
| Leasing costs |
|
(489 |
) |
(621) |
||
| Tenant improvements |
|
(859 |
) |
(1,986) |
||
| AFFO 1 |
|
$ |
10,616 |
|
$9,201 |
|
| 1 Refer to “Non-IFRS Measures” section above. |
|
|
|
|||
|
|
|
||||
|
|
|
||||
| Three months ended December 31, | ||||||
| (in thousands of U.S. dollars, except per unit amounts) |
|
2019 |
2018 |
|||
| Net income (loss) |
|
$ |
14,016 |
|
$(9,017) |
|
| Interest expense and other financing costs, net |
|
9,064 |
|
9,608 |
||
| Change in fair value of financial instruments |
|
(284 |
) |
— |
||
| Disposition costs |
|
1,331 |
|
575 |
||
| Change in fair value of properties |
|
(3,015 |
) |
33,419 |
||
| Deferred income tax expense (recovery) |
|
5,045 |
|
(4,223) |
||
| Current income tax expense |
|
114 |
|
— |
||
| Unit expense (income) |
|
676 |
|
(2,348) |
||
| Adjustments for equity investment |
|
(108 |
) |
— |
||
| Straight-line rent revenue |
|
(118 |
) |
(331) |
||
| IFRIC 21 property tax adjustment |
|
(4,934 |
) |
(4,870) |
||
| Adjusted EBITDA 1 |
|
$ |
21,787 |
|
$22,813 |
|
|
|
|
||||
| NOI 1 |
|
$ |
24,266 |
|
$25,353 |
|
| Other expenses |
|
(2,479 |
) |
(2,540) |
||
| Adjusted EBITDA 1 |
|
$ |
21,787 |
|
$22,813 |
|
| Cash interest paid |
|
(8,696 |
) |
(9,465) |
||
| Interest coverage ratio 1 |
|
2.51x |
2.41x |
|||
|
|
|
||||
| WA units |
|
43,145 |
|
44,971 |
||
| FFO per WA unit 1 |
|
$ |
0.29 |
|
$0.30 |
|
| FFO payout ratio 1 |
|
72.8 |
% |
69.7% |
||
| AFFO per WA unit 1 |
|
$ |
0.25 |
|
$0.20 |
|
| AFFO payout ratio 1 |
|
86.8 |
% |
102.6% |
||
1 Refer to “Non-IFRS Measures” section above. |
||||||
