Slate Grocery REIT Reports Fourth Quarter and Year End 2021 Results

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 twelve months ended December 31, 2021.

"Slate Grocery REIT’s strong performance throughout 2021 underscores yet again the exceptional operational abilities of our management team and the strength and resiliency of the grocery-anchored sector,” said Blair Welch, Chief Executive Officer of Slate Grocery REIT. “We have significantly accelerated the REIT’s growth and enhanced the overall stability and durability of our portfolio. Our mission remains the same: to own and operate a superior portfolio of grocery-anchored assets that provides long-term sustainable income, and we are extremely well positioned to benefit from organic growth and to pursue high-quality, accretive acquisitions that will unlock value for our investors.”

For the CEO's letter to unitholders for the quarter, please follow the link here.

Highlights

• Achieved record growth at attractive valuations to scale the REIT’s portfolio and increase exposure to leading omnichannel grocers
  • Invested $468.5 million in accretive grocery-anchored acquisitions at compelling values in 2021, adding 3.7 million square feet or 38.2% of gross leasable area
  • Significantly increased the REIT’s exposure to leading omnichannel grocers in America’s largest metropolitan areas, including New York and Texas
• Further enhanced the portfolio's durability through proactive asset management
  • Completed a record 375,655 square feet of new leasing during the year at a 17.9% weighted average rental spread, resulting in a 93.6% occupancy rate and marking the REIT’s sixth consecutive quarter of occupancy growth
  • Same-property net operating income ("NOI") for the fourth quarter increased by $0.6 million or 2.9% over the comparative period
  • Adjusted funds from operations ("AFFO") per unit for the fourth quarter was $0.22, in line with the prior year
• Well-positioned to pursue organic growth and high-quality, accretive acquisitions
  • Maintained a strong balance sheet through a period of record growth to ensure ample liquidity and flexibility
  • Actively underwriting compelling investment opportunities in a highly fragmented market, benefiting from the insights and deal flow of Slate Asset Management, a global alternative asset management platform that owns and operates over $3 billion of grocery assets worldwide

Summary of Q4 2021 Results

	Three months ended December 31,
(thousands of U.S. dollars, except per unit amounts)		2021		2020		Change %
Rental revenue		$	38,348	$	31,872	20.3%
NOI^1		$	31,885	$	22,583	41.2%
Net income ^2		$	20,191	$	21,268	(5.1)%
New leasing (square feet) ^2			50,621		35,823	41.3%
New leasing spread ^2			20.2%		1.4%	18.8%
Total leasing (square feet) ^2			314,652		480,738	(34.5)%
Total leasing spread ^2			4.9%		2.7%	2.2%
Leasing – anchor / junior anchor ^2			192,133		353,454	(45.6)%
Weighted average number of units outstanding ("WA units")			60,054		43,752	37.3%
FFO^1 2		$	15,684	$	11,684	34.2%
FFO per WA units^1 2		$	0.26	$	0.27	(3.7)%
FFO payout ratio^1 2			82.4%		81.7%	0.7%
AFFO ^1 2		$	13,266	$	9,651	37.5%
AFFO per WA units^1 2		$	0.22	$	0.22	—%
AFFO payout ratio^1 2			97.4%		98.9%	(1.5)%
(thousands of U.S. dollars)		2021		2020		Change %
Same-property NOI (3 month period, 69 properties)		$	21,443	$	20,830	2.9%
Same-property NOI (12 month period, 60 properties)		$	75,216	$	74,688	0.7%
	As at December 31,
(thousands of U.S. dollars, except per unit amounts)		2021		2020		Change %
Total assets, IFRS		$	1,737,162	$	1,323,554	31.2%
Total assets, proportionate interest		$	1,955,072	$	1,331,515	46.8%
Debt, IFRS		$	937,744	$	726,373	29.1%
Debt, proportionate interest		$	1,149,649	$	733,252	56.8%
Net asset value per unit		$	12.29	$	10.94	12.3%
Number of properties ^2			107		75	42.7%
Portfolio occupancy^2			93.6%		92.9%	0.7%
Debt / GBV ratio			54.0%		54.9%	(0.9)%
Interest coverage ratio^1		2.98x		2.45x		21.6%
^(1) Refer to “Non-IFRS Measures” section below.
^(2) Includes the REIT's share of joint venture investments.

Conference Call and Webcast

Senior management will host a live conference call at 9:00 am ET on Thursday, February 24, 2022 to discuss the results and ongoing business initiatives of the REIT.

The conference call can be accessed by dialing [phone] or 1 [phone]. Additionally, the conference call will be available via simultaneous audio found at https://snwebcastcenter.com/webcast/slate/2022/0224. A replay will be accessible until March 10, 2022 via the REIT’s website or by dialing [phone] or 1 [phone] (access code 2595989) 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 U.S. $1.9 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 targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate’s platform spans a range of real estate and infrastructure investment strategies, including opportunistic, value add, core plus, and debt investments. 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.

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 [e-mail] or [phone].

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”, “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. Some of the specific forward-looking statements contained herein include, but are not limited to, statements relating to the impact of the COVID-19 pandemic. There can be no assurance regarding the impact of COVID-19 on the business, operations, and financial performance of the REIT and its tenants, as well as on consumer behaviors and the economy in general. 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 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 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 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 December 31,
(in thousands of U.S. dollars, except per unit amounts)		2021			2020
Rental revenue		$	38,348		$	31,872
Straight-line rent revenue			104			(375	)
Property operating expenses			(6,128	)		(3,512	)
IFRIC 21 property tax adjustment			(5,418	)		(5,568	)
Contribution from joint venture investments			4,979			166
NOI^1 2		$	31,885		$	22,583
Cash flow from operations		$	7,266		$	8,049
Changes in non-cash working capital items			6,383			4,961
Transaction costs			54			803
Finance charge and mark-to-market adjustments			(429	)		(398	)
Interest, net and TIF note adjustments			27			33
Adjustments for joint venture investments			2,572			88
Non-controlling interest			(175	)		—
Taxes on dispositions			—			(2,227	)
Capital			(1,238	)		(839	)
Leasing costs			(494	)		(293	)
Tenant improvements			(700	)		(526	)
AFFO^1 2		$	13,266		$	9,651
Net income^1 2		$	20,191		$	21,268
Change in fair value of financial instruments			—			437
Transaction costs			54			803
Change in fair value of properties			10,026			(13,515	)
Deferred income tax expense			10,391			8,730
Adjustments for joint venture investments			(21,134	)		217
Unit expense			1,748			1,539
Non-controlling interest			(174	)		—
Taxes on dispositions			—			(2,227	)
IFRIC 21 property tax adjustment			(5,418	)		(5,568	)
FFO^1 2		$	15,684		$	11,684
Straight-line rental revenue			104			(375	)
Capital expenditures			(1,238	)		(839	)
Leasing costs			(494	)		(293	)
Tenant improvements			(700	)		(526	)
Non-controlling interest			(1	)		—
Adjustments for joint venture investments			(89	)		—
AFFO^1 2		$	13,266		$	9,651
	Three months ended December 31,
(in thousands of U.S. dollars, except per unit amounts)		2021			2020
NOI^1 2		$	31,885		$	22,583
General and administrative expenses			(3,050	)		(1,714	)
Cash interest, net			(9,663	)		(8,475	)
Finance charge and mark-to-market adjustments			(429	)		(398	)
Current income tax expense			(463	)		(609	)
Adjustments for joint venture investments			(2,407	)		(78	)
Non-controlling interest			(175	)		—
Capital expenditures			(1,238	)		(839	)
Leasing costs			(494	)		(293	)
Tenant improvements			(700	)		(526	)
AFFO^1 2		$	13,266		$	9,651
^(1) Refer to “Non-IFRS Measures” section above.
^(2) Includes the REIT's share of joint venture investments.

	Three months ended December 31,
(in thousands of U.S. dollars, except per unit amounts)			2021		2020
Net income ^1		$	20,191		$	21,268
Interest and financing costs			10,092			8,873
Change in fair value of financial instruments			—			437
Transaction costs			54			803
Change in fair value of properties			10,026			(13,515	)
Deferred income tax expense			10,391			8,730
Current income tax expense (recovery)			463			(1,618	)
Unit expense			1,748			1,539
Adjustments for equity investment			(18,816	)		295
Straight-line rent revenue			104			(375	)
IFRIC 21 property tax adjustment			(5,418	)		(5,568	)
Adjusted EBITDA^1 2		$	28,835		$	20,869
NOI^1 2			31,885			22,583
General and administrative expenses			(3,050	)		(1,714	)
Adjusted EBITDA^1 2		$	28,835		$	20,869
Cash interest paid			(9,690	)		(8,508	)
Interest coverage ratio^1 2		2.98x			2.45x
WA units			60,054			43,752
FFO per WA unit^1 2		$	0.26		$	0.27
FFO payout ratio ^1 2			82.4	%		81.7	%
AFFO per WA unit^1 2		$	0.22		$	0.22
AFFO payout ratio ^1 2			97.4	%		98.9	%
^(1) Includes the REIT's share of joint venture investments.
^(2) Refer to “Non-IFRS Measures” section above.