Slate Grocery REIT Reports Fourth Quarter and Year End 2022 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, 2022.

"Our year end results show that Slate Grocery REIT has maintained stable growth and performance throughout 2022, despite broader market volatility and uncertainty,” said Blair Welch, Chief Executive Officer of Slate Grocery REIT. “Heading into 2023, fundamentals in the grocery-anchored sector are providing tailwinds for our portfolio. We believe the REIT’s leasing momentum, embedded rental growth, and financial flexibility will enable us to further grow our revenue, enhance the durability of our income, and meaningfully increase the value of our real estate.”

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

Highlights

• Completed 1.8 million square feet of total leasing in the year at attractive spreads that drove revenue growth
  • Completed 456,724 square feet of leasing in the fourth quarter; new deals were completed at 10.8% above in-place rent and renewals at 5.8% above expiring rent. On a year-to-date basis, the REIT's new leasing spread is 20.7% and total leasing spread is 9.0%.
  • Portfolio occupancy remains healthy at 93.2%, with a grocery-anchor retention rate of 100.0% in 2022.
  • Adjusting for completed redevelopments, same-property Net Operating Income ("NOI") increased by $1.1 million or 3.7% year-over-year.
  • Adjusted funds from operations ("AFFO") per unit for the fourth quarter of 2022 was $0.22, which is in line with the comparative period in the prior year.
• Completed $424.5 million of acquisitions in 2022 at a defensive basis with upside on rents and occupancy
  • At $12.22 per square foot, the REIT’s weighted average in-place rent for the portfolio is significantly below market, providing runway for long-term organic growth and value creation.
  • Completed $25.3 million in redevelopment projects, providing incremental NOI of $3.4 million, which represents a 13.3% return on investment.
  • Disposed of four non-strategic properties and one outparcel with plans to recycle proceeds into new, accretive opportunities.
• Enhanced the REIT’s financial flexibility and balance sheet to create liquidity for continued, accretive growth
  • Partnership with the Slate North American Essential Fund L.P., which includes a leading global sovereign wealth fund, provides the REIT with access to nimble capital.
  • Refinanced $608.0 million of the REIT's credit facility at improved terms, including enhanced pricing and favorable valuations.
  • Subsequent to year-end, the REIT closed a $56.0 million mortgage loan with a 2033 maturity, using net proceeds from the loan to pay down the REIT's nearest term debt maturity in 2023. Post refinancing, the REIT has no debt maturities remaining in 2023.

Summary of Q4 2022 Results

	Three months ended December 31,
(thousands of U.S. dollars, except per unit amounts)			2022		2021	Change %
Rental revenue		$	50,655	$	38,348	32.1%
NOI^1 2		$	40,599	$	31,885	27.3%
Net income ^2		$	18,506	$	20,191	(8.3)%
Same-property NOI (3 month period, 96 properties) ^1		$	29,303	$	29,013	1.0%
Same-property NOI (12 month period, 61 properties) ^1		$	76,812	$	76,576	0.3%
New leasing (square feet) ^2			118,159		50,621	133.4%
New leasing spread ^2			10.8%		20.2%	(9.4)%
Total leasing (square feet) ^2			456,724		314,652	45.2%
Total leasing spread ^2			7.0%		4.9%	2.1%
New leasing – anchor / junior anchor ^2			22,095		10,845	103.7%
Weighted average number of units outstanding ("WA units")			61,468		60,054	2.4%
FFO^1 2		$	16,799	$	15,684	7.1%
FFO per WA units^1 2		$	0.27	$	0.26	3.9%
FFO payout ratio^1 2			78.8%		82.4%	(3.6)%
AFFO ^1 2		$	13,789	$	13,266	3.9%
AFFO per WA units^1 2		$	0.22	$	0.22	—%
AFFO payout ratio^1 2			96.0%		97.4%	(1.4)%
(thousands of U.S. dollars, except per unit amounts)			December 31, 2022		December 31, 2021	Change %
Total assets, IFRS		$	2,270,400	$	1,737,162	30.7%
Total assets, proportionate interest ^1		$	2,485,131	$	1,955,072	27.1%
Debt, IFRS		$	1,131,487	$	937,744	20.7%
Debt, proportionate interest ^1		$	1,341,465	$	1,149,649	16.7%
Net asset value per unit		$	14.65	$	12.29	19.2%
Number of properties ^2			117		107	9.3%
Portfolio occupancy^2			93.2%		93.6%	(0.4)%
Debt / GBV ratio			49.8%		54.0%	(4.2)%
Interest coverage ratio^1		2.89x		2.71x		6.6%
^(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 February 15, 2023 to discuss the results and ongoing business initiatives of the REIT.

The conference call can be accessed dialing [phone] or 1 [phone]. Additionally, the conference call will be available via simultaneous audio found at https://viavid.webcasts.com/starthere.jsp?ei=1592846&tp_key=a5117b5972. A replay will be accessible until March 1, 2023 via the REIT’s website or by dialing [phone] or [phone] (access code 324161#) 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 targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate’s platform has 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. 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)			2022		2021
Rental revenue		$	50,655	$	38,348
Straight-line rent revenue			(175)		104
Property operating expenses			(7,352)		(6,128)
IFRIC 21 property tax adjustment			(7,278)		(5,418)
Contribution from joint venture investments			4,749		4,979
NOI^1 2		$	40,599	$	31,885
Cash flow from operations		$	6,178	$	7,266
Changes in non-cash working capital items			11,389		6,383
Transaction costs			1,480		54
Finance charge and mark-to-market adjustments			(703)		(429)
Interest, net and TIF note adjustments			39		27
Adjustments for joint venture investments			1,908		2,572
Non-controlling interest			(3,338)		(175)
Capital			(2,251)		(1,238)
Leasing costs			(373)		(494)
Tenant improvements			(540)		(700)
AFFO^1 2		$	13,789	$	13,266
Net income^1 2		$	18,506	$	20,191
Transaction costs			1,480		54
Change in fair value of properties			(2,214)		10,026
Deferred income tax expense			3,714		10,391
Unit expense			2,664		1,748
Adjustments for joint venture investments			3,980		(21,134)
Non-controlling interest			(4,053)		(174)
IFRIC 21 property tax adjustment			(7,278)		(5,418)
FFO^1 2		$	16,799	$	15,684
Straight-line rental revenue			(175)		104
Capital expenditures			(2,251)		(1,238)
Leasing costs			(373)		(494)
Tenant improvements			(540)		(700)
Adjustments for joint venture investments			(386)		(89)
Non-controlling interest			715		(1)
AFFO^1 2		$	13,789	$	13,266
^(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)			2022		2021
NOI^1 2		$	40,599	$	31,885
General and administrative expenses			(4,069)		(3,050)
Cash interest, net			(13,087)		(9,663)
Finance charge and mark-to-market adjustments			(703)		(429)
Current income tax recovery (expense)			392		(463)
Adjustments for joint venture investments			(2,841)		(2,407)
Non-controlling interest			(3,338)		(175)
Capital expenditures			(2,251)		(1,238)
Leasing costs			(373)		(494)
Tenant improvements			(540)		(700)
AFFO^1 2		$	13,789	$	13,266
^(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)			2022		2021
Net income ^1		$	18,506	$	20,191
Interest and financing costs			13,790		10,092
Transaction costs			1,480		54
Change in fair value of properties			(2,214)		10,026
Deferred income tax expense			3,714		10,391
Current income tax (recovery) expense			(392)		463
Unit expense			2,664		1,748
Adjustments for joint venture investments			6,435		(18,816)
Straight-line rent revenue			(175)		104
IFRIC 21 property tax adjustment			(7,278)		(5,418)
Adjusted EBITDA^1 2		$	36,530	$	28,835
NOI^1 2			40,599		31,885
General and administrative expenses			(4,069)		(3,050)
Adjusted EBITDA^1 2		$	36,530	$	28,835
Cash interest paid			(13,127)		(9,690)
Interest coverage ratio^1 2		2.78x		2.98x
WA units			61,468		60,054
FFO per WA unit^1 2		$	0.27	$	0.26
FFO payout ratio ^1 2			78.8%		82.4%
AFFO per WA unit^1 2		$	0.22	$	0.22
AFFO payout ratio ^1 2			96.0%		97.4%
^(1) Includes the REIT's share of joint venture investments.
^(2) Refer to “Non-IFRS Measures” section above.