TORONTO, ON–(Marketwired – May 03, 2017) –
(All amounts are expressed in U.S. dollars unless otherwise stated)
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 months ended March 31, 2017. Senior management will host a conference call at 9:00 a.m. ET on Thursday, May 4, 2017 to discuss the results and ongoing business initiatives of the REIT. The dial-in details can be found below.
“Our first quarter results are reflective of our team’s continued hard work and we remain excited about the real estate we continue to buy in the U.S. and the long-term opportunity these investments present” said Greg Stevenson, the REIT’s Chief Executive Officer.
For the CEO’s letter to unitholders for the quarter, please follow the link here.
Quarterly Highlights
- Increased quarterly year-over-year same-property net operating income (“NOI”) by $0.7 million or 4.5% to $16.2 million. Excluding the impact of termination income, the increase would be $0.5 million or 3.0%.
- Completed 276,310 square feet of leasing in the quarter, 244,035 square feet was renewals, two of which were grocery-anchor renewals and 32,275 square feet was new leasing activity. The REIT executed 10 new shop space leases at an average rental rate of $17.00 per square foot which is $4.87 per square foot or 40.1% higher than the weighted average in-place rent for comparable space. The weighted average retention rate was 94.8%.
- The REIT acquired two grocery-anchored properties for a total purchase price of $32.6 million ($129 per square foot) at an average cap rate of 7.24%. Subsequent to the quarter end, the REIT announced the acquisition of Eustis Village for $23.0 million ($147 per square foot) located in Orlando, Florida.
- The REIT reported a $2.5 million increase in rental revenue, excluding termination income, to $26.7 million compared to the first quarter of 2016 as a result of rental rate growth from leasing and new acquisition activity.
- Net income increased by $9.4 million to $8.7 million compared to the same period in the prior year.
- Funds from operations (“FFO”) was $0.32 per unit, a decrease of $0.02 per unit compared to the same period in the prior year as a result of timing between the equity raise and funds redeployed.
- Adjusted funds from operations (“AFFO”) was $11.6 million or $0.29 per unit, an increase of $4.1 million or $0.05 per unit, compared to the same period in the prior year. The increase is the result of accretive acquisitions and capital, leasing and tenant improvement spend concurrent to the REIT’s existing leasing and high volume of new and renewal leasing activity.
- The AFFO payout ratio for the first quarter was 71.7% compared to 82.5% for the same period in the prior year.
- On January 20, 2017, the REIT completed a sale of 5.6 million class U units by way of a public offering of 5.2 million class U units and a private placement to Slate Asset Management L.P. of 0.4 million class U units, at a price of $10.89 or C$14.35 per unit, for gross proceeds to the REIT of approximately $60.5 million or C$79.8 million. The REIT has used the net proceeds to initially repay debt, but has and expects to continue to redraw such amounts to fund acquisitions.
- Debt to GBV is down to 51.6% from 57.3% for the same period in the prior year, which has positioned the REIT’s balance sheet to take advantage of our growing pipeline of opportunities.
Summary of Q1 2017 Results
| Three months ended March 31, | |||||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | Change % | ||||||||
| Rental revenue | $ | 27,233 | $ | 24,205 | 12.5 | % | |||||
| Net operating income (“NOI”) | $ | 19,411 | $ | 17,077 | 13.7 | % | |||||
| Net income (loss) | $ | 8,652 | $ | (760 | ) | (1,238.4 | )% | ||||
| Leasing – shop space | 100,926 | 108,727 | (7.2 | )% | |||||||
| Leasing – anchor | 175,384 | 175,120 | 0.2 | % | |||||||
| Total leasing activity (square feet) | 276,310 | 283,847 | (2.7 | )% | |||||||
| Same-property NOI | $ | 16,187 | $ | 15,490 | 4.5 | % | |||||
| Weighted average number of units outstanding (“WA units”) | 39,847 | 31,872 | 25.0 | % | |||||||
| FFO | $ | 12,859 | $ | 10,685 | 20.3 | % | |||||
| FFO per diluted weighted average (“WA”) units | $ | 0.32 | $ | 0.34 | (5.9 | )% | |||||
| FFO Payout ratio | 64.6 | % | 58.0 | % | 11.4 | % | |||||
| AFFO (1) | $ | 11,587 | $ | 7,517 | 54.1 | % | |||||
| AFFO per WA units (1) | $ | 0.29 | $ | 0.24 | 20.8 | % | |||||
| AFFO Payout ratio (1) | 71.7 | % | 82.5 | % | (13.1 | )% | |||||
| As at March 31, | |||||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | Change % | ||||||||
| Total assets | $ | 1,158,102 | $ | 1,033,985 | 12.0 | % | |||||
| Total debt | $ | 597,787 | $ | 592,297 | 0.9 | % | |||||
| Net asset value per unit | $ | 13.21 | $ | 13.41 | (1.5 | )% | |||||
| Portfolio occupancy | 93.2 | % | 94.4 | % | (1.3 | )% | |||||
| Debt / GBV ratio | 51.6 | % | 57.3 | % | (9.9 | )% | |||||
| Interest coverage ratio | 3.72x | 3.27x | 13.8 | % | |||||||
| (1) The REIT has changed its calculation of AFFO in the current period, in accordance with the definition provided by the Real Property Association of Canada in its White Paper on FFO and AFFO for IFRS, as revised in February 2017. |
Changes to the determination of AFFO
The REIT has changed its methodology to calculate AFFO in the current period. In February 2017, the Real Property Association of Canada issued its White Paper on FFO and AFFO for IFRS. Accordingly, the REIT has adopted the definition of AFFO provided by REALPAC, beginning for periods beginning on or after January 1, 2017. The REIT has restated prior periods on a retrospective basis in order to maintain comparability.
Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on Thursday, May 4, 2017 to discuss the results and ongoing business initiatives.
The conference call can be accessed by (647) 427-2311 or 1 (866) 521-4909. Additionally, the conference call will be available via simultaneous audio found at http://www.snwebcastcenter.com/webcast/slate/2017/0504. A replay will be accessible until May 28, 2017 via the REIT’s website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 4492992)) 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 across the top 50 U.S. metro markets that are visited regularly by consumers for their everyday needs. The REIT’s conservative payout ratio, together with its diversified portfolio and quality tenant covenants, provides 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 L.P.
Slate Asset Management L.P. is a leading real estate investment platform with approximately $4.0 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 proven 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 and IFRIC 21 adjustments. 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, deferred income taxes, unit expense 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 earnings before interest, income taxes, distributions, fair value gains (losses) from both financial instruments and properties, while also excluding certain items not related to operations such as transaction costs from dispositions, acquisitions, debt termination costs, or other events.
- Interest coverage ratio is defined as adjusted EBITDA divided by cash interest paid.
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 March 31, | ||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | ||||||
| Rental revenue | 27,233 | 24,205 | ||||||
| Straight-line rent revenue | (401 | ) | (427 | ) | ||||
| Property operating expenses | (16,907 | ) | (15,425 | ) | ||||
| IFRIC 21 property tax adjustment | 9,486 | 8,724 | ||||||
| NOI (1) | $ | 19,411 | $ | 17,077 | ||||
| Net income (loss) | $ | 8,652 | $ | (760 | ) | |||
| Acquisition and disposition costs | 354 | 140 | ||||||
| Change in fair value of properties | (14,638 | ) | (12,108 | ) | ||||
| Deferred income taxes | 6,552 | 5,068 | ||||||
| Unit expense | 2,453 | 9,621 | ||||||
| IFRIC 21 property tax adjustment | 9,486 | 8,724 | ||||||
| FFO (1) | $ | 12,859 | $ | 10,685 | ||||
| Straight-line rental revenue | (401 | ) | (427 | ) | ||||
| Capital | (526 | ) | (752 | ) | ||||
| Leasing costs | (101 | ) | (323 | ) | ||||
| Tenant improvements | (244 | ) | (1,666 | ) | ||||
| AFFO (1) (2) | $ | 11,587 | $ | 7,517 | ||||
| NOI | $ | 19,411 | $ | 17,077 | ||||
| Other expenses | (2,019 | ) | (2,440 | ) | ||||
| Cash interest, net | (4,726 | ) | (4,304 | ) | ||||
| Finance charge and mark-to-market adjustments | (208 | ) | (75 | ) | ||||
| Capital | (526 | ) | (752 | ) | ||||
| Leasing costs | (101 | ) | (323 | ) | ||||
| Tenant improvements | (244 | ) | (1,666 | ) | ||||
| AFFO (1) (2) | $ | 11,587 | $ | 7,517 | ||||
| WA units | 39,847 | 31,872 | ||||||
| FFO per WA unit | $ | 0.32 | $ | 0.34 | ||||
| FFO Payout ratio (1) | 64.6 | % | 58.0 | % | ||||
| AFFO per WA unit (2) | $ | 0.29 | $ | 0.24 | ||||
| AFFO Payout ratio (1) (2) | 71.7 | % | 82.5 | % | ||||
| (1) Refer to “Non-IFRS Measures” on page 3. |
| (2) The REIT has changed its calculation of AFFO in the current period, in accordance with the definition provided by the Real Property Association of Canada in its White Paper on FFO and AFFO for IFRS, as revised in February 2017. |
For Further Information
Investor Relations
Slate Retail REIT
Tel: +1 416 644 4264
E-mail: ir@slateam.com