Slate Retail REIT Announces 3% Distribution Increase and Reports Strong Third Quarter 2015 Results
TORONTO, ON --(Marketwired - November 12, 2015) - Slate Retail REIT ("Slate Retail" or the "REIT") (TSX: SRT.U) (TSX: SRT.UN) today announced its financial results for the three and nine months ended September 30, 2015. Senior management will host a conference call at 9:30 a.m. ET on Monday, November 16, 2015 to discuss the results and ongoing business initiatives of the REIT.
Slate Retail achieved strong results for the third quarter of 2015 as it executed on its strategy of building a high-performing portfolio of U.S. grocery anchored retail properties.
Remarking on the investment climate for U.S. grocery-anchored shopping centres, Greg Stevenson, Slate Retail's Chief Executive Officer, wrote in a letter to unitholders:
"Low supply and high demand are driving rent growth at a higher rate than inflation, with limited investment required to entice tenants to renew or move to our properties… In the third quarter, we completed over 200,000 square feet of leasing and achieved solid rental rate growth on non-anchor space of 9.6% above expiring rent. Occupancy remains strong at 94.7% and we are having success leasing new space, with same property occupancy up 50 basis points year-over-year."
Read the full letter to unitholders here.
Highlights for the Quarter
-- Same property Net Operating Income increased by 7.2% compared with the
same quarter for the previous year
-- Funds from Operations per unit increased by 13.8% compared with the same
quarter for the previous year
-- Achieved a 94.7% occupancy rate
-- Increased rental rates 9.6% for renewed leases less than 10,000 square
-- Completed lease transactions for 219,373 square feet, consisting of
22,592 square feet of new shop space leases 47.1% above portfolio-wide
shop space rent and 196,781 square feet of lease renewals
-- Purchased and cancelled 637,113 class U units under the REIT's normal
course issuer bid for a total cost of $6.90 million
-- Acquired five grocery-anchored shopping centres
Subsequent to the Quarter
-- Increased monthly unitholder distributions by 3% to $0.0649 per class U
unit per month, effective December 2015
-- Continued unit repurchase activity
-- Entered into an agreement to purchase a grocery-anchored shopping centre
in South Carolina
Conference Call and Webcast
Senior management will host a live conference call at 9:30 a.m. ET on Monday, November 16, 2015 to discuss the results and ongoing business initiatives.
The conference call can be accessed by dialing (647) 788-4919 or toll-free (877) 291-4570. Additionally, the conference call will be available via simultaneous audio webcast on Slate Retail's website at www.slateam.com/SRT. A replay will be available on the website or by dialing (416) 621-4642 or toll-free (800) 585-8367, conference ID 75255623, approximately two hours after the event, available until November 20, 2015.
Summary of Results
Three months ended September 30,
Thousands of U.S. dollars excluding ratios, per unit
values 2015 2014
Rental revenue $ 22,416 $ 11,386
Net operating income ("NOI")(1) $ 16,307 $ 7,982
Weighted average number of units outstanding 32,234 15,975
Funds from operations ("FFO")(1) $ 10,793 $ 4,595
FFO per unit(1) $ 0.33 $ 0.29
Adjusted funds from operations ("AFFO")(1) $ 8,833 $ 4,535
AFFO per unit(1) $ 0.27 $ 0.28
As at September 30,
Total assets $ 971,721 $ 533,877
Total debt $ 538,423 $ 292,920
Portfolio Occupancy 94.7% 96.0%
AFFO payout ratio(1) 68.7% 66.7%
Debt / GBV ratio 55.4% 54.9%
Interest coverage ratio 3.58x 3.10x
(1) See Non-IFRS Measures below.
During the third quarter the REIT acquired five grocery-anchored shopping centres in South Carolina, Colorado, Georgia and Florida. As at September 30, 2015, the REIT's portfolio comprised 64 properties as compared with 29 when it listed on the Toronto Stock Exchange in April 2014. Subsequent to the quarter, on November 3, 2015, the REIT entered into a binding agreement to purchase an additional grocery-anchored shopping centre in South Carolina.
As at September 30, 2015, the REIT's portfolio was diversified across 20 states with over 600 distinct tenants and occupancy of 94.7%.
During the third quarter, management completed 196,781 square feet of renewals. The weighted average rental rate increase on renewals completed less than 10,000 square feet was $1.20 per square foot or 9.6% higher than expiring rent. The weighted average rental rate decrease on renewals completed greater than 10,000 square feet was $1.25 or 23.8% lower than expiring rent. This decrease was driven by the renewal of the grocery anchor tenant at Buckeye Plaza in Cleveland. Although leasing costs to secure new tenants are generally higher than the costs to renew in-place tenants, the REIT maintained the anchor tenant at Buckeye Plaza at no cost and the REIT's anchor renewal rate remains at 100%. The income loss at Buckeye was more than offset by renewal leasing spreads and newly executed leases which resulted in our sixth straight quarter of income growth from leasing since listing in April of 2014.
Management also completed 22,592 square feet of new leasing. There were eight new leases executed with complimentary uses to the REIT's existing consumer staple and service based tenant mix. The weighted average base rent on all new leases completed less than 10,000 square feet was $16.81 per square foot, which is $5.38 per square foot or 47.1% higher than the weighted average in-place rent for comparable space across the portfolio. The weighted average base rent on all new leases completed greater than 10,000 square feet was $11.38 per square foot which is $3.80 per square foot or 50.1% higher than the weighted average in-place rent for comparable space across the portfolio. All new leasing completed this quarter compares favorably to the weighted average portfolio in-place rent of $10.05 per square foot.
Management has renewed 100% of all grocery anchor tenants and continues to proactively renew their lease terms well in advance of expiry. Management continues to see an increase in demand for space at its shopping centres. The lack of new supply and the increase in market occupancy, coupled with management's hands-on leasing strategy, is driving rental rate increases. In addition, management remains focused on increasing lease terms and the credit quality of tenants across the portfolio.
Normal Course Issuer Bid
The REIT has certified a Normal Course Issuer Bid ("NCIB") which commenced on May 26, 2015 and will remain in effect until the earlier of May 26, 2016 or the date on which the REIT purchased an aggregate 2,591,136 class U units (amended on September 30, 2015 from the previous maximum number of 1,093,895 class U units permitted under the NCIB), representing 10% of the REIT's public float of 25,911,358 class U units at the time of entering the bid through the facilities of the TSX.
For the nine months ended September 30, 2015, 1,093,895 class U units have been purchased and subsequently canceled under the NCIB for a total cost, including transaction costs, of $11.77 million at an average price of $10.76.
Distributions and Distribution Reinvestment Plan
Slate Retail also announced today an annual distribution increase to $0.779 per unit, representing a 3% increase over the REIT's existing distribution amount.
In accordance with the distribution increase, the REIT's board of trustees (the "Board of Trustees") has declared a distribution for the month of December 2015 of $0.0649 per class U unit.
Holders of class A units, class U units and class I units of the REIT are eligible to participate in the Distribution Reinvestment Plan (the "DRIP"). In electing to participate in the DRIP, unitholders will have their cash distributions used to purchase class U units and will also receive a "bonus distribution" of units equal in value to 3% of each distribution. Unitholders wishing to participate should contact their investment advisors to enroll. Additional details and information can be found on the REIT's website at slateam.com/SRT.
The REIT may initially issue up to 620,000 class U units under the DRIP. The REIT may increase the number of class U units available to be issued under the DRIP at any time at its discretion subject to (a) the approval of the Board of Trustees, (b) the approval of any stock exchange upon which the trust units trade, and (c) public disclosure of such an increase.
All interested parties can access Slate Retail's Supplemental Information online at slateam.com/SRT in the Investors section. These materials are also available on SEDAR or upon request to the REIT at email@example.com or (416) 644-4264.
This news release contains forward-looking information within the meaning of applicable securities laws. These statements include, but are not limited to, concerning the REIT's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Readers should not place undue reliance on any such forward-looking statements.
Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained herein.
Such forward-looking statements are based on a number of assumptions that may prove to be incorrect, including, but not limited to, the continued availability of mortgage financing and current interest rates; the extent of competition for properties; assumptions about the markets in which the REIT and its subsidiaries operate; the global and North American economic environment; and changes in governmental regulations or tax laws.
Although the forward-looking information contained in the MD&A is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in the MD&A may be considered a "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than the MD&A. Except as required by applicable law, the REIT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Non-IFRS Financial Measures
This news release contains financial measures that do not have a standardized meaning under International Financial Reporting Standards ("IFRS") as prescribed by the International Accounting Standards Board. The REIT uses the following non-IFRS financial measures: Funds from Operations ("FFO"), Adjusted Funds from Operations ("AFFO") on an aggregate and per unit basis, Net Operating Income ("NOI") and same property ("same property") analysis. Management believes that in addition to conventional measures prepared in accordance with IFRS, investors and analysts in the real estate industry use these non-IFRS financial measures to evaluate the REIT's performance. Management uses AFFO and FFO as supplemental measures in addition to net income to report operating results. FFO is an industry standard for evaluating operating performance. AFFO differs from FFO in that AFFO excludes from its definition certain non-cash revenues and expenses recognized under IFRS, such as straight-line rent and the amortization of finance costs, but also includes capital and leasing costs incurred during the period, but capitalized for IFRS purposes. Management also uses AFFO to evaluate the cash generation performance of the REIT available to fund distributions to unitholders, which is why certain non-cash items are excluded and capital expenditures and leasing costs are deducted. NOI is used by real estate industry analysts, investors and management to measure operating performance of the REIT's properties. NOI represents total property revenues less property operating and maintenance expenses, excluding straight-line rent revenue and IFRIC 21 property tax adjustments. Accordingly, NOI excludes certain expenses included in the determination of net income such as investment property fair value gains, and indirect operating expenses and financing costs. These items are excluded from NOI in order to provide results that are more closely related to a property's results of operations. Certain items, such as interest expense, while included in FFO, AFFO and net income, do not reflect the operating performance of a real estate asset but rather how the property is financed or how the entity is capitalized. As a result, management uses only those income and expense items that are relevant to evaluate a property's performance. Same property portfolio analysis is used by industry analysts, investors and management to compare operational results of the same asset base period over period thereby highlighting the impact of occupancy and rental rate growth.
About Slate Retail REIT
Slate Retail REIT is an open-ended real estate investment trust focused on U.S. grocery-anchored real estate. The REIT's portfolio includes 64 properties located primarily across the top 50 U.S. metro markets. The REIT is focused on maximizing value through internal organic rental growth and strategic acquisitions. Visit slateam.com/SRT to learn more.
Slate Asset Management L.P. is a leading real estate investment platform with C$3 billion in assets under management. Slate is a value-oriented company and a significant sponsor of all 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
For Further Information
Chief Executive Officer
Slate Retail REIT
+1 (416) 619 4285
Vice President, Investor Relations
Slate Asset Management L.P.
+1 (416) 619 4284