Subject: MISCELLANEOUS
Slate Retail REIT Reports Fourth Quarter 2017 Results
(All amounts are expressed in U.S. dollars unless otherwise stated)
TORONTO, Feb. 19, 2018 (GLOBE NEWSWIRE) -- 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, 2017. Senior management will host a conference call at 9:00 a.m. ET on Tuesday, February 20, 2018 to discuss the results and ongoing business initiatives of the REIT. The dial-in details can be found below.
"We are pleased to report on all of the positive progress that we made in 2017. Heading into 2018 our focus will be on leveraging the strong relationships that we have built with our tenants and focusing on organic growth opportunities within the portfolio today," commented Greg Stevenson, Chief Executive Officer of the REIT.
For the CEO's letter to unitholders for the quarter, please follow the link here.
Quarterly Highlights
- Completed 402,050 square feet of leasing in the quarter, comprised of 111,990 square feet of new leasing and 290,060 square feet of renewals at a 5.1% weighted average spread above expiring rent.
- Executed 17 new shop space leases at an average rental rate of $15.75 per square foot, which is $3.21 per square foot or 25.6% higher than the weighted average in-place rent for comparable space.
- Two grocery-anchor tenants were renewed in advance of their expiry (February 2018 and August 2018) at existing rental rates, per contractual renewal options. The REIT renewed 10 anchors during the year ended December 31, 2017 for a total of 567,005 square feet, which is 14.5% of total anchor GLA. Total contractual anchor expiries entering 2017 was 2.4% of total anchor GLA.
- The REIT declared a 3.7% distribution increase of $0.07 per unit, or $0.84 annually. This increase is the fourth consecutive annual distribution increase since the REIT listed its Class U units on the Toronto Stock Exchange in 2014.
- On November 9, 2017, the REIT entered into a new $250.0 million term loan from a syndicate of lenders. This loan bears interest at LIBOR plus 200 bps and matures on February 9, 2023. Proceeds were used to repay the REIT's $50.0 million term loan acquired in the third quarter of 2017 and repay a portion of the revolver. This loan added significant liquidity to the REIT and staggers the current maturity profile of the REIT's debt. The weighted average term of the REIT's debt is now 4.0 years, with no maturities until 2020.
- The REIT acquired two properties for an aggregate purchase price of $48.5 million ($149 per square foot), at a weighted average capitalization rate of 7.2%. Subsequent to the end of the fourth quarter, the REIT disposed of an office outparcel at Westhaven for $9.1 million located in Franklin, Tennessee and an outparcel at Mooresville Consumer Square for $6.5 million located in Mooresville, North Carolina.
- The REIT reported a $9.8 million increase in rental revenue to $34.9 million compared to the fourth quarter of 2016, as a result of rental rate growth from re-leasing above in-place rent, new leasing and acquisitions.
- Increased net operating income ("NOI") by $6.7 million to $24.6 million compared to the same period in the prior year.
- Same-property NOI decreased by 1.7% (comprised of 57 properties) and increased by 0.9% (comprised of 52 properties) from the prior period for the three and twelve months ended December 31, 2017, respectively. Including the impact of the completion of the North Augusta Plaza anchor redevelopment, same-property NOI increased by 0.2% and 1.4% for the three and twelve months ended December 31, 2017, respectively.
- Funds from operations ("FFO") was $15.4 million or $0.33 per unit, an increase of $0.09 per unit compared to the same period in the prior year as a result of increased NOI and the $2.8 million, or $0.08 per unit, charge to income from the mortgage defeasance in the fourth quarter of 2016.
- Adjusted funds from operations ("AFFO") was $11.4 million or $0.24 per unit, representing a $4.3 million increase over the same quarter in the prior year driven by the increase in FFO, partially offset by increased capital spend.
- The AFFO payout ratio for the three and twelve month period ended December 31, 2017 was 84.7% and 81.0%, respectively.
- Net income increased by $43.8 million to $31.4 million over the same period in the prior year, primarily due to increases in income from property acquisitions.
Summary of 2017 Results
| Three months ended December 31, | |||||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | Change % | ||||||||
| Rental revenue | $ | 34,859 | $ | 25,044 | 39.2 | % | |||||
| NOI | $ | 24,592 | $ | 17,931 | 37.1 | % | |||||
| Net income (loss) | $ | 31,421 | $ | (12,397 | ) | 353.5 | % | ||||
| Leasing - shop space | 177,902 | 97,917 | 81.7 | % | |||||||
| Leasing - anchor | 224,148 | 160,251 | 39.9 | % | |||||||
| Total leasing activity (square feet) | 402,050 | 258,168 | 55.7 | % | |||||||
| Weighted average number of units outstanding ("WA units") | 46,443 | 35,494 | 30.8 | % | |||||||
| FFO (1) | $ | 15,406 | $ | 8,688 | 77.3 | % | |||||
| FFO per WA units (1) | $ | 0.33 | $ | 0.24 | 37.5 | % | |||||
| FFO payout ratio (1) | 62.5 | % | 82.6 | % | (24.3 | )% | |||||
| AFFO (1) | $ | 11,360 | $ | 7,110 | 59.8 | % | |||||
| AFFO per WA units (1) | $ | 0.24 | $ | 0.20 | 20.0 | % | |||||
| AFFO payout ratio (1) | 84.7 | % | 101.0 | % | (16.1 | )% | |||||
| (in thousands of U.S. dollars) | 2017 | 2016 | Change % | ||||||||
| Same-property NOI (3 month period) | $ | 15,477 | $ | 15,750 | (1.7 | )% | |||||
| Same-property NOI (12 month period) | 57,948 | 57,448 | 0.9 | % | |||||||
| As at December 31, | |||||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | Change % | ||||||||
| Total assets | $ | 1,499,519 | $ | 1,114,606 | 34.5 | % | |||||
| Total debt | $ | 883,046 | $ | 624,892 | 41.3 | % | |||||
| Net asset value per unit | $ | 12.78 | $ | 13.36 | (4.3 | )% | |||||
| Portfolio occupancy | 93.7 | % | 93.5 | % | 0.2 | % | |||||
| Debt / GBV ratio | 58.9 | % | 56.1 | % | 5.0 | % | |||||
| Interest coverage ratio | 3.05x | 3.35x | (7.9 | )% | |||||||
| (1) The REIT completed a defeasance of a mortgage during the fourth quarter of 2016, at a cost of $4.5 million representing the excess of the U.S. Treasury securities required to be funded over the outstanding principal balance of the mortgage. A $2.8 million charge to income was recorded which was determined as the $4.5 million cost, less $1.7 million, representing the unamortized mark-to-market premium associated with the mortgage. FFO and AFFO was impacted by the $2.8 million charge to income. Adjusting to exclude the impact of the defeasance of the mortgage, FFO would be $11.5 million or $0.32 per unit and AFFO would be $9.9 million or $0.28 per unit for the three month period ended December 31, 2016. FFO payout ratio and AFFO payout ratio would be 62.3% and 72.2% for the three month period ended December 31, 2016, respectively. | |||||||||||
Conference Call and Webcast
Senior management will host a live conference call at 9:00 a.m. ET on Tuesday, February 20, 2018 to discuss the results and ongoing business initiatives.
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 http://www.snwebcastcenter.com/webcast/slate/2018/0220. A replay will be accessible until March 3, 2018 via the REIT's website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 5299815) 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 U.S. $1.5 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 over $4.5 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 [email protected] 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, Levies ("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.
For Further Information
Investor Relations
Slate Retail REIT
Tel: +1 416 644 4264
E-mail: [email protected]
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) | 2017 | 2016 | ||||||
| Rental revenue | $ | 34,859 | $ | 25,044 | ||||
| Straight-line rent revenue | (523 | ) | (287 | ) | ||||
| Property operating expenses | (5,357 | ) | (3,771 | ) | ||||
| IFRIC 21 property tax adjustment | (4,387 | ) | (3,055 | ) | ||||
| NOI (1) | $ | 24,592 | $ | 17,931 | ||||
| Cash flow from operations | $ | 13,559 | $ | 4,922 | ||||
| Changes in non-cash working capital items | 1,569 | 1,753 | ||||||
| Acquisition and disposition costs | 104 | ? | ||||||
| Finance charge and mark-to-market adjustments | (564 | ) | (143 | ) | ||||
| Interest, net and TIF note adjustments | 215 | 173 | ||||||
| Debt defeasance mark-to-market adjustments (2) | ? | 1,696 | ||||||
| Capital | (1,485 | ) | (452 | ) | ||||
| Leasing costs | (390 | ) | (351 | ) | ||||
| Tenant improvements | (1,648 | ) | (488 | ) | ||||
| AFFO (1) (2) | $ | 11,360 | $ | 7,110 | ||||
| Net income (loss) (2) | $ | 31,421 | $ | (12,397 | ) | |||
| Acquisition and disposition costs | 104 | ? | ||||||
| Change in fair value of properties | 27,150 | 8,276 | ||||||
| Deferred income taxes | (31,582 | ) | 504 | |||||
| Unit expense (income) | (7,300 | ) | 15,360 | |||||
| IFRIC 21 property tax adjustment | (4,387 | ) | (3,055 | ) | ||||
| FFO (1) (2) | $ | 15,406 | $ | 8,688 | ||||
| Straight-line rental revenue | (523 | ) | (287 | ) | ||||
| Capital | (1,485 | ) | (452 | ) | ||||
| Leasing costs | (390 | ) | (351 | ) | ||||
| Tenant improvements | (1,648 | ) | (488 | ) | ||||
| AFFO (1) (2) | $ | 11,360 | $ | 7,110 | ||||
| NOI (1) | $ | 24,592 | $ | 17,931 | ||||
| Other expenses | (1,962 | ) | (1,724 | ) | ||||
| Cash interest, net | (7,183 | ) | (4,831 | ) | ||||
| Debt defeasance loss (2) | ? | (2,832 | ) | |||||
| Finance charge and mark-to-market adjustments | (564 | ) | (143 | ) | ||||
| Capital | (1,485 | ) | (452 | ) | ||||
| Leasing costs | (390 | ) | (351 | ) | ||||
| Tenant improvements | (1,648 | ) | (488 | ) | ||||
| AFFO (1) (2) | $ | 11,360 | $ | 7,110 | ||||
| Three months ended December 31, | ||||||||
| (in thousands of U.S. dollars except, per unit amounts) | 2017 | 2016 | ||||||
| NOI (1) | $ | 24,592 | $ | 17,931 | ||||
| Other expenses | (1,962 | ) | (1,724 | ) | ||||
| Adjusted EBITDA (1) | $ | 22,630 | $ | 16,207 | ||||
| Cash interest paid | (7,430 | ) | (4,840 | ) | ||||
| Interest coverage ratio (1) | 3.05x | 3.35x | ||||||
| WA units | 46,443 | 35,494 | ||||||
| FFO per WA unit (1) (2) | $ | 0.33 | $ | 0.24 | ||||
| FFO payout ratio (1) (2) | 62.5 | % | 82.6 | % | ||||
| AFFO per WA unit (1) (2) | $ | 0.24 | $ | 0.20 | ||||
| AFFO payout ratio (1) (2) | 84.7 | % | 101.0 | % | ||||
| (1) Refer to "Non-IFRS Measures" section above. | ||||||||
| (2) The REIT completed a defeasance of a mortgage during the fourth quarter of 2016, at a cost of $4.5 million representing the excess of the U.S. Treasury securities required to be funded over the outstanding principal balance of the mortgage. A $2.8 million charge to income was recorded which was determined as the $4.5 million cost, less $1.7 million, representing the unamortized mark-to-market premium associated with the mortgage. FFO and AFFO was impacted by the $2.8 million charge to income. Adjusting to exclude the impact of the defeasance of the mortgage, FFO would be $11.5 million or $0.32 per unit and AFFO would be $9.9 million or $0.28 per unit for the three month period ended December 31, 2016. FFO payout ratio and AFFO payout ratio would be 62.3% and 72.2% for the three month period ended December 31, 2016, respectively. | ||||||||
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