Mr. David Dunn reports
SLATE GROCERY REIT REPORTS FIRST QUARTER 2021 RESULTS
Slate Grocery REIT has released its financial results and highlights for the three months ended March 31, 2021.
"We are pleased to report a solid first quarter in which the REIT continued to progress on key operational and strategic objectives," said David Dunn, chief executive officer. "The strong performance of our grocery-anchored portfolio throughout the pandemic has enabled us to further increase our ownership of the critical real estate that facilitates the last mile of food logistics. We have now executed over $530-million of grocery-anchored acquisitions since June, 2020, at a weighted-average cap rate of 7.8 per cent and look forward to applying our active asset management strategies to create further value for unitholders."
During the first quarter of 2021, the REIT announced a $390.0-million acquisition of a high-quality, grocery-anchored portfolio comprising 25 properties and 3.1 million square feet in major metro markets across the United States. The acquisition materially increases the REIT's exposure to certain of America's largest metropolitan statistical areas (MSA), with 83 per cent of the portfolio's income derived from the top-50 MSAs, including 46 per cent from New York and Dallas. The acquisition represents a 7.8-per-cent capitalization rate or $127 per square foot, and is expected to close in the third quarter of 2021. In connection with the acquisition, the REIT issued 11.42 million subscription receipts at an issuance price of $11.65 per subscription receipt, for gross proceeds of $133.0-million.
On Feb. 10, 2021, the REIT completed the acquisition of five grocery-anchored properties for an aggregate purchase price of $54.2-million ($138 per square foot), at a weighted-average capitalization rate of 7.7 per cent. This acquisition contributes 396,471 square feet to the REIT's portfolio.
On Jan. 14, 2021, the REIT closed a $169.0-million 10-year mortgage, bearing interest of 3.75 per cent. The net proceeds from the loan were used to reduce the REIT's term loan to $83.0-million, resulting in an increase of the REIT's debt portfolio to a weighted-average term to maturity of 5.5 years.
- The REIT completed 143,325 square feet of leasing during the three-month period ended March 31, 2021, at a 2.4-per-cent weighted-average rental spread, composed of 96,551 square feet of renewals and 46,774 square feet of new leasing.
Occupancy increased by 0.2 per cent from the fourth quarter to 93.1 per cent mainly due to the portfolio acquisition of five grocery-anchored properties with a weighted-average occupancy of 97.8 per cent. The weighted-average tenant retention rate for the first quarter was 93.4 per cent.
Since the start of the pandemic, the REIT has collected 97 per cent of contractual rent. For the first quarter, the REIT has collected 96 per cent of contractual rent. The REIT expects to substantially collect outstanding billings through immediate cash collection and deferral programs.
Adjusting for termination fees, same-property net operating income (NOI) for the trailing 12-month period ended March 31, 2021 (composed of 59 properties), increased by 0.9 per cent over the same period in the prior year. Same-property NOI for the three-month period ended March 31, 2021 (composed of 59 properties), decreased by 1.1 per cent over the comparative period in the prior year.
Rental revenue for the first quarter was $32.5-million.
Net income for the first quarter was $60.8-million.
NOI for the first quarter was $23.3-million.
Funds from operations (FFO) per unit were 24 cents for the quarter, which represented a two-cent decrease from the same period in the prior year, primarily due to a $200,000 charge to income as a result of refinancing a portion of the REIT's $250.0-million term loan with a $169.0-million 10-year mortgage, partially offset by increases to NOI.
Adjusted funds from operations (AFFO) per unit were 19 cents for the quarter, a two-cent decrease from the comparative period. Decreases in AFFO were due to the aforementioned decreases in FFO, partially offset by a decrease in capital expenditures.
(in thousands of U.S. dollars, except per-unit amounts)
Three months ended March 31,
Rental revenue $32,471 $32,042
NOI (1) $23,285 $22,071
Net income (2) $60,775 $5,819
Leasing -- shop space 85,249 103,180
Leasing -- anchor/junior anchor 58,076 157,247
Total leasing activity (square feet) (2) 143,325 260,427
FFO (1, 2, 3) $11,529 $11,160
FFO per WA unit (1, 2, 3, 4) $0.24 $0.26
FFO payout ratio (1, 2, 3, 4) 90.7% 81.4%
AFFO (1, 2, 3, 4) $9,450 $8,748
AFFO per WA unit (1, 2, 3, 4) $0.19 $0.21
AFFO payout ratio (1, 2, 3, 4) 110.7% 103.9%
(in thousands of U.S. dollars) 2021 2020
Same-property NOI (three-month period, 59 properties) $18,455 $18,662
Same-property NOI (12-month period, 59 properties) $74,060 $73,921
As at March 31,
(in thousands of U.S. dollars, except per-unit amounts) 2021 2020
Total assets $1,539,994 $1,249,525
Total debt $766,616 $735,206
Net asset value per unit $12.47 $10.55
Number of properties (2) 80 72
Portfolio occupancy (2) 93.1% 92.8%
Debt/GBV ratio (5) 53.5% 58.8%
Interest coverage ratio (1) 2.50x 2.44x
(1) Note the non-international financial reporting standard measure.
(2) Includes the REIT's share of its equity-accounted property investment.
(3) Adjusting to exclude the impact of the $169.0-million debt refinancing in the first
quarter of 2021, FFO, FFO per unit and FFO payout ratio would be $11.8-million, 24 cents
and 88.3 per cent, respectively, and AFFO, AFFO per unit and AFFO payout ratio would be
$9.8-million, 20 cents and 107.1 per cent, respectively.
(4) Adjusting to exclude the impact of the refinanced credit facility and extinguished
mortgage, FFO, FFO per unit and FFO payout ratio would be $11.5-million, 27 cents and
79.2 per cent, respectively, and AFFO, AFFO per unit and AFFO payout ratio would be
$9.1-million, 21 cents and 100.2 per cent, respectively.
(5) Subscription receipt funds in escrow have been removed from total assets to calculate
the leverage ratio for the first quarter of 2021. The REIT's leverage ratio including
subscription receipt funds in escrow would be 49.8 per cent.
In response to the pandemic, Slate Asset Management (Canada) LP, as manager of the REIT, has implemented a COVID-19 response plan, with employee and tenant safety as a top priority. This plan is intended to monitor and mitigate the business and health risks posed to the REIT and its stakeholders.
Appropriate operational planning and cost control measures are in place to manage operational and financial risk. The REIT has mandated increased sanitation and health and safety measures at its properties. The REIT continues to monitor direction provided by the World Health Organization, public health authorities, and federal and state governments to control the spread of COVID-19.
Management has assessed 66 per cent of the REIT's tenant portfolio is composed of essential tenants, including grocery-anchored tenants, medical and personal services, financial institutions, and other essential-based services. All of the REIT's centres are grocery anchored. Rent is typically paid within the first 15 business days of each month. All of the REIT's centres have remained open throughout the COVID-19 pandemic, with 100 per cent of tenants in operation.
The REIT is well positioned from a liquidity perspective to withstand any further negative impacts as a result of COVID-19; however, the REIT will continue to evaluate and monitor this as the situation endures.
Conference call and webcast
Senior management will host a live conference call at 9 a.m. ET on May 11, 2021, to discuss the results and continuing business initiatives of the REIT.
The conference call can be accessed by dialling 647-427-2311 or 1-866-521-4909. Additionally, the conference call will be available by simultaneous audio. A replay will be accessible until May 25, 2021, through the REIT's website or by dialling 416-621-4642 or 1-800-585-8367 (access code 3876089) approximately two hours after the live event.
About Slate Grocery REIT
Slate Grocery REIT is an owner and operator of U.S. grocery-anchored real estate. The REIT owns and operates approximately $1.4-billion (U.S.) 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.
All interested parties can access Slate Grocery's supplemental information on-line at the REIT's website 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.
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