Achievements in the quarter were highlighted by the REIT's previously announced debt refinancing, first property sale since inception and the completion of the rights offering which was 46% oversubscribed. Remarking on the achievements of the past quarter Greg Stevenson, the REIT's Chief Executive Officer, wrote in a letter to unitholders:
"All of these initiatives result in the REIT having the liquidity to take advantage of what we believe are some of the best opportunities for growth we have seen in the last five years."
The conference call can be accessed by dialing (647) 788-4919 or 1 (877) 291-4570. Additionally, the conference call will be available via simultaneous audio found at http://www.gowebcasting.com/7447. A replay will be accessible until May 26, 2016 via the REIT's website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 85614105) approximately two hours after the live event.
Summary of Q1 2016 Results
| | |
| Three months ended March 31 | |
| (Thousands of U.S. dollars except, per unit amounts) | | 2016 | | | 2015 | |
| Rental revenue | | $ | 24,205 | | | $ | 16,347 | |
| Net operating income | | $ | 17,077 | | | $ | 11,054 | |
| | | | | | | | | |
| Weighted average number of units outstanding | | | 31,865 | | | | 20,927 | |
| FFO | | $ | 10,685 | | | $ | 7,515 | |
| FFO per unit | | $ | 0.34 | | | $ | 0.36 | |
| AFFO | | $ | 7,598 | | | $ | 6,590 | |
| AFFO per unit | | $ | 0.24 | | | $ | 0.32 | |
| | | | | | | | | |
| | | As at March 31 | |
| (Thousands of U.S. dollars) | | 2016 | | | 2015 | |
| Total assets | | $ | 1,033,985 | | | $ | 690,824 | |
| Total debt | | $ | 588,702 | | | $ | 339,580 | |
| Portfolio occupancy | | | 94.4 | % | | | 96.0 | % |
| FFO payout ratio | | | 58.0 | % | | | 55.1 | % |
| AFFO payout ratio | | | 81.6 | % | | | 62.8 | % |
| Debt / GBV ratio | | | 57.4 | % | | | 49.8 | % |
| Interest coverage ratio | | | 3.27x | | | | 3.40x | |
| | | | | | | | | |
Transaction Activity
On March 28, 2016, the REIT completed the disposition of Madison Centre, a grocery-anchored shopping centre located in Madison, Alabama. The shopping centre was sold for $9.1 million on a tax deferred basis, which was above the REIT's IFRS estimate of fair value. The property was originally purchased in 2013 for $7.4 million with $1.5 million of NOI being earned during the hold period.
"The sale of Madison Centre represents the first property sale for the REIT from its inception," commented Greg Stevenson, the REIT's Chief Executive Officer. "As our asset management team maximizes value at certain properties we will look to selectively crystallize those gains and reinvest into assets where we can continue to build value."
On March 30, 2016, the REIT completed the acquisition of Charles Town Plaza, a 206,146 foot grocery-anchored shopping centre located in Charles Town, West Virginia. Charles Town Plaza was acquired for $20.9 million ($101 per square foot). The property is 99% occupied and anchored by Walmart.
The Rights Offering
On March 2, 2016 the REIT distributed rights to subscribe for class U units to eligible holders of REIT units and exchangeable units of subsidiaries. Every nine rights held entitled an eligible holder of rights to subscribe for one class U unit at a subscription price of $10.21 or C$13.71. The REIT issued a total of 31,852,607 rights. On April 19, 2016, 3,539,175 class U units were issued for gross proceeds of approximately $36.6 million. The proceeds will be used to fund future acquisitions and redevelopment opportunities.
Distributions and Payout Ratio
The REIT's monthly distribution to unitholders is $0.06489 per class U unit, or $0.77868 per class U unit on an annualized basis. Distributions were $6.2 million for the three month period ended March 31, 2016.
The AFFO payout ratio was 81.6% for the three month period ended March 31, 2016, compared to an AFFO payout ratio of 62.8% for the same period in the prior year. On a pro forma basis, using annualized first quarter AFFO and the current distribution of $0.06489 per month, the AFFO payout ratio would be 81.1%. The REIT's determination of AFFO includes actual tenant improvements, leasing commissions, landlords work and maintenance capital expenditures, which can vary from period to period, at times significantly, depending upon the timing of lease expiries, releasing and our capital plan for the period. As a result of the natural variability of such costs, the REIT's calculation of its AFFO payout ratio will be volatile when comparing current period results to prior periods, and accordingly, inherently more volatile than the REIT's FFO payout ratio of 58.0% (March 31, 2015 - 55.1%) which does not include such costs. Management continues to target a 70% AFFO payout ratio.
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 approximately U.S. $1 billion of assets 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 about the REIT.
About Slate Asset Management L.P.
Slate Asset Management L.P. is a leading real estate investment platform with over $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 about Slate Asset Management L.P.
Supplemental Information
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 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 Financial Measures
We disclose a number of financial measures in this news release that are not measures used under IFRS, including net operating income, same property net operating income, funds from operations, adjusted funds from operations, AFFO payout ratio, adjusted EBITDA and the interest coverage ratio, in addition to certain measures on a per unit basis. 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. Reconciliations of these non-IFRS measures to the most directly comparable financial measures calculated and presented in accordance with IFRS are included within this news release.
