Slate Retail REIT Announces Solid Second Quarter 2015 Results and Appointment of Greg Stevenson as Chief Executive Officer

(All amounts are expressed in U.S. dollars unless otherwise stated)

TORONTO, Aug. 12, 2015 /CNW/ –  Slate Retail REIT (“Slate Retail” or the “REIT”) (TSX: SRT.U / SRT.UN) today announced its financial results for the three months and six months ended June 30, 2015. Senior management will host a conference call at 9:00 a.m. ET on Thursday, August 13, 2015 to discuss the results and ongoing business initiatives of the REIT.

Slate Retail achieved strong results for the second quarter of 2015 as it executed on its strategy of building a high-performing portfolio of U.S. grocery anchored retail properties. Subsequent to the quarter, the board of trustees appointed Greg Stevenson as Slate Retail’s Chief Executive Officer, effective immediately. Mr. Stevenson has had asset management and operational oversight of the REIT’s portfolio since 2013 and has played a pivotal role in the company’s ongoing growth and development. He succeeds Blair Welch as the Slate Retail REIT’s Chief Executive Officer. Blair Welch will remain actively involved with Slate Retail in his capacity as partner and co-founder of the REIT’s external manager Slate Asset Management L.P. (“Slate Asset Management”, “Slate” or the “Manager”).

“The second quarter was another success for SRT as we completed the vend-in of Slate U.S. Opportunity (No. 3) Realty Trust as well as additional investment properties, and executed on nearly 200,000 square feet of lease transactions,” said Blair Welch.

“We have also demonstrated our belief in Slate Retail’s strategy via our unit buyback program that in the first half of 2015 purchased for cancellation over $5 million of trust units. Add to this Slate’s approximate $30 million equity share in the REIT and our ongoing effort to provide best-in-class operations, including the appointment of Greg Stevenson as Chief Executive Officer. Mr. Stevenson is intimately familiar with the REIT’s goals and objectives, having overseen asset management and operations for some time.”

Highlights for the Quarter

• Acquired 16 grocery-anchored properties, including the 13-property portfolio of Slate U.S. Opportunity (No. 3) Realty Trust
• Purchased for cancellation 499,434 class U units under the REIT’s normal course issuer bid for a total cost of $5.3 million
• Achieved a 95% occupancy rate
• Increased rental rates 6.6% for renewed leases less than 10,000 square feet
• Increased rental rates 2.9% for renewed leases greater than 10,000 square feet
• Completed lease transactions for 198,817 square feet, consisting of 25,562 square feet of new shop space leases 4.0% above portfolio-wide shop space rent and 173,255 square feet of lease renewals
• AFFO per unit increased by 12% compared with the same quarter for the previous year
• Anchor tenant retention remained 100%

Subsequent to the Quarter

• Acquired, or committed to acquire, 5 grocery-anchored properties
• Purchased and cancelled 202,097 class U units under the REIT’s normal course issuer bid

Conference Call and Webcast

Senior management will host a conference call at 9:00 a.m. ET on Thursday, August 13, 2015 to discuss the results and ongoing business initiatives of the REIT.

The conference call can be accessed by dialing (647) 427-7450 or 1 (888) 231-8191. Additionally, the conference call will be available via simultaneous audio webcast on the REIT’s website. A replay will be available on the REIT’s website or by dialing (416) 849 0833 or 1 (855) 859 2056, access code 92261062, approximately two hours after the event.

Summary of Results

Chief Executive Officer Appointment

The REIT is pleased to announce the appointment of Greg Stevenson to the role of Chief Executive Officer, effective immediately. Mr. Stevenson has had asset management and operational oversight of the REIT’s portfolio since 2013 and has played a pivotal role in the company’s ongoing growth and development. Prior to Slate, Greg held positions with a global real estate asset manager and a wealth management company. Greg holds a Bachelor of Commerce degree (Hons.) in economics and is a CFA charterholder.

Mr. Stevenson succeeds Blair Welch as the REIT’s Chief Executive Officer.  Mr. Welch will remain actively involved with Slate Retail in his capacity as partner and co-founder of Slate Asset Management, the REIT’s external manager.

Slate is a sophisticated commercial real estate platform with C$3.0 billion of assets under management and has aligned itself with REIT unitholders via an approximate US$30 million equity investment in the REIT (approximately 8% of the REIT’s market capitalization).

Acquisitions

During the second quarter the REIT acquired 16 grocery-anchored shopping centres including the 13 properties of Slate U.S. Opportunity (No. 3) Realty Trust. As at June 30, 2015 the REIT’s portfolio comprised 59 properties as compared with 29 when it listed on the Toronto Stock Exchange in April 2014.

Management believes that a large opportunity continues to exist in the United States in which high quality grocery-anchored shopping centers can be purchased in non-gateway markets offering attractive risk adjusted returns.  Furthermore, management is maintaining a robust acquisition pipeline comprising properties that demonstrate one or more of the following attributes:

As at June 30, 2015 the REIT’s portfolio was diversified across 20 states with over 600 distinct tenants and occupancy of 95 per cent.

Operations

During the second quarter, management completed 173,255 square feet of renewals. The weighted average rental rate increase on renewals completed less than 10,000 square feet was $1.07 per square foot or 6.6% higher than expiring rent. The weighted average rental rate increase on renewals completed greater than 10,000 square feet was $0.24 per square foot or 2.9% higher than expiring rent.

Management also completed 25,562 square feet of new leasing in the second quarter. There were nine new leases executed with complementary uses to the REIT’s existing consumer staple and service based tenant mix. The weighted average base rent on all new leases was $11.69 per square foot which is $0.45 per square foot or 4.0% higher than the weighted average in-place rent for comparable space across the portfolio and compares favorably to the weighted average portfolio in-place rent of $9.95.

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 centers. 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 of 1,093,895 common shares (representing 5% of the REIT’s issued and outstanding class U units at the time of entering the NCIB through the facilities of the TSX).

For the six months ended June 30, 2015, 499,434 class U units have been purchased for cancellation under the NCIB for a total cost, including transaction costs, of $5.3 million at an average price of $10.65.

Distributions and Distribution Reinvestment Plan

The REIT pays a monthly distribution, which was increased by 5% in November 2014 to $0.063 per class U unit of the REIT (“class U units”), representing $0.756 per class U unit on an annualized basis.

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.

Outlook

Slate Retail will continue to focus on identifying and acquiring undervalued grocery-anchored retail properties in the U.S. while maintaining a conservative financial structure. These results demonstrate the Manager’s commitment to those goals and to creating value for our unitholders.

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

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 this 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 this 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 this 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 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. Slate Retail uses the following non-IFRS financial measures: Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”) on an aggregate and per unit basis and Net Operating Income (“NOI”). Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate the REIT’s performance and financial condition. Accordingly, FFO and AFFO are used by real estate industry analysts, investors and management as supplemental measures of operating performance of investment property. Management uses AFFO and FFO 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. 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 affect the operating performance of a real estate asset and are often incurred at the REIT level as opposed to the property level. As a result, management uses only those income and expense items that are incurred at the property level to evaluate a property’s performance.

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 63 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.

About Slate

Slate Asset Management L.P. is a leading real estate investment platform with $3 billion in assets under management. Slate is a value-oriented company and a significant sponsr 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.

SOURCE Slate Retail REIT