Slate Retail REIT Announces 5% Distribution Increase and Reports Strong Third Quarter 2014 Results

• AFFO outpaced forecast by 5%
• Significant acquisition activity
• Strong leasing fundamentals
• Anchor tenant renewals
• Enhancements to debt structure
• 5% increase to monthly distribution

TORONTO, Nov. 12, 2014 /CNW/ - Slate Retail REIT ("Slate Retail" or the "REIT") (TSX: SRT.U / SRT.UN) today announced its financial results for the quarter ended September 30, 2014. All amounts are expressed in U.S. dollars unless otherwise stated.

Blair Welch, CEO of Slate Retail said:

"We are delighted to report Slate Retail once has again executed on its business growth strategy in the third quarter.  We continue to experience meaningful rental rate growth across the portfolio driven by tenants that want to be located in our quality grocery anchored centres.  In the third quarter we also added 4 properties to our initial portfolio of 29 assets and, since September 30, have purchased or committed to purchase 8 additional properties.  We continue to maintain a robust pipeline of highly accretive opportunities, all within attractive markets and all within the U.S. grocery anchored space."

Third Quarter 2014 Highlights

• FFO⁽¹⁾ per unit was $0.29, in-line with the Forecast
• AFFO⁽¹⁾ per unit was $0.27, up compared with the Forecast per unit AFFO⁽¹⁾ of $0.25.
• Balance sheet remains strong with debt to gross book value ratio of 54.9% and 3.1 times interest coverage ratio
• Significant growth through leasing activity totaling 157,062 square feet including 139,854 square feet of renewal transactions
• Weighted average rental rate increase on renewals below 10,000 square feet was 6.5% and 2.0% for renewals over 10,000 square feet.
• During the quarter, the REIT acquired four properties totaling 538,080 square feet for an aggregate purchase price of $68.3 million ($127 per square foot) and a blended going-in cap rate of 7.3%
• Subsequent to the quarter, the REIT acquired, or committed to acquire, eight additional properties totaling 862,315 square feet for an aggregate purchase price of $105.6 million ($123 per square foot) and a blended going-in cap rate of 7.8%

Mr. Welch added:

"Management is aligned with fellow unitholders through its significant ownership of Slate Retail REIT and remains committed to its investment strategy.  In a relatively short timeframe, we have undergone considerable growth and, recently, acted on very compelling opportunities to further enhance the Slate Retail's financing structure."

Key Performance Indicators

	Three months ended September 30, 2014
US$ thousands, excluding ratios, per unit values	Actual		Forecast
Rental revenue	$11,386		$10,904
Net operating income ("NOI")^(1)	$7,982		$7,627
Number of units outstanding	15,976		16,000
Funds from operations ("FFO")^(1)	$4,596		$4,830
FFO per unit^(1)	$0.29		$0.30
Adjusted funds from operations ("AFFO")^(1)	$4,244		$4,056
AFFO per unit^(1)	$0.27		$0.25
Total assets	$533,877
Total debt	$292,920
Portfolio Occupancy	96	%
AFFO payout ratio^(1)	66.7	%
Debt / GBV ratio	54.9	%
Interest coverage ratio	3.10x
^(1)See Non-IFRS Measures.

Use of Leverage / Debt Structure
Subsequent to the end of the quarter, the REIT entered into financing arrangements that will extend the REIT's debt maturity profile, reduce interest costs and increase the amount of fixed rate debt on the balance sheet.

The REIT entered into a rate lock agreement for a 10 year first mortgage financing totaling $50 million secured by three assets at a fixed rate of 3.80%.

In addition, the REIT also committed to a new $300 million corporate credit facility which will consist of a term loan component and a revolving component. The facility has received commitments exceeding the $300 million dollar amount. The facility will include structural enhancements providing the REIT with flexibility to convert to an unsecured structure and increase the facility through an accordion feature. The initial tenor of the revolver will be three years with two 12-month extension options and the term loan will include a four year tenor with one 12 month extension option. The pricing on the LIBOR based facility ranges from 175 to 250 basis points.

Anchor Tenant Activity
During the third quarter the REIT negotiated early five year lease renewals with two tenants.  The REIT continues to maintain an anchor tenant retention rate of 100% since inception.  Winn-Dixie at Uptown Station in Florida added an additional 5 years to the existing contractual term.  Winn-Dixie accounts for 16% of the GLA at the centre and the new remaining lease term is now 9.0 years.  Publix at Oak Hill Village in Florida added an additional 5 years to the existing contractual term.  Publix accounts for 51% of the GLA at the center and the new remaining lease term is now 5.6 years.

Distributions and Distribution Reinvestment Plan
Slate Retail also announced today an annual distribution increase to US$0.756 per unit, representing a 5% 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 November 2014 of US$0.063 per class U unit of the REIT ("Class U Units"), representing US$0.756 per Class U Unit on an annualized basis.

Holders of Class U Units may elect to receive their distribution in Canadian dollars and should contact their investment advisor to make such an election. If a holder of Class U Units elects to receive distributions in Canadian dollars, the holder will receive the Canadian dollar equivalent amount of the distribution being paid on the Class U Units based on the U.S./Canadian dollar exchange rate at the time of payment of the distribution.

Holders of class A units of the REIT ("Class A Units") will receive a distribution equal to the Canadian dollar equivalent (based on the U.S./Canadian dollar exchange rate at the time of payment of the distribution) of US$0.063491 per Class A Unit. Holders of class I units of the REIT ("Class I Units") will receive a distribution equal to US$0.066490 per Class I Unit. Holders of units of subsidiaries of the REIT that are exchangeable into Class U Units ("Exchangeable Units") will receive a distribution equal to US$0.063 per unit.

Distributions on all unit classes of the REIT, and distributions on Exchangeable Units, will be payable on December 15, 2014 to unitholders of record as of the close of business on November 28, 2014.

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 of the REIT 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 www.slateretailreit.com.

The REIT may initially issue up to 620,000 Class U Units of the REIT 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.

Slate U.S. Opportunity No. 3 Realty Trust
The REIT anticipates that its continuing relationship with Slate Asset Management LP ("Slate") will provide opportunities to acquire additional investment properties. In particular, Slate is currently the manager of Slate U.S. Opportunity (No. 3) Realty Trust ("SUSO 3"), which has nearly identical investment objectives, operating guidelines and strategy as that of the REIT. The REIT may have an opportunity to acquire SUSO 3 or its properties. Any acquisition of SUSO 3 or its properties would be subject to a number of conditions, and there can be no assurance that the REIT will acquire SUSO 3 or its properties. Slate has a strong track record of closing acquisitions and believes that it can grow the asset base of the REIT on an accretive basis (either through the purchase of SUSO 3, its properties or otherwise) in the near to medium term.

Outlook
Slate Retail REIT 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 our commitment to those goals and to continuing to create value for our unitholders.

Conference Call and Supplemental Information
Senior management will host a live conference call at 9:00 a.m. ET on Thursday, November 13, 2014 to discuss the results and ongoing business initiatives of the REIT. The conference call can be accessed by dialing [phone] or 1 [phone]. Additionally, the conference call will be available via simultaneous audio webcast on the REIT's website at www.slateretailreit.com. A replay will be available on the REIT's website or by dialing [phone] or 1 [phone], access code 22689225, approximately two hours after the event.

All interested parties can access Slate Retail's Supplemental Information online at www.slateretailreit.com under the Investors section.  These materials are also available on SEDAR or upon request to the REIT at [email protected] or [phone].

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 "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 capital 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.

Use of Estimates
The preparation of the REIT financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management's estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions.

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 over 35 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. For more information, please visit www.slateretailreit.com.

SOURCE: Slate Retail REIT

Blair Welch, Chief Executive Officer, 416 644 4267; Brady Welch, Chief Financial Officer, 416 644 4263

Related Links

www.slateretailreit.ca