Slate Grocery REIT (SGR-UN) Q3 2024 earnings summary

Executive summary

• Achieved strong Q3 performance with 850,455 sq. ft. of leasing, new deals at 24.8% above average in-place rents, and non-option renewals at 14.1% above expiring rents, driving healthy same-property NOI growth.

• Portfolio consists of 116 U.S. grocery-anchored properties valued at $2.4B, totaling 15.2M sq. ft. across 23 states as of September 30, 2024, with 95% grocery-anchored and top tenants including six of the top seven U.S. grocers.

• Portfolio occupancy stable at 94.6% at quarter end; average in-place rent of $12.61/sq. ft. remains well below the market average of $23.58/sq. ft.

• Over $500M in debt refinanced post-quarter, with an additional $138M expected by year-end, reducing balance sheet risk.

• Units trade at a 24.5% discount to NAV as of September 30, 2024, seen as a compelling investment opportunity.

Financial highlights

• Same-property NOI increased by $2.4 million, or 6.2% year-over-year in Q3; rental revenue rose 3.3% to $52.3M, and NOI up 4.3% to $41.9M.

• FFO increased 7.5% to $17.6M; FFO per unit up 7.4% to $0.29; AFFO grew 9.5% to $14.3M; AFFO per unit up 9.1% to $0.24.

• Net income declined 41.4% year-over-year to $7.2M.

• Portfolio in-place rent is $12.61 per sq. ft., 47% below the Q3 2024 national average retail rent of $23.58 per sq. ft.

• 34.2% of GLA is expiring in the next three years, offering mark-to-market rent growth opportunities.

Outlook and guidance

• Expectation for continued mid-teens non-option renewal spreads and NOI growth in the 3–4% range for 2025, with some volatility depending on lease rollovers.

• Management expects continued strong demand for grocery-anchored centers due to necessity-based retail and limited new supply.

• Advanced stages of refinancing $138M in upcoming debt maturities, expected to close in Q4.

• Forecasted weighted average interest rate post-refinancing is 4.8%, supporting positive leverage and stability.

• Online grocery sales are forecasted to grow from 11.4% to 12.4% of total sales by 2027, supporting omnichannel distribution needs.